Venkat Core Banking

Definition of Banks The business of banking has been defined under section 5(b) of the Banking Regulation Act, 1949 as “Accepting, for the purpose of lending or investment, of deposits of money From the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise”. The main functions of commercial banks are 6. Accepting of Deposits 7. Lending of Money 8. Subsidiary (Agency) Services.

Classification of Banks

Classification of Banks • Types of banks – Classified by customer group • Commercial bank • Industrial bank • Private bank

– Classified by business • Wholesale bank • Retail Bank

– Classified by ownership • Public sector • Private • Multinational

Classification of Banks • Types of Bank – Classified by size • Large • Medium • Small

– Classified by nationality • Domestic • International

Classification of Banks Commercial Banks: They are not only engaged in their traditional business of accepting and lending Of money but have diversified their activities into new fields of operations like Merchant banking, leasing, housing finance, mutual funds, venture capital etc,. They have introduced a number of innovative schemes for mobilising deposits In addition to the above, they are providing valuable services to their customers by way of collecting cheques bills, pruchasing securities on behalf of customers ,issuing drafts, traveller’s cheques, gift cheques, accepting valuables for safe Custody.

Scheduled Commercial Banks: The banks whose names are included in the second schedule to the Reserve Bank of India Act are known as scheduled commercial banks. Such banks are entitled to borrow from the Reserve bank of India. But they have to follow the rules and regulations of the Reserve Bank and to maintain certain minimum statutory reserve.

Classification of Banks Classification of Commercial Banks

Classification of Banks Public Sector Bank The public sector banks are the banks owned by the Government. In the Indian banking system, they are playing a vital role by handling 94% of the total banking business. The public sector banks are classified as follows: 4. State Bank and its subsidiaries. 5. Nationalised Banks 6. Regional Rural Banks

Classification of Banks State Bank of India The State Bank of India was established on Ist July 1955, under the State Bank of India Act, to take over the business of the Imperial Bank of India. It was started for the purpose of extending the banking facilities to rural and other unbanked areas on a large scale.The state bank of india was the first bank to be set up in the public sector. It is the largest commercial bank in India in terms of branch network, resources and man power. It enjoys the full support to the central and State Governments. As such, it is handling a major portion of the banking transactions of the Government and public sector undertakings. As a result,it has grown as a giant among the commercial banks in IndiaToday, it finds a place among the big five hundred banks in the world.

Classification of Banks Functions of Nationalised Banks The functions of nationalised banks are the same as that of other commercial banks.Like State Bank of India, they have also diversified their activities in the field of merchant banking,leasing, housing finance and mutual funds etc. For which, they have also floated their subsidiaries like Can Fin AHomes Ltd., Ind., bank housing, Can Bank Mutual Fund, Indian Bank mutual fund, PNB and BOI Mutual Funds etc. Objects of Nationalisation. 1.Elimination of control over the banks by a few people. 2.Diversification of the flow of bank credit towards priority sectors such as agriculture,small scale industries, exports,weaker sections and backward areas. 3.Greater mobilisation of savings through bank deposits. 4.Extension of banking facilities to unbanked areas by widening the branch network of banks particularly in rural and semi-urban areas.

Classification of Banks Regional Rural Banks A Regional Rural Bank is a separate body corporate estabished by the Government of India as per the provisions of the Regional Rural Bank Act.As per the Act, the Government may start a Regional Rural Bank on request made by a commercial bank, called Sponsor Bank. Theses sponsor banks have to assist the RRBs for training the personnel and provide the managerial and financial facilities. Functions 1.Granting of Agricultural Loans. 2.Granging of Small Loans.

Classification of Banks Private Sector Banks The commercial banks which are not owned by the Government of India are known as private sector banks. Though they are not owned by the Government, the overall control over them lies with the Reserve Bank of India.

The Private sector banks are classified in to two categories: 1.Private sector Indian banks 2.Private sector Foreign banks

Classification of Banks Private Sector Indian Banks These banks are incorporated as companies in India under the Companies Act, 1956. They are wholly owned and managed by a group of individuals who have contributed to the share capital of such banks. These banks are managed by a board of directors,consisting of a majority of the directors elected by the shareholders in the annual general meeting and the shareholders in the annual general meeting and a few nominated by the Reserve Bank of India. But the nominated directors have no voting rights. A chairman of the bank is appointed by the RBI of the chairman of the bank is appointed by the RBI on the basis of recommendations made by the board.

Classification of Banks Private Sector Foreign Banks The foreign banks operating in India are classified under this category. Now, there are twenty three foreign banks working in India. Out of which eight bank commenced their operations only during the last decade. These banks are also treated at par with the private sector Indian banks for the purposes of issuing guidelines and exercising control over them by the Reserve Bank of India. But the guidelines in respect of priority sector lending have not been made applicable to foreign banks. However, in financing advised to show increased involvement in financing small-scale industrial units professional and self-employed persons retail traders etc. The branches of foreign banks are located only at urban and metropolitan centres which have a large business potential. Therefore, they are mainly concentrating and providing financial assistance to business concerns rather than on agriculture.

Products/services offered by Banks

3. 4. 5. 6.

Operative accounts Non-Operative accounts Miscellaneous Services Clearing Process

Operative Accounts • • • • • •

Savings account Its Object is to promote the habit of Savings among the people. Mainly for Individuals with Joint or E(S) Accounts. Limited number of Transaction and with limited amount. Third party cheques with endorsement cannot be deposited for collection. No Over Draft Facility is Given. Interest rate of 3.5% per annum with minimum balance from 10th to last date of the month.

Operative Accounts • • • • • • • •

Current account It is mainly for Business Establishments (Companies) and for Traders. Its object is to provide convenience to the customers Third party cheques with endorsement can be deposited for collection and credit. Overdraft facility is available. No restriction for Huge withdrawels and deposits. Banks have to maintain adequate cash reserve. No interest is paid to the Customers. Operational charges such as Folio charges are charged for the current account holders.

Operative Accounts Advances Advances are Running Loans where Both Credit and Debit transactions are involved. Here two important criteria are Limits and DP (Drawing Power). The Main Categories of Advances we will discuss here are 6) Cash Credit (CC) 7) Secured Overdraft (SOD) 8) Secure Overdraft against Fixed Deposits (SODA)

Operative Accounts • CASH CREDIT • In a Cash Credit the goods are taken as Primary Security and Building or Real estate will be the collateral security. • Every month the Borrower should submit the Stock Statement to the Banker. • The Borrower can withdraw the amount also deposit when he has surplus hence called Running Loan. • Arrival of Limits and Drawing Power Limits: It is fixed at the Beginning of the loan. With 50% of Margin. Drawing Power: It is the Available credit limit given to draw. It is equal to the Limit initially.

Operative Accounts CASH CREDIT Let us discuss Three Situations of Arriving the Limit and Drawing Power. Condition A: Suppose the Borrower has 10 lacs of Goods. With 50% Margin his limit is fixed as 5 lacs and also the drawing power i.e.) Limit = Drawing Power = 5Lacks Condition B: Suppose if the Borrower is having only 8 lacs of goods with him in the next month. Now Limit will be the same 5 lacs and DP will be 4 lacs. i.e.) even though he has a limit of 5 lacks his available credit limit allowed to withdraw will be just 4 lacs (50% of 8Lacks). Condition C: Suppose if the Borrower has now 12 lacs of goods with him . Now the limit =4 lacs and DP=4 lacs(& not 6 lacs). i.e.) Limit or DP whichever is lower.

Operative Accounts SECURED OVER DRAFT The Primary Security for this kind of advance is Equitable Mortgage of Residential /Commercial plot and or building (Real Estate) and Collateral Security will be Hypothecation of Stock-inTrade. Here also the Phenomenon such as DP (Drawing Power) and LIMIT Comes into play. It is mainly for Traders (Individuals/Proprietary or Partnership firms) to meet the working capital requirements. Margin is 50% and Rate of interest is 13% p.a.

Operative Accounts Secured Overdraft Against Fixed Deposits (SODA) • This is also a running Loan, where both Credit and Debit Transaction Takes place. • 75% of Fixed Deposit amount is Granted as advance and a 2% extra interest over the deposits interest is taken as rate of interest. and for a particular Tenor (Period) • Here till the advance gets closed the Deposit receipt is kept as security and marked as Lien.

Calculation of Interest for Advances (Running Loans-CC ,SOD & SODA) DATE

Limit & DP Sanctioned in CC or SOD Account

Daily Balance (Debit Balance )

01/08/2004 -50,000

-10,000

Daily Interest Product (P*N*R/100)N = 1/365 R=13% 10000*1/365*13/100

02/08/2004 -50,000

-15,000

15000*1/365*13/100

03/08/2004 -50,000

+5000

Nil

Operative Accounts NRI Accounts NRE (Non-Resident External Rupee account) c) It can be in the form of savings or fixed deposits. d) No local inflow allowed. e) Can be Repatriable. (Taken outside India) f) It can be opened only by foreign remittance. NRO (Non- Resident Ordinary Rupee Account) When a Resident Indian becomes a Non-Resident, his domestic resident account becomes NRO account. a) It can be in the form of savings or fixed deposits. b) It is Non-Repatriable (cannot be sent to outside India) c) Legitimate dues such as house rent can be credited. d) By Foreign remittance .

Operative Accounts NRI Accounts FCNR (Foreign currency non-resident) d) It is maintained in any one of the foreign currency. (e.g. GBP, Euro, Yen, USD) e) It can be Repatriable. f) It can be closed and converted to Indian rupee when needed. g) It can be maintained only as term deposit.

Non Operative Accounts 1. Deposits 2. Loans

Non Operative Accounts Deposits TIME/TERM Deposits • If the Deposit is held in the Bank for a Particular Term or Tenor it is called Term Deposit or Time Deposit • It is classified based on the Time Buckets as Short Term and Long Term deposits. • Short Term : A Deposit held in the Bank for a Period of Less than 6 months is called Short Term Deposits. E.g. (Fixed Deposit, Reinvestment FDs, Recurring Deposits) Where the Tenor is less than 6 months.

Non Operative Accounts Deposits •

Long Term Deposits If the Deposit is maintained in the Bank for a period of more than 6 months it is called Long Term Deposits E.g. (Fixed Deposits, Reinvestment FDs, Recurring Deposit) where the Tenor is more than 6 months

Non Operative Accounts Fixed Deposits • Fixed Deposits impose a Simple Interest Formula on the Principle amount deposited by the customer. (Say P*N*R/100). P=> The Principle N=> The Duration in Years R=> Rate of Interest. • Interest can be paid Quarterly, Semi-Annually or Annually as req. by customer.

Non Operative Accounts Re-Investment FDs • They Impose Compound Interest to the principle amount given by the customer. • Here the interest will be calculated quarterly and will get added with the Principle each quarter. And thus you get the high yield on the maturity date • Formula used: P*(1+R/100)N

Non Operative Accounts Recurring Deposits • Every month the Customer Pays the Installment which is fixed in the beginning. • The Formula: P+N(N+1/2)*R • For Pre closure a Penalty of 1% is Charged.

Non Operative Accounts LOANS ARE FURTHER CLASSIFIED AS LONG TERM LOANS: For a Period Above 5 Years SHORT TERM LOANS For a Period Less than 5 Years

Non Operative Accounts Terms Related to Credits • Mortgage: An Interest in Property created as a security for a

loan or payment of debt and terminated on payment of the Loan or debt. The Borrower is called Mortgager and Lender called as Mortgagee. The security is any Immovable Property.

• Pledge: An article given by the Borrower (Pledger) to a Lender

(pledgee) as a security for a debt. It remains in the ownership of the pledger though it is in the pocession of the pledgee until the debt is repaid. (Movable Property or goods)

• Hypothecation: An authority given to a banker usually a letter of hypothecation to enable the bank to sell goods that have been pledged to them as security for a loan. Here the True owner is the Bank but the property in the hands of the customer (Say Vehicle Loan).

Non Operative Accounts Terms Related to Credits

• EMI :

Equated Monthly Installment Here both the Principal and Interest is clubbed together and arrived at a particular Installment amount.

• NEMI :

Non Equated Monthly Installment Here the Interest is Calculated based on the Tenor and Period and rate of interest. Where the installment amount differs each time.

• MARGIN:

It is the Party’s (Customer’s) Contribution of money towards the loan amount. Both the Bank’s Contribution and Party’s Marginal Contribution serves the complete Loan Amount.

• Holiday Period: It is time gap given initially for the borrower of a loan. In this period only the interest repayment alone is done and not the principle amount.

Non Operative Accounts TYPES OF LOANS 2) 3) 4) 5) 6) 7) 8) 9)

Housing Loan (Mortgage Loan) Vehicle Loan (Hypothecation Loan) Machinery Loan (Hypothecation Loan) Professional Loan Personal Loan Educational Loan Jewel Loan Ware House Loan (Pledge of Goods)

Housing Loan Eligibility: Individuals (Including NRI and Kartas of HUF) Purpose: To Purchase a ready built Flat/ House (new and

also existing ones not older than 5 years). To purchase a plot and construction of house. For repairs/renovations/additional construction. Loan Amount: Maximum Rs15.00 lacks.

Margin: 25 % Rate of Interest : Equated Monthly Installment Method 10.5% above 5 years & up to 10 Years 10.75 % above 10 years. Security: Equitable mortgage of Land/Building.

Vehicle Loan • Type of Facility : Hypothecation Loan (Vehicle) • Eligibility : Individuals/Proprietorship/Corporates. Except those engaged in Car Hiring Business.

• Purpose : To Purchase new/Second Hand (nor older than 5 years) car for own/business use except for Car Hiring.

• Loan Amount: Upto 7.50 lacs • Margin: 20% (30% for second hand cars) • Interest Rate : 11.5 % Max. 60 Months (EMI) with Postdated cheques collected in advance.

• Security : Hypothecation of Car.

Machinery Loan • Eligibility: Individuals/Professionals/Traders/Business Establishments carrying business operations and earning profit.

• Purpose : To Pruchase Branded Machinery (Say Computer, Printers, UPS System)

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Loan Amount: Maximum Rs. 50,000/= Margin: 30% Interest Rate: 14% , Maximum 36 EMI Security: Hypothecation of asset Financed.

Professional Loan • Type of Loan : TERM LOAN • Eligibility: Doctors/CAs/Lawyers/Chartered Engineers • Purpose: To acquire Machinery/Equipment/Apparatus/Tools/ Office equipments and to finance Foreign Business Trips.

Loan Amount: Rs. 15 Lacs Maximum out of which foreign travel permissible loan is Rs. 3 lacs.

Margin: 20% Rate of Interest: 13.5 % Primary Security: Hypo. of Assets acquired out of Bank finance. Collateral : Suitable Collateral security shall be insisted.

Personal Loan • Type of Loan : Installment Loan • Eligibility: Salaried employees of PSUs/Reputed Companies/self

employed/other individuals, who can provide securities fully covering loan amount by way of NSCs/KVPs/IVPs/RBI Bond, LIC Policies.

• Purpose: For Personal Consumption. • Loan Amount: Rs. 1,00,000 (With 100% Security) • Margin:

Rs. 50,000.00 (Unsecured) Nil

• Rate of Interest: 13% for secured and 14% unsecured. Max 36 EMI-Post dated Cheques for 12 EMIs collected.

• Security: Primary – DPN, Collateral-NSCs/KVPs/IVPs/RBI Bond.

Educational Loan • Purpose: For Studies in India or Abroad. • Eligibility: Indian National, Secured admission to

Professional/Technical courses -India thru Common Entrance Test.

• Eligible Expenses: College fees/cost of books/ equipments, instruments, uniform/Caution deposit/study tour project

• Loan Amount: For Studies in India Max: 7.5 lacs, For studies in abroad maximum 15.00 lacs.

• Margin: Upto 4.00 lacs Nil, Above 4.00 lacs- 5-15% • Rate of Interest: PLR 12.5% • Security: Above 4 lacs collaterals security equivalent of loan.

Jewel Loan • • • •

Type of Facility: Overdraft Eligibility: Individual (owners of jewellery) Purpose: For Consumption Purposes Loan Amount: Minimum Rs5000@275 /gram

Maximum Rs1lac under MDP&2.5lacs –AGM/DO • Rate of Interest: 14%

• Primary Security : Gold jewellery of minimum purity of 22 carats

• Collateral: Optional

WareHouse Loan 

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It is Loan given for the Borrowers who have kept the goods as security in a Ware House (Goods are Pledged) or Cold Storages. The Owner of the Ware house called Warehouse Keeper will issue a ware house Receipt which is then used for the release of the goods under the possession of warehouse, after the loan amount has been settled. The Goods are generally secured in a ware house where it is pledged and marked as lien.

Miscellaneous Services • • • • • • • •

Remittances Standing Instructions Stop Payment Internet Banking Phone Banking ATM Issuance of DD/PO Locker Facility

Miscellaneous Services Remittances DD (Demand draft), Pay order, mail transfer (MT) and Telegraphic transfer (TT) Demand Draft: It is an instrument issued by one Branch of the Bank favoring the Party Payable at a different Branch of the Bank. For Example: Issuing Branch is Trichy Br. And Paying Branch Chennai and the Party say XYZ .. It is surely honorable instrument and will never be returned unless any discrepancies.

Miscellaneous Services Remittances DD (Demand draft), Pay order, mail transfer (MT) and Telegraphic transfer (TT) Pay Order: It is an instrument issued and paid by the same branch itself. It is also called Manager’s Cheque or Banker’s Cheque Any Payments by the bank such as issuance of loans or expenses of Bank premises is made by issuing Pay orders

Miscellaneous Services Remittances DD (Demand draft), Pay order, mail transfer (MT) and Telegraphic transfer (TT) Mail Transfer: It is Form of Money Transfer through mail From the issuing branch to the favouring Branch of the Bank. Telegraphic Transfer: It is also equivalent to mail transfer but here the credit advice is encoded and sent as telex message and amount gets credited on the same day itself.

Miscellaneous Services Standing Instructions It is an instruction given by the Customer to the Banker to debit or credit the customer’s account on a specified date without the presence of the customer at the bank. For example: payment of utility Bills Payment of LIC insurance Premium or a recurring deposit. Criteria needed: 9. Customer’s Account Number 10. Number of Installments and amount. 11. Specified date of action.

Miscellaneous Services Stop Payment: It is an under taking given by the Banker to Stop the Payment of the Cheque as per the customer’s instruction Criteria needed for stop payment: 5. Cheque number 6. Cheque issued date 7. Cheque amount and payee’s Name

Miscellaneous Services Internet Banking 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Login with CustID and IPIN View Account Balance View Complete Account Statement Online Bill Payment View Cheque Status Open New Fixed Deposit Request For a Demand Draft Request For a Cheque Book Request For a Stop Payment Request For a TDS Enquiry

Miscellaneous Services Internet Banking Login with CustID and IPIN

Miscellaneous Services Internet Banking View Account Balance

Miscellaneous Services Internet Banking View Complete Account Statement

Miscellaneous Services Internet Banking Online Bill Payment

Miscellaneous Services Internet Banking Credit Card Payment

Miscellaneous Services Internet Banking View A/C Statement

Miscellaneous Services Internet Banking View Cheque Status

Miscellaneous Services Internet Banking Open New Fixed Deposit

Miscellaneous Services Internet Banking Open New Fixed Deposit

Miscellaneous Services Internet Banking Request For a Demand Draft

Miscellaneous Services Internet Banking Request For a Demand Draft

Miscellaneous Services Internet Banking Request For a Cheque Book

Miscellaneous Services Internet Banking Request For a Stop Payment

Miscellaneous Services Internet Banking Request For a TDS Enquiry

Miscellaneous Services • Phone Banking

Miscellaneous Services ATM (Automated Teller Machine) • How ATMs Work You're short on cash, so you walk over to the automated teller machine (ATM), insert your card into the card reader, respond to the prompts on the screen, and within a minute you walk away with your money and a receipt. These machines can now be found at most supermarkets, convenience stores and travel centers. Have you ever wondered about the process that makes your bank funds available to you at an ATM on the other side of the country?

Miscellaneous Services ATM (Automated Teller Machine) • •

How Do ATMs Work? An ATM is simply a data terminal with two input and four output devices. Like any other data terminal, the ATM has to connect to, and communicate through, a host processor. The host processor is analogous to an Internet service provider (ISP) in that it is the gateway through which all the various ATM networks become available to the cardholder (the person wanting the cash).

Miscellaneous Services ATM (Automated Teller Machine) •

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Most host processors can support either leased-line or dial-up machines. Leased-line machines connect directly to the host processor through a fourwire, point-to-point, dedicated telephone line. Dial-up ATMs connect to the host processor through a normal phone line using a modem and a toll-free number, or through an Internet service provider using a local access number dialed by modem. Leased-line ATMs are preferred for very high-volume locations because of their thru-put capability, and dial-up ATMs are preferred for retail merchant locations where cost is a greater factor than thru-put. The initial cost for a dial-up machine is less than half that for a leased-line machine. The monthly operating costs for dial-up are only a fraction of the costs for leased-line. The host processor may be owned by a bank or financial institution, or it may be owned by an independent service provider. Bank-owned processors normally support only bank-owned machines, whereas the independent processors support merchant-owned machines.

Miscellaneous Services ATM (Automated Teller Machine) •

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Parts of the Machine You're probably one of the millions who has used an ATM. As you know, an ATM has two input devices: Card reader - The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The host processor uses this information to route the transaction to the cardholder's bank. Keypad - The keypad lets the cardholder tell the bank what kind of transaction is required (cash withdrawal, balance inquiry, etc.) and for what amount. Also, the bank requires the cardholder's personal identification number (PIN) for verification. Federal law requires that the PIN block be sent to the host processor in encrypted form.

Miscellaneous Services ATM (Automated Teller Machine) • • • •

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And an ATM has four output devices: Speaker - The speaker provides the cardholder with auditory feedback when a key is pressed. Display screen - The display screen prompts the cardholder through each step of the transaction process. Leased-line machines commonly use a monochrome or color CRT (cathode ray tube) display. Dial-up machines commonly use a monochrome or color LCD. Receipt printer - The receipt printer provides the cardholder with a paper receipt of the transaction. Cash dispenser - The heart of an ATM is the safe and cash-dispensing mechanism. The entire bottom portion of most small ATMs is a safe that contains the cash.

Miscellaneous Services ATM (Automated Teller Machine) • Sensing Bills The cash-dispensing mechanism has an electric eye that counts each bill as it exits the dispenser. The bill count and all of the information pertaining to a particular transaction is recorded in a journal. The journal information is printed out periodically and a hard copy is maintained by the machine owner for two years. Whenever a cardholder has a dispute about a transaction, he or she can ask for a journal printout showing the transaction, and then contact the host processor. If no one is available to provide the journal printout, the cardholder needs to notify the bank or institution that issued the card and fill out a form that will be faxed to the host processor. It is the host processor's responsibility to resolve the dispute. Besides the electric eye that counts each bill, the cash-dispensing mechanism also has a sensor that evaluates the thickness of each bill. If two bills are stuck together, then instead of being dispensed to the cardholder they are diverted to a reject bin.

Miscellaneous Services ATM (Automated Teller Machine) •

The same thing happens with a bill that is excessively worn, torn, or folded. The number of reject bills is also recorded so that the machine owner can be aware of the quality of bills that are being loaded into the machine. A high reject rate would indicate a problem with the bills or with the dispenser mechanism.

Miscellaneous Services ATM (Automated Teller Machine)

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Settlement Funds When a cardholder wants to do an ATM transaction, he or she provides the necessary information by means of the card reader and keypad. The ATM forwards this information to the host processor, which routes the transaction request to the cardholder's bank or the institution that issued the card. If the cardholder is requesting cash, the host processor causes an electronic funds transfer to take place from the customer's bank account to the host processor's account. Once the funds are transferred to the host processor's bank account, the processor sends an approval code to the ATM authorizing the machine to dispense the cash. The processor then ACHs the cardholder's funds into the merchant's bank account, usually the next bank business day. In this way, the merchant is reimbursed for all funds dispensed by the ATM.

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So when you request cash, the money moves electronically from your account to the host's account to the merchant's account.

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What is ACH?The Automated Clearing House (ACH) NetworkThe ACH Network is a highly reliable and efficient nationwide batchoriented electronic funds transfer system governed by the NACHA OPERATING RULES which provide for the interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries. ACH payments include: Direct Deposit of payroll, Social Security and other government benefits, and tax refunds; Direct Payment of consumer bills such as mortgages, loans, utility bills and insurance premiums; Business-to-business payments; E-checks; E-commerce payments;

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Federal, state and local tax payments.

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(ACH) The number of ACH payments originated by financial institutions increased to 8.05 billion in 2002, up 13.6 percent from 2001. These payments were valued at $21.7 trillion. Including payments originated by the Federal government, there were a total of 8.94 billion ACH payments in 2002 worth more than $24.4 trillion.

• Originator (ACH) Any individual, corporation or other entity that initiates entries into the Automated Clearing House Network • Originating Depository Financial Institution (ODFI) A participating financial institution that originates ACH entries at the request of and by (ODFI) agreement with it's customers. ODFI's must abide by the provisions of the NACHA Operating Rules and Guidelines Receiving Depository Financial Institution Any financial institution qualified to receive ACH entries that agrees to abide by the NACHA Operating Rules and Guidelines • Receiver An individual, corporation or other entity who has authorized an Originator to initiate a credit or debit entry to a transaction account held at an RDFI.

Miscellaneous Services •

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ATM Security Many banks recommend that you select your own personal identification number (PIN). Visa recommends the following PIN tips: Don't write down your PIN. If you must write it down, do not store it in your wallet or purse. Make your PIN a series of letters or numbers that you can easily remember, but that cannot easily be associated with you personally. Avoid using birth dates, initials, house numbers or your phone number. Visa also recommends the following tips for safe ATM usage: Store your ATM card in your purse or wallet, in an area where it won't get scratched or bent. Get your card out BEFORE you approach the ATM. You'll be more vulnerable to attack if you're standing in front of the ATM, fumbling through your wallet for your card. Stand directly in front of the ATM keypad when typing in your PIN. This prevents anyone waiting to use the machine from seeing your personal information. After your transaction, take your receipt, card and money away. Do not stand in front of the machine and count your money. If you are using a drive-up ATM, get your vehicle as close to the machine as possible to prevent anyone from coming up to your window. Also make sure that your doors are locked before you drive up to the machine. Do not leave your car running while using a walk-up ATM. Take your keys with you and lock the doors before your transaction. If someone or something makes you uncomfortable, cancel your transaction and leave the machine immediately. Follow up with your bank to make sure the transaction was cancelled and alert the bank to any suspicious people. Many retail merchants close their store at night. It is strongly recommended that they pull the money out of the machine when they close, just like they do with their cash registers, and leave the door to the security compartment wide open like they do with an empty cash-register drawer. This makes it obvious to any would-be thief that this is not payday.

Miscellaneous Services •

For safety reasons, ATM users should seek out a machine that is located in a well-lighted public place. Federal law requires that only the last four digits of the cardholder's account number be printed on the transaction receipt so that when a receipt is left at the machine location, the account number is secure. However, the entry of your four-digit personal identification number (PIN) on the keypad should still be obscured from observation, which can be done by positioning your hand and body in such a way that the PIN entry cannot be recorded by store cameras or store employees. The cardholder's PIN is not recorded in the journal, but the account number is. If you protect your PIN, you protect your account.

Miscellaneous Services • • • • • •

Locker Facility It is Given to Reputed Customers who Hold a Deposit account in the Branch. Based on the Amount of Deposits Maintained The Size of the Locker Differs. Safe Deposit Lockers are Classified on their Size as Small, Medium and Large. The Rent Received Per Annum Ranges from Rupees 600 to 1000 depending on the size. Charges can be collected even Quarterly or Half yearly. The Contents of the Lockers could be Gold Ornaments, Documents of Title Deeds or Securities.

Miscellaneous Services Locker Facility • Main branch • Size Charge s (in QR) 12x33x51 250.00 24x33x51 350.00 32x33x51 500.00 48x33x51 700.00

Miscellaneous Services Locker Facility • Specialised Savings Branch: • Size Charge s (in QR) 15x20x50 250.00 15x40x50 350.00 30x40x50 350.00

Clearing Process • • • • • • • •

Inward Clearing (MICR) Outward Clearing (MICR) High Value Clearing (Non-MICR) Outstation Cheques for Collection (OCC) Inward Cheques for Collection (ICC) Inward/outward Bills for Collection (IBC & OBC) Local Cheque Purchase/Discount (LCP) & Cheque Purchase (CP)

Inward Clearing Process The Clearing process which involves local inward Cheques presented by SBI/RBI (or any Clearing House). Also called MICR I/W Clearing. Accounting Procedure: 7. Debit all cheques in Party’s Account 8. Credit the endpoint .(Clearing House)

Outward Clearing Process The Clearing process which involves local Outward Cheques Booked and sent to SBI/RBI (or any Clearing House). Also called MICR O/W Clearing. Accounting Procedure (3 Days Concept) 7. Book all the Clearing cheques (Day 1) 8. Mark the Booked Statues to Credit Status (Day2) 9. Mark it to Realised Status (Day3)

High Value Clearing The cheques with One lack and above Amount are sent for clearing and gets realized on the Same day itself. Particularly in METROS. Accounting Procedure: 5. Book all cheques in Separate Zone (say Zone 5) 2. The Fate of Cheque received in Evening. 3. Now Credit and Realize the Cheques on the same day itself.

Outstation Cheques for Collection The Cheques which do not come under a regional clearing houses and which pertains to other city clearing houses are called outstation cheques. Accounting Procedure: 7. Book the cheques in OCC Batch entry. 8. Send the instrument to that City where Branch is available or to different Bank. 9. Generally charges are collected (Commission) 10. Get the cheques realised after a week when that Bank sends the Advice or a Demand Draft (Other Bank)

Inward Cheques for Collection The Cheques which comes for collection from a different Branch/Bank in a different city is termed as ICC. (Inward Cheques for Collection). Accounting Procedure: 6. Book the cheques in ICC and send it for Local Clearing. 7. After the cheque is passed, then realise the ICC Zone 8. Issue a DD Favouting Karur Vysya Bank and send it to the OCC Branch/Bank.

Inward & Outward Bills for Collection The Documents which involve a Domestic Trade Settlement such as Invoices are sent along with a LR number (Lorry Receipt) are Sent to the Banks for Collection and hence termed as Bills. They are of 2 categories (G) Inward Collection Bills (H) Outward Collection Bills.

CP and LCP Cheque Purchase (CP) and Local Cheque Purchase (LCP) Cheque purchase also called Cheque Discount Local Cheque Purchase done for (Local MICR Clearing Cheques). Cheque Purchase done for (Outstation Cheques for Collection)

CP and LCP Accounting Procedure : (3) Based on the Limit Sanctioned for the Party, the CP and LCP is done. (4) You get the credit on the same day itself the day when the booking is done after deducting the charges. (5) Sometimes Against Clearing is also Done. (6) Basically Any DDs (Demand Drafts) and PO (Pay Orders) can be Discounted without Risks. (7) Also banks generally refuse to do LCPs on Cooperative Bank cheques.

Cheque Bouncing Also called Cheque Return When there is no balance in a Party’s A/C. The cheques are generally refused. Criteria for a Cheque Return- Return MEMO 6. Any Stop Payment informed by written statement by the issuer. (Payement Stopped by Drawer) 7. When there is no balance in Account (Insuffucient Funds) 8. When a Granishee order issued by court where we mark debit stopped (in case of Liquidation) 9. Effects Not Cleared (Refuse to pass it in Against Clearing amount).

Operation of Operative Account • 1. Origination • 2. Servicing • 3. Closure

Origination

Deposit Products Application

PreQualification

Processing Communica Administra tion tion

Customer fulls out application

Ineligible scrutiny - Default list - Black list - Existing account holder

A/C opening Deposit - Minimum balance

Product choice is chosen

Desirability scrutiny - Employment/ Business - Place of work/ stay

Welcome letter Authorizations - ATM/ Phone banking/Net banking - Card embossing - Relationship designators

Authorization for access/ entries -Cheque book Printing -Signature mapping

Servicing Deposit Products Transactions

Fee & Charges

Interest

Reporting

Customer Relations

Deposit Withdrawal

Frequent Withdrawals

Balances overdraws

Periodic account statements

Transaction profile statement

Transfers

Issue of Cheque books/ Account statements

Standing Instructions

Duplicate Records

Bill payments

Returned Cheques

Issue of cheque books

Cancellation of Drafts

Account statements

Account closure

Addition/ Changes to account holders Addition/ Changes to groups

Regulatory Reporting

Closure Deposit Products Request

Processing

Administration

Closure

Customer request for closure

Striking balance

Collection of unused cheques

Closing of accounts

Banks decision to close

Status on - Standing instructions - Uncleared cheques inward - Uncleared cheques outward

Cancellation of authorization - ATM - Phone - Online

Repayment of balance

Transfer to Nonoperative account

Special conditions - Lien - Approvals Fee/ Charges

Removal of accounts