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In the present competitive world, margins are becoming thinner and

focused efforts are required to increase the profits. In such a scenario,
each rupee saved is rupee earned and legitimate income not collected is
money lost. Revenue leakage is a menace, which eats into the profits of
the Bank like a termite. Reducing income leakage will have direct and
positive impact on our profits. In this context, the role of Inspecting
Officers is vital in ensuring that the bank invariably collects all the
legitimate income, which is due to us and does not pay interest more
than what is due from us.
This compendium spells out areas requiring focus by the Inspecting
Officers in arresting income leakage.
I am sure that the Inspecting Officers will make the best use of it.

Date: 28.07.08

A C Mahajan
Chairman & Managing Director

Page 1 of 19

Compendium on Areas of Income Leakage

The Inspecting Officers have to play a positive role in ensuring adherence to the
laid down systems & procedures.
The Inspecting Officers are aptly referred as the Eyes and Ears of the
Management. Apart from this Inspecting Officers have to play a pivotal role in
detecting income leakage. Income Leakage affects the profitability of the bank. In
the present day Banking Business profitability plays a vital role in performance
of the organization.
It is observed that some of the Inspecting Officers confine themselves to
checking of documents alone without paying much attention to those areas which
causes huge income leakage to the Bank. In this regard attention is drawn to HO
Circular 224/2005 dated 20.08.2005, wherein a list of manual errors causing
income leakage is furnished.
System deficiencies and limitations in the computer packages also cause huge
income leakage. Inspecting Officers (IOs) should be familiar with system
deficiencies to detect such income leakage.
We are furnishing hereunder some manual errors made by branches which lead
to Income leakage and some tips to our IOs to detect income leakage and
thereby avoid loss of legitimate income due to the bank.


Interest Calculation / application / Checking Register (NB 151) not

maintained/not updated. (BPC-MOI on Interest Collected Clause 12.2
Page 68 updated till 30.11.2003 & Cir.No.224/05 dt. 22.08.2005).


Rate of Interest not checked by the Branch Officials resulting in leakage

not found out by the branch. (Cir. No.224/05 dt.22.08.2005)
IOs should ask for INTEREST DUMP for the entire review period
(12/18/24 as the case may be) immediately on commencing the inspection
of a particular branch and prepare the list of accounts where interest is not
debited. IOs have to verify whether non debit of interest is on account of
loan accounts classified as NPA or on account of mistakes in feeding the
master data. If such accounts are segregated and studied, we will be in a
position to find out non debiting of interest due to incorrect feeding of
flags. `Interest on Principal' flag would have been fed as `N' in IBBS
branches. (CBS Guidelines 73/06 dt.16.12.2006)

Page 2 of 19


In IBBS Package, whenever loan accounts are classified as NPA for the
first time, branch is supposed to change the interest flag as `N'. When
they are reclassified as Standard, the flag is to be changed as `Y'. Failure
to change the flag results in non debiting of interest and the resultant
income leakage. (Page 90, Clause 3.5 of BPC-MOI on Interest
Collected updated till 30.11.2003)


Revision of Rate of Interest is not updated in the system promptly as and

when interest is changed. (Cir.No.236/94)


In respect of CBS branches, Interest Dump generated from Business

Object is available and branches are not ensuring correctness of interest
charged and rate of interest applied to the loan account. (CBS guidelines
22/08 dated 26.05.2008)


Subsequent to migration of branches to CBS environment, all loan

accounts are to be reviewed and ensure correct schedule of Interest i.e.,
Fixed or Floating is given to the account as per DIT guidelines. Branches
are not reviewing all the loan accounts. (CBS Guideline 22/08


If wrong migration of Interest schedule is noticed/observed i.e., from Fixed

to Floating or vice-versa, branches are not taking steps to set right the
discrepancies. (CBS Guideline 22/08 dt.20.05.2008)


In CBS branches, scheme level interest changes are being effected at DIT
level. Branches have to verify whether revised interest rate is correctly
percolated to the account and ensure the correctness. Wherever account
level preferential/concessional interest rates are permitted, branches are
not ensuring the correctness of interest rates and differential interest is not
being collected manually. (CBS guidelines 06/08 dt.18.02.008)


Incase of OD/OCC accounts/working capital limits, the interest rates are

maintained at account level at branches. Branches have to effect the
interest changes at account level by opting CHM48. Check the same.
(CBS guidelines 06/08 dt.18.02.2008)


Incase of ODCC accounts in CBS, most of the products are linked to

BPLR. Check whether branches are selecting Index rate of BPLR (20001)
in CHM07 option at the time of limit creation and maintain variance in
CHM48 for customer accounts, so that any change in BPLR will get
effected at account level automatically when the rate is changed at DIT
level. (CBS guidelines 06/08 dt.18.02.2008)

Page 3 of 19


In case of PMRY loans, subsidy is to be placed in term deposits carrying

0% interest and while fixing slab rate of interest for loan, branches are
feeding the rate of interest as 0% from the first day itself. It should be
actually from the date of disbursement of last instalment. (CBS guidelines
87/07 dt.19.10.2007)


Branches are not maintaining register for interest rate changes as per
circular 326/94 and Appendix-1 of manual of instructions on Interest


Before proceeding with the scrutiny of loan documents, IOs have to go

through Interest Scheme Codes created by the branch. By checking
various versions for updations, IOs can observe that some of the interest
revisions are not updated by the branch. Whenever interest rate is fed at
ACCOUNT LEVEL, more care needs to be exercised. There is no
provision for generating a list of accounts having ACCOUNT LEVEL
codes. Branches are required to maintain a register for these accounts
and updations are to be carried out one by one. Many omissions have
been noticed in such updations. (CBS guidelines 30/06 dt.08.09.2006)


Rate of Interest changed in the system with retrospective effect is not

taken care in the Core Banking System due to limitation of the package.
(Cir.No.224/05 dt.20.08.2005 & CBS guidelines 6/08 dt.18.02.2008))


Whenever interest rates are revised branches are required to update the
same expeditiously. If there is delay in updating the interest scheme code
in IBBS PACKAGE, even if effective date is given, system will not
calculate interest from back date unless updation is done within that
month itself, i.e. Before interest is debited for the month in which revision
is made. (Cir.No.224/05 dt.20.08.2005 & Page 68 Clause 12.2 of BPCMOI on Interest Collected updated till 30.11.2003))
To quote an example, if interest revision of 05.05.2006 was effected in the
month of July 2006, even though effective date was fed as 05.05.2006,
system will not recalculate the interest for the months of May and June
2006 in IBBS package. However, Bancs 2000 will recalculate from the
effective date and debit the differential interest.


In the case of wrong credits made in Current account/OD accounts, while

reversing, branches do not reverse with value date. In such cases,
interest for the notional OD/transgressions, is to be calculated manually
and system will calculate only if value dated reversal is done.

Page 4 of 19


Simple Interest collected on adjusted rates.


Branches are in the habit of changing the repayment commencement date

to a future date in the system whenever accounts are going to appear in
Special Watch accounts. In these cases, the system will calculate
overdues only from such future date and will take into account all the
recoveries made so far as prepayments resulting in incorrect calculation of
overdues. Overdue interest will not be calculated from the date of loan to
till the date of commencement of modified repayment date. Party who is
at default gets benefited. There is a stipulation that whenever such
rephasements are done, branches are required to change the DCB figures
which will avoid such mistakes but many branches are not aware of this
stipulation. (Cir.No.224/05 dt.20.08.2005)


Compound interest flag should be N for simple interest loans and Y for
other loans. However compound interest flags are to be made as `Y in the
case of overdue agricultural loans. IOs attention is drawn to HO Cir
131/06 dated 12 05 06.
In the case of Gold Loan accounts, compound interest flag is to be
changed as `Y' at the end of 12 months, which is not being done resulting
in income leakage. (Cir.No.131/06 dt.12.05.2006)


Broken period interest in respect of loan accounts is not collected by

branch subsequent to migration to CBS i.e., from the date of last charged
in the legacy till the date of migration. Branches have to arrive the
differential interest and debit manually as given below: (CBS guidelines
11/08 dt.10.03.2008)
a. Holiday period and staff loan accounts where interest is not
charged, broken period of accrual interest can be arrived as
Accrual interest available in the LNM10 Account Details (minus)
uncollected interest in the legacy system (minus) catch up interest
accrual in CBS available in LNM10 Audit Trail.
b. EMI and IPI (Non EMI) accounts where interest is not charged and
accrual is happened in the month end (Ex : February 2008)
Accrual interest available in the LNM10 Account details (minus)
interest accrual in CBS available in LNM10 Audit trail

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c. EMI and IPI (Non EMI) accounts where interest is charged and
accrual is happened in the month end (Ex : February 2008)
Interest charged in the loan account in LNM10 (Statement of inquiry)
(minus) {interest accrual happened in the month end + catch up
interest accrual till the anniversary date} in the LNM10 - Audit Trail.

For OD / VSL against 3rd party deposits, higher rate of Interest as

applicable to category of borrower not collected. (Cir.No.162/08


Whenever deposits pledged to VSL are renewed, corresponding interest

revision for VSL is not updated.


OD/VSL against deposits - 100% erosion of margin - clean rate of interest

for the overdrawn liability will not be calculated by the system and to be
done manually. (System deficiency) (Cir.No.162/08)


In respect of LPD accounts, the rate of interest prevailing as on the date of

transfer of the liability to LPD with penal interest if any, is to be taken as
the rate of interest applicable till the closure of the LPD account, not
withstanding the changes made at the product level at DIT. Branches are
not taking care of this aspect. (CBS guidelines 27/08)


In LPD Suit filed accounts, interest till the date of filing of suit not
calculated and not included in the plaint. (Page 48, Clause 7.5.1 of BPCMOI on Interest Collected updated till 30.11.2003)


Transferred loan accounts product adjustment register not maintained

and appropriate interest not collected. (Cir.No.224/05 dt.20.08.2005 &
IBBS guidelines 4/01 of CPPD dated 03.04.2001)
Transferred loan accounts - IOs to verify product adjustment register and
ensure collection of interest. (Cir.No.224/05 dt.20.08.2005)
Income leakage is always observed in the case of employees transferredin accounts. Branches though feed the accumulated products as furnished
by the transferor branch, fail to take into account the products from the
date of transfer to the date of opening the account in the transferee


In NPA accounts where recoveries are effected, branches are not

appropriating the same to interest collected account. (Cir.No.224/05
dt.20.08.2005 & Page 90 Clause 3.6, 3.9 of BPC-MOI on Interest
Collected updated till 30.11.2003)

Page 6 of 19


Rate of interest is to be reset promptly in case of term loans where reset

clause has been stipulated. Inspecting Officers have to verify whether
reset has been done as per reset clause and updated in the system.


Collection of penal interest in case of non-compliance of bill culture norms

and non-completion of EMT / II Charge in terms of HO Circular
No.197/2001 dated 04.10.2001.


Adhoc limit wherever granted, 1% additional interest not collected and

when not regularized before the period specified 2% penal interest not
collected (Page 60, Clause 9.5.8 of BPC-MOI on Interest Collected
updated till 30.11.2003).


Penal Interest on delayed submission/non-submission of stock statements

not collected. (to be done manually) (Page 60, Clause 9.5.5 of BPC-MOI
on Interest Collected updated till 30.11.2003)


When there is no stock / less stock penal interest not collected. (to be
done manually). (Page 60, Clause 9.5.5 of BPC-MOI on Interest
Collected updated till 30.11.2003)


Penal interest for overdue amount / installment not collected. Overdue

Month End Flag should be fed as `Y' for staff loans only. But some of the
branches feed the same as `Y for all personal loans like Canpension,
Canbudget, Canmobile etc. where repayment is linked to salary. This
results in wrong calculation of overdues as well as overdue interest. (Page
60, Clause 9.5 of BPC-MOI on Interest Collected updated till
In the case of EMI loans, branches should feed the EMI flag as `Y as
otherwise system appropriates the recovery to principal alone and
overdues are understated and resultant loss of penal interest income.


Processing charges as per sanction and for adhoc / extension of limit not
collected. (Cir.No.96/07)


TOD outstanding beyond stipulated period (Current Account) Processing

charges not collected. (Cir.No.96/07 dt.29.03.2007)


CDB permitted under Emergency Powers- Processing charges not

collected, if not realized with in 15 days of discounting. (Cir.No.96/07

Page 7 of 19


Upfront fee not collected wherever term loans are granted with repayment
period of 36 months and above classified as Term Loan. If the repayment
period is less than 36 months but the repayment holiday + repayment
period permitted is equal to 36 months or more, upfront fee is to be
collected. (Cir.No.96/07 dated 29.03.2007 & & Compendium of
Instructions / Guidelines on Services Charges dated 30.09.2001)


Ledger Folio charges not collected for OD/OCC/Current/KCCS Accounts.

(Cir.No.231/07 dt.28.08.2007)


For Project appraisal Certificate are issued on behalf of our customers one
time fee of Rs.10000/- not collected ( HO cir no. 96/2007 dtd. 29/03/2007)


Documentation charges are not being collected as per cir. 96/07 dated


Charges if copy of documents is for submission to any statutory authority

not collected as per cir. 96/07 dtd.29/03/07.


Charges for noting cancellation of Banks lien on Govt securities / LIC

policies at the time of grant of loan not collected (HO cir no. 96/2007


Commitment charges not collected (HO cir. No. 96/2007).


Wherever loans are syndicated by us, whether syndication fee is

recovered by the branch as per term sheet is to be verified.


Wherever we have taken up Lenders Agency / TRA / Escrow Agency /

Lead Bank Assignments (Term Loan), collection of annual fee at agreed
rates needs to be verified.


Pre Closure charges not collected for retail loans and term loans.
(Cir.No.338/06 dt.11.12.2006)


Periodical Godown Inspection charges / Unit Inspection charges not

collected. (Cir.No.96/07 dt.29.03.2007)


When Export Gold Card Limit is renewed for 3 years, processing charges
collected for one year only. (Page 341, Clause 1.3 of BPC-MOI on
Working Capital Finance updated till 30.06.2005)


Penal interest for liability in excess of drawing power not collected (Cir.
No.224/05 dated 20.08.2005 & Page 225, Clause 4.21.2 of BPC-MOI on
Working Capital Finance updated till 30.06.2005)

Page 8 of 19


201. When bills are handled under LCs opened by other banks, branches
collect interest upto the due date without having reference to the actual
date of receipt of funds in our Bank account.
202. Non collection/Short collection of commission/processing charges on NFB
limits. (Page 70, Clause 12.2.xi of BPC-MOI on Interest Collected
updated till 30.11.2003)
203. LC amendment charges not collected. (Page 68, Clause 11.6 of BPCMOI on Bank Guarantees updated till 30.09.2004)
204. Wrong collection of commission on FLC/ILCs: Whenever LCs are opened
with tolerance clause and interest clause, commission needs to be
collected for LC value + Tolerance level + Interest amount. System will not
take care of this aspect. In Bancs 2000 package there is a provision for
entering tolerance % and if entered correctly, commission will be collected
for LC value + tolerance amount. Here again, commission will not be
calculated for the interest portion.
205. Commission not collected on disputed Bank Guarantee invoked but not
crystallized due to Court Proceedings. (Page 53, Clause 11.2 of BPCMOI on Bank Guarantees updated till 30.09.2004)
206. Commission short collected on GTEs due to wrong classifications of the
type of Guarantee. (Page 53 Clause 11.2 of BPC-MOI on Bank
Guarantees updated till 30.09.2004)
207. Deferred collection of commission on BG on annual basis not followed up
and collected. (Page 59, Clause 11.8 of BPC-MOI on Bank Guarantees
updated till 30.09.2004)
208. Processing Charges not collected on BG permitted on single transaction
basis. (Page 52, Clause 11.1 of BPC-MOI on Bank Guarantees
updated till 30.09.2004)
209. Minimum 2 quarters commission for BG, upto Rs. 10 lakhs not collected.
(Page 53, Clause 11.2 of BPC-MOI on Bank Guarantees updated till
210. For Solvency Certificate / Capability Certificate appropriate commission
not collected. (Cir.No.96/07 dt.29.03.2007)

Page 9 of 19

211. Full guarantee commission not collected at the time of devolvement

wherever concessional commission is permitted. (Cir.No.345/05
212. For availing Buyers Credit facility, Letter of Comfort / Undertaking are
being issued to our borrowers. Collection of commission as applicable to
financial bank guarantees for the same and not as applicable to LCs, need
to be verified.


Wrong feeding of NRE SB and NRE Term Deposits interest rates,

resulting in excess / short payment of interest.


In Computer System, change in parameters are not effected whenever

there is change in Rate of Interest


Payment of Interest to ineligible SB Accounts. (Page 68, Clause 12.2 of

BPC-MOI on Interest Collected updated till 30.11.2003)


In Bancs 2000 package branches, there is no provision to find out cheque

leaves issued beyond 40/60 leaves in a year to SB accounts and charges
are not recovered by the system hence it is to done by manually. (Cir.
No.231/07 dt.28.08.2007)
Presently, in Bancs 2000 package there is no provision to find out cheque
leaves issued beyond 40/60 leaves in a year to SB accounts and charges
are not recovered by the branches through the system. It is to be done
manually and omissions are noticed. BC officials/IS auditor's help can be
sought for writing a SQL program to extract a list of accounts where
cheque leaves beyond the prescribed 40/60 leaves are issued.


Non collection of service charges for non maintenance of minimum

balance in SB/CA incase of Banc 2000 branches by not running the
programme and in the other packages (IBBS, CBS) parameters are noted
correctly. (Cir.No.231/07 dt.28.08.2007)


Folio charges/Half yearly Service Charges for in-operative SB/CA

accounts are not collected. (Cir.No.231/07 dt.28.08.2007)


Stop payment charges as applicable and Service Charges for closure of

accounts within one year are not collected. (Cir.No.231/07 dt.28.08.2007)

Page 10 of 19


Service charges not collected for return of cheques in SB, CA, etc. while
branches are promptly collecting cheque return charges in respect of
return of inward clearing cheques, charges are not being collected in
respect of outward clearing cheques returned from other banks. System
will not calculate and manual intervention is required. (Cir.No.231/07)


Interest not collected for return of inward clearing cheques received for
amount of Rs. 50,000/- and above. (Page 94, Clause 45.7.6 of BPC-MOI
on SB / CA)


Locker Rent short collected. (Cir.No.224/05 dt.20.08.2005 & Page 4 & 6,

Clause 3 of BPC-MOI on Safe Deposit Lockers updated till


Delayed remittance of locker rent @Rs.20/- pm/fraction of a month for a

period of delay not collected (HO cir 231/2007 dated 28.08.2007).


Rs.20/- per operations beyond 24 operations per year not collected (HO
circular No. 231/07 dated 23.08.2007.


Excess commission paid to NNND agents. (Box item (NC) to Cir.

No.95/08 dt.10.04.08, No.107/08 dt.28.04.08 & No.108/08 dt.29.04.08)


Short collection of commission on DDs/TTs/OSC etc.

In the case of OSCs, 50% commission is applicable only for Public Sector
Banks and RRBs sponsored by our Bank. Branches extend this 50%
concession for private sector banks like ICICI Bank, IDBI Bank, IndusInd
Bank etc. (Page 65 & 66, Clause 2.2 of BPC-MOI on OSC)
Whenever OSC proceeds are placed in term deposits, branches do not
collect commission. There is no such blanket permission. Powers are
delegated to RO and CO for waiver of commission.
Whenever FOSCs are handled, commission is to be collected at the rate
of 0.25% subject to a minimum of Rs.10/. This commission is chargeable
even for OSCs handled for our NRIs. Branches are under the wrong
impression that only P&T need to be collected from NRIs. While it is so for
inland instruments, commission at the above rates is to be collected from
NRIs also for FOSC instruments. (Page 60, Clause 3.22.7 of BPC-MOI
on Foreign Remittances updated till 31.01.2003)

Page 11 of 19


Turnover commission for Government Transactions claimed wrongly.

(Cir.No.142/06 dt.23.05.06)


Postal tariff are not collected in all cases wherever applicable, including
where at par facilities are granted, as follows. (HO Circular 231/07)
i) Ordinary Post
ii) Registered/Courier
iii) Telegram/fax/Telephone $

: Actual minimum Rs.10/- per envelope

: Actual minimum Rs.30/- per envelope
: Actual minimum Rs.50/- per message

$ Only at the request of customer.


Service Charges for Electronic Clearing Service (Debit Clearing) of Rs.1

per transaction are not collected. (HO Circular 23/2006).


Electronic Clearing Service (Debit Clearing) Charges for returns not

charges/collected. (HO Circular 110/2008).


Cash handling Charges for Cash Remittance to CA/OD/OCC accounts are

not collected by branches (H O Circular 13/2008)


Service Charges in respect of funds transfer using Canspeed

(RTGS)/NEFT are not collected by branches. (HO Circular 27/2008).


Charges for overdue GRs not collected. (Cir.No.224/05 dt.20.08.2005 &

Page 30, Clause 1.41.6 of BPC-MOI on Export General updated till


Whenever advance payment is received for export a commission of

Rs.100 is being deducted at FD. When export bills are tendered
subsequently at branches by customers, a commission of Rs. 250/Rs. 100
as the case may be is to be collected from them by branches and credited
to their Commission account. IOs attention is drawn to Page 270 of Export


In case of Export Bills drawn in Indian Rupees, appropriate commission

not collected.

Page 12 of 19


A) IBBS Platform:

In SB and CA modules SB and CA minimum balance violation charges

and TOD interest rates not fed. (Cir.No.231/07)


MICR cheque charges not parameterized correctly. (Cir.No.231/07)


Folio charges in CA and ODCC are not fed correctly. (Cir.No.231/07)


Stop payment charges are to be collected manually, as the system does

not provide for the same. (Cir.No.231/07)


In ODCC, generally system takes care of collecting folio charges. But

branch may set a flag in master for collecting folio charges manually.
These accounts are to be verified. (Cir.No.231/07)


Effective date for TD is entered wrongly resulting in wrong calculation of



Payment of interest to NRE term deposits when closed before maturity

within 12 months. (Page 31, Clause 1.22.1 of BPC-MOI on NRI Deposits
updated till 31.07.2003)


Interest is being charged with interest debit mode set wrongly as quarterly/
half yearly / yearly instead of monthly.


Advances interest failure reports are not reviewed and interest is not
debited manually in these accounts


In advances, scheme level interest updation is not done or interest is

wrongly updated. Interest is short debited in loan accounts having this
particular interest code.


Even if the branch updates ROI at scheme level, they have not updated in
the loan accounts where interest is defined at account level.


In overdue AL loan accounts simple interest is charged and compound

interest flag is not modified as Y(Cir.No.132/06 dt.12.05.2006)


Simple interest is stipulated in some of the retail lending schemes like

Teachers' loan, instead of compound interest (Page No.22, Clause 5.13
of BPC-MOI on Interest Collected updated till 30.11.2003)

Page 13 of 19


In loan accounts collection flow id is wrongly set as BOPI instead of BOIP.

Flow Id BOPI can be stipulated only for staff housing and LHV loans
where principal amount is recovered first. Short collection of interest is
observed since the entire credit is adjusted to principal and not to the
outstanding interest. (CBS guideline 11/08 dt.10.03.2008)


While feeing master data in computer, the collection flow ID and

compound interest flags are not set correctly which will result in income
leakage (CBS guideline 11/08 dt.10.03.2008.
Staff simple
Others simple


Collection Flow ID

Compound Interest Flag


Non updation of interest rates in Advances / Loans, (CBS User

Educational Series No.8 dt.13.07.2006)

BANCS 2000 Platform - Legacy Data


Non recovery of minimum balance charges in current account due to SQL

program used for recovery is wrongly modified by local TM sections
officials. (Cir.No.231/07 dt.28.08.2007)


Setting of Numeric codes of interest like D 1050 for 10.50% for VSL loan
accounts instead of creating separate code for each and every VSL loan
account depending upon the limit.


If Term Deposit account is opened on transfer from other branch with

interest amount fed wrongly, system will not verify the correctness of


For every change in Domestic Deposit Rate, corresponding overdue

Domestic Deposit Interest code is to be set up as per DIT guidelines.
System may take wrong interest code if Deposit is renewed after 14 days.

Page 14 of 19

B. Core Banking Solution


Checking of Interest Rate for all ODCC & Loans and advances
Fast Path
- For ODCC accounts
Fast Path
- For loans and advances
(CBS guideline 2A/2006 dt. 26.06.2006)


Checking of all loan accounts with details whether Fixed or Not Sample
verification of some loan accounts whether the loan type shown in the
report are actual Fixed Interest accounts or not? (CBS guidelines 7/08
dated 26.02.2008)
Report to be generated through Business Objects Loans and advances
interest rate for loan accounts List of fixed type loan accounts.


Incase of CDB/FCDB in Flexcube Retail module, the Rate of Interest

changes has to be handled procedurally by inputting the interest variance
field in ST070 at the time of purchasing/discounting the
cheque/currency/TC. (CBS guidelines 46/07 dt.18.06.2007 & 7/08


Whenever Rate of Interest changes, incase of outstanding CDB/FCDB

amounts in Flexcube Retail Module, the differential interest, if any, has to
be debited to the CASA accounts of the customers and credited to interest
collected General Ledger manually.


As system will not support for recovery of overdue interest for

overdue/delayed period in the case of realization of Inland Bills like CDB,
branches have to collect the differential interest for overdue/delayed
period manually.
The differential interest can be observed by review of the following reports:
FP 643 List of CDBs/FCDBs - Purchased/Discounted
FP 213 List of CDBs/FCDBs - Realised


Incase of renewal of NRE Deposits within 14 days, System will not support
for picking the lower rate of interest between the interest rate on the date
of maturity and the prevailing interest rate on the date of Renewal. Hence
IOs should verify such accounts and ensure that higher rate of interest is
not paid. (Page 35, Clause 1.27 of BPC-MOI on NRE Term Deposits
updated till 31.07.2003)

Page 15 of 19


Incase of agricultural loans, for the products 812, 840, 841, 842, 845, 847,
876, 895, 896 and 899, the interest rates are fixed at the account level in
LNM83. As such, the branches have to take care of interest change at the
account level only. (CBS guidelines 29/08 dt.30.06.2008)


The interest rate change in respect of Farm House loans (Products 783
and 885) is to be taken care at the account level, as the change in the
product level has not taken effect at account level due to mismatch of
'interest slabs' between account level (LNM83) and product level (LN060).
(CBS guidelines 29/08 dt.30.06.2008)


Interest rates for DPN loans to employees are different depending upon
the period of sanction (Prior to introduction of Clean OD 13.75% & for
converted DPN 9%). Since, we cannot assign different rates of interest
to the same product, we have assigned the ROI for the product 701 (Staff
Clean DPN) as 13.75%. Branches may note to give the interest variance,
wherever applicable. The interest variance earlier maintained to be
modified as the interest index selected is BPLR. (CBS guidelines 29/08


In respect of Loans in CBS, the necessary changes in Rate of Interest, as

communicated in HO Circular from time to time, are effected, at product
level at DIT. Branches have to verify all the loan accounts and ensure that
the change in Rate of Interest has been percolated at account level
correctly. In case of any discrepancy in rate of interest, branches have to
rectify the same by giving account level variance in LNM83 (both 1000
and 4000 series) and adjust the differential interest to the loan accounts
through BAM57. (CBS guidelines 29/08 dt.30.06.2008)


In case of OD/OCC accounts/Working Capital limits, the interest rates are

maintained at account level at Branches. Hence, branches have to effect
the changes in ROI at account level by opting CHM48. In case the
branches have already selected BPLR index code (20001) at the time of
opening of the account, in CHM07, the changes made at DIT level would
have percolated to such accounts. IOs should check whether correct
interest is charged to the OD/OCC accounts. (CBS guidelines 29/08


For OD/OCC accounts, it is preferable that Branches select Interest Index

rate of BPLR (20001) in CHM07 option at the time of limit creation and
maintain variance in CHM48 for Customer accounts, so that any change in
BPLR would get effected at account level automatically when the rate is
changed at DIT level. (CBS guidelines 29/08 dt.30.06.2008)

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In case of Staff OD accounts, normal Interest Index rate codes are only to
be attached at the time of account opening. (CBS guidelines 29/08


Wherever OD is granted against Deposits, branches should maintain the

variance over and above the Deposit Rate, in CHM48 , as the system
arrives the Net Rate basing on the rate noted in CHM07(Deposit Rate) +
the interest variance maintained.(2% over and above the deposit rate) in
CHM48 (CBS guidelines 29/08 dt.30.06.2008)


Rate of Interest for VSL/OD against own deposits:

As per HO guidelines, the ROI for a VSL against own deposits excluding
NNND and FCNR upto the value of 90% of the deposit is 2% above the
ROI offered on deposits, 90% to 100% of value of deposit is 2% above
the ROI stipulated on the loans and advances and more than 100% of
value of deposit is clean ROI. But CBS system supports interest only 2%
above the ROI on deposits. Hence, branches have to calculate the
differential ROI manually. (Cir.No.162/08 dt.30.06.2008).


In case of VSL/OD against third party deposit and loan/OD against NNND
deposits, loan against FCNR, RFC, NRE, the ROI changes to be handled
manually. (CBS guidelines 29/08 dt.30.06.2008)


Interest variance should not be given by the Branches in LN057 for the
accounts where incremental slabs are applicable. (example staff VSL
accounts) else, the variance will get updated in all the slabs. (CBS
guidelines 29/08 dt.30.06.2008)


Rate of Interest applicable for loans to individuals (Clean OD/DPN other

than Teachers loan) is to be handled manually. (CBS guidelines 29/08


Rate of Interest applicable for CANRENT/CANMORTGAGE for the

accounts opened before 17-04-2007 is to be handled manually. (CBS
guidelines 29/08 dt.30.06.2008)


Resetting the ROI after 3 years in case of fixed ROI in the loan products of
manually. (CBS guidelines 29/08 dt.30.06.2008)

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