RATIONALES

1. Cheque Truncation System is introduced.

Ans: Capture image of cheques and restricts their physical movement.

This will speed up the collections.
To prevent the possibility of frauds.
To control the complaints of missing of instruments.

2. Mobile Banking is introduced in banks.

Ans: Mobile phones can be used as a medium of banking services.

The rapid growth in users and wider coverage of mobile phone network has made it an important
platform for extending banking service.
It is cost effective.
It will attract new generation customers.
Nationalised banks can meet the competition.
In order to ensure the level playing field for our bank in comparison of Foreign/Private banks.

3. HRMS project is implemented in our bank.

Ans: To manage the human resources properly. Deployment of staff, proper person for proper place can
be implemented effectively.
Back office operations in respect of staff can be centralised at one place.
This will provide more time to the staff at branches for business development work.

4. Very high Current Ratio is not a good sign.

Ans: Very high current ratio is an indicator of in-efficient working capital management.
There is a risk of manipulation in quality, quantity, rate of the current assets, which may result in
wrong decision.
There is a possibility of hoarding of stocks, accumulation of non moving stock, long unrealised debts
etc.

5. Documents are to be filled in completely before execution.

Ans: Documents are proof of availment of the loan/advance.

If documents are not completely filled-in before execution, the borrower may object the genuinity of
the matter filled-in subsequently. He may disagree to repay the loan on the grounds that he was not
aware about all the terms and conditions of the loan.
It is not a good practice as the procedure will not be transparent.

6. Loan for milch animals is disbursed in two phases.

Ans: Loan is released for purchase of milch animal and second instalment is released after 6 months to
ensure that one animal will give milk during dry period of the other animal for continuous income
generation for the borrower.
The repayment of loan will be regular.

7. Under SARFAESI Act 2002, Possession Notice should be published in two news papers.

Ans: As the possession of the property is taken over by the Secured Creditor, it is a notice to the public
as well as to the borrower informing them of the fact and cautioning them not to deal with the said
property.

8. Promoting Farmers Clubs is beneficial to the Bank.

Ans: Farmer’s club formation is based on the principle “Development through credit”.
It enables the farmers to adopt improved practices for their development.
Because of their voluntary participation, the change process will be faster.
We can as well make use of the Clubs to inculcate proper credit discipline among the farmers.

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9. Staff accounts should be scrutinised thoroughly by the Branch Manager at regular
intervals.

Ans: With a view to ensure that such accounts are conducted properly and that no transactions of an
unusual nature (involving large amounts disproportionate to known sources of their Income) are
being routed through these accounts.
Also to prevent possible frauds.

10. ‘Whistle Blowing’ is given importance.

Ans: The growing number of frauds and declining ethical values and corruption at high levels made it
necessary to introduce a system whereby a check can be had.
It will also boost the morale of the lower level people in an organisation.

11. Why Corporate Governance?

Ans: To enhance shareholders value.

To protect interest of shareholders, customers, employees and society at large.
To ensure transparency and integrity in communication and to make available clear information to all
concerned. To ensure accountability for performance and to achieve excellence at all levels.
Kumar Mangalam Birla Committee has given various recommendations on it.
To provide corporate leadership.

12. Why Cross Selling?

Ans: It is selling additional products/ services to an existing as well as new customers and it fosters brand
loyalty.
It costs a bank five times less to cross sell an existing client than to acquire a new one.
Cross Selling helps bank to plan, implement, and maintain better customer relationship management
programmes. Right product at a right time offered to customer. This builds banks image. It
helps bank to increase miscellaneous income.

13. Alternate Delivery Channels are the need of the hour.

Ans: Several alternate delivery channels such as ATM, Mobile banking, Internet banking, etc. will
provide customer satisfaction and convenience.
It will decrease the crowd at the counters and give free time to branch operative staff to sell and
market products.
It will help to improve market share and quality of business.
It will help our bank to compete effectively with new forces of the market.

14. Banks are focusing on CASA Deposits.

Ans: CASA deposits are low cost deposits. They are stable and useful for ALM.
Since CASA deposits are obtained from a large number of customers, it eliminates the shocks of
sudden withdrawals. Customer base will increase which increases cross selling opportunities and
revenue to the bank. This is also a way of financial inclusion.

15. Bank brands the stamp `All our stamps cancelled' while returning the cheques.

Ans: This is done to ensure that the Bank does not incur any liability in future as an agent for collection
of the instrument.
Holder can renegotiate the instrument through the same or even other Bank.

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16. Pre-sanction inspection is very important.

Ans: To know the exact location of the business.

To ascertain creditworthiness, local standing and integrity of the applicant.
To examine suitability of location.

17. Articles kept in safe custody should be examined periodically.

Ans: To prevent any possibility of these articles being damaged by white ants and dampness etc.
To discharge our duties as that of bailee as per Section 151 of Indian Contract Act.
18. Payment of a Bank draft cannot be stopped by the purchaser.
Ans: While issuing the drafts the Bank receives value well in advance.
Hence, the bank cannot go back on its own promise to pay the money, which was received as
consideration.
Once a draft is issued, the Bank becomes trustee of the funds for the payee.
The payee might have got the title to the draft by providing some consideration.
Hence payment of draft cannot be countermanded.

19. Job rotation in the Bank is done periodically.

Ans: To avoid frauds arising out of the monopoly of the specific employees handling specific areas.
To drive out monotony. Development of the people by providing them with an opportunity to handle
different types of jobs on a regular basis. To avoid the effect of indispensability of selfish people.
To ensure that the Bank’s work does not suffer in the absence of anybody.

20. Password secrecy is observed in Branch.

Ans: Password secrecy protects bank and save us from future loss and misuse by fraudsters.
The sensitive information can be used by unscrupulous elements for own vested interest.
Fraud committed can cause loss to individual and organization.
More than that it can cause reputation loss for the organization.

21. Government Business has to be given a lot of importance.

Ans: It contributes to the bottom line directly by means of commission income.

No need for any outlay of funds/ capital adequacy.
It gives scope for close rapport with various Govt. Departments.
It gives vital business leads

22. All persons intending to hire Safe Deposit lockers are required to open either a Current or
Savings Bank account if they do not already maintain such account. Why?

Ans: Opening of an account would establish the credentials of the customer beyond
doubt.
Safe deposit locker rent can be debited to such accounts as and when due.

23. Form 60/61 has to be obtained in the absence of a PAN No., for opening account with an
initial deposit of cash.

Ans: CBDT have clarified that it is not mandatory to have a PAN / GIR No. to open an
account.
But, in lieu of that, form 60/61 has to be obtained.
Form 61 relates to accountholders whose income is from agriculture and Form 60 is taken from
others.

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24. Note bundles should be periodically turned over in the strong room.

Ans: To avoid notes getting stuck to each other/deteriorate in quality.

To obviate notes getting damaged due to white ants/pests
To enable verification at periodical intervals.

25. Partial Endorsement is not valid for purpose of Negotiation.

Ans: As per Sec. 56 of NI Act, a person's liability in a contract cannot be apportioned.

Therefore, a partial endorsement will not be valid in law.

1) Negotiability is not same thing as transferability of Negotiable instrument.

Negotiability of Negotiable instrument means free transfer of title in favour of a transferee by the transferor
through delivery or endorsement and delivery. Through negotiation, the transferee gets better title even
though there may be defect in the title of the transferor provided the transferee has no notice of such defect.
In case of negotiability, the transferee gets a title subject to defects if any, and not free from such defects.

2) A cheque is defined as bill of exchange, but it is not stamped.

A cheque is demand bill of exchange instead of usance bill of exchange. It is only usance bills, which attract
payment of stamp duty under schedule I of Indian Stamp Act. Issue of cheque without payment of stamp
duty, as such does not attract any violation of any law of the land.

3) A material altered cheque is not paid without the authentication by the drawer.

Material alteration of cheque alerts the mandate of the drawer and Banks can make payment of the cheques
drawn by them taking into account the mandate. In case a cheque with material alteration is paid, it will
amount to payment without caring for the mandate of the drawer. Such payment cannot be considered a
payment in due course and Bank will be held liable to compensate the drawer in case of loss to him.

4) Bank do not prepare Draft payable to bearer on demand.

Under the provision of Sec 31 of RBI Act 1934, no person in India, other than RBI or Central Govt, shall
draw, accept, make or issue any Bill of Exchange, Hundi or Promissory Note for the payment of money
payable to bearer on demand. Although Sec 5 of NI Act does not put any restriction on the drawer ( bank in
case of bank draft ) of a bill of exchange to draw it as payable on demand to bearer, but Sec 31 of RBI Act
has an over-riding effect.

5) All partnership firms are not registered with Registrar of firms.

Under provisions of Sec 69 of Indian Partneship Act 1932, it is not mandatory that a firm should get itself
registered with Registrar of Firms, which has the effect of a public notice. The registered firms however, have
certain advantages which the unregistered fims do not have. The non registered does not make the
partnership illegal in any way, though its legal position is weak compared to the registered firms.

6) Banks prefer registered partnership firms for the purpose of giving loans.

Under provisions of Sec 69 of Indian Partnership Act 1932, it is not mandatory that a firm should get itself
registered with Registrar of Firms, which has the effect of a public notice. The registered firm can sue other
parties in its name, on the contracts entered into by it with third parties. Such provision is not available for
unregistered firms this may affect the recovery of dues from the firm when the firm is unable to recover the
dues from its debtors.

7) A cheque signed by an expired partner of a firm is not paid while a cheque signed by an
expired director of a company is paid.
A partner in a partnership firm represents the firm as well as himself, being jointly and severally liable for the
dues. With his death, the contract with the Bank comes to an end. On the other hand, a director represents
the company and is only an agent. Death of an agent though brings end to agency but not the company.
Hence, relationship between company and bank does not terminate.

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8) When a cheque is crossed to two Banks it is not paid.

A crossed cheque is considered to be direction of the drawer to the paying bank, but crossing in favour of
two banks is not a clear mandate unless it is stated simultaneously that one Bank is acting on behalf of the
other. Sec 127 of NI Act prohibits payments of such cheques. The paying Bank cannot get protection, if such
cheques are paid as mandate is not clear.
9) Liability of an endorser of a Negotiable Instrument is similar to principal debtor / guarantor.

Under Sec 35 of NI Act, an endorser is deemed to have impliedly promised that on due presentment the
instrument will be paid and in case of dishonor, the holder will be compensated if he receives a notice of
dishonor. As a result, his liability to pay is absolute without any pre-conditions. He is the party, who is liable
on the instrument jointly as well as severally.

10) A currency note is not a promissory note despite fulfillment of most of the features of a
promissory note.

Sec 4 of NI Act while defining a promissory note, expressly excludes the bank note and currency notes from
the definition of a promissory note, as bank / currency notes are money. Further, bank / currency notes are
issued as payable to bearer whereas a promissory note cannot be issued as per restrictions imposed by Sec
31 of RBI Act. NI Act does not affect the provisions relating to paper currency as contained u/s 21 of Indian
Paper Currency Act 1871, which deals with currency / Bank notes.

11] Your branch is located in a city with population more than 100000. A Co – Operative bank is functioning
at the same place. About 2 KMs away a college with staff strength of 150 is functioning. You understand that
a sales representative of private sector bank is marketing for Housing Loans. How you will deal with the
situation.

ANS: The branch has been exposed to competition from a private bank. We will take following steps –
1) Contact the college authorities to open salary accounts of the staff.
2) Take a meeting of staff members to inform them about our Personal Loan, Car Loan, Education Loan
scheme etc.
3) Advise them about the various banking products available under one roof in our bank.
4) We will inform them about the financial assistance to the college under school plus scheme.
5) We will inform them about the technological upgradations & facilities available in our bank viz.
Corporate Internet Banking, Retail Internet Banking, Mobile Banking etc.
6) We will undertake viability study to install ATM in college campus in view of the number of student
accounts.
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12] A customer is maintaining a current account showing a credit balance of Rs 25,000 with your branch. The
bank receives a Garnishee Order from a local court restricting the operations in all the accounts of the
customer. The customer has also hired a locker. He requests that he has to attend a marriage and wants to
operate the locker. Will you allow the customer to operate the locker, or decline his request after receipt of
the Garnishee Order?

ANS:
1) Garnishee orders are applicable on amounts, which the customers keep with the bank as deposits.
2) Literally, Garnishee Order means that orders applicable on 'Debtors'. Bank is a debtor to its
customers in respect of only deposit accounts.
3) Providing Lockers to the customers is a facility given by the bank but it is neither a deposit account,
nor the bank is a 'Debtor' for the same.
4) Garnishee Order is applicable only under the Debtor - Creditor relationship. It means money
belonging to the customer in the hands of Banker at the time of receipt of the order.
5) In case of locker, the relationship is of lesser and lessee on which Garnishee Order is not applicable.
6) Bank therefore, will allow the locker holder to operate the locker.

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13] A person approaches you with a cheque drawn on other bank and requests you to open a TDR for 3
years. What will you do?

ANS:
1) The person is not a customer of the bank.
2) The bank will not get the protection if cheque is collected for a wrong payee.
3) Therefore, first we will open a savings bank account of the customer after completion of KYC
formalities.
4) The cheque will be collected and TDR will be issued after realisation of the cheque.

14] Shri Kumar issued a cheque favouring “Yourselves” drawn on his SB account with your branch for
Rs.20,000/- for credit (of this amount) to his PPF a/c. The cheque, which was a bearer and open cheque,
was handed over by Shri. Kumar to his servant for delivery to your branch. The cheque has been paid in
cash to the bearer on the grounds “Once a bearer, always a bearer”. Is the Bank liable on account of
deficiency of service by payment of the above cheque? Comment.

Ans:
1) The cheques marked “Yourselves” are generally issued by customers who want a service rendered by
the Bank for an equivalent amount, which is an established practice in the Banking industry.
2) Hence, the Bank should have taken cognisance of the beneficiary (“Yourselves”), before making
payment of the cheque in cash.
3) The Bank is, therefore, negligent and deficient in service. Hence, the Bank is liable for making good the
loss to the customer.

15] You have a joint Savings Bank Account in the name of A & B to be operated E or S. You receive a notice
of A’s death. B now wants you to collect for this account cheque amounting Rs.50,000/- drawn in favour of A
and then allow him to withdraw the money. What will you do?
Ans:
1) B’s request should be firmly rejected.
2) After the death of A the beneficiaries of his assets are his legal heirs (representatives) and not B.
3) B would however, be allowed to dispose off the credit balance of the account in question at the time of
the receipt of notice of A’s death.

16] Mr. Menon and his wife are joint hirers of a safe deposit locker for the last 10 years. Mr. Menon has fixed
deposits to the tune of Rs.1 lac with the branch and is a very demanding customer. Mrs. Menon comes to
the branch in an agitated mood one day and says that she and her husband are going to be separated and
whether her deposits are safe with the bank. Mr. Menon drops into the branch in the afternoon with a request
to preclose his deposit for Rs. 7 lacs, which is the name of both he and his wife (E or S). He says that he
needs the money urgently for his business commitments. How will you deal with the situation?
Ans:Premature closure of term deposits in joint names can be done only with the approval of all the joint
account holders. Hence the customer’s request should be tactfully declined.
1) It must be explained to him that as per Bank’s rules and regulations, his wife’s discharge is also
required on the TDR receipt.
2) The Bank should be all the more cautious since there is a dispute between the husband and wife.
3) But the customer is a longstanding customer of high value connection. Hence it should be done
tactfully.
17) BANKS ENTERED INTO INSURANCE, Why ?

1. To diversify the business. 2. To improve non interest income.

3. To provide integrated services to customers 4. To face the competition of others

18) Bouncing of cheques due to insufficient funds treated as cognizable offence .

To enhance acceptability and creditability of cheque as dependable instrument , i.e. means of payment
settlement. To enhance reliability of cheque and eliminating chances of frauds, cheating ad otherwise
stopping of cheque on flimsy grounds. The penal clauses act as deterrent because bouncing of cheque for
want of sufficient balance in the relevant account is made a cognizable offence under Indian Penal Code.

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19) Rationale for appointing ombudsman

To facilitate quick disposal of complaints against banks regarding various services. This improves the
standard of customer service, as there are penalties for delinquencies and costs awarded to the
complainant. customers would become better aware of their rights and get better attention at the banks and
also inculcate social responsibility in banks; staff.
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20) Passwords on the computer should be kept secret
Password enables the official to access the accounts of customers, office account etc. If the password is
known to another person, there is a risk of fraud, mis-appropriation etc. putting the bank to loss. The official
also will be accountable for the serious lapse.

21) INTERNET BANKING INTRODUCED

1* To provide anywhere and anytime banking.
2* Extend prompt, efficient and flawless remittance facilities and services comparable in quality and
range to that of foreign and private banks.

22) RTGS SYSTEM INTRODUCED.

Customer will get the funds simultaneously when the remitter remitted the funds through safe, secure,
efficient and integrated payment and settlement system. Improves the customer service.

23) The payment of a Bank draft cannot be stopped.

Once a draft is issued the Bank becomes a trustee of the payee for the draft amount. Further the Bank Draft
carries a promise of the Bank that it would pay 'Payee' or 'order' a sum of money for value received and third
parties might have got title to the draft by negotiation. The Bank has already received the value for the draft.

24) Why Cheque Truncation is being introduced.

a. Capture image of cheques and restricts their physical movement.
b. To speed up the collections.
c. To prevent the possibility of frauds.
d. To minimize complaints of missing of instruments.

25. Why Right To Information Act.

 Enacted on May 13, 2005.
 Deals with right to information for citizens to secure access to information under the control of
public authorities.
 To promote transparency and accountability in the working of every public authority.
 Central/State Information Commission set up to secure compliance with the provisions of this
Act.
 Penalty of Rs. 250/ per day with maximum of Rs. 25000/

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1. Mr Foolchand, one of your customer is habitual of handing over the cash to a cashier of
the branch who resides near the shop of the customer. The cashier is making false
entries in the pass book to cover up the fraud. After knowing about this, Foolchand is
demanding money; he states that cashier is employee of Bank; cash is handed over to deposit
account in the Bank; bank is responsible for the misdeeds of cashier.
Should you accede to the request of Customer.?

Ans. As the acct has not been performed in the course of employment, i.e., not in branch premises,
bank is not liable for the same. This has been laid down by Supreme Court; it has been held by the SC
that in this case, the cashier has been working as an agent of Customer and not in the capacity of an
employee of the Bank. The Bank is not liable for misdeeds of the employee and loss to the
Customer.

2 The anticipated annual sales of a unit are Rs 20 lacs. The profit is Rs 2 lacs; the total
costs Rs 18 lacs (inclusive of Depreciation of Rs 1 lakh). The unit has been sanctioned a TL of Rs
5 lacs repayable @ Rs 10,000- pm. What is the DSCR for the unit.

Ans: DSCR = Cash Accruals/ Annual repayment of TL installments

Cash Accruals = Net profit (PAT) + Non cash expenses

= 2,00,000 + 1,00,000
= 3,00,000

Annual repayment of TL Installments = 12 X 10,000 = 1,20,000

Therefore DSCR (net) = 3,00,000 / 1,20,000

= 2.50

3 Bank has decided to subscribe to multiple bureaus for credit information on pro-
spective borrowers for certain advances.
Ans:
1. Given the fact that credit portfolio including the number of borrowers, has been on
the rise, with the sharpest spike being in the Retail segment, the necessity for multiple
bureau has been felt in various quarters.
2. Subscribing to Multiple Bureaus helps in mitigating Credit risk by not relying on single
supplier of Credit information
3. Multiple bureaus will also allow the Indian lending industry, to exploit the signific-
ant experience they have in other markets which will lead to better data quality as the
lenders.

4. PAN card of student/parent is mandatory for all Educational Loans.

Ans:
1. To mitigate the difficulties faced by operating staff in contacting the borrower after completion of
studies and rising NPA in Education Loans .
2. To facilitate follow up and track the borrower easily.
5. While opening accounts in the name of Partnership Firms, in addition to
other formalities we take Partnership Letter.
Ans. 1. Through Partnership letter the partners undertake to advise the Bank of
any change inthe constitution of the firm
2. The Partnership letter is signed by all the partners confirming that they abide by
the terms of opening and mode of operation of the account (Partnership Deed may not have been
signed by all the partners)

8
6. In Internet Banking, in addition to regular user id and password, a customer also
needs to have a profile password.
Ans. The regular user id and password allow a customer to enter the site and view his accounts, and
put through routine transactions within his accounts Profile password allows a personto assign trusted
third party and fix limits for funds transfer to them It is an additional safety measure, so that if the
customer's password is compromised, nobody else can have access to his funds and transfer the
same to a third party.

7. TDRs maturing on Holidays are paid on the succeeding working day but not on the
preceding working day.

Ans. Bank holidays are declared as per Sec.25 of NI Act with specific reference to payment of
Negotiable Instruments which are paid on the previous working day. TDRs are not NIs but are receipts
of monies deposited. Their payments can not be made before maturity date as per Contract lest they
should become premature payments.

8. One Rupee Notes are issued by the Government Of India, whereas all other
notes are issued by the Reserve Bank of India.
Ans. One Rupee is the unit of currency of the country. Its issue is vested with the Government of
India under the Coinage Act. All other notes are multiples of unit of currency. Note issue is vested with
RBI as per RBI Act,1934.

9. Payment Of Interest On Savings Bank Account On Daily Product Basis.

Ans. RBI guidelines. In view of the present satisfactory level of computerization in commercial
bank branches, payment of interest on Savings Bank accounts would be made on daily product
basis w.e.f. 01.04.2010. Bank customers should be given additional incentive for parking their
surplus funds in SB accounts which banks have come to treat as a source of free float funds.
10. As Branch Manager you notice that in the first week of the month your branch is filled up
with people who want to withdraw money from their accounts (salary, pension etc). People
generally prefer coming to the branch even though most of them have ATM cards. These huge
crowds make your VIP customers vary of coming to branch for their work. Explain how you will
deal with this issue.
ANS: As Branch Manager, I would address this issue on the following lines:
I.Crowd management in the First week would be given topmost priority. Attention would be
paid to seating and other arrangements. At the same time, I would also ensure that the
crowd is not blocking the entrance and movement of other customers in the banking hall.
II.Secondly as a long term measure, I would ascertain the cause of ATM Card holders not opting to
use ATMs for withdrawals. This issue would be addressed by educating customers about the
convenience factor in ATM and by demonstrating how easy it is to use an ATM Card.
III.Confidence building in customers would be undertaken by speeding up and attending to
withdrawal related ATM complaints immediately.
IV.Organise a staff meeting about how they can be b e n e f i t e d by lesser crowds if they take
pains to educate customers about usage of ATM and other channels.The HNI customers
would be provided with separate seating space and counter for exclusivity and privacy of their
transactions.

9
11. Your bank as a secured creditor of a manufacturing unit has issued 60 days notice,
under SARFAESI Act-2002 to the borrower who has defaulted in repayment. The borrower
has failed to discharge his liability within the period specified. In such a situation, what
measures secured creditor may take recourse to recover its dues?
A. After expiry of the 60 days notice period, bank will take the possession of the securities
charged with the bank and after giving the 30 days public notice, move to sell the securities
through auction.
B. In case of movable security, bank, after taking the possession, will make the inventory and
panchnama and thereafter will sell the goods.
C. However, in case of immovable property, Sale notice and auction notice will be issued and bank will
conduct the auction after expiry of public notice period and confirm the sale in favour of the
highest bidder.
D. For participating in the bid, party will have to deposit 10% of Reserve Price as EMD and remain-
ing amount will have to be paid within 15 days after confirmation of the sale by the se-
cured creditor (bank). Alternatively, bank can do securitization of the loan and sell the same to
the secutirization company.
12. Mr. Sinha maintains an account with us. A court attachment order for
Rs.25000/- on the account is received. How you will deal with the following
situation as a Branch manager.

(a) Mr. Sinha has tendered Rs.15000/-for purchase a Draft.

(b) Mr. Sinha also maintains a joint account with his wife with credit balance
of Rs.5000/-
(c) A credit vouchers for Rs.7000/- being S.C realized has been released.
(d) A Draft for Rs.7,500/- presented in clearing for credit of current account has been paid
(e) Mr. Sinha has tendered a clearing cheque for Rs.2000/- which will be presented in the
clearing.

ANS: (a) Not Attached: Only Debts 'owing and accruing due' to the judgment debtor at
the hand of the Bank are attached.
(b) Not attached: As the attachment order is in the sole name of Mr. Sinha, the joint account not
attached
(c) Attached: if at the time of receipt of attachment, the Proceeds of the
collection cheque have been realised.
(d) Attached: Same as (c)
(e) Not attached: future credit has not been attached

13. There is a fixed deposit of Rs.1 lac in the name of A & B payable to "Either or
Survivor". How will you deal?
a) When A has approached for payment of the TDR duly discharged by him
only on due date.
b) When A has approached for premature payment of the TDR duly discharged by him
only and there is no mention of B

Ans. a) Bank can pay the amount to A on due date and his discharge alone on the
TDR is enough and the signature of B need not be obtained as the
mandate is E or S

b) The signatures of both the depositors have to be obtained, in case

the deposit is to be paid before maturity.

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14. The account of a firm is overdrawn but each of the partners has a private account
with a credit balance. Under what circumstances could the bank set-off those balances
against the firm's debts?
Ans. Every partner in a partnership is liable, jointly and severally, for all acts of the firm done while
he is a partner. This liability is unlimited and extends even to the private property of the partner
concerned as per Section 25 of the Partnership Act, 1932
This does not give the banker, right to set-off automatically between the overdrawn account of the
partnership and the credit balance(s) in the individual partner's account. If the banker wishes to
exercise such a right, the bank's usual letter of set-off should be got signed by the partners in their
personal capacities or individual letter of authority should be taken from each of the part-ners
authorizing the bank to transfer funds from their individual accounts to the account of the partnership
as and when it is overdrawn
15. M/s XYZ & Co has availed a cash credit loan for Rs. 10 lacs against security of
stock. The loan was guaranteed by Mr. Banta . The loan became NPA after some time. Bank
has given notice to both the borrower & guarantor. But they have not responded.
Bank has recalled the loan. Bank has sold the pledged goods for Rs. 6.00 lacs
and initiated legal action. But the guarantor contended that since the bank has
sold the goods without his consent, he is not liable. Discuss bank's action.
Ans: Guarantor's liability is co extensive with that of the principal borrower as per Section 128 of
Contact Act which also being upheld by the Apex court in a recent judgment.
In the instant case, It is in order for the bank to sell the pledged goods and effect recovery of Rs.6.00
lacs. As goods pledged to the bank form part of the primary security, obtaining of gua-rantor's
consent is not essential. Hence, the guarantor's liability does not get extinguished and the contention
made by him is not tenable.

Therefore the Bank is well within its rights to initiate legal action to recover the shortfall
16. A cheque for Rs 500/- is issued by the drawer leaving space before the amount in
words &figures. Payee of the cheque changed the amount to Rs 5500/- . Cheque is presented
for payment and ho-noured by you. Please justify your action.

Ans:In this case, the amount of the cheque has been changed which is a material alteration.
There-fore, it requires drawer authentication. It also appears from the case that the payee had been
to able to make such change due to negligence of the drawer in writing the cheque and Under Sec 89
of NI act statutory protection is available to the paying banker in case of
payment of cheques which have been materially altered provided the alteration is not
apparently clear and payment is made in due course.
In the present case, both the conditions appear to be fulfilled as there is no ground to believe that
payment has not been made in due course. Therefore, paying banker can seek protection under section
85 of the NI Act.

17. What actions you will take when rent is overdue in a locker?
Ans.: Following Procedure will be followed in case of non-payment of rent of a locker
i) Reminder will be sent to the hirer (s) on due date
ii) In case locker rent remains unpaid even after serving notice, the recovery
of arrears of rent may be made by sale of contents of locker.
iii) Controlling authority's approval will be obtained before breaking open
the locker
iv) After breaking open the locker inventory of contents shall be prepared in the
presence of two officers of the branch and two independent witnesses.
v) Contents so found in locker will be valued by an approved Govt Valuer
and kept on record.
vi) Arrear of rent may be realized by sale of the contents

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18. Shri Ramesh Kumar, an SB account customer of your branch approaches you with an
ATM related issue. He says that he purchased jewels from a famous jewelry shop using his
ATM card. His account was twice debited for the amount of purchase. The POS machine used
by the shop belongs to some other Bank. The vendor said that his account was credited
only once. Now the customer wants refund of the amount debited erroneously. How will
you deal with the situation?
ANS: Shri Ramesh Kumar will be asked to provide his ATM Card No or A/c No. His complaint will be
lodged in centralized Complaint Management System (CMS) application (URL
https://10.0.22.170:8070/CMS). A ticket number will be generated acknowledgement of com-
plaint will be sent to the customer by e- mail / SMS. Since the complaint relates to erroneous
debit at POS, it will be handled by ATM Switch Centre and the customer's Account will be
cre- dited directly In case of delay in settlement of complaint beyond 7 days, Shri Arvind
Kumar will be compensated with Rs 100/- per day from 7th Day.

19. A valued customer of your branch reports that he has forgotten the PIN number of his ATM.
How will you help him?

ANS: Requests for generation of duplicate PIN can be registered in CMS by the current
branch of the customer or any other branch. Customers can also lodge requests for dup-licate
PIN through CMS via Contact Centre. A ticket number will be generated in CMS. Current
branch of the customer can track the Re- PIN request anytime in CMS or ATM WEB. If request is
lodged by another branch, they too can track it in ATM WEB. Acknowledgement is sent to the
customer when their mobile number /email id are entered. Regenerated PIN will be dispatched to
the current branch only after dispatch of PIN, the details are sent to customers, where mobile
number is available at Core data, through SMS. The stipulated Service charge will also be
recovered.

20. The hirer of a locker operated the locker but forgot to lock it after the operation. The
locker official observed the same at the end of the day. What steps are to be taken to protect
the bank's interest?

Ans: An inventory of the contents should be taken; it is to be witnessed by two officers of

the bank preferably joint custodians; it is preferable to have it witnessed by a valued customer
of the bank. The contents may be kept in a sealed packet as a safe deposit item in the custody of
BM/ Acct. The customer has to be contacted for taking delivery. The matter should be explained to the
locker holder in detail as also put on record; the contents have to be delivered against his
unconditional acknowl-edgement of the entire contents. The customer would be requested to be
cautious in operating the locker in future.

21. The Bank has erroneously credited Rs. 10,000/ relating to A's
Account toB's A/c . Subsequently B closed the account and has drawn the
entire amount available in the account including the wrongly
credited one. A has now claimed the amount. Discuss the situation.

Ans: Any credit afforded wrongly must be returned along with interest as this leads to
UNJUSTenrichment as per Section 72 of Contract Act,1872.
In the cited case the relative vouchers/records etc has to be scrutinized and the bank
will make good the amount to A's account without delay and demur.
However, the bank can legally proceed against B to recover the dues . The staff concerned
must be made accountable for such act.

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22. A customer of your branch approaches you and narrates the loss of ATM card along
with her purse in the market. She fears that the PIN of the card might have been written in
the cover. She urges to stop operation of the account and the card. As a branch
Manager what
is your action.

Ans: The genuineness of the claim and identity of the the lady will be established if
found satisfactory, then a written request would be asked for. The account will be hold and the
card can be blocked through INB branch interface. Also the customer will be educated not to
record the PIN in the card envelope etc but to memorize the same . Further, other means to
blocked the card viz: through con-tact centre, sending SMS to 567676 from the registered mobile
of the customer etc will be explained to her. She may be asked to apply for new card. The suitable
charges to the above effect will be recovered.

23. The Balance Sheet of the unit as on 31.03.2013 is as under;

Liabilities Assets
Bank Loan (CC Hyp) 200 Cash in hand 10
Sundry Creditors 50 Stocks 200
Advances received from 20 Sundry Debtors 150
Customers
Term Liability 90 Advance Tax 10
paid
Paid up capital 100 Shop, Land & 150
Building
Reserves 115 PL Debit Balance 15
Preliminary 40
Expenses
575 575
Total
Calculate the following ratios
a) Current Ratio
b) Tangible Assets
c) TNW
d) TOL/TNW Ratio
Ans: ASSETS: Current Assets = 10+200+150+10 = 370
Fixed Assets = 150
Intangible Assets = 15+40 = 55
LIABILITIES: Current Liabilities = 200+50+20 = 270
Term Liabilities = 90
Capital/ Net Worth = 100+115 = 215
31.03.2013
Current Ratio (CA/CL) 370/270 = 1.37
Tangible Assets (Total assets – Intangible assets) 575 – 55 = 520
Tangible Net Worth (Net worth – Intangible assets) 215 – 55 = 160
TOL/TNW = 270+90 / 160
= 360/160 = 2.25
24. Cash flow statement is tudied while opening of a LC
Ans. The Bank has to ensure that the borrower has the ability to generate adequate funds to effect
payment of bills drawn under the LC when they are received for payment. If he is unable to pay, it
would result in devolvement of such payments on the Bank.
25. RBI has decided to withdraw the notes issued prior to 2005.
Ans. Notes printed from 2005 have more security features and therefore, it is difficult to produce fake
notes of these notes. Most of the fake notes have been found in the pre 2005 notes. This step will
help to reduce the circulation of fake notes.

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01. Validity period for Cheques/Drafts/Banker's Cheques / Pay Orders / IOIs has been
reduced
from six months to three months by RBI effective from 01.04.2012.
� To address the regulatory concerns.
� To obviate the possibility of taking undue advantage by some unscrupulous elements, of
the said practice of banks of making payment of cheques/drafts/pay orders/banker's cheque
presented within a period of six months from the date of the instrument as these instruments
are being circulated in the market like cash for six months.

05. Prior administrative clearance should be obtained in all cases from the Global Markets
Department, Corporate Centre, Mumbai, where equity shares are being pledged as security
(primary/collateral),before disbursement of the advance.
� In terms of Section 19(2) of the Banking Regulation Act, 1949, no banking company shall
hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an
amount exceeding 30percent of the paid up share capital of that company or 30 percent of
its own paid up share capital and reserves, whichever is less.
� In order to ensure such compliance, prior administrative clearance should be obtained.

06. Demand drafts of Rs.20,000/- and above are issued invariably with account payee crossing
with immediate effect.
� To address the regulatory concerns
� To obviate the possibility of using demand drafts without any crossing for transfer of money
as alternative to settlement through cash by some unscrupulous elements.

07. Controllers must visit branches at stipulated intervals.

� In order to monitor adherence of bank's laid down systems and procedures
� To verify quality of assets maintained at branches / operating units with an end to minimize
operational and credit risks the bank is exposed to in day to day business operations.

08. Bank has decided to subscribe to multiple bureaus for credit information on prospective
borrowers for certain advances.
� Given the fact that credit portfolio including the number of borrowers, has been on the rise,
with the sharpest spike being in the Retail segment, the necessity for multiple bureau has
been felt in various quarters
� Subscribing to Multiple Bureaus helps in mitigating Credit risk by not relying on single supplier
of Credit information
� Multiple bureaus will also allow the Indian lending industry, to exploit the significant experience
they have in other markets which will lead to better data quality as the lenders.

09. It has been instructed that all branches/CPCs to ensure tagging of all eligible Education
Loans sanctioned to Economically Weaker Sections as "Yes" in "Interest Subsidy for EWS"
field in CBS.
� Any education loan account, which is otherwise eligible for interest subsidy but not marked
in CBS, will not be available in the portal for claiming subsidy.
� An eligible student of EWS must not be deprived of the subsidy being provided by the
Government of India.

11. It has now been decided to withdraw the instruction for obtaining undated and pre- signed
cheques where mandate for repayment of home loan through ECS/S.I. is obtained.
� Section 25 of the Payment and Settlement System Act, 2007 provides punishment for
dishonor of electronic funds transfer on account of insufficient funds etc.
� The provisions of Section 25 of the said Act are similar to Sections 138,139, 140 & 146 of
the Negotiable Instrument Act dealing with dishonor of cheques and provide punishment for
the said offence.
� As such there is no need to obtain undated and pre signed cheques.

14
12. Multiple Demand Loans against the same TDR/STDR can now be permitted.
� At present the depositor(s) can avail only one Demand loan against theTDR/STDR.
� Some of the customers have requested that they should be allowed multiple Demand Loans
against the same TDR/STDR so long as the total loan limit is within the overall permissible
amount against the TDR/STDR.
� To enable the customers to draw the loan in different quantum as per their requirement.

13. Branches have been advised to go for Up-selling of Two Wheeler Loans to Car Loan
customers
� To leverage the increased business trend in our Car Loan portfolio due to latest festival
offers such as lowest EMI, No processing fee, and waiver of pre payment penalty.
� Many car loan applicants who have adequate income and are eligible for higher loan amounts
but avail only lower amount required to buy a car.
� There is an opportunity to sell our Two Wheeler Loan scheme to such prospective borrowers
having college-going children.
� Some car loan applicants may be apprehensive of asking for two loans at a time even
though they have adequate means and necessity

16. PAN card of student/parent is mandatory for all Educational Loans.

� To mitigate the difficulties faced by operating staff in contacting the borrower after completion
of studies and rising NPA in Education Loans .
� To facilitate follow up and track the borrower easily.

18. CERSAI has been introduced by government of India.

� For the purpose of registration of all security interest over property, transactions of
securitization and asset reconstruction and to enable enforcement of SARFAESI Act
provisions in a better and stringent way

21. Branch should obtain a STDR from new hirers of Safe Deposit Lockers.
� Lockers to be allotted on first come first basis without insisting for deposits. However, To
ensure prompt payment of rent, Branch should obtain a STDR from new hirers that would
cover 3 years rent and the charges for break open in case of an eventuality

22. Annuity Deposit Scheme Reintroduced.

� To marketing the product with focus on regular fixed monthly income to self-employed/
professionals, retired persons, beneficiaries of compensation from Court Order/ insurance
companies etc, we can revive the scheme and book substantial business

23. Passwords of computer users should be changed frequently.

� Security should be maintained in respect of passwords used by different functionaries at
the branch.
� To prevent unauthorized access to the account.
� Software packages do not accept the passwords those have not been changed for a long
time.

24. Disaster Recovery Plan must be prepared for all the branches.
� To ensure that in the event of a disaster the branch is capable of dealing with the situation
and take emergent action to restore the normalcy and commence transaction within least
possible time.

25. Relationship Banking is gaining importance now.

� To build up close rapport and understanding with the customers,
� Enable us to anticipate the needs of the customer well in advance and to meet them,
� To meet the competition from the other players in the market.

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26. LTV ratio introduced for Housing Loans.
� In order to increase the safety margin for the Bank
� To minimize loss due to defaults and prevent slippages

27. No interest is applied on NPA accounts.

� NPA ceases to generate income for the Bank
� The principal itself is doubtful of recovery in these cases.
� In order to avoid tax liabilities on unreceived income.
� As per RBI guidelines, income should be recognized on realization basis but not on accrual
bias.

28. Data Warehousing and Data Mining are the need of the hour.
� It seeks to centralize a variety of data and data mining attempts to dig into the data.
� Its goal is to find out patterns of customer behaviour
� It helps in designing new products and cross- selling products.
� CRM heavily draws on these

31. RBI introduced Special Mention Accounts [SMAs].

� To identify the accounts with early warning signals and take effective measures against
slippage to NPAs.
� RBIs directive.

32. Minimum two milch animals are to be financed under dairy farming scheme.
� In order to ensure continuous and uninterrupted income through dairy, even when one animal
goes dry as the animal has two phases of life cycle i.e. lactation period (milk period) and
dry period.

33. Interest on Agricultural Term Loans is calculated in May and November.

� It coincides with harvesting of kharif & rabi crops and it is easier &convenient to repay the
installments and interest from the sale proceeds and will not result in compounding of
interest.

34. Take over norms is made more stringent by the Bank

� To address the concerns of Central Vigilance Commissioner and RBI, like
i) Problem Accounts get taken over as the transferor bank does not provide true and vital
information about the account when called for.
ii) Unscrupulous borrowers often take advantage of the competition amongst banks and the
irregularities committed at the transferor bank with respect to sanction, disbursement and
monitoring of account goes unexamined in the process.

35. A prudent Banker should endeavor to obtain Gold, NSCs and KVPs as collaterals, wherever
feasible, while processing Advances proposals.
� Obtaining Gold, NSCs & KVPs as financial collaterals enables the Bank to reduce the
exposure by the amount of the collateral while calculating capital requirements.
� This helps significant capital savings.

42. An Electronic waste ( e-waste) management policy has been formulated by the Bank.
� In order to ensure proper handling of e-waste with a view to protecting the environment,
reducing pollution by toxic gases / green house emissions and other non-biodegradable
substances caused by e-waste disposal.
� Falling in line with instructions of Ministry of Environment and Forests, Government of India
(GOI)

16
43. Bank has decided to subscribe to multiple bureaus for credit information on prospective
borrowers for certain advances.
� Given the fact that credit portfolio including the number of borrowers, has been on the rise,
with the sharpest spike being in the Retail segment, the necessity for multiple bureau has
been felt in various quarters
� Subscribing to Multiple Bureaus helps in mitigating Credit risk by not relying on single supplier
of Credit information
� Multiple bureaus will also allow the Indian lending industry, to exploit the significant experience
they have in other markets which will lead to better data quality as the lenders

46. Penalty charges are to be recovered from SB/CA holders, if the account is closed within 1
year but after 14 days from the date of opening the account.
� As our bank has accepted the Banking Codes and Standard Board of India (BCSBI), we
would have to abide by the clause 8.1 of the BCSBI code which is as under: "If you are not
happy about your choice of current /savings account, within 14 days of making your first
payment into the account, we will help you switch to another of our accounts or we will give
your money back with any interest it may have earned. We will ignore any notice period and
any extra charges".

47. A new type of user rights facility is being introduced for Retail Internet Banking customers
with limited transactions rights, "L: Limited transactions rights".
� It is observed that a large number of Internet Banking customers do not opt for "View &
transaction rights" for various reasons, most prominent amongst them is the concern for
security. These customers are deprived of various useful features of onlinesbi.com including
transfer of funds to own accounts and getting a new e-TDR/e-STDR. As On line transactions
have cost advantage to the bank, we are focusing on the migration of transactions from
branch banking to Internet Banking.

50. Financing "PRODUCER COMPANIES" is a new thrust area in agricultural Finance.

� Our Bank is also showing inclination in financing.
� Identification of Producer Companies as an emerging area in Agriculture Business
Opportunities and to take advantage of revolution in Agriculture marketing.

51. GOI has approved a scheme for SSI for obtaining Performance & Credit rating by approved
outside agencies.
� With an objective to promote SSI, the second largest employment provider, in improving
their contribution towards economy. A good rating will boost the confidence of the sector as
the market accepts the units. It also improves the bargaining power of the units while
approaching the Bankers. The Bankers will come forward to finance the well-rated SSI
units, which leads to growth of the economy.

54. Mobile Banking services were made available over USSD (Unstructured supplementary
Services Data).
� To facilitate the customers having non-java mobile phones to avail the service.
The advantage of using this mode of Mobile Banking Services is that the customers need
not download the mobile banking application and can avail the facilities over a SMS session.
RBI has restricted the daily transaction limit per customer to Rs.1,000/-.

55. Credit Scoring Models for Personal Banking Segment advance introduced.
� Introduced at the RBI directive based upon BASEL II guidelines. This will price the borrower
for a given product based on credit scores. The Scoring Model Serves as a credit decision
making tool to strengthen the existing system of appraising loan applications. Better Turn
Around Time (TAT) and improves the asset quality.

17
56. Staff Suggestion Scheme is broadly revamped.
� To expedite disposals of the suggestions, so that the suggestors are rewarded suitably for
their keen interest evinced in the progress/ development of the Bank
� To improve the system procedure as well as customer service.

57. Credit exposure norms are stipulated by banks.

� The concentration credit risk is avoided.
� Failure of a single advances or advance to a single group will not affect the capital stability
of bank.
� It will enable availability of credit for all sector of economy.
It is a prudential control measure aimed to minimize credit risk for banks.

58. Operational Risk is emphasized in Banks.

� It is as per BASEL-II guidelines.
� Due to significant growth in banking transactions there is increase in operational risk i.e.
inadequate / failed internal Processes, people, systems etc.
� To strengthen the soundness and stability of system and it is an important component of
risk management system.

60. Right to information act has been enacted.

� The constitution has given the citizen the right of freedom of speech and expression and
this right can be effectively exercised only if information is available to him. Hence the right
to information act was passed in 2005.
Its main objective is to promote transparency and accountability in working of every public
authority.

62. No death certificate to be insisted upon for settlement of cases of missing persons up to
Rs.1lac
� With a view to alleviate hardship to claimants in respect of missing persons, it has been
decided to entertain small value claim without death certificate.
� In line with the RBI instructions.

63. No interest applied in the loan account of an employee from the date of his death to closure
of loan.
� The liabilities of deceased employees to the bank are normally liquidated from the proceeds
of terminal benefits payable to the nominee/legal heirs. The settlement of claims relating to
terminal benefits of a deceased employee takes 2/3 months. Interest payable may not be a
huge sum

65. A duplicate demand draft up to Rs.50,000/- may be issued to a staff member, based only a
declaration (unstamped) from him instead of a stamped letter of indemnity.
� Law does not stipulate that the Bank is compelled to obtain indemnity while issuing duplicate
draft since the purchaser (staff member) is not indemnifying the Bank in the declaration, it
would not attract stamp duty. Bank's interest is protected as action may be taken against
the erring staff for making false declaration.

66. Banks have been advised by RBI that they should not offer any banking product including
online remittance schemes with prize / lottery / free trip (India and/or abroad), etc., or any
other incentive having an element of chance.
� Such products involve non-transparency in the pricing mechanism and are therefore
againstthe spirit of guidelines. Such products, if offered by banks would be considered as
violation ofthe extant guidelines and would be liable for penal action.

18
68. Branches are advised to desist from pushing customer transactions in the inter-bank mode
while using RTGS.
� Different time windows are prescribed for different types of RTGS transactions taking various
things into consideration. Routing of customer transactions in the inter bank session violates
the return discipline since the gap of one hour and thirty minutes is not maintained. Hence,
failure to comply with time norms will attract penalty.

69. Coverage under the eligible advances (under CGTMSE), accounts with credit limits up to
Rs.100 lakhs under the Scheme without insisting on collateral security need be increased
significantly.
� Guarantee under CGTMSE without insisting upon any collateral security offers a more
effective mechanism of risk mitigation as against the protracted and expensive procedure
of enforcement of collateral security in the event of any loan default.

70. It has been decided to dedicate 1st August of each year as KYC Compliance and Fraud
Prevention Day in the Bank.
� While efforts are on to provide excellent service the underlying objective is also to prevent
establishing relationship not in consonance with the Bank's Customer Acceptance Policy
as also perpetration of frauds so that loss to the customer and/or the Bank is obviated.
While observing the day, various activities and programmes will be undertaken / organized
with a view to creating awareness in this regard.

73. Branches should ensure resolution of complaints in respect of wrongful debits in ATM
transactions within a maximum period of 7 days from the date of receipt of customer
complaint.
� As per the RBI directive it is mandatory to reimburse the amount within a maximum period
of days. Branches have to manually calculate the compensation payable (Rs.100/- per day
fromthe 8th date) to the customer till the date of actual credit to the customer's account
along withthe credit of the failed transaction. This has to be done even without any claim
from the customer.

78. In case of failure to furnish PAN tax shall be deducted from the income at the rate of 20%
with effect from 01.04.10.
� The declaration filed in Form 15G, 15H u/s 197 shall not be valid unless the person filing the
declaration furnishes his PAN in such declaration when it is invalid, the tax deduction shall
be at a higher rate.

79. It has been decided that testing for fugitive ink be made compulsory for payment of cheques
for Rs.25, 000/- and above.
It has been observed that many frauds have been perpetrated through encashment of fake
cheques recently. On investigation it transpired that the cheques did not have security
feature in built of background printing of the Bank's name and symbol with fugitive ink,
which gets smeared in contact with any liquid containing water.

82. Mobile Banking Services have been popularized in a big way.

� It is convenient, user friendly safe and strong alternate delivery channel for rendering banking
services. It is cost effective both for the Bank and customer. It is a tool for financial inclusion.

84. It has been decided by the bank that all operating units wherever Mobile Banking Services
are available, shall ab initio offer these services to the customers as part of the products
like Savings Bank/ Current account at the time of opening the accounts.
� Propagation of MBS. Enhancement of customer delight through better utility services.
� To minimise the transaction cost and increasing the profitability of the bank.

19
85. Gold loans could be granted against gold coins sold by Banks.
� RBI have clarified that specially minted gold coins sold by banks need not be treated as'
BULLION' and hence there should be no objection to our bank in granting loans against the
specially minted gold coins sold by banks.

86. The instructions in regard to ' Controller's Visit to Branches were reviewed and revisited.
� Consequent upon the redesign of LHOs / abolition of Module and that of the position of Dy
General Manager as Modular Head and creation of Regional Business Offices,
implementation of different BPR Projects, including setting up of different CPCs, the
instructions in regard to Controller's Visit to Branches' were reviewed and revisited.

88. Bank does not insist on stamped indemnity for issuing duplicate Term Deposit Receipt.
� Term Deposit Receipt is NOT a negotiable instrument and therefore not transferable by
endorsement delivery. The chances of the TDR is paid for the second time even inadvertently
is remote as the receipt has to be presented only to the issuing branch for payment Hence
a simple letter of indemnity is sufficient.

90. KYC norms have been issued.

� To facilitate the bank to properly identify individuals / corporates at the time of opening of
the accounts itself .
� To avoid opening of accounts in the name of non- existing persons (benami accounts). To
avoid money laundering
� To prevent financial frauds
� To facilitate monitoring of high value / suspicious transactions
� To formulate ways and means for reporting such transactions

91. While opening accounts in the name of Partnership Firms, in addition to other formalities
we take Partnership Letter.
� Through Partnership letter the partners undertake to advise the Bank of any change in the
constitution of the firm
� The Partnership letter is signed by all the partners confirming that they abide by the terms
of opening and mode of operation of the account (Partnership Deed may not have been
signed by all the partners)

92. RACPC has been established.

� Skill Pooling: Team of people focusing on the same job again and again - acquires the
expertise.
� Standardization of the systems and procedure - following uniform practices to minimize
the turn around time.
� To enhance the customer satisfaction level.
� With the use of technology in these processing centers human error is eliminated and
quality is improved.
� Migration of non-customer facing activities to these centers facilitates branches to focus
more effectively in sales and service,

94. It has been decided by RBI that AD Banks may be permitted to accept FCNR (B) deposit in
any permitted currency.
� The liberalization by RBI will give flexibility to our NRI customers to keep their FCNR (B)
deposits in the currency of their choice to avoid conversion cost.

95. Why certificate to commence business in not called for, in case of private Limited company?
� A private limited company is not required to obtain certificate to commencement of business,
as certification of registration serves to dual purpose. Since no certificate of commencement
of business to private limited company is issued, banks do not call for the same.

20
96. Why currency notes are not accepted as security?
� A security should either be a good as defined u/s 2{7} of the scale of Good Act 1930, or a bill
/ promissory note as a defined u/s 4&5 of the Negotiable instruments Act, 1881 or a security
u/s2{b}of securities Contracts [Regulation] Act 1956 or an immoveable property. Currency
notes/banks notes being none of the above but legal tender can not be accepted as security.

97. Why banks do not accepts a policy taken for the benefits of married woman while considering
anoverdraft limit?
� Not withstanding the provisions of section 2 of the Married Women's Property Act 1874,
underthe provisions of section 6(1)(2a(ibid)) if a policy is effected by any married man on
his own life and expressed on the face for the benefit of his wife and or children, the husbands
be deemed in trust for wife and or children, No valid assignment can be made on such
policy. Bank as such does not accept such policies.

98. Why whole life policies are not accepted for overdraft there against whereas in some cases
these can be accepted as collateral security?
� The claim under whole life policy can be lodged only after death of insured. It cannot be
surrendered. Keeping in view that repayment date is uncertain loans are not granted against.
as far as collateral security is concerned it is an additional security & payment is sure
albeit date is not certain.

99. Why all loan documents should be properly filled in and stamped {if required} before
execution?
� Section 17 of the Indian Stamp Act, 1889 provides that documents must be properly stamped
before or at the time of execution. We therefore ensure stamping before or at the time of
execution.
� Documents stamped after execution may not be taken in to evidence by a civil court.

100. Why bank do not generally entertain customers after business hours?
� Entertainment of customer, especially for payments of a negotiable instruments[as defined
u/ s13 of the Negotiable Instruments Act, 1881 is not a payment in due course within the
meanings of S-10 {ibid} and carry inherent risks. Further section 65 of NI Act states that
presentment of acceptance should be made during the usual business hours. However for
all other services customer must be entertained even after business hours especially for
non-financial transactions.

101. Why all instruments received must be immediately branded with special crossing stamp of
the branch?
� If a cheque is crossed specially within the meaning of section of 124 of the negotiable
instruments act, 1881 then under the provision of section 126{ibid} it can only be paid to
bank to whom it is so crossed. The cheque with special crossing stamp is safe guard
against misuse. It can not be collected by any other bank except to which it is so crossed.
To protect from the charge of conversion.

102. Why two minors cannot open a joint account payable to either or survivor?
� In joint accounts payable to either or survivor, each person acts as principal for himself and
appoints other as his agent{s}. A minor U/s 183 read with section 11 of the Indian contracts
Act,1872 cannot appoint any other person as his agent.

103. A separate letter after some days of the deposit?

EM confirmation letter to be sent after some days / next day of creation of EM.
� Confirmations on same day will tantamount to mortgage deed and will attract registration
u/s 17 of the Indian registration act 1908. Confirmation after some days is a mere letter of
confirmation of a previous act and only an additional evidence regarding intention of depositor
of title deeds for creation of mortgage.

21
104. Why we insist for indemnity while issuing a duplicate draft?
� The Negotiability of original drafts is not affected by issuance of duplicate thereof. The bank
can be compelled to honor both the instruments by holder in due course. To keep its interests
intact bank obtain indemnity as explained u/s 124 of Indian contracts Act, 1872. Bank can
recover the amount from indemnifier in case of need.

105. Micro finance will help in poverty alleviation of weaker section of society.
� Micro finance involves provision of thrift credit and other financial services and products of
very small amount to the poor in rural semi urban and urban areas for enabling them to
raise their income levels and improve living standards. This programme is gaining increasing
recognition in many developing countries including India.

106. Statement of assets and liabilities are to be obtained as a notarized affidavit from Borrowers
/ guarantors of loans rated SB4 and below and from borrowers/guarantors in respect of
existing loans where rehabilitation/restructuring is envisaged.
� To assess the realistic value of the personal guarantees of the borrowers/guarantors and
ensure their continued stake in the business financed by the Bank.

107. An integrated approach to review and manage Stressed Assets has been introduced.
� To streamline the multiple review process and to integrate the Bank's approach towards
stressed assets for effective prevention of slippage of SMAs to substandard assets and
also in up gradation of sub-standard assets.

108. FCNB deposits are not accepted for long duration [only 3 Years].
� RBI Directives .To minimize risk on account of exchange rate fluctuations.

109. We stop operations in the account of partnership firm on death of a partner.

� On death of a partner, partnership firm stands dissolved. To avoid application of Clayton's
Rule. ? To crystallize the exact liability of the deceased partner as on the date of his death.
His survivors cannot be made liable for debits to the account after his death. As per sec. 42
of Partnership Act 1932

110. DP Note is obtained in addition to pledge of gold ornaments.

� The D.P. Note is obtained in order to establish the personal liability of the customer. It
enables the Bank to proceed against the borrower on the strength of DP Note in the event
of pledged ornaments when the sale proceeds are insufficient to liquidate the outstanding
in the loan account on account of default.

111. Revival Letter is obtained from borrower.

� All security documents are revived as per the provisions of Indian Limitation Act 1963. In
case the documents are not renewed, the Bank cannot legally proceed against the borrower
in the event of default on the strength of the time-barred documents.

112. Account opening forms have been modified.

� For compliance of KYC guidelines. It is made more user friendly. More writing space is
introduced for customers/office use. Personal information of customer will help the Bank in
designing new product and adopting different marketing strategies.

113. Lok Adalats are established and limit enhanced from Rs.5.00 Lacs Rs.10.00 Lacs.
� The court cases are costly, time consuming and cumbersome.
� Off late Banks and borrowers have been favouring non-legal remedies like OTS, Lok
Adalatsbeing conciliatory body and play an active role in bringing out such out of court
settlementexpeditiously. One of the NPA reduction tools.

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115. Depositors of SBI are unsecured creditors.
� The depositors do not have any specific charge over any of the assets of the Bank. Bank is
a privileged debtor.
116. RBI has introduced exposure norms for the Bank.
� To achieve diversification of risk and ensure better and balanced risk management function.
� To ensure that failure of a single or a few sectors in the economy do not affect the stability
of Banks.
� It is a prudential credit control measure aimed at minimizing & managing credit risk.

117. Drop Box facility has been introduced in branches for dropping of cheques by customers.
� For the convenience of customers, avoiding standing at our counters in long queues To
avoid rush at our counters, so that other customers can transact their business easily
Time and work saving for our frontline staff, so that they can utilize their time for attending
to other work.
� It is one of the recommendations of Goiporia Committee

118. Single Window System has been introduced in our branches.

� To provide all the services usually required by customers at one counter It is one of the
recommendations of Goiporia Committee.
� To provide better customer service
� To empower frontline staff and offer opportunities to them for shouldering higher
responsibilities

119. RBI has relaxed the rule for pension accounts by permitting banks to open joint accounts of
pensioners with their spouses.
� To make it easier for old and disabled pensioners to transact their accounts By obtaining
authorization for family pension in the relative PPO, the bank's risk of continuing to pay
pension even after the death of the pensioner is minimized In case of any such excess
payment, it can be recovered from the family pension payable to the spouse

120. Banking Ombudsman Scheme has been revised recently.

� To enlarge the scope of the Scheme, to include credit card complaints, failure to honour
promises made by direct selling agents, charges for remitting lower denomination notes /
coins, etc.
� By having the Scheme funded and staffed fully by RBI, its effectiveness will increase to meet
the demands of customers by enabling e-filing of complaints or sending complaints by email .
� To satisfy the demands of aggrieved parties for an appellate authority, the same has been
introduced

121. KYC norms have to followed for not only deposit accounts but also for loan accounts, safe
deposit lockers, demat accounts, etc.
� To avoid benami or fraudulent transactions in all types of accounts Recent frauds in IPO,
uncovering of ammunition in safe deposit lockers, etc. underline the need for alertness in
all areas of service provided by banks, as there is scope for their misuse To prevent use of
banking services by terrorists or for illegal activities.

122. Payment of TDRs in cash over Rs.20,000 is not made.

� To curb illegal or benami transactions in cash
� As it has been instructed by IT Department under Sec.269 (T) of IT Act, 1961
� It is a measure by the Government to make such transactions flow through A/C only.

23
124. Welcome Kits consisting of ATM Card and Internet Banking user id and password are given
to persons opening new SB or Current accounts.
� As a measure of good customer service, so that customers can use these facilities from
day one It is being provided by other banks, so customers expect our bank to provide the
same
� To be competitive and attract new/ younger generation customers to our Bank

125. RBI has asked banks to make available "NO Frills" account.
� It is a win-win solution for banks and public. By relaxing the norms for opening deposit
accounts for public and providing fewer facilities, both parties are benefited. High minimum
balance norms excluded many members of the public from access to deposit facilities To
make basic banking facilities available to more members of the public To reduce the cost of
banks in maintaining and servicing unremunerative accounts.

126. Our Bank is introducing e-learning courses for staff.

� It is difficult to spare staff members from branches for training. Staff members can learn at
their convenience They can take up courses relevant to them and pursue them Reduces
cost for the bank.

127. Central Pension Processing Cell has been introduced.

� To reduce the workload of branches, so that staff can be freed for marketing.
� To make best use of technology to provide uniform and prompt service to pensioners No
time lag reporting transactions by branches to Focal Point Link Office and in claiming funds
Settlement of funds with various government departments becomes easier

130. IP phones have been provided to most branches and administrative branches.
� Most branches have been provided with connectivity via SBI Connect SBI Connect supports
connectivity for ATMs, CBS, phones, etc. A cost effective facility for easy communication
between branches, administrative offices, training centers, etc. Our Bank can save on
telephone expenses

131. In Internet Banking, in addition to regular user id and password, a customer also needs to
have a profile password.
� The regular user id and password allow a customer to enter the site and view his accounts,
and put through routine transactions within his accounts Profile password allows a person
to assign trusted third party and fix limits for funds transfer to them It is an additional safety
measure, so that if the customer's password is compromised, nobody else can have access
to his funds and transfer the same to a third party.

132. Comprehensive insurance for tractor loans have been waived, if the borrowers give a letter
of undertaking.
� Comprehensive insurance is expensive and poses a financial burden on the farmer Where
the tractor is not likely to ply on public roads, but is going to be used only on farms, there is
not much risk in not taking comprehensive insurance
� By taking third party insurance and a letter of undertaking from the borrower, the bank's
interests is adequately safeguarded.

133. A customer who has opened a deposit account with simplified KYC norms can have a
balance less than Rs.50,000/- in his account.
� As per guidelines of RBI.
� To prevent unscrupulous persons from using this channel to bypassKYC norms, and use
the account for wrongful activities The simplified norms are meant to help genuine persons
from lower income groups who are unable to provide all the documentary proof required as
per KYC norms. However, a person having a balance of over Rs.50,000 should be in a
position to provide the documents required.

24
134. Appeals against the order of a DRT can be made to Appellate Tribunal only after depositing
75%of the order amount.
� To prevent borrowers from adopting tactics for gaining time, and stall the bank in its recovery
efforts To prevent frivolous appeals, and provide redressal only to genuinely aggrieved borrowers.

135. Crop insurance scheme has been introduced.

� To protect the interests of farmers, so that they are not at the mercy of monsoon or other
natural calamities. To provide relief to farmers, and to provide funds to enable them to take
up farming activity again for the next season.
� To prevent farmers from becoming defaulters of banks /financial institutions, and they remain
eligible for further finance.

136. A component for consumption credit is included in Kisan Credit Card limit.
� To carry on farming activity, a farmer has to necessarily incur expenses towards
consumption needs. If finance is not provided to him for these purposes, there may be a
tendency for him to divert some of the loan amount towards these expenses, or approach
private financiers. In either case, our loan repayment is at risk.
� To prevent our advance from going bad, and to provide the farmer with a viable alternative.

137. 100% refinance is available from NABARD for all loans given to SHGs.
� SHGs have proved to be a very good means of financing micro-credit activities, and for
uplifting the rural and urban poor.
� To encourage banks to lend more to SHGs Refinance prevents blockage of bank's funds
and helps cash flow.

138. Literate borrowers under KCC are provided with cheque books.
� So that they can operate their KCC account as a running account.
� To enable them to operate their account freely without having to come to the bank for every
withdrawal.
� To enable them to make payments to third parties

139. Partial removal of outstanding from AUCA is now permitted.

� To have objective assessment of realizable dues and effective management of the same If
any part of the dues appears to be unrecoverable, it is better to remove the same through
partial removal, so that the balance in AUCA depicts the accurate value of realizable dues.

140. Our bank has tied up with Western Union for money transfer scheme in respect of foreign
inward remittances.
� It offers very good scope for increasing our fee-based income, as foreign inward remittances
are on the rise. A way to leverage our large branch network, and gain forex business. The
remitters could be approached subsequently for marketing our NRI services and products.

141. Exporters who make recurring remittances abroad, can now file consolidated A1/A2 forms
With Authorised dealers.
� To streamline procedures for forex remittances
� To reduce paperwork and simplify procedures

142. CIBIL clause is inserted in loan documents.

� It is obtained from borrowers for their consent in disclosing details about the loan account
to CIBIL. If it is not taken, disclosure of information would violate the confidentiality norms,
and make the bank liable for legal action from borrowers.

25
143. Banks are allowed to give incentives to NGOs for providing SHG-Bank linkages.

� To compensate the NGOs for the work involved for them in providing the linkages It is an
incentive to increase the involvement of NGOs, and enable bank to achieve its target under
SHG linkage.

144. PIN Retention Register and Card Retention and Distribution Register have to be maintained
by branches in respect of ATM cards and Pins held by them.
� There are a lot of undelivered Cards and Pins at the branch, which should be held in the
custody of two different persons The situation is fraught with risk, in case both the Card
and Pin fall into the hands of the same person The registers are maintained to make it easy
for verification by Inspection & Audit Team, and have proper control over these items.

145. Market related Transfer Pricing has been introduced.

� To ascertain the true profitability of operating units by bench marking the product prices to
the market rates. More scientific method, which integrates with the Assets Liability
Management. Reduce manual calculations and saves time and efforts at the branch level.

146. Multi-city Cheques have been introduced.

� To introduce a competitive paper based payment mechanism.
� To attract new age trading and personal customers with products similar to those offered
by New private sector banks.

147. Obtention of Revival letter and Balance confirmation letters in case of Term Loan under
personal segment loan has since been dispensed with.
� Obtention of revival letters and balance confirmation letters consume a lot of resources. The
limitation period of three years in such loans starts from the date of default of installment or call
up of advance. Obtention of revival letters in case of regular term loans is therefore redundant.

148. Agriculture Gold Loan scheme is revised.

� In view of the negligible NPAs and vast potential available for increasing gold loan portfolio
in agri business. The procedures have been simplified to de-bottleneck the scheme keeping
risk mitigation aspect intact.
� RBI has recently reduced the risk weightage on loans up to Rs 1 lac against gold and silver
ornaments from 120 % to 50 %. Therefore, financing under this portfolio will ease the capital
adequacy ratio of the Bank.

149. Bank will be engaging Business Facilitators and Business correspondents.

� With the twin objective of ensuring greater financial inclusion and increasing the outreach
of theBank combined with the need to substantially increase our market share in the rural
and semiurbanarea.
� Branch banking is ruled out due to the huge cost of opening branches and the high cost of
operation. Through Business facilitator and Business correspondent model our bank has
to substantially increase our rural business base in untapped/unbaked areas through the
use of existing branch net work and new technology combined with outsourcing.

151. Presanction process in Housing Loans has been standardized.

� To ensure uniformity in pre-sanction procedures and make it full proof against frauds. To
ensure effective compliance of the instructions by operating functionaries.
152. Loan against pledge of Gold ornaments reviewed and modified.
� With a view to making it more customer friendly and broad base our customer base. To
rationalize the rate of interest Gold loan being a secured loan and involving simplified process
needs to be marketed with competitive edge.

26
154. ATMs are being installed in large number.
� Round the clock service can be provided to the customer.
� There is ease and privacy of operations through self-service and no need to involve bank
staff intransactions.Quick customer service is possible. Free from human errors. No sign
of tiredness.
� Cost of maintenance of ATM is lesser.

155. Bank has simplified the SME segment documentation.

� To standardize the different sets of document devised by the bank over a long period for
SSI &SBF.
� To ensure a common sets of procedure and operational guidelines recommended by the
Committee set up by the Bank for the purpose.

156. Discretion to quote competitive price on discounting of bills has been recently vested with
the various authorities starting from the DGMs.
� To increase bill business by discounting Bills drawn under LCs of our own branches and
those of the First Class Banks against stiff competition from other players in the market.
� As per Bank's instruction.

157. Drafts for Rs. 50,000/- and above should not be issued against cash and PAN/G.I.R number
have to be obtained.
� R.B.I has issued directive to the Banks that Draft, T.T, Bankers cheque, RTC above Rs.
50,000/- are to be issued by debit to the customer's account. This is done to avoid tax
evasion and misuse of banking channels for illegal purposes. This also helps in curbing
benami / fictitious transaction which in turn will avoid circulation of black money.

158. Current account should not be opened in the name of a minor.

� A current account cannot be opened for a minor. In respect of a minor, if an overdraft is
created by oversight in his current account it cannot be recovered legally.

159. Cheques payable to a firm should not be accepted for credit of the private account of a
Partner without the sanction of the other partners.
� It is the responsibility of the Collecting Banker to credit the amount to the payee only as per
the directions of the drawer of the cheque. As per the drawers instructions the amount has
to be paid only to the firm. If it is credited to the partner's individual account the bank will be
liable for conversion.

160. Interest has to be paid to customers on delayed collections of instruments.

� As per the directives of the RBI, based on the recommendations of the Goiporia Committee
on Customer Service in Banks.
� To compensate the customers for delay in collection of instrument
� To tone up the efficiency of the banking system.
161. Bank has introduced 'No Frill 'Account.
� As per the provision of Union Budget under financial inclusion and as per RBI directive. To
cater to the needs of vast sections who are otherwise not fulfilling certain conditions of our
existing Savings Bank account requirement and thus are deprived of opening a Bank account.

162. It has been decided to grant overdraft against security of life insurance policy issued by
SBI Life Insurance Company Ltd. On the same terms and conditions as stipulated in case
of overdrafts against Life Insurance Policies issued by LIC.
� To provide strategic promotional support to the product of our Joint Venture Company.

27
163. Draft advices are not required up to Rs.10 Lacs.
� Bank would be saved of voluminous work involved in issue of advices, their follow-up and
marking them up in the relevant books with out jeopardizing the Bank's interest

164. Transparent stickers are now affixed on the amount portion of drafts issued by branches.
� The transparent sticker is considered to be a better device for prevention of frauds by
chemical alteration in figures than the use of reverse carbon.

165. Accounting procedure in respect of DD Bills has been revised.

� To rationalize the accounting procedure. To have effective control over the bills outstanding.
� To represent outlay of funds forming part of advances. To satisfy the requirements of
accountingand audit norms.

166. In case of Agricultural Loans the interest is to be applied on due dates.

� This is only to avoid the compounding of interest as the agriculturists will not be getting
incometo repay the interest if applied earlier.

167. There is no need to deduct margin from scale of finance while sanctioning crop loans.
� The scale of finance is cost of cultivation minus margin. Therefore, entire amount as per
scale of finance can be financed.

168. Consumption Loans are sanctioned to weaker section borrowers in addition to other facilities.
� To meet essential obligatory unforeseen expenses. To meet essential needs of the
borrowers until the scheme takes off. To prevent withdrawal of funds for the borrower's
sustenance needs from the funds invested in the Scheme.

169. Crop Loans are to be sanctioned only during the season.

� Crop loans are sanctioned to meet the cultivation expenses to grow the crops. To obviate
diversion of funds for unproductive purposes. To ensure only needy are financed.

170. Two months cushion period is added for repayment after harvest of the crops.
� The peak harvest prices will be low. To enable the farmer get a better price after
announcement of support price by the Government. Further, there will not be any buyers
for the produce in view of wetness it contains soon after harvest.

171. Optimal use of Credit information companies (CIC) is the need of the hour.
� Bank is required to use the information in a judicious manner which ensures mitigation of
credit risk in a cost effective way.
� Working in a multi bureau environment may result in a rise in operational expenses during
the short run, which is proposed to be offset by the efficient use of information.

172. Separate D.P.Note need not be obtained while taking hypothecation agreement on Form
AB1.
� The DP note is embedded in the Hypothecation agreement itself. Borrower's personal liability
clause takes care of demand promissory legalities.

173. Photographs are taken for literate Agricultural borrowers also.

� It serves to identify the borrowers easily especially in such a mass loaning programme.
Further, villagers have similar names. It enables the Bank to identify them with the help of
photos.

174. Bank obtains deposit and confirmation letters in case of equitable mortgage.
� It denotes voluntary deposit of the title deeds by the borrower with an intention to create
charge over it for securing the advance obtained by him. Further, it is an evidence that
there is no coercion for depositing title deeds.

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175. In case of illiterate borrowers/guarantors the thumb impressions should not be attested on
the documents.
� It should not be attested as it attracts ad valorem stamp duty. Instead, a separate letter is to
be obtained from two witnesses.
� To prove that the contents of the document were explained in a language known to the
borrower/ guarantor.

176. DCB Register is to be compiled as on 30th June every year.

� Crop year ends by 30th June. New Kharif season starts from 1st July. To know the demand
raised, collections made and the balance outstanding from each of the accounts. Crop
loans are to be recovered from collection of sale proceeds by the farmer borrowers during
the season.

177. The repayment period of Agricultural gold loans is linked to harvesting season.
� Agricultural gold loans are sanctioned for meeting the shortfall in expenses in cultivation of
crops or for acquisition of productive assets. Therefore, the repayment shall be fixed with
reference to the due date of harvest payment capacity likely to be generated by the
investment.

179. No refinance is given by NABARD for DIR Scheme.

� The rate of interest charged by NABARD for refinance is more than the one charged for on
DIR loans, which by itself a concession. Further, the amount locked up in DIR loans is
meager compared to total advances portfolio.

180. NABARD has introduced eligibility criteria for drawal of refinance.

� To ensure the quality of lending, the NABARD insists for minimum recovery percentage so
as to decide the eligibility of banks for the drawal of refinance.

181. Loans for cultivation of Horticulture and plantation crops are given as Agricultural Term
Loans whereas for cereal crops like paddy it is given as Agricultural Cash Credit.
� These crops have long gestation period and long bearing life. The cost of cultivation is also
very high. As the income accrues over a period of years they are sanctioned as Term Loan
which are repayable from cash accruals.

182. Spacing norms for location of wells are stipulated by NABARD.

� If wells are constructed too close they are likely to interfere with each other resulting in
lowering of discharge. Hence, not viable. The purpose is defeated. The farmer borrower
may not be able to repay the loan which becomes bad and doubtful.

183. Poultry Farming should be financed only when there is immediate assured market.
� Eggs which are perishable should find a ready market without loss of time. Poultry is capital
intensive project and repayment is to be based on profits generated.

184. Partnership Letter (COS.37) is obtained from partnership concern when an account is
opened.
� It restricts the implied authority of the partners and imposes an obligation that any change
in the constitute of the partnership firm is to be informed to the Bank. Joint and several
liability is undertaken by all the partners.

185. On the death of a partner or whenever there is change in constitution of the firm the account
should be closed and reopened.
� It enables the Bank to quantify the liabilities of the partners in the dissolved firm and to
guard against operation of the Clayton's rule.

29
186. The personal guarantee of all the partners(excluding minors) is obtained, when an advance
is sanctioned to a Partnership firm.
� The guarantee facilitates the Bank to proceed against the property of the individual partners
without exhausting its right against the property of the firm.

187. A Carpenter in a city can be financed as a Village industry.

� He fits into the definition of village industry as per the recommendations of the Tambe
Committee.

188. JHF Letter is obtained from a Joint Hindu Family concern when an advance is
sanctioned.
� JHF Letter provides for intimation to the bank of any change in the JHF and that the
Coparceners are bound by the acts and omissions of the Karta. Joint Hindu Family property
is attachable.

189. The written down value method for calculating depreciation is more appropriate than the
straight- line method.
� The written down value method is an accepted method for claiming exemptions from profits
in terms of the provision of the Indian Income Tax Act. An asset never loses its full value
over a period of time which is denoted by written down value method.

190. Comprehensive Insurance Cover is required to be obtained in respect of the hypothecated

vehicles in the name of the borrower only.
� In case Bank's name is also included, it is likely that the third parties may claim damages
from the Bank for any acts of negligence on the part of transport operator resulting in injury/
loss and to obviate claim by insurance company for unpaid insurance premia.

191. Use of Non-judicial stamps in place of special adhesive stamps for documents is
permissible.
� In as much as the documents bear adequate stamp duty, the difference in the nature of
stamps does not affect the validity of the documents.

192. Bank name boards are exhibited wherever we finance any asset/unit.
� These boards indicate that the Bank has a prior charge over the assets and serve as a
notice to public avoiding double financing. It is a constructive pledge.

193. High priority is given to rehabilitation of sick industries.

� The objective of Nursing Programme is to restore the units' capacity to generate internal
surplus thereby becoming active participation in the scheme of increasing production. This
enables the Bank to recover the blocked funds. An opportunity to reassess the real financial
needs of the borrowing unit.

194. Insurance cover against fire for advances upto Rs.25,000/-has been waived by RBI in the
cases of village industries.
� To help the small borrowers by reducing his expenses on account of insurance premium.
Majority of the activities are non-hazardous, loss due to fire may be remote and in tune with
Tambe Committee Recommendations.

195. Identification of sick units should be done promptly.

� Sick units are potentially sticky units. Early identification of sickness enables the Bank to
take necessary corrective measures to revive or recover the advance.

30
196. Our charges are to be registered with Registrar of Companies within the stipulated period.
� It is a requirement under the Company Law. If the charges are not registered with in the
stipulated time, the Bank may have to concede the first charge in favour of another creditor
who may register their charge in the books of the Registrar. Otherwise the entire loan
becomes unsecured and it is difficult to recover the same.

197. We obtain a Demand Promissory Note from the Borrower in addition to the ornaments
pledged to the Bank while sanctioning a Gold Loan.
� In the event of default and the proceeds of the ornaments falling short of the amount due,
the borrower can be proceeded against personally on the strength of the Demand Promissory
Note to recover the shortfall.

198. There is a need for aggressive marketing for high value SSI Business.
� The share of high value SSI advances has declined over the years. Adverse mix of low and
high yield SSI business implies threat to the Bank's premier position and our market share
besides affecting our profitability.

199. Safe Custody Receipt must be produced at the time of taking delivery of the securities,
while memorandum of securities is not insisted upon.
� Memorandum of securities is a mere acknowledgement while Safe Custody Receipt is a
receipt against deposit of articles.

201. The Bank is responsible for not taking reasonable care of an article kept in Safe Deposit
which was damaged due to improper/negligent handling by the Bank's Staff and
absentmindedness.
� As per Section 151 of Indian Contract Act, a bailee must take as much care of bailed articles
as a reasonable man of ordinary prudence would take care of his own articles of the same
bulk, quality and value as the goods bailed(against destruction, deterioration or unauthorised
interference by outsiders).

202. All employees of the Bank should execute Declaration of Fidelity and Secrecy?
� Maintenance of secrecy in regard to the affairs of the customers is a contractual obligation
(duty)of a banker. The declaration on the prescribed format is obtained to make the
employees a party to this obligation.

203. A standard register is maintained for recording details of settlement of deceased constituents.
� To ensure proper follow up. To expedite formalities for disposal of claims of legal heirs. To
record claims received in chronological order and to avoid complaints for delay in settlement.

.204. A Power of Attorney must be definite and not conditional.

� Because the failure to fulfill the conditions may automatically cancel the Power of Attorney
and jeopardise the interest of the Bank.

205. Gold ornaments or articles in Safe Deposit should not be delivered against Succession
Certificate.
� Succession Certificate is applicable in the case of only debts and securities. Gold loans do
not fall under the category.

206. We normally do not collect Bills for non-constituents.

� To avoid liability to the true owner if it proves to be a conversion. We loose protection under
section 131 of N.I.Act,1881 if they are not our constituents.

207. Advance against warehouse receipts should be made only to the original depositor.
� Warehouse receipts are not negotiable, non-transferable and title cannot be alienated.
Advance becomes clean and is difficult to recover.

31
208. Proceeds of a clearing cheque cannot be credited to Government account unless the
stipulated return clearing hours are over.
� The Government Account cannot be debited in the event of cheque being dishonoured and
it takes a very long time for recovering the same from the Government.

209. Whenever a fraud occurs or a suit is filed, all the vital documents connected therein should
be recorded in the Branch Document Register and held in the personal custody of the
Branch Manager.
� To ensure availability of records at the required time for verification by inspectors/auditors/
controlling authority etc and to prevent tampering with the evidence.

210. The requirement of obtention of No dues Certificate has been dispensed with in certain
cases, in the Agriculture Segment advances.
� This is in accordance with the Gupta Committee recommendations. To avoid unnecessary
inconvenience to small farmers.

211. Production of legal representation is not required for disposal of money left with the Bank in
the case of deceased Army and Air Force personnel.
� Such property is governed by the provisions of the Army and Air Force(Disposal of Privat
Property)Act, 1950.Letter from the Commanding Officer of the unit is sufficient to pay the
Money to the dependents of the deceased)

212. Branch Manager has to scrutinise vouchers daily with care and intelligence.
� To detect any errors/mistakes/frauds. It helps the Branch Manager to know the inflow and
outflow of funds which can be used for business development and to ensure that the powers
exercised by the officers are within the stipulated limits.

213. Notes bearing political slogans are not accepted by the Bank.
� As per RBI guidelines in terms of Legal Tender(Inscribed Notes) Act,1964, notes containing
political slogans are not legal tender.

214. Bank does not issue guarantees for an indefinite period.

� The Bank's liability should be limited to a specified period and specified amount. Other
wise the Bank's contingent liabilities will become unmanageable and risky.

215. Before granting an advance to company, its memorandum and articles of association should
be scrutinised.
� Memorandum of association defines the objectives of the company and borrowing powers
of directors are contained in articles of association. Any advance given by the bank for ultra
vires activity is not binding on the Company.

216. Two signatures are taken on D.P.Note, one on revenue stamp and another by the side of
it.
� It is an evidence that the document was stamped at the time of execution and another
signature is an evidence for execution of the document in case of the stamp gets dropped.

217. We do not insist on registration of a partnership firm before granting advance to the firm.
� Non-registration of a partnership does not preclude the bank from suing the partners for
recovery of an advance.

218. The loss of a blank cheques reported by the constituent must be recorded in the Lost
Document Register.
� To make the fact a permanent record and to avoid misuse of cheque at any time. To exercise
caution against any inadvertent payment being made.

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219. We cannot grant a loan against gold ornaments which bear initials other than that of the
borrower.
� It indicates that the ornaments do not belong to the borrower. To obviate any loss in case
the title to these ornaments is defective. If his title proves defective, we cannot enforce our
right to recover the advance.

220. Currency Administration Cells have been introduced by the Bank.

� Due to high cost of carrying such liquidity as huge cash balances do not earn any income.
To improve the profitability by deploying them for profitable ventures. Cash is a non-performin
asset.

221. A Bill of Exchange is deemed to be due on the preceding business day when its actual date
of maturity falls on a public holiday.
� As per provisions of N.I.Act,1881 they represent credit afforded. If they are payable after the
due date, contractual terms get altered which may not stand legally valid.

222. First withdrawal on a dormant / inoperative account is referred to the Branch Manager/
Manager of Division.
� To verify the genuineness of account holder, his signature etc. To establish the identity and
bonafides of the payee as well as drawer with a view to obviate perpetration of frauds.

223. The Bank should not collect interest on government securities held on account of deceased
constituents except when it is applied for liquidation of overdraft or demand loan.
� Death of the principal terminates agency. Under Section 202 of Indian Contract Act, 1872,
agency coupled with interest can take all precautions and necessary steps to protect his interest.

224. All DP Notes executed by the borrowers are required to be renewed after 2 to 2 1/2 years.
� To avoid operation of law of limitation. Not to make the document time barred and losing our
right to recover the dues from the borrower in his individual capacity for any shortfall in
case the security does not yield the required income.

225. We do not advance against the shares of the SBI.

� Prohibited under Sec.20 of B.R.Act,1949 and amounts to depletion of our own equity.

226. Negative growth is worse than negative variance.

� Negative variance means that the targeted budget is not achieved, but negative growth
means loss of existing business.

227. We show bills sent for collection as contra item on both the sides of the Balance Sheet i.e.,
both as a liability as well as an asset.
� To have record and control over these transactions. They are shown as liability to those on
whose account the bills have been sent for collection and as an asset on account of those
the bills are to be collected.

228. An Unconditional Cancellability Clause has been introduced in the loan documents.
� This is as per RBI guidelines in compliance with New Capital Adequacy Framework of
Basel-II
� Borrowal accounts complying with the unconditional cancellability clause would attract zero
percent Credit Conversion Factor (CCF) on the portion of the undrawn commitment
� The Bank need not have to provide additional capital on such undrawn portion of credit
limits.

33
229. Disinfectants and anti-termite treatment in locker rooms should be carried out regularly.
� In order to keep the locker room clean and treated against insecticides, dampness, white
ants, moth etc.
� To avoid claims for damages, losses etc. To get protection under Section 151 of Contract Act.
� To protect the image of the bank.

230. A banking holiday should be declared a public holiday under the N.I.Act, 1881.
� As it is required under Sec.25 of N.I.Act,1881. As the banks deal in negotiable instruments,
they can not stop business unless holiday is declared under the Act.

231. Current account cheques are treated as security forms but the saving bank withdrawal
forms are made available freely.
� S.B.Withdrawals are not negotiable instruments. They are meant for personal withdrawal
on the counter.

232. Cheques presented after business hours are not paid.

� As such payments are not considered as payments in due course under Sec.10 of the
N.I.Act.
� To obviate any liability if the payment proves to be defective. Sec.65 of N.I.Act provides for
payment of negotiable instruments during banking hours.

233. Irregularity reports are required to be submitted.

� To enable the controlling authority to control, monitor and guide the branch about the irregular
loan a/cs.
� To meet the requirements of the Scheme of delegation of financial powers for reporting,
confirmation by the appropriate authority.

234. Bills drawn on local parties are got accepted before they are discounted by the Bank.
� Sec.34 of SBI Act,1955 prohibits discounting of bills before they are accepted by the drawee.
� To make the drawee liable on the bill. It represents outlay of funds which should be recovered
with least difficulty.

235. While contemplating advances to a Joint Stock Company, the office of the Registrar of
Joint Stock Companies should be searched.
� To ensure that there are no existing encumbrances on the assets of the Company otherwise
our advance gets second/subsequent charge on the assets which is detrimental to the
interests of the bank.

236. All Government Promissory Notes tendered as security for advances are sent to the
respective Public Debt Office for examination.
� To ensure that the endorsements on the Promissory Notes are in order that they are not
stopped or confiscated, not duplicate ones and no alterations have been made in the principal
amount etc. and to get the security transferred into our bank's name to get right over the
property for easy liquidation of the loan account at a later date.

237. Crop loans are converted in to medium term loans when anawari is declared by the
appropriate authority in the district for reason of natural calamities.
� The facility of conversion enables the farmers to avail further loan facility from the bank and
to continue their agricultural operations.

� to provide sufficient cushion to the farmers for repayment in extended years.

34
238. The weighing scales and bullion metric weights should be got certified annually by the
govt.Weights & measures dept.
� The use of unverified weights, measure, weighing & measuring instruments is an offence
as per sec 264 of IPC and sec 153 of Cr.P.C.239. All the advances sanctioned to self-help
groups irrespective of line of activity should be classified under agriculture.
� As the purpose of loan is not asked by the bank at any stage and the members to whom the
loan amount is ultimately disbursed by the SHGs, use them for such diverse purposes as
consumption, agricultural, small business, repayment of old loans etc. the members of
SHG generally belong to rural areas & are agrl. Labourers.

239. Service charge is recovered on unremunerative Current Account.

� To compensate for the services rendered and operational costs involved in repetitive balancing
work, violation of minimum balance requirements, frequent return of cheques etc.

240. The concept of dematerialization of shares has been introduced.

� Because shares held in demat form have certain distinct advantages like (i) protection
against loss of certificates, (ii) bad deliveries, (iii) saving in stamp duty, (iv) ease of noting
pledge etc.

241. Overstamping and under stamping of Documents is considered as irregular.

� Overstamping may create doubts in the minds of borrower and also increase a burden on
the borrower. Under stamping may involve in payment of penalty . The documents get
nullified, not valid in courts.

242. Time Norms Tables are displayed at Branches.

� On the recommendations of Talwar Committee. To make the customer aware of the time norms.
� To show our concern to the Customer. To provide prompt Customer Service. It is a selfimposed
penalty to mould ourselves for better working to the satisfaction of the customers.

243. Concurrent Audit is conducted at bigger branches.

� To trace out errors/frauds for their rectification on an ongoing basis.
� To avoid accumulation of large irregularities if they are not pointed out immediately.
� To check whether the Systems and Procedures are followed meticulously.
� To plug income leakage.
� To verify documentation of loans sanctioned with a view to protect our interest in case of
legal disputes.
� To facilitate easy conduct of Central Office Inspection and Audit.

244. Nomination facility is provided to all deposit accounts.

� It is in pursuance of amendments in Banking Regulation Act,.
� For easy and prompt settlement of claims of legal heirs of deceased constituents.
� To reduce legal costs to the heirs in getting legal representation.

245. Books of the Bank are closed once in a financial year.

� As per SBI Act and RBI Act, Bank's Books and Registers have to be balanced and closed
as on March 31 every year.
� To present them to Statutory Auditors and submission to Central Government after
certification.
� To arrive at net result of our operations during the year.
� To determine Bank's Tax liability.

246. Reasonable Notice must be given by the Bank before closing an unsatisfactory account.
� Account is a bilateral contract. Bank cannot unilaterally close the account and terminate
the contract. This is to obviate chances of litigations and thereby not being made liable for
wrongful dishonour of Cheques issued on the account.

35
247. The details of tractor/implements purchased should be obtained on the supplementary
hypothecation letter signed by the borrower and the guarantor.
� As the machinery will be purchased subsequent to execution of documents and any addition in
the security documents subsequent to its execution by executants amounts to a material alteration
& may invalidate it. This is not needed in case of purchase of second hand tractors.

248. Items in the course of collection are not attachable by Garnishee Orders.
� Because in the case of collections the Banker-Customer relationship is that of Agent and
Principal butnot that of Debtor and Creditor. Garnishee Orders are issued for funds due but
not becoming due.

249. Only BIS marked agricultural machinery should be purchased.

� BIS mark on the product is an assurance that the product has been produced and tested to
meet the requirements of relevant Indian standard specifications. With a view to protect the
interest of farmers/bank.

250. Thumb impressions of illiterate Depositors and Borrowers are to be attested by a Supervising
Official on the pay-in-slip & withdrawal forms.
� To obviate chances of cheating of illiterate Customers by unscrupulous persons and to
avoid frauds and litigations at a later stage. It enables the Bank to establish the bonafides
and identity of the Customers.

251. Branch Manager should examine all Trust Accounts & Deeds periodically.
� Trust Accounts are fiduciary in nature and it must be ensured that their provisions are not
Over looked because any violation is there it lands the Bank in trouble for refund of monies
to the beneficiaries.

252. SB Accounts are not to be opened for Firms/Companies.

� SB accounts are purely meant for individuals with a view to encourage and inculcate savings
habit in them but not for business purposes. SB Accounts cannot be opened for profit
oriented commercial organisations as per Income Tax Act.

253. SB Withdrawals not accompanied by Pass Books should not be paid.

� Withdrawal Form is not a cheque and is only designed to suit the convenience of Depositors
of non-cheque operated accounts and to obviate chances of frauds by forgery by
unscrupulous persons.

254. TDRs maturing on Holidays are paid on the succeeding working day but not on the preceding
working day.
� Bank holidays are declared as per Sec.25 of NI Act with specific reference to payment of
Negotiable Instruments which are paid on the previous working day. TDRs are not NIs but
are receipts of monies deposited. Their payments can not be made before maturity date as
per Contract lest they should become premature payments.

255. Tax is deducted at source on deposits.

� Income Tax Act provides for the same. Its violation by the Banker is an offence punishable
under IT Act. The person responsible for the lapse will be penalised.

256. Delayed payments of RD installments are penalised.

� To ensure against investment of the RD installments in some other accounts on which
interest earned is more than the penalties payable by him on delayed installments.
257. The Bank has recognised Training as an important intervention.
� To meet effectively the growing needs of the changing scenario and environmental
compulsions and not to lag behind in the competition. Towards increasing job knowledge
and skills in employees.Towards facilitating attitudinal changes..

36
258. The Bank has set up an Institute of Information and Communication Management.
� To meet the emerging needs for new skills on account of the Bank entering into rapid
telecommunication and electronic banking era. To train on an ongoing basis personnel
manning the fully computerised branches.

259. The Bank has been placing continuous emphasis on the simplification of Systems &
Procedures.
� With the objective of improving work efficiency, accounting practices, Customer Service,
productivity and reduction in costs and time. rationalise systems and procedures by
removing outdated and obsolete practices . To remove wrong notions in the minds of
customers, staff and other bank that delay in service at SBI is due to lengthy systems and
procedures.

260. Visiting Faculty Scheme is implemented in the Bank.

� To enable the Faculty of Training Centres to visit more number of Rural/Semi-urban Branches
and guide the Staff in the implementation of Systems and Procedures of work. To clarify the
doubts of Staff on the spot regarding their routine work.

261. SBI has entered into Credit Card Business.

� The bank has entered into this area as world-wide, card system is the accepted payment
mode, and a growing business fetching handsome returns. This is in tune with bank's goal
of becoming a global bank in all areas of banking, especially the personal/retail-banking
segment.

262. Banks can not sanction advances against the membership certificates under Unit Linked
Insurance Plan of UTI.
� ULIP Certificates can not be assigned in favour of the Bank.

263. Notice of the Bank's Lien or Charge on the Shares against which advances are granted
should invariably be sent.
� By doing so the lending Banker gets priority over the debts obtained by the particular
Shareholder from other sources.

264. Credit Deposit Ratio should be at least 60% in Rural and Semi-urban areas.
� This is to ensure that the resources mobilised in Rural areas are utilised/channelled for the
development of these areas. To remove regional imbalances in economic development.

265. Purposeful inspection of the Unit on an ongoing basis is a must.

� To ensure end-use of funds, assess the activity / utilisation levels, to ascertain the financial
position of the unit and present position of the Securities charged to protect the interest of
the Bank.

266. Access Letter should be obtained from the landlord of the Unit if situated in rented premises.
� To ensure that the Banks representatives have free and unimpaired access to the rented
premises of the Borrower through the Land Lord's portion for inspection and/or seizure of
stocks etc., in case of default. To obviate the claim of the Landlord on the assets of the Unit
in case of default of rents due by the Unit.

267. Banks should not issue Performance Guarantees.

� Because Banks can not undertake the Constituent's technical, managerial abilities and
vocational experience. Any loss sustained by the beneficiary on account of non-performance
is arrived at in terms of cash, financial liability alone is undertaken.
268. We obtain Counter Guarantees from the Constituents before issuing Bank Guarantees.
� In order to bind the constituent to undertake to make good or reimburse the bank on demand
all costs and damages on the guarantee in case the guarantee is invoked by the beneficiary.

37
269. Branches are subjected to Inspection & Audit at irregular intervals.
� To ensure that the Branches are adhering to the laid down Systems & Procedures,
conducting safe and acceptable business as per Budgets & Norms, to check income/
expenditure leakages and to suggest remedial measures for growth and development.

270. Certain large advances at Branches are subjected to RBI Inspection.

� Under Sec.35 of RBI Act such inspections are carried out to ensure proper compliance of
various policies and norms of credit framed by RBI from time to time.

271. Fidelity Guarantee Insurance cover is arranged for Tellers by the Head Office.
� With a view to cover any loss as a result of any act of forgery, embezzlement, larceny or
fraudulent conversion of money committed by the Teller.

272. Power of Attorney Holder should not be allowed to surrender the Locker Key to the Bank.
� Power of Attorney Holder is only authorised to operate on the Locker for convenience of
hirer and the original agreement is between the Bank and the Locker Hirer. Termination of
the contract is in the hands of the original hirer only.

273. Credit Monitoring Scheme is introduced by RBI.

� To eliminate delays in prior authorisation and constant criticism. To improve credit appraisal
skills of the Banks and to monitor credit dispensation for purposes of priorities and policies
enforcing financial discipline amongst the large borrowers.

274. IRAC norms have been introduced in the banking industry.

� To identify and book only real incomes and thereby the real profits on recorded recovery
basis.
� To classify the assets based on their income generating capacity and to provide for the
losses arising out of the bad and doubtful debts. To maintain, increase the required Capital
adequacy to international standards for enhancing our business links globally.

275. Bank has introduced the practice of recording on the face of the passbooks/term deposit
Receipts issued to the depositors, the position regarding availment of nomination facility
with a legend superscribed thereon as "Nomination Registered".
� This has been done to facilitate the heirs of the depositors to know that nomination facility
has been availed by the deceased depositors.

276. A farmer who is being financed for purchase of tractor should be persuaded to avail of crop
loan facility also.
� To avoid borrowers approaching the money lenders to get finance for cultivation expenses,
thereby reducing the cost of funds to cultivators and to discourage multiple financing.
Sufficient surplus is generated from cultivating the land for regular repayment of instalments
of Agrl. Term loans.

277. We should obtain debit balance confirmation (COS 48) on revenue stamp of Rs.1 in the
case of advance a/c.
� It serves as an acknowledgement of debt and extends the period of limitation for a further
period of three years from the date of the balance confirmation as per Sec.18 of the Indian
Limitation Act,1963.

278. In principle approval is accorded in case of house loans to public.

� To improve thrust and increase our customer base in the market To give the borrower
greater flexibility in negotiations.
� To have greater flexibility with the bank to mobilize more customers.

38
279. Nominee's signature is not obtained on the nomination form.
� Nomination comes into picture only on the death of the original depositor. There is no contract
with the nominee. Further, to maintain secrecy and to enable account holder to change the
nomination at his will in another person's favour without any legal problems created by the
earlier nominee. of a gold loan account of the deceased constituent, we take from him a
letter of undertaking. � To obviate the possibility of the person claiming the assets if he is not one
of the legal heirs. To obtain undertaking from him to join in indemnity to Bank along with other legal
heirs against future litigations.

280. Bank provides product information to prospective customers through its website.
� It is a fair banking practice adopted by the bank as per RBI directive. Customer can compare
with those of the competitors products and have a wider choice. It facilitates our marketing
effort.

281. A Copy of the Currency Chest Book should always be retained in the strong room.
� So that a record of the contents of the chest would still be available even if the copy retained
outside is lost by fire or otherwise.

282. Cash Receipt delivery books are to be maintained by each of the cash department staff.
� To record inter-counter movement of cash. To record acknowledgements by cashiers and
Cash officer to fix responsibility of cash taken/handed over by them. To make cash balancing
exercise in the evening systematic, authentic, accurate.

283. The Branch Cash Balance Account in General Ledger is always in DEBIT.
� Cash is a real Account, to which receipts are debited and payments are credited. The
balance represents cash on hand which is the excess of receipts over payments and is
therefore, always in DEBIT.

284. Note bundles should be periodically turned over in the Strong Room.
� To obviate any portion of the Currency Chest remaining dormant for a long period and
getting damaged due to white ants. It helps in verification of cash at periodical intervals.

285. Petty Cash balance should be kept separately from the Head Cashier's hand balance.
� Petty Cash is an advance given to the Cash Officer for meeting petty expenses and should
be accounted for at the month end. It is not part of the hand balance.

286. Strong Room Fitness Certificate is obtained every year.

� It is the requirement under the Central Government Treasury Rules, Rule No.113. It serves
as a review for the protective arrangements.

287. One Rupee Notes are issued by the Government Of India, whereas all other notes are
issued by the Reserve Bank of India.
� One Rupee is the unit of currency of the country. Its issue is vested with the Government of
India under the Coinage Act. All other notes are multiples of unit of currency. Note issue is
vested with RBI as per RBI Act,1934.

288. Locking-up arrangements are drawn at Branches and approved by Controlling Authority.
� It serves as a check and control over the authorised positioning/handling of keys by
authorized persons vested with the power. It is a record enabling tracking of usage of keys
and to obviate unauthorised usage thereof to perpetrate frauds.
289. Fresh Nomination is not obtained every time a Term Deposit is renewed.
� As per the provisions in the Banking companies (Nomination ) Rules 1985, a nomination or
cancellation of nomination or variation of nomination shall not cease to be in force merely
by reason of the renewal of the deposit. To provide convenience to the customers and also
to avoid unwarranted paper work.

39
290. On the death of one of the joint depositors the survivor does not get absolute right over the
property.
� Sec.45 of Indian Contract Act.1872 provides for repayment of monies received from the
Joint depositors on the death of one of them jointly to the survivor and the legal heirs of the
deceased.
Survivor holds the property in trust for the legal heirs of the deceased.

291. Bank is extending financial assistance to women SHGs.

� In order that the women get greater economic self reliance and develop their skills in taking
financial decisions to obviate suppression and exploitation by male dominated societies.

292. Bank encourages NRI accounts.

� NRI deposits are bulk deposits and are held with the bank for a longer period. The servicing
cost of these deposits are low as NRI does not visit the branch frequently. With the
remittance / withdrawal in the NRI accounts banks earns exchange and commission..

293. Bank have introduced platinum debit card.

� Bank have felt the needs and targeted towards the affluent segment having annual income
of Rs.10 lac and above. These segments, characterized by high purchasing power, desire
products meeting their recognition needs as well as value added facilities/services. To
facilitate transactions of these customer segments, the Bank have introduced Platinum
Debit Cards.

295. Payment Of Interest On Savings Bank Account On Daily Product Basis.

� RBI guidelines. In view of the present satisfactory level of computerization in commercial
bank branches, payment of interest on Savings Bank accounts would be made on daily
product basis w.e.f. 01.04.2010. Bank customers should be given additional incentive for
parking their surplus funds in SB accounts which banks have come to treat as a source of
free float funds.

297. Branches should not direct the customers to Clearing CPCs for clearing related queries
and grievances.
� RBI license for CCPC does not permit any interaction with the customers. Besides by
design CCPC is a back office unit and the ownership of the customers continues to remain
with the home branches for all practical purposes.

298. Non-Disclosure Agreement has been contemplated under the IT Policy and IS Security
Policy of the Bank.
� Certain projects will involve sharing of Bank's confidential information, internal procedure
and processes. With the increase in outsourcing of Bankers' business and IT operations,
there is need to allow the third party vendors' employees to access Bank's critical information
systems and documents. It is, therefore, necessary to have control, which would indemnify
the Bank against disclosure of Bank's critical information by the third party vendors.

301. RBI has suggested that in addition to the legend 'Nomination Registered' banks should Also
indicate the name of the nominee in the Pass Book / Statement of A/c TDR, in case the
customeris agreeable to the same.
� The instructions / suggestions are already in place to eliminate complaints. Such a step
will be helpful to the customers / nominees.

303. Branches have been instructed that payments relating to Bank's expenditure, if more than
Rs.20,000/-should be made by Account Payee cheque or Account Payee Draft only.
� As per Section 40A (3) of the IT Act, such payments in violation of these requirements are
treated as non-allowance expenditure. Any violation of the provisions, therefore, causes
substantial loss to the Bank.

40
304. Foreign Currency Loans to NRIs against FCNR(B) deposits has been launched.
� To give benefits of lower interest rates to NRIs who may like to avoid loan in foreign currency
And / or to meet their currency liabilities RBI have since permitted authorized dealers to
extend such loans. This will help in straight through processing of inward payment. It will
also come in handy once BPR initiatives viz. Centralized Inward Remittance Processing
Cell is rolled out.

305. General-purpose credit cards and overdrafts against No Frill Accounts should be treated
as priority sector advances.
� in order to give impetus to financial inclusion, banks have been advised by RBI to classify
100% of the credit under GCCs and overdrafts up to Rs.25,000/- granted against no frill
accounts in respect of accounts in rural and semi-urban areas as indirect finance to
agriculture under priority sector advances.

306. Use of electronic mode of payment has been made mandatory for Rs.10 lakh and above
transactions between certain institutions.
� RBI has reduced the threshold limit from Rs1 crore to Rs.10 lakhs and hence made it
mandatory between RBI regulated entities such as banks, primary dealers and NBFCs to
route all payments only through electronic payment mechanisms from 1st August 2008.

308. A scheme for Debt Swapping of borrowing has been launched under agricultural segment.
� Farmers in the country are heavily indebted to non-institutional lenders including money
lenders. Interest on such loans is very high and it is almost impossible for the borrowers to
come out of the debit trap. To mitigate acute distress the scheme for providing relief to
farmers who are indebted to non-institutional lenders, the Scheme has been introduced.

309. Restrictions on maximum permissible amount of loan for two or more wards of a parent /
guardian have been removed.
� There were requests for deviation. Each ward of a parent / guardian can avail loan as per
their eligibility provided availability of collateral security stipulated as per the scheme for the
aggregate loan put together.

310. Minor's signature need not be obtained on the Partnership Letter when a Partnership firm is
financed but his date of birth is ascertained.
� Minor is admitted only to the benefits of the Partnership firm. Minor, on his attaining majority,
has to ratify the transactions conducted by the firm if he is willing to continue in the partnership
firm and to make him liable for the acts of Partnership before his attaining majority.

311. While analysing the balance sheet, investments even in quoted/listed shares are classified
as miscellaneous asset.
� All investments other than investments in Govt. securities should be classified as
miscellaneous assets, although these shares are quoted and listed. These shares would
not qualify to be classified under current assets.

312. In the case of Equitable Mortgage created by a borrower, a confirmation through Regd.
Post on Form 'A' is obtained. This is not so in the case of companies where Equitable
Mortgage is created over the Company's immovable properties.
� In terms of Section 125 of Indian Companies Act, 1956, the mortgage charge should be
registered with Registrar of Companies by the creditor. This serves as a confirmation
regarding creation of the Equitable Mortgage by the company.

313. We do not open the Registered Letters sent to the borrowers which are returned undelivered.
� To avoid any possible dispute as to the contents of cover which serves an alternative mode
of service under Criminal Procedure Code.

41
314. Accounts of customers whose cheques are returned frequently have to be closed.
� To inculcate financial discipline amongst the customers.
� To penalize the deliberate default by the cheque issuer.

315. While renewing Cash Credit Limit, the Credit summations in the account are taken into
consideration.
� The credit summations in the account indicate the sales turnover which is essential to take
a decision regarding continuation of the facility and to fix the quantum of limit to be granted/
renewed and to ensure the end use of the limits sanctioned.

316. Branch Manager should scrutinize Staff accounts at Quarterly intervals.

� To ensure that the inflows of monies, spending and life style of Staff Members is of usual
nature commensurate with the known sources of income and they are properly conducted.

317. The prospective CurrentAccount Depositors have to sign an undertaking while opening a
BankAccount.
� This is to obviate possibility of lodging of Cheques in the Current Account of another Bank
other than the Bank granting credit limits as the outstanding in the lending Bank become
unsecured.

318. Green channel counters have been introduced.

� The Green Channel counters provide safety and comfort to the customers. It avoids filling
up withdrwal forms/cheques, pay in slips. The customer can get cash in denomination his/
her choice. Cost effective for bank as it reduces the burden of VVR checking/back office
operations.319. New Pension System introduced.
� it is a voluntary contribution of funds for those don't have the benefit of pension after
retirement. It gives an opportunity to the subscriber to build up the pension fund benefited
by drawing pension after attaining the age of retirement i.e. 60 years of age. This is introduced
by GOI and being regulated by Pension Fund Regulatory and Development Authority.

321. Duplicate ATM PIN requests from customers are now being accepted through contact
centre.
� To reduce the delivery time of duplicate PIN. The initiative will improve customer service
and enhance customer satisfaction.

322. Policy for dealing with incidence of frequent dishonor of Electronic Payment System has
been modified.
� Under Section 25 of Payment and Settlement Systems Act, 2007 dishonor of an electronic
fund transfer instruction due to insufficiency of funds in the account etc is an offence
punishable similar to the dishonor of a cheque under NI Act,1881. This will enforce financial
discipline among the customers.

323. Agri Gold Loan Scheme has been modified and simplified.
� Gold loan has been one of the safest advances. Lower incidence of NPA in this portfolio.
Further RBI has reduced risk weight for loans up to Rs. 1 lac against Gold and Silver
ornaments thereby lower capital adequacy ratio. To meet the competition particularly forms
the NBFCs.

326. What is the purpose of having symbol for Rupee?

� The Symbol will have ICONIC meaning, which will convey brand value of the Currency &
Nation.
� It will be step towards making it internationally acceptable for trading.

42
328. While renewing the CC limits the credit summations are taken into consideration.
� The credit summations represent the Sales/Turnover of the unit.
� The volume of sales is an important date for assessing credit needs of the borrower.
� The adequate credit limit to the borrower could be fixed base on the credit summations.
� It will obviate over finance or under finance and also ensure end use if the funds.

329. With DP Note we take Note Take Delivery Letter.

� It servers as an evidence that DP Note is made with sole intention of creating a security
against a debt.
� To dispense with notice of dishonor.

331. SARFAESI Act. Introduced.

� NPA of the Banks were increasing due to weak creditors right prevailed earlier. SARFAESI
Act was enacted to make creditors to overcome the difficulty.
� Securitisation allows locked funds to be released for recycling.
� It has empowered the Banking Industry and creditors to recover the funds from the defaulting
debtors apart from legal action.

332. Basel-II norms have to be followed by all the Bank.

Basel-II consist of three-mutual reinforcing pillars viz:
� Minimum Capital requirement.
� Supervisory review of capital adequacy.
� Market discipline.
I requires banks to hold capital not only for credit and market risk but also for the operational
risk.
� RBI directives.

333. Preference to be given to Compromise proposal /OTS.

� Compromise proposals are based on mutual consent of the parties and hence can be
settled fast.
� Court cases are time consuming, costly and cumbersome.
� One of the important tool to reduce NPA.
� Enable Banks to recover and recycle idle funds.
� It cleans the Balance Sheet to meet the desired capital adequacy norms.

334. Banks does not advance its own share.

� Under Section 34(1) of SBI Act. Prohibits granting advance against own share.
� It amounts to depletion of Share capital.

335. Contact Farming is being encouraged.

� Efficient timely technological guidance.
� Assured supply of quality seeds, pesticides and fertilizers.
� Assured market for the farmers.
� Better price for the produce.
� As for the Bank Self Liquidating Loans or secured advances.
� High value advances with low transaction & supervision cost.

336. RTGS has been introduced.

� To ensure instant transfer of funds between banks and Fis.
� To enable banks to manage intra day liquidity position effectively.
� Fund transfer will become credit based instead of debit based. Hence, risk for bank come
down significantly.

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337. The bank is keen to cover all its Housing under SBI Life.
� It mitigates the risk of default due to death of borrower and is therefore a good measure for
containing NPA in housing loan portfolio.
� It also helps in retaining customer loyalty and can minimize the risk of takeover of the loan
by other banks.
� It is a good source of other income for the bank.

338. Gold deposit scheme is re-introduced.

� To reduce country's reliance on Gold imports.
� This will save country's valuable foreign exchange.
� This is and opportunity for people to earn income on idle gold and increase their liquidity.
� To mobilize domestic gold and recycle the same for economic purpose.
� An excellent income generation avenue for the bank also it boost profit of the bank.

339. The bank has introduced Mobile Banking Service.

� Increasing growth in mobile phone coupled with multi functionalities.
� Due to convenience, Mobile Banking is emerging as a strong alternative channel for rendering
customer service.
� Cost effective, Secure and user friendly for banking services and transactions.

340. PMEGP introduced.

� To generate employment in rural and urban areas by setting self-employment venture.
� To give self-employment opportunities to artisan and rural/urban un-employed youth.
� To arrest migration of rural youth to urban areas for search of employment.

342. When a partner dies, operation if the Cash Credit or OD account of partnership firm is
stopped forthwith.
� According to Section-42 of Partnership Act, the death of partner dissolves the partnership.
� Operation of account is stopped in order to retain claim over estate of deceased partner.
� Clayton's rule will apply as per Section-59-61 of Indian Contract Act.

345. BPR has been introduced.

� There have been fundamental changes in competition, technology and customer expectation.
Also there have been many changes in delivery system of products and services of the
Bank. But the Business Process (i.e. The task, procedure, documentation etc.) have
remained the same.
� BPR (Business Process Re-engineering) is the fundamental re-thinking and radical redesign
of business process to bring about dramatic improvement in performance.

346. Scoring model for Tractor Loan has been introduced.

� There are cases agriculturist may not have minimum eligible land holding for financing
tractor, but they may have earnings from other agricultural related operations. The scoring
model enables us to assess repayment capacity in such cases.
� Interest rate is linked to the risk level of the loans.

347. Know your Customer (KYC) / Anti-Money Laundering Act. (AML) introduced.
� To prevent banks from used, intentionally or unintentionally by criminal elements for
moneylaundering
or Terrorist financing activities.
� To know/understood our customer and their financial dealings.
� To mange risk prudently.
� RBI guidelines.

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348. CPC introduced under BPR.
� To bring about improvement in performance and customer service.
� Skill pooling
� Standardization of process
� Automation.

349. Base rate has been introduced.

� BPLR system has fallen short of expectations in its original intent and needs to be modified
and leads to introduction of Base Rate.
� Base rate will include all those cost elements, which can be clearly identified and common
across borrowers.
� Serve as reference benchmark rates for floating rate loan products.
� In order to bring about greater transparency in loan pricing.

351. RBI has decided that bank need not obtain license for opening of off-site ATM.
� It will enable banking system to penetrate rural areas where banking is yet to make headway.
� Serve as great boost for financial inclusion.
� Banks who have limited reach on account of lesser number of branches can have a wider
reach now.

353. The Bank is not responsible for the transactions of the customer put through Internet Banking.
� The Bank has the responsibility to safeguard the personal date of the customer by employing
highest security features.
� It is the responsibility of use to protect the username, Password and any attempts of attack
to hijack the banking information by any unscrupulous elements.
� Since all Internet transactions are conducted through Virtual Banking (without direct
involvement of bank staff) the responsibility for Internet transactions lies solely with the
customers.

355. All staffs have to submit their claims regarding monthly expenses online in HRMS portal.
� Avoidable and Costly paper work will be saved in respect of small amounts.
� Centralized payment will be credited to employees salary account.
� The process will be speeded up.
� A step towards Green-Banking.

356. While returning the cheque for want of funds the reason mentioned in the memo should
be "insufficient funds" but not refer to drawer.
� In order to enable the payee of the cheque to proceed against the drawer by filing a criminal
case U/S 138 of N.I. Act.
� Supreme court Judgment.
� IBA's Advice.

357. It is preferable for bank to advance SME sector under CGTMSE coverage.
� CGTMSE cover is more effective risk mitigation tool than collateral security because the
enforcement of collateral in case of loan default is a protracted and expensive procedure.

358. Locker Keys with Name of the Bank, Branch and Branch Code engraved on them.
� This will facilitate the identification of Safe Deposit Locker on the basis of locker keys in
case sized by Income-Tax and other investigating authorities.
� RBI directives.

359. CASA Deposit are given more importance.

� CASA deposits are least costly.
� Improve Net Interest Margin.
� More stable deposits.

45
360. Right To Information Act. has been enacted.
� The constitution has given the Citizen the right of freedom of speech and expression and
this right can be effectively exercised only if information is available to him. Hence the
Right to information Act was passed in 2005.
� Its main objective is to promote transparency and accountability in the working of every
Public Authority.

361. Lockers have to be interchanged in case of any closure of locker account.

� This precaution is taken to ensure against any attempt by the previous locker holder to try
to open / operate the surrendered locker.

362. Security feature like use of fugitive ink is must for cheque for Rs.25000/- and above.
� Restrict Fraud, which have been perpetrated through encashment of fake cheques.
� Fugitive ink gets smeared in contact with water and helps in detection of any alteration
done on writing on cheques.

363. Revival letter is not required to obtain for Standard Term Loan.
� Revival letter / Annual balance confirmation is obtained as a matter of abundance caution.
The process involves huge resources of the bank, time consuming and unproductive.
� Limitation period starts from overdue of the loan.

365. The bank is now paying a great deal of attention to the marketing of the products
and services.
� Due to increased competition from private and fereign banks.
� Introduction of new products and services.
� Due to fast changing scenario in the banking industry.
� To retain / increase our market share in the banking industry.
� Due to thinning spread and decreasing profitability.

366. Payment of cheque outside business hours is not made to any person other than the
drawer.
� Such payments are not considered as payment in due course U/S 10 of N.I. Act.
� Section 65 of NI Act. provides for payment of Negotiable instruments during banking hours.
� Bank will be liable for loss caused on account of wrongful payment outside banking hours,
in case of death/insolvency/insanity of depositor / stopping payment of cheque / receipt of
Garnishee or IT attachment order.
� Payment outside business hours may be made only to the drawer as he cannot
countermand/stop payment of such cheques.

367. ATM Cards to be issued to all eligible customers.

� To provide Anywhere, Anytime Banking to our customer.
� To provide an additional delivery channel to our customers.
� To make maximum use of our investments in ATMs.
� To reduce the transaction cost.
� To reduce foot falls in the branch.
� To release branch staff for marketing efforts.

368. Non-interest income is becoming increasingly important for Banks.

� Increase profitability.
� Bank's funds are not locked.
� Due to narrowing interest spreads.
� For improvement in operating efficiency.
� Better asset utilization.
� NPAs are not generated
� Capital Adequacy norms are not applicable to Miscellaneous Business.

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369. KYC norms introduced by RBI.
� To avoid money laundering and control financial frauds.
� In order to properly identify individuals/corporate and monitor high value transactions and
transaction of suspicious nature.
� RBI has stipulated these norms as per Section 35(A) of Banking Regulation Act, to ensure
recording of entire information of customer.
� To facilitate ease exchange of information, if warranted.

370. RBI introduced Special Mention Account (SMAs)

� These are accounts that may slip into NPA, if the early warning signals are not given proper
attention.
� This is a part of the Bank's Risk Management process.
� RBI is considering provisioning on SMAs also as part of the IRAC norms.

371. Importance is given for NPA Management.

� NPA reduces the yield on advances as income cannot be booked on them.
� Huge provisions and write off affects profitability.
� Banks funds are blocked and recycling of funds not possible.
� NPAs are high-risk weighted assets, which affect the Capital Adequacy Ratio.
� Huge Cost is involved in follow-up and supervision.
� To clean Balance Sheet as per International Standard.

372. Miscellaneous / Non-fund based business should be encouraged by branches.

� In case of miscellaneous business float funds are available.
� Non-fund based business involves no outlay of funds.
� This will increase profit of the branch and need not be shared with Corporate Centre.
� Operational cost is very low.

373. SHG to be encouraged.

� It inculcates unity, saving habit and enhance earning capacity by undertaing viable economic
activities.
� The transaction cost is very low.
� The recovery percentage is very high and low NPA.
� It develops thrift habit among the rural poor and instills financial discipline.
� Govt. subsidy is available and these loans treated as weaker section advances.
� It saves rural poor from the clutches of moneylenders.

374. Agricultural loans are not disbursed at one instance but in stages.
� Agriculture requires funds at different stages of operation.
� To ensure end use of funds and to avert diversion of funds.
� This will reduce interest burden on agriculturists.

375. The Balance in currency chest is not reflected in General ledger.

� General ledger reflects Bank's assets and liabilities.
� Currency Chest is the property of RBI and it is neither on asset nor a liability of the bank.

376. On DP Note two signature of the borrowers, one over the revenue stamp and the
other by the side of it is insisted.
� Signature over revenue stamp cancels the stamp.
� The other by the side of it proves the execution of DPN by the borrower in the event of loss
of revenue stamp bank is protected.
377. Bank cannot issue a Demand Draft payable to bearer.
� Demand Draft is Bill of Exchange, which requires three parties.
� As per Section 31 of RBI Act issuance of Bill of Exchange payable to bearer is prohibited
and tantamount to currency not which is punishable U/S 58(1b) ibid.

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378. The bank publishes Quarterly results.
� To adhere to the listing agreement as per SEBI directives.
� Dissemination of information regarding the performance and to enables the investor public/
Shareholders to take an informed decision.
� To ensure review and to determine plan of action.

379. When Bank draft is cancelled, a receipted discharge on revenue stamp is taken form the
applicant.
� When a draft is cancelled, it ceases to be a negotiable instrument, and the payment is
made in full and final settlement of the purchaser's claim in the form of receipt.
� Any receipt above Rs.5000/- should be stamped as per Stamp Act.

380. Margins are maintained for advances.

� Margin ensures the borrowers stake / investment in the project.
� A buffer to take care of the fluctuation in the value, deterioration in quality, shrinkage of the
securities and loss arising due to forced sale.
� Any escalation in the project costs or any unforeseen contingencies can be met.

381. Interest should not be applied on NPA accounts.

� Non-Performing Assets are idle assets which ceases to generate income
� When the principal itself is doubtful of recovery, applying of interest will artificially inflate the
profit.
� It interest is recognized Bank has pay tax on this income. As realization of the interest is
doubtful, Bank should avoid paying tax on it.

382. Although we obtain partnership deed, we insist on partnership letter.

� All the partners may not sign partnership deed. Partnership letter on the bank's standard
format COS 37 need to be signed by all the partners.
� In this they undertake to advise bank of any changes in the constitution of the firm and
ensure that all partners abide by the terms of opening of account and mode of operation is
made explicit.

383. Bank is liable for any damage caused to articles in safe custody.
� The relationship between the banker and customer in case of safe custody is that of Bailee
and Bailor.
� As per Section 151 of Indian Contract Act, the Bank will be held liable for any negligence on
its part as Bailee.

384. An account should be opened in cash only.

� Banker Customer relationship is established only after accepting cash for opening of account.
� If opened with cheque, the banker loses protection as per section 131 of N I Act. as a
collecting banker, in the event of the person not having a good title.

385. A cheque drawn by a Director of a company on its account can be paid even after death of
the director.
A company is a legal entity with perpetual succession and a common seal.
� As the director is operating in his representative capacity and not in his individual capacity,
such chaques can be paid even after the death of the director.

386. Nominee's Signature is not obtained on the nomination form.

� Nomination comes into effect only on the death of the original depositor. Till such eventuality,
there is no contract with the nominee.
� To maintain secrecy and to enable account holder to change the nomination at his will.
� As per provisions of Banking Regulation Act.

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387. Tem deposit receipts can not be presented through clearing.
� TDRS are non-transferable receipts and an actionable claim.
� They are not negotiable instruments. Clearing is mean for settling transaction between
banks on account of negotiable instruments only.

388. No advance is granted against other bank's TDR.

� Other bank will exercise paramount lien. It may refuse to mark a lien in our favour.
� Possibility of unscrupulous persons availing advances against forged TDRs cannot be ruled
out.
� This may acts as disincentives to keep deposit with us. � As per RBI directives.

389. No advance is granted to PVT. Ltd. Co. Shares.

� Shares of Pvt. Ltd. Companies are generally Not transferable. Therefore, the bank shall not
be in apposition to have the assignment in its favour.
� They are not quoted in Stock Exchange. Therefore, it is not possible to ascertain their
present market value.
� It amount to sanction of a clean loan.

390. goods are preferably insured for the full market value.
To safe guard Bank's interest.
� Otherwise, "average clause" will apply and unit will get proportionately less amount / less
compensation from the insurance company.
� To save the borrower from the obligation of meeting any loss on account of uninsured
portion.

391. Date and place to be mentioned in DP Note.

� The date enable the bank to ascertain the period of limitation. The place will enable the
bank to determine the place of jurisdiction. The DP note will be rendered as an inchoate
instrument in absence of the above.
� To determine the stamp duty pertaining to the place of execution and date.

392. Gestation / Moratorium period is allowed for the term loan.

� Any project requires time for the completion of it inception and commence commercial
production and surpass the break even level, the unit will generate profit and repay the
installments. Hence adequate gestation / moratorium / start up period is allowed.
� To guard against acceleration of NPA.
� Reduce the financial burden of budding unit.

393. Financial Statements have their own limitation.

� Financial Statement are as on a particular date and static. By the time they are submitted
the items mentioned therein will undergo change.
� There is ample scope of window dressing.
� They do not reflect the non-financial areas such as competition, market, labour relationship etc.

394. Crop loans are disbursed both in cash and kind.

� Disbursement in cash ensures payment to labour / water charges and to avail of discounts.
" It is made in kind to ensure proper end use of funds of credit and purchase / application of
right inputs like fertilizers and pesticides.
� The right mix guards the interest of the bank as well as the borrower.

395. Interest is applied at the time of harvest on crop loans and not in the case of cash credit
accounts.
� The repayment of crop loan is synchronized with the harvesting and marketing of crops
during which the interest components is also recovered. This is not so in the case of cash
credit as it is working capital advance and a running account.

49
396. Undated, signed, transfer forms are obtained for tractor loans.
� This will enable the bank to realize the bank's dues by sale of tractor in the event of willful
default by the borrower.
� The bank will be able to produce the transfer forms after dating them, to RTO for effecting
the transfer to third party / buyers, who pay off the loan.

397. Bank conducts Government Business.

� It offers substantial income.
� Float funds are available.
� Rapport with Government officials leads to cross-sell of our products.
� It is statutory responsibility under section 32 of SBI Act.

398. One Rupee notes are issued by the Government of India, whereas all other notes are
issued by the Reserve Bank of India.
� One Rupee is the unit of currency of the country.
� Its issue is vested with the Government of India under the Indian Coinage Act.
� All other notes are multiple of unit of currency and issue authority is vested with RBI as per
RBI Act, 1934.
� No reserves are required to be made for issue of one-rupee notes.

399. Scale of finance in case of crop loans varies from place to place.
� It varies with the cost of cultivation from place to place depending upon the agro climatic
conditions of the region like weather, soil, water table etc.
� The cost of inputs, labour etc are also different in every area.
� Scale of finance is also based on the cropping pattern and periodicity.

400. Advances are not Granted to Minors.

� Any contract with a minor is void ab-initio as per Section 11 of Indian Contract Act. minor is
incapable of entering into any contract, he may repudiate the transaction.
� In the contracts, Minor can bind all others excepting himself. Because of inherent lacunae,
loans cannot be recovered from minors.

401. the documents must be completely filled in before execution.

� Incomplete documents are unenforceable in law.
� They are not the full agreements of the borrowers.
� If executed and filled on a later date the borrower may dispute the contents.

402. The payee of a cheque cannot stop payment of the cheque.

� There is no privity of contract between the payee and the bank.
� No obligation on the bank to follow anybody's instructions except the drawer (account holder).

403. Bank cannot stop payment of it own draft.

� After the draft is issued, the relationship of the bank to the payee would become that of a
trustee of the payee.
� Bank cannot go back on its own promise to pay the money, which was received, for
consideration.
� Otherwise, Bank would be held liable for Breach of Trust.

404. Before granting an advance to company, Its Memorandum and Articles of Association
should be scrutinized.
� Memorandum of association defines the objectives of the company and borrowing power
of directors are contained in Article of Association.
� Any advance given by the bank ultra vires the activity is not binding on the Company.
� To ensure protection for the bank under company law as well as NI Act.

50
405. The Depositors of SBI are called Unsecured Creditors.
� As they have no charge on the assets of the SBI.
� As they do not hold any security.

406. Customer Relations Programmes are held at branches periodically.

� To identify problems/requirements of and providing amenities to customer and for render
excellent and effective customer service.
� To give special platform to customers for ventilating their grievances and to deliver
suggestions for improvement of Bank's services.
� To consider customer's grievances and suggestions to improve bank's business and image.

407. Nomination facility is provided to all deposit accounts.

� It is in pursuance of amendments in Section 45 Z A of Banking Regulation Act.
� For easy and prompt settlement of claims of legal heirs of deceased constituents.
� To reduce legal costs to the heirs in getting legal representation.
� To inculcate confidence in the mind of depositors.

408. All Banks have to maintain CRR.

� It is a credit control mechanism of RBI.
� To regulate money supply.
� To check inflation.
� As per section 42(1) of RBI Act.

409. SB Accounts are not to be opened for Firms / Companies.

� SB Accounts are purely meant for individuals with a view to encourage and inculcate saving
habit in them but not for business purposes.
� SB Accounts cannot be opened for profit oriented commercial organization as per Income
Tax Act.

410. Tax is deducted at source on deposits.

� As per provision of Income Tax Act.
� Its violation by the banker is an offence punishable under IT Act. The person responsible
for the lapses is liable for the punishment.
� It is the paramount responsibility of the person who pays the interest income to deduct the
tax at source.

411. Term deposit Receipts maturing on holidays are paid on the succeeding working day but
not on the preceding working day.
� Bank holidays are declared as per Section-25 of NI Act. with specific reference to payment
of Negotiable Instruments which are paid on the previous working day.
� Time Deposits are not negotiable instruments but are receipts of monies deposited.
� There payment cannot be made before maturity date as per contract, lest they would
premature payment.

412. Bank does not negotiate/transact foreign exchange transactions for large amount on
Saturdays.
� International money market remains closed on Saturdays and Sundays. Therefore, it would
be difficult for the bank to arrange for proper cover through RBI.
� Exchange Rate fluctuations will have a bearing on the Bank's spread.

413. Merger of banks is gaining importance.

� To consolidate their strength, improve their CAR, promote and market new products.
� Best possible way for revival of banks with narrow capital base, poor bottom lines and high
level of NPAs.

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414. Branches send Control Returns to their controllers.
� To ensure that the BM has not exceeded the discretionary powers vested in him.
� To ensure that the sanction of advances conform to the laid down policies, terms and
stipulations of the Bank and are in order.

415. The Branch Manager should do Periodical verification of Staff Accounts.

� To ensure that against the unusual nature of transactions that are disproportionate to the
source of their income.
� To ensure proper conduct of the account.
� As a preventive vigilance step.

416. Intraday cash verification has been introduced.

� To ensure that all the transactions have been put through.
� To access any excess or shortage.
� To prevent frauds.
� As an effective Preventive vigilance measure.

417 Clean Note Policy has been introduced / currency note packets should be wrapped with
paper bands only.
� Life span of notes gets reduce on continuous usage of staple pins.
� Quite a huge amount of foreign exchange is being spent on account of printing currency.

418. Validity of draft is restricted to 3 months.

� To avoid possibility of circulation of some of drafts in the market for an indefinite period,
thereby creating problems for reconciliation.
� There is no point in keeping such liability outstanding for an unlimited period.
� The draft can also be used for hoarding purpose. We cannot encourage it.

419. When crossing is opened, cheques are paid to drawer only.

� To avoid the possibility of an unscrupulous person / holder forging the drawer's signature to
open the crossing and obtaining the payment in cash.
� Preventive vigilance measure.

420. Rectification of irregularities in I&A Report should receive top priority.

� As an implementation of the recommendations made by Rashid Jillani Committee.
� Improves safety of the branch business immediately. Frauds prevention and preventive
vigilance measure.
� It also helps the branches for achieving up gradation in rating during the next inspection
exercise.

421. In granting advances, viability is more important than the security offered.
� This indicates bank's approach to need based lending.
� Viability decides the safety of the bank's funds. We must be in a position to recover the
loan and recycle the funds.
� Servicing of the loan repayments will not be a problem for viable unit.

422. VVR checking is important.

� It will ensure against interpolation/manipulation of vouchers.
� To avoid extraneous entries and double posting.
� To ensure that no voucher is missing and is properly accounted for.

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424. DSCR and Debt Equity ratio are examined before a TL is sanctioned.
� Debt Service Coverage Ratio (DSCR) will indicate the borrower's ability to generate cash
accruals to meet the repayment obligation under TL. Based on this, repayment schedule
can be fixed by the Bank.
� Debt Equity ratio reflects solvency of the borrower.
� To ensure repayment of long term debt without interruption and to have recourse in the
event of default.

Q.No.1 RBI has directed banks to open “NO FRILL” a/cs.

Ans: 1] To facilitate common man to open bank a/c at nominal cost. 2] To help common man to
cultivate banking habits. 3] To achieve the target of “Financial Inclusion”.
Q.No.2 Bank Guarantee is issued for definite period.

Ans: 1] These are contingent liabilities which may crystallize into actual liability. 2] The risk
of crystallisation is very high when guarantees are issued for long/ indefinite period. 3] The
bank has to provide capital. 4] These are RBI restrictions.
Q.No.3 Cheque Truncation System is introduced.

Ans: 1] Capture image of cheques and restricts their physical movement. 2] This will speed up the
collections. 3] To prevent the possibility of frauds. 4] To control the complaints of missing of
instruments.
No.4 Attention is being paid to Credit Risk Management.

Ans: 1] It is the most important of all the risks. 2] It helps in managing risk of exposure, default and
risk of deterioration in the standing of the borrower. 3] Credit risk is managed through use of
covenants, collateralisation, managing concentration and capital allocation in relation to risk, risk
return optimisation.
Q.No.5 Mobile Banking is introduced in banks.

Ans: 1] Mobile phones can be used as a medium of banking services. 2] The rapid growth in users
and wider coverage of mobile phone network has made it an important platform for extending
banking service. 3] It is cost effective. 4] It will attract new generation customers. 5] Nationalised
banks can meet the competition. 6] In order to ensure the level playing field for our bank in
comparison of Foreign/Private banks.
Q.No.6 We have introduced new current account product titled as “Power Jyoti.”

Ans: To provide fee / donation collection facility to the institutional customers. This will reduce
paper work, manual work and transaction cost to a considerable extent. Current account will give
no cost deposits to the bank. We can collect fees/commission for each transaction to compensate
the cost incurred by us.
Q.No. 7 We have to inform rules, service charges etc. to customers at the time of opening
of Savings Bank accounts.
Ans: As per the code of BCSBI, accepted by us and as a measure of fair dealings with our
customers we have to maintain transparency in our dealings with the customers. If we do not
inform it to the customers, it may invite complaints from the customers. It will build a better image
of the bank.
Q.No.8 Welcome Kits consisting of ATM Card are issued to new SB account holders.
Ans: To ensure good customer service. Customers can use them immediately. To meet the
competition. This will help us to attract new generation customers.

53
Q.No.9 HRMS project is implemented in our bank.

Ans: To manage the human resources properly. Deployment of staff, proper person for proper
place can be implemented effectively. Back office operations in respect of staff can be centralised
at one place. This will provide more time to the staff at branches for business development work.
Q.No.10 Emphasis is given on KYC.

Ans: To safeguard banks from being used for conversion of funds acquired through illegal means
into legal money. To prohibit use of banking channels for movement of illegal funds acquired
through criminal activities or unethical practices in business. To check financing for terrorism
activities through banks. To help the Banks to control frauds, money laundering and suspicious
transactions. To enable banks for scrutinising high value cash transactions.
Q.No.11 Very high Current Ratio is not a good sign.

Ans: Very high current ratio is an indicator of in-efficient working capital management. There is a
risk of manipulation in quality, quantity, rate of the current assets, which may result in wrong
decision. There is a possibility of hoarding of stocks, accumulation of non moving stock, long
unrealised debts etc.

Q.No.12 Documents are to be filled in completely before execution.

Ans: Documents are proof of availment of the loan/advance. If documents are not completely
filled-in before execution, the borrower may object the genuinity of the matter filled-in subsequently.
He may disagree to repay the loan on the grounds that he was not aware about all the terms and
conditions of the loan. It is not a good practice as the procedure will not be transparent.
Q.No.13 Outstanding entries in System Suspense Account are to be reconciled promptly.
Ans: Outstanding entries in System Suspense account indicate inefficiency in the system and lack
of control over operations. System Suspense account is very sensitive and may result in fraud.
Entries in this account reflect that the accounting process is not complete and may put bank into
trouble in case of deficiency in services. Bank has to make provision for long outstanding entries,
which will affect the profitability of the bank.
Q.No.14 Credits from foreign remittances are only accepted in NRE accounts.

Ans: Balance outstanding in NRE account is freely repatriable to foreign country. RBI has put
these restrictions to prohibit remittance of Indian funds to foreign country. However certain current
income is permitted to be credited to the NRE account.
Q.No.15 RBI has made it mandatory to obtain letter from customer if he does not wish to
give nomination.
Ans: Nomination is mandatory facility available to the customers. Nomination facilitates the banks
to speed-up the claim settlement in case of deceased customer. Letter from the customer will
confirm that the customer has taken a conscious decision for not giving any nomination for his
deposit account.
Q.No.16 Agriculture Cash Credit and normal Cash Credit are same in nature but their
interest application frequency is different.
Ans: Interest on ACC is applied at the time of the harvesting but interest is applied on monthly
basis on normal cash credit account. The agriculturist gets income on selling the produce after
harvest. In case of normal cash credit the income will be received on daily or monthly basis hence
interest application frequency is changed.

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Q.No.17 Loan for milch animals is disbursed in two phases.

Ans: Loan is released for purchase of milch animal and second instalment is released after 6 months
to ensure that one animal will give milk during dry period of the other animal for continuous
income generation for the borrower. The repayment of loan will be regular.

Q.No. 18 Base Rate mechanism for interest on loans and advances is introduced.
Ans: Base Rate mechanism is expected to bring transparency in the interest rate system. It is aimed
to protect the interest of small borrowers. It will put an end to cross subsidisation. It will bring
transparency in pricing of loans by banks.
Q.No.19 Banks are giving importance to Customer Relationship Management

Ans: The markets have now become buyers’ markets and Banking & financial services are
no exception. In the Buyers’ market customer is the king. To withstand the competition and
to increase the customer lifetime value, it is necessary for the banks to focus on CRM.

Q.No.20 Under SARFAESI Act 2002, Possession Notice should be published in two news papers.

Ans: As the possession of the property is taken over by the Secured Creditor, it is a notice
to the public as well as to the borrower informing them of the fact and cautioning them not
to deal with the said property.

Q.No.21 Realistic repayment schedules to be fixed.

Ans: Banks to ensure that while granting loans and advances, realistic repayment
schedules are fixed on the basis of cash flows with borrowers. This would go a long way to
facilitate prompt repayment by the borrowers and thus improve the record of recovery in
advances

Q.No.22 Risk Management has assumed great significance in banking scenario

Ans: Risk can be defined as potential loss from a banking transaction (in the form of a loan or
investment in securities or any other kind of transaction undertaken by the bank for itself or for
customers), which a bank can suffer due to variety of reasons. The basic objective of risk
management is to safeguard the stake holders’ value by maximizing the profit and optimizing
the capital funds for ensuring long term solvency of the banking organization. As a part of
payment system reforms, RBI had initiated several measures to reduce risks, especially
settlement and systemic risk.

55
Q.No.23 Exporters do not accept revocable Letters of Credit opened in their favour.

Ans:
a) Revocable letters of Credit will be revoked by the Opening Bank without notice to the
beneficiary.
b) Banks do not take-up financing the beneficiaries of the revocable letters of credit.
c) The exporter runs the risk of loss due to abrupt revocations.
d) Such Credits have ceased to be operative in trade.

Q.No.24 UCPDC is amended from time to time by International Chamber of Commerce.

Ans:
a) The business environment has undergone change.
b) Technology upgradations, Computerisation have necessitated the ICC to
update & amend the UCPDC.
c) Emerging new software under SWIFT, Developments in transportation, Banking
etc. have also necessitated amendments.

Q.No.25 Promoting Farmers Clubs is beneficial to the Bank.

Ans: Farmer’s club formation is based on the principle “Development through credit”. It
enables the farmers to adopt improved practices for their development. Because of their
voluntary participation, the change process will be faster. We can as well make use of the
Clubs to inculcate proper credit discipline among the farmers.

Q.No.26 Group cohesion is the important parameter for considering SHG linkage.

Ans: As long as group dynamics are evident, the group performance will be satisfactory.
Group cohesion can be assessed in terms of, group meetings, maintenance of accounts,
transparency in operations etc. All these parameters are taken into account before
extending the linkage.

Q.No.27 Staff accounts should be scrutinised thoroughly by the Branch Manager at

regular intervals.

Ans: With a view to ensure that such accounts are conducted properly and that no
transactions of an unusual nature (involving large amounts disproportionate to known
sources of their Income) are being routed through these accounts. Also to prevent possible
frauds.

56
Q.No.28 NPAs have a multiple effect on Banks/financial institutions.

Ans:
a) They do not earn income;
b) They need provisioning out of the income earned from other assets;
c) The image of the institution with high NPAs is tarnished;
d) The morale of the staff will be low;
e) There will be hesitancy in exercise of delegated power crippling quick
decision taking capacity;

Q.No.29 ‘Whistle Blowing’ is given importance.

Ans: The growing number of frauds and declining ethical values and corruption at high
levels made it necessary to introduce a system whereby a check can be had. It will also
boost the morale of the lower level people in an organisation.

Q.No.30 Search reports should be obtained from the office of Registrar.

Ans: To enable the bank to know:

(i) Whether the title deeds covering the property to be mortgaged are registered or not.
(ii) Whether the contents and details of the title deeds submitted for creating
mortgage are as per details recorded in the books of the Registrar.

Q.No.31 Financial inclusion - a National priority.

Ans:. Financial inclusion is defined as delivery of banking services, at an affordable cost to

vast sections of the disadvantaged and the downtrodden groups, especially in the rural
areas. In other words, it aims at providing access to savings, payment and remittance
facilities, loans, insurance, etc. by the formal financial system to those who are excluded.

Sustainable development can be achieved when rural people are part of the development
process and it is education, which unlocks the mental faculty and prepare the so called
majority for active participation in this process.

Bank nationalization in India marked a paradigm shift in the focus of banking as it was
intended to shift the focus from class banking to mass banking. The rationale for creating
Regional Rural Banks was also to take the banking services to poor people.

57
Q.No.32 Paper tokens should be issued to the customers if the SB Pass Book is not
returned updated to the customer.

Ans:: This will help identification of the customer when he calls at the branch to collect the
Pass book and thereby prevent delivery of the pass book to unauthorised persons and to
prevent frauds.

Q.No.33 Control Returns are sent by the branch managers to their Controllers at
stipulated periodical intervals.

Ans: Control returns are subjected to scrutiny by the controllers to ensure that the branch
manager has exercised his powers within the discretionary powers vested in him to ensure
that the sanction of advance conforms to the laid down policies, terms, stipulations of the
bank and are in order. This is an administrative tool to ensure that the delegated powers
are exercised properly.

Q.No.34 Review /Renewal exercise should be taken up for loan accounts yearly.

Ans: This exercise will show whether the limits sanctioned are commensurate with the
results achieved by the firm. This will show the extent of utilization of limits, sale proceeds /
whether bills have been routed through the account and whether the account has been
conducted properly. Adequate facilities commensurate with current level of operations can
be extended. Non review / renewal in time will render the account as NPA.

Q.No.35 The collateral security exemption limit for MSE loans has been raised to
Rs.10 lac.

Ans:: MSEs play an important role in increasing the GDP growth rate and providing
employment. These could give better performance if their credit requirements are met by
the banking system. Due to non-availability of collateral security, MSEs are unable to avail
bank loans according to their need.

In order to take care of these problem, the Govt./RBI on recommendations of VK Sharma

committee recommendation, has enhanced the exemption amount from Rs.5 lac to Rs.10
lac.

58
Q.No.36 Why Corporate Governance?

Ans:
Ø To enhance shareholders value.
Ø To protect interest of shareholders, customers, employees and society at large.
Ø To ensure transparency and integrity in communication and to make available clear
information to all concerned.
Ø To ensure accountability for performance and to achieve excellence at all levels.
Ø Kumar Mangalam Birla Committee has given various recommendations on it.
Ø To provide corporate leadership.

Q.No.37 Bank is appointing Business Facilitator & Business Correspondents.

Ans:
Ø To provide financial services to the underprivileged encompassing savings, credit,
remittance, insurance, pension products in a cost effective manner in unbanked, under
banked areas.
Ø To improve process efficiency and reduce transaction cost.
Ø To increase rural business base, market share.
Ø To emerge as a leader in “Financial Inclusion”.

Q.No.38 Bank Guarantee are not issued for indefinite period.

Ans:
Ø These are contingent liabilities which may crystallize into actual liability.
Ø The risk of crystallisation is very high when guarantees are issued for long/ indefinite
period.
Ø The bank has to provide for capital adequacy ratio.
Ø There are also restrictions by RBI in this regard.
Q.No.39 Why Cross Selling?
Ans:
Ø It is selling additional products/ services to an existing as well as new customers and it
fosters brand loyalty.
Ø It costs a bank five times less to cross sell an existing client than to acquire a new one.
Ø Cross Selling helps bank to plan, implement, and maintain better customer
relationship management programmes.
Ø Right product at a right time offered to customer. This builds banks image.
Ø It helps bank to increase miscellaneous income.
Ø To face the competition.

59
Q.No.40 Alternate Delivery Channels are the need of the hour.

Ans:
Ø Several alternate delivery channels such as ATM, Mobile banking, Internet banking,
etc. will provide customer satisfaction and convenience.
Ø It will decrease the crowd at the counters and give free time to branch operative staff
to sell and market products.
Ø It will help to improve market share and quality of business.
Ø It will help our bank to compete effectively with new forces of the market.

Q.No.41 Operational Risk has been given importance by the Banks.

Ans:
Ø It is as per Basel guidelines.
Ø Due to significant growth in the banking transaction there is increase in operational
risk e.g. Inadequate/failed internal processes, people, system etc.
Ø To strengthen the soundness and stability of system.
Ø It is an important component of risk management system.

Q.No.42 Any change in the terms and conditions of a loan should be intimated to a
borrower in writing.

Ans:

Ø As per Fair Practice Code for Lenders.

Ø If not intimated to the borrower in writing and his consent obtained, it will not be
maintainable in a court of law.
Ø The borrower can contest the same and make a complaint to the Banking
Ombudsman.

Q.No.43 Banks insist on margin money while sanctioning loans.

Ans: Margin money is the borrower's stake in business or particular transaction. Margin
money takes care of possible fluctuations in the market prices of the securities/goods. In
case of default, full value may not be realised due to fluctuations and cost involved in
effecting sales and handling of securities. Hence banks insist on margin money from
borrower.

60
Q.No.44 Banks are focusing on CASA Deposits.

Ans: CASA deposits are low cost deposits. They are stable and useful for ALM. Since
CASA deposits are obtained from a large number of customers, it eliminates the shocks of
sudden withdrawals. Customer base will increase which increases cross selling
opportunities and revenue to the bank. This is also a way of financial inclusion.

Q.No.45 A Confirmation Letter is sent separately after creation of Equitable

Mortgage.

Ans:
Ø In order to secure an independent legal proof that mortgagor has willingly
deposited the title deeds with intention to create Equitable Mortgage.
Ø If the letter is taken simultaneously with the deposit of title deeds then it will
attract ad-volarem stamp duty.
Ø To avoid pleading by the borrower that the title deeds were left by mistake or
were deposited by coercive method.

Q.No. 46 Total reliance on balance sheet and financial statement is not desirable
while arriving at conclusion of health of the unit.
Ans:
Ø Balance Sheet is prepared on a particular day. There may be a window
dressing and deviations from accounting standards.
Ø Other factors like labour problems, market availability, and raw material are
also important and have impact on performance of the unit and in turn
viability of advance.
Ø Availability of infrastructure has a greater influence on the performance of
the unit and also safety of advance.

Q.No.47 Bank brands the stamp `All our stamps cancelled' while returning the
cheques.
Ans:

Ø This is done to ensure that the Bank does not incur any liability in future as an
agent for collection of the instrument.
Ø Holder can renegotiate the instrument through the same or even other Bank.

61
Q.No.48 Though Opening an L/C is a non-fund based transaction, detailed appraisal
is required to be carried out.

Ans:

Ø Though there is no out go of funds at the time of establishing L/C, the

Bank's liability can arise if the applicant fails to honour the bill on due date
i.e. the non-fund based exposure may result into fund-based exposure. L/C
opening is therefore a credit decision, which requires detailed appraisal.
Such appraisal enables the Bank to know well in advance, the capacity of the
client to honour the bills on due date as also the recourse for the Bank in
case of default.

Q.No.49 Pre-sanction inspection is very important.

Ans:
Ø To know the exact location of the business.
Ø To ascertain creditworthiness, local standing and integrity of the applicant.

Ø To examine suitability of location.

Q.No.50 We stop operations in the account of partnership firm on death of a partner.

Ans:
Ø On death of a partner, partnership firm stands dissolved.
Ø To avoid application of Rule based on Clayton's case.
Ø To crystallize the exact liability of the deceased partner as on the date of his
death. His survivors cannot be made liable for debits to the account after his
death.

Q.No.51 First debit to dormant account should be referred to Branch

Manager/Manager of the Division.

Ans:
Ø Dormant accounts are a fraud-prone area. Therefore this is an extra
precaution to ensure that the customer and his signature are genuine.

Ø To establish the bonafides of the payee/endorsee by means of a personal

dialogue by a reasonably senior official, before effecting the payment.

62
Q.No.52 All Field Officers should tour extensively for inspection and follow up.
Ans:
Ø One of the reasons for mounting NPAs is lack of supervision and follow up.
Ø If the area of operations is toured frequently by the field officers, then a close
rapport can be developed with the borrowers.
Ø Helps in regular recovery.
Ø It can also help the field officers to explore the business potentials.

Q.No.53 Articles kept in safe custody should be examined periodically.

Ans:
Ø To prevent any possibility of these articles being damaged by white ants and
dampness etc.

Ø To discharge our duties as that of bailee as per Section 151 of Indian Contract Act.

Q.No.54 Opinion Reports on Borrowers and Guarantors to be updated/ compiled every year.

Ans:
Ø Opinion Reports are compiled to assess the net worth of the Borrowers and
Guarantors.
Ø This needs to be compiled/updated every year to ascertain any change in the
position of their assets & liabilities and to take appropriate steps to safe guard Bank’s
interest.
Ø It also helps to identify the details of assets, which may be required to be
submitted to the Court for attachment/execution in case of need.

Q.No.55 Payment of a Bank draft cannot be stopped by the purchaser.

Ans:
Ø While issuing the drafts the Bank receives value well in advance. Hence,
the bank cannot go back on its own promise to pay the money, which was
received as consideration.
Ø Once a draft is issued, the Bank becomes trustee of the funds for the
payee. The payee might have got the title to the draft by providing some
consideration. Hence payment of draft cannot be countermanded.

63
Q.No.56 All instruments received for collection at the branch are immediately
branded with special crossing stamp before sending these instruments for clearing.

Ans:
Ø When instruments are branded with crossing stamp, these becomes payable to the
Bank to which it is crossed.
Ø When branded immediately (with crossing stamp), in the event of loss (inadvertently)
these cheques cannot be deposited with other Banks. (cheques crossed to more than one
Bank are not paid unless the other Bank acts as a collecting agent of the said Bank).

Q.No.57 Turnover in a Cash Credit Account has to be carefully monitored.

Ans:
Ø To check whether all sales realizations are routed through the account as
per the Bank’s requirements.
Ø As a measure of effective supervision and follow up.
Ø To observe the level of operations with a view to judge assess the need
for enhancement or reduction in the limits.
Ø To check diversion of funds through some other accounts opened at
other Bank(s).

Q.No.58 A cheque drawn by a Director of a Company on its account can be paid even
after the death of the director.

Ans:
Ø A company is an artificial person having a separate legal entity with
perpetual succession. Company does not die even if the director dies.
Ø As the director is operating the Company’s account in his capacity as a
director and not in his individual capacity, such cheques can be paid even
after the death of the director.

Q.No.59 Job rotation in the Bank is done periodically.

Ans:
Ø To avoid frauds arising out of the monopoly of the specific employees handling
specific areas.
Ø To drive out monotony.
Ø Development of the people by providing them with an opportunity to handle
different types of jobs on a regular basis.

64
 Ø To avoid the effect of indispensability of selfish people.
Ø To ensure that the Bank’s work does not suffer in the absence of anybody.

Q.No.60 Rectification of irregularities in Inspection & Audit Report should receive top
priority.
Ans:
Ø Improves safety of the branch business immediately. Frauds prevention and
preventive vigilance measure.
Ø It also helps the branches for achieving upgradation in rating during the next
inspection exercise.

Q.No.61 Bank cannot sell pledged goods without notice to borrower.

Ans:
Ø It is essential as per the provisions of Indian Contract Act.
Ø The pledger can procure a better bidder in the interest of himself as well as the
Bank.
Ø To avoid legal complications arising out of any possible objections by the
pledger. For e.g. the stocks are being sold cheaply.

Q.No.62 Bank does not insist on stamped indemnity letter for issuing duplicate TDR.

Ans:
Ø TDR is a not a negotiable instrument & therefore not transferable by endorsement and
delivery.
Ø It is only a receipt and becomes payable only at the branch where it was issued.

Q.No.63 We obtain periodically stock statements in case of hypothecated advances.

Ans:

Ø To ensure that the outstandings in the account are fully covered by the advance value
of the goods hypothecated.
Ø To ensure that there is healthy/regular turnover of stocks.
Ø To ensure that there are no overdue/sticky bills, unrealised for a long time.

65
Q.No.64 Password secrecy is observed in Branch.

Ans: Password secrecy protects bank and save us from future loss and misuse by
fraudsters. The sensitive information can be used by unscrupulous elements for own
vested interest. Fraud committed can cause loss to individual and organization. More than
that it can cause reputation loss for the organization.

Q.No.65 Credit Risk Assessment (CRA) system has been stipulated by the bank.

Ans: Under this system the advances granted to the borrowers are rated on the basis of
certain parameters. By this the risk content is assessed.

This system is useful to stipulate suitable interest rates for the advances based on the
rating.

This system helps the bank to take a suitable credit decision for extending further limits.

Q.No.66 Government Business has to be given a lot of importance.

Ans:
Ø It contributes to the bottom line directly by means of
commission income.
Ø No need for any outlay of funds/ capital adequacy.
Ø It gives scope for close rapport with various Govt.
Departments.
Ø It gives vital business leads

Q.No.67 Why the legend "Payable at State Bank of Hyderabad Branch"

should be noted in all the Usance Bills immediately after acceptance?
Ans:
Ø This would be giving a notice to the drawee that he should come over to
that branch for retiring the bill.
Ø Otherwise as per NI Act the usance bill has to be again presented to the
drawee for payment on the due date.

Q.No.68 All persons intending to hire Safe Deposit lockers are required
to open either a Current or Savings Bank account if they do not already
maintain such account. Why?
Ans:
Ø Opening of an account would establish the credentials of the customer
beyond doubt.
Ø Safe deposit locker rent can be debited to such accounts as and when
due.

66
Q.No.69 CRR/SLR is revised periodically by RBI.

Ø This is done as a measure of credit control.

Ø To control the liquidity in the banking system.
Ø To check inflationary/deflationary trends in the economy.

Q.No.70 Noting and Protesting is necessary in case of Usance Bills and

not for cheques and drafts.
Ans:
Ø In case of usance bills, dishonour is not supported by any documents.
Whereas in case of cheques and drafts, reasons for dishonour are given by
the bank itself in writing.
Ø To establish evidence of dishonour, noting and protesting is necessary.

Q.No.71 In respect of Safe Deposit Lockers, the locks of surrendered

lockers must be inter changed before reallotment.
Ans:
Ø In case of any lapse in control of master key, the same locker can be
opened by the duplicate key by an unauthorised person.
Ø To ensure against any fraudulent use, the locks must be interchanged.

Q.No.72 While extending agricultural finance, obtention of no due certificates may be waived
for new applicants seeking agricultural credit limits upto Rs.50,000/-.
Ans:
Ø To ease the workload at the branches.
Ø To quicken the disbursal of Agricultural Loans.
Ø As recommended by Gupta Committee.

Q.No.73 Safe deposit packets should be securely packed so that the

contents inside do not move.
Ans:
Ø It prevents damage or loss to the contents of the packet at the time of
redelivery.
Ø To safeguard the property as a bailee.

Q.No.74 Drafts are not issued as payable to bearer.

Ans:
Ø It would then amount to equal to currency, the issue of which is the
monopoly of RBI,
Ø Prohibited by Sec.31 of RBI Act and Sec.4 of NI Act.

67
Q.No.75 Currency notes with political slogans should not be accepted.
Ans:
Ø As per provisions of "Legal Tender (inscribed notes) Act of 1964", such
notes cease to be a legal tender. .

Q.No.76 When a LIC policy is reassigned after repayment of Bank’s

advance, the policy holder is advised to re-nominate.
Ans:
Ø Every assignment cancels the earlier nomination.
Ø They will not be valid even after the policy is reassigned on liquidation of
loan. Hence a fresh nomination is suggested.

Q.No.77 The Bank does not grant advances against partly paid shares.
Ans:
Ø If the shares stand transferred in the Bank's name, the Bank shall be
forced to pay the calls in arrears.
Ø If the shareholder fails to pay calls in arrears, the shares may be
forfeited by the company. This may entail loss of security.

Q.No.78 Articles in Safe Deposit and gold ornaments are not deliverable against
succession certificate.
Ans:
Ø Succession certificate covers only debts and securities as per
Sec.370 (2) of the Indian Succession Act.
Ø Safe deposit articles represent assets which are not covered under the
Act.

Q.No.79 Before a duplicate draft is issued to the purchaser, a written

confirmation should be obtained from him stating that the original has
not been delivered to the payee.
Ans:
Ø On issue of a draft, a privity of contract is established between the Bank
and the payee.
Ø Banker will get protection only if he obtains a letter of concurrence from
the payee.

Q.No.80 We normally do not grant loans against gold ornaments which

bear initials other than those of the borrower.
Ans:
Ø The ornaments may not belong to the borrower.
Ø To obviate any loss in case the title to those ornaments is proved defective.

68
Q.No.81 Banks lend actively under Self Help Groups.
Ans:
Ø This creates self-employment to the rural people leading to rural
development.
Ø More women are forming SHGs and by linking groups, women
empowerment is achieved.
Ø Repayment level is very high in respect of these advances and the chances of the
accounts becoming is NPA is very low.

Q.No.82 The duplicate keys of a branch are deposited with another

branch.
Ans:
Ø To ensure separate custody of the two sets of keys.
Ø To facilitate easy operation in the event of loss of the original keys.

Q.No.83 A cheque payable to a firm may not be accepted for credit to

the private account of a partner without consent of the other partners.
Why?
Ans:
Ø The failure to query the circumstances under which the amount of
principal is credited to the account of an agent amounts to negligence.
Ø The Banker would held liable for "Conversion" under Sec.131 of NI Act.

Q.No.84 Before granting an advance against LIC policy the last premium
receipt should be produced and the surrender value to be ascertained.
Ans:
Ø It is necessary to ensure that the policy is in force.
Ø To arrive at the limit to be sanctioned to the borrower

Q.No.85 Complaint forms to be provided to the customers in triplicate.

Ans:
Ø As per Goiporia committee recommendations, one copy as
acknowledgement to the customer, one copy for the branch and one copy to
the controlling authority with Branch Manager's remarks.

Ø This enables speedy disposal of the customer complaints.

Ø The system offers scope for more transparency.

Q.No.86 Capital Adequacy norms against risk weighted assets have

been introduced.
Ans:
Ø To comply with international standards.
Ø As recommended by Basel Committee.
Ø To control credit expansion since increased credit need to be supported
by an increase in capital and reserves too.

69
Q.No.87 Form 60/61 has to be obtained in the absence of a PAN No., for
opening account with an initial deposit of cash.
Ans:
Ø CBDT have clarified that it is not mandatory to have a PAN / GIR No. to
open an account.
Ø But, in lieu of that, form 60/61 has to be obtained.
Ø Form 61 relates to accountholders whose income is from agriculture and
Form 60 is taken from others.

Q.No.88 Branches have to affix hologram stickers on High value bank

drafts (Rs 1 lac and above) and also on all bank LCs and Guarantees.
Ans:
Ø To protect and preserve their authenticity.
Ø To prevent frauds by way of substitution and duplication.

Q.No.89 All eligible account holders have to be canvassed for ATM

cards.
Ans:
Ø To improve customer service by giving them any time money facility.
Ø To reduce workload at the counters.
Ø To make effective use of the large investment made in this alternate
delivery/self service channel.

Q.No.90 Branches are subjected to inspection and audit at irregular

intervals.
Ans:
Ø To ensure that the branches are adhering to the laid down systems and
procedures
Ø To check income leakage, control expenditure and
Ø To suggest remedial measures for growth and development.

Q.No.91 Daily vouchers at the branch should be scrutinised with care

and intelligence.
Ans:
Ø It helps BM to know the inflow and outflow of funds so that plans for
business development can be drawn.
Ø To detect any errors/mistakes.
Ø To detect frauds.
Ø To avoid fraudulent alteration of instruments.

Q.No.92 The Bank does not accept as security the LIC policy taken out
for the benefit of wife/child/children.
Ans:
Ø Any insurance policy issued for the benefit of wife and children does not
form part of the estate of the assured (As per Sec.6 of Married Women's
Property Act).
Ø It represents trust money which is not assignable.

70
Q.No.93 Value dating has been extended on collections for credit of
advances accounts.
Ans:
Ø To extend the facility of payment of interest on delayed collection to
borrowers also.
Ø To develop awareness among operating staff regarding the importance
of handling the bills/cheques received for collection/realisation.

Q.No.94 Formalities for payment of assets of deceased constituents

without legal representation have been relaxed by the Bank.
Ans:
Ø To expedite processing of claims at the branch level in respect of
accounts of deceased constituents.
Ø To reduce expenditure and hardship caused to legal heirs / claimants.
Ø As per directives of RBI/GOI/Customer Service Committee
recommendations.

Q.No.95 We insist on insurance policy to be issued in the joint names of

the borrower and the bank in case of advances against goods.
Ans:
Ø To obviate the possibility of the borrower claiming the insurance without
the knowledge of the Bank.

Ø To avoid the complex procedure of taking policy in borrower's name and

assigning it to the bank.

Q.No.96 Customer Relations Programmes are being arranged at

periodical intervals in the Bank.
Ans:
Ø To have an opportunity to redress/arrange for redressal of the customer
grievances.
Ø To develop rapport with the customers.
Ø To enhance customer satisfaction.

Q.No.97 Management Audit is conducted in the Bank.

Ans:
Ø To evaluate the performance of the various management processes and
functions in achieving the objectives of our Bank.

Q.No.98 All DP Notes executed by the borrowers are required to be

renewed after 2 to 2 1/2 years.
Ans:
Ø To avoid the operation of law of limitation.
Ø If the debt becomes time barred, the Bank will lose the right of legal
remedy.

71
Q.No.99 The Bank is now paying a great deal of attention to marketing
of its services.
Ans:
Ø Due to great increase in competition.
Ø To overcome the effect of disintermediation.
Ø To increase profitability.
Q.No.100 Covers containing letters to borrowers returned undelivered
to the Branch must be retained unopened.
Ans:
Ø This serves as constructive evidence of the dispatch of the letter.
Ø To safeguard the Bank's interest in the eyes of law in the event of
contention by the borrower in future.

Q.No.101 Security Registers and Ledgers are maintained separately for

our deposits and other securities / scrips.
Ans:
Ø To make a distinction between our time deposits and others.
Ø To ensure collection of periodical interest on the other securities and
credit them to the loan account.

Q.No.102 Authority for sanction of concession in service charges has

been introduced.
Ans:
Ø To maintain our competitive edge.
Ø To prevent business getting diverted to other Banks.
Ø To accelerate the decision making process.
Ø To impart greater flexibility in extending concessions in the competitive
environment.

Q.No.103 All employees of the Bank execute Fidelity and Secrecy

Bonds.
Ans:
Ø Maintaining secrecy is a contractual obligation for Banker.
Ø By obtaining the Bonds, the employees are made party to this obligation.

Q.No.104 Frauds Register has to be maintained

Ans:
Ø To enable the Branch Manager to follow up the various matters
systematically and to enable inspecting officials to verify whether procedural
inadequacies which had resulted in frauds have been rectified.
Ø To follow the Reserve Bank of India directives.

Q.No.105 Two signatures are taken on the Demand Promissory Note,

one over the Revenue Stamp and the other beside it.
Ans:
Ø In case of loss of the Revenue Stamp, the other signature will provide as
good evidence.
Ø It enables verification of the Borrower's signature.

72
Q.No.106 In case of death of a partner, it is advisable to stop operations
in the account of the firm and open fresh account for further
operations.

Ø The death of a partner leads to dissolution of the firm (if not provided
otherwise) as per Partnership Act,
Ø The Bank cannot make the legal heirs of the deceased partner for the
debits subsequently raised in the account.
Ø To fix the partner's individual liability and avoid operation of the rule in
"Clayton's Case".

Q.No.107 A stamped receipt is obtained from the legal claimants, in

addition to signatures on the Bankers cheque.
Ans:
Ø The Receipt serves as a direct evidence of payment.
Ø This discharges the Bank from its fiduciary responsibility to the legal
heirs.

Q.No.108 Partial Endorsement is not valid for purpose of Negotiation.

Ans:
Ø As per Sec. 56 of NI Act, a person's liability in a contract cannot be
apportioned.
Ø Therefore, a partial endorsement will not be valid in law.
Q.No.109 "Not Negotiable" crossing does not mean "Not Transferable".
Ans:
Ø As per NI Act, a Not Negotiable crossing does not restrict the
transferability of any instrument.
Ø But the holder does not get a better title than the transferor.
Q.No.110 In case Attachment Orders are received in respect of an
Account, the Bank insists on closure of accounts.
Ans:
Ø The Revenue Attachment Orders attaches Future Credits also to the
account.
Ø The Bank will be liable to remit all future credits also to the Revenue
Authorities till final satisfaction.
Ø To absolve the Bank from such future credits, the account is closed.

Q.No.111 TDRs maturing on holidays are repaid on succeeding working

day but not on preceding working day.
Ans:
Ø Bank holidays are declared as per section 25 of NI Act with specific
reference to payment of negotiable instruments which are paid on the
previous working day.
Ø TDRs are not negotiable instruments but are receipts of money
deposited. Their payments cannot be made before maturity as per contract.

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Q.No.112 Note bundles should be periodically turned over in the strong
room.
Ans:
Ø To avoid notes getting stuck to each other/deteriorate in
quality.
Ø To obviate notes getting damaged due to white ants/pests
Ø To enable verification at periodical intervals.

Q.No.113 Cash Receipt / Delivery Book are to be maintained by each of

cash dept. staff (excepting subordinate staff).
Ans:
Ø To record acknowledgement of receipt and delivery of cash
Ø To fix responsibility of cash received / handed over
Ø To facilitate balancing of cash at the end of the day.

Q.No.114 A system of intra-day cash verification at the cash counters by

the Cash Officer at irregular intervals has been introduced.
Ans:
Ø To reduce incidence of frauds committed at cash counters by employees
with fraudulent bent of mind.
Ø As a preventive vigilance measure.
Q.No.115 Gestation period is given in respect of term loans.

Ans:
Ø A certain period is required for the completion of the
project/income generation to repay the dues
Ø Hence the time lag known as gestation period is given.

Q.No.116 Personal Accident Insurance Scheme for KCC Holders has

been introduced.

Ans:
Ø To provide risk coverage to the KCC holders.
Ø Government of India/RBI guidelines.

Q.No.117 Agriculture finance is a supervised credit.

Ans:
Ø It has to be closely followed up for the end use for the mutual benefit of
borrower and banker
Ø The approach should be farmer oriented rather than farm oriented.

Q.No.118 Inspection of agricultural advances should be farmer oriented rather than farm
oriented.
Ans:
Ø To understand their problems, credit requirements and repayment
capacity.
Ø To ensure better supervision; follow up, recovery and revival.

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Q.No.119 Loans for cultivation of horticulture and plantation crops are given as term loans.
Ans:
Ø Loans to horticulture/plantation are spread over more than three year
period.
Ø The gestation period for the plantation crops is very long.

Q.No.120 Bank encourages Kisan Credit Cards.

Ans:
Ø To facilitate adequate and timely flow of credit to farmers.
Ø To provide flexibility to the borrowers.
Ø To control costs effectively.

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