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पदोन्नित परीक्षा अूैल 2011
के िलए
अध्ययन साममी
STUDY KIT
FOR
PROMOTION TEST APRIL 2011
आन्ीा बैंक कमर्चारी महािवद्यालय

Andhra Bank Staff College
27-29, िवत्तीय िजला Financial District, नानकरमगुड़ा Nanakramguda, गच्चीबावली Gachibowali
है दराबाद Hyderabad-500 032

फोन Phone : 65812553 ई मेल e-mail abstc@andhrabank.co.in
ूःतावना
FOREWORD
इस पुिःतका को ूःतुत करते हुए हमें बहुत ूसन्नता है ।

पदोन्नित परीक्षा में बैठने वाले अिधकािरयों के लाभाथर्
इसे तैयार िकया गया है ।
सूचना की िवशुद्धता को सुिनिश्चत
करने हे तु यथासंभव ूयास िकये गये हैं ।
तथािप, इस पुिःतका का ूयोग करने वाले, जहाँ कहीं
अपेिक्षत हो, सूचना को समय-समय पर अद्यतन कर लें ।
हम अिधकािरयों के ूयासों में सफलता की कामना करते हैं ।
We are glad to present this Study Kit for Promotion

Test aimed to help the Officers appearing
for the written test for promotion.
While all precautions to
Ensure the accuracy
of the information
to the extent possible
were taken, the users are advised
to update the information wherever required.
We wish the Officers all success in their efforts.
ूाचायर् व संकाय सदःय,

Principal & Members of Faculty
आन्ीा बैंक कमर्चारी महािवद्यालय, है दराबाद
Dt. 09.03.2011 Andhra Bank Staff College, Hyderabad
पदोन्नित परीक्षा अूेल 2011 के िलए
अध्ययन साममी
STUDY KIT
FOR
PROMOTION TEST APRIL 2011
िवषय सूची I N D E X
Sl. िवषय Topics Page No.

1. Banking Regulation / RBI Act 1
2. Banker Customer Relationship 12
3. Bank Deposit Schemes 18
4. Loan Policy 33
5. Agricultural Finance 53
6. Priority Sector Advances/ SME 92
7. Govt Sponsored Scheme 99
8. Balance sheet Analysis 105
9. Working capital loans 111
10. Term Loans 115
11. Bank Guarantee 120
12. Retail Credit / Personal Banking Schemes 122
13. Foreign Exchange 131
14. Recovery Management 171
15. Fee based & ancillary services 177
16. Information & Technology 186
17. Official Language 198
18. Banking Concepts 205
19. Bank Performance-2008-09,2009-10 &Dec.10 218
20. Test 233
21. Miscellaneous 239
आंीा बैंक कमर्चारी महािवद्यालय, है दराबाद
RBI ACT & BANKING REGULATION ACT
01. Present Bank Rate of RBI is

1. 5% p.a. 2. 11% p.a. 3. 12% p.a. 4.6% p,a. 5. None of the above.
02. Central Bank of our country, that regulates the functions of Banks etc., is
1 Central Bank of India 2. State Bank of India
3. Reserve Bank of India 4. Bank of India 5. Indian Bank
03. RBI was established in the year

1.1948 2. 1947 3. 1934 4. 1935 5. 1950
04. RBI was nationalised in the year …...

1.1949 2. 1935 3. 1955 4. 1934, 5. 1923
05. The percentage of NDTL, the commercial banks have to maintain as Cash
Reserves (CRR) with RBI is
1. 4.75% 2.10% 3. 6.00% 4. 5.00% 5. 5.75%
06. The percentage of NDTL, Commercial banks have to maintain as Statutory

Reserves (SLR) is
1. 31.5% 2. 25% 3. 30% 4.24% 5.20%
07. Maximum extent of shares of a limited company which can be held by any
banking company as security or as absolute owner is
1.50% of paid up capital
2.30% of paid up capital of that company
3.30% of Banking Company's own paid up capital plus reserves
4. Out of both 2 & 3 whichever is lower
5. 25% of paid up capital of company of Banking company whichever is lower
08. Scheduled Bank is a

1. Bank whose name is included in the second Schedule of RBI Act 1934
2. Bank having paid up capital of 5 lacs
3. Bank having paid up of capital of 10 lacs
4. Commercial bank established in India
5. 1 & 2
09. RBI Governor is

1. Dr. Y V Reddy 2. Dr D Subba Rao 3. Mr. C. Ranga Rajan
4. Mr. S. Venkata Ramaiah 5. Mr. S. Jagannathan
10. The percentage of the issued share capital of R.R.B. to be subscribed by

sponsor Bank is
1. 15% 2. 35% 3. 50% 4. 25% 5. 33-1/3%
11. RBI is empowered to issue licences to commercial banks for opening branches
under
1. Banking Regulation Act 1949 2. RBI Act 1934 3. Negotiable
पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

1
Instruments Act 1881 4. Acquisition of Banking Companies Act 1970

5. None of the above
12. Total No. of nationalised banks today are

1. 14 2.27 3. 20 4. 19 5. None of the above
13. Our Andhra Bank was nationalised on

1. 15.4.1980 2. 19.7.1969 3. 16.4.1980 4. 28.11.1983 5.
20.11.1983
14. 'X' Share holder of Modern Bank Ltd approached the Bank for loan against
security of shares of the Bank. The Bank can sanction loan Up to
1. 75% of face value 2. 75% of Market value or Face Value
whichever is lower 3. 50% of face value or Market value whichever is lower
4. Cannot sanction any loan/advance on security of its own shares
5. 50% of face value
15. Nomination facility for payment of depositors money is governed under

1 Banking Regulation Act 1949 2. RBI Act 1934
3. Negotiable Instruments Act 1881 4. Indian Contract Act 1872
NEGOTIABLE INSTRUMENT ACT
16. Cheque is dated 30th February, what date do you take as date of cheque
1. I st March 2. Cheque is not drawn in proper form 3. Last day of the
month 4. Subsequent working day 5. Preceding working day
17 Which amount is payable when there is a discrepancy in words and figure

regarding amount of a cheque as per NI Act 1881
1. Amount mentioned in figures
2. Amount .mentioned in words
3. Amount whichever is lower between words and figures
4. Average of the amount in words and figures
5. Amount whichever is higher between words and figures
18. A crossed cheque with the words ."Not negotiable" means/denote

1. Cheque is not transferable 2. Cheque is transferable for one time
only 3. Transfer of such cheque is governed by N1 Act. 4. Transfer is governed
by Indian Contract Act 5. Cheque is transferable but transferee cannot get a
better title than that of transferor
19. The payee of a cheque has endorsed on the back as "Pay to K. Rama Rao
only". This endorsement is known as
1. Endorsement in full 2. Sans recourse endorsement
3. Facultative endorsement 4. Restrictive endorsement
20. A Banker gets protection u/s 131 of NI Act for collection of cheques if
1. He collects for a customer
2. He collects a crossed cheque
3. He acts in good faith and without negligence

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4. The customer's account is opened as per KYC norms

5. All of the above
21. "Account Payee only or Payee's Account only" This type of crossing on a
cheque is
1. A special crossing 2. A general crossing 3. An endorsement sans recourse.
4. Instructions to collecting banker to collect the proceeds of cheque into payee's
account only 5.3 & 4 of the above
22. Across the face of a cheque it bears the words "Andhra Bank" what it speaks?
1.Drawn on Andhra Bank 2. The cheque is specially crossed in favour of Andhra
Bank 3. It is extraneous matter appearing on the cheque. Hence should be
returned. 4. These words can be ignored and payment can be made accross
the counter if it is other wise on order 5. None of the above
23. Who can cross a cheque

1 .The drawer 2. The payee 3. The Holder 4. Holder in due course
5. Any one of the above
24. Statutory protection is given to paying banker for payment of bearer cheques
through
1. Sec 85 (1) of NI Act 2. Sec 85 (2) of NI Act 3. Sec 85 (A) of NI Act
4. Sec 131 of NI Act 5. None of the above
25. 'X' opened CD account with Modern Bank, Mumbai on 22.8.2005 and cheque
book was issued. Today the branch received a cheque issued by 'X' on his account
dated 20.6.2005. Can the cheque be paid?
1. The cheque cannot be paid as the account was opened only on 22.8.2005 and
there is no contract between bank and X as on 20.6.2005.
2. The cheque can be paid till 20.12.2005 i.e. before it becomes stale.
3. It is only instruction to the Banker not to pay the cheque before its date
4. The cheque can be paid if it is otherwise in order
26. Mr Ramesh payee of an order cheque for Rs. 10,000 endorsed it in favour of
Radha for Rs. 5,000, Gopi Rs. 3,000 and Krishna for Rs. 2,000. All the three came
to the Bank, presented the cheque and requested for payment across the counter
1. Instrument should be endorsed for full amount. Partial endorsement is not
valid (cheque cannot be paid either across the counter or through clearing)
2. Endorsements should not be in favour of more than two persons.
3. Bank can pay cash as per endorsements after identifying the payee and
endorsees
4. Cash cannot be paid but amounts can be credited to accounts of 3
endorsees

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27. Nitin is maintaining a current account with Naveen Bank, Nagpur Branch
with a balance of Rs. 30,200/- in the account. Today the branch received cheques
No. Date Rs.
739630 10.1.05 30,000
739628 12.1.05 2,000
739632 10.1.05 20,000
739626 15.1.05 10,000
739630 12.1.05 8,000
739633 8.1.05 5,000
739635 9.1.05 1,000
Which of the above instruments can be paid by the Bank?
1. Cheques with higher amounts i.e. 30,000 to be passed
2. As many cheques as possible should be passed (i.e. cheques with lower
amounts)
3. Cheques as per serial nos. printed to be passed first
4. Cheques as per date of cheques issued (i.e earlier) to be passed first
5. Bank can pay any cheque and return any cheque as per its choice
28. When the date of the cheque is subsequent to the date on which it is
presented for payment, the cheque is called as
1. Ante dated cheque 2. Stale cheque 3. Post dated cheque
4. Invalid cheque 5. None of these
29. "A" Payee of an order cheque endorsed it to B,B endorsed it to C,C lost it. D
gets the cheque and endorsed it in favour of E by forging signature of C,E
endorsed it to F and F to G for payment when G presented the cheque it was
returned as payment was countermanded by drawer. Mention the persons liable to
G?
1. All previous endorsees including drawer as G is HIDC 2. Only E & F
3. D only as he forged the signature of C 4. D,E,F
5. None of these
30. "X" clerk of "A" has stolen a cheque leaf of A's cheque book and issued it to Y
by forging A's signature for Rs. 10.000. Y accepted it in good faith and endorsed in
favour of Z and Z in favour of Q. When presented the cheque was returned with
the reason "Drawer's signature differs" Mention the persons who are liable to Q?
1. A who negligently kept cheque book accessible to X 2. Y,Z and A
3. Y & Z 4. X the thief of the cheque 5. None of the above

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31. Whether the following payments can be deemed as Payment in Due

course?
1. Cheque dated 15th August 05 paid on 5th Aug 05
(it is payable on or after 15.8.05 and before 15.2.06 if it is otherwise in order)
2. A cheque crossed specially in the name of Union Bank of India was paid to
United Bank of India (Payment should be made to Union Bank of India only)
3. A cheque with double crossing in the names of SBI and SBH is paid to SBH.
Here SBH is acting as agents for collection on behalf of SBI.
(Double crossed cheque can be paid to one of the banker if he is acting as
agent for the other)
4. The signature of drawer is so cleverly forged that it was very difficult to
detect the forgery. It was paid by the Drawee Bank.
(There is no mandate from customer to debit his account, even though he
negligently kept the book accessible to strangers)
5. Banker paid a cheque inadvertently for which "Payment was
countermanded by drawer"
(Banker cannot make payment of a cheque when payment is stopped by
drawer)
6. A Banker paid a cheque with material alteration in date and payees name not
confirmed by drawer
(Any material alteration on the cheque should be confirmed with full signature
of drawer)
7. 'A' is maintaining 2 accounts. S.B. Account and Abhaya Gold Account.
Cheque issued by A from the book given for Abhaya gold on ordinary S.B.
Account is paid by banker (Payment should be made for cheques issued
from the same cheque book issued for that account only)
8. A peon of a company presented a cheque for Rs.l,50,000 favouring himself,
the cheque was otherwise in order and Bank paid the cheque. Later on
banker was informed that cheque was stolen from company.
(Bank should have enquired from the company before the payment is made)
9. A crossed cheque was paid to payee across the counter
(The payment should be made to a Banker only for Crossed cheque)
10. Cash was paid to a banker towards payment of a Account payee cheque
(Cash can also be paid to a Banker for crossed cheques with proper
endorsements)
32. An order cheque is payable to a woman in her maiden name Miss

Aparna Rao. Now she is married to Sanjeev Kumar, She has to endorse it
as
1. Aparna Rao 2. Aparna Kumar 3. Aparna Rao (Now Mrs. Sanjeev Kumar)
4. Aparna Kumar (formerly Aparna Rao) 5. Either 3 or 4
33. An order cheque is payable to Dr M.A. Rahim, MD. He has to endorse it

as
1. M.A. Rahim, MD. 2. M. Abdul Rahim (Dr.) MD. 3. M.A. Rahim
4. Mohammed Abdul Rahim 5. 1 or 3
34. The endorsee of a Bill of Exchange is Major General J.S. Arora. He has
to endorse it as
1. J.S. Arora. Major General 2. J.S. Arora 3. Major General Jagjit Singh
Arora 4. Major General J.S. Arora 5. 1 or 2

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35. Your bank has opened a joint SB Account of A & B payable to E or S. A

issued a cheque on the account 10,000. There was some material
alteration in date of cheque. As A was out of station, B authenticated
alteration with his signature whether it is valid?
1. A only has to confirm the material alteration
2. B can also confirm material alteration as Account is payable to E of S.
3. Both A & B have to confirm the material alteration
4.The Holder of a cheque has to confirm any material alteration by affixing his full
signature thereat
5. 1&4
36. When a mutilated cheque is presented for payment

1. It cannot be paid if mutilation affects important particulars of cheque
2. It can be paid if mutilation is guaranteed by drawer
3. It can be paid if mutilation is guaranteed by collecting banker
4. It cannot be paid at all
5. 2 or 3
37. When a bearer cheque with 2 endorsements is presented for payment

1. The collecting banker need not confirm the endorsements
2. Paying banker is discharged by payment in due course to the bearer of the
cheque
3. Paying banker need not take cognizance of any endorsements on the cheque
4. The bearer has to sign on the back of cheque as token of receipt of the
amount of cheque if presented across the counter
5. All the above
38. Identify the regular endorsement in following cases when payees

name is: Miss. Malathi Chandra now married to Mr. Rao
1. Malati Chandra 2. Malati Rao (Formerly Malathi Chandra)
3. Mrs. Malati Rao 4. Miss. Malati Chandra 5. 1 & 2
39. When an order cheque is presented for payment

1. If it is crossed, cash cannot be paid and the amount is to be paid to a
banker.
2. If it s uncrossed, payment can be made if presenter is identified as
payee of the cheque by customer/person known o bank
3. Bank can pay if the collecting banker confirms the endorsements
4. Even though it is a crossed cheque, cash can be paid if presented by a
banker
5. All the above
40. Which is the due date of bill dated 31st January 05 payable one
month after date accepted on 2nd Feb 05.
1. 28.2.05 2. 3.3.05 3. 4.3.05 4.5.3.05 5. 2.3.05
41. Which is the due date of bill dated 10.9.05 payable 30 days after date
1.13.10.05 2. 10.10.05 3. 11.10.05 4. 14.10.05 5.
None of these

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42. A bill falling due for payment on 15.8.05 is payable on

1. 14.8.05 2.16.8.05 3. 18.8.05 4. 17.8.05 5. None
of these
43. A demand bill dated 15.8.05 is payable on

1. On demand, at sight, on presentation 2. 16.8.05
3. 18.8.05 4. 17.8.05 5. None of these
44. In respect of a demand bill, stamp duty payable

1. is according to amount of the bill 2. Varies from state to state
3. is Uniform throughout the country 4. Depends upon the period and amount
of the bill 5. is NIL
45. Usance bill can be drawn for a maximum period of

1.90 days 2. 180 days 3. 360 days 4.270 days
5. no time limit
46. When a bill is drawn, accepted and endorsed without consideration it

is
1. Accommodation bill 2. Clean bill 3. Clean usance bill
4. Demand bill 5 None of these
47. When a demand bill is presented for payment, the drawee has to pay
1. Within 24 hours 2. Within 48 hours 3. Immediately
4. Within 72 hours 5. within 3 days excluding any public holiday
48. A bill of 15.7.05 is payable one month after date. The state
government has declared 15,16,17,18 of August 05 as Public holidays
under NI act. The bill falls due for payment on
1.19.8.05 2. 14.8.05 3. 17.8.05 4. 15.8.05 5. 22.8.05
49. Bill of Exchange accompanied by Document of title to goods is known

as
1. Demand Bill 2. Usance Bill 3. Clean Bill
4. Documentary Bill 5. Accommodation Bill
50. When usance bill of exchange is presented to drawee for acceptance

he has to
1. accept or refuse within 24 hours 2. accept or refuse within 48 hours
3. accept or refuse within 3 days 4. accept within reasonable time
5. accept immediately
51. When does the transferee cannot get better title than that of the
transferor in transfer of a cheque?
1. Account payee crossing
2. Special crossing
3. General crossing
4. Either General or special crossing with the words "not negotiable"
5. None of these

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52. A person incompetent to endorse a negotiable instrument

1. Minor 2. Purdanashin lady 3. blind 4. Insane 5. illiterate
53. The words "account payee" and "not negotiable" are written across a
bearer cheque. Then the cheque
1. should be returned as not in proper form
2. may be paid to collecting banker against its guarantee
3. Collecting banker may be contacted to know genuiness
4. account payee is not a special crossing. Two parallel transverse lines are
must and words account payee should be written between these 2 lines. Hence
cash can be paid
5. It can be paid to collecting bank if otherwise in order
54. When a cheque issued in discharge of debt/liability is dishonoured for

"insufficiency of funds" the drawer will be punished with
1 . Imprisonment Up to 1 year 2. fine Up to twice the amount of cheque
3. fine Up to 10000 or double the amount of cheque whichever is higher
4. imprisonment Up to 2 years 5. 2& 4
55. Mr. Smart and Mr. Clever are partners in Firm "Innovations and
Creations". An order cheque forRs. 50,000 was received by firm on its
name from its debtors. Smart endorsed the cheque in his own favour and
deposited with his banker for collection into his personal account. The
collecting banker is
1. protected u/s 131 of NI Act for collection of this cheque 2.
Liable for conversion
3. Negligent and not enquired in such doubtful case 4. Smart being partner
has every right to endorse a NI 5. Both 2 & 3
56. Protection to paying banker u/s 85(2) is not available for payment of
1. Demand draft 2. bearer cheque 3. Order Cheque
4. Crossed order cheque 5. None of the above
57. When a cheque was wrongfully dishonoured by drawee bank it may

be sued for damages by
1. payee 2. endorsee 3. drawer 4. holder in due course
5. collecting banker
58. Novelty Package Industries (P) Ltd is maintaining 2 current accounts

with a Bank. A cheque for Rs. 50,000 was issued on No. 1 account where
the balance is only Rs. 25,500. But in No. 2 account there is a balance of
Rs. 1 lac. The paying banker has transferred Rs. 25,000 from A/c No. 2 to
A/c No. 1 and paid the cheque. Drawee banker is
1. Negligent as he is not supposed to transfer funds from one account to other
without consent/request of
the account holder. He has to return the cheque.
2. Cannot pay the cheque as it is not a payment in due course.
3. has to return the cheque with reason "Funds insufficient"
4. Drawee banker has to contact, drawer and seek his instructions.
5. The drawee banker can act in any manner as mentioned in 1,2,3 & 4.

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59. Our Bank has returned the capital of ______________amount to Govt

Of India
1.75 cr. 2. 48. crs. 3. 50 crores. 4. 110 crs. 5. No such contemplation.
60. What is the percentage of share holding of the Government in the

total capital of our bank?
1.49.51%. 2. 56.10%. 3. 51.55%. 4. 50.20%. 5. NOA
ANSWERS – BR & NI Act

1.4 2.3 3.4 4.1 5.3 6.4 7.4 8.5 9.2 10.2 11.1 12.4 13.1 14.4
15.1 16.3 17.2 18.5 19.4 20.5 21.4 22.2 23.5 24.2 25.4 26.1
27.5 28.3 29.2 30.3 31.1)N 2)N 3)Y 4)N 5)N 6)N 7)N 8)N 9)N 10)Y 32.5
33.5 34.5 35.2 36.5 37.5 38.5 39.5 40.2 41.1 42.1 43.1 44.5 45.5
46.1 47.3 48.2 49.4 50.2 51.4 52.4 53.5 54.5 55.5 56.2 57.3
58.1 59.3 60.3
NOTES ON COMMERCIAL BANKS
1. Commercial Banks have to maintain CRR as Fixed by RBI from time to time
(ranging between 0 % to 15% of NDTL) as per (sec. 42 (1) of ------------------------
------
a. Sec. 42(1) of RBI Act 1934 empowers RBI to stipulate minimum CRR
2. Commercial Banks have to maintain SLR as per-----------------------------------.

a. Sec. (24 of BR Act 1948) It empowers RBI to stipulate minimum SLR
3. Bank Rate: is the rate at which RBI makes advances against approved securities
or purchase rediscount eligible bills to provide financial accommodation to CBs and
FIs.
4. The RBI is empowered to issue directives to Banks on lending policy under a. Sec.
21 of BR Act 1949
5. Selective Credit Control is

Used to regulate distribution of Bank Credit to particular sectors of economy. The
objective is to prevent speculative holding with help of Bank credit of certain
essential commodities like food grains, edible oils, sugar, gur etc. RBI stipulates
minimum margin, minimum Rate of Interest and ceiling on level of credit while
lending against the specified essential commodities.
NOTES ON BANKING & NI ACT

1. Components to be taken for arriving @ SLR requirements:
1. Cash with RBI in excess of CRR requirement
2. Balance in current account with SBI and its subsidiaries in India
3. Investments in Govt. securities, treasury Bills and other approved securities in
India - Less Borrowings from RBI against approved Securities and Borrowings form
SBI and other Notified Banks.

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2. Rights of Holder of a Negotiable Instrument:

1. A holder can convert an endorsement in blank into endorsement in full
2. Holder can cross a cheque either generally or specially and also add the words
"not negotiable" to the crossing.
3. Holder can negotiate the cheque to any third person if negotiation is not
restricted as per tenor of the cheque.
4. Holder can claim payment for the instrument and can sue in his own name on
the instrument
5. Holder can ask for a duplicate cheque if original is lost.
3. Privileges of a Holder in Due course (HIDC)

1. HIDC possess better title free from all defects
2. Every prior party to a NI is liable to HIDC until instrument is duly satisfied
3. Rights of holder in due course to recover money are not affected even when
originally incomplete instrument is later on filled up for higher amount by
subsequent transfers.
4. The acceptor to a NI is liable to HIDC even when it is drawn on behalf of a
fictitious person
5. The person liable to pay a NI cannot defend against HIDC that the instrument
is obtained by unlawful means or for unlawful purposes.
6. the promisor or drawer of a NI cannot deny the original validity of the
instrument
7. No endorser of a NI can deny the signature or capacity of any prior party to
the instrument
4. Payment in due course: means

1. Payment in accordance with the apparent tenor of the instrument
2. In good faith and without negligence
3. To any person in possession of NI
4. Under circumstances which do not afford a reasonable ground for believing
that he is not entitled to receive the payment of the amount therein
mentioned.
5. If payee of negotiable instrument is illiterate person, he may endorse the

instrument by affixing his L.T.I. thereon. The LTI should be witnessed properly
LTI of 'X' Attested by or witnessed by 'Z' - Advocate
H.No. 2-2-12/1 Deshmukh Colony,
Hyderabad - 500 007
6. Facultative Endorsement: The endorsee must give notice of dishnour of NI to

endorser to make him liable. But when the endorser waives this condition by writing
in the endorsement as notice of dishonour waived". It is called facultative
endorsement. However the endorser remains liable to the endorsee for non payment
of the instrument
7. 'Sans Recourse' Endorsement

When an endorser of N.I. by express words in endorsement excludes his own
liability thereon, the endorsement is called as 'Sans Recourse' endorsement. Eg" -
Pay to Ramakrishna Rao without recourse to me
sd/Ramana
Pay to Balakrishna or order @ his own Risk

10
sd/Yashoda
8. Opening of Crossing: Even though, anybody can cross a cheque, but the crossing
can be opened by drawer only. Paying banker should be careful while making
payment of such cheque. The cash payment of such cheques should be made to
drawer or his authorised agent
only, and not to others or else it may lead to complications regarding position of
different parties to it.
9. Essential requisite for general crossing

- two parallel transverse lines
- for special crossing - name of a banker
10. Incohate..; instrument is one which is incomplete as to its date, amount or name
of payee.
11. Person who can countermand payment of a cheque is drawer, anyone of the joint
account holders, authorised signatories, partner of a firm
12. "Stop Payment request letter" served earlier on Bank can be withdrawn only by
the drawer, by all the joint account holders, by all authorised signatories together by
a separate request letter.
13. Conversion means: Unlawful taking, using, disposing or destroying, interfering

with goods which is inconsistent with the true owner's right of possession.
14. A bill may be dishonoured by non-acceptance or non-payment

11
GENERAL BANKING
BANKER CUSTOMER RELATIONSHIP
1. What is the maximum number of partners allowed in a firm carrying on the

Business of Banking?
1.10 2.20 3. 2 4. 50 5. No limit
2. A person depositing his money in a Bank is

1. Secured Creditor 2. Unsecured Creditor 3. Depends upon the terms and
conditions of the deposit 4. Some times secured creditor and in some other
occasions unsecured creditor 5. None of these
3. A Garnishee Order served on Head Office of A Bank will come into force
1. Immediately on receipt of the order by Head Office
2. After receipt of the order by the Branch from Head Office
3. From the date of the order
4. After reasonable time for conveying the message to the branch where the
account is maintained
5 None of these
4. Before affecting the Garnishee Order the Banker has a right to

1. Pay the cheques presented in clearing on that day, but are yet to be
passed for payment
2. Pay the cheques presented across the counter on that day, but are yet to
be passed for payment
3. Pay the cheques already passed for payment in respect of which the actual
payment was not affected
4. Set off all debts due to the Bank at the time of the Order
5. All of the above
5. A banker would be justified in disclosing the affairs of his customer in the
following case/cases
1. As per the practices and usages in the Banking business
2. With the express/implied consent of the customer
3. In Bank's own interest
4. In public/National interest
5. All of the above
6. Banker is permitted to disclose the affairs of the Customer under the following
acts
1. RBI Act; 2. I.T. Act; 3. Companies Act; 4.1 & 2 above; 5. 1,2, & 3 above
7. Banker's obligation to honour its customers cheques ceases when:

1. Customer is sentenced to imprisonment 2. Customer meets with an
accident 3. Customer is convicted in a case 4. Customer is adjudged as
insolvent 5. All the above cases
पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी 12

8. The relationship of the Banker & Customer may be terminated

1. Voluntarily by the customer 2. By the banker by giving reasonable
notice to the customer
3. By the process of Law as in the case of the death, bankruptcy etc.
4. On receipt of a garnishee order attaching the entire balance in the account
5. All of the above
9. A customer has submitted a cheque for collection through his tenant, who is a
bank employee. The bank employee has fraudulently encashed the cheque and
made some false entries in the pass book of the customer. In such a situation
1. Bank has to make good the loss caused to the customer
2. First the Bank has to recover the amount from the employee and there
after it has to make good the loss
3. Bank has to reimburse the loss first and subsequently recover from his
employee
4. Bank is not at all liable for the loss
5. None of these
10. Where a guardian has been appointed by a competent court for
superintending the person or property or both of a minor, he will attain majority
at the age of
1. 18 years 2.25 years 3.21 years 4.19 years 5. None of
these
11. An account is opened by the guardian on behalf of the Minor. In the event of
the minor predeceasing the guardian, the balance may be paid
1. To the mother of the deceased minor 2. To the guardian on production
of minor's death certificate
3. To the legal heirs of minors. 4. Jointly to the mother and guardian
12. A joint account is in the names of X and Y operated by both of them jointly.
On the death of X the credit balance in the account is payable to
1. Y 2. The legal heirs of X 3. As per the court orders only
4. Jointly to Y and the legal heirs of X 5. None of these
13. A mandate has to be registered with

1. Sub-registrar of assurances 2. Registrar of firms
3. Registrar of joint Stock Companies
4. The court under whose jurisdiction it falls
5. Need not be registered
14. A contract entered into by a minor is

1. Enforceable against him 2. Enforceable if the contract is ratified by him
after attaining majority 3. Cannot be enforceable against him 4. Cannot be
enforceable even if he ratifies the contract after attaining majority 5.3 & 4
above

15. A Loan taken by the guardian of a Minor on behalf of the minor binds the
estate of the minor only when
1. The guardian is legally competent to represent the minor
2. The contract entered into is on behalf of the minor
3. The contract is for the benefit of the minor
4. The minor ratifies the contract after attaining majority
5. Only when, 1,2 & 3 above are satisfied
16. While extending credit facilities to an illiterate person branches should

1. Get the thumb impression witnessed on all loan documents
2. Need not get the witness for thumb impressions on loan documents unless
otherwise specified in documents
3. Explain the terms and conditions of the sanction in a vernacular language
in the presence of a witness,
4. Explain the terms and conditions of sanction and a certificate need to be
appended
5. 2 and 3 above
17. BCSBI is set up by

1. An act of Parliament
2. Indian banks Association
3. Department of RBI
4. Independent Society by RBI
5. None of these
18. BCSBI is set up to

1. To act as controller of Banks
2. To supervise the systemic deficiencies
3. To conduct Customer service meetings
4. To conduct meetings of Banks on customer service
5. To oversee implementation of Fair Practice Code evolved by IBA
19. The liability of a Partner for a Loan availed by the Firm is

1 . Equal share with other partners
2. Limited to his share or property in
3. As per his proportionate share in the partnership firm
4. Unlimited, and joint and several
5 None of these

20. You have received a proposal from a partnership firm and on scrutiny of
partnership deed you found that there is a clause in the deed saying that "any
liability not shown in the books maintained by the firm shall not be binding on the
firm". What course of action do you adopt?
1. Do not entertain such a proposal 2. Ignore the clause and take up the
proposal
3. Refer to controlling office for clarification/guidance
4. Take up the proposal and obtain a letter signed by all the partners stating
that "not withstanding the said clause, we are jointly and severally be liable for
the entire amount borrowed from the Bank"
5. Seek the legal opinion from approved advocate and act accordingly
21. Partnership letter in a prescribed format (RF 23) duly signed by all the
partners has to be obtained along with the application for advance because
1. Through this letter partners undertake that they do not borrow from other
banks/FIs etc.
2. It authorises the Bank to proceed against the individual properties of
partners.
3. It gives authority to the Bank to inspect the goods and provide access to
the goods/securities
4. It casts a responsibility on the part of the firm/partners to give a notice in
writing to the Bank in case of any change n the constitution of the firm.
5. It authorises one or more partners to borrow and execute documents on
behalf of the firm
22. In case of manufacturing/trading firms the partners are not having implied
power to borrow on behalf of the firm and bind all the partners in the following
case/cases
1. To pledge goods/securities 2. To overdraw the account during the ordinary
course of business; 3. To discount a bill of exchange 4. To mortgage a firm's
immovable property; 5. In all the four cases
23. A loan proposal from a partnership firm in which Limited company / HUF are
there as partners
1. Can be considered in the usual course of business
2. Should not be considered at all in view of the recent Supreme court’s
judgement
3. Can be considered with prior permission from controlling office
4. Can be considered 5. None of these
24. Maximum number of share holders in a Public limited Company

1.7 2.50 3. As decided by the Board of Directors 4.
As per the Articles of Association 5. No restriction
25. Maximum number of share holders in a Private Limited Company

1.50 2. 100 3.7 4. As per the Memorandum of Association
5. No restriction

26. If a Company intends to borrow more than its paid up capital and free
reserves as prescribed under section 293 (1 d) of the Companies Act.
1. A resolution from Board of Directors is necessary
2. After borrowing the money, it has to be ratified by the share holders in a
General Body Meeting
3. A resolution has to be passed by the share holders in a General Body
Meeting prior to the borrowing
4. It can borrow in usual course and get it confirmed by the Board of
Directors
5. None of these
27. As per Section 292 of the Companies Act, Board of Directors can delegate the
powers to borrow monies otherwise than on debentures to .
1. Managing Director
2. Manager or any other Principal Officer of the Company
3. Principal Officer of the Branch Office, in case of a Branch Office of the
company
4. A Committee of Directors
5. To any of the above
28. Charge that does not require registration under section 125 of the companies
Act is
1. Hypothecation 2. Mortgage 3. Pledge 4. Assignment
5. None of these
29. Out station instruments Up to Rs. 15000/- submitted for collection are to be
credited to customer's account if he so desires & is eligible within a period of -----
------------------
30. For the purpose of payment of penal interest on the delayed collection of
outstation cheques, extra ordinary delay has been defined as:
1.period of 30 days 2.45 days beyond normal collection period 3.60 days
beyond normal collection period 4. Delay exceeding 90 days beyond normal
collection period. 5.120 days.
31. The Banking Ombudsman Scheme came into force :

1. Through a special enactment by parliament
2. As an amendment to the Consumer Protection Act
3. Through a Central Legislation
4. Through the Regulatory powers of RBI
5. None of these
32. Time allowed for collection of outstation cheques presented and drawn at all
places other than state capitals (excluding North Eastern Region and Sikkim)
and Metros------------- is days.

33. Where the delay is beyond 45 days but not exceeding 90 days Interest at
the rate of-----------------to be paid for delay in collection of instruments .
34. The Banking Ombudsman Scheme 2006 came into effect from ----------------
--------
35. In respect of Instruments to be credited to Overdraft/Cash Credit/Loan A/c

the rate of interest payable for delay in collection is:
1. SB + 2% 2. PLR Rate 3. Interest rate applicable to such an
advance
4. BMPLR or Interest rate on such an advance which ever is lower
5. FD Int. for applicable period and 2% over FD Int. in case of abnormal
delay.
ANSWERS –Gen bnk
1.1 2.2 3.4 4.4 5.5 6.5 7.4 8.5 9.1 10.3 11.3 12.4 13.5
14.5 15.5 16.5
17.4 18.5 19.4 20.4 21.4 22.4 23.2 24.5 25.1 26.3 27.5 28.3
29. Immediately (instant credit) 30. 4 31.4 32.14 days 33.FD

(Prevailing) Int. rate
34. 01.01.2006 35.3
---:O:---

ANDHRA BANK
&
DEPOSIT SCHEMES
1. Andhra Bank attained the rank of …… position among Global 500 top Banks for
2010 conducted by UK Based Brand Finance Co,
1. 192 2. 461 3. 158 4. 197 5.400
2. In terms of brand value, our Bank has been listed for ….. million dollars for the
year 2010
1. 520 2. 197 3. 134 4. 169 5. 736
3. The number of Regional Rural Banks sponsored by Andhra Bank are
1. 5 2. 2 3. 4 4. 1 5.2
4. Andhra Bank has launched credit card in the year
1.1979 2.1980 3. 1981 4.1984 5.1985
5. Aggregate deposits of Andhra Bank as on 31.3.2010 are
1. 33922 cr 2. 59354 cr 3. 77688 cr 4. 45100cr 5. 51200 cr
6. Total advances of Andhra Bank as on 31.3.2010 is
1. 44431 cr 2. 34556 cr 3.34960 cr 4. 38110 cr 5.56505 cr
7. The Net profit of Andhra Bank as on 31.3.2010 is
1. 95.01 cr 2. 653 cr 3. 726.80 cr 4. 841.22 cr 5. 1046 cr
8. Deposit Loan should not be allowed in case of
1. Bhagya Lakshmi Deposit 2. FCNR Deposit
3. AB Tax Saver 4. NRE Deposit 5. all deposits
9. What is the age limit for insurance coverage under Insurance Current Account
1.18 to 55 years 2. 18 to 60 years 3. 5 to 70 years 4. 5 to 60 years
5.0 to 70 years
10. What is the age limit for insurance coverage under ABJ Special
1. 5 to 70 years 2. 0 to 70 years 3. 18 to 60 years 4. 18 to 55 years
11. Deposit Loan against term deposits of other branch
1. should not be allowed
2. can be allowed to staff members
3. can be allowed to important customers
4. can be allowed after informing to the branch holding the deposit
5. can be allowed if the loan amount is less than Rs. 20,000/-
12. Penalty for premature cancellation of a term deposit of an individual up to
Rs1.00 lakh
1. 2%
2.1%
3. 2% if the contracted period of deposit is less than 91 days
4. 1% if the contracted period of deposit is 91 days and above
5. No penalty
13. Which of the following statement is true with regard to AB Arogyadaan
scheme?
1. It is a group Mediclaim Insurance Scheme which takes care of
Hospitalisation expenses.
2. Issued as a Floater Policy, in association with M/s United India
Insurance Company Ltd.
3. Age limit for the first time coverage is up to 60 years.
4. Statement 1&3 is true.
5. Statement 1,2&3 is true.

18
14. The maximum Balance in S.B. Account that can be maintained by the account
holder to get interest is
1. Rs. 3 lakhs 2. Rs. 5 lakhs 3. Rs. 10 lakhs 4. Rs. 1 crore
5. No limit
15. What is the maximum amount of core instalment in case of Recurring
Deposit Plus
1. 1000/- 2. 100,000/- 3. 100/- 4. 10000/- 5. No limit
16. What is the maximum period for opening an RD Plus account?
1. 12 months 2. 24 months 3. 36 months 4. 48 months 5. 60
months
17. Which of the following is not true with regard to AB Arogyadaan?
1. The policy will be valid for one full year from the date of joining the
scheme.
2. A nominal amount of Rs.55/- per account is collected as scheme
administrative charges.
3. The premium paid under the scheme is eligible for Income Tax relief u/s
80D.
4. The coverage is available starts from Rs.50,000/- onwards.
5. TPA is the third party administrator empanelled by Insurance Company.
18. Minimum period for which Kalpataruvu Deposit can be accepted is
1.3 Months 2.6 Months 3.1 Year 4. 2 Years 5.46
days
19. What is the eligible amount of accidental insurance coverage for Kiddy Bank
A/c.
1. 1.00 lac to kid 2. 1.00 lac to parent 3. 2.00 lacs to both 4. 1.00 lac to
each 5. NIL
20. Cash payment of Term Deposit should not be made as per Sec. 269 T of I.T.
Act if the aggregate of Deposits payable
1. Exceed Rs. 10000 2. Rs. 20000 & above 3. exceed Rs. 50000
4. Exceed Rs. 1 lakh 5. None of these
21. If a deposit is cancelled prematurely before minimum period from the date of
deposit, the rate of interest to be charged on the deposit loan allowed
against it is
1. 2% over and above the Rate of interest on deposit 2. 2%
3. 1% over and above the rate of interest on deposit 4. No interest
is charged 5. Commercial rate of interest presently BMPLR+3.5%
22. After joining Arogyadan policy, upto what age can an individual continue to be
eligible for medical insurance
1. 75 years 2. 70 years 3. 80 years 4. 85years 5. 68 years
23. Minimum balance (QAB) in "AB Super Salary " Savings Bank Account
1. Rs. 1500 2. Rs. 2000 3. Rs. 2500 4. Rs. 4000 5.
Rs.5000
24. Maximum Insurance coverage per individual in Abhaya Gold Savings Bank
Account is
1. Rs. 10000 2. Rs. 25000 3. Rs. 100000 4. Rs. 200000
5. Rs. 500000
25. Insurance premium per individual to be remitted to Insurance Company in
Abhaya Gold Savings Bank Account is
1. Rs. 200 2.Rs. 45.00 3. Rs.37.00 4. Rs. 50 5. Rs. 34.30
26. Service charges that will be credited to P & L a/c on each Abhaya Savings
Bank Account every year at the time of remitting insurance premium is

19
1. Rs. 12 2. Rs. 2.75 3. Rs.10 4. Rs. 15 5. Rs. 3

27. What is the penalty for premature closure of RD Plus Deposit account ?
1. Rs. 50 per '000 2. Rs. 10 per "000 3. 0.50% of balance –Min.50/-
Max.500/-if closed within 6 months 4. Min.Rs100 per year , Max.Rs.500/-
5. Rs. 100 per year
28. Penalty for delayed payment of instalment in Recurring Deposit Plus is
calculated as follows:
1. 06 paise for every instalment of Rs. 5 per month
4. Nil
29. In case of ABJeevan Abhaya savings bank account ,the premium payable for
the age group 51-55 years is
1. Rs.237 2. Rs.372 3. Rs.805 4. 855 5. None of the
above
30. Form to be used for variation of nomination by a depositor is
1. DA 1 2. DA2 3. DA3 4.DV1 5. DV2'
31. The following can not be a nominee
1. Pardanashin woman 2. Minor 3. Charitable Trust 4. Other than
a close relative of the depositor 5. None of these
32. Nomination facility is not available for the following banking facility
1. Safe Deposit Locker 2. Kiddy Bank
3. Current account 4. Term deposit in the name of the minor 5.
Gold Loan
33. In the case of deposit held by joint persons, the nomination can be made in
favour of
1. a single individual 2. more than one person in case deposit is
payable jointly 3. more than one person in case deposit is payable to
either or survivor(s) 4. Separate persons by each depositor 5. None of
these
34. In the case of Safe Deposit Lockers held by two hirers with operating
instructions 'Either or Survivor'
1. there can be only one nominee 2. Each hirer is entitled to
nominate separately 3. Both of them jointly nominate separate nominees
4. There is no nomination facility 5. None of these
35. A Savings Account is in the joint names of X & Y payable jointly with a
nomination in favour of Z. On the death of X, the credit balance held in the
account is payable to
1 .Y 2. Z 3. Y & Z jointly 4. Y and legal heirs of X jointly
5. Y,Z and legal heirs of X jointly
36. Capital Gains Account Scheme is first introduced in the year
1. 1980 2. 1971 3. 1988 4.1991 5.1986
37. Probate is required in the case of
1. Intestate claims 2. Testamentary claims 3. Nominee claims
4. Where succession certificate is submitted 5. None of these

20
38. In Intestate succession, the production of the following document does not
arise
1. Indemnity Letter 2. Death certificate 3. Will executed by the
deceased 4. Sworn Declaration by the major claimants 5. None of
these
39. What is the minimum balance in "AB Premium Current Account"
1.Rs. 50,000 2. Rs.1,00,000 3.Rs. 2,00,000 4. Rs. 5,00,000 5.
Rs.5000
40. What is the minimum period for RD Plus account
1. 6 months 2.12 months 3 . 3 months 4. No
Minimum months. 5. None of these
41. Percentage of Net NPAs to Net Advances as on 31.3.2010
1. 1.02% 2. 0.17% 3. 3.80% 4. 3.33% 5. 7.5%
42. The percentage of CASA to total deposits as on 31.3.2010 is
1.29.43% 2.8.53% 3. 9% 4. 10.5% 5. 17%
43. Capital Adequacy ratio of our bank for the year ended 31.3.2010 is
1. 10% 2. 11% 3. 12% 4. 13% 5.13.93%
44. The percentage of gross NPAs to gross advances for 31.3.2010 is
1. 0.86% 2. 2.7% 3. 1.5% 4. 2.0% 5. 1.25%
45. Service Charges that will be credited to P&L A/c in insured C.D A/c per
individual
1. Rs. 38/ - 2. Rs.30.00 3.Rs. 35.90 4. Rs.17.95
5.Rs. 18/-
46. The rate of interest chargeable on loan against deposit with 10% margin to
depositor, Partnership deposits of partner, to a proprietary concern against
deposits of proprietor is
1. 3% over the Deposit Rate 2.4% over the Deposit Rate
3. 2.5% over the Deposit Rate 4. 2% over the Deposit Rate
5. 5% over the Deposit Rate
47. The operating Profit of our bank as on 31-3-2010.
1.Rs.1810 Cr. 2.Rs.470.28 Cr. 3.Rs.456.72 Cr. 4.Rs.502.68 Cr.
5.Rs.575.57 Cr.
48. Name of the insurance company that is jointly floated by our Bank, BOB &
L&G.
1. National insurance
2. New India Assurance co ltd.,
3. IFFCO-TOKIO
4. India first Insurance Co.,
5. Oriental Ins.
49. Productivity in banking industry means:
1.Total business of the bank 2.Earnings Per Share 3.Profit per employee
4.Business per employee 5.Return on Assets.
50. What is the maximum amount that can be given if a withdrawal slip is
presented by a depositor who did not bring the SB pass book?
1. Rs. 10000. 2. 2000. 3. 5000. 4. Any amount if the identity is known. 5.
don’t pay until he brings the pass book.
51. What is the charge per leaf for SB account after utilising 25 leaves free of
cost?
1.Rs.1.00 2.Rs.2.50 3.Rs.5.00 4.Rs.3.00 5.Rs.4.00

21
52. With a view to increasing low cost deposits, it is decided to permit branches to
open new SB Accounts with Zero balance for:
1. the salaried class. 2. Traders. 3. professionals. 4. SHGs. 5. Any body can
open.
53. Point out the incorrect statement out of the following with regard to opening
SB account for government departments.
1. Banks are allowed to open Savings Bank Accounts in the names of
central/State Government departments/bodies/agencies
2. only for operating grants/subsidies released for implementation of
various programmes/schemes
3. Such programmes must have been sponsored by central/State
Governments.
4. Banks must insist upon an authorization certifying the permission is
accorded by the governments to open such account.
5. State Governments cannot open SB accounts for any purpose.
54. Which Insurance company is tied up for AB JEEVAN ABHAYA (ABJ) scheme?
1. M/s Birla Sun Life Insurance Company Limited.
2. HDFC life insurance.
3. India first Insurance
4. LIC
5. M/S. IFCO TOKYO.
55. The premium under ABJ deposit scheme is to be debited once in:
1. In a month. 2. A quarter. 3. half-year. 4. In a year. 5. NOA.
56. The Insurance period under ABJ deposit scheme is:
1. August 1 to September 30, every year.
2. 1st December to 30th November every year.
3. April 30 to March 31 every year.
4. February 21 to February 20 every year.
5. January 1 to December 31 every year.
57. In case of an accidental death of the policy holder with an assured amount of
1 lakh under ABJ scheme, the nominee will get a sum of.
1. 50000. 2. 1 lakh. 3. 2 lakhs. 4. 1.5 lakhs. 5. 5 lakhs.
58. What is the age group required for opening an ABJ account in our bank?
1. 5 to 70 years. 2. 5 to 60 years. 3. 18 to 70 years. 4. 5 to 55 years. 5.18
to 55 years.
59. What is the sum assured under ABJ Scheme in case of normal death?
1. 1 lakh. 2. 2 lakhs. 3. 50000. 4. 25000. 5. No insurance in case of normal
death.
60. Which of the following statements is not correct regarding the insurance policy
under ABJ Scheme?
1. No individual Policy will be given
2. This is a Group Policy
3. There will be no Surrender Value.
4. Surrender value is 90% of the total premium paid.
5. None of 1,2 & 3
61. What is the amount to be deducted as service charges while operating ABJ
deposit?
1. Rs. 50
2. Rs.22
3. Rs. 40.

22
4. Rs. 41
5. Rs.53
62. Which of the following statements is false while disposing of claims under ABJ
insurance policy in case of Suicide or self-inflicted injury?
1. See whether the Life Insured is medically sane or insane.
2. Suicide is exclusion in the first year of joining the scheme
3. From second year suicide is not exclusion
4. Sum insured of Rs. 1.00 lac will be paid by the Insurance Company, if
such death occurs in the second year.
63. Point out the falsifying statement with regard to the detection of fake notes
across the counter.
1. The forged notes found in the note packets should be
segregated and impounded.
2. The case should be reported to the police.
3. In no case, the entire note packet with forged notes should be
returned to the tenderer.
4. The impounded note should be returned to the tenderer.
5. Forged notes are to be forwarded to the Issue Offices of the
RBI
64. What is the preferential rate of interest paid above the normal rate on deposits
accepted from senior citizens
1. 0.75% 2. 0.50%. 3. 0.25%. 4. preferential rate withdrawn. 5. NOA
65. How many operations are allowed free of charge for a locker in a quarter?
1. 10 2. 15 3. 20 4. 25 5. 06
66. What is the charge for additional operations/transactions over the permitted
number of transactions?
1. Rs. 32.00 2. Rs. 38.00 3. Rs. 50.00 4. 25.00. 5. Rs. 10.00
67. Name the company that covers risk of the depositors under Kiddy Bank?
1. The GIC. 2. The oriental insurance. 3. UIICO 4. The national
insurance.. 5. Ms IFCO TOKYO.
68. What is the minimum balance to be maintained by the depositor under AB
Kiddy Bank?
1. Rs. 150. 2. Rs. 100. 3. Rs. 250. 4. Rs. 400. 5. RS. 500.
69. What is the sum assured to the parent/ guardian of depositor under Kiddy
Bank, in case of accidental death?
1. 25,000 each to the parent/guardian.
2. 50,000 to the next of depositor.
3. 75,000 to the guardian only.
4. 1.00 lakh .
5. 2.00 lakh to the kith of depositor only.
70. What is the insurance premia to be debited from the account-holder of Kiddy
Bank to cover under the insurance scheme?
1. Rs. 32. 2. 18. 3. Rs. 50. 4. Rs. 12 5. 26.25.
71. What is the amount of service charges to be debited to the account holder of
Kiddy Bank while collecting insurance charges every year?
1. Rs. 32. 2. Rs20. 3. Rs. 50. 4. Rs. 12 5. Rs26.

23
72. Which of the following is correct relating to the accounting year for Kiddy
Bank?
1. The year starts on April 1, and closes by March 31, every year.
2. Starts from February 21, to February 20, every year.
3. November 1st to October 31, every year.
4. October 1, to September 30, every year.
5. None of the above.
73. Nomination is governed by which of the following Act ?
1. RBI Act
2. N I Act
3. B R Act
4. I T Act
74. In case of Abhaya savings bank (ASB) which of the following statement is
false
1. The total insurance premium is Rs.9/- per head.
2. The penal charges are collected from Pensioners, staff and senior citizens.
3. The service charges are Rs.10/- per head.
4. Individuals within the age group of 5 to 70 years are eligible to open the
account.
5. All the joint account holders are to be compulsorily covered.
75. Premium for ABJ for a depositor of 35 years of age:
1. Rs.238 2. Rs.235. 3. Rs.221. 4. Rs.250 5. Rs.236.
76. Branches are required to maintain separate registers for recording entries of
cash transactions of Rs. (CTRs)
1. 2 lakhs and above. 2. Not required 3. 5 lakhs and above. 4. Only for
suspicious transaction. 5. Rs.10 lacs and above.
77. Who is authorized to impound counterfeit currency notes?
1. Branches of PSBs. 2. The currency chests. 3. Treasuries. 4. All RBI
Issue Offices. 5. All of the above.
78. The interest payable on SB group accounts as per the revised norms &
periodicity is
1. Monthly 2. Quarterly 3. Daily 4. Yearly 5. Half-yearly
79. Name the insurance company with which our bank has entered in to an
agreement to cover our Abhaya Savings Plus Account holders under Group
Personal Accident Insurance Coverage.
1. UIICO.
2. Oriental insurance Company.
3. M/s IFFCO-TOKIO.
4. General Insurance Company.
80. Insurance charges of Rs.70/- to be debited to the Abhaya Gold account
holder should be appropriated in the share of:
1. Rs. 25/- towards P&L and 46 to insurance co.
2. Rs 25/- to branch P&L and Rs/- 45/ to Insurance co.
3. Rs 45/- to our P&L and Rs/ 26 to the insurer.
4. Rs 46/- to branch P&L and Rs/-25 to the insurance co.

24
81. Which of the following statements is incorrect with regard to Insurance Year of
our deposit schemes?
1. Abhaya Gold commences from 1st November, of the year to 31,
October, of the subsequent year.
2. For ICD the year starts from 21, February to 20th Feb of the next year.
3. Abhaya Savings Bank accounting year starts from 1 st September to
31, August of every next year.
4. All of the above.
82. In the event of a death claim being admissible under the policy covering
Abhaya Gold a/c, the funeral expenses that can be paid by the insurance
company:
. 1. Actual. 2. Max of Rs. 5000. 3. 2000 Rs. 4. max of Rs 2, 500. 5.
No such provision now.
83. What is the maximum compensation that can be paid for the education grant
of dependent child aged above 10 years in the event of death of the insured
under Kiddy /bank?
79.Rs. 5000. 2. Rs. 8,000. 3. Rs. 3000. 4. Rs. 5000 per child. 5. 10000/
84. Under Abhaya Gold deposit scheme, Intimation of accidents giving rise to
claims shall be given to Insurance Company within how many days from the
date of the accident?
1. 30 days. 2. 120 days. 3. 90 days 4. 60 days. 5. 180 days.
85. Under Abhaya Gold scheme, claim forms are to be submitted to the insurance
company Within:
1. 180 days from the date of accident.
2. 180 days after the intimation about the accident.
3. 90 days after the date of intimation about the accident.
4. 120 days after the date of the accident.
86. The minimum amount for which a certificate of Deposit can be issued is
1. Rs. 5 lakhs with the multiples of 5 lakhs.
2. Rs. 5 lakhs with the multiples of 1 lakhs
3. Rs. 25 lakhs with multiples of 5 lakhs.
4. Rs. 1 lakh with multiples of 1 lakh.
87. A minor can open and operate Savings Bank by him self, if he is of age above
1. 10 years 2.12 years 3.15 years 4. 18 years 5. 21 years
88. In the event of death of a depositor of a term deposit before the maturity of
the deposit, and if the deposit is claimed for payment after maturity, what is
the rate of interest payable from the date of maturity till date of payment..
1.Simple interest at applicable rate obtaining on the date of maturity, for the
period for which the deposit has remained beyond the date of maturity
2.Compound interest at applicable rate obtaining on the date of maturity, for
the period for which the deposit has remained beyond the date of maturity
3.Compound interest at applicable rate obtaining on the date of payment, for
4.Simple interest at applicable rate obtaining on the date of payment, for
5. NIL

25
89. In the event of death of a depositor of a term deposit after the maturity of the
deposit, and if the deposit is claimed for payment after maturity, what is the
rate of interest payable from the date of maturity till date of payment..
1.Savings bank rate as applicable on the date of maturity,
2.No interest is payable
3.Compound interest at contracted rate
4.Simple interest at applicable rate obtaining on the date maturity
5. Compounded interest at prevailing rate.
90. Andhra bank has tied up with how many Mutual Funds for distributing their
products.
1. One 2.Six 3. Four 4. Six 5. Eleven
91. The service tax applicable on the service charges collected by banks
1.10.20% 2.10.30% 3.15.50% 4.Nil. 5.None of the above
92. Any complaint which is received through the office of Banking Ombudsman
should be replied with in a maximum time limit of ________.
1. 3 days 2. 7 days 3. 30 days 4.10 days 5. 45 days
93. What is our net interest margin for the year ended March 2010?
1. 3.03 2. 2.70 3. 3.21. 4. 3.01 5. 2.94
94. Which of the following is true in case of interest payment of delayed collection:
1. applicable only for inland instruments. 2.Payment of interest shall
be made without any demand from customers. 3.Interest shall be paid
only if it works out to Rs.5/- & more. 4. Statement 1, 2&3 are true.
5.Statement 1 & 3 are correct.
95. Which of the following is incorrect in case of Abhaya savings Plus?
1. Individuals who have attained the age of 5 years and have not
completed the age of 70 years shall be eligible to be covered .
2.Singly, jointly with 'E or S' or 'anyone or survivor', HUF accounts.
3.Clubs, Societies & Associations are eligible for coverage.
4.The premium payable is Rs.18/-.
5. The service charges are Rs.18/-
96. Which of the following is correct with regard to AB Money time?
1. Deposit Amount Minimum Rs.25,000/- and in multiples of
Rs.1000/- thereafter.
2. Period of Deposit Min:15 months, Maximum: 120 months
3. Rate of Interest As applicable for Different maturities
ruling from time to time( 0.5%extra payable to senior
citizens)
4. Existing/Retired Staff are eligible for preferential rate of
interest and concession rate of interest on loans against
deposits.
5. All are correct.
97. Which of the following is correct in case of AB Tax saver.
1.An assessee can invest in the term deposit of any amount
not exceeding one lakh rupees in a year.
2.The amount to be invested in the term deposit shall be a
minimum of one hundred rupees or multiples thereof.
3.No nomination shall be made in respect of a term deposit
applied for and held by or on behalf of a minor.
. 4.All are correct 5.None is correct

26
98. What is the quarterly average minimum balance to be

maintained in " AB Super salary SB account"
1. Rs. 2000 2. Rs. 3500 3. Rs.4000 4. Rs. 5000 5. Rs.1000
99. What should be the last drawn take home pay of individual staff member in
the case of "AB Super salary SB a/c"
1.Rs. 10,000 2. Rs.12,500 3. Rs.20,000 4. Rs. 15,000 5. No such
stipulation.
100. Which of the following is incorrect statement?
1. ABFSB can be attached to ATM card.
2. ABFSB can be attached to Debit card.
3. Cancellation of the units takes place as per First in First
out FIFO method.
4. AB Freedom deposits offer liquidity to the customers.
5. Sweep & Auto reverse sweep facility is available.
ANSWERS (OUR BANK & OUR DEPOSIT SCHEMES
Q A Q A Q A Q A Q A Q A Q A Q A Q A Q A
1 2 2 3 3 2 4 3 5 3 6 5 7 5 8 3 9 3 10 4
11 1 12 5 13 5 14 5 15 2 16 5 17 4 18 2 19 4 20 2
21 5 22 3 23 5 24 3 25 2 26 3 27 3 28 4 29 3 30 3
31 3 32 5 33 1 34 4 35 4 36 3 37 2 38 3 39 2 40 1
41 2 42 1 43 5 44 1 45 2 46 4 47 1 48 4 49 4 50 5
51 2 52 1 53 5 54 3 55 4 56 2 57 2 58 5 59 1 60 4
61 3 62 2 63 4 64 2 65 1 66 3 67 3 68 2 69 4 70 1
71 2 72 3 73 3 74 2 75 2 76 5 77 5 78 5 79 1 80 2
81 5 82 5 83 5 84 3 85 1 86 4 87 1 88 1 89 1 90 5
91 2 92 3 93 5 94 4 95 3 96 5 97 4 98 4 99 5 100 3

27
आन्ीा बैंक कमर्चारी महािवद्यालय है दराबाद Andhra Bank Staff College Hyderabad
बीमा संबघ्द मांग जमा योजनाएं - एक नजर में Insurance linked Deposit Schemes- at a glance
चालू खाता बचत खाता Savings Bank
आई सी डी अभया बचत बैंक अभया बचत बैंक प्लस अभया गोल्ड ए बी जीवन अभया
Current Deposit (CD) SB ए बी िकड्डी बैंक
Insured Current Abhaya Savings Bank Abhaya Savings Bank Abhaya Gold AB JEEVAN ABHAYA
(Insurance coverage (Insurance coverage AB Kiddy Bank
Deposit (ICD) ASB Plus ASB+ (ABG) (ABJ)
optional) optional)
Individuals, JHF, Prop. Concerns, Partnership firms, Pvt.,
पाऽता Individuals
Ltd. Co.s, Public Ltd., Cos. Accounts of Children (Minors)
Eligibility Criteria Either single or joint
OD/ Overdraft /Cash Credit/PAGCC
Children up to 18
आयु Age (for
18 to 55 years 5 to 70 yrs 18 to 55 years 5 to 70 yrs 18 to 55 years yrs. / Parents - 18-
insurance coverage)
70 yrs
बीमा कवरे ज Insurance

Rs.1 lac each for kid
Cover Rs.1.00 lac Rs.1.00 lac Rs.1.00 lac Rs.25000/- Rs.50000/- Rs.1.00 lac Rs.1.00 lac
& parent /guardian
(Per person)
Natural / accidental
Natural / accidental death. Natural / accidental death.
Accidental death / death. Accidental death# /
जोिखम कवरे ज (Risk coverage for natural death (Risk coverage for natural
partial or permanent Accidental death / partial or permanent disability (Risk coverage for natural permanent or partial
Risk covered after 45 days from opening death after 45 days from
disability death after 45 days from disability
account) opening account)
opening account)
51-
Age group/ Premium 18-35 36-50 51-55 18-35 36-50 51-55 18-35 36-50
36.00 9.00 18.00 45.00 55 32.00
per person- p.a (Rs.)
235 407 805 235 407 805 235 407 805
Service Charges 40 40 40 30.00 40 40 40 10.00 18.00 25.00 40 40 40 20
Total/person/pa.Rs 275 447 845 66.00 275 447 845 19.00 36.00 70.00 275 447 845 52.00
Premium for new accounts is to be collected on the day of opening of the account and renewal premium of existing accounts is to be debited on the last day of the insurance year to the credit of non-operative collection account of the
Periodicity of collecting
respective company. Premium collected for new accounts is to be transferred to the main account of the insurance company maintained at different branches in Hyderabad at the end of each month and renewal premium is to be remitted
premium / Service
on the first day of the insurance year along with details of premium collected. In case of PAGCC a/c, the scheme is optional and premium is payable by borrower directly and should not be debited to a/c. Service charges colleted on the
charges.
day of opening of account and at the time of renewal are to be taken directly to P&L account.
बीमा कंपनी
India first Life Insurance UII Co.Ltd India first Life Insurance UII Co.Ltd India first Life Insurance UII Co.Ltd
Insurance Company
बीमा वषर्
1st Dec to 30th Nov 21st Feb to 20th Feb 1st Dec to 30th Nov 1st Sep to 31st Aug 1st Nov to 31st Oct 1st Nov to 31st Oct 1st Dec to 30th Nov 1st Nov to 31st Oct
Insurance year
Endowment Commissioner's Himayatnagar
Kandivalli, Mumbai Kandivalli, Mumbai Hyderguda Branch Kandivalli, Mumbai Kachiguda Br,
िूमीयम का अंतरण Abid Road, Hyderabad office Extension Counter, Branch
A/C.No A/C.No A/c A/C.No A/C.No
Transfer of Premium 070511011021008 Hyderabad A/c A/c No.
121011100001361 121011100001361 No.020811011001395 121011100001361 032111011001070
No.150911011000009 02111011001846
दुघट
र् ना की सूचना Within 90 days of death / Within 30 days of
Information of accident directly to the accident directly to the Within 90 days from the date of accident/ death directly to the concerned Insurance company
accident Insurance company. Insurance Co.
Claim submission Within 180 days from the date of accident / death to the concerned Insurance Company, through Branch.
Area R S U M R S U M R S U M R S U M R S U M
With Cheque Rs.750/-for those of 18-35

1000
2000
3000
5000
1000
2000
3000
5000
250
250
500
500
300
500
500
500
400
500
500
500
Minimum
Balance
yrs of age in Rural, Semi-

Book (Rs.) urban & Urban Branches. &
Rs.1000/- Rs.100/-
Rs.1000/- for rest of the
Without Chq. branches and age groups.
100
250
250
250
150
250
250
300
200
300
300
300
--
Book (Rs.)
407/51/25 068/51/5
पिरपऽ Circular 028/51/04 Dt.30.04.2010 028/51/04 Dt.30.04.2010 028/51/04 Dt.30.04.2010
Dt.19.02.2009 Dt.31.05.07
@ Service Charges are Exclusive of Service Tax # Education grant of Rs.5000 & 10000 for 0-10 & 11-18 age groups respectively on accidental death of parents/ guardian
+ Life Insurance coverage can be extended to the parents aged between 18-55 yrs. under ABJ scheme by debiting additional premium.
Prepared by Rama Rao Chauhan - Updated on 21/03/2011

28
ए बी िूमीयम चालु खाता AB PREMIUM CURRENT ACCOUNT
Who can open ? Individuals, Joint Account holders, HUF, Sole Proprietors, Partnership firms,
Limited Companies.
Minimum balance Rs.1,00,000/-
Facilities available For all customers
- All facilities of Core banking
- 50% concession in Service charges for funds remittance within our
bank
- No folio charges
- Free cheque books
- Free internet banking
- Free multi city cheque book if Monthly Average balance of Rs.5.00
lakhs or more is maintained.
- Free ATM/Debit card for 1st year
For Individual & Sole proprietary accounts only
- Free monthly statement of account
- Free Demat account (Conditions apply)
- Free Credit card (Individuals & Sole Proprietor)
- Balance in excess of Rs.2.00 lakhs can be converted to Term deposit
(in units multiples of Rs.10000/-) subject to AB Freedom guidelines.
Penal charges for Rs.400/- Per Quarter
not maintaining
minimum balance
एबी सुपर वेतन बचत खाता AB SUPER SALARY SB ACCOUNT
Who can open? Salaried Staff of any company / organization drawing salary through our Bank
Minimum balance Can be opened with ZERO balance
Quarterly average balance of Rs.5000/- to be maintained
Facilities Available - No folio,/ No transaction charges
- Free remittance up to Rs.25000/- per month
- Free internet banking facility
- Free access to Non Andhra Bank ATMs
- Free monthly statement of account per month.
- Free reply to e-mail to balance queries
- Free cheque book (50 leaves in a year.)
- Free multi city cheque book at select centres provided monthly
average balance is Rs.50000/-.
- Free ATM/Debit card (first year)
- Free Credit card / PDC on specific request.
- Free Demat account / Online trading (conditions apply)
- Auto sweep of balances in excess of Rs.10000/- to term deposits, as
applicable to AB freedom A/c.
- Depositors eligible for Retail Loan as per guidelines of respective loan
facility.
- OD equivalent to last drawn net salary at BMPLR. Account holder
having 60% net salary can draw up to the limit once in a quarter and
repayment in 2 months.
- Free NEFT /RTGS facility twice in a month.
- Free personalised Chequebook (50 leaves in a year) for monthly
average balance of Rs.10000/-and above.
- ABJ scheme can be extended as per extant guidelines.
Penal charges for Rs.150/-Per Quarter
not maintaining
minimum balance
NON SALARIED Non salaried persons also can avail the above facilities provided they open
PERSONS account under this scheme with minimum balance of Rs.5000/- and NOT with
zero balance. No OD facility is allowed.

‚¸›šÏ¸ ¤¸ÿˆÅ ˆÅŸ¸Ä ¸¸£ú Ÿ¸í¸¢¨¸Ô¸¸¥¸¡¸ í¾™£¸¤¸¸™ ANDHRA BANK STAFF COLLEGE: HYDERABAD
¬¸¸¨¸¢š¸ ¸Ÿ¸¸‡¿ (¬¸¸Ÿ¸¸›¡¸) TERM DEPOSITS (General)
¡¸¸½ ¸›¸¸ ‚¸¨¸¢÷¸Ä ¸Ÿ¸¸ ‚¸¨¸¢÷¸Ä ¸Ÿ¸¸ + RD ˆÅ¥œ¸÷¸£€¨¸º ›¸ˆÅ™ œÏŸ¸¸µ¸ ž¸¸Š¡¸¥¸®Ÿ¸ú
Ÿ¸ú¡¸¸™ú FDR
Scheme RD Plus KTD œ¸°¸ CC BLD
œ¥¸¾›¸
Recurring Fixed Reinvestment Daily savings
Plan
Step up option: Up to 10 Higher return on deposit
¢¨¸©¸½«¸÷ times and multiples of core Power of compounding
installments any number of Monthly / Quarterly Small amounts
¸¸ Monthly
times during the month. Interest payment Round amt. of Odd amt. of make a big
Special installment Step down option: Any time facility deposit & deposit & Round deposit.
feature but not below the core
Odd amt. of MV. amt. of MV.
installment.
Who can Individuals, two or more individuals in joint names payable jointly or severally etc., minor to be operated by
open Parent/guardian, a Hindu Undivided Family or an Institution, a proprietary concern, Partnership firm, a company,
account Corporation, Trust, Association (subject to conditions) can open the account.
Min Ra.5/- Rs.100/- Rs.100/- Rs.100/- Rs.100/-MV Rs.10/-
Deposit
amount
No limit. No limit. No limit.

Ma Rs.1.00 Lakh
(Multiplies of No limit. (Multiplies of (Multiplies of No limit.
x. (Multiplies of Rs.100/-)
Rs.5/-) Rs.50/-) Rs.100/-)
Deposit Period
<1 Lac-15 days

Min 6 Months 1 Lac & above- 6 Months 2 Years.
7day
120 Months
Ma 10 Years
(Multiplies of 3 60 Months 10 Years 10 Years
x. (Multiplies of 3 Month)
M.)
Applicable ROI Applicable ROI for
Applicable ROI calculated on daily the period of @ 2.5% on the
products on the minimum Applicable ROI for the period
for the period to deposit (Simple) to balance as on first
¤¡¸¸ ¸ balance available (quarterly compounded) to be paid
be paid on between 10th and last be paid Quarterly Monday of the
Interest on maturity
maturity day of the month and & if monthly @ month
payable on maturity discounted rate.
--------------------------------------Additional Interest of 0.5% for senior citizens & 1% for our staff members--------------------------
--------------------
Prepared by Rama Rao Chauhan - 21 March 2011 30
¬¸¸¨¸¢š¸ ¸Ÿ¸¸‡¿ (¬¸¸Ÿ¸¸›¡¸) TERM DEPOSITS (General)
Deposit --------------------------------------------------90% - Own deposit / 75%- Third Party deposit -------------------------------------------------
Loan --
Prematur
e --------------------------------------Allowed with interest at applicable rate for the expired period minus applicable penalty---------
Withdraw -------------------------
al
Balance <
Rs.100/-Rs.10/-
Penalty 0.5 % of outstanding
, >Rs.100/-& Deposit from Individuals up to 1 Lac for any period & from Corporates up to
for balance with Min.of
<Rs.1000/- 100 Lac for up to 90 days - No Penalty.
Prematur Rs.50/- & Max. of
Rs.20/-, Rest of the depositors, amount & period - @1% Penalty
e closure. Rs.500/-
>Rs.1000/-
Rs.50/-
Penalty
for delay 10 paisa for
in every
payment installment of No penalty -------------------------------------------------------Not applicable-----------------------------
of Rs.10/-per -----------------------
Installmen month.
t
Prepared by Rama Rao Chauhan - 21 March 2011 30

¬¸¸¨¸¢š¸ ¸Ÿ¸¸‡¿ (¢¨¸©¸½«¸) TERM DEPOSITS (Special)
¡¸¸½ ¸›¸¸ ‡¤¸ú Ÿ¸›¸ú ’¸ƒÄŸ¸ ‡¤¸ú ”¤¸¥¸ ‡¤¸ú ’¾Æ¬¸ ¬¸½¨¸£
‡¤¸ú œÏ€ú”Ÿ¸
Scheme AB Money Time AB Double AB Tax Saver
AB Freedom
œ¥¸¾›¸
Fixed Reinvestment Fixed/ Reinvestment
Plan
Surplus amount in SB account will
¢¨¸©¸½«¸÷
automatically transfer to Term Deposit Tax exemption
¸¸ Double the amount of
Monthly Income (FD or KTD as per option) in a unit of under Sec. 80C of IT
Special investment.
Rs.1000/-with minimum of 5 units for a Act
feature
period opted.
‰¸¸÷¸¸ Individuals, two or more individuals in joint names Except special minors, all others who
ˆÅ¸¾›¸ payable jointly or severally etc., minor to be are eligible to open SB Accounts, can
‰¸¸½¥¸ operated by Parent/guardian, a Hindu Undivided open. Individual / HUF
¬¸ˆÅ÷¸¸ í¾ Family or an Institution, a proprietary concern, Income tax
No deposit receipts issued. However
Who can Partnership firm, a company, Corporation, Trust, assesses
statement will be issued for SB as well
open Association (subject to conditions) can open the
as FD/KTD transactions.
account account
Min Rs.25000/- Rs.1000/- Rs.5000/- Rs.100/-
¸Ÿ¸¸ £¸¢©¸
Deposit
amount
Rs.1.00 Lakh in a
No limit.
Ma No limit. No limit. year
(Multiplies of
x. (Multiplies of Rs.1000/-) (Multiplies of Rs.5000/-) (Multiplies of
Rs.1000/-)
Rs.100/-)
Min 15 Months 15 Days 5 Years.
¸Ÿ¸¸ ‚¨¸¢š¸
Applicable period to become

Deposit
(for both Fixed & Re-investment plan) Applicable ROI for

Period
double
Ma the period (quarterly
10 Years the amount of deposit ONE Year
x. compounded) to be
@ applicable rate of interest (for both Fixed & Re-investment plan)
paid on maturity
Prepared by Rama Rao Chauhan - Updated on 9 March 2011 32

¬¸¸¨¸¢š¸ ¸Ÿ¸¸‡¿ (¢¨¸©¸½«¸) TERM DEPOSITS (Special)
Interest @
applicable rate on
deposit for first 3
Applicable rate of interest for Applicable ROI for
months will be Applicable rate of interest
SB & Term deposit. the period (quarterly
¤¡¸¸ ¸ added to Principal for Term deposit.
(Periodical interest payment will be compounded) to be
Interest amount and
allowed on quarterly basis) paid on maturity
thereafter to be
paid on discounted
basis.
--------------------------------------------------------Additional Interest of 0.5% for senior citizens & 1% for our staff members---
-------------------------------------------------
¸Ÿ¸¸ †µ¸
-------------------- Own deposits- 90% & Third Party No deposit loan.
Deposit No deposit Loan
deposit- 75%---------- However Lien marking is allowed on units
Loan
‚œ¸¢£œ¸Æ Amount can be withdrawn from Term
Allowed with interest at applicable rate for the Deposit in units of Rs.1000/- through SB
¨¸ ‚¸í£µ¸
Premature
expired period minus applicable account. Not allowed
Withdrawal penalty
Premature withdrawal of units allowed
Deposit from Individuals up to 1 Lac for any period
™¿”
&
Penalty
from Corporates up to 100 Lac for up to 90 days -
for No penalty Not applicable
No Penalty.
Prematur
Rest of the depositors, amount and period - @1%
e closure.
Penalty
œ¸¢£œ¸°¸ 270/51/19 Dt. 431/51/30
143/44/17 Dt.06.08.2008 159/44/20 Dt.27.08.2008
Circular 19.10.2008 Dt.13.03.2008
Prepared by Rama Rao Chauhan - Updated on 9 March 2011 32

LOAN POLICY GUIDELINES

OBJECTIVE:
¾ To improve the credit off-take of the Bank and maximize profits.
¾ To ensure that there is a balanced growth of credit. Lopsided growth of
credit to any particular sector of economy / segment of borrower is not
desirable and needs to be avoided.
¾ To ensure that the loan policy of the Bank is competitive and flexible in
relation to other Banks so as to attract and bring good Corporate/Non
Corporate borrowers into our fold.
¾ Continue to maintain thrust to priority sector advances in consonance with
Govt. of India / Reserve Bank of India guidelines and
¾ To ensure that the quality of credit is sound and the Bank is not exposed
to avoidable and unwarranted risks.
EXPOSURE NORMS:
¾ As per RBI guidelines, Bank’s maximum exposure to a single
borrower.
Not more than 15% of Bank’s Capital Funds i.e. Tier I Capital + Tier II
Capital as per Audited Balance Sheet of the previous year.
¾ Bank’s maximum exposure to NBFCs as per RBI guidelines.
Bank’s exposure to a single NBFC/ NBFC(Asset Finance Company) not to
be more than 10% / 15% of Bank’s Capital Funds i.e. Tier I Capital +
Tier II Capital as per Audited Balance Sheet of the previous year.
(Cir 381 ref 26/66/ dt 31.01.2009)
¾ As per RBI guidelines, Bank’s maximum exposure to a Group.
Not more than 40% of Bank’s Capital Funds i.e. Tier I Capital + Tier II
¾ Bank’s maximum exposure norm to a single borrower for
infrastructure Projects.
20% of Bank’s Capital Funds i.e. Tier I Capital + Tier II Capital as per
Audited Balance Sheet of the previous year.
¾ Bank’s maximum exposure norm to a single NBFC/ NBFC(AFC) for
financing infrastructure Projects.
Bank’s exposure to a single NBFC/ NBFC (Asset Finance Company) for
financing to infrastructure projects may exceed the exposure norm of
10% / 15% by additional 5% (i.e. upto 15% / 20%) of Bank’s
Capital Funds i.e. Tier I Capital + Tier II Capital as per Audited
Balance Sheet of the previous year. (Cir 381 ref 26/66/ dt
31.01.2009)
¾ As per RBI guidelines, Bank’s maximum exposure to a group for
financing Infrastructure projects.
Not more than 50 % of Bank’s Capital Funds i.e. Tier I Capital + Tier II
¾ Borrower with substantial exposure:
Any borrower enjoying limits of Rs.550 Crore & above is called a borrower
with substantial exposure and is also known as a Large Borrower.
¾ Bank’s Substantial Exposure Limit.
o The sum of limits sanctioned to Large Borrowers i.e., borrowers
with substantial exposure (both individual & group borrowers)
should not exceed Rs.16500 Crore. (300% of capital fund as
on31.03.2008)
33
पदोन्नित परीक्षा अूैल 2011 के िलए अध्ययन साममी
¾ The extent up to which Individual & Group borrower exposure

norms can be exceeded by the Board of the Directors of the Bank :
In exceptional circumstances, with the approval of the Board
(individual & Group borrowers), additional exposure up to a maximum of further
5% of Capital funds is permitted, subject to the borrower consenting for
disclosure in Bank’s annual report.
¾ Our Bank’s exposure norms for Film Industry.

o Exposure to single party shall not exceed Rs.4 Crore.
o At any point of time, we shall not extend finance to more than 6
parties.
¾ Our Bank’s maximum exposure limit to Infrastructure Project
Finance per Project.
o Rs.500 Crore per project
¾ Our Bank’s maximum prudential limit for Individual / Proprietary
concern.
Rs.20 Crore ( Rs.30 Crore for Group) / Rs.60 Crore by CMD/ED OR
6 Times of Net worth of the concern as per the Latest Audited
Balance Sheet, which ever is less
¾ Our Bank’s maximum prudential limit for Partnership concerns.
Rs.30 Crore ( Rs.40 Crore for Group) / Rs.60 Crore by CMD/ED
OR 6 Times of Net Worth of the concern as per the latest Audited
Balanced Sheet, whichever is less
¾ Our Bank’s maximum exposure limit for HUF concerns.
o Rs.10 Crore.
¾ Our Bank’s maximum exposure limit for Trusts/Coop Societies /
Association of Persons.
Rs.20 Crore (Rs.30 Crore for Group) / Rs.60 Crore by CMD/ED OR
6 Times of Net Worth of the concern as per the latest Audited Balance
Sheet, whichever is less.
¾ Our Bank’s maximum exposure limit for Private Limited
Companies.
Rs.80 Crore (Rs.100 Crore for Group) OR 6 Times of Net Worth of
the company as per the latest Audited Balance Sheet, whichever is less.
¾ Our Bank’s maximum exposure limit for Closely held Public Limited
Companies.
o Rs.100 Crore (Rs.120 Crore for Group)
¾ Our Bank’s maximum exposure limit for Widely held Public Limited
Companies and all other constitution of borrowers if sanctioned by
MC.
15% of Bank’s Capital Fund (40% of Capital Fund for Group &
50% of Capital Fund in case of Infrastructure Projects under Group.)
¾ “Administrative clearance” required for sanction of credit facilities

to Trust & HUF borrowal accounts.
Administrative clearance from H.O is required for the first sanction.
For subsequent renewals & enhancements it is not required provided
there is no change in the composition / activity of HUF / Trust.
34
¾ The extent up to which Interest bearing Unsecured Loans (from

promoters, friends and relatives) can be treated as Quasi
Capital/Net Worth for exposure norms.
50%
¾ The extent up to which Non-interest bearing Unsecured Loans
(from promoters, friends and relatives) can be treated as Quasi
Capital/Net Worth for exposure norms.
100%
¾ The condition to consider 50% of Interest bearing Unsecured

Loans as part of Net Worth.
1. Interest on unsecured loans shall not exceed rate of interest
charged by the bank on the loans & advances extended.
2. Payment of interest and repayment of unsecured loans shall be
subordinated to the bank borrowings.
An undertaking to the above shall be obtained from the borrower and
be kept on record.
¾ The condition to consider 100% of Non-interest bearing
Unsecured Loans as part of Net Worth.
i. Repayment of unsecured loans shall be subordinated to the bank
borrowings.
ii. An undertaking to this effect shall be obtained from the borrowers
and be kept on record.
¾ The types of facilities for which exposure ceilings will not apply.
o Loans & Advances against security of bank’s own term deposits and
LCs / BGs covered by 100% cash margin.
o Food Credit.
o Rehabilitation of Sick / Weak Industrial units: Existing / additional
credit facilities (including funding of interest and irregularities)
granted to weak / sick industrial units under rehabilitation
packages.
o Govt. of India Guaranteed accounts where principal & interest are
fully guaranteed.
o Bills purchased/negotiated/discounted under LC( where the
payment to the beneficiary is not made under reserve.)
¾ Our Bank’s maximum prudential exposure limit for Bank
Guarantees.
o 3 times of Net Worth of the Bank.
¾ Our Bank’s maximum prudential exposure limit for Letters of
Credit.
o 2 times of Net Worth of the Bank.
¾ Our Bank’s maximum Prudential exposure limit for Foreign
Exchange commitments (Forward contracts etc.,).
o Equal to the Net Worth of the Bank.
¾ The prudential limit up to which guarantees favouring other
Banks, Financial Institutions and other agencies may be issued.
o 10% of Bank’s capital funds i.e., 10% of Tier I capital Only
¾ Maximum exposure norm in respect of financing to Construction
Company
The fund based and non fund based limit to construction company shall
not exceed 15 times of the Net Owned funds of the construction company.
35
REPAYMENT PERIODS
¾ Maximum repayment period that can be allowed for Term Loans in
case of Infrastructure Projects
A+++, A++ (CRS/CRAS)& A++(CRRM)---- 15 years including gestation
period.
A+,A&B(CRS/CRAS)A+,A,B++(CRRM)--12years including gestation
period
¾ Maximum repayment period that can be allowed for RTO Loans
A+++,A++(CRS/CRAS)&A++(CRRM) -- 6 years including holiday period.
A+, A&B (CRS/CRAS)& A+,A,B++(CRRM) rated--5 years including
holiday period
¾ Maximum repayment period for Term Loans other than RTO Loans
and Infrastructure Projects
A+++, A++, A+, A & B(CRS/CRAS)A++,A+A,B++(CRRM) ---- 7 years
excluding holiday period.
¾ Maximum tenure of Term Loan in respect of
‘C’(CRS/CRAS)B+,B(CRRM) rated borrowers---- 5 years excluding
holiday period.
CREDIT INVESTIGATION
¾ What is Credit Investigation?
Credit investigation, as a preliminary study gives valuable information
about prospective borrower, associate concerns, guarantors, market reports,
details of the project and performance of the industry etc. It serves as
preliminary information about the prospective borrower, before detailed
evaluation is undertaken.
¾ What is the cut-off limit for conducting Credit Investigation?

All new advances less than Rs 1 cr and all existing advances
irrespective of the limit, except Agriculture advances, Government sponsored
schemes and weaker section advances up to a limit of Rs.25 lakhs.
¾ What is the cut off limit for submission of Due diligence report ?
All new advances of Rs 1Cr and above Due diligence report to be submitted.
MARGINS AND SECURITIES:

¾ Restriction regarding obtention of Agricultural Lands / Rural
buildings as collateral security for Bank Guarantees.
Value of Agricultural Land and / or Rural Buildings should not exceed 30%
of total collateral security requirement in case of new accounts and 50%
in case of existing accounts that too in states where there is no ban on
acceptance of agricultural land as security for non-agricultural purposes.
¾ Eligible bank finance against NSCs / KVPs

75% of the purchase value plus accrued interest of NSCs / KVPs.
¾ Stipulation / condition for allowing loans to general public against
securities
The loans should be extended only where the date of maturity is less
than 3 years from the date of finance except where the facility of premature
36
cancellation / surrender value is available.

¾ Minimum margin for advances against Book Debts
50% ( 30% for SMEs )and sanctioning authority can reduce margin to
25% on book debts of Govt.dept.
¾ What are the eligible Book Debts to arrive at Drawing Power

Book Debts not older than 90 days & 180 days for MSME and which are
not financed by way of purchase / discount of bills.
¾ Stipulation while financing second hand machinery for new units

The Cost / Capacity of proposed second hand machinery shall not
exceed 25% of total Cost/Capacity of machinery of the proposed
scheme Stipulated margin on second hand machinery?
50%
¾ Security norms for Crop Loans / Agricultural Term Loans up to
Rs.50,000/-
Hypothecation of Crops / Assets to be financed.
¾ Security norms for Crop Loans / Agricultural Term Loans above
Rs.50,000 and up to Rs,1,00,000.
In addition to hypothecation of Crops / Assets, Co-obligation / Third
party guarantee is to be obtained.
¾ Security norms for Crop Loans / Agricultural Term Loans above
Rs.1,00,000 or aggregate commitment per borrower exceeding
Rs.1,00,000 ?
In addition to hypothecation of Crops / Assets to be financed and
Co obligation / Third party guarantee, 100 %Collateral security in
the form of mortgage of land / charge creation under state laws are to be
obtained .
ASSESSMENT METHODS & IMPORANT RATIOS:
TURNOVER METHOD :( for Working Capital limits up to & inclusive of

Rs.6.00
Crore)
A. Accepted Projected Sales Turnover
B. 25% of Sales Turnover
C. Margin @ 5 % of Sales Turnover
D. Actual NWC available as per latest Audited Balance Sheet
E. B-C
F. B-D
G. M.P.B.F = E or F, whichever is less.
INVENTORY METHOD :(For Working Capital limits up to & inclusive of

Rs.6.00 Crore)
A. Total Current Assets
B. Current Liabilities (other than Bank Borrowings)
C. Working Capital Gap =A-B
D. Margin @ 13% of Projected Current Assets
E. Actual NWC available as per latest Audited Balance Sheet
F. C-D
G. C-E
37
H. M.P.B.F = F or G, whichever is less.

INVENTORY METHOD :( For Working Capital limits above Rs.6.00 Crore)
C. Working Capital Gap =A–B
F. C-D
G. C-E
I. M.P.B.F = F or G, whichever is less.
Note:- If actual NWC is less than required margin, the borrower has to
bring in the short fall and sanctioning authority has to ensure the
same.
¾ Maximum Working Capital credit limit up to which Turn Over
method can be extended.
o Rs.6 Crores.
¾ Assessment system under which seasonal industries can be
financed.
Cash Budget System
¾ Basis for accepting future projections in the build up of Current
Assets and Other Current Liabilities.
The past inventory levels shall be the basis.
However the sanctioning authority will have flexibility to accept
higher levels provided there is enough justification on a case to case basis.
¾ Minimum acceptable Current Ratio in case of working capital credit
facility up to Rs.6 Crore when assessed as per Turnover Method or
Inventory Method.
• Minimum of 1.15
¾ Minimum acceptable Current Ratio in case of Working Capital
credit limit of above Rs.6 Crore.
• Minimum of 1.33
¾ Maximum acceptable level of Total Debt- Equity Ratio.
• Maximum of 6
¾ Formula for calculating Total Debt-Equity Ratio.
Total Debt-Equity Ratio = TL + CL
Tangible Net Worth
¾ Maximum permissible Gearing Ratio while assessing the eligibility
for non-funded limits.
• Maximum of 10
¾ Standard average D S C R specified as applicable for all Term
Loans
• 1.50 to 2.00
¾ Where there is assured source of income for repayment of
instalments in Term Loans, the minimum DSCR stipulation is 1.20
¾ Example of facilities, where lower DSCR of 1.20 can be accepted.

Rural Godowns Scheme & Rent Receivable.
38
¾ Penal interest in case of non-submission of all the required data /

information and latest audited /provisional statements for yearly
review / renewal of limits:
For the first 3 months of the overdue Penal interest of

period 1%
Beyond 3 months of overdue period till Penal interest of
submission of all the required data / 2%
information
GUIDELINES ON BALANCE SHEET ITEMS:
¾ Term Loan installments falling due for payment in next 12 months
for the purpose of calculation of Current Ratio and MPBF.
Term Liability in both the cases.
¾ Inter-corporate deposits are to be treated as
Non-Current Assets.
¾ When it is not possible to bifurcate term liability component of
Mobilisation Advance in case of construction company account, to
treat such mobilisation Advance.
• 50% as Term Liability and 50% as Current Liability.
STATEMENTS FOR MONITORING:
¾ Time stipulation for the obtention of Stock Statements.

As on the last Friday of the month before 10th of succeeding month.
¾ Nature & periodicity of submission of stock statements
• Cash credit up to Rs 1 lakhs-abridged monthly

• More than Rs 1L and up to Rs 5L- Abridged monthly
and detailed quarterly
• More than Rs5L(including book debts limit)-Detailed
monthly
¾ Penalty for the delayed / non submission of stock Statements.

Penal Interest of 1% for the period of default on working
capital outstanding.
¾ Minimum working capital limit to accept Book Debts as security.
Cash Credit Limits of above Rs.5 Lakh.
¾ Periodicity for the obtention of Book Debts statements.
Every month certified by the borrower and every quarter duly
certified by a Chartered Accountant.
¾ Minimum working capital credit limit for the obtention of M S O D.
Rs.100 Lakh and above from the Banking system.
¾ Time stipulation for the submission of MSOD:
MSOD is to be submitted on or before 15th of next month.
¾ Penal provision for non-submission of MSOD.
Penal interest of 1% to be charged the period of default.
¾ Various QIS statements to be obtained:
QUARTERLY INFORMATION SYSTEM - QIS II
and
QUARTERLY INFORMATION SYSTEM - QIS III
39
¾ What is QIS II?

It is a Quarterly Statement showing the performance during the
quarter.
¾ What is QIS III?
It is an Half yearly Operating and Funds-Flow statement.
¾ Cut-off limits for obtention of QIS form II.
I.. Funded working capital limits of above Rs.6.00 crore ( A &
above rated)
II.“C”( B & B+ for CRRM) rated accounts, with fund based working
capital limits of Rs.1.00 crore and above
III. “B”(CRS/CRAS)& B++(CRRM) rated accounts, with fund based
working capital limits of Rs.2.00 crore and above
¾ Cut-off limits for obtention of QIS form III.
I Funded working capital limits of Rs.3.00 cr and above (' A ' and above
rated)
II. “C”(B & B+ under CRRM) rated accounts, where fund based working
III. “B”(B++ under CRRM) rated accounts, where fund based working
¾ Periodicity for obtention of QIS II & III.

QIS II - Every Quarter
QIS III - Every Half Year (Mar/Sept).
¾ Time stipulation for the submission of QIS II.
Within six weeks from the close of the quarter.
¾ Time stipulation for the submission of QIS III.
Within two months from the close of the half year.
¾ Penalty for non-submission of QIS II / QIS III.
Penal interest @ 1% p.a for one full quarter on the working
capital outstanding.
¾ Maximum over all penal interest chargeable in an account for any
reason.
2%
UNIT INSPECTIONS & AUDITS :
¾ Periodicity of Unit Inspection in case of credit facilities other than
OCC irrespective of limits.
Once in a quarter by an Officer;
Once in half year by the Manager.
¾ Periodicity of Unit Inspection in case of Cash Credit/Overdraft
limits below Rs.50 Lakh.
Bi-monthly by the branch .
¾ Periodicity of Unit Inspection in case of Cash Credit limits of Rs.50
Lakh & above.
Once in a month by Officer
Once in a Quarter by Branch Manager
Once in a month by Officer
¾ Short Inspection
o Advances of above Rs3 crores(FB+NFB) by concurrent auditor -Fresh

advances within three months of first disbursement and existing
advances once in a year. In case the branch is not under concurrent
40
audit,short inspection by Inspector of branches for new and take over

accounts
¾ What is the limit for conducting unit inspection by officials from

Zonal Office
o Rs 5 cr and above
¾ Who should inspect the units with Working Capital Limits of above
Rs.5 Crore from Zonal Office?
Technical Officer/Senior Manager (Credit)/Chief Manager (Credit)
in Z O. or CM/SM heading branches one in a year.
¾ Accounts for which conducting “Short Inspection” is applicable:
Advances(fund plus Non fund based) of aboveRs.3Crore
¾ Periodicity for conducting “Short Inspections”.

In case of Fresh Advances : Within 3 months from the date of first
disbursement.
In case of existing Advances: Once in a year preferably six
months after the regular inspection of the branch.
¾ Minimum Cash Credit limit for conducting “Stock & Receivable
Audit”.
Aggregate credit limit of Rs.2.00 Crore.
¾ Who will conduct “Stock & Receivable Audit”?

A firm of practicing Chartered / Cost Accountants.
¾ Accounts for which conducting “Stock & Receivable Audit” is

Applicable.
C – Rated Accounts Rs.2 Crore & above(Of which FB limits

are >50%)
B – Rated Accounts Rs.3 Crore & above(Of which FB limits
are >50%)
A & above Rated Rs.5 Crore & above(Of which FB limits
Accounts are >50%)
NPA Accounts With real balances of Rs.5 Crore &
above
New/Take-over Where Working Capital Limits enjoyed
accounts which are are Rs.2 Crore & above irrespective of
less than 3 years old. Credit Rating.
To all accounts W.C.Limits of Rs.10 crore & above
(fund based and non fund) irrespective
of rating.)
( Please see the corresponding mapping for rating under CRRM for
Cir 463 ref 26/83 dt 31.3.2009)
¾ Periodicity of “Stock & Receivable Audit”.
Once in a year
¾ Who will review the Stock & Receivable Audit Reports?
41
Zonal Office has to review the Stock and Receivable Audit

Reports.
¾ When is pre-sanction Unit Inspection report to be submitted ?
Before sanction of Fresh / Renewal / Enhancement of the limits
¾ Within how many days should the 1st inspection of the Unit be
done in case of new accounts and by whom?
Preferably by Branch Manager himself within in one month of
disbursement of loan
¾ Exemption from Stock & receivable audit

• Export credit to Diamond industry
• Public sector Undertaking
• State Electricity boards
• FSCS
• Educational Institutions
• Short term loans & working capital limits to commercial real estate up
to Rs 5 cr
¾ What is MCMR
• Monthly Credit Monitoring Report for
9 All accounts with aggregate limits of above Rs 50L
9 Two sepearte consolidated statements,one for accounts with
aggregate limits up to Rs 10L and second for limits above Rs10 L
up to Rs50 L
¾ Who are the monitoring authorities for taking necessary steps by
giving direction to branches
S No: Range of the Borrowal Accounts Monitoring Authority

1 Accounts with aggregate credit limits up Branch Manager
to Rs10L
2 Accounts with aggregate credit limits of Zonal Office
above Rs10L and up to Rs 3 cr
3 Accounts with aggregate credit limits of Head Office
above Rs 3 cr
CREDIT RATING:
¾ Various Credit Rating methods available.
i. Credit Rating for Small Loans of above Rs.2 Lakh and below Rs.5
Lakh – Fund and Non-Funded (SSI, RT, BE, PSE, RTO)
ii. Credit Rating System (CRS) for Fund Based Limits of Rs.5 Lakh &
above but less than Rs.50 Lakh
iii. Credit Risk Assessment System (CRAS) for both Fund Based and
Non-Fund based Limits of Rs.50 Lakh & above up to Rs 5 crores
iv. Credit Rating Model for New units without Audited Balance Sheet
for Limits of Rs.5 Lakh & above but less than Rs.50 Lakh.
v. Credit Rating Model for New units without Audited Balance Sheet
for Limits of Rs.50 Lakh & above up to Rs 5 cr
vi. Credit Risk rating Model for credit limits of above Rs 5 cr(fund &
non fund based)CRRM model is applicable.
¾ Applicable limits for arriving at Risk Rating in case of Stand alone
Term Loans.
Rs.5 Lakh & above.
42
¾ For stand alone Term Loans of Rs.5 Lakh & above , how is the Risk
Rating to be done?
As per CRS/CRAS/CRRM (as applicable ) at the time of half yearly /
annual review basing on latest Audited Balance Sheet and pricing shall be
reset as per the credit rating so arrived at by the sanctioning authority.
¾ Is CRS/CRAS applicable for the borrowal accounts of

“Professionals”?
No. CRS/CRAS is applicable for the borrowal accounts with both
working capital and term loan limits under the INDUSTRY / BUSINESS
/TRADE / AGRICULTURE SEGMENTS
¾ How is the Interest rate fixed for advances of above Rs.10 Lakh?
Interest Rate as per Credit Rating finalised by the sanctioning
authority is applicable for advances of above Rs.10 Lakh.
¾ When both Working Capital Limits and Term Loan facilities co-
exist, how will the interest spread on Term Loans be arrived at,
while renewing the working capital limits?
The interest spread as applicable to working capital limits at the
time of Renewal shall be applicable to term loans also.
¾ Is CRS/CRAS/CRRM exercise required to be done in respect of
export/import credit proposals?
Yes. CRS/CRAS/CRRM exercise should be done in respect of export /
import credit proposals.
¾ How shall interest rate be fixed in respect of export / import
credit proposals?
Interest rate shall be fixed as stipulated by RBI / Bank from time to time
but not as per CRS/CRAS/CRRM rating.
¾ Is Credit Rating as per CRS / CRAS/CRRM to be done for non-fund
based limits?
Yes.
¾ Rating system applicable for arriving at rating and charging
interest for RICE MILL ACCOUNTS WITH LIMITS OF ABOVE Rs.10
Lakh?
CRS is applicable for Rice Mill accounts with limits of above Rs.10
Lakh irrespective of any upper limit.
¾ For agriculture segment, applicable limits for credit rating to

various types of borrowers:
Firms and Corporate Borrowers Above Rs.5 Lakh

Individual and Non-corporate Rs.25 Lakh &
borrowers above
¾ Categories of agricultural loans exempted from charging of

interest based on Credit Rating?
a. Loans under DWCRA / SHGs
b. Loans under IRDP / SGSY / SCAP /STAP
c. Loans routed through FSCS / LAMPS
d. Cold Storages, Rural Godowns Scheme / storages financed under
capital investment subsidy scheme of NABARD.
43
¾ Basis for arriving at the various financial parameters at the time of

renewal / sanction under CRAS / CRS/CRRM?
Audited Balance Sheet of the latest financial year shall be the basis.
¾ In the absence of audited balance sheet of the latest financial

year, how will the credit rating be arrived at?
The least of ratings arrived based on the latest provisional balance sheet
OR last audited balance sheet shall be awarded.
In such cases, the audited balance sheet for the latest financial year is to
be obtained within 6 months to finalise credit rating and re-fix interest
accordingly.
¾ In which case will additional interest be charged for non-
submission of audited balance sheet of the latest financial year?
If the audited balance sheet of the latest financial year is not
submitted within 6 months from the date of closure of financial year for arriving
at credit rating in case of fund – based advances of Rs.1 Crore & above,
additional interest of 1% is to be charged from 1st OCTOBER onwards till
submission of audited balance sheet.
¾ Can branches renew/enhance the existing limits in respect of ‘C’
rated accounts within their discretionary powers?
No. Renewal of ‘C’ rated accounts ( B under CRRM)under the branch/zonal
office powers shall be considered by Zonal Manager & DGM as II level
official at ZO. At HO respective sanctioning authorities can renew the “C”
Rated A/cs.
For Enhancement one level higher to the sanctioning authority upto
GM(Credit). ED/CMD are empowered to sanction enhancements under
their delegated powers the limits. For D rated limits renewal/review
powers are with one level higher to the sanctioning Authority.(Cir.274
ref.26/35 dt.11.11.2008)
¾ Normal validity period of CRAS / CRS:
CRAS / CRS once assigned shall be normally valid for a minimum
period of six months. In the event of slippage based on any control statement,
CRAS / CRS should be reviewed / revised immediately.
¾ Who is empowered to assign A+++ and A++ Grades under Credit

Rating?
An authority not below the rank of General Manager (Credit) at H.O.
¾ What is the effective date for revision of interest rates as per

Credit Rating?
The date of approval of CRAS / CRS by the sanctioning authority is the
effective date for revision of interest rates in normal course.
¾ What is the entry level norms for taking up exposure under CRS /
CRAS and rating system for small loans?
• Minimum overall score of above 40%* for CRS & Small loans
• A minimum score of above 40%* against the score allotted to each
parameter of Industry; Management, operational& Financial
Risks(CRAS).
(* proposal for builders/property developers minimum A rating
required)
44
¾ Is there any Credit Rating for PBC advances

“Credit Scoring System for Personal Banking schemes “ is adopted for
PBC
¾ What is the entry level score required
40% minimum for customer of our Bank /40% of applicable score for non
customers
¾ What are the scores under rating PBC advances?
% of Marks obtained Rating grade Remarks

60% and above A Excellent
50% to less than B Good
60%
40% to less than 50% C Satisfactory
Less than 40% D Poor . Not eligible for
loan
¾ What are the schemes for which Credit Scoring for Personal
banking Schemes not applicable
Clean Loans to Pensioners, Non Agl Gold Loans, Loans against NSC’s,
KVP’s, Life Insurance policies, and Education Loans.
WORKING CAPITAL TERM LOANS FOR TRADERS & SMALL UNITS:

¾ Maximum limit up to which Working Capital Term Loans can be
sanctioned to Traders and Small Units.
• Maximum Limit of Rs.10 Lakh.
¾ Permissible repayment period of Working Capital Term Loan to
Traders and Small Units.
• 60 equal monthly instalments.
¾ Periodicity for obtaining Stock-Statements in case of WCTL to
Traders and Small Units.
• Once in quarter.
¾ Margin on Primary Security in case of WCTL to Traders and Small
Units.
• Upto Rs.5 lakhs-10% & Beyond Rs.5 lakhs-25%
¾ Stipulated periodicity of Unit Inspection in case of WCTL to
Traders and Small Units. Once in a Quarter
¾ Minimum value of Collateral Security for WCTL to Traders and

Small Units.
125% of the value of Limit if it is immovable property & 100% for liquid
security(NSC?KVP?LIC policy etc).
FINANCING OF POULTRY UNITS ( Cir no 412 Ref 26/55 Dt. 12.02.2007)
¾ New Borrower intending to establish a poultry unit having satisfactory net

worth shall be considered for finance.
¾ Established units owning sheds, cages and poultry equipment, which
approach the bank for short-term finance, can be considered now.
45
¾ Collateral norms for existing a/cs with minimum 3 years satisfactory track
record continues to be 100% and for new farmers/units the collateral
norm is 150% of the loan amount.
LIQUID GOLD SCHEME (Cir 311 ref 26/61 dt 30.11.10)

¾ “Liquid Gold” Scheme:
o Secured Over Draft against Gold Jewellery is called as “Liquid Gold”
Scheme.
¾ To whom can SOD against gold ornaments be allowed.
Individual/Firms who are small players in industry, service or business
sectors (Pawn brokers not eligible).
¾ Validity period of SOD limit against Gold Ornaments.
o Two Years from date of sanction.
¾ Commitment charges in Liquid Gold Scheme.

o Commitment charge @ 2% p.a (0.5% p quarter)on the utilized
portion if the limits are not utilized atleast 75% of limit per quarter
¾ Minimum and maximum limits under “Liquid Gold Scheme.
o Minimum Limit : Rs.2.00 lakh
o Maximum Limit : Rs.10.00 Lakh.
LEGAL AUDIT:
¾ Objective of “Legal Audit”:
o To verify whether the branch has obtained all documents to secure
the repayment in compliance with all terms and conditions of the
sanction in the form and manner required in terms of
documentation procedure.
¾ Cut off limit for Legal Audit:
o All new/ renewal borrowal accounts with aggregate credit limits of
Rs.25.00 lakh and above.
¾ Who has to conduct the legal audit ?
o From limits of Rs.25 lakhs to Rs.100 lakhs empanelled Advocate
who has not given legal opinion or Law Officer at Zonal Office .For
limits above Rs.100 lakhs law officer at ZO has to conduct the legal
audit ( He has to subsequently scrutinize the documents if Advocate
conducts legal audit in his absence)
¾ When Legal Audit to be completed in case of credit limits of Rs.25
Lakh & above?
o Legal Audit is to be completed before release of loan amount.
¾ Cut off limit under Legal Audit for obtaining prior permission
from Zonal Office for release of limits?
o After the completion of Legal Audit, permission from Zonal Office is
required, in respect of the borrowal accounts with aggregate credit
limits of Rs.50 lakhs& above (fund based & non fund based inland
and foreign business limits) for release of sanctioned limits.
LOAN DELIVERY SYSTEM:

¾ Applicable credit limit for implementation of loan delivery system.
Borrowal accounts with fund based working capital credit limits
of Rs.10 Crore and above from the banking system.
46
¾ Disbursement guidelines for implementation of loan delivery

system.
The total disbursement for WCDL and Cash Credit should not
exceed 80% and 20% of the sanctioned limits.
However funds can be released either as Cash Credit or as Demand Loan
basing on the request of the borrower.
TAKE OVER OF ACCOUNTS:

¾ Norms for take over of accounts from Banks or Financial
Institutions.
o The account should be a Standard Asset with Positive Net Worth &
profit record.
o Rating as per CRS/CRAS/CRRM should be worked out basing on all
the relevant parameters excluding operational parameters.
o The account copy of the borrowal account with other bank should
be obtained for preceding 6 months and perused.
o Sanction letter copy of the Other Bank/Financial Institution to be
obtained
o Satisfactory P & C report from the existing bank to be obtained
before disbursement
o The party shall secure A & above rating under CRAS and B++
under CRRM (minimum of B rating in CRAS & B++ under CRRM in
trade advances).
o The Powers to permit to take over of A/cs – Rs.10 cr- DGM as Zonal
Manager and Rs.25 cr for GM as Zonal Manager & Rs 2 cr for AGM
as ZM.
o Borrower has to inform in writing to the existing banker about his
intention to shift to our Bank under copy to us.
o Enhancement may be considered within the delegated powers.
( for waiver of P & C, powers delegated etc as per Cir 271 ref
26/54 dt 20.11.09)
CORPORATE LOANS
¾ Maximum repayment period for a Corporate Loan.

60 Months.
¾ Purposes for which Corporate Loans are normally sanctioned.

o To meet margin requirement for Working Capital ; Margin for Long
Term Project Finance.
o To meet the financial commitment of the Corporate.
o For any other purpose related to the financial needs.
¾ Purpose for which we can not sanction a Corporate Loan?

o To meet the financial commitments of sister concerns.
OTHER MISCELLANEOUS :
¾ Sensitivity Analysis is made mandatory in respect of all Term
Loans of
_Rs. 50 Lakhs & Above.
47
¾ To what extent can sanctioning authority allow credit limit

beyond the eligible amount as per scale of finance in case of
PAGCC
10% increase over the eligible amount calculated as per Scale of

o
Finance.
¾ What are the limits prescribed for Half yearly review of large
borrowal accounts?
o Advances with aggregate credit facilities (both Fund & Non-fund put
together) of Rs.1 Crore & above.
¾ To which type of credit facilities is “Restructuring of accounts”

applicable?
o To all type of credit facilities including working capital limits
extended to Industrial Units, provided they are fully covered by
Tangible Securities.
¾ What are the stages at which the restructuring / rescheduling /

renegotiation of agreed terms could take place?
o Before commencement of Commercial Production.
o After commencement of Commercial Production but before the
asset has been classified as Sub-standard.
o After commencement of Commercial Production and after the asset
has been classified as Sub-standard.
¾ What is the frequency of valuation of properties by approved

valuers for fund & non funded working capital limits?
¾
o 2 years
¾ What is the frequency of valuation of properties by approved

valuers for Term Loan & Deferred Payment Guarantees?
¾
o Before disbursement only
¾ What is the frequency of valuation for Non-Performing & suit filed

accounts?
Once in 2 years
¾ What are the properties to be valued by Manager / RDO ?

o Agricultural lands below Rs.5.00 lacs – Branch Manager
o Above Rs.5.00 lacs – RDO and countersigned by Manager
o Vacant sites upto Rs.25,000 – Manager
¾ Can banks issue Guarantees & Co-acceptances favouring financial

institutions, other Banks and other lending agencies for the loans
sanctioned by them?
o Yes, subject to RBI/FEMA guidelines
¾ Can credit facilities be extended against the guarantees issued by

other Banks ?
48
o Yes
¾ What is the applicable interest spread on Term Loan where both
Working Capital limit and Term Loan facilities co-exist?
The spread as applicable to Working Capital limits shall be the
spread on Term Loan.
¾ What is the condition / stipulation for the disbursement of Term

Loan by way of reimbursement for the assets already created by
the borrower?
It shall be permitted by the sanctioning authority, provided
i. Such reimbursement is within 12 months from the date of
purchase / acquisition of the assets.
ii. It should be supported by satisfactory proof of investment /
source of funds supported by Invoice/receipt/voucher followed
by auditor’s certificate.
iii. Such funds should have been remitted through a bank
account.
¾ Can we finance for second hand vehicle under RTO Loans?

No
¾ Guidelines regarding advance collection of Processing Charges /
Upfront Fee for new accounts involving fund/non fund based
credit limits of more than Rs.2 Lakh?
25% of upfront fee/proc.charges to be collected in advance.
If the application is declined no further amount needs to be collected .
If sanctioned the remaining amount is to be collected at the time of delivering
the sanction letter.
¾ Whenever L.C and Term Loan for equipment / machinery is

sanctioned, how is processing fee / up front fee to be collected?
Processing Charges as applicable to L.C or Up front Fee applicable for
Term Loan whichever is higher shall be collected.
¾ Premium / charges to be collected for premature closure of all

Term Loans
2 % flat on the prepaid amount i.e., amount paid ahead of
repayment schedule as on the date of closure of Term Loan, where the
repayment period is fixed beyond 36 months. This is exempted for Education
loan, AB Saral Housing loans, Govt. sponsored schemes, weaker section
advances & repayment due to death of the borrower and HL repaid from own
sources.
¾ Penal interest on over due limits.
First 3 months from the due date Penal interest of

of the credit facility 1%
Beyond 3 months from the due date Penal interest of
of the credit facility till submission of 2%
renewal application with full
information
49
ADHOC LIMITS:
1. Whether Branch Managers of Scales I, II and III have powers to
allow Adhoc Limits for the sanctions made by higher authorities?
They have no powers to allow Adhoc limits for the sanctions made by
higher authorities except in case of ‘A’ & above rated Micro, Small
Enterprises borrowers.
2. What are the discretionary powers for allowing Adhoc facility by field level
functionaries?
Up to 20% of the Working Capital facility sanctioned with in the delegated
powers up to & inclusive of Zonal Managers.
3. What is the maximum period for which Adhoc limit can be

sanctioned?
For a period not exceeding 3 months.
4. How many times Adhoc limit shall be sanctioned for a Working

Capital Limit?
Not more than 3 times during the validity period of the Working Capital
Limit.
5. When an Adhoc limit will be treated as NPA?

If the Adhoc limit is not adjusted / not renewed within 180 days from
the date of sanction of Adhoc limit.
6. How the Adhoc limit shall be regularized?

The Adhoc limit shall be regularized on or before due date either by
adjustment or by considering the need based regular limits where the
Adhoc limit is also reckoned.
7. Whether the concept of Adhoc Limit is applicable for Non-funded

limits?
No
8. In which statement the details of Adhoc limits allowed within the
discretionary powers are to be reported?
To be reported in ADA - IX along with monthly sanctions.
EXCESS DRAWALS:
1. What are the discretionary powers of Branch Managers for allowing

Excess Drawals in the sanctions made by higher authorities including
MC?
Up to 20% of the Working Capital facility subject to the following ceilings.
Secured Unsecured
Scale I Rs.1.00 Rs.0.10
Manager Lakh Lakh
Scale II Rs.2.00 Rs.0.20
Manager Lakh Lakh
Sclae III Rs.3.00 Rs.0.30
Manager Lakh Lakh
2. What are the discretionary powers for allowing Excess Drawals by field level
functionaries?
50
Up to 20% of the Working Capital limit sanctioned with in the delegated

powers up to & inclusive of Zonal Managers.
3. What is the maximum period for which Excess Drawals can be

sanctioned?
For a period not exceeding 15 days.
4. How many times Excess Drawals shall be allowed in a Working

Capital account?
Not more than 6 times during the validity period of the working capital
limit.
5. What is the procedure to be followed before allowing Excess Drawals?
Branch should obtain a letter from the constituent requesting for the
Excess Drawal facility specifying the amount ; purpose and the time limit.
6. Whether Adhoc limit / Excess Drawals can be allowed for SOD limit
against Real Estates?
ADHOC Not permitted. Excess Drawls can be allowed (Cir.No.215
Ref.No.26/24 dated 08.10.2008.)
7. What are the general conditions to be satisfied for allowing Adhoc
Limits / Excess Drawals?
i. The account is standard and performing
ii. The conduct of the account is satisfactory
iii. These facilities shall be given to borrowers who are already
enjoying regular sanctioned limits.
iv. There shall not be any irregularity or over dues in any of the credit
facilities of the borrower.
v. The sanction should be current and not overdue.
vi. The due date of adhoc / excess drawal should not be after the due
date of the regular limits.
vii. Both adhoc and excess drawals should not be allowed
simultaneously.
viii. If excess drawals are allowed beyond discretionary powers of BM,
duly filled in Compliance Certificate should be kept on record.
8. How much additional interest is to be charged when Adhoc limit /

Excess Drawals are allowed?
2 % additional interest.
9. Whether excess drawals shall be allowed for Cash Payments?

Normally excess drawals should not be allowed for cash payments. If they
are allowed to meet some urgent cash payments such as payment of wages or
urgent cash purchases, proper justification for such cash drawals should be
kept on record..
10. In which statement the details of Excess Drawls allowed within

the discretionary powers are to be reported?
To be reported in ADA - X along with monthly sanctions.
TEMPORARY OVER DRAFTS:
51
1.What a Temporary Over Draft?

A TOD is a facility by which a constituent is permitted to draw money from
his Current Account in excess of his credit balance.
2.Whether Temporary Over Drafts can be allowed in Savings Bank

Accounts?
Yes It can allowed in SB accounts with satisfactory transactions up to Rs.
1000/- per account subject to a total amount of Rs.10,000/-TODs allowed at the
Branch as part of specially launched schemes.
3. Whether Temporary Over Drafts can be allowed in accounts of our
staff members?
No. TODs should not be allowed in accounts of our staff members.
4. What is the important guideline for allowing TOD?

1 The Current Account holder should have undoubted reputation and
integrity.
2 Satisfactory transactions in the account for a minimum period of
six months.
5. What is the procedure to be followed before allowing TOD?
Branch should obtain a letter from the constituent requesting for the TOD
facility specifying the amount ; purpose and the period for which the
facility is required.
6. When the Compliance certificate is to be prepared while allowing

TOD?
When the TOD is allowed beyond discretionary powers, the compliance is
to be prepared and a copy of it should be enclosed to the letter seeking
confirmation.
7. How many times a TOD can be allowed in an account?

TOD facility can not be extended beyond six times in a year in an
account.
8. In which statement details of TODs are be reported?

In ADA – XI every month.
9. What are the discretionary powers of Branch Managers for allowing

TODs?
Scale I Rs. 5000

Manager
Scale II Rs.10000
Manager
Scale III Rs.25000
Manager
----------------------------------------------------------------------------------------------------------------
VKV/01/2011
52
KISAN CHAKRA
With a view to provide mobility without wasting much time of the farmers
waiting for the Govt./ Pvt., transport facility and also to facilitate them to
transport the agricultural inputs and farm products from/to the market, our bank
has launched an innovative scheme called “KISAN CHAKRA” i.e., Loans to
the farmers for purchase of ‘2 -wheelers’ or ‘ 4 wheelers’.
Eligibility
Farmers who are owner cultivators having minimum 2 acres of double cropped
area or 5 acres of single cropped area. Women borrowers also can be
considered. Persons not more than 55 years age having valid driving license
only are to be considered. When the head of the family who is the land owner,
is aged more than 55 years, these loans can be considered to his son/daughter
holding valid driving license upon the guarantee/co obligation of the land owner.
In case the land is in the name of the wife and /or husband, loans can be given
to either of them having valid driving license provided the other joins as co-
obligant / guarantor.
Amount of finance:
a. 2-wheelers : 85% (in case of Small and Marginal Farmers) / 75% (in
case of other farmers) on the cost of the vehicle + Road tax +
Insurance etc., subject to maximum of Rs.40000.
b. 4-wheelers: 75% of cost of the new vehicle including road tax,
insurance etc.,
subject to maximum of Rs.3,00,000/-
ROI: . BMPLR+ 0.50%+0.25
Margin: 25% of cost + Road Tax + insurance.

15% for the eligible SF/MFs
Security:
Considering overall limits of agricultural credit sanctioned to the farmer.
1) Up to Rs.50,000/- : Hypothecation of Crops / Assets to be financed
2) Above Rs.50,000 – Rs.1,00,000/- : In addition to hypothecation of crops /
Assets, co obligation/ third party guarantee is to be obtained.
3) Above Rs.100,000/ or aggregate commitment per borrower exceeding
Rs.100000/-: Collateral security in the form of mortgage of land/charge
creation under state laws in addition to 2 above
Powers: Delegated under agricultural advances
Classification of advances: To be classified under Investment credit under the

category of agricultural implements and machinery.
Repayment: 10 half yearly / 5 yearly instalments linked to harvesting season
पदोन्नित परीक्षा अूैल 2011 के िलए अध्ययन साममी 53

QUESTIONS
1. The purpose of Kisan Chakra scheme is:
a. To finance for vehicle to big farmers

b. To provide vehicle finance to farmers to facilitate transport to markets
c. To provide bullock carts to farmers
d. None of the above.
2. What is the eligibility criteria for Kisan chakra scheme ?
a. Owner cultivators having 2 acres double cropped or 5 acres single cropped land
b. Farmers having agriculture land , tenant farmers, share croppers.
c. Only to big land lords
3. What is the age criteria for Kisan Chakra ?
a. Borrower’s age should not be more than 55 years.

b. If the farmer is more than 55 years, his son/daughter with valid license can be considered.
c. In case of (b) above, the farmer should stand as coobligant.
d. All the above.
4.What is the maximum loan under Kisan chakra for two wheeler ?
a. 85% of the road price for small and marginal farmers

b. 75% of the road price for other farmers
c. Maximum loan amount Rs.40000/-
d. All the above.
5. What is the maximum loan under Kisan chakra for four wheelers ?
a. 85% of the road price for small and marginal farmers

b. 75% of the road price for others
c. 75% of the road price with a maximum of Rs.3 lakhs for all farmers
6.How Kisan chakra is classified in priority sector ?
a. Conventional advances
b. Indirect finance agriculture
c. Direct finance agriculture
KEY
1 B 2 A 3 D 4 D 5 A 6 C

KISAN VIVEK
(Scheme for financing setting up of Agriclinics and Agri Busines centres
by Agriculture graduates in subjects allied to Agriculture)
The scheme aims at supplementing the existing extension net work to accelerate the
process of technology transfer to agriculture onto the field and providing supplementary
sources of input supply and services to it.
Objectives:
To supplement the efforts of Government extension system.
To make available supplementary sources of input supply and services to needy farmers.
To provide gainful employment to agriculture graduates in new emerging areas in
agricultural sector.
Concept/Definition:
Agriclinics: Agriclinics are envisaged to provide expert advise and services to farmers on
cropping practices, technology dissemination, crop protection from pests & diseases, market
trends and prices of various crops in the markets and also clinical services for animal health
etc. which would enhance productivity of crops / animals.
Agribusiness Centers: Agribusiness centers are envisaged to provide input supply, farm
equipment on hire and other services.
In order to enhance viability of the ventures, Agriculture Graduates may also take up in
agriculture and allied areas along with the Agri clinics /Agribusiness centre.
Eligibility :
The scheme is open to Agriculture Graduates / Graduates in subjects allied to agriculture like
horticulture, animal husbandry, forestry, dairy, veterinary, poultry farming, pisiculture and
other allied activities.
Project cost & Coverage:

The project may be taken up by Agril., Graduates either individually or on joint/group basis.
The outer ceiling for the cost of project by individual would be Rs.10 lakhs and for the project
by group would be Rs.50 lakhs. Group may normally be of 5, of which one could be
management graduate with qualification or experience in business development
and management.
Margin Money(Down payment):

No Margin Margin for thelimits upto Rs.5 lacs ( Cir. 109/19/4 dt. 15.06.04). For the limits
above Rs. 5 lacs as per the bank’s usual norms. Shortfall in margin by the beneficiary could
be supported out of the “soft loan margin assistance fund” of NABARD upto 50% of the
prescribed margin without interest. Banks can charge service charge @ 3% p.a.
Security:
Collateral security up to Rs5 lacs waived. Primary security – Hypothecation of assets created
Selection of borrowers:
The selection of borrowers and location of the projects may be done by the banks in
consultation with Agril., Universities/ Krushi Vikas Kendras etc., in their area of operations, if
necessary.

6Project activities:
♦ Soil and water quality cum inputs testing laboratories .

♦ Pest surveillance, diagnostic and control services.
♦ Maintenance, repairs and custom hiring of agril., implements and machinery including
micro irrigation systems.
♦ Agri service centers including the three activities mentioned above (group activity) .
♦ Seed processing units.
♦ Micro-Propagation through plant tissue culture labs and hardening units.
♦ Setting up of Vermiculture units, production of bio-pesticides, biocontrol agents.
♦ Setting up of apiaries(bee keeping) and honey & bee products’ processing units.
♦ Provision of extension consultancy services.
♦ Facilitation and agency of agri., insurance services.
♦ Hatcheries and production of fish fingerlings for acquaculture.
♦ Provision of livestock health cover, setting up veterinary dispensaries & services including
frozen semen banks and liquid nitrogen supply.
♦ Setting up of information technology kiosks in rural areas for access to various agriculture
related portal.
♦ Feed processing and testing units.
♦ Value addition centers.
♦ Setting up of cool chain from the farm level onwards (group activity)
♦ Post harvest management center for sorting, grading standardisation, storage and
packaging.
♦ Setting up of metallic/nonmetallic storage structures(group activity).
♦ Retail marketing outlets for processed agri-products.
♦ Rural marketing dealerships of a farm inputs and outputs.
Any combination of two or more of the above viable activities along with any other
economically viable activity selected by the graduates, which is acceptable to the bank.
Repayment:
Between 5 to 10 years depending on the activity. It includes holiday period not exceeding 2
years.
Refinance by NABARD:
Quantum of Refinance:100% extended under ARF. The outer limit of the project cost would
be Rs.25 lakhs subject to ceiling of Rs.15 lacs towards refinance availment. Projects with
outlay above Rs.25 lacs may be submitted to NABARD for prior sanction. Margin money
assistance from “ Soft Loan Assistance Fund ” on recommendations of the bank.
Reporting:
To be classified under indirect Finance to agriculture.
-----------------------------------------------------------------------------------------------

QUESTIONS
1. Kisan vivek scheme is applicable to ____
a. Farmers
b. Agriculture graduates
c. Those who qualify in courses like horticulture etc.,
d. Both b & c
2. One of the activities of Kisan vivek – Agri clinic is not correct :
a. Soil and water testing laboratory

b. Agency of agricultural insurance services
c. Trading in agriculture related products
3. What is the maximum project cost for Kisan vivek – Individual ?
a. Rs.5 lakhs b. Rs. 10 lakhs c. Rs.25 lakhs d.Rs.50 lakhs.
4.What is the maximum project cost of Kisan Vivek – Group ?
a. Rs.5 lakhs b.Rs.10 lakhs c.Rs.25 lakhs d.Rs.50 lakhs.
5. What is the margin requirement for Kisan Vivek upto Rs.5 lakhs ?
a. 5 % b.10 % c.15% d. Margin not required.
6.NABARD will provide a soft loan for margin for Kisan vivek upto ______
a. Up to 25 % without interest
b. Up to 50% with interest
c. Up to 75% without interest
d. Up to 50 % without interest.
7. Collateral security is not required under Kisan Vivek upto limit of _____
a. Rs.2 lakhs b. Rs5 lakhs c. Rs.4 lakhs d. For any amount.
KEY
1D 2D 3 B 4 D 5 D 6 D 7B
KISAN BANDHU (TRACTOR FINANCE)
Objectives
________________________________________________________________________
To finance for tractors to improve farm mechanization.
Eligibility
_________________________________________________________________
Farmers having 3 acres of double cropped (owned) or 6 acres of single cropped land
(owned)
Quantum of finance
________________________________________________________________________
Up to unit cost of the tractor. Besides Tractor, minimum 3 implements including Trailor
should be considered as Unit Cost.
Margin
________________________________________________________________________
15% of the unit cost
Repayment
________________________________________________________________________
9 yearly or 18 half yearly installments linked to harvesting season.
Collateral Security
________________________________________________________________________
• Up to Rs.3,50,000/- , no collateral security.

• Above Rs.3,50,000/-: Collateral security in the form of mortgage of land/charge
creation under state laws
Rate of interest
________________________________________________________________________
Base Rate + Spread + TP i.e., 9.00 + 3.75 + 0.25 = 13.00% p.a.

KISAN PRAGATHI
To meet various need based miscellaneous expenditure connected to farming & allied activities, a new scheme
"AB KISAN PRAGATHI" has been introduced.
The scheme aims at providing hassle free credit to the farmer in the areas where it is difficult to assess the small credit
requirement in strict banking terms towards cost incurred like
• Land leveling, bunding, contour formation, land reclamation etc.,

• To purchase miscellaneous agricultural implements like sickles, harrows, Cultivators, seed drills etc.
• To purchase plant protection equipment like sprayers, dusters and power Sprayers etc.
• To carry out the repairs for the existing agricultural implements and plant Protection equipment
• To grow live hedge, trees like coconut, teak, vegetable cultivation on bunds etc.
• To carryout small repairs to the existing minor irrigation structures like wells, tube wells, electric motors and
pump sets, oil engines, replacement of pipelines, etc.
• To meet the working capital requirements of existing livestock like dairy, sheep, goat, backyard poultry etc.
The details of the new scheme are as under:
Name of the Scheme :
AB KISAN PRAGATHI ( Finance to meet the miscellaneous expenditure incurred by the farmer towards agricultural
Eligibility
All existing and new farmers who are owner cultivators and availed crop loan facility with the branch.
Credit limit:
up to a maximum credit limit of Rs.10, 000/- (or) to the extent of crop loan limit availed by him, which ever is low
borrower who is owner cultivator. The finance can be extended on the basis of self declaration that the farmer requi
amount to carry out the certain miscellaneous activities mentioned above during the current crop season.
Facility :
Agricultural Term loan
Margin:

15% of the proposed requirement towards the miscellaneous activities mentioned in the self declaration
Rate of interest:
Base Rate + 2.50 + 0.25 =9.00 + 2.75 + 0.25 = 12.00 % p.a.
Repayment schedule:
Repayable in 5 annual installments commensurate with the due date of the crop loan.
Security :
As per existing guidelines of the Bank for agricultural advances
Compounding of interest:
If a particular installment is not paid on due date, compounding of Interest is to be done on that particu
Upfront fee:
1% of the term loan limit.
Insurance:
No specific insurance is to be covered .However; all eligible crops are to be covered under crop insuran

KISAN SAMPATHI
(AGRICULTURAL PRODUCE (MARKETING ) LOANS SCHEME)
The farmers in general, have to dispose off their agricultural produce soon after
harvest season when the prices tend to be low, to meet their consumption needs
and thus they are unable to take advantage of the higher prices at a later date.
The middlemen who purchase the produce take the advantage of price
difference.
1.Crops to be covered:
A) Paddy, Wheat B) Maize, Millets(Jowar, Ragi, Bajra) C)Groundnut,
Mustard
C) Tur (Red gram), Bengal Gram, Black gram, Green gram D) Yam
E) Turmeric F) Dry Chillies G) Jaggery
2.Eligibility for Loan:

Loans can be sanctioned to all farmers. Both Loanee and non loanee farmers
can be financed.
3.Loan Amount:
75% of the value of the produce (charged) at Government announced
procurement prices, subject to a maximum of Rs10.00 lakh.
4.Repayment Period:
It shall be repaid within a maximum period of 12 months from the date of
disbursement.
5.Rate of Interest: Changed WEF 27.10.2010
Up to Rs.2.00 lakhs 9.50

Above Rs.2.00 lakhs & upto Rs.10.00 11.00
lakhs
6.Security :
By pledge of ware Up to Rs.10 Lakh By Personal guarantee

house receipts of of two persons.
Central ware
housing
Corporation /
State ware
housing
corporation / FCI
Against the Up to Rs.2 Lakh By personal guarantee
Hypothecation of
the produce Above Rs.2 Lakh Collateral security by
stored with the way of mortgage of
cultivator immovable property
with value not less than
150% of the bank loan.

7.Operational Details:
The relative crop production loan should be adjusted out of this loan. Pending
adjustment of this liability, disbursements for the next season should be
continued.
The borrowers should file Quarterly stock statements. The branch should arrange
for periodical inspection of the produce pledged.
8.Classification:
These loans are to be reckoned as other short term loans under direct
finance,
----------------------------------------------------------------------------------
QUESTIONS
1. To whom we can sanction kisan sampathi loans ?
a. Only to loanee farmers

b. To loanee and non loanee farmers
c. Loan to suppliers of implements to farmers
d. Deposit loans to farmers.
2.What is the quantum of loan that can be sanctioned under Kisan

Sampathi scheme ?
a. 50% of the value of land + 75% of liquid assets

b. 75% of the value of the produce as per government procurement
prices subject to maximum Rs.10 lakhs.
c. As applicable to Pattabhi agri card
d. Non of the above.
3. What is the repayment period for Kisan Sampathi loan ?
a. 24 months b. 12 months c. 36 months d. 15 months.
4. What is the primary security for Kisan Sampathi loan ?
a. Pledge of warehouse receipt

b. Hypothecation of agriculture produce stored with farmer
c. both a & b
d. None.
5. What is the collateral security for Kisan Sampathi loan ?
a. Collateral security not required.

b. Collateral not required if produce is stored in a government ware house
c. Collateral not required for loans up to Rs.2 lakhs
d. both b & c

6.How can we disburse the Kisan sampathi loan ?
a. By way of a crossed demand draft in favour of suppliers

b. By cash
c. By crediting to crop production loan
d. At the discretion of the branch.
7. How do you classify Kisan Sampathi loan in priority sector ?
a. Indirect finance agriculture

b. Direct finance agriculture
c. Short term agriculture loan
d. Bridge loan.
8. What is the purpose of Kisan Sampathi Loan ?
a. To make more finance available to farmer

b. To store the food grains for future
c. To enable the farmer to wait for favorable market conditions
d. To increase priority sector lending.
KEY
1.b 2. b 3.b 4. c 5.d 6.c 7.b 8. c

KISAN SAMRAKSHA
(Scheme for financing Rural Godowns (Grameena Bhandaran))
Many farmers are not in possession of sufficient storage space either on their
farm or at homes. There might not be availability of go-downs of state/central
warehousing corporations. Though they are there, availability of space might
be a constraint.
Due to lack of storage facility:

♦ Farmers are being forced to sell their bulky produce immediately after
harvesting. Hence they could obviously realize lower prices because of
the fact of Market Glut i.e. arrival of farm produce into the market all at a
time
♦ Farmers are not in a position to avail the facility being extended by banks
on stored argil., produce after harvest (Kisan Sampathi).
And also keeping in view of lifting of quantitative restrictions on imports as per

WTO agreement, GOI in its budget for the year 1999-2000, has announced
Capital Investment Subsidy Scheme meant for godowns of cold storage and
horticulture produce. (Cir.364/19/19 dt. 21.3.2000). It was announced in the
budget 2001-2002 to extend the coverage of the scheme to cover rural go-
downs to enable small farmers to enhance their holding capacity in order to sell
their produce at remunerative prices. New scheme has been approved for
implementation during the years 2007-2012 with modifications for new projects
to be sanctioned with effect from 26.06.2008.
The salient features of the scheme are:
Eligibility: Individuals, farmers, group of farmers / growers,

Proprietary/partnership firms, NGOs, SHGs, Companies, Corporations,
Cooperatives, local bodies.
Capacity : Can be decided by the entrepreneur. But subsidy will be restricted to

capacities ranging from 100 tones to 10000 tones Capacity. Rural godowns of
smaller size upto 50 tones also will also be eligible for subsidy as a special case
based on viability analysis depending on the topography of the area.
Pattern of funding:
Projects located in States/areas Projects located in NE

other than NE states/hilly areas, states/hilly areas ( 1000
and projects not belonging to meters above sea level) &
women farmers/SC/ST projects belonging to
entrepreneurs & their self help Women farmers ( If
groups/ co-op societies partnership/co-ownership,
at least 50% women should
be there)/SC/ST
entrepreneurs & their
SGHs/Co-operatives.(SC/ST
cooperatives should be
certified by concerned

officer of State Govt.

Source of Finance Farmers, Agril. Individuals,
graduates, Co- Companies
ops, State/Central and
Warehousing Corporations
Corporations
Owner's minimum
contribution ( Cost 25% 25% 20%
of land not
exceeding 10% of
project cost can be
part of margin)
Subsidy from the 25% 15% 33.33%
Government
Term Loan from
eligible financing 50% 50% 46.67%
institutions (
Minimum)
Location: The Entrepreneur is free to construct the godown at any place and of
any size as per his commercial judgement, except for the restriction that it
would be outside the limits of the municipal corporation and be of a minimum
capacity of 100 tones and maximum 10000 tones. Rural godowns constructed in
the Food parks promoted by the Ministry of Food Processing industries shall also
be eligible under the scheme for assistance.
Eligible financing Institutions:
Commercial banks, RRBs, State Co-op banks, State Co-operative Agricultural
and Rural Development Banks, Agricultural Development finance companies,
Scheduled urban coop banks, North Eastern development finance corporation
and such other institutions eligible for refinance by NABARD.
Term Loan: As the subsidy is back ended, bank loan plus subsidy amount
should be sanctioned as a term loan.
Time Limit for completion: The project should be completed within 15
months from the date of disbursement of first instalment. However, if reasons
for delay are justified, a further grace period upto 6 months may be allowed by
the bank. If the project is delayed beyond, the benefit of subsidy shall not be
available.
Repayment: Depending on the cash flow, the term loan would carry an
adequate long term repayment period, not less than 5 years including a grace
period of one year. After recovering the loan amount, subsidy will be adjusted
to loan account but not before 5 years from the date of disbursement of first
instalment of term loan.
ROI: BMPLR- spread + TP i.e.: 12.-2.25 + 0.25 = 10. % Upto 10000 MT
Refinance: Available from NABARD.
Security: Primary security of the site and the godown built on it. Collateral
security should be at least 100% of the loan amount. Relaxation is provided to
waive it either partially/fully where tie-up with SWC/CWC is available. Not to
insist on collateral security for construction of rural godowns with a capacity
ranging from 50 to 200 tones.
Insurance: The godown and the stocks therein are to be fully insured covering
all risks.

Cir No>189/19/5 dt.23.9.2008
QUESTIONS
1.Kisan sampathi loan can be given to ____
a. Individuals
b. Corporates
c.Local bodies
d. All the above.
2.What is the minimum and maximum capacity of godown under Kisan sampathi
?
a. 5 tons and 1000 tons

b.50 tons and 10000 tons
c.100 tons to 10000 tons
d. No such stipulation
3. To avail special treatment for subsidy under Kisan Samraksha, a project by

women borrowers should contain minimum _____
a. 75% women
b. 50% women
c. 100% women
d .No such stipulation
4. Under Kisan samrakshna, cost of land can be taken as margin of borrower to

the extent of ____
a. Maximum 15%
b. Maximum 20%
c. Maximum 10%
d. No such stipulation
5. What is the percentage of margin money to be provided by farmers and

agriculture graduates under Kisan samraksha if they do not belong to special
category ?
a. 20% b.25% c.15% d.33.33 %
6. What is the subsidy available to special category borrowers under Kisan

samraksha scheme ?
a. 25% b.50% c.33.33% d.75%
7. Where can the godown be constructed under Kisan sampathi scheme ?

a. Only in rural areas with population below 50000

b. Any place
c. Any place out side the limits of any municipal corporation
d. Only in urban areas
8. What is the time limit for completion of construction of godown under kisan
samraksha scheme ?
a. To be completed within 15 months from the date of first disbursement

b. To be completed within 15 months from the date of first disbursement and
can be extended by another 6 months for genuine reasons
c. It is the discretion of the borrower
d. It is the discretion of the financing bank
9. Collateral security should not be insisted for rural godowns with capacity of
____ to ______ tons.
a. 100, 2 b. 200, 500 c.50, 200 d. Collateral security is must
KEY
1. d 2. c 3.b 4. c 5.b 6. c 7. c 8. b 9. c

ANDHRA BANK PATTABHI AGRI CARD
OBJECTIVE
AB PAC was launched in the year 1998 during the Bank’s platinum jubilee year.
The scheme aims at adequate timely financial support in a flexible and cost
effective manner to their farmers for meeting their crop production needs.
Purpose : Short-term credit for Crop Production.
Operational guidelines
A photo identify card with details such as particulars of Branch, Name and
address of the cardholder, limit, due date will be given to the cardholder along
with passbook.
Credit Limits
The limit will be fixed based on crop production requirement of the card holder
as per scales of fiancé / acreage norms. The limit will be a revolving credit. The
entire crop production requirements of the farmer for the full year i.e., for
Khariff and Rabi seasons will be taken into account while fixing the limit.
A sub limit of 25% of the total limits will be fixed in case of literate borrowers for
using the card to get agricultural inputs directly from the notified suppliers in the
Mandal. The Cardholders can also draw cash up to the sanctioned limit in any of
our branches in the district. There is provision for sanction of 20% over
and above the approved scales of finance to meet the post
harvest/household expenses of the farmers.
Validity
Valid for 3 years subject to annual review. The account should be brought to
Credit / Nil balance once a year on or before 30th June after harvest..
Security
1. Up to Rs.50,000/- : Hypothecation of crops
2. Rs.50,000 – Rs.1,00,000/- : In addition to hypothecation of crops, third party
guarantee / co obligation is to be obtained.
3. Above Rs.1,00,000/-: Collateral security in the form of mortgage of land /
charge creation under state laws in addition to 2 above.
Rate of interest:
UP TO Rs.50000 BR + 1.5 =
10.5
Above Rs.50000 & Up to and inclusive of Rs.2 Lakh BR + 2.75 =
11.75
Above Rs.2 Lakh & Up to and inclusive of Rs.10 Lakh BR + 5 + 14
Above Rs.10 Lakh & Below Rs.25 Lakh(Individual & Other BR + 5 =
Non-Corporates) 14
Above Rs.10 Lakh & up to Rs.100 Lakh ( For Corporate Based on
Borrowers) & Credit rating
Above Rs.25 Lakh & Up to Rs.100 Lakh (Individuals & Non-
corporates)
Above Rs.100 Lakh Based on
Credit rating

*For the current year 2008-09, upto a sanctioned limit of Rs.3.00 Lakh,
the rate of interest is 7% and interest subvention is 2.00%.For 2009-10
there is 1%Addl incentive for prompt repayment & for2010 & 2011 ,
2% addl interest for prompt repayment
Insurance:
Crop insurance for the notified crops in the notified area under NAIS.
Personal Accident Insurance Scheme for the card holder to the extent of
Rs.50,000/-.
Insurance payable is Rs.15/- per year per borrower, out of which Bank will bear
Rs.10/-. Andhra bank Kisan Vikas (ATM) card is linked to PACs with bio-metric
operational facility.In addition to the above, for PAC borrowers not older than 70
years, accident insurance cover of Rs.1 Lakh is also available under our ICD
Scheme with UII Co. Ltd., on optional facility over and above the GOI Scheme.
QUESTIONS
1. Pattabhi Agricard is :
a. Is a crop loan given to farmer

b. A card issued to farmer which enables him to draw cash from ATM
c. A limit sanctioned to farmer for crop production in which a card is issued to
facilitate purchase crop inputs from shops and cash withdrawals from branches
in the district.
2. How is the eligible limit arrived under PAC ?
a. As per Scale of finance of respective crop

b. Scale of finance for Kharif and Rabi
c. Scale of finance for Kharif and Rabi plus 10 % for consumption needs
3. What is the validity period of Pattabhi agri card ?
a. 1 year b. 2 years c. 3 years d. One crop season
4. The due date for payment of dues under Pattabhi agri card is:
a. As applicable to Kharif and Rabhi seasons

b. Every year the account should be brought to nil balance on or before 30th June
c. It depends on the crop
5. Is there any incentive for prompt repayment of dues under pattabhi agri card
?
a. 2% incentive for payment of dues before due date as applicable to crop

b. 2% incentive for payment of dues on or before 30th June
c. 1% % incentive for payment of dues before due date as applicable to crop
d. 1% incentive for payment of dues on or before 30th June.

6. Interest subvention is applicable to crop loans up to rupees ___
a. Rs.1 lakhs b. Rs.3 lakhs c.Rs.2.5 lakhs d. Rs.2 lakhs.
7. What is Kisan Vikas Card ?
a. A credit card issued to farmers

b. An ATM card issued to farmer on PAC to use in ATMs.
c. A debit card
KEY
1 C 2 C 3 c 4 b 5 a 6b
7. B

AB MAHALA JYOTHI SCHEME
The scheme is implemented by Society for elimination of rural poverty (

SERP), Government of India. This scheme envisages to extend finance to
SHGs in community managed sustainable agriculture villages located in
Andhra Pradesh.
OBJECTIVES:
To promote food security, profitable agriculture by assisting Small
and marginal farmers, tenant farmers who are members of SHGs
Debt swapping
To encourage SHG members for community managed sustainable
agriculture
Land development
Diversified income sources like live stock
Important consumption needs.
Eligibility:
1) Only A rated SHGs under Critical rating index which are already
existing.
2) New SHGs after 6 months regular savings.
Purpose:
As per Micro credit plan with following components:
a.Crop production cost and lease amount of agricultural land

b. Term loan for land development
c.Term loan for live stock
d.Debt swapping (Max. 40% of MCP)
e.Consumption needs maximum 10% of investment credit.
Amount of loan:
1. Aggregate limit for 1st and 2nd doses should not exceed Rs.5 lakhs
2.From 3rd dose onwards, limit hould not exceed Rs.10 lakhs.
Repayment: 1st and 2nd doses: Maximum 60 months with gestation of 6

months
3rd dose onwards maximum 96 months with gestation of 6
months.
Security :
Primary: Standing crops and assets created.

Collateral security: Upto Rs.5 lakhs, need not be insisted. Above Rs.5 lakhs, need
not be insisted from SHGs with good track record.
Jsr. Cir No:42/19/1 dt.21.05.2010

Rythu Mitra Groups (RMGs)
With a view to enable the Tenant farmers, Share Croppers and those not having proper
land records to access the bank credit Govt., of Andhra Pradesh and SLBC have
developed a strategy, according to which the tenant farmers, share croppers and other
weaker section farmers can form into Self Help Group which are called Rythu Mitra
Groups (RMGS).
The RMGS are expected to function on the lines of SHGs with necessary group dynamics
for their full involvement in developmental activities.
Objectives
Providing access to credit facilities from banks,
To serve as a conduit for technology transfer, facilitate common access to market
information and market
Training and Technology dissemination in activities like soil testing, training,
health camps and assessing input requirements etc.,
Functioning of RMGs
• All marginal, small and tenant farmers including women farmers in a
village are eligible to become members of RMGs and it will have a unique name.
• Only one member per family will become a member of RMG.
• The optimum number of members in each group will be 15.
• Minimum monthly thrift of the RMG is Rs.50/- per member.
• The State Govt., provides initial grant of Rs.2500/- on formation of RMG for
capacity building, records etc.
• After reviewing the performance for a period of 6-9 months and depending on
their savings, a matching grant of Rs15000/- will be provided.
• A progressive farmer from each group will be identified as contact farmer, who
will be trained by the Agril., Dept., in best management practices.
• Govt., may extend 5% Interest Subsidy on the crop loans issued by the banks.
Credit flow to RMGs

¾ RMGs will certify proof of lease of members. RMGs obtain a letter of self
declaration to this effect.
¾ Agril.,Dept., in the district will identify suitable groups and sponsor them to the
bank branches. It encloses the profile of each member as per proforma
enclosed to Cir. 184/19/10 dt. 19.08.2004.
¾ Active existence for at least six months, may not be insisted upon for the
present.
¾ The individual default of a member/his family member should not be a bar for
sanctioning of a limit.
¾ For the present, only crop loans will be sanctioned. The investment credit
requirements can be considered at later stages on maturity of the groups.
¾ For the purpose of lending, the land cultivated by the tenant-farmer-members
should be restricted to the maximum as per norms applicable to Small and
Marginal Farmers.i.e. SFs upto 5 & MF upto 2.50 acres.
¾ RMGs should prepare a micro credit plan(MCP) and submit the same along
with loan application.
¾ Basing on the MCP, loan is to be sanctioned and credited the RMGs SB Account
which is operated by the convener and the co-convener co-opted by the
members. In case some members have already availed loans individually, the
total limit to be sanctioned to the RMG is to be reduced to that extent.

¾ The group decides on the quantum of loan to be given to the individual

members out of the total limit sanctioned by the bank to the group.
¾ The Manager should interact with the members pre- and post-sanction.
Every member should be informed of the sanction particulars.
Security:
Hypothecation of present and future crops, assets created out of bank loan.
No collateral security upto Rs.5 lacs per group.
Repayment:
Production loans given for cultivation of crops should be repaid on or before 30th
June
every year.
Loan documents: ( Model formats are enclosed to the Cir. 184/19/10 dt. 19.8.04 )
Profile of the members of RMGs submitted by the Agril. Dept.,
Application to be submitted by RMG to the bank
Inter-se-agreement to be executed by all the members of a RMG.
Articles of agreement
Micro credit plan (MCP)
Mode of sanction:
Crop production loans to RMGs may be sanctioned as revolving credit i.e. as
AGCC. After maturity of the groups, they may be covered under Pattabh Agri
Card.
To be covered under ICD and subsequently PAIS is to be extended when it is
covered under PAC.
Crop Insurance:
Crop Insurance premium as per the crops grown by the individual member to the
AGCC account and declarations to be made on individual basis.
Processing charges:
No processing charges should be levied.
Discretionary Powers:
Branch managers are vested with powers upto Rs.5 lacs. Exceeding Rs5 lacs under ZM
powers.
ROI: up to Rs.50,000- BMPLR-2.50% p.a.-

Above Rs.50000- upto Rs.2 lacs-BMPLR-1.25%p.a.
Rs.2 lacs- uptoRs.10 lacs-BMPLR+1.00%p.a.
With regard to the rate of interest to the ultimate borrower, it is left to the decision of
RMG
Others:
Manager should invariably attend the RMG meetings to facilitate them in
conducting the meetings, maintenance of records, functioning of the group.

JOINT LIABILITY GROUPS (JLG)
In many instances, it is found that other farmers of RMG are not willing to sign
on the documents on behalf of the tenant farmers. To avoid this problem it is
decided to implement the scheme with the following alternative mode for
financing tenant farmers:
1. The tenant farmers from the existing RMG may be allowed to form into groups
on their own, which may be called as “JOINT LIABILITY GROUPS” (JLG).
2. Those tenant farmers who are not members of RMGs and forming a new JLG
may also considered for financing.
3. The members of “Joint Liability Groups” are from the same socio economic
status living in the same village and carrying on the same activity i.e.,
Cultivation of Crops.
4. Branches are advised to finance to the members of JLG to meet the expenses
of crop production by sanctioning to individual members on providing
guarantee by all the other members of JLG. (“ONE TO ALL & ALL TO ONE”)
Procedure for financing to tenant farmers:

To obtain a declaration letter from the Tenant farmer regarding the
particulars of lease, extent of land, period of lease, crops grown etc.,
On the basis of the above declaration branches can extend loan to the
tenant farmers of JLG by observing the other terms of lending i.e.,
cropping patterns, scales of finance, group guarantee etc.,
Branches should counsel the members of the JLG before sanctioning loans.
The role and responsibility of the groups members should be clearly made
known to them.
Loan Limit:
¾ The loan limit can be arrived based on the declaration of land taken
as lease subject to the maximum of 2.5 Acres of Irrigated land or 5
Acres of Dry land.
¾ The maximum limit to be sanctioned should not exceed
Rs.25000 per each tenant farmer.
¾ The above monetary ceiling does not apply to the category of
tenant farmers who have tie-up arrangements with sugar
factories/tobacco board etc.,
Security:
i. Hypothecation of Crops
ii. Group Guarantee by all the members of JLG
--------------------------------------------------------------------------------------------------

Financing Farmers for purchase of LAND for Agril. Purposes
The scheme aims at providing term finance to small and marginal farmers including
share croppers and tenant cultivators to purchase agricultural land as well as fallow
and waste land to develop and cultivate it with a view to increase production and
productivity to enable them to diversify their present activities and also to take up
allied activities.
OBJECTIVES:
To make small and marginal holdings economically viable.
To bring fallow and waste lands under cultivation.
To step up agricultural production and productivity.
To finance the share croppers/tenant farmers to purchase land to enable them
to increase their income.
Eligibility:
1) Small and Marginal farmers

2) Share Croppers/Tenant Farmers. Those availing credit facilities from us with
satisfactory track record of 3 years.
Purpose:
To purchase land meant for agricultural purposes covering the cost of land and value of
stamp duty/Registration charges for sale.
Valuation: Last 5 years’ average registration value available with Registrar of the area.
Quantum of Loan:
Depending on the area of land and its valuation, maxi., of Rs.2 lakh.
Margin:
Up to Rs.50000 NIL
Beyond Rs.50000 Min. 10%
Security : The land to be purchased under EMD.
Location of Land holding: The farmers may be allowed to purchase land within the
village boundary or in a radius of 3 to 5 KMs from the existing land, owned by him, duly
taking care of the managerial aspects of such fragmental holdings.
Co obligation/guarantor and ROI: As applicable to Agricultural advances.
Mode of Disbursement:
E.C. for 13 years and legal opinion are to be obtained to ascertain clear and
marketable title. Margin is to be collected and should be given as advance by means
of DD/PO. An agreement of sale is to be entered by the purchaser and seller. Based
on the agreement, bank portion is to be disbursed by way of DD/PO in the name of the
78
seller to be handed over at the time of Registration in the Sub-Registrar’s office and the
same is to be incorporated in the sale deed confirming having received full value.
Repayment:
7 to 12 years, with a maximum moratorium of 24 months.(Moratorium depends on

merits of each case). The branch should satisfy itself that the borrower/s would have
adequate income surpluses from their production activities on the land being purchased
and other income to repay with interest and the repayment period may be fixed
accordingly.
QUESTIONS
1. To whom we can sanction loan for purchase of agriculture land ?
a. Small and marginal farmers

b. Share croppers
c. Tenant farmers
d. All the above provided they have satisfactory track record for the last 3 years.
2. What is the maximum loan under Purchase of agriculture land scheme ?
a. Rs.3 lakhs b. Rs.2 lakhs c.Rs.5 lakhs d. No ceiling.
3. How is the land valued under purchase of agriculture land scheme ?
a. Market value of the land

b. Recent registration value
c. Average of last 5 years registration value
d. At the discretion of the farmer.
4. What is the margin requirement for purchase of agriculture land scheme ?
a. Margin is not required up to finance of Rs.50000/-

b. Margin is 10% for the loans above Rs.50000/-
c. Both a & b are correct
d. None of the above
5. The land purchased under agriculture land purchase scheme should be _____
a. Situated within the boundary of the village of the farmer

b. Within the radius 3 to 5 km from the existing land of the farmer
KEY
1 D 2 B 3 C 4 C 5C
79
Dairy – Scheme for financing Dairy Agents

(Indirect finance to Agriculture)
Dairy Agent:
The private milk processing units like M/s Heritage (foods) India Ltd., Tirumala
Dairy, Model diary etc., are operating through Dairy agents. The Agent is an
agriculturist and also a milk producer. He represents the group of milk
producers and on their behalf conducts transactions with the company. The
agent organises the collection of milk from villages. He will also be engaged in
disbursing cattle loans, distributing cattle feeld etc. provided by the company
and recovery of the same from the farmers with whom he is attached. The
company will give incentive to the agent on the fat percentage of milk/ quantity
of milk procured by him.
Introduction of Dairy Agent:

The agent should be satisfactorily associated with the company for a minimum
period of two years. The format on which the company has to recommend the
agent is enclosed in the format - A and he is to be interviewed by the branch in
the format-B enclosed to the Cir. 264/19/17 dt. 16.10.04.
Loan amount:
Minimum of Rs. 1 lakh per borrower for every 100 litres of milk procured by him
and a maximum of Rs.3 lakh for 200 litres of milk upon specific recommendations
of the company. The loan is to be disbursed as Agricultural Term Loan and
classified under Indirect finance to Agriculture.
Tie-up arrangement: Milk processing companies/units have to execute a tie-up

agreement to the effect that the proceeds of milk supplied by the Dairy Agent will
be routed through the financing branch. A model agreement is enclosed to the
captioned circular. Where tie up arrangement is not possible, 100% collateral
security may be stipulated.
Repayment:
Recovery from the cheques issued by the Processing companies in 24 months
with + 3 months holiday. For loans with Rs.3 lakhs limit, 48 months with 3
months gestation may be stipulated. The account will be reviewed once in a
quarter.
Security:
Hypothecation of receivables and assets created.
Mortgage of landed/building property equal to 100% of the loan amount.
Zonal Manager can waive collateral security for loans up to Rs.1.00 lakh on case
to case basis subject to obtention of Guarantee/ surety.
Rate of Interest:
Loans upto Rs.50,000: B.R: 9.00 +2.75+0.25 = 12.00

Loans above Rs.50000: 9.00 + 4.00+0.25 = 13.00
80
QUESTIONS
1. A dairy agent should have minimum satisfactory association with a milk

processing company for ____
a. 3 years b. 2 years c. 5 years d. Not required.
2. Which of the following is correct ? A dairy agent is eligible for a loan:
a. Rs.1 lakhs for procurement of 100 litres of milk per day

b. Rs.3 lakhs for produrement of 200 litres of milk per day
3. Which statement is correct in respect of dairy agent loan ?
a. Tie up arrangement with milk processing company is a must

b. Tie up arrangement is not required.
c. Tie up arrangement can be waived if 100% collateral security is
available
4. Dairy agent loans can be classified under priority sector as:
a. Direct finance agriculture

b. Indirect finance agriculture
c. Micro enterprise
5. Dairy agent loan should be repaid within:
a. 36 months with a gestation of 3 months .

b. 48 months with a gestation of 3 months for loan of Rs.3 lakhs.
c. As per the DSCR of the unit
d. Both a & b are correct.
1 B 2 C 3 C 4 B 5 D
81
Government of India has introduced the following Animal Husbandry
Schemes to be Implemented up to March 2012.
Establishment/modernization of Rural Slaughter Houses
1. Objective: To establish slaughter houses and processing facilities in rural

areas
2.Implementing agency: Dept. of Animal Husbandry, Dairying and Fisheries,

GOI and NABARD
3.Elegibility/Norms/Coverage: Any company, partnership firm, NGO and

individual entrepreneur
4.Nature of assistance: Under the scheme a back ended capital subsidy @ 50%
of the total financial outlay of the
project with the upper ceiling based on the type of unit and capacity ranging
from Rs.30.00 lakh to Rs.200 lakh.
Integrated Development of Small Ruminants
1. Objective: To encourage sheep and goat rearing and breeding activities in a

systematic manner in all districts of the state
2. Implementing agency : Dept. of Animal Husbandry, Dairying and Fisheries,

GOI and NABARD
3. Elegibility/Norms/Coverage: Individual farmers, SHGs for rearing units and

individual farmers, NGOs, companies
would be eligible for breeding farms
4. Nature of assistance: Under the scheme a subsidy of 25% of the outlay

(33.33% for SC/ST entrepreneurs)
Subject to maximum outlay of `Rs.1.00 lakh and `Rs.25.00 lakh is being
provided for sheep and goat rearers (40+2 )
and sheep and goat breeding units (500+25) respectively in the state.
Establishing “Poultry Estates” and Mother units for Rural Backyard

Poultry
1. Objective: For encouraging back yard poultry rearing
2. Implementing agency Dept. of Animal Husbandry, Dairying and Fisheries,

GOI, Department of Animal Husbandry,
Government of AP and NABARD
3. Elegibility/Norms/Coverage : Individuals, SHGs, NGOs.
4. Nature of assistance: Rural Back yard Poultry Development : Mother units

with a unit size of 1500 chicks would be

established for rearing one day old chicks of low input birds up to 4 weeks.
These mother units will be eligible for a
subsidy amount of Rs. 0..20 lakh per unit which would be directly routed by
the State Department of Animal Husbandry
to the financing bank. The mother units will also be eligible for interest free
loan of Rs. 0.36 lakh per unit which will be routed
through the financing banks by NABARD.
Scheme for Pig Development
1. Objective: To encourage commercial pig rearing by farmers/laborers to

improve production performance of native
breed through cross breeding by using selected animals of high performing
breeds.
2. Implementing agency : Dept. of Animal Husbandry, Dairying and Fisheries,

GOI and NABARD
3. Elegibility/Norms/Coverage: Producer companies, partnership firms,

corporations, NGOs, SHGs, JLGs,
cooperatives and individual entrepreneurs.
4. Nature of assistance: Under the scheme A subsidy of 25%of the outlay

(33.33% for SC/ST entrepreneurs) is
being provided for certain activities of piggery like pig breeding farms (
20+4, max. outlay ` 6.00 lakh) Pig rearing &
fattening units (3+1 max. outlay of ` 0.76 lakh) Retail outlets (max outlay
of ` 10.00 lakh and facilities for live
markets ( @ 2 per district, 50% of the outlay as back ended subsidy
subject to a ceiling of ` 2.50 lakh)
Scheme for “Utilization of Fallen Animals”
1. Objective: It is envisaged to facilitate prevention of environmental pollution

and check spread of livestock
diseases, provide employment opportunity to all rural poor engaged in
carcass collection, flaying and byproduct
processing by producing better quality hides and skins.
2. Implementing agency : Dept. of Animal Husbandry, Dairying and

Fisheries, GOI, Department of Animal Husbandry ,
Government of AP and NABARD
3. Elegibility/Norms/Coverage: Individuals, Flayers cooperatives, NGOs or any

other agency involved in such activities
4. Nature of assistance: 90% of the outlay is provided as capital subsidy by

GOI through Department of Animal Husbandry,
GoAP for establishment of carcass utilization centers (CUC) of different
capacities as detailed hereunder.
(a) Model-I : an indicative unit cost of Rs.145.00 lakh has been provided for
establishment of a CUC to process of 5 to

6 carcasses per day.
(b) Model –II: an Indicative unit cost of Rs.280.00 lakh has been provided
for establishment of a CUC to process 20 to
25 carcasses per day.
( c ) Renovation/ Modernization of existing Carcass Utilization Centers: an
indicative unit cost of Rs. 160.00 lakh has been
provided for this activity. No bank loan is envisaged for these models.
2. 50% of the outlay is provided as back
ended capital subsidy by GOI through NABARD for establishment of
Bone Crushing unit with a maximum outlay of `
Rs.30.00 lakh.

Andhra Bank Kisan Green Card
NABARD has revised the model of KCC (PAC) scheme to cover

term loans for agriculture & allied activities and also consumption
credit needs to the farmers besides production credit requirements.
RBI has suggested to introduce the scheme.
In response to the above, our bank has launched ‘Andhra Bank

Kisan Green Card’ with an objective to provide short and medium
term loans and also a reasonable component of consumption credit.
It is a beginning step of maintaining accounts farmer-wise.
Eligibility:
Farmers having an excellent repayment record of the last 2 years
inclusive of revised terms of payment of rescheduled accounts
irrespective of their land holdings are eligible. Other bank
borrowers can also be considered, duly liquidating their dues with
them.
Quantum of limit:
50% value of the landed property owned and 75% of the liquid
assets ( e.g. NSCs pledged, Fixed deposits) or 5 times the annual
farm income subject to a maximum of Rs.5 lakh. The minimum
card limit is Rs25000/-. Once this card is issued, Pattabhi Agri Card
is to be withdrawn. As per guidelines, land is to be valued @ 12
times the existing net annual income from it.
Validity period of the card:

The card limit is valid for 3 years. No documentation is required
further except revival letter during the period of three years.
Default of any of the instalments/ outstanding would render the
cardholder ineligible for further withdrawals.
Operational procedure:
Farmer-borrower will be issued an identity card-cum-pass book with
photo containing separate folios for different accounts. The farmer
has to submit a requisition letter and the required quotations
(wherever applicable) stating the purpose of drawal of limit for each
of the facility and the approximate cost thereof less a minimum
margin of 15%. Branches will have to make the payment direct to
suppliers wherever applicable. Cash payments can also be allowed
for works involving labour payments and purchase of farm inputs
and to meet the consumption needs. Drawals for consumption
credit should not exceed 20% of the limit.
A separate account will be opened for each purpose and a separate

repayment programme drawn up in consultation with the farmer.

Loans may be considered within the sanctioned limit for crop loans,
land development, purchase of implements, cart & bullocks, dairy
animals, sheep, repairs to equipment/house, processing unit, two
wheeler, and under consumption credit for medical / educational /
social functions etc.,
Registers to be maintained:
A separate register suitably designed for noting down the

details of Green Cards issued and loans sanctioned under the
scheme will be maintained.
Classification of loans: According to the purpose for which loans

are allowed.
Insurance: Farmers under PAIS and all assets created for their full
value against all risks.
Repayment: Each account under the scheme will have its own
repayment period depending upon the type of investment / income
generated, as per the existing guidelines.
Prudential norms:
¾ Prudential norms will as per RBI norms.
¾ Automatic stoppage of withdrawals under different loan
facilities, if one a/c is impaired.
Collateral Security: Up to Rs.1,00,000/- no collateral security is to

be insisted.
TEST PAPER
1.To avail Andhra Bank Kissan Green Card facility, a farmer should
have satisfactory PAC track record of minimum ___
a. 3 Years b. 5 years c. 2 years d. 1 year.
2. Minimum land holding to avail Andhra Bank Kissan Green Card

facility is __
a. 5 acres b. 2.5 acres c. 2 acres d. No minimum land

holding.
3.The quantum of limit is assessed under AB Kissan Green card as:

a. 75% of value of land + 75% of liquid assets or 5 times of

annual farm
Income with a maximum of Rs. 5 lakhs
b. 50% of the value of land + 75% of liquid assets or 5 times of

annual farm Income with a maximum of Rs. 5 lakhs
c. 50% of the value of land + 50% of liquid assets or 5 times of

annual farm
Income with a maximum of Rs. 10 lakhs
d. 50% of the value of land + 75% of liquid assets or 5 times of

annual farm Income with a maximum of Rs. 5 lakhs and
minimum of Rs.25000/-
4.Validity period of AB Kissan Green card is ___
a. 1 year b. 2 years c. 3 years d. 5 years
5. AB Kissan Green Card provides a farmer ___
a. Short term Loans

b. Short term + medium term loans
c. Short term + medium term + consumption needs
d. Only agriculture inputs.
6. What is the minimum margin for medium term loans under

Kissan
Green card facility ?
a. 25 % b. 15% c. 20% d. Nil
7. Consumption credit may be allowed under AB Kissan green card

scheme
To the extent of ____
a. 15% b.10% c. 20% d. Not allowed.
8. What is the repayment period for medium term loans under AB

kissan
Green card facility ?
a. Maximum 3 years

b. As applicable to the purpose of medium term loan

c. As requested by the borrower
d. At the discretion of the bank.
KEY
1. C 2. D 3. D 4. C 5. C 6. B 7. C 8. B

Scheme for financing to SHEEP AGENTS
01. Objectives:
To increase business under Agricultural segment

To supply exotic pedigreed RAMS to shepherds and others engaged in
Sheep rearing
To improve the quality of meat
Overall improvement in the sheep breed
02. Area of Operation: Entire State of Andhra Pradesh
03. Nature of Facility: Indirect Finance to Agriculture
04. Classification: Under GLB Code 2220
05. Loan Amount:

Maximum of Rs 1.50 lakhs for purchase of 500 nos Ram Lamb units.
These 500 Ram lambs are required for breeding 10,000 sheep. Each
Agent can meet the local requirement of around 100 Shepherds (Each
Shepherd normally maintains a flock of nearly 100 sheep).
06. Mode of payment

The limit is to be operated as a Term Loan
The Agent will buy the ram lambs at different intervals as per availability
The purchases will be made only from Government Breeding Stations
The amounts will be released directly to suppliers.
07. Repayment Period:

The loan is repayable in 36 monthly instalments after a gestation period of
three months.
08. Rate of Interest:

The loans carry the following rates of Interest
Up to Rs 50,000 BMPLR-1.25+TP%
Above Rs 50,000 BMPLR-0.50+TP%
09. Security:
Hypothecation of Ram Lambs
Mortgage of landed / building property equal to 150% of the loan amount.
10. Insurance coverage:

Animals should be properly tagged and covered under comprehensive
insurance cover immediately after purchase.
89
CHANNEL FINANCING FOR TRACTORS
Andhra bank entered MOU with M/s. International tractors Ltd., to provide
Channel finance to their dealers for purchase of Sonalika tractors for onward sale
to customers. The MOU is valid up to 31.8.2011.
The process of financing will be as under:
1. M/s.International tractors Ltd., will identify their dealers who are interested in
availing finance and inform the bank accordingly.
2. Along with the list of dealers identified for this purpose, the company will issue
a comfort letter to bank.
3.Branch shall appraise the credit proposal received from the dealer through
M/s.ITL as per the guidelines within 10 working days.
4. The facility is applicable only to specific models of tractors as approved by the

bank.
5.All financial transactions between the dealer and ITL should be routed through
the cash credit account.
6.The cash credit facility will be available for the invoices raised by ITL after the
start of the facility only. All past dues should be settled within them separately.
7.The dealer submits his indent to bank to place order for certain number of
tractors and bank will place order to buy basing on the indent of the dealer and
blocks the required amount in the cash credit account.
8.On supply of the indented tractors to the dealer, ITL will fax the invoice to
branch and send Form No.22 in original to branch by courier. This form 22 is
compulsory to register the vehicle in the name of the customer by the dealer.
9. Branch will credit the account of ITL which is with Pritvihar branch, New
Delhi, with the invoice amount by debiting the cash credit account.
10.On sale of tractor to his customer, the dealer will deposit the invoice amount
in the cash credit account along with interest and collects Form 22.
11.The dealer is expected to square up the credit facility availed for the
consignment by selling the tractors or within a maximum period of 90 days.
12. If the dealer is not retiring the form 22 within 90 days, branch has to serve a
demand notice on the dealer with a copy to ITL..
13.ITL will issue a no objection letter to branch to take repossession of the

tractors and for any damage or expenses, bank is not responsible.
14.On taking repossession of tractors from the dealer, branch shall send
intimation of repossession to ITL and within 15 days, ITL will repurchase such
tractors and authorise the branch to debit their account with Pritvihar branch and
adjust the liability in the cash credit account.
90
15.The total exposure to ITL should not exceed Rs.50 crores and hence branch
should ascertain from the Head Office to find out the exposure before
sanctioning any facility under this arrangement.
91
Priority Sector Advances
AGRICULTURE MICRO SMALL ENTERPRISES OTHERS

Direct Finance
Direct Finance Micro Enterprises-Manufacturing Retail Trade
Farm Mechanisation Minor irrigation: Engaged in manufacture, production, process or Advances granted dealing in essential
Land development. loans to plantations preservation of goods whose original investment in commodities ( fair price shops), consumer co-
etc., loans to allied activities hi-tech plant & machinery (excluding cost of land operative stores without any ceiling in credit
agricultural projects &buildings) does not exceed Rs.25 lakhs limit, subject to the definition under MSMED
Loans to corporate up to Rs.1 crore & one Act,2006 .
third of the amount above one Cr Small Enterprises-Manufacturing Advances granted to private retail traders with
Loans to distressed / indebted farmers for Engaged in manufacture, production, process or credit limits not exceeding Rs.20 lakhs.
repayment of loans preservation of goods whose original investment in Micro Credit
Indirect Finance plant & machinery (excluding cost of land Loans of small amounts not exceeding
Agro-industries with investment up to &buildings) does not exceed Rs.5 crore Rs.50,000 per borrower financed directly or
Rs.10 Cr. indirectly through SHG/ JLG or to MFI /
2/3rds of the finance component of above Micro Enterprises –Service NBFC for on-lending.
Rs.1 cr to corporates Engaged in providing/rendering of services whose Loans to poor indebted distressed (non-
Working capital dealers of fertilisers, original cost of investment in equipment (excluding farmers) persons to prepay their debt to non-
pesticides, seeds cost of land, building, furniture & items not directly institutional lenders.
drip/sprinkler irrigation system/ related to the rendered) does not exceed Rs.10 lakhs. State sponsored organisation for SCs/STs
Machinery up to the limit of Rs.30 lacs (the small & Micro enterprises-service, shall include For supply of inputs and marketing of out-puts
per/dealer. Dealers distributing inputs for small road & water transport operators, small Education
the ALLIED activities up to the limit of business, professional & self employed persons and Granted to individuals for education up to
Rs.40 lacs. all other service enterprises) Rs.10 lakhs & Rs.20 lakhs for studies in India
Construction of storage facilities .Agri & abroad respectively.
Clinics/Agro business centers,Loans , Small Enterprises- Service Loans to NBFC for on lending for education up
Finance for custom hire service units Engaged in providing/rendering of services whose to above limits
managed by original cost of investment in equipment (excluding Housing
individuals/organisations.Financing cost of land, building, furniture & items not directly Loans up to Rs.20 lakh for
farmers indirectly through co-operative related to the rendered) does not exceed Rs.2 crore. purchase/construction per family
system such as PACS etc. NBFCs for on- Khadi & Village Industries sector Loans for repairs up to Rs.1lakh in rural/semi-
lending to agriculture. All advances under KVI sector, irrespective of size, urban& Rs.2 lakh in urban/ metro areas.
Financing to commission location and amount of original investment in plant & Assistance for government agency and non-
agents(ARTHIAS) for supply inputs to machinery govt.agency (approved by NHB) for on lending
farmers. Indirect Finance up to Rs.5 lakh per dwelling unit for
50 percent of the amount out standing in Credit to persons and cooperatives involved in the construction or for slum
GCC(general Purpose credit card) supply of inputs to and marketing of outputs of
clearance/rehabilitation.
artisans, village and cottage industries
-पदोन्नित परीक्षा अूैल 2011 के िलए अध्ययन साममी 92

WEAKER SECTIONS
The weaker sections under priority sector shall include the following:
(a)Small and marginal farmers with land holding of 5 acres and less, and landless labourers, tenant farmers and share croppers; (b) Artisans, village and cottage industries
where individual credit limits do not exceed Rs. 50,000; (c) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY); (d) Scheduled Castes and Scheduled Tribes; (e)
Beneficiaries of Differential Rate of Interest (DRI) scheme; (f) Beneficiaries under SJSRY; (g) Beneficiaries underSLRS; (h) Advances to Self Help Groups; (i) Loans to
distressed poor to prepay their debt to informal sector against security. (j)Loans granted under (a) to (i) above to persons from minority communities as may be notified by
GOI from time to time
TARGET
S.No Sector Target as Of Which
percentage
1 Priority sector 40% ANBC or CBE *
2 Agriculture 18% ANBC or CBE *
3 Indirect-Agriculture 4.5% ANBC or CBE *
- do - 25% Target for Agriculture finance
4 Weaker sections 10% ANBC or CBE *
5 - do - 25% Priority sectors
6 DRI 1% Total advances of the previous year
7 Micro-enterprises(Mfg) with investment upto 40% Small Enterprises #
Rs.5 lac &
Micro-enterprises( service) with investment up
to Rs.2 lac
8 Micro- Enterprises (Mfg) with invest. above 20% Small Enterprises #
Rs.5 lac upto Rs.25 lac &
Micro-Enterprises(Service)above
Rs.2 lac upto Rs.10 lac
ANBC or CBE *- Adjusted net Bank credit(Net Bank Credit plus investments made by banks in non-SLR bonds held
in HTM category) or credit equivalent of Off-balance sheet exposure which ever is higher
# The total finance to Micro-enterprises should constitute 60% of the finance to
Small enterprises

Micro, Small & Medium Enterprises

(MSMEs)
The Small Enterprises (SSI) contribute 40% of the country’s industrial output and offer the largest employment after
agriculture. The sector, therefore, presents an opportunity to the country to harness its local competitive advantages for
achieving global dominance. In recognition of these aspects, Government of India, Ministry of Finance, Department of
Economic Affairs (Banking Division), New Delhi, had announced a Policy Package for stepping up credit to Micro,Small and
Medium Enterprises (MSMEs). Consequently MSMED Act 2006 was passed.
Pursuant to the above policy announcement, Reserve Bank of India has communicated measures for improving credit flow to
Small and Medium Enterprises which inter alia includes definition, rating and pricing of products offered to MSMEs for
accelerating the development of the Micro,Small & Medium Enterprises (MSME) Sector.
Definition of Micro,Small & Medium Enterprises:

As per the policy package announced, the definition of MSME(Micro,Small & Medium Enterprises) is as follows.
Micro (Manufacturing) Enterprises with investment in plant & Machinery (original cost excluding land & building and the
items specified) up to Rs.25 lakhs, Small ( manufacturing) Enterprises with investment in plant & Machinery(original cost
excluding land & building and the items specified) up to Rs.5 Crore and Medium(Manufacturing) Enterprises above Small
(manufact) Enterprises limit up to Rs.10 Crore with investment in plant & Machinery(original cost excluding land & building
and the items specified)
and
Micro (Service) Enterprises with investment in equipment(original cost excluding land, building, furniture and other items
not directly related to service) up to Rs.10 lakhs, Small (service) Enterprises with investment in equipment(original cost
excluding land, building, furniture and other items not directly related to service) up to Rs.2 crore and Medium(service)
Enterprises above Small ( service) Enterprises limit up to Rs.5 Crore with investment in equipment(original cost excluding
land, building, furniture and other items not directly related to service)
and
Khadi and Village industries sector(KVI)- advances granted to units in the KVI sector, irrespective of their size of operations,
location and amount of original investment in plant and machinery.

Credit Assessment methods for MSMEs :

Credit Assessment methods are common as applied for other sectors, i.e upto Rs.6.00 crore Fund Based working capital limits
“Turnover or Inventory Methods whichever is higher” and for Rs.6.00 crore and above “ Inventory Method”.
Rating of Small & Medium Enterprises (SMEs):

At present the Bank has been rating the borrowers on risk rating scale based on internal Credit Rating Models. The Bank's internal
Credit Rating Models interalia include Credit Rating Model for rating small borrower accounts of above Rs. 2 lacs & below Rs. 5
lacs
CRS Model for Rs. 5 lacs & above but less than Rs. 50 lacs
CRAS Model for Rs. 50 lacs & above advances up to Rs. 5.00 Crores, for existing & new borrower accounts. Full details of the
Credit Rating Systems have been circulated vide HO Circular No. 27 Ref.No. 26/03 dated 16.04.2005.
CRRM for above Rs. 5 crore limits, w.e.f. 31.03.2009.
SMERA :
Since RBI/GOI is emphasizing transparent system of rating for pricing the loans to SMEs, it has been decided to accept the rating
awarded by SME Rating Agency of India Limited (SMERA) also for all borrower accounts coming under the purview of SMEs. The
option to get themselves rated shall be at the discretion of the concerned SME.
It is to be noted that SMERA rating is for the purpose of pricing the borrower and it is not a substitute for Bank's internal Credit
Rating Models. Therefore, Controlling Offices & Branches shall continue to rate the borrowers as per Bank's internal Credit Rating
Models, despite rating of borrower account by SMERA.
--------------------------------------------------------------------------------------------------------------------------

CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES
1. What is the eligibility criterion under the Scheme?

Credit facilities extended by eligible lending institutions, in respect of a single
eligible borrower, not exceeding Rs.100 Lakh, by way of term loan and / or
working capital facilities without any collateral security and / or thirty party
guarantees. For credit facilities sanctioned during the Quarter, lending institution
should apply for guarantee cover before end of the following quarter.
2. Which type of borrowers can be covered under the Scheme?
New and existing Micro and Small enterprises (both manufacturing and service
sector).
3. Whether borrowers from all service sector enterprises are eligible under
the Scheme?
Yes. Retail Trade, Agricultural Credit are not covered.
4. Whether loans given to Small Road Transport Operators are eligible for
coverage under the Scheme?
Yes, Service units under Micro and Small enterprises are eligible. As per RBI Norms,
Small Road & Water Transport Operators, Small Business, & Professionals & Self
Employed categories are covered under Micro & Small Enterprises.
5. What is the Quantum of credit facility that can be covered under the
Scheme?
Term Loan and / or Working Capital facilities up to Rs.100 Lakh per eligible borrower
are covered under the guarantee scheme.
6. What is the Extent of Guarantee cover?
Guarantee Coverage is furnished below: (Cir. No. 428/52/3 dtd.09.03.2009.)
Upto Rs.5 Lakhs Rs. 5 to 50 Lakhs Rs.50 to 100 lakhs
Micro 85% of amt. In 75% of amt. In 37.50 Lakhs + 50% of amt

Enterprise default. default. default
Maximum 4.25 Maximum 37.50 Maximum 62.50 lakhs
lakhs lakhs
Women / 80% of amt. In default. 40.00 Lakhs + 50% of amt
Units located Maximum 4.00 lakhs default
in NE Maximum 65.00 lakhs
Others 75% of amt. In 75% of amt. In 37.50 Lakhs + 50% of amt

default. default. default
Maximum 3.75 Maximum 37.50 Maximum 62.50 lakhs
lakhs lakhs
7. Can a credit facility of over Rs.100 Lakh be covered under the Scheme?
Yes, provided the credit facility is extended without any collateral security
and it is otherwise eligible for a guarantee cover under the scheme.
The guarantee cover available will be restricted to a maximum credit limit of Rs.100
Lakhs. Maximum credit risk borne by the CGTMSE is restricted to Rs. 62.50 lakh
being 75%, or Rs. 65 lakh being 80%, as the case may be.
8. What is the Guarantee Fee payable?
¾ Guarantee Fees is payable to CGTMSE within 30 days from the date of first
disbursement or the date of Demand Advice, whichever is later, on the limits
sanctioned by Bank.
¾ For Credit facilities up to Rs. 5 lakhs is -- Guarantee fee of 1%

¾ For Credit facility sanctioned, above Rs. 5 Lakhs --Guarantee fee of 1.5%
¾ For Credit facility sanctioned to borrowers in North Eastern Region, including
the State of Sikkim - Guarantee fee of 0.75%.
9. what is the Service Fee Payable?
¾ Annual Service Fees is payable on all the Credit facilities, covered under
CGTMSE, Outstanding as on March 31st every year.
¾ Annual Service fee payable, within 60 days, i.e. on or before May 31, of
every year.
¾ The applicable rate is 0.50% in the case of credit facilities up to Rs. 5.00
lakhs,
¾ And 0.75% in the case of credit facilities above Rs. 5.00 lakhs,
¾ On the amount of credit Limits sanctioned in the borrower account.
10. What is the maximum period for which the loans can be covered under
CGTMSE?
One time Guarantee fee paid, covers the following:
1. For Working capital limits, coverage is available for 5 years, or a block of 5
Years.
2. The cover will commence from the date of payment of Guarantee fees and
run through the agreed tenure of Term Loan / composite Credit.
3. If both Term Loan and Working Capital limits are coexisting both the facilities
are covered as per the repayment period fixed for the term loans.
4. If a working capital limit is enhanced then the one time fee is payable, on the
enhanced amount, for the balance period of 5 years, and the Guarantee cover
will be available for a block of 5 years, where working capital alone is
sanctioned.
5. Non Fund Based limits are also covered under the scheme.
11. What is the Cardinal Principle of CGTMSE?

• Lender should extend credit without any collateral / third party guarantee.
• Borrower to avail credit from a single lending institution (an assisted unit of
SFC can get bank finance and be covered under the scheme)
• Interest rate should not exceed Bank’s PLR+3%
• Facilities covered under ECGC are not eligible for cover under CGTMSE
guarantee
12. What are the incentives available to the banks?

CGTMSE guaranteed loans carry -Zero percent risk weight & Zero percent
provisions.
13. Who are the Member Lending Institutions (MLIs)

All Scheduled Commercial Banks (either PSU, Private or Foreign Banks), select
Regional Rural Banks, or such of those institutions as may be directed by GOI can
avail of guarantee cover in respect of their eligible credit facilities under the
Scheme. Small Industries Development Bank of India (SIDBI), National Small
Industries Corporation Ltd (NSIC) and North Eastern Development Finance
Corporation Ltd (NEDFI) have been included as eligible institutions
14. Can a credit facility of over Rs.100 Lakh be covered under the Scheme?
Yes, there is no restriction on sanction of loan amount, depending upon the
customer requirement but the guarantee cover available will be restricted to

credit of Rs.100 Lakh. i.e., maximum of credit risk borne by CGTMSE is

restricted to Rs.62.50 lakh, as per the norms applicable.
15. Is there any lock in period for claim settlement ?

Yes,. Claims are entertained by the Corporation, after the lock in period.
Claims can be made after completion of 18 months from the date of last
disbursement, or from the date of guarantee cover, whichever is later. The account
should have been classified as N P A and recovery proceedings initiated. Bank has
to exercise all care & due diligence and ensure that there is no violation of any
guidelines of CGTMSE. The Trust will pay 75% of the claim within 30 days and
remaining amount after conclusion of recovery proceedings..

GOVT. SPONSORED SCHEMES
1. What is the INCOME ceiling for financial assistance under PMEGP?

1. 24000/-
2. 36000/-
3. 18000/-
4. 12000/-
5. No ceiling.
2 .What is the minimum educational qualification for projects above
Rs.10.00lacs in Manufacturing sector & above Rs.5.00 lacs in
Service/business sector under PMEGP ?
1. 10 th standard pass
2. 10 th standard pass/fail
3. VIII standard pass/completed
4. Not required
5. Any Degree
3. What is % of Margin Money required from a PMGEP beneficiary under
general category?
1. 10% 2. 15% 3. 20% 4 . 25% 5. nil
4. What is the loan/ limit of the project up to which Coll. Security is not
insisted on, under PMEGP ?
1. upto Rs.2.00 lacs
2. No Ceiling
3. upto Rs.5.00 lakhs
4. upto Rs.10.00 lacs
5. RBI serial No.
5. What is % of Margin Money required from PMGEP beneficiary under
Special category?
1. 10% 2. 15% 3. 20% 4. 25% 5. 5%
6. What is the % of Subsidy for a PMEGP beneficiary under General
category in urban area?
1. 25% of the cost of the project
2. 15% -do-
3. 20% -do-
4. 10% -do-
5. 30% -do-
7. What is the maximum cost of the project permissible under (PMEGP) in
manufacturing sector?
1. Rs.10 lakhs 2. .Rs.25 lakhs 3 Rs.20 lakhs 4. Rs.15 lakhs 5. Rs.30
lakhs
8. What is the maximum cost of the project admissible under (PMEGP)
Service/business sector?.
1.. Rs.25 lakhs 2. .Rs.10 lakhs 3 Rs.20 lakhs .4. Rs.15 lakhs 5. .30
lakhs
9. What is the amount of subsidy for a beneficiary in rural area under
general category under PMEGP?
1. 25% of the project cost

10.What is the% of subsidy for special category beneficiary in rural area

under
PMEGP?
OTHERS:
11. Advances to a borrower under DRI Scheme meant for vocational
course for a
physically handicapped person :
1. Rs. 5,000/- 2. Rs. 6,500/- 3. 7,500/- 4. 10,000/- 5. No
ceiling
12. Interest @ 4% p.a on DRI advances is charged on
1. Simple Int basis - yearly rests
2.Quartely compounding
3. Simple interest basis - Half-yearly rests
4. Simple interest basis - Yearly rests
13. Marginal farmer is the one who is having
1. 5 acres of dry or 2.5 acres of the wet land
2. 2.5 acres of dry or 1.25 acres of wet land
3. 1.25. acres of dry or 0.50 acres of wet land
4. 1.25 acres of dry or wet land
5. 1 acre of wet or dry land
14 If a Swarozgari under SGSY availing Rs. 5,000/- subsidy, closes his
loan account
which is repayable in 5 years; but closes after completion of 3 years of
loan he is
eligible for subsidy to the extent of
1. Entire subsidy of Rs. 5,000/-
2.Left to the discretion of branch
3. Rs. 3,000/-
4. 50% of the subsidy i.e., Rs. 2,500/- with the approval of DRDA
5. Not at all eligible
15. Which is the nodal agency for PMEGP at national level?
1. KVIC 2. DIC 3. SLBCC 4. KVIB 5.NABARD
16. How much grant is available for SHG group as revolving Fund under
SGSY.
1. Rs. 10,000/-
2. Rs. 1,000/- per each member of the group subject to maximum of Rs.
25,000/-
3. Rs. 1,25,000/-
4. As much as loan availed
5. As much as saving effected in one year

17. S.H.G. comprises of Homogenous group of

1. Poor urban women
2. Poor rural women
3. Poor urban/rural men
4. Either poor men or women or from rural/urban area
5. Rural Poor
18. An S.H.G. can be financed to the maximum extent of savings, as first
dose
1. One time of its savings
2. Two times of its savings
3. Three times of its savings
4. Eight times of its savings
5. Four times of its savings – Minimum Rs.50000/-
19. Inter-Se Agreement is to be signed by
1.NGO sponsoring S.H.G.
2. Authorised signatories of S.H.G
3. All the members of S.H.G.
4. VA/NGO as well as S.H.G. members
5. Authorised signatories of S.H.G. & VA/NGO
20. Maximum ceiling on the project cost to be financed under SJSRY for
an individual?
1. Rs. 1.00 lac 2. Rs. 2.00 lacs 3. Rs. 0.50 lac 4. Rs. 0.25 lac
5. No ceiling
21. Maximum ceiling on the project cost to be financied under SJSRY
forGroup -UWSP?
1. Rs. 1.00 lac 2. Rs. 2.00 lacs 3. Rs. 0.50 lac 4. Rs. 0.25 lac
5. No maximum ceiling
22. The scheme designed for liberating Scavengers is
1. SJSRY 2.SHG 3. SEMFEX - II
4. SRMS 5. DWCUA
23. What is the subsidy under SJSRY ( UWSP)
1. 35% subject to Max. 3.00 lacs. 2. 35% subject to Max. 3.00 lacs or
60000/- per beneficiary
3. 35% subject to Max. 3.00 lacs 4. 35% subject to Rs. 60000/- per
beneficiary
24. What is the subsidy under SJSRY for an individual
1. 25% subject to Max. 0.50 lacs. 2. 35% subject to Max. or 60000/-
3. 35% subject to Max. 3.00 lacs 4. 15% subject to max Rs. 0.50
25. What is the % of margin to be contributed by the beneficiary under
SJSRY -Individual
1. 5% of project cost 2. 10 % of project cost
3. 20 % of project cost 4. 30 % of project cost
5. 25 % of project cost
26.What is the max. project cost under SRMS scheme ?
1.Rs.1.,00,000/-
2.Rs.75,000/-
3.Rs.500,000/-
4.No limit.
27. What is the Min . project cost under SRMS scheme ?
1. 25000/- 2.50000/- 3. 1.00 lac 4. 50000/- 5. No Min.

28. What is the maximum ceiling of subsidy for SC/ST beneficiaries

under SGSY?
1. Rs.10000/- 50% 2. Rs.7500/- 30%
3. Rs.5000/- 4.Rs.3000/- 5.Rs.2500/-
29. What is the % of subsidy for limits up to 25000/- under SRMS?
1. 50% 2. 25% 3. 20%
4. 35% 5. 15%
30. What is the Margin requirement under SGSY for limits less than is Rs.
50,000/-?
1.5% 2. 10% 3. 15% 4. 20% 5. Nil
31. What is the target fixed for SC/ST beneficiaries under DRI scheme ?
1. 3/4th of total DRI advances 2. 1/5th of total DRI advances
3. 2/5th of total DRI advances
4. 1/3rd of total DRI advances 5. 2/3rd of total DRI advances
32.The objective of SGSY scheme is to help the assisted family cross the
poverty line in
1. 5 years 2. During IX Plan Period 3. 2 years
4. 3 years 5. None of these
33. Under SGSY scheme, the key Activities to be financed are identified
by
1. Gram Panchayat 2. DRDA 3. Lead Bank
4. Block SGSY Committee 5. None of these
34. What is the target fixed for rural/semi-urban areas under DRI
scheme ?
1. 3/4th of total DRI advances 2. 1/5th of total DRI advances
3. 2/5th of total DRI advances
4. 1/3rd of total DRI advances 5. 2/3rd of total DRI advances
35.What is the limit up to which coll. Sec. is not required under SGSY
Scheme for individuals?
1. Rs.1.00 lac 2. Rs.2.00 lac 3. Rs.0.50 lacs 4.Rs.0.25 lacs 5.None

of these
36. What is the limit up to which coll. Sec. is not required under SGSY
Scheme for Group?
1. Rs.1.00 lac 2. Rs.2.00 lac 3. Rs.0.50 lacs 4.Rs.0.25 lacs 5.
10.00 lacs
37.The subsidy available for SHG under the SGSY scheme
2. 30% of Project cost

3. 50% of Project cost subject to 10000/- per member
4. 50% of Project cost max.1.25 lakhs with per capita amount of Rs.10000/-
5. None of these
38.What is the Education Qualification stipulated for a beneficiary under
SJSRY ?
1. 10+2
2. 10th Fail
3. upto 9th Standard
4. 10th Pass
5. No Min & No Max is prescribed

39. Which beneficiaries are eligible to be treated as Special category

under PMEGP?
1. SC/ST/OBC/ ONLY
2. SC/ST/OBC/WOMEN
3. SC/ST/OBC/WOMEN/EXSERVICEMEN
4. SC/ST/OBC/WOMEN/MINORITIES/EXSERVICEMEN/PH/NER/BOARDER AREAS
5. SC/ST ONLY.
40. In case of PMEGP, what is the lock-in period after which the
(subsidy) margin money from KVIC is to be adjusted to the loan
outstanding?
1. 3 years from the date of sanction.
2. 3 years from the date of Ist disbursement .
3. 5 years from the date of Ist disbursement .
4. At the time of closure of the loan as per sanction letter.
5. To be decided by KVIC.
SELF HELP GROUPS:
1. While financing 2nd dose of finance to Self Help Groups (rural),

how many times of Corpus fund can be fixed as loan limit?
10 Times of Corpus fund or 1 lakh whichever is higher
2. While financing 1st dose of finance to Self Help Groups Rural, how
many times of Corpus fund can be fixed as loan limit?
4 times of Corpus fund or Rs50,000 which ever is higher.
3. While financing 3rd dose of finance to Self Help Groups, how may
times of Corpus fund can be fixed as loan limit?
As per Micro Credit Plan -MCP
4. What is the maximum aggregate limit for financing 1st dose of
finance to the Self Help Groups- Rural?
Rs 1.75 lacs
5.What is the maximum aggregate limit for financing 2st dose of
finance to the Self Help Groups- Rural
Rs.2.50 lacs
finance to the Self Help Groups- Rural
Rs.5.00 lacs
7. What is the maximum limit stipulated under SHG Credit Card?
Rs.2.00 Lakh
8. What is validity period of SHG Credit Card?
3 years
finance to the Self Help Groups- Urban
Rs.3.25 lacs
10. Under which policy the SHG members get additional benefit of life
insurance coverage?
Janashree Bima Yojana Scheme
11. Under which policy the SHG members are covered for Health
Insurance?
SWASTHYA BIMA POLICY.

Answers
1. 5 16. 1 31. 3
2. 3 17. 4 32. 4
3. 1 18. 5 33. 4
4. 3 19. 3 34. 5
5. 5 20. 2 35. 1
6. 2 21. 5 36. 5
7. 2 22. 4 37. 4
8. 2 23. 2 38. 5
9. 1 24. 1 39. 4
10. 5 25. 1 40. 2
11. 1 26. 3
12. 3 27. 5
13. 2 28. 1
14. 3 29. 1
15. 1 30. 5

QUESTIONNAIRE ON BALANCE SHEET
01 For taking a credit decision what important documents does the credit officer
need?
A In addition to the application, property statements etc, “financial
statements” play very important role.
02 What are the common financial statements we call for?
A We call for
1.Trading or manufacturing account
2.Profit and loss Account, 3. Balance Sheet and Funds Flow statements
03 Is it necessary to obtain financial statements for all types of activities?
A Except for agriculture (for some facilities), personal banking schemes and
government-sponsored schemes “for all other activities “financial
statements are required.
04 Why do we need financial statements for all activities as above?
A As per loan policy guidelines
1. The sanctioning authority has to ensure availability of NWC (margin),
and it is possible to ensure availability of NWC only through financial
statements.
2. If the customer is in the audit preview, as per the statutory / bank
guidelines to ensure compliance of exposure norms.
3. To understand the liquidity, profitability of the business and
borrower’s stake in the business.
The financial statements are required for all activities.
05 Why certain activities don’t require financial statements?
A Financing under Personal Banking and Govt Sponsored schemes will be done
as per the set guidelines of the bank, Govt. respectively. Hence no financial
statements are required.
In case of agriculture advances wherever the applicant has to prepare the
financial statements for audit purpose under any criteria, we should obtain
it, for verifying net worth to ensure compliance of exposure norms as per the
loan policy guidelines and availability of NWC etc. For other agriculture
activities it is not insisted.
06 Under what circumstances we insist for an “ Audited Balance Sheet”?
A 1. If the annual sales turnover is above Rs.40.00 lac
2. If the annual income receipts are above Rs.10.00 lac in the case of
Professional and self employed
If the total working capital requirement from the banking system is Rs.10.00
lac and above in case of a non corporate clients
07 Are there any standard formats recommended by government or any other
organisations
to prepare the financial statements?
A Companies have to prepare the financial statements as per the “ Schedule VI
of Companies Act 1956 “. Other type of constituents can prepare the
financial statement as per their convenience.
08 What are the steps involved in reviewing the financial statements?
A 1. Classification: Identifying the assets, liabilities income and
expenditure based on the nature of it.
2. Grouping: After identification group them according to the nature (ex.
short term long term, manufacturing exp , financial exp etc)

3. Ratio analysis: Studying the relationship between various assets,

liabilities, income , expenditure , profit etc.
4. Interpretation : Interpreting the ratios based on the results and
drawing conclusions.
09 How to group the different items of balance sheet and profit and loss
account?
A Balance Sheet items can be grouped as
LIABILITIES ASSETS
Net Worth Fixed Assets
Term Liabilities Current Assets
Current Liabilities Non Current Assets
. Intangible Assets
Profit and Loss account items are bifurcated as 1. Gross Sales 2. Net Sales
3. Manufacturing Expenses 4. Cost of Production 5. Cost of Sales 6. Financial
Expenses. 7. Non-Operating Income 8. Non-Operating Expenses 9. Profit
Before Tax 10. Tax 11. Profit after Tax
10 As per loan policy guidelines what are the bench marked ratios?
A Current Assets Minimum of
1. Current Ratio = ---------------------- 1.15 upto Rs. 6.00 Crore
Current Liabilities working capital limits
1.33 above Rs.6.00
Crore working capital
limits
Total Outside Liabilities Maximum of 6 times
2. ------------------------------
Tangible Net Worth
CL + TL + NFB limit Maximum 10 times
3. Gearing Ratio = --------------------------
TNW – Non CA
PAT + Depreciation + Int. on TL Minimum 1.50
4. D.S.C.R = --------------------------------------- Wherever assured
Int. on TL + Instalment of TL source of income is
available 1.20 is also
acceptable
11 What are the other important ratios used in credit assessment though not
bench marked?
A Debt: Equity Ratio. : Long Term Debt / Tangible Net worth
Interest Coverage Ratio. : PBDIT / Interest Expenses.
Net Profit to Net sales. : Net Profit / Net Sales
Dividend Paid %. : Dividend Paid / PBDIT
Dividend to Net Profit. : Dividend / Net Profit.
Earnings per share. : PAT/No of Equity Shares.
PBDIT. : Profit Before Depreciation Interest and Tax
Inventory Turnover Ratio.: Cost of Goods Sold / Average inventory
Or (Net Sales / Average inventory)
Average Inventory: (Opening Stock + Closing Stock) / 2
Debtors Collection period. : (Debtors / Credit Sales) * 12
Creditors Turnover Ratio. : (Creditors / Credit Purchases) * 12

12 Are there any specific guidelines to treat any specific assets are liabilities in
a particular way?
A There are no specific guidelines to treat an asset or liability in a particular
way. However for some assets and liabilities, flexibility is given in treatment.
1. Term loan installments repayable in next 12 months may be treated
as Term Liability for the purpose of calculation of Current Ratio, NWC
and MPBF.
2. Unsecured loans from friends, relatives and directors to the extent of
50% can be treated as “ QUASI capital” in the case of interest bearing
unsecured loans and 100% in the case of non interest bearing
unsecured loans only for the purpose of "ARRIVINGING MAXIMUM
EXPOSURE ” provided such interest is less than the interest charged
by the bank and payment of interest and unsecured loans shall be
subordinated to the bank borrowings.
Same treatment is given to unsecured loans even for the purpose of
arriving at Net Worth and to compute TOL/TNW, for considering
renewal of working capital limits as per the loan policy .
3. Mobilisation advance may be treated as “ term liability “ to the extent
of 50% and the other 50% as “ current liability”.
4. The following may be treated as current assets.
a. Quoted investments
b. Deposits with banks including LC /BG margins
5. Provision for tax and Advance Tax paid can be netted.
13 “Provision for Tax “ and “ Advance Tax paid ” are appearing in the balance
sheet, what is the treatment while classifying the balance sheet, and what is
the importance of the treatment?
A Provision for tax is a “ current liability”, Advance tax paid is a “ current
asset”. Normally the provision will be less compared to the advance paid. It
is permitted by the loan policy to net both these items which is likely to
result in a better current ratio.
14 Up-to what period the Debtors are considered as “ Current Assets” as per
our loan policy?
A For the purpose of asset classification all debtors are permitted to be
classified as
“ Current assets “ but for arriving “ drawing power “ only a portion of
debtors are considered based on the sanction terms and conditions i.e 90
days , 180 days etc.
15 Advances given to employees are part of ____________assets.
A Current Assets
16 Advances given to the directors or partners are part of ----------- assets.
A Non- current assets
17 Advance given to “ Suppliers of Capital goods” is ____________ asset
A Non- current assets
18 Advance given to “ Suppliers of Stocks ” is ____________ asset
A Current Assets
19 .“Capital work in progress “ is a part of __________Asset
A Fixed
20 Goodwill, Patents, Copyrights etc. are ____________________assets
A Intangible

21 What do you mean by “Retained Earnings”?

A Profit after tax (less) Dividend
22 In a Balance Sheet if Reserves contain “Revaluation Reserves”, while
calculating the net worth how to treat the Revaluation Reserves.
A It should be deducted from reserves, and also from the fixed assets
23 If revaluation reserve is available in the balance sheet, which asset is
affected and how?
A A revaluation reserve indicates that the “ Fixed Assets “ are re-valued. Due
to improvement in the value of “ Fixed Assets “ the difference between the “
Present Value and Book Value” is considered as a profit and the same is
included as “ revaluation reserve”. Since it is not a real inflow of cash /
profit it should not be considered as a part of net worth.
24 If the term liability includes overdue instalment and interest on TL how do
you classify these amounts?
A Over due instalments and interest shall be treated as “Current Liabilities”.
25 How the Preferential Share Capital is to be treated, if it is appearing in the
balance sheet?
A Any preference shares redeemable in more then 12 years “ the amount that
is redeemable after 12 years” shall be treated as part of “Net worth” and in
less than 12 years shall be treated as “ Term Liability”
26 What is an encumbered reserve, and how to treat it during the classification
for financial analysis?
A Though this reserve is not freely available for all purposes, it is carved out of
net profits only. Hence it is to be treated as part of net worth.
27 In a balance sheet of a company the Contingent liabilities are shown under
A Footnote
28 Where the debit balance of Profit and Loss account is to be classified in a
Balance Sheet?
A Intangible asset
29 Capital Subsidy is part of _____________________________
A Net Worth
EXERCISES
01 Calculate Total Debt Equity Ratio when the Current Liabilities are Rs.10
Lakh; Net Worth is Rs.4 Lakh ; Term Liabilities are Rs.5 Lakh and
Intangible Assets are Rs.1 Lakh.
A Formula : TOL / TNW , TOL = 5 +10 = 15 , TNW = 4 –1 = 3 ,
Total Debt Equity Ratio is 15 / 3 = 5 times
02 A firms sales in a year is Rs.100000 , Depreciation is Rs.20000 ,
Other operating expenses are Rs. 90000 . What is the profit , funds
generated in the business?
A Total Expenses 20000 + 90000 = 110000 , Hence loss is Rs.10000
Funds from operations are Depreciation Rs.20000 less Loss Rs.10000 =
Rs.10000
03 X Ltd has a Current Ratio of 4.5 : 1 , Acid test ratio is 3 : 1 , inventory is
Rs. 24000 , find out total current liabilities?

A Current Assets 4.5 Liquid Assets 3

Current Ratio = -------------------- = ----- Acid Test Ratio = -----------
------
Current Liabilities 1 Current
Liabilities 1
Difference between “ Current Assets and Liquid Assets “ is inventory

which is Rs. 24000 and it is equal to 4.50 – 3.00 = 1.50
when compared to the ratios.
If 24000 is equal to 1.50 what is the value of 1 ? i.e 24000 / 1.5 =
16000
Therefore current liabilities are Rs. 16000
04 A business has a Current Ratio of 3 : 1 , Net Working Capital is Rs.400000
, Stock is Rs.250000 , calculate Acid Test Ratio.
A In the given current ratio “ Current Assets “ are Rs.3 , “ Current Liabilities “
are Rs.1
NWC = 3 –1 = 2 which is equivalent to Rs. 400000 , if 2 = to Rs.400000 ,
what is the value of current assets 3 , that is equal to Rs.600000 . Value of
1 i.e Current Liabilities is Rs.200000
Now Current Assets are Rs. 600000 (less) Inventory Rs.250000 = Quick
assets are Rs.350000
Quick Ratio is 350000 / 200000 i.e 3.5 : 2
05 From the following calculate 1. Current Ratio 2. TOL / TNW
Liabilities Rs. Assets Rs
Share Capital 21000 Fixed Assets 17000
Reserves 1500 Stock 6200
P& L Balance 2500 Debtors 3200
Bank Over Draft Cash
Unsecured Loans 2000 6600
Total
6000
33000 33000
A 1. Current Ratio = ( 6200 +3200 +6600) / (2000 +6000) = 16000
/8000 = 2 : 1
2. TOL / TNW = ( 2000 + 6000 ) / (21000 + 1500 + 2500 ) =
8000 / 25000 = 0.32 : 1
06 Current Ratio of a firm is 3% , NWC is Rs. 30000 , workout Current Assets
and Current Liabilities
A Let “ Current Liabilities “X,the “ Current Assets “ are 3 x
NWC =3x - x = 2x = 30000. If 2x is equal to Rs. 30000
x = 30000 /2 = 15000
X = Current Liabilities = Rs.15000, and Current Assets = 3x = 15000 X 3 =
45000
07 Total Debts of M/S. Hunger India are Rs.390000 , Long Term Debts are Rs .
300000
NWC is Rs.180000 , workout the “ Current Ratio”.

A Current Liabilities = Total Debts - Long Term Debts = 390000 –300000 =

90000
NWC = Current Assets – Current Liabilities = 180000 = CA – 90000
CA = NWC + Current Liabilities = 180000 + 90000 = 270000
Current Ratio = CA / CL = 270000 / 90000 = 3 : 1
08 From the following information workout the “ Stock Turnover Ratio”
Sales = 600000 , Gross Profit = 150000 , Opening Stock = 100000 ,
Closing Stock = 125000
Stock Turnover Ratio = Cost of Goods Sold / Average Stock
Cost of Goods Sold = Sales - Gross Profit = 600000 – 150000 = 450000
Average Stock = (Opening Stock + Closing Stock) / 2 = (100000
+125000) /2 = 112500
Therefore “ Stock Turnover Ratio is 450000 / 112500 = 4 times
09 Calculate Stock Turnover Ratio?
Annual Sales :200000 , Gross Profit :25% on cost , Opening Stock :38500 ,
Closing Stock :41500
Stock Turnover Ratio = Cost of goods sold / Average Stock
Cost of goods sold = Sales – Gross Profit.
If cost of Goods sold = 100 , Gross Profit = 25 , Sales = 125
If sales = 125, CGS = 100, If the Sales = 200000 what is CGS? =
100
125 X 200000 = 160000
Average Stock = (OPS + CLS) /2 = (38500 + 41500) / 2 = 80000 / 2 =

40000
ST Ratio = 160000 / 40000 = 4 times
10 Calculate the amount of Opening and Closing stock from the following
information.
1) Stock Turnover Ratio = 6 2) Gross Profit is 20% on sale and it is
Rs.180000
3) Closing Stock is Rs.15000 more than the Opening Stock.
1. Gross Profit Ratio = (Gross Profit / Sales ) X 100 or

2. Sales = (Gross Profit / Gross Profit Ratio) X 100 = ( 180000 / 20) X
100 = Rs.900000
3. Cost of Goods Sold = Sales – Gross Profit = 900000 – 180000 =
720000
4. Average Stock = Cost of Goods Sold / Stock Turnover Ratio = 720000 / 6
= 120000
5. Average Stock = (Opening Stock + Closing Stock) / 2 = 120000
6. Opening Stock + Closing Stock = Average Stock X 2 = 120000 X 2 =
240000
7. Closing Stock - Opening Stock = 15000
8. Adding ( 5 +6 ) = 2 Closing Stock = 255000
9. Closing Stock = 250000 /2 = 127500
10. Opening Stock = 127500 – 15000 = 112500

Questions on Working Capital
1 What is Gross Working Capital?

A Total Current Assets
2 What is Working Capital Gap?
A Current Assets – Current Liabilities (Excluding Short Term Bank
Borrowings)
3 What is Net Working Capital (NWC) ?
A Current Assets - Current Liabilities
4 What are the Working Capital assessment methods our bank is
adopting?
A The following working capital assessment methods are used in our
bank ……
a.Turnover Method “ up to Rs. 6.00 crore fund based working
capital limits “
b.Inventory Method “ upto Rs 6.00 crore fund based working
capital limits” ( option to the borrower)
c.Inventory Method “ above Rs. 6.00 crore fund based working
capital limits “
d. Cash Budget Method
5 How to work out the working capital eligibility under “ Turnover
Method “
A Projected Annual Sales Turnover
25 % of Projected Annual Sales Turnover ( working capital
requirement)
c. 5% of Projected Annual Sales Turnover ( as margin / NWC)
Actual available margin
MPBF : b - c) or (b - d) which ever is lower
6 How to work out the working capital eligibility under “ Inventory
Method “
A a. Current Assets
b.Less Current Liabilities ( Excluding Bank borrowings)
c. Working Capital Gap
d.NWC / Margin= 13% / 25% of Current Assets
( Excluding Export Receivables)
e. Actual NWC available
f.Working Capital Eligibility / MPBF : (c - d) or
( c - e ) which ever is lower
7 As per Loan Policy guidelines of our bank, what is the Minimum
Margin Stipulated under Turnover Method of Working Capital
Assessment?
A 5% of Projected annual sales turnover or Actual NWC
whichever is higher .
Margin Stipulated under Inventory Method upto Rs.6.00 Crore
Working Capital Assessment?

A 13% of Current Assets excluding export receivables

Margin Stipulated under Inventory Method for above Rs.6.00 Crore
A 25% of Current Assets excluding export receivables
10 What is the “ Current Ratio “ that works out if the margin is fixed as
13% on the Current Assets?
A 1.15
11 What is the “ Current Ratio “ that works out if the margin is fixed as
25% on the Current Assets?
A 1.33
12 Which committee has recommended the “ Turnover Method “ of
A Nayak Committee
13 “Cash Budget Method “ of working capital assessment is applicable
for
A Seasonal Industries
14 What is “ MPBF”
A Maximum Permissible Bank Finance
15 How to fix the MPBF if the “ Available NWC (margin) ” is more than
the “ Minimum Required NWC”
A MPBF shall be reduced “ to the extent of additional margin
available”
16 Drawings under working capital limits is permitted against
A Chargeable Current Assets like Stock, Debtors and not on
Other current Assets such as Cash, Bank Balance etc.
17 For working capital assessment how many year financial information
is sought for?
A Five year information is sought i.e “ Three actual years i.e
completed financial years , current year estimates and
future year projections”
18 What is the basis to estimate the “ Raw material holding” level for
the “ Projected year “ while working out the Working Capital under
Inventory method?
A Raw material “consumption “ and “outstanding raw material
balance” in the “ latest completed financial year ”
19 What is the basis to estimate the” Work In Process”
holding level for the “ Projected year “ while working out
the Working Capital under Inventory method?
A “ Cost of Production “ and “outstanding work in process
balance” in the “ latest completed financial year ”
20 What is the basis to estimate the” Finished Goods ” holding level for
the “ Projected year “ while working out the Working Capital under
Inventory method?

A “ Cost of Sales “ and “outstanding finished goods balance”

in the “ latest completed financial year ”
21 What is the basis to estimate the” Debtors / Receivables ” holding
level for the “ Projected year “ while working out the Working Capital
under Inventory method?
A “ Gross Sales “ and “outstanding debtors “ in the “ latest
completed financial year ”
22 What is the basis to estimate the” Creditors ” holding level for the “
Projected year “ while working out the Working Capital under
Inventory method?
A “ Credit Purchases / Purchases “ and “outstanding
creditors ” in the “ latest completed financial year ”
23 What is the “ Current Ratio” that works out normally under
“Turnover Method”, where only 5% of projected turnover is available
as margin?
A Projected turnover = Rs.100
Working Capital Requirement
( Total Current Assets) = Rs. 25
Margin (NWC) = Rs. 5
MPBF (Current Liability ) = Rs. 20
Current Ratio =25/20=1.25
24 What is the Minimum Stipulated “Current Ratio” under “Turnover
Method” of working capital assessment?
A The Current Ratio is not stipulated exclusively for “ Turnover Method
“ , but up to Rs. 6.00 crore working capital limits under any
assessment method the minimum required current ratio is “
1.15 : 1 ”

25 How to assess the LC limits?

A a. Projected annual purchases
b. Of (a) above annual “ credit “ purchases
c. Of (b) above average monthly purchases
d. Of (c) above on “ D / P (sight) “ basis
e. Lead (transit) time for “ D / P (sight) “ bills in months
f. LC eligibility on D/ P (sight)
= d X e
g. Of (c) above on “ D / A (usance) ” basis
h. Lead (transit) time for “D / A ( usance) “ bills in months
i. Usance (credit) time extended by the supplier in months
j. LC eligibility on D/A (Usance)
= g X (h+i )
k. Total LC requirement
= f + j
26 How to fix the “ Non-fund based ( LC) “ limits under “ Turnover
Method”?
A 1. Working Capital Assessment shall be made as per Turnover
Method and MPBF shall be worked out
2. Requirement of “ Non fund based (LC)” limits shall be
assessed as per the standard assessment method as above.
3. The “ NFB “ shall be fixed as “ Sub Limit” with in the MPBF ,
as there is no provision to assess or verify the “ Sundry
creditors “ separately.
27 How to fix the “ Non fund based (LC)“ limits under Inventory
Method?
A 1. Working Capital Assessment shall be made as per Inventory
Method and MPBF shall be worked out
2. Requirement of “ Non fund based (LC) ” limits shall be
assessed as per the standard assessment method as above.
3. Composition of “ Sundry Creditors “ in the projected
balance sheet must be verified and confirmed whether the
sundry creditors are “ Direct “ creditors or “ Inclusive of LC
“ related creditors
4. If the creditors are “ Direct “ creditors then the “ NFB “
limit shall be sanctioned as“Sub -limit”with in the overall
MPBF.
5. If the creditors are “ Inclusive of LC “ creditors then the “
NFB “ shall be sanctioned as a separate limit i.e out side
the MPBF

Questionnaire on Term Loans

Sl Particulars
01 What is a Term Loan?
A Any loan that is repayable in more than 36 months is a term loan.
02 What is the purpose of a term loan?
A The purpose of a term loan is for meeting Capital expenditure of a concern., like
creation of fixed assets. Such capital expenditure will have its effect on the unit for a
period exceeding one year.
03 What is a fixed asset?
A The assets that are
1. Used for improvement / development of the business.
2. Not available for sale.
3. Income generation is slow and steady.
4 Life cycle is very long, and some times it is infinite Ex. Land.
04 Name some fixed assets?
A Land, Building, Plant & Machinery, Furniture & Fixtures, Electrical Installations etc.
05 Why a demand loan should not be sanctioned for creation of fixed assets?
A Any loan or cost of asset shall be repaid through cash generation from such assets.
A demand loan is repayable on demand or at least by the end of the operating cycle.
But the income generated from the fixed assets is so low that on some assets it is
negligible and the money is not sufficient to repay on demand , to repay the amount
of loan availed or money spent on creation of such assets. Therefore a loan that is
repayable with certain specific terms and conditions and one condition being a longer
repayment period shall be sanctioned / availed for creation of fixed assets.
In case of current assets the cash generation is fast and within the operating cycle.
Hence the loan is repayable on demand.
On the other hand in case of fixed assets, income generation is very slow, and so the
repayment period is also longer.
06 What are the important steps involved in term loan assessment?
A 1. Estimating the Fixed Assets requirements 2.Arriving at the cost of the Fixed Assets
3. Margin money availability from the customer 4. Credit available from the market for
purchasing fixed assets 5. Amount of bank loan required 6. Income generation 7.
Profit generation 8. Cash generation 9. Money retained in the system.
Note: While working out the Margin availability, it should be checked with the Margin
requirements as per the rates recommended by the loan policy.
07. What precautions should we take while accepting the fixed assets?
A The precautions discussed here are only illustrative. The appraiser has to take a
careful view of the asset requirement as well as the cost of such asset.
Asset Care to be taken
Land Market value / Registrar value which ever is less.
Building Engineer estimate / market enquires subject to the
rates recommended in the loan policy.
Plant and Machinery Quotations from the standard manufacturers, if
Fabricated machinery market enquiries and if it is a
Second hand machinery a certificate from a reputed
Engineer or a garage , subject to the loan policy
Guidelines.
Electrical equipment Quotations from standard manufacturers.
Furniture & Fixtures Quotations from standard manufacturers and market
enquiries.
08 Are there any other long-term investment requirements?
A Yes, normally Contingencies to meet the unforeseen expenses, Preliminary and Pre-
operative expenses, depending on the size, implementation of the project and cash
generation time, interest on term loans are also required as long-term investment.
The appraiser must be more vigilant and assess the exact requirement. Only actual

expenses required shall be permitted. If any additional amount is considered without

proper assessment there is possibility that the constituent may not really bring such
money into the system, but might report that the money is invested and request to
consider it as his margin money, and all the ratios like LTD / TNW, TOL / TNW will be
affected automatically.
09 Is it necessary to consider “ Working Capital” also as a part of long-term
requirement?
A No, Working capital is not a long-term requirement. But the working capital margin is
a long-term requirement / investment. The appraiser must verify the “ working capital
“ requirements for all types of term loan applicant. Whether the activity is small or big
(Ex: a Horse cart, Xerox unit or a Power project or New, Modernisation, Expansion,
Diversification etc) will have a bearing on the working capital. Therefore the appraiser
shall invariably look into the requirement, arrangement, and available margin.
10 Are there any precautions to be taken while estimating the profitability?
A Yes, the ultimate credit decision depends on the profitability of the project and the
repayment terms depend on the cash flow projections. The following are some
important areas to be examined while accepting the profitability of the project.
1. Installed Capacity 2. Operating Capacity 3. Selling Price 4. Projected Sales
5. Excise Duty 6. Valuation of WIP and Finished Goods 7. Depreciation system
8. Income Tax guidelines 9. Dividend Policies etc.
11 Is there any minimum profit to be made by the constituent?
A No, no such minimum profit is fixed, but minimum Debt Service Coverage Ratio
(DSCR) is fixed.
12 What is a DSCR?
A DSCR is estimating the available surplus money ( cash generation) against the debt to
be serviced.
PAT + DEPRECIATION + INTEREST ON TERM LOAN
Formula is = --------------------------------------------------------------------------------
-------------
INTEREST ON TERM LOAN + INSTALLMENT ON TERM LOAN
Average DSCR must be 1.50 i.e to repay an amount of Rs.1.00 ( Int + Inst) , a
surplus of Rs. 1.50 must be available. However if assured source of income is
available a minimum DSCR of 1.20 is also acceptable.
PAT = Profit after Tax
13 Why depreciation is considered as source / available surplus for repayment
of term loan while working out DSCR?
A Depreciation is already debited to the P&L account, but in real terms the money is not
an outflow from the system. It is available as additional money and generated from
long-term assets. It is idle surplus and by repaying the term loan the constituent can
save cost on the term loan. On the other hand if the money is continued in the
system, it may result in diversion of funds. Therefore it is considered as a source of
fund.
14 Why Interest on Term Loan is considered in both numerator as well as
denominator?
A While working out the profit, interest on term loan is already debited and the profit
after tax is reduced to this extent. But in the bankers view the customer has to
service both the instalment as well as interest. Since the amount is already reduced
from the profit after tax, it is again added as a numerator. As there is demand for
both interest and instalment, interest is also considered as denominator.
15 How to workout average DSCR?
A Average DSCR shall be worked as Total Sources available for the proposed repayment
period divided by Total Repayments, and not the sum of the each year DSCR
divided by total number of years.

Wrong Correct
Period 1 2 3 4 5 Period 1 2 3 4 5
DSCR 0.7 1.3 2.1 1.6 2.6 Source 25 40 63 44 66
8 3 7 2 4 Uses 32 30 29 27 25
Average 8.54 /5 = 1.71 DSCR 0.7 1.3 2.1 1.6 2.6
8 3 7 2 4
Avg.DSCR 238 / 143 = 1.66
16 What are the other important ratios or workings to be done?
A 1. LTD / TNW shall be worked out for the total project and a minimum of 2 : 1 is
ideal. But it may be noted that no benchmark is fixed by our bank in the loan
policy.
2. TOL /TNW should not be more than 6 times.
Sensitivity analysis for all Rs.50.00 lac and above Term loans.
17 What is a BEP? Why it is not included in the above list?
A BEP is known as Break Even Point. It is a position where the activity is continuing but
neither profit nor loss exists. It is not included in the above list the reason being it is
not recommended by our loan policy.
18 Is it necessary to workout BEP, when it is not recommended by our loan
policy?
A Normally it is not required, but if the BEP is worked out properly, the appraising
officer can exactly understand, when the activity will start profit making, how much
gestation / holiday period is to be given.
19 Explain what is sensitivity analysis?
A Every business activity is sensitive to certain expenditure items apart from sales price.
It may be Raw Material, Labour, Power, or Transport etc. Therefore the appraiser
should critically understand the project on which type of expenditure the activity
mainly depends.
On identifying such expenditure, the appraiser should influence the expenditure items
by increasing it to a certain degree of percentage (if the activity depends on multiple
expenditure all such items) and re workout the profitability, DSCR etc. Depending
upon the degree of effect the appraiser should recommend suitable conditions or take
a credit decision.
He should also examine how the profitability will be affected on price variation along
with the variation of influencing expenditure items.
20 Explain how to workout BEP?

A 1. Every activity will have fixed cost as well as variable cost.

2. It is normally assumed that fixed cost shall be incurred always and on the
other hand variable cost will be only if the activity continues.
3. While fixing the selling price of a unit, the seller always prefers to recover the
“ variable cost ” that is made for producing the specific unit that is being sold,
along with some profit.
4. But in the beginning whatever amount is collected through sale of each unit,
shall be first adjusted towards variable cost, and the surplus amount will be
adjusted towards fixed cost.
5. The surplus amount is called as “ contribution”. (Selling Price less Variable cost
= Contribution) . It means each unit is contributing some amount towards
recovery of fixed cost.
6. At a given point of sales, the total contributions will be equal to the total fixed
cost. It means at that point of sales the total fixed cost is recovered along with
variable cost.
7. Therefore at this stage no cost is left un recovered, and no profit is also
available. The sale that has contributed for recovery of total fixed cost is called
BEP sales.
8. It means at BEP sales level the constituent will neither make any loss nor
profit.
9. If an additional unit is sold, the surplus amount that was contributed towards
fixed cost al along, now will contribute to the profit.
10. If a unit is less sold than the BEP units, un-recovered fixed cost persists.
11. If BEP units are multiplied by selling price it will give the BEP sales value.
Per unit selling price – per unit variable Cost = per units Contribution
Total Fixed Cost
BEP sales ( units ) = -----------------------------
Per units contribution
BEP sales ( value) = BEP sales units X Per unit selling price.
21 Explain IRR?
A IRR is known as Internal Rate of Return. Any business activity will normally have
unlimited life and it continually generates profit / loss depending upon the situation
through out its lifetime.
To continue such business the entrepreneur has to invest a lot of money.
The IRR should be worked out “ By discounting the future expected inflows and the
value of the business at a future expected date with a rate and by trial and error
method find out the exact rate at which the total value of such amounts shall be equal
to the today’s outflow”. Such rate at which both the amounts will be equal is called as
“ IRR”.
It may be noted that normally the IRR should be higher than the average cost of
funds i.e i.e divided payable on capital , reserves, interest on long term debts, short-
term debts etc.
It is a better comparison over DSCR. Because DSCR considers only TL and cost of
such term loans, but IRR considers the cost of all types of funds such as Capital,
Reserves, long term loans, short term loans etc vis a vis discounted value of future
inflows including the future business value.
22 What is Gestation period?
A Time lag between COD (Commercial Operations date) and receipt of Sale proceeds
after first cycle of cash flow
23 How to treat Front ended LC opened for supplementing TL?
A Front ended LC- treated as single exposure-processing charges of LC/Upfront fee of TL
whichever is high to be collected
24 Can a TL be sanctioned to financing second hand machinery?

A •Financing second hand machinery- Maximum 25% of cost /Capacity

•50 % margin( further reduction in Margin to be referred at Higher Authority)
•Efficient performance at least till the repayment period (supported by chartered
engineers certificate)
•Cost plus maintenance to compare well with new machinery
•Economically viable with extra input cost
25 Can a TL be sanctioned for an asset already created
A Reimbursement for the asset already created-
•Within 12 months of purchase
• Proof of investment/source of funds
• Purchase invoice/receipt/D.O
• Company Auditor’s certificate
• Remitted through a Bank account

BANK GUARANTEES
1. Guarantee is covered under which Act?

A.Indian Contract Act B. negotiable instruments Act C. RBI Act 1934
D. Banking Regulation Act
2. What is the difference between an Indemnity and a Guarantee?
Indemnity Guarantee
A. There are two parties - There are three parties
B. There is no right of - There is right of
Subrogation subrogation
C. Promisor bears the loss -Principal Debtor bears the loss
D. Liability is primary -Liability is coextensive
E. All the above
F. None of the above
3. Can a Guarantee be reversed for part amounts?
A Yes B .No
4. The minimum cash margin bank Guarantee as per HO guidelines is
A. 15% B. 25% C.50% D.10% E. None of the above
5 The minimum claim period that is mandatory for issuing Bank
Guarantee is
A.1 month B.3 months C.4 months D.6 months E. Not mandatory
6... The maximum period for which Bank Guarantee can be issued at
branch level as per HO guidelines.
A. 1 year B.2 years C. 5 years D. 3 years E. None of the above.
7. The clean portion of the Bank Guarantee should be covered by
collateral security of value not less than
A. 50 % of clean portion B. 100% of clean portion
C.150% of clean portion D.200 % of clean portion E. None of these
8. Processing charges for non-funded limits should be---percent of
Funded based limits?
A. 50% B. 25% C. 40 % D. same as Fund based limits
9. A Bank guarantee can be renewed at the request of
A. Beneficiary B. Applicant C. Both beneficiary and applicant
D. Bank’s discretion E. None of these
10. Which of these is not a financial Guarantee?
A. Bid bond/tender money guarantee,
B.. Security Deposit Guarantee,
C. Advance Payment Guarantee (Mobilisation Advance),
D Installation of machinery
E. Guarantees given to Courts, Customs, Excise, Sales Tax Depts.,
11. Can we issue a Bank Guarantee for beyond 10 years validity?
A. No B. Yes
12. How bank guarantee commission is refunded?
A. Unexpired period less 3 months X 50% of commission
B. Cannot refund commission
C. Refund commission for the unexpired quarters
D. Unexpired period less 1 month X 25% of commission
13. Formula for Gearing Ratio is------------------------------------------------
14. Which of the following statements are not true with regard to
Reversal of Expired BGs?

A. Validity has expired

B. No invocation within the terms of BG
C. BG is not a continuing guarantee
D. original BG should be received back.
E. BG is issued with our Restricted Clause
F. No prohibitory orders from any court
15. What is the maximum period for which Ad-hoc limits for NF based
limits can be sanctioned?
A. 6 months only B. 3 months only C. No Ad hoc limits permitted
D. One year plus Restrictive Clause
16. Maximum permissible gearing ratio:
A.10 B.6 C.8 D.1.33 E.1.50
17. Which of the following guidelines for accepting Agril. Land / Rural
Buildings as Collateral Security is NOT true
A..If the borrower is not able to produce urban property
B. .In the States, where mortgage of rural property is not banned for agril.
Purpose
C.. Should not be more than 30% of the total collateral security requirement
D.. Existing accounts will continue upto 50%
E. Coverage of 200% is needed if it is agril. land /rural buildings
a. All are true b. A,B& E are true c. A is false d. E is false
18. When an Invoked Bank guarantee limit becomes NPA?
A After 90 days from date of debit to invoked Guarantees paid acct
B. After 90 days from due date of the original bank guarantee.
C.After 90 days from expiry of 3 months in Invoked Guarantees paid acct status
D. None of the above
Bank Guarantees
ANSWERS:
1. A
2. E
3. B
4. D
5. E
6. D
7. B
8. D
9. C
10.D
11.B
12.A
Total Outside Liabilities + 100% Non-fund limit/outstanding
13. ---------------------------------------------------------------------------
Net worth – (Non Current Assets excluding advances for capital expenses
14.D
15.C
16.A
17.E
18.A
IBG/GM/DEC 2010

आन्ीा बैंक कमर्चारी महािवद्यालय है दराबाद ANDHRA BANK STAFF COLLEGE: HYDERABAD
खुदरा ऋण उत्पाद -एक नजर Retail Credit Products (PART-I) at a glance
उपभोक्ता ऋण अटोमोबाइल ऋण एबी वनीता वाहन िनबर्ंध ऋण बंधक ऋण
Consumer Loan Automobile Loan AB Vanitha Vahan Clean Loan Mortgage Loan
Salaried/ Professional & self employed Women
Any individual having Any individuals holding
Any individual having minimum having min. gross Income of Rs.1.0 Lac pa for 4W, Any individual having repayment
repayment capacity. house /flat in their/
gross Income of Rs.1.0 Lac- Rs.60000 pa for 2W & Rs.40000/- pa for battery capacity.
पाऽता (Non-Salaried spouse/major children's
pa for 4 W, Rs.60000 pa for operated e-bikes Age not above 75yrs in case of
Eligibility persons- Minimum names. Age-21-60 yrs.
2W & Rs.40000/- pa for 50% of Husband's salary will be taken for computing Pensioners &
Income Rs.30000/- Above 60 yrs. jointly with
battery operated e-bikes eligibility provided he is working and stands as Co- 55 yrs in case of LIC Agents.
pa) spouse or major children.
obligant.
4 Wheeler Salaried Persons
NEW - Least of Road price* minus Margin or 3 yrs. gross income. Fresh- 8 Times. Max. of Rs.1.00 Lac.
USED- (Not more than 3 years old) - Least of 60% of garage value or 3yrs. of gross Repeat- 10 Times. Max. of Rs.1.50 Lac
income or Max. of Rs.5.00 Lac 18 Times of gross salary at Zonal Level.
18 Times of gross pay/
2 Wheeler
Non-Salaried pension and for Non-
Equal to 10 Months NEW- Least of Road price* minus Margin or Max. of Rs.60000/-
2 Times of average annual income salaried persons-
gross salary- 40 % on Margin- Salaried with salary deduction & SME/Corporate borrower with B rating &
Max.0.50Lac. - Sanction at ZO depending on the
ऋण रािश annual Income in case above - 15%, Others - 20%
repayment capacity
Loan amount of non-salaried Pensioners
assessed on the basis of
persons or 75% of 8 Times of monthly Pension Max 1.00
IT returns/ Assessment
cost of articles, *Road Price- Invoice price, Lakh
order or Max. of 50% of
whichever is lower Registration, Life Tax, LIC Agents
*Road Price- Invoice price, Registration, Life Tax, value of the property.
Insurance & accessories up 2 Times of average of 3 yrs. annual
Insurance & accessories up to Rs.5000/-.
to Rs.5000 for 4 W & renewal Commission for IT Assesses
Rs.1000 for 2 W. and 50% of average of 3Yrs. annual
renewals Commission for Non IT
Assesses. Max 2 Lac
Security - NIL
ूितभूित Hypothecation of REPEAT / RENEWAL
Hypothecation of vehicle purchased Mortgage of House/Flat
Security goods purchased After payment of 1/3rd regular
installments
गारं टी Good third party guarantee acceptable to the Bank.
Guarantee/ (Incase of Clean loan to Pensioners- Nominee of the pensioner/ family pensioner shall join as Co obligant/ Guarantor. In case of Clean loan to LIC Agents- Spouse or one of the family
Co obligation members and one LIC Agent & In case of AB Vanitha Vahan - Father /Husband of the applicant or suitable third party guarantee.
40% after proposed installment
िनवल वेतन
(Incase of Non-working Swarnabharana borrower, the Co-obligant should have take home pay of 40% after the proposed installment and incase of LIC Agent the take home renewal
Net Pay
commission should be 40%)
पुनभुग
र् तान Maximum of 60 EMI (In case of Pensioners aged above 65 yrs. & LIC
Max.60EMI 4 W- New-12-72 EMI 4 W- Used-60EMI 2 W- 12-60EMI
Repayment Agents -36 EMI)
Upto 4 W- BR+ 3.00 4 W- BR+ 2.50 2 W- BR+ 3.50
R BR+7.5 % BR+ 6.75 BR+ 6.25
36M 2 W- BR+ 4.00 (0.5% Concession for prompt repayment as back end)
O
4 W- BR+ 3.00+0.25 4 W- BR+ 2.50+0.25 2 W- BR+3.50+0.25
I >36M BR+7.5 +0.25% BR+ 6.75+0.25 BR+ 6.25+0.25
2 W- BR+ 4.00+0.25 (0.5% Concession for prompt repayment as back end)
Proc.@ Admn.* Proc.@ Admn * Proc@ Admn. * Proc.@ Admn. * Proc.@ Admn.
Upto 1% of the loan
Rs.250 Rs.50 Rs.250 Rs.50 Rs.250 Rs.50 Rs.250 Rs.50 Rs.50
Proc.&Adm.
0.25L amount
charges
> 0.25-
0.50L
Rs.500 Rs.75 Rs.500 Rs.75 Rs.500 Rs.75 Rs.500 Rs.75 irrespective of Rs.75
> 0.50-
the limit and
0.75L
Rs.750 Rs.100 Rs.750 Rs.100 Rs.750 Rs.100 Rs.750 Rs.100 period of the Rs.100
loan with out
> 0.75 L Rs.1000 Rs.150 Rs.1000 Rs.150 Rs.1000 Rs.150 Rs.1000 Rs.150 maximum limit
Rs.150
2% flat on the prepaid amount for all Term Loans where the repayment is fixed beyond 36 months. i.e. installments paid ahead of repayment schedule. (Cir.53 Ref:: 26/05
Pre-payment
Dt.09.05.2005)
@ To be collected at the time of processing loan application * To be levied once in a quarter Prepared by Rama Rao Chauhan – Last updated on 21-Mar-11
122
आन्ीा बैंक कमर्चारी महिवद्यालय है दराबाद : ANDHRA BANK STAFF COLLEGE HYDERABAD
खुदरा ऋण उत्पाद - एक नजर में RETAIL LOAN PRODUCTS (PART –II) – AT A GLANCE
सरकारी ूितभूितयों पर ऋण ए बी आनंद जीवन
ए बी नाइिटं गेल ए बी डॉक्टर + ूाप्य िकराया
Loans Ag, Govt. AB Anand Jeevan
AB Nightingale AB Doctor + Rent Receivable
Securities (REVERSE MORTGAGE)
Individuals, Proprietorship, Single or Jointly with spouse
Employees/ Pensioners / Candidates passed B Sc Individuals, Partnership firms/ Ltd Partnership, Public / Private ltd. Age - First borrower -Above 60 Yrs,
पाऽता Professional & Self-employed (Nursing) or equivalent and co. /Trusts. Key promoters should Companies, Trusts etc. owning Spouse- Above 55 Yrs.
Eligibility holding Govt. securities (except currently employed in Private/ be qualified Medical practitioner and properties including landlords of our
Doctors (Residual life of the property should be
IVPs) Corporate / Govt. Hospitals branch premises.
20 Yrs & above.)
Tenants must be of Reputed Public/
To purchase vehicles, To purchase equipments, Vehicles, Private sector / undertakings, Banks,
National / International Airlines etc.
उद्येँय Purpose Not specific consumer goods, contingency Ambulance, medical software, To meet any genuine needs.
Setting up clinics etc. Individual Tenants sanction at HO
loans & go abroad
To meet any genuine needs.
Rent receivable in next 84 Months (10 90% of realizable value of House /Flat.
Priority Sector: Rural & S/U- 15
Equal to 75% of purchase value yrs in case of leased premises of our (Realizable value is 70% of Market
Lac with sub-limit of Rs.3 Lac for WC
of security including Accrued Branches) / unexpired certain lease value) Min. Rs.5 Lac. Max.Rs.100 Lac.
ऋण रािश Urban- 10 Lac with sub-limit of Rs.2
interest / Surrender value of period, whichever is less after making Loan installment payable to the
Loan amount Max. Rs.1.00 Lakh Lac for WC
LIC Policies. adjustment for TDS, Property Tax and borrower for Rs.1.00 Lac for a loan
Non-Priority Sector: Rural - NO
Due date of NSC should be less 15% of rent towards maintenance or tenor of 15 Yrs (i.e. Max) in Monthly,
Semi Urban- 25 Lac. Urban - 50
than 3 years. Min. of 25 Lac & Max. of 10 Crore. Quarterly, and Lump sum is Rs.223/-,
Lac
(Individuals-Max. 5 Crore) 663/- & 20082/-respectively.
15% of rent receivable towards
15% Margin Margin: 20%
मािजर्न maintenance and 25% of margin in
25 % (No margin for travel abroad (No margin for travel abroad and to NA
Margin collateral security of NSCs, Deposits
and contingency loans) meet domestic expenses)
etc.
गारं टी /
Two sureties including one One Guarantor
सहबाध्यता Limit above Rs.50000/- Co Title holder to execute a registered Will
close relative Third party guarantee (Our Bank premises- Guarantor need
Guarantee/ obligation is required in favour spouse.
not be insisted)
Co obligation
Collateral Security -
Up to 1 Lac - No security.
Above 1 Lac.- EM of property for which Registered Equitable Mortgage of
Collateral security of 50% of loan
Above 25000/-Colleteral rentals are charged to loan or House/Flat, against which loan is
ूितभूित Security Pledge of security amount by way of EM of immovable
security of 50% of exposure Alternative property of value not less sanctioned.
property or lien on NSC/KVP/LIC etc.
than 150% of loan amount or NSCs,
Deposits etc.
Lease dead should be registered
Payable in Lump sum after the opted
84 Months
चुकौती Max. of 60EMI or 20EQI loan tenor is over or last surviving
Max.60EMI Max.36 EMI (120 Months in case of our Branches)
Repayment Gestation- 6 Months Borrower dies or opt to sell the home or
EMI through Escrow Account
permanently moves out the home
Upto Priority Sector- BR+4.5+0.25 % 10.75 % Fixed
BR+3.75 BR+4.25
ROI 36M
Non- Priority Sector- BR+4.75+0.25% (ROI will be reset at the end of every 3
> 36M BR+3.75+0.25 BR+4.25+0.25 BR+5.25+0.25% yrs.)
Processing 1% of the loan amount irrespective of 0.25 %+Tax of loan amount with a
Charges NO - - the limit and period of the loan with a
max. of Rs.4000/-
minimum of Rs.25000/- and with out
Upfront fees NO Rs.250/- 0.50% any maximum limit -
2% flat on the prepaid amount,
Prepayment / where the repayment is fixed beyond 2% flat on the prepaid amount, where the repayment is fixed beyond 36 Prepayment of loan is allowed any time
Charges NA
36 months. i.e. installments paid months. i.e. installments paid ahead of repayment schedule. during loan tenor without any charges.
ahead of repayment schedule.
Circular No. 593/51/36 Dt.25.03.2004 273/51/22 Dt.19.10.2006 274/51/23 Dt.19.10.2006 352/26/66 Dt.04.01.2011 168/26/17 Dt.02.09.2008
Prepared by Rama Rao Chauhan – Last updated on 21-Mar-11

123
शैिक्षक ऋण योजनाएं (डा. पट्टािभ िवद्या ज्योित ) एक नजर में Educational Loan Schemes (Dr.Pattabhi Vidya Jyothi) at a glance
िनजी व्यवसायी कॉलेज
भारत में अध्ययन िवदे शों में अध्ययन िूमीयर संःथाएं िनजी मेडीकल व डें टल कॉलेज
Private कमिशर्यल पाईलेट शे िनंग िवदे शों में रोजगार
एबीकॅल्स Private
Studies in Studies Premier Medical & Dental Colleges Commercial Pilot Employment
ABCALS Professional
India Abroad Institutions Management seats (AP) Training Abroad
Colleges
Secured Secured admission in Poor & Merit
Secured Qualified
पाऽता
admission Secured Secured admission under Flaying training Permanent Students (Family
admission in Technical &
through admission in EAMCET Ranking based Institutes approved by employees of reputed income should not
Eligibility overseas Professional
test/selection premier Institutes Management seats DGCA & Reputed organization be more than 1 Lac
institution graduates
process Abroad Institutes. pa.)
आयु मानदं ड Balance service not
12-30 yrs. 17-35 yrs 12-30 yrs Below 30 yrs. -
Age Criteria less than 10 yrs.
कोसर्
All courses Management To go abroad Graduation &
Graduation SPL PPL & CPL
including /Technical/ Medical & Dental Higher studies/Skills for above Technical &
Course and above Courses
schooling Prof'nal courses employment Prof'nal courses
Need based Loan BG
genuine Rs.8.20 L Need based
ऋण रािश MBBS Need based genuine For Air fare &
Need based genuine expenditure expenditure Rs. (5 Yrs.) genuine
expenditure related Initial
Loan Amount related to the course related to the 10.00 Need based & Max. of expenditure related
348750/- to the course expenses
course BDS Lacs Inland -10 Lacs to the course
(4 yrs.) Abroad -20 Lacs
अिधकतम ऋण
Rs.15000/-Free
Rs. 10.00 Lac First year fee reimbursement
Rs.20 Lac Rs. 10.00 Lac Rs.7.5 Lac Rs.1 Lac seat Rs.50000/-
Maximum Loan (Max.2 Loans) should not be considered
Payment
Above Up to Above
Up to As in the case of
मािजर्न Rs.4 Rs.4 Rs.4
Rs.4 L 10% 10% Studies India & Abroad 10% 25 % Nil
Margin Lac Lac Lac
schemes
Nil 5% Nil 15%
चुकौती 5 Yrs incl.
5-7 Yrs Max. 72 Months 5-7 Yrs 60 EMI 36 EMI
Repayment gestation
2 yr. after
उत्पादन पूवर् अविध 1 Year after completion of course or 6 Months after getting job whichever is earlier. completion of
One month
Gestation period course or 6 Months
after getting job
Up to Rs.4 Lac-Parents co- As in case of Studies 100 %
For Loans- Security as in
obligation. India & Studies Abroad 100 % Collateral Collateral & Nil
case of Studies India
ूितभुित/गारं टी
Above Rs.4 & up to 7.5 Lac- scheme LIC Policy
Guarantee of
Satisfactory third party
Security / earning parents / Sufficient Insurance
guarantees. Bond / undertaking
Guarantee Guardian For Bank Guarantee - 100% coverage for the life Two
Above Rs.7.5 Lac - Collateral Not to be insisted from borrower to
collateral security of the student is co-obligants
security of suitable value & Co pay the loan
obligation of parents must
Up to 4 Lac – BR+2.50 Up to 2 L >2 Lac
Above 4 Lac - BR+4.25 BR+3.75 BR+3.75
ब्याज दरें BR+3.75 BR+3.75 BR+4.75 BR+3.75 12%
Rate of Interest Staff Children - BR-2.5% (Irrespective of limit +0.25@ +0.25@
@ Above 36 Months
Simple interest during course & gestation period + Concession of 0.50% for Girl students
दं ड ब्याज Panel Int. 2% for overdue amount of overdue period for limit above 2.00 Lakh
छूट Exemptions All types of Educational loans are exempted from levying Processing /Administrative/ Upfront fee/ Pre-payment Charges
पिरपऽ Circular No. 429/28/23 Dt.30.12.2003, 289/28/15 Dt.01.11.2006, 339/26/53 Dt.22.12.2008
Prepared by Rama Rao Chauhan–Last updated on 21-Mar-11 124

आवासीय ऋण एक नजर में Housing Loan Schemes at a glance
ःवणर् जयंती मामीण आवासीय िवत्त
सामान्य आवासीय िवत्त अिनवासी भारतीय - सामान्य अिनवासी भारतीय -दब
ु ई
Golden Jubilee Rural
General Housing Finance Non Resident Indians - General Non Resident Indians - DUBAI
Housing Finance
In rural areas & Towns having Non-resident Indians & Persons of Indian Non-resident Indians residing in Dubai,
In any area like
population not more than origin Individually or jointly with resident UAE & Sharajahan, Individually or jointly
Rural, urban, Metro etc.
50000 as per census 1991. close relatives with resident close relatives
पाऽता NRI account holders and valued
Persons of Indian origin and residents of constituents with minimum of one year of
Eligibility Individual either singly or jointly with spouse & Children at Branch level & Pakistan, Bangladesh, Srilanka, abroad service
With other blood relations at HO level. Afghanistan, China, Nepal & Bhutan have
Investment in Immovable property in
to obtain prior permission from RBI
India by NRI is subject to FEMA guidelines.
उद्येँय Purpose Construction or Purchase of house / Extension / Renovation/ Repairs to existing house Construction or Purchase of House / Sites
आयु मानदं ड Age of the Borrower - 21-65 yrs.
Age Criteria Independent House - Below 25 Yrs / Flat - Below 20 Yrs
Co-applicant ---------------------------------------------------------------------------------Spouse of the applicant-----------------------------------------------------------------------------
Least of 48 times of Monthly gross salary / 4 times of Annual income or HOUSE – Least of 48 times of Monthly
income or 80% Cost of construction /
ऋण रािश 75% Cost of construction / 85% of Out-right Purchase
Purchase.
Loan Amount SITE – Least of 12 times of Monthly
50% of expected rental income can be added to income
income or 80% Cost of site.
अिधकतम ऋण Rural-25 Lac, S/U-Rs.75 Lac. Urban-150
No maximum limit Max. of Rs. 250 Lac
Maximum Loan Lac, Metro-Rs.250Lac
Take home pay ----------------------------------------------------------------------------------30 % ------------------------------------------------------------------------------------------------
Max. 20Yrs. Max. 20 yrs for House /36 Months for Site
ऋण चुकौित
Max. 20Yrs. Max. 15 Yrs. Installment shall be paid by remittances outside India or out of funds in his NRE, FCNR
Repayment Accounts or out of rental income.
उत्पादन पूवर् अविध 18 Months (24 Months in case of housing board) from disbursement of first installment or immediately after completion 18 Months for Construction
Gestation period of house / taking possession 3 Months for Purchase of house / Site
मरम्मत /नवीकरण
Up to 5yrs- 2.0 Lac. Up to 5yrs- 2.0 Lac.
Repairs/ Max. 0.50 Lac
Above 5 & up to 25 yrs.-8.0Lac Above 5 & up to 25 yrs.-8.0Lac
Renovation Loan
Where mortgage of primary
ूितभूित
House/Flat to be constructed / purchased security is not feasible, other House/Flat to be constructed / purchased plus Lien on other assts in India
Security securities can be accepted.
गारं टी Guarantee
Co-obligation/ Satisfactory third party guarantee Resident close relative as Co-obligant / Guarantor
/ Co obligation
वगीर्करण Up to 20 Lac - Priority # Priority Non Priority
Classification Above 20 Lac -Non Priority (Irrespective of loan amount) (Irrespective of loan amount)
Repayment period Up to 5 Yrs Above 5 & up to 10 Yrs Above 10 Yrs.
Rate of Interest
Up to 30 Lac ->->-> BR+1.00 BR+1.25 BR+1.50
Above 30 Lac ->->-> BR+1.75 BR+2.00 BR+2.25
Processing
0.50% of loan amount subject to maximum of Rs.10000/- At the time of processing loan application
Charges
ूशासिनक ूभार
Up to 10 Lac Rs.100, Above 10 L& upto15 L-Rs 150/- Above 15 Lacs 250/- Per quarter
Admn.Charges
2 % flat on pre-paid installments, where the repayment is fixed beyond 36 months.
Pre-Pay.Charges
Pre-Payment charges may be waived, incase the payment is from own savings /windfall gains.
पिरपऽ Circular 437/28/28 Dt.31.12.2003 437/28/28 Dt.31.12.2003 437/28/28 Dt.31.12.2003 156/28/11 Dt.02.08.2006
# Loans for Repairs < 1.00Lac in Rural/SU & <2.00 Lac in Urban/ Metro areas to be treated as Priority
Prepared by Rama Rao Chauhan –last updated on 21-Mar-11 125
Retail Loans
1. Administrative Charges' on personal banking schemes is to be collected

by our bank on---basis:
1. Half yearly.
2. Quarterly.
3. Annually.
4. Once at the time of disbursal.
5. No such charges are levied.
2. Contingency loans under personal banking segment can be renewed
upon:
1. 1/3 of the stipulated period of repayment is lapsed
2. The installments are regular.
3. Payment of 50% of the loan amount.
4. 1 & 2.
3. For financing a used Four-wheeler under PBCs, the age of the vehicle
should be not more than
1. 1 year.
2. 6 months.
3. 3 years.
4. No such condition.
5. Second hand vehicles cannot be financed.
4. For Loans against Govt. Securities, where the limit is upto Rs.50, 000/-
the co obligation is
1. Two
2. Compulsory
3. As deemed fit
4. Not compulsory
5. Acceptable to the bank
5. What is the minimum & maximum limit that can be sanctioned in case of
Liquid Gold Scheme?
1. No minimum & Maximum of 100.00 Lakh.
2. 0.05 Lakh & 10.00 Lakh respectively.
5. No such restrictions
6. In case of advance against NSCs the Residual Maturity Period of NSC
should be NOT more than
1. 1 Year
2. 2 Years
3. 3 Years
4. 4 Years
5. 5 Years
7. In case of housing loans, if the account is closed before due date, Pre-
payment charges are to be collected at the rate of
1. 2% on the outstanding liability on the date of pre-closure.
2. 1.5% for the un-expired period of repayment fixed at the time of
sanction.
3. Bank cannot charge such amount.
4. 2% flat on the prepaid installment, where the repayment is fixed
beyond 36 months.
5. 3% on the total advance amount.

8. In the case of financing used 4 wheeler, which of the following statements

are correct?
1. The maximum scale of finance is 5 lakhs
2. The margin to be insisted is 40%.
3. The rate of interest is in the same lines of financing a new motor
vehicle.
4. 1, 2 and 3 are correct.
9. Up to what limit General Housing loan would be treated as Priority sector
Advances as per our bank guidelines?
1. 5 Lakh in Rural /Semi-Urban areas & 10 Lakh in Urban/ Metro area
2. 2 Lakh in Rural /Semi-Urban areas & 5 Lakh in Urban /Metro area
3. 20 Lakh in all the areas
4. 10 Lakh in all the areas
5. 1 Lakh in Rural / Semi-Urban areas & 2 Lakh in Urban / Metro area
10. The charge created in case of consumer Loan is
1. Pledge
2. E.M.
3. Simple Mortgage
4. Hypothecation
11. The powers for permitting the takeover of housing loans from other
Banks/Financial Institutions are vested with
1. Administrative clearance from the competent authorities, as per
delegated powers.
2. Only Head Office.
3. Only ZO.
4. GM (Credit)
5. Such switching over cannot be permitted.
12. The processing charges for clean loans to Pensioners is
1. As applicable to the limit
2. Rs.750/- flat
3. Nil
4. Rs.1000/-
13. Up to what amount our bank can waive the stipulation of third party
guarantee under Dr.Pattabhi Vidhya Jyothi scheme?
1. Up to 7.5 lakh
2. Up to 4 Lakh.
3. 2 lakhs.
4. 10 Lakh.
14. What are the processing charges for a clean loan of Rs.1 lakh under
Personal Banking scheme?
1. Rs. 250/-
2. Rs. 500/-
3. Rs. 1000/- per account
4. Rs. 1000/-
5. RS. 750/-
15. What is Risk weightage Ratio in case of Housing loan and personal loan as
per policy of Reserve Bank of India?
1. 50% & 100% respectively


16. What is the age limit to become eligible for a mortgage loan in our bank?
1. 21 to 60 years.
2. 18 to 60 years.
3. 21 to 70 years.
4. 18 to 65 years.
5. No age limit.
17. What is the margin set for consideration of a loan under mortgage loan
scheme?
1. 15%.
2. 20%.
3. 50%
4. 25%.
5. Depends upon the merit of the case.
18. What is the margin to be stipulated for sanction of loan against pledge of
Gold ornament?
1. 50%
2. 40%
3. 30%
4. 10%
5. 20%
19. What is the margin to be stipulated for purchase of site under housing
loan to NRI residing at Dubai?
1. No loan for purchase of site
2. 25%
3. 20%.
4. 30%
5. 15%
20. What is the margin to be stipulated for Educational loan of Rs.15 Lac for
pursuing studies abroad?
1. 5%
2. NIL
3. 15%
4. 10%
5. 25%
21. What is the maximum amount allowed by our bank for consideration of
mortgage loans to salaried class under retail banking segment:
1. 6 months gross salary & maximum of 75% of value of property
4. 15 months net salary & maximum of 25% of value of property
5. 1 or 4 whichever is higher.
22. What is the maximum repayment period fixed for the borrowers availing
mortgage loans?
1. 36 months.
2. 10 years.
3. 6 years.
4. 60 months.
5. 7 years.
23. What is the prime stipulation for sanctioning AB Doctor + to a partnership
firm?
1. Partnership firm should be unregistered.
2. Partnership firm should not have minors as partners

3. All the partners of the Partnership firm should be Doctors.

4. Key promoters should be qualified medical practitioner.
5. Partnership dead should not have loan borrowing clause
24. What is the quantum of finance allowed to fresh borrowers by the branch
under contingency loans under PBS?
1. 8 months Gross Salary.
2. 10 months gross salary.
3. 6 months of net salary.
4. 1 or 3 whichever is less.
5. 2 or 3 whichever is less
25. What is the quantum of finance available for borrowers under our ABCALS
scheme?
1. Rs.4.25 lakhs.
2. Rs.5 lakhs.
3. Actual fees, subjected to a maximum of Rs.7.50 lakhs.
4. Actual fees, subjected to a maximum of Rs. 4 lakhs.
5. 15 lakhs.
26. What is the quantum of finance available for borrowers under our AB
Anand Jeevan ?
1. 90% of realizable value or max. of 100 Lakh.
2. 70% of market value or max. of 1 crore
3. 63% of realizable value.
4. 75%. Of market value
5. 2.5 Crore.
27. Which of the following statements are false in respect of AB Vanitha
vahan scheme?
1. Salaried / Professional & self employed women having a minimum
gross income of Rs.1.00 lakh p.a. is eligible for finance of 4
wheeler.
2. For a pre owned 4 wheeler the amount eligible for finance is 60%
of garage value or 3 years gross income and Maximum of 5.00
Lakh, whichever is less.
3. 75% of Husband's salary will be taken for computing eligibility
provided he is a co-obligant.
4. Hypothecation of vehicle is not compulsory.
5. Statement 3 & 4 are false.
28. Which of the following statements are true in respect of Education Loans?
1. The rate of interest is 0.5% less for sanctions to Women borrowers
2. All courses including schooling are eligible for finance under studies
in India.
3. Maximum of Rs.10 Lakhs loan is permissible for studies in India.
4. Statements 1 & 3 are true.
5. Statements 1,2 & 3 are true.
29. Which of the following statements are not correct in the case of our
ABCALS scheme?
1. The loan is repayable in 60 monthly installments.
2. The gestation period for repayment is one month.
3. Collateral Security of value equal to the loan amount is required.
4. In case the property belongs to third party, he should stand as co-
obligant.

30. Who can stand as a co-obligant for a borrower under our ABCALS?
1. One Co-obligant worth at least equal to loan amount.
2. 2 Co-obligants of individual worth at least equal to loan amount.
3. The employer of the borrower should stand as a co-obligant.
4. Co-obligation waived.
5. One of the above
ANSWERS (Retail Loans)
Q A Q A Q A Q A Q A Q A Q A Q A Q A Q A
1 2 2 4 3 3 4 4 5 4 6 3 7 4 8 4 9 3 10 4
11 1 12 1 13 2 14 4 15 4 16 1 17 3 18 5 19 3 20 3
21 2 22 4 23 4 24 1 25 3 26 1 27 5 28 5 29 5 30 4
---:O:---

FOREIGN EXCHANGE
I. NR ACCOUNTS
1. Which of the following statement is not true

1. Non Resident Indian who comes to India for temporary visits will continue
to be treated as Non Resident Indian
2. Indian citizens gone abroad for business tours, medical treatment, are
treated as Non Resident Indians
3. Indian residing in Nepal and Bhutan are treated as residents
4. An Indian citizen deputed abroad by Central Govt. and Public Sector
Undertaking on assignments is treated as Non Resident
5. Foreign national married to Indian citizen and staying abroad is treated as
non-resident.
2. In which of the currencies the RFC (D) accounts are to be maintained?
1. In Rupees only
2. USD, GBP, EURO
3. USD & GBP only
4. USD, GBP, EURO & YEN
3.The NRO account in the name of a Foreign tourist departing India can be
closed by the AD & balance repatriated if the account is maintained for a period
not exceeding
1. 12 months 2. 1 month 3. 6 months 4. 3 months 5. None

of the above.
4. Following mode of remittance is not treated as inward remittance

1. Funds remitted through banking channels in freely convertible currencies
2. Proceeds of foreign currency notes and Travellers' cheques
3. Sale proceeds of immovable properties in India acquired before becoming
Non Resident
4. By transfer of funds from existing Non Resident A/c.
5.By proceeds of DDs, TTs etc., drawn by certain exchange houses in Gulf
counties on branches of Banks in India
5. Residents can open the following foreign currency accounts:

1. NRO; 2. NRE; 3. RFC; 4. RFC (Domestic); 5. None of the above
6. Which of the following statement is not true in respect of foreign students’

accounts:
1. Foreign students can open SB a/cs.
2. All drafts received to the credit of the accounts of foreign students should
be presented to the paying bank across the counter and not through
clearing
3. A copy of the resident permit issued by the Police Dept. to the foreign
national to be obtained

4. We need not obtain copy of currency declaration form where the amount
of Foreign currency presented for deposit is below US $ 5.000 or its
equivalent
5. Foreign Travellers cheques may be accepted for credit in to his account,
provided they are issued in the name of depositor and tendered by the
a/c.holder in person.
7. In the following N.R. deposit a/cs. repatriation of funds in favour of non-

resident nominee is allowed
1. NRO 2. NRE 3. FCNR 4. 2&3 5.1&3
8. Following form is to be obtained from the non resident nominee for claiming
the deposit amounts held in NRE/ FCNR A/c.
1. LEG 2. LOW 3. BEF 4. QA22 5. None of these
9. Your Non-resident customer requested you to close his NRO a/c and
repatriate the balance.
1. Can not be allowed;
1. Can be allowed with RBI Permission
2. Can be allowed to the extent of funds derived by inward remittance
with RBI permission
4. Can be allowed to the extent of USD 1 Million in a financial year.
5. Funds in NRO deposit are not repatriable.
10. If the Non-resident deposit is cancelled prematurely for the purpose of

renewing for longer period penalty is to be levied in case of:
1. ONR is renewed as ONR A/c.
2. NRE A/c renewed as NRE or RFC
3. FCNR renewed FCNR or RFC
4. FCNR renewed as NRE
11.The maximum interest rate payable on NRE term deposit is
1. LIBOR.
2. LIBOR less 25 bps
3. LIBOR plus 100 bps.
4. LIBOR plus 175 bps
12 . Resident Foreign Currency (Domestic) Account should be credited with

/opened out of foreign exchange :
1. acquired by the resident while on a visit to any place outside India by way
of payment for services/honorarium or gift;
2. acquired by the resident from any person not resident in India and who is
on a visit to India, as honorarium or gift or for services rendered or in
settlement of any lawful obligation;
3. represents the unspent amount of foreign exchange acquired by the
resident from an authorised person for travel abroad;
4. earned by resident through export of goods and/or services, royalty,
honorarium etc., and/or gifts received from close relatives and repatriated
to India through normal banking channels;

5. all the above
13. Which of the following credits are not eligible for crediting in NRE a/c.
1. Interest on Govt. securities and Dividend on units of mutual funds, when

the securities/units were purchased to the debit of NRE a/c.
2. Sale Proceeds of Units of mutual funds, where the securities/units were
originally purchased to the debit of account holder’s NRE/FCNR account.
3. Proceeds of foreign currency/bank notes tendered by the power of
attorney of the account holder
4. Transfer from other NRE/FCNR accounts of the account holder
5. None the above transactions.
14. In our Bank, FCNR deposits can be accepted in the following currencies only
1. USD, GBP, DEM, JPY
2. USD, GBP, DEM, JPY, EURO
3. USD, GBP, JPY, EURO
4. USD, GBP, EURO, Australian Dollars (AUD), Canadian Dollars(CAD)
5. USD, GBP only
15. While calculating interest for I year reinvestment FCNR (B) deposit we have
to follow the following procedure
1. Quarterly compounding (360 days a year basis);
2. Half yearly compounding (360 days a year basis);
3. Compounding for every block of 180 days;
4. Interest to be calculated for actual number of days in each 6
Calender months and compounding for the second half year.
5. For deposits Up to one year, at the applicable rate without any
compounding effect.
16. Accounting Standards (AS 11) is mandatory on all Banks for

1. All Foreign Currency Transactions
2. All Domestic Treasury operations in rupees
3. FCNR (B) Transactions only
4. FLCs & FBGs only
17. The following types of deposit accounts are permitted under NRO account.
1. SB only
2. CD only;
3. SB,CD & Term Deposits.
4. SB without cheque book facility;
18. Your non-resident customer remitted Rs. 1.00 lac by way of demand draft
drawn by Citi Bank, NewYork drawn on Citi Bank Chennai. What type of non
resident A/cs. can be opened with that remittance?
1. ONR, NRE, & FCNR (B)
2. ONR & NRE only
3. ONR, & FCNR (B) only
4. ONR only
5. FCNR (B) and NRE only

19. As per Foreign Exchange Management (Deposit) Regulation 2000 “Person of

Indian Origin” means, (i) he at any time held Indian Passport; or (ii) he or
either of his parents or any of his grand-parents was a citizen of India by
virtue of the constitution of India or the Citizenship Act, 1955; or (iii) the
person is a spouse of Indian citizen or a person referred above and he
should not be a citizen of :
1. Pakistan.
2. Bangladesh
3. Pakistan & Bangladesh.
4. Pakistan, Bangladesh & Sri Lanka
5. None of the these
20. As per RBI guidelines Temporary over drawings in NRE (SB) is permissible
upto a limit of_________subject to the discretion of the concerned Bank
1. 15,000
2. 20,000
3. 1,00,000
4. 50,000
21. What is the minimum balance in the RFC (D) a/c in USD?
1. USD 500
2. USD 750
3. USD 1000
4. USD 5000
5. No minimum balance
22. What are the guidelines for renewal of Overdue NRE term deposit?
1. If the overdue period does not exceed 14 days, renew the deposit
retrospectively from due date at the rate of interest prevailing on the date
of maturity.
2. If the overdue period exceeds 14 days renew the deposit retrospectively
at the interest rate prevailing on the date of maturity or date of renewal
whichever is less.
3. All the above.
4. Neither payment of overdue interest nor renewal of deposit retrospectively
is permitted in the NRE a/cs.
5. Overdue Interest should be paid at 3% if the overdue period is less than
45 days, 4% from 46 to 90 days and 5% for above 90 days.
23. What is the margin to be maintained for Deposit Loans in Indian Rupees in
India to holders of FCNR(B) deposits.
1. 25%
2. 10%
3. 15%
4. 20%
5. Remaining maturity up to one year is 15 % and above one year 25%
24. What is the rate of interest on Deposit Loans in Foreign Currency in India to
holders of FCNR (B) deposits.

1. 2% over deposit rate

2. 1% over deposit rate
3. 1% over LIBOR
4. 2% over LIBOR
5. Prime Rate of the Country of that currency
25. Resident Foreign Currency Account can be maintained in our Bank in :

1. Any of the convertible currencies
2. USD only
3. USD ,GBP and EURO
4. USD, GBP, EURO,AUD and CAD
5. Indian Rupees
26. RFC (Domestic) account is to be maintained in the form:

1. In all forms of domestic deposits
2. Only term deposits
3. Only SB deposit
4. Either SB or Current Account
5. Only current account without payment of any interest
27. Foreign Currency loan in India to holders of FCNR(B) should not be given for
the following purpose:
1. For children education
2. For family maintenance in India
3. For medical expenses
4. For travel purpose
5. For investment in India
2. CONTROL RETURNS
28. What is BEF Statement?

1. Half-yearly statement for reporting outstanding export bills to RBI;
2. Quarterly statement for reporting overdue FCNR accounts;
3. Half-yearly statement for reporting the names of importers, who have
defaulted in submission of documentary evidence of imports within six
months from the date of remittance.
4. For reporting blocked accounts
5. For reporting Balance in EEFC account
29. XOS statement is used for:

1. Reporting outstanding import LCs to RBI
2. Reporting overdue export bills outstanding beyond 12 months from the
date of shipment.
3. Reporting overdue export bills outstanding beyond due date
4. Reporting overdue export bills, which are not crystalised
30. R Returns are to be submitted to R.B.I. on fortnightly basis by

1. I.D
2. B Category Branches
3. A Category Branches
4. A & B Category Branches

5. Bank as whole
31. Schedule I in 'R' returns is used for :

1. A 1 forms
2. A2 forms
3. A3 forms
4. A4 forms
5. GR forms
32. XOS is to be submitted to RBI with in 15 days from the close of :

1. June & December
2. March and September
3. June, September, December & March
4. Every month
33. NRD-CSR is to be submitted :

1. Fortnightly
2. Monthly
3. Quarterly
4. Half yearly
5. Weekly
34. A2 forms are used for:

1. Drawing foreign exchange for import payments
2. Drawing foreign exchange for purposes other than imports
3. Selling of foreign exchange by the customer
4. Drawings in FCNR a/cs
35. A1 forms are used for

1. Drawing foreign exchange for import payments
2. Drawing foreign exchange for purposes other than imports
3. Selling of foreign exchange by the customer
4. Drawings in FCNR a/cs
36. NRD-CSR is meant for:

1. New Revised Deposit Centralized System of Reporting
2. Non-Resident Deposits Comprehensive Single Return
3. New Revised Deposit Comprehensive Single Return
4. Non-Resident Deposits Centralized System of Reporting
5. Non of the above
3. ECGC
37. Discretionary limits for our Bank for automatic cover under ECIB (WTPC) &
(WTPS) are
1. Rs. 50 lacs under WTPC & Rs. 75 lacs under WTPS
2. Rs.100 lacs under WTPC & Rs. 100 lacs under WTPS
3. Rs. 75 lacs under WTPC &Rs. 100 lacs under WTPS
4.Rs. 100 lacs under WTPC& Rs.75 lacs under WTPS
5.Rs. 50 lacs both under WTPC& WTPS

38. Premium on WTPC & WTPS is

1. 07 Ps per Rs. 100/- P.M. under WTPC & 05 Ps per Rs. 100/- under WTPS
on average daily products
2. 07 Ps per Rs. 100/- P.M. under WTPC & 07 Ps per Rs. 100/- under WTPS
3. 06.00 Ps per Rs. 100/- P.M. under WTPC & 05.5 Ps per Rs. 100/- per
month under WTPS on average daily products
4. 07 Ps per Rs.100/- PM. under WTPC & 06 WTPCG & WTPS together on
average daily products
5. 05 Ps. per Rs.100/- PM. payable by bank for both WTPC & WTPS together.
39. Maximum liability i.e.,the maximum amount Up to which claims will be paid
by ECGC to the Bank
1. Rs.500 Cr. under WTPC & Rs.500 Cr. under WTPS
2. Rs.100 Cr. under WTPC & Rs.50 Cr. underWTPS
3. Rs. 175 Cr. under WTPC & Rs. 150 Cr. under WTPS
4. Rs.1000 Cr. under WTPC & Rs.1000Cr. under WTPS
5. Rs.125 Crores total put together under WTPC & WTPS
40.Percentage of cover available under WTPC is

1. 75% upto Rs.873.46 lakhs , 65% above Rs 873.46 lakhs and 90% to
small scale exporters.
2. 75% upto 100 lakhs and 65% above 100 lakhs and 90% to small scale
exporters
3. 60% to others and 85% to small scale exporters
4. 85% to policy holders and 60% in the case of others and 90% of loss in
case of Small Scale Exporters
41. Percentage of cover available under WTPS is

2. Under Policy Holders (PH), 60% to Associates and 90% to others.
Under Non Policy Holders(NPH), 50% to Associates and 60% to others.
4. 75% in the case of others, 90% in the case of small scale exporters
and 66 2/3% for advances granted for export of goods of perishable
nature.
42. When a report of default is to be submitted to ECGC

1. One month from the date of calling up of advance by the Bank or within
four months from the due date or extended due date which ever is earlier
2. Three months from the date of recall or 4 months from the due date or
extended due date whichever earlier
3. Four months from the date of default or due date
4. One month from the date of default or due date
5. Six months from the date of default or due date
43. WTPS does not cover the following advances:

1. Advances granted to Govt companies.

2. Advances granted for exports on deferred terms of payment, service

contracts, Construction works, Turnkey projects
3. Advances granted against Letter of Credits; advances against Duty
Drawback
4. Advances granted by Overseas Banking Units (OBUs) of banks located in
Special Economic Zones (SEZ) FTZ/EPZ
5. All the above
44. The time limit for filing claims under WT-PC is:
1. 30 days from the date of default

2. 6 months from the date of report of default
3. 6 months from date of recall
4. 2 or 3 above whichever is earlier
45. Bank got the discretion for extension of due date without reference to ECGC
upto:
1. 180 days preshipment & 360 days postshipment
2. 360 days preshipment & 180 days postshipment(360 days for Status
holders)
3. 180 days for both preshipment & postshipment
4. 360 days for both preshipment & postshipment
46. What are the risks covered under WTPS

1. Insolvency of importer;
2. Non payment on due date;
3. Non acceptance of documents;
4. Insolvency/protracted delay of Exporter;
5. All the above
47. Who is a small scale exporter as per ECGC guidelines

1. Whose Annual export sales turnover does not exceeds Rs 1 Crore
2. All small scale industrial exporters
3. Whose Annual export sales turnover does not exceed Rs.50 lakhs
4. All exporters who have taken individual policy from ECGC
48. What is the concept of “Whole Turnover Principle” in ECGC guarantees

1. The entire turnover of the exporter should be declared to ECGC
2. The entire turnover of the Bank should be declared to ECGC
3. Failure of any of our branches in complying with the conditions will be
deemed to be the Bank’s failure under the guarantee as a whole.
4. Failure of any of the Exporters in complying with the conditions will be
deemed to be the Bank’s failure under the guarantee as a whole
4. PRESHIPMENT FINANCE
49. Clean packing credit is otherwise known as

1. Packing credit-Hypothecation;

2. Packing credit-pledge;
3. Extended packing credit;
4. Packing credit-Usance;
5. None of the above;
50. Quantum of Finance under P.C is normally fixed upto

1. FOB value of Contract/LC;
2. Domestic value of the goods;
3. Maximum of CIF;
4. Maximum of C & F value;
5. Lower of 1 & 2;
51. For liquidating packing credit finance following statement is true

1. Substitution of contract can be permitted by ECGC
2. Substitution of commodity can be permitted by DGFT
3. Substitution of contract or commodity can be permitted only by RBI
4. Financing bank can permit substitution of contract and or
commodity
5. Packing credit should be repaid by the same commodity/contract
and no substitution is permitted
52. How to provide packing credit for the goods sold in International exhibitions
abroad
1. Banks can directly provide packing credit in abroad;
2. Banks have to finance as a normal domestic trade and only after sale is
completed, concessions applicable to packing credit can be extended by
way of rebate
3. Banks have to grant packing credit and only if sales could not materialize,
treat it as normal domestic trade;
4. Finance for participating in international exhibition is not treated as export
finance
5. RBI’s permission is required for granting packing credit for participating in
international exhibitions abroad.
53. One of the following is not a source of funds for the Bank for releasing
“Packing Credit in Foreign Currency” (PCFC)
1. Balances in EEFC a/c
2. Balances in RFC a/c
3. Balance in FCNR (B) A/C
4. Balances in NRE a/c
5. Lines of credit arranged abroad
54. Export finance to “Deemed Exports” at concessional rate is normally

restricted to--
1. Pre supply 60 days and post supply 30 days;
4. Pre supply 90 days and post supply 60 days
5. No export finance can be granted to deemed exports
55. The time limit for submission of export declaration form by Exporter to an
AD is :

1.15 days from the date of invoice

2. 30 days from shipment
3. 21 days from the date of shipment
4. 7 days from the date of bill of lading
5. No time limit
56. What is the maximum rate of interest on PCFC as per RBI guidelines
1. LIBOR plus 2%
2. LIBOR plus 3.5 %
3. BMPLR minus 4.50%
4. BMPLR minus 2.50 %
5. LIBOR plus 3%
57 Which of the following is not an Export declaration form?

1. G.R. Form;
2. P.P. Form;
3. S.D.Form;
4. V.P./C.O.D.Form;
5. Softex Form
58. Running Account facility means

1. Allowing the exporter to draw finance without any restriction
2. Sanction of preshipment finance without insisting on immediate lodgment
of L/C or Export orders
3. To allow exporter to adjust the outstanding packing credit liability either
with domestic sale proceeds or export sales proceeds
4. Overdue packing credit outstanding beyond 180 days.
59. For export of Deoiled / Defatted cakes Packing credit advances granted in
excess of the value of export order (where the raw material cost is more than
the export value) should be adjusted.
1. with the export proceeds only within 180 days
2. either with cash or sale of Bi-product locally, within 30 days
3. within 360 days from the date of advances
4. to the debit of EEFC A/C
5. POSTSHIPMENT FINANCE
60. Normal Transit Period means

1. Time taken for the arrival of goods at overseas destination
2. Average period normally involved from the date of
negotiation/purchase/discount till the receipt of proceeds in the nostro
account of the bank
3. Time taken from the date of shipment to the date of submission of export
documents to the Bank for negotiation.
4. Time taken from the date of despatch of documents to the date of receipt
at the counters of our correspondent bank

61. Post shipment finance is extended in the following manner;

1. Negotiation/Payment/Acceptance of export doc. under L.C.
2. Purchase/Discount of export doc. under confirmed order
3. Purchase/Discount of export doc. under confirmed export contract.
4. Advance against export bills sent on collection basis
5. All the above
62. Rediscounting of Export Bills Abroad (REBA) normally extends to the

following
1. Export bills with usance period Up to 180 days from the date of shipment
2. Export bills with usance period beyond 180 days from the date of shipment
3. Export bills with usance period beyond 360 days from the date of shipment
4. Export bills with usance period beyond 180 days and not more than 360
days
5. Export bills with usance period can only be discounted and demand bills
cannot be discounted.
63. Normal transit period is decided by

1. ECGC
2. FEDAI
3. RBI
4. Ministry of Commerce
5. EXIM bank
64. Export value of goods exported to Indian owned warehouses established

abroad with the permission of RBI should be realised with in
1. 12 months from the date of shipment
65. Incase of unpaid export bills which were earlier

discounted/purchased/negotiated, the foreign currency should be crystalised
by the Bank
1- On the 10th working day after the date of
negotiation/purchase/discount
2. On the 30th day after the expiry of NTP/Notional due date/Fixed due
date
3. On the 21st day from the date of Bill of lending
4. At any time within 180 days from the date of export
6. EXCHANGE RATES
66. What is the rate applicable for Foreign Currency Export Bills negotiated
under L/C.
1. T.T. Buying Rate
2. Bill Buying Rate
3. Base Rate
4. Cross Rate

5. T.T. Selling Rate
67. Incase of usance Export Bills , notional due date is arrived at by adding
1. Normal transit period, usance period and Grace period
2. Normal transit period and Grace period
3. Normal transit period and seven days
4. Normal transit period and ten days plus grace period
68. What is the rate applicable for crystallization of of export bills:

1 .T.T. Selling rate
2. T.T. Buying rate or TT selling rate whichever is lower
3. Bill Buying rate
4. Bill selling rate
5. TT Selling Rate or original bill buying rate, which ever is higher
69. Bill drawn in a currency other than that of drawees' country, but
reimbursable in the country of the currency is to be treated as
1. Direct Bill
2. Indirect Bill
3. Demand Bill
4. Usance Bill
5. Domestic Bill
70. Indirect rate means

1. A given number of units of Foreign Currency per unit of local currency
2. A given number of units of local currency per unit of Foreign Currency
3. Rate given by RBI
4. Rate given by Local Banks
71. In forward contract, the actual settlement takes place:

1. On the same day
2. Next working day;
3. 2nd working day;
4. On the due date
72. Cover rate means:

1. The rate at which ADs can unload their merchant transactions in the inter-
bank market
2. The rate on which merchant rates are computed
3. The rate between two currencies without the involvement of domestic
currency
4. The rate for which risk cover is not provided by RBI
73. Cross rate means

1. The rate at which ADs can unload their merchant transactions in the inter-
bank market
2. The rate on which merchant rates are computed

3. The rate between two currencies without the intervention of domestic

currency
4. The rate for which risk cover is not provided by RBI
74. Swap means:

1 .Buying and selling of different amounts of the same Foreign currency for
the same maturity
2. Buying and selling of the same amount of different Foreign currencies for
the same maturity
3. Buying & selling of the same amt. of the foreign currency for different
maturities
4. Sell high buy low
5. Sell low buy high
75. Forward margin means:

1. Margin money deposited by the customer for forward contract
2. Forward rates are at Marginal profit
3. The difference between forward rate and base rate
4. The difference between forward rate and spot rate
76. Forward margins are at premium or discount would be decided by:

1. The Central Banks of the two countries, of the currencies involved
2. The maturity period of the contracts
3. The difference in the level of interest rates in the countries of the two
currencies
4. The base rates of the respective currencies
77. Direct rate means

1. A given number of units of Foreign Currency per unit of local currency
2. A given number of units of local currency per unit of Foreign Currency
3. Rate given by RBI
4 Rate given by Local Banks
78. What is the maxim in two way quotes of direct rates:

1. Buy high-sell low;
2. Buy low-sell high;
3. Selling and buying simultaneously;
4. Square or near square position
7. IMPORTS
79. What rate is applied for retirement of import bills received under L/C:
1. Bill buying;
2. Bill selling;
3. T.T. Buying;
4. T.T. Selling;
5. Cross rates

80. Value date denotes:

1. Date of payment by the importer;
2. Date of reimbursement under LC;
3. Date of exchange of currencies
4. Date of high value transaction;
81. Claused bill of lading is the one, which-

1. bears the clauses, which are detrimental to the interest of the bank
2. indicates the defective condition of goods or its packing
3. was issued by an unauthorised agent
4. was not inconformity with the terms of the L/C
5. was stale
82. What is the Red Clause Credits?

1. Doc. Credit which is typed in Red
2. Doc . Credit which contains a clause for payment in advance for
purchasing raw materials/processing and/or packing the goods.
3. Doc. Credit which contains a clause of reimbursement
4. Doc. Credit which contains a clause for payment in advance for
warehousing and insurance charges
83. A confirming bank in documentary credit is .

1. to pay, to incur a differed payment undertaking to accept drafts or to
negotiate
2. undertaking responsibility of payment/negotiation/acceptance under the
credit in addition to that of opening bank
3. the opening bank of a confirmed L/C '
4. Undertaking responsibility to confirm the correctness of import
documents.
84. Bill of Entry refers to :

1. Certificate evidencing export
2. Certificate evidencing import
3. Certificate permitting export of goods
4. Permit or Licence for import of goods
5. None of the
85. Payment for imports from Nepal & Bhutan is to be made in

1. ACU Dollars;
2. In any Foreign Currency;
3. In Indian Rupees;
4. In the currency of the country of export
86. What is a Green Clause credit?

1. Doc. Credit which is typed in Green

2. Doc . Credit which contains a clause for payment in advance for

purchasing raw materials/processing / packing the goods and/or for
warehousing and insurance charges.
3. Doc. Credit which contains a clause for payment in advance for
warehousing and insurance charges only
4. Doc. Credit which contains a clause of reimbursement
87. What is the maximum amount of foreign exchange that can be remitted in
advance for imports into India without a foreign bank guarantee if AD is
satisfied?
1) USD 25,000
2) USD100,000
3) USD5,000,000(USD 5 Mio)
4) Equivalent of Rs.5,00,000
5) USD 1,000,000(USD 1 Mio)
88. Confidential (Status) Report is to be obtained on Overseas Seller at the time

of opening letter of credit, in the following cases:
1. If the value of L/C is USD 25,000 and above;
2. If the value of L/C is USD 1,00,000 and above for A+ and above rated
borrowers;
3. For Import Bills of value USD 1,00,000 and above received directly by the
Importer from the Exporter
4. If the dealings of the importer with the Branch is less than one year P&C
report is to be obtained irrespective of the amount.
5. All the above.
8. UCPDC-600
89. The latest revision (2007) of Uniform Customs & Practice for Documentary
credits came into effect in 2007 on
1. 1st January
2. 31st December
3. 1st June
4. 30th September
5. 1st July
90. As per Article 3 of UCPDC 600 (2007 revision), a credit is------------------

even if there is no indication to that effect
1. Irrevocable credit;
2. Revocable credit;
3. Open credit;
4. Restricted credit;
91. Can the negotiating Bank accept documents bearing dates of issuance prior
to that of credit:
1 Yes, provided such documents are presented within the time limits set by
the L/C
2. No. unless it is permitted by the L/C
3. Yes, by obtaining an indemnity from the drawer

4. Yes, where the value of L/C is less than Rs. 1,00,000

5. Yes, With the permission of RBI
92. As per Article 17 d of UCPDC 600, if a credit requires presentation of copies

of documents
1. presentation of original only permitted
2. presentation of copy only permitted
3. presentation of either originals or copies is permitted.
4. presentation of originals together with copies permitted
93. As per Art. 16 (d), of UCPDC 600, what is the notice period in case of
discrepant documents received by the issuing /nominated/confirming bank
1. not later than the close of the fifth banking day following
the day of presentation
2. With in five days from the date of receipt of documents
3. With in five days from the date of receipt of documents
excluding saturday
4. With in seven days from the date of receipt of documents
94. A third party bill of lading is a transport document showing

1. Banker (opening Bank) as shipper
2. Issued to order and blank endorsed
3. Shipper is other than the exporter
4. Issued by an agent of the Shipping Company
95. What is the minimum amount of insurance cover to be obtained as per

Article 28. f. ii of UCPDC
1.110% of CIF value of goods
2.110% of the amount for which payment, acceptance or negotiation is
requested
3. 110% of the gross amount of the invoice
4. Out of 1, 2 and 3 above whichever is higher
5. 100% value of L/C
96. As per Art. 30(a) of UCPDC the words 'About', , 'Approximately' or similar
expressions used with reference to credit amount, quantity or unit price, it
would be taken to mean as
1. allowing 5% more or less
4. allowing 5% more only
5. allowing exact amount as per L/C only
97. If the L/C does not stipulate anything about partial shipments/drawings, as
per Art. 31 (a) of UCPDC 600 the negotiating bank may--------------.
1. allow partial shipments;
2. allow partial drawings;
3. allow partial shipments and drawings;
4. allow partial shipment but not partial drawings;

5. may refuse both
98. What is a restricted letter of credit

1. Restricts the amount;
2. Restricts the quantity;
3. Restricts further transfers;
4. Restricts the negotiation to a particular bank;
5. Restricts reimbursement to a particular bank;
99. If the forward contract is not taken up (performed) by the Customer on

maturity date, it will be cancelled by the Bank
1. Immediately on maturity date;
2. One month from the date of booking;
3. 7 days after the maturity date;
4. 15 days from the maturity date
5. 30th day from the maturity date
9. REMITTANCES
100. What is the maximum amount of foreign exchange that can be released by
AD for travel purpose under private visits.
1. USD 25000per financial year
2. USD 10000 per calender year
3. USD 10000 per financial year
5. No limit
101. Sale of Foreign Exchange for travel to a resident going abroad should be
by way of debit to their a/c or crossed cheque drawn on his account with
another bank if the rupee equivalent is exceeds.
1. Rs. 50,000
2. Rs. 1,00,000
3. Rs. 20,000
4. Rs. 10,000
5. Rs. 15,000
102 What is the amount of foreign currency/travelers cheque that a returning

traveler is allowed to retain with him in India
1. USD500;
2. USD1000
3. USD2000
4. USD 1500
5. No limit
103. What is the maximum amount that can be released for business visits by
AD:
2. USD 25000 per visit;
5. No limit

104. What is the maximum amount of Foreign Exchange that can be released to
a person, who is going abroad for employment
1. USD 1000
2. USD 1500
3. USD 500
4. USD 1,00,000
5. No limit ....
105. What is the maximum amount of Foreign Exchange that can be released
towards gifts per person per calender year:
1 . USD 1000
2. USD 10000
3. No Separate Limit – included in USD 200000 limit for Individual
remittance under LRS
4. USD 16000
5. Rs.5 lakhs
106. Currency Declaration Form (CDF) is to be produced to the authorised

dealer, by the foreign tourist for encashment of foreign currency notes, if the
value of such currency exceeds.--
1. USD 2500
2. USD 5000
3. USD 10000
4. USD 25000
5. Rs. 1,00;000
107. Full details of inward Remittance are required in respect of remittances,

whose value is equivalent to USD-----------or above
1. 5,00,000
2. 1,00,000
3. 1,25,000
4. 10,000
5. 2,500
108. Encashment certificate is to be given to the Non Residents, which will

enable them:
1. As a proof of encashment of Travellers Cheques/TCs.
2. To reconvert the unspent Rupees into Foreign Currency;
3. To make domestic payments in Rupees
4. All the above
109. A resident who received foreign exchange as remuneration for services

rendered by him either in or outside India, shall sell the same to an
Authorised dealer with in ----------------- days from the date of its receipt.
1. 30 days;
2. 10 days
3. 7 days
4. 180 days

5. No limit
110. FEMA, 1999 came into force w.e.f..

1. 1.1.2000
2. 1.6.1999
3. 1.1.2001
4. 1.6.2000
5. 1.4.1999
ANSWERS
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

2 2 3 3 4 2 4 1 4 4 4 5 3 4 5
16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.
1 3 1 3 4 1 3 5 1 4 5 5 3 2 5
31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45.
1 1 2 2 1 2 2 3 1 1 2 1 5 2 2
46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.
4 3 3 3 5 4 2 4 2 3 1 4 2 2 2
61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75.
5 1 2 2 2 2 1 1 1 1 4 1 3 3 4
76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90.
3 2 2 2 3 2 2 2 2 3 2 3 5 5 1
91. 92. 93. 94. 95. 96. 97. 98. 99. 100.101.102. 103. 104. 105.
1 3 1 3 4 2 3 4 3 3 1 3 2 4 3
106. 107. 108.109. 110.

2 4 4 4 4
-------
FOREX QUESTIONS AND ANSWERS
1.The maximum amount of Indian Currency which a resident can take to any
other country except Nepal & Bhutan is:
Ans : Rs 7500/-
2. What is the account a non resident including NRI can open is :
Ans : NRO
3. What is the minimum and maximum period for which FCNR(B) accounts can
be opened ?

Ans: Minimum 1 year and Maximum 5 years
4. What is the amount of deposit up to which swap charges need not be

collected for cancellation of FCNR(B) deposits before 1 year ?
Ans: Deposits up to USD 10000/- or equivalent
5. What is the minimum period for which NRE Term deposit can be opened ?
Ans: 1 year
6. What is the margin on deposit loans against FCNR(B) deposits ?
Ans: If the residual period of deposit is up to 1 year 15% and above 1 year 25 %
7.What is the interest rate on Deposit loan in rupees against FCNR(B) deposits
Ans: Base Rate + 3 %
8. What is the interest rate cap on PCFC advances ?
Ans : LIBOR/SWAP plus 200 bps
9. What is maximum amount allowed under Trade Credit ?
Ans: USD 20 million per transaction
10 What is all in cost ceiling prescribed by RBI for trade credits?
Ans: LIBOR plus 200 bps
11.What is the maximum amount permitted under ECB automatic route ?
Ans: USD500 million per financial year per borrower
12.What is the maximum amount that can be remitted under AB Speedway?
Ans: USD 10000 per remittance

USD 15000 per month
USD 100000 per annum
13.What is the declared collection period for USD instruments on collection as

per our cheque collection poicy?
Ans: One month for collection under cash letter/ lock box/cheque mail box
arrangement and 2 months for cheque received under final credit service.
14. What is the compensation for delayed collection of a Foreign Currency

cheque ?
Ans: 1. Delay up to 14 days is Simple interest @ SB rate plus 0.25%

2. Delay from 15 days to 45 days is simple interest @ SB rate plus 0.50 %

3. Delay beyond 45 days is SB rate plus 0.75%
15. Loans against NRE/FCNR term deposits to Account holders I Third parties is
to be restricted to Rs____ as per RBI guidelines.
Ans: Rs 100lakhs
16. For import. of goods under negative list, licence is given by:
Ans: DGFT
17.Authorized dealers allow Importers and Exporters to book forward contract

on the basis of_____ other than underlying contracts.
Ans . Average of previous three years actual import / export turnover or

Previous year's actual import /export turnover whichever is higher
18. What is t he rate to be applied for crystallizing / delinking of export bill:
Ans: TT selling rate
19. In the new UCPDC,_______ has been added under the Force Majeure clause
(article 36) which was not there earlier.
Ans: Act of terrorism
20.Which one of the following has been prohibited from opening of FCNR(B)
account?
1) Persons of Indian Origin 2)Overseas Corporate Bodies, 3) Students

4)NRIs 5)None of the above
Ans: (2)
21. When a letter of credit is confirmed by a confirming bank, the request for
such confirmation should come from which of the following:
A: negotiating bank
B: Exporter
C: Importer
D: opening bank
Answer: (D)
22. A customer has returned permanently to India after her 8 years’ stay in UK
and wants to retain the repatriability benefits of the money he is bringing with
him. Which of the following accounts can be opened, to suit his needs?
A: EEFC account
B: RFC (D) account

C: RFC account
D: NRO account
Answer: (C)
23. Foreign Exchange Rates in India are determined by:

A: Finance Ministry
B: RBI
C: FEDAI
D: Market Forces of demand/supply
Answer: (D)
24. Interest and principal can be repatriated by an NRI, in the following

accounts?
A: FCNR
B: NRE
C: EEFC
D: a & b
Answer: (D)
vkv/032011

FOREIGN EXCHANGE
SHORT NOTES
TRADE CREDIT
Trade Credit could be credit for import extended by supplier or Bank/FI abroad.
While credit given by supplier is Suppliers Credit, the Credit arranged by the
buyer from Bank/FI abroad is Buyers Credit. The salient features are:
¾ Maximum period for non capital goods is up to 1 year , for capital Goods
import it is less than 3 years
¾ Per transaction limit is USD 20 million
¾ Only for physical import of goods
¾ Merchant transactions and software import prohibited
¾ Issue of Guarantee/LOC/LOU by AD to supplier/foreign lender is permitted
¾ All in cost ceiling LIBOR+ 200 bps
¾ ADs to maintain Short Term Trade Credit approval register with Loan
Identification number
¾ Monthly report of Trade Credits approved to be sent to RBI by ADs
EXTERNAL COMMERCIAL BORROWING (ECB)
A foreign currency finance facility for eligible borrowers, the salient features
of which are:
¾ Available under automatic route( No prior permission from RBI) and
approval route( with prior approval from RBI
¾ Eligible borrower include Corporate registered under Companies Act,
Non Government Organisations(NGO) engaged in micro finance activity
subject to conditions and units in SEZ
¾ Amount USD 500 million /per borrower/financial year
¾ Maturity USD 20 million- average minimum maturity of 3 years and
above USD 20 million – average minimum maturity of 5 years
¾ All in cost – 3 years and up to 5 years =LIBOR + 300 bps, more than 5
years LIBOR + 500 bps
¾ ADs are not permitted to issue Guarantees/Letter of Undertaking or
Letter of Comforts
¾ Permissible end use include import of capital goods ,new projects or
modernisation or expansion in real sector , first stage acquisition of
shares ,ODI in joint ventures/WOS etc
STANDBY LETTER OF CREDIT
Standby letter of Credits are like guarantees with features of LC. It is permitted
to issue Standby LC for imports of goods in to India subject to guidelines issued
by FEDAI. Unlike documentary LC it is a clean facility hence collateral may be
insisted up on. To avoid possibility of double payment , invocation should be
accompanied by submission of one set of non negotiable documents . It is a
risky product .Satisfactory credit report of the beneficiary to be insisted up on.
Customers should be counselled before offering he product.

FOREIGN CURRENCY CONVERTIBLE BONDS
It is foreign currency finance option for Indian companies. The bonds, which are
debt instruments are issued in Foreign Currency. The principal and interest is
payable in Foreign Currency. The bond is convertible to equity either in part of
in full. The bonds are to be subscribed by non residents in Foreign Currency. The
repurchase of bonds are permitted subject to conditions.
PROJECT EXPORTS
Refers to export of engineering goods on differed payment terms or execution of

turnkey projects and civil construction contracts abroad.Contracts up to USD 100
million can be approved by ADs. Beyond USD 100 million by working
group.Regulatio is laid down in Memmorandum of Project Export(PEM).
Corporate guarantees can be issued by exporters in lieu of bid bonds not
exceeding 5% of the contract value.
MERCHANTING TRADE
It involve both import and export leg. The product of import and export should
be permitted by Foreign Trade Policy.The entires transaction should be
completed in 6 months. Merchanting trade are generally not finanaced.
COUNTER TRADE
Barter trade.Imports are balanced by exports either in cash/kind or a proportion

of both. For routing the transaction ESCROW account is to be opened with
permission from RBI The import leg should precede the export leg. Once the
counter trade agreement ends, the account is settled as receivable or payable.
EXCHANGE TRADED CURRENCY FUTURES
It is a standardised foreign exchange derivative contract on a recognised

stock exchange to buy or sell one currency against another on a specified future
date at a price specified on the date of the contract .
Eligibility: Person resident in India are eligible to hedge an exposure to forex
rate risk.
Features:
USD-INR , EUR- INR,GBP-INR & JPY-INR contracts only are allowed. Size of
each contract USD , EUR, GBP of 1000 and JPY 1,00,000. To be quoted in INR
and settled in INR. Maturity of the contract shall not exceed 12 months.
Settlement price shall be RBIs reference rate on the last trading day. Banks can
trade on behalf of the clients or on their own.To become a member of the
currency exchange Banks have to fulfil:
-Minimum networth Rs 500 crore
- CRAR 10
-Net NPA not to exceed 3 % of advances
- made net profit for the last 3 years

Diamond Dollar A/C:
A new diamond dollar account scheme has been introduced for the benefit of
diamond exporters wherein export proceeds will be retained in dollars and such
DDA holder will be allowed to utilise dollars in this a/c for import of Rough
diamonds/cut and polished diamonds from local market. The exporter/importer
should have good track record of atleast 2 years in import or export of
diamonds with an average turnover of Rs. 3 crores or above during the
preceding 3 licensing years. They are permitted to open Dollar accounts with not
more than five authorised dealers. The eligible firms and companies have to
apply for permission to the Chief General Manager, Exchange Control
Department, RBI, Central Office, Mumbai through their AD for opening DDA a/c..
Special Economic Zones:
With a view to enabling hastle free manufacturing and trading activity for the
purpose of exports, special economic zones are set up. The units in these zones
shall not be subjected to any pre-determined value addition, export obligation,
input-output/wastage norms. They shall be treated as being outside the customs
territory of the country. Sale in domestic tariff area by the Units in these zones
will be permitted only on payment of full customs duty.
Letter of Credit :
Parties to an L.C:
1. Applicant or Buyer or Importer or Opener. 2. Issuing Bank
3. Beneficiary or Exporter or Seller 4. Advising Bank
5. Negotiating Bank 6. Confirming Bank
7. Reimbursing Bank
Types of L.Cs:
1. Acceptance credits
2. Revocable/Irrevocable credits
3. Confirmed credits
4. With recourse and without recourse credits
5. Transferable credits
6. Back to back credits
7. Anticipatory credits
(a) Red clause credit
(b) Green clause credit
8. Revolving credit
Documents under L.C:
1. Bill of exchange
2. Invoice
3. Transport Documents
4. Insurance Documents
5. Other Documents

UCPDC 600 :
Uniform Customs and Practice for Documentary Credit (UCPDC) 2007 revision,
ICC Publication No.600 is a set of standard rules and definitions formulated by
ICC. It contains 39 articles. Some of the important features of UCPDC are as
follows:
1. All definitions such as Issuing Bank, Advising Bank, Applicant, Beneficiary,

Banking day Presentation, Confirmation, Confirming Bank, Credit, Honouring the
Draft, Negotiation, Nominated Bank, Presentation are defined in Article 2
2. All interpretations such as Irrevocable, 'well known', 'immediately' 'un till'
etc are defined in article 3
3. A credit is irrevocable even if there is no indication to that effect
4. Credit should be made available by Draft, drawn on a Bank (not on applicant);
Draft on applicant to be treated as an additional document
5. Banks deal with documents and not with goods, services or performance to
which the documents relate (Article 5)
6. A credit must state expiry date for presentation. An expiry presented for
honour or negotiation will be deemed to be an expiry date for presentation
(Article 6)
7. Non documentary condition in credit will be disregarded
8. An issuing bank is irrevocably bound to honour as of the time it issues the
credit(Art 7)
8. Refusal communication must list all discrepancies and must be given by
expeditious means no later than the close of the fifth banking day following the
day of presentation
9 Bank assumes no liability or responsibility for the consequences arising out of
delay, loss in transit, mutilation or other errors arising in the transmission of any
messages or delivery of letters or documents (Art 35)
10.Bank assumes no liability or responsibility for the consequences arising out of
the interruption of its business by Acts of God, Riots, Civil Commotion, Wars, Act
of Terrorism etc., or by any strikes or lockouts or any other causes beyond its
control.(Art 36) – Force Majeure clause
Exchange Rates:
Direct Rate: If the unit of foreign currency is kept constant and home currency is
varied then that rate is known as Direct rate.
Indirect Rates: If home currency is kept constant and foreign currency is varied
then the rate is known as Indirect Rate.
Two way quotations: It is customary in forex markets to always quote two way
rates i.e, one for buying and the other for selling.
Value date: Date on which exchange of currencies actually takes place is value
date. Value dates for the following contracts are as follows
(a) Cash/Ready - On the date of deal

(b) Tom - Next working day
(c) Spot - Second Working day after the date of the deal
(d) Forward rates - After spot date

Base Rate: Basis for computing Merchant rates.
Rates for Merchant Transactions
1. TT Buying For inward remittances like TT, MT, DD, where cover funds
are received in Nostro account..
2. TT Selling For outward remittances like TT, MT, PO, DD (other than
imports)
3. Bill Buying For Export bills
4. Bill Selling For all import transactions.
Export Declaration Forms:
1. G.R./ E.D.I / S.D. Form : Exports made otherwise than by post.

2. PP Forms : Exports made by Post Parcel.
3. Softex form : Export of computer software in non-physical form
ENC/SNC statement : To be submitted to RBI fortnightly along with R.Returns.
Restricted cover countries:
When payment risks become too high in a country, ECGC provides cover for
shipments to such countries on restricted basis. The Bank should obtain prior
approval of the corporation, before allowing any advance against the exports to
these countries.
Outward Remittances:
AD can release the foreign exchange upto the following limits for different
purposes without permission from RBI. If the amount of Foreign Exchange
exceeds the limits, RBI approval is required.
(a) Travel - Basic Travel quota US $10,000/- per person per

financial year.
(b) Education - US $ 1,00,000 or estimated amount per academic year
, whichever is higher
(c) Medical treatment- US $ 1,00,000 on declaration.
(d) Employment - US$1,00,000 per person
(e) Emigration - US$1,00,000/- per person
(f) Business Visits - US$25,000 per trip
(g) Resident Individual Remittance - US $ 2,00,000 per financial year (
inclusive of Gifts)
For all outward remittances (other than imports) to be applied in form A2.
Schedules attached to 'R' Supplementary Returns:
SCH-1 - (a) for Form A1 - payments below Rs. 5 lacs towards imports
(b) for payments above Rs. 5 lacs towards imports.
SCH-2 - (a) for Form A2 - payments below Rs. 5 lacs towards other than
Imports
(b) for payments above Rs.5 lacs other than Imports
SCH-3 for exports where full value has been realised

SCH-4 for exports where part value has been realised

SCH-5 for exports where full value has been received in advance
SCH-6 for exports where part value has been received in advance
Non Resident Indians
(i) Indian citizens who stay abroad for employment for carrying on a
business or vocation or for any other purpose, in circumstances
indicating an indefinite period of stay outside India.
(ii) Indian citizens working abroad on assignments with foreign
governments,
International agencies like UNO, World Bank, IMF etc.
(iii) Officials of Central, State Govt. and PSU deputed abroad on
temporary assignments or posted to their offices.
Persons of Indian Origin: A citizen of any other country(other than

Bangladesh or Pakistan)
(i) He at any time held Indian passport ( or)

(ii) He or either of his parents or any of his grand parents was citizen of India
(or)
(iii) the person is spouse of Indian citizen or of a person of Indian origin as in (i)
&(ii).
SWIFT
Society for worldwide Inter Bank Financial Telecommunications. HO, Brussels,

(Belgium)
RBI and Commercial Banks are its Members. SWIFT allows member financial
institutions world wide to electronically exchange information amongst each
other. The services offered by Swift are cost effective, reliable, and secure.
Messages are transmitted globally through high speed communication channels
on standardised message formats for many international banking operations.
Swift has a Regional Processor (RP) in each host country through which all the
messages meant for the country are routed. Each user (Bank) in that country is
required to install a Computer Based Terminal (CBT) in his own premises. The
CBT is a device for interfacing with the SWIFT RP through the telephone lines.
Swift network ensures that no fraudulent message can enter the system nor can
any message be modified during the process. The Network is available 24 hours
a day and seven days a week with all messages delivered within normal business
hours irrespective of geographical destination. Swift ensures against loss or
mutilation of messages during transmission.
FORFAITING
The word forfaiting has been drawn from French Language and it means given
up our Right. It is a mechanism of financing exports.
• by discounting export receivables
• evidenced by bills of exchange or promissory notes.
• without recourse to the Seller (exporter)
• on a fixed rate basis (Discount) and

• Up to 100% of the Contract Value
Forfaiting is the non-recourse discounting of export receivables. In a forfaiting

transaction, the exporter surrenders, without recourse to him, his rights to claim
for payment of goods delivered to an importer, in return for immediate cash
payment from a forfaiter. As a result, the exporter in India can convert a credit
sale into a cash sale, with no recourse to him or to his Banker.
In a Forfaiting transaction, Bills of Exchange or Promisory Note backed by Co

acceptance (or avalisation) from the buyers' Bank are endorsed by the exporter,
without recourse, in favour of forfaiting agency in exchange for discounted cash
proceeds.
EURO
European Union (EU), consisting of 15 member Countries viz; Germany, France,

Italy, UK, Spain, Netherlands, Belgium, Austria, Sweden, Denmark, Finland,
Portugal Greece, Ireland and Luxumberg in the Maastincht Treaty 1991, decided
to have a Single European currency called 'EURO’.
It is aimed to eliminate exchange risk costs in national currencies of EMU

Member countries and to promote free flow of trade, investment among EU
Nations, in order to reduce costs, abolish tariffs and to make European business
globally more competitive.
• From 1-1-99 Euro conversion rates for all major currencies have been
quoted.
• From 1-1-2002 Euro has become the Legal Tender and co-exited with
National currencies up to 30-6-2002.
• From 1-7-2002, the European States cancelled the “Legal Tender” status
of their respective National Bank Notes and Coins..
• From 1-7-2002 Euro replaced the national currencies and is the sole legal
tender in EMU States.
Britain. Denmark. & Sweden are yet to join in the Euro conversion.
FOREIGN EXCHANGE MANAGEMENT ACT, 1999 (FEMA)
Foreign Exchange Management Act came into force w.e.f. 1-6-2000. Foreign
Exchange Regulation Act, 1973 is replaced by FEMA 1999. FEMA is aimed at for
facilitating the International Trade and Payments and maintenance of an orderly
Forex market in India.
FEMA is a civil legislation. Onus of proving the contravention rests with the
enforcement authorities and not on the accused. Any violations of FEMA
provisions are treated as civil offences and attracts penalty to a maximum of 3
times to the sum involved and imprisonment only when penalty is not paid (Sec.
13.)
All Forex Transactions have been divided into Current Account transactions &
Capital Account transactions. Transactions that alter the assets and liabilities

outside India of a person resident in India or assets or liabilities in India of a

person resident outside India have been classified as capital A/C transactions. All
other transactions are current A/C transactions.
As per Sec. 10(6) of FEMA, Foreign Exchange drawn for a particular purpose, can
also be used for other purposes also, provided such purpose is permissible under
the Act.
Resident Foreign Currency Account (Domestic):
All Resident individuals in India can open the Resident Foreign Currency
(Domestic) account with foreign currency notes and travellers cheques, which
they got out of:
(a) Unspent amount of foreign exchange acquired from an authorised person for
travel abroad;
(b) Received by way of honorarium or gift or payment for services while on a
visit to any place outside India;
(c) Received from any person not resident in India and who is on a visit to India
as honorarium or gift or for services rendered or in settlement of any lawful
obligation;
(d) Gifts received from close relatives and repatriated to India through normal
banking channels and foreign exchange earnings through export of goods,
services, royalty, honorarium etc,.
Currency of the account and Minimum Balance: USD min. 500; GBP min.
250; EURO min. 500
Type of account and Rate of Interest: Only Current account and no interest is to
be paid. No overdraft, loan/advance shall be allowed.
Debits: The balances in the account can be used for any approved purposes for
which foreign exchange can be purchased from a bank in India i.e., for payment
towards current/capital account transactions.
Cheque book facility is available.

Features of various deposit schemes available to

Non-Resident Indians
Particulars FCNR a/c NRE a/c NRO a/c

(Foreign (Non-Resident (Non-Resident
Currency External Rupee Ordinary a/c.)
Non-Resident a/c.)
a/c.)
1 2 3 5
Who can open an NRIs. NRIs Any person resident
account outside India
Joint account of two
or more NRIs Permitted Permitted Permitted
Joint account with
another person Not permitted Not permitted Permitted
resident in India
Currency in which Pound Indian Rupees Indian Rupees
account Sterling,
denominated US Dollar,
Euro. AUS $ ,
CAN $
Repatriability : Freely Freely Repatriable up to USD
repatriable repatriable 1 million per finanacial
year
Type of accounts Term deposits Current, Current, Savings,
only Savings Recurring,Fixed
Recurring, Deposits
Fixed Deposits
Period for fixed Min one year Min one year As applicable for
deposits and maxi 5 and Max 10 domestic deposits
years years
Notes:
1. Nomination facilities: Nomination facility is available in all types of

accounts maintained in the names of individuals only. Nominee may be a
resident or a non-resident.
1) Packing Credit or Pre shipment Credit (PC):- Any loan or advance

granted or any other credit provided by the bank to an exporter for financing the
purchase, processing, manufacturing or packing of goods prior to shipment on
the basis of letter of credit/order for export of goods from India.
1) RBI provides Refinance to Banks on the outstanding amounts under PC

sanctioned in rupees for a period not exceeding 180 days

2) If PC is not adjusted by submission of export documents within 360 days

from the date of advance – no concession in rate of interest from the date of
advance.
3) If the exports do not materialize at all, domestic lending rate should be

charged on the relative PC advance.
Liquidation of PC:- By submission of export documents/from the balances in

Export Earners Foreign Currency A/c (EEFC)/ rupees resources to the extent
exports have already taken place
Running Account:- It is a facility given to exporters by banks for availing

Packing Credit in respect any commodity without insisting on prior lodgement of
LC/firm export orders. In our Bank Running Account facility is extended only for
accounts rated “A” and above by the sanctioning authorities. LC/Order to
be submitted with a reasonable period of time.
Export Credit Guarantee Corporation provides protection to banks against

non payment of pre shipment credit and post shipment credit by exporters.
It is called ECIB (Export Credit Insurance for Banks) WT-PC( Whole
Turn over Packing Credit) & WT-PS ( Whole turn over Post shipment)
Packing credit in foreign currency:- Pre-shipment credit in foreign currency:-

• Objectives
• Competitive rates of finance
• Additional window of finance
• Any convertible currency
• Similar terms and conditions like P/C
• Running Account also available
• Only for cash exports
Source of funds –
foreign currency funds arranged by the Bank under Line of Credit, Syndicated
Loans, FCNR(B), EEFC & RFC deposits
• Prior permission of RBI not required
• Liquidation by discounting of bills under Rediscounting of Export Bills
abroad
• Exporter have the following options:-

• Preshipment in Rupees – Postshipment in Rupees or REBA
• Preshipment in FC and Postshipment in REBA
• Preshipment in FC and then repay/prepay out of EEFC
• Preshipment in Rupees and then convert into PCFC at the discretion of
Bank.
• ECGC cover will be available in rupees only

Inter rate on Export Credit in Foreign Currency:-
Upto 180 days …..Libor + 2%
Beyond 180 days and upto 360 days : Rate of interest of 180 days
prevailing at the time of extension + 2%
Pre-shipment credit in foreign currency (PCFC)
• Normally for 180 days
• Extension of credit beyond 180 days upto 360 days – similar to that of
packing credit in rupees with additional cost of 2% above the rate of
interest of period 180 days
• If no export within 360 days PCFC adjusted at TT selling rate for currency
concerned - Interest will be charged at appropriate rates on rupee
equivalent of the principal amount at ECNOS (plus a penal rate as per
bank’s discretion)
RBI guidelines relating to PCFC

• From 1 Jan 99,PCFC can be made available in EURO also
• Simplify procedures -Application form
• W/C finance by banks -any suitable method
• For export of seasonal commodities, peak and non-peak credit facilities
• Inter changeability of pre and post shipment finance now allowed
• Term loan requirement for modernisation /upgrading technology to be
met
• Export assessment need-based and not linked to collateral
• Credit Committee to be set up
• More publicity and training
2) Post shipment credit in Rupees:- It is an advance or loan granted or any

other credit provided by the bank to an exporter of goods from India from the
date of extending credit after shipment of goods to the date of realization of
export proceeds and includes any loan or advance granted to an exporter, in
consideration of, or on the security of any duty drawback allowed by Govt of
India from time to time
Normal Transit Period (NTP) for export bills as per FEDAI is 25 days which
is the period of advance. It means the average period normally involved from
the date of negotiation/purchase/discount till the receipt of proceeds in the
Nostro Account of the bank concerned. It should not be regarded as the
time taken for arrival of goods at overseas destination.
For usance bills, exporter should not drawn bill of exchange for more
than 180 days (maximum duration 180 days) from the date of shipment
inclusive of NTP
Overdue Bill:-
In case of demand bill which is not paid before the expiry of the normal transit
period and In case of usance bill, which is not paid on the due date

Export Credit not otherwise specified (ECNOS):- Interest rate for the period
beyond the due date ie., for the overdue period the rate fixed is ECNOS and no
penal interest should be charged.
Consignment exports to Russian Federation against repayment of state

credit in rupees:-
1) Application should be made to RBI by the Status Exporters and others with
good export track record for shipments made to Russian Federation on a
consignment basis for a longer period upto 360 days from the date of shipment
for realization of export proceeds and the payments will be made against
repayment of state credits in rupees. Our Opera House Branch is the nodal
branch for exports to Russia.
Export Credit Guarantee Corporation provides protection to banks against

non payment/realization of export proceeds by exporters subject to certain
conditions stipulated by them. It is called Export Credit Insurance for
banks(ECIB) (Whole Turnover Preshipment(WT-PC)& Post shipment(
WT-PS) scheme)
Deemed Exports:- In simple terms, it is an export where the goods do not

leave the country, but supplies made within the country for projects
aided/financed by bilateral or multilateral agencies/funds including world bank.
As notified under Deemed Exports in EXIM Policy.
Deemed exports are eligible for concessional finance under Pre shipment
credit and post shipment credit (for a maximum period of 30 days or upto
the actual date of payment by the receiver of goods whichever is earlier)
Deemed Exports – Both pre shipment & post shipment credit eligible for
refinance from from RBI
Post shipment credit in foreign currency:- Rediscount of Export Bills

Abroad (REBA)
This is an additional window to exporter
The facility will be available in all convertible currencies

The scheme covers the bills upto 180 days
The scheme envisages ADs rediscounting the bills in overseas markets at rates
linked to LIBOR for six months
ADs have been permitted to use on-shore foreign exchange funds also
In our Bank, Investments & International Banking, Mumbai arranges funds

from overseas banks through Line of Credit, Syndicated Loans, FCNR(B)
Deposits etc., for lending in Foreign Currency under PCFC/ REBA. Ultimate cost
to exporter should not exceed 100 Basis Points above 6 months London
Inter Bank offered Rate(LIBOR)/EURILIBOR/ EURIBOR excluding
withholding tax

Options to the Exporter
To avail Pre-shipment & Post-shipment in rupees

To avail pre-shipment in Rupees and Post-shipment in the form of rediscounting
of export bills in F.C.
To avail Pre-shipment in F.C. and Post Shipment under REBA
3) Gold Card Scheme for Exporters ( H.O. cir 122 Ref No 15/21 dt
5.7.2004)
In pursuance with the Exim Policy 2003-04, RBI announced Gold Card Scheme
for credit worthy exporters with good track record for easy availability of export
credit on best terms. B & C Category branches will have to identify the eligible
and credit worthy exporters including those in small and medium sectors with
good track record for issue of Gold Cards as per the following criteria laid down
by our Bank
1) Eligibility:- 1) Credit rating of A+ and above 2) Exporters’ account classified

as Standard Asset continuously for a period of 3 years and there are no
irregularities/adverse features in the conduct of the accounts will be considered
as having good track record
3) Those Exporters not blacklisted by ECGC or included in RBI Defaulters’
List/caution list. 4) Exporters making losses for the past 3 years or having
overdue export bills in excess of 10% of the currency year’s turnover will not be
accorded the status “Gold Card Holder”( RBI exempted over due in excess
of 10% clause for the year 2009-10 on account of recession)
Time limit for sanction of credit facility:-
For disposal of fresh applications: 25 days

Renewal of limits : 15 days
Sanction of Adhoc limits : 7 days
Rate of Interest:- Reduction in rate of interest for export credit
For A +++ customers by 0.5%

For A ++ & A + customers by 0.25% compared with the interest rates offered to
other exporters (H O Cir 147 Ref No 15/28 dt 26.7.2004)
Concession in Service Charge:- 25% concession on the normal service

charges to be levied
Adhoc Limits:- 20% of the assessed limit as stand by limit for meeting urgent
credit needs for executing sudden orders
Validity of the sanction:- Valid for 3 years and will be automatically renewed
for a further period of 3 years unless there are adverse features/irregularities in
the account.
000000

Export Credit Guarantee Corporation (ECGC):-
Export Credit Insurance for Banks(ECIB)
Maximum Liability:- maximum claim amount paid to the bank for advances
granted during the year is Rs500 Cr
Percentage of cover:- (per exporter) :For losses upto Rs 873.46 lac

75%
-do- beyond Rs873.46 lakhs 65%
PC to small scale exporters (Annual turnover not exceeding Rs 50 lakhs) 90%
Discretionery Limit:- Limits not exceeding Rs 100 lakhs to any new exporter
customer, sanctioned by the bank at its own discretion, but in accordance with
the rules and procedure will be eligible for cover. Any amount beyond Rs.100
lakhs need the approval of ECGC before disbursement by the branches(
Accounts classified as Standard assets need not seek prior papproval
but to be notified to ECGC within 30 days from the date of
sanction/enhancement of limits)
Premium payable:- 6 paise per Rs100 per month on the average daily
product on a monthly basis payable on or before the last working day of the
succeeding month
Whole Turn Over Post Shipment (WT-PS)
Maximum Liability:- maximum claim amount paid to the bank for advances
granted during the year is Rs500 Cr
Percentage of cover:-
Policy Holders:-
Associates …60% Others 90%
Non Policy Holders:-
Associates …. 50% Others …..60%
Associate means an overseas subsidiary or any associate of the exporter client

of the insured in which the exporter client has financial interest and/ or
operational/ managerial control)
Discretionery Limit:- Limits not exceeding Rs 100 lakhs to any new exporter
customer, sanctioned by the bank at its own discretion, but in accordance with
the rules and procedure will be eligible for cover. Any amount beyond Rs.100
lakhs need the approval of ECGC before disbursement by the branches.(
Accounts classified as Standard assets need not seek prior papproval
but to be notified to ECGC within 30 days from the date of
sanction/enhancement of limits)

Premium payable:- 5.5 paise per Rs100 per month on the average daily
product on a monthly basis payable on or before the last working day of the
succeeding month.
NRI Deposits:-
Int on NRE Deposits are quoted as follows:- 1 year < 2 years, 2 years < 3 years
and 3 years and above.
Interest rate on SBNRO & SBNRE is applicable to domestic deposits(presently

3.5 % p.a. Int rate on NRE term deposits is linked to LIBOR/SWAP. On NRE
Term deposits the ceiling is LIBOR/SWAP for corresponding maturities plus 175
bps. FCNR(B) it is LIBOR/SWAP plus 100 bps
Any individual having right to operate SB/NRE a/cs are eligible for issue of
ATM/Debit card.
FCNR(B) Deposits:- Interest rates for a maximum period of 5 years are offered
for the following currencies.
1) US Dollars 2) Great Britain pound 3) Euro 4) Canadian Dollars 5) Australian

Dollars
Interest rates on FCNR(B) deposits are revised on monthly basis on the last day
of the preceeding month and are effective for the succeeding month ( The ceiling
on FCNR(B) it is LIBOR/SWAP for corresponding maturiry plus 100 bps
FCNR(B) Accounts – Levy of Swap cost/ penalty on premature closure

(H O Cir 74 Ref No 15/06 dt 7.6.2006
1) Before the expiry of one year from the date of FCNR (B) deposit:- No
interest is payable for the period of less than one year. Further branches shall
levy penalty to cover actual swap cost if the deposit is more than USD 10,000 or
its equivalent
2) a) After expiry of one year from the date of deposit, but before the
due date
1) For the purpose of renewal – Penalty of 1% is waived

provided the fresh deposit is made for a longer period than
the residual maturity period of the existing deposit. The
deposit shall be renewed for the same currency and under the
same scheme.
2) In the case of premature withdrawal of deposit after
expiry of one year from the date of deposit for any
other reasons – penalty of 1% less is levied on the
applicable rate of interest for the period for which the deposit
has remained with the Bank

NRI depositors have to be informed about the penalty provision in

FCNR(B) deposits at the time of acceptance of fresh/renewal of
deposits.
Opening of Representative Office in Dubai & New Jersy(USA): It is only a

liaison office and no normal banking transaction take place
Imports:- Imports of goods value USD 1,00,000 and less – follow up for
evidence of import ( H O cir 62 Ref No 15/04 dated 30.05.2006)
AS per RBI guidelines, Authorised Dealer branches (“B” Cat Branches) making
import remittances are advised to ensure that the importer submits
documentary evidence of import ie., Exchange Control copy of the Bill of
entry for Home Consumption It is obligatory for ADs to follow up with the
importers for submission of evidence of import if the remittance exceeds USD
100,000 or its equivalent.
Where the imports are made in non physical form ie., software or data through
internet/datacom. Channels etc., a certificate from Chartered Accountant that
the software has been received by the importer may be obtained and the
customs authorities be informed by the importer.
In case of documentary evidence (bill of Entry) for remittances less than USD
1.00 lakh or its equivalent, RBI delegated powers to ADs and branches need to
observe the following:
Category of Importers Documentary Evidence required

a) Importers who are enjoying For all imports of USD 1 lakh and below or its
credit limits from our Bank and equivalent
documents routed through our Self Declaration from the lmporter for
Bank remittances made against import
b) Importers who are not 1) For all imports upto USD 25000 or its
enjoying any credit facilities, equivalent
but maintaining current account a) self Declaration from the importer for
with our Branches remittances made against import
2) Above USD 25000 and upto USD 1 lakh or
its equivalent
a) Self declaration from the importer and
b) Certificate from the auditors of the
company/firm certifying that the goods have
been imported into India by the importer
c) Importers who receive Exchange control copy of the Bill of Entry for
original documents directly Home Consumption (original) has to be
from the overseas exporters submitted at the time of remittance by the
importer irrespective of whether the importer
is a borrower or not.
Policy guidelines on issue of Letter of Comfort(LOC)/Letter of

Undertaking (LOU)/Guarantee ( H O Cir 289 Ref No 26/60 dt 2.12.09)
- Given by “B’ Category branches in favour of an overseas supplier,

bank or financial institution, upto USD 20 Million per transaction for

a period of one year for import of all non capital goods permissible
under Foreign Trade Policy (except gold) and
- upto 3 years for import of capital goods, subject to prudential

guidelines issued by RBI from time to time
Eligibility:- Our borrower constituents who are enjoying import credit facility
under Trade Credit. Trade Credit refers to credits extended for imports directly
by the overseas bank, and financial institutions for original maturity of less
than 3 years
Trade Credit, depending upon the source of finance, includes suppliers’ Credit
or Buyers’ Credit
Suppliers’ credit: Credit extended by the overseas supplier to Indian importer

for import of goods into India
Buyers’ Credit:- Loan for imports into India arranged by the importer from a
bank or financial institution outside India for a maturity of less than 3 years.
Issue of Letter of comfort (LOC)/Letter of Undertaking (LOU)/Guarantee is
applicable for Buyers’ Credit.
Maximum Amount:- USD 20 Million or its equivalent per transaction
Period: One year for import of all non capital goods and less than 3 years for
import of capital goods. The period of LOC/LOU/Guarantee has to be co-
terminus with the period of the credit, reckoned from the date of shipment. No
roll over/extension will be permitted beyond the permissible period.
All in cost payable to overseas institution not to exceed-

1) Maturity period upto 1 year ---- 6 month LIBOR + 200 basis
points
2) More than 1 year but less than 3 years – 6 month LIBOR + 200
basis
points
Branches need to obtain approval from Investments & International Banking,

Mumbai from Exchange Control Angle.
*****
Eaxposure of the Bank for setting up special Economic Zone (SEZ) or acquisition
of units in SEZ which includes Real Estate as Exposure to commercial Real
Estates
(H O Cir 230 Ref No 26/29 dt 27.9.2006)
Exposure of Banks to entities for setting up SEZ or for acquisition of units in SEZ
which includes Real Estates would be treated as exposure to commercial
real estate sector and banks would have to make provision as also assign
appropriate risk weights for such exposure as per the existing guidelines.
*****

Purchase of Immovable property in India by NRIs & PIOs – Mode of

payment
(H.O., Cir No 178 Ref No 15/11 dt 26.8.2006)
Indian citizen resident outside India and person of Indian Origin can acquire
immovable property in India other than agricultural property, plantation or a
farm house and the payment for such acquisition shall be made out of
1) funds received in India through normal banking channels by way of inward
remittance from any place outside India or
2) funds held in any non resident account maintained in accordance with the
provision of the FEMA 199 and the regulations made by RBI from time to
time
It is clarified by RBI that such payments cannot be made either by Traveller’s

cheque or by foreign currency notes or by other mode other than specifically
mentioned in (1) or (2)
Foreign Contribution Regulation Act (FCRA)1976 – (H O Cir 163 Ref No 15/10

dt 8.8.2006)
Associations registered under FCRA (1976) are required to furnish intimation

about the acceptance, source, manner and utilization of foreign contribution in
the manner and within the period prescribed under the Act. No organization
shall receive foreign contribution without registration or prior permission from
the Central Government.
Issue of Encashment Certificates (EC) by branches: ( H O Cir 162 Ref No

15/09 dt 8.8.2006
Authorised Branches are required to issue Encashment Certificates in the Form

ECF in all cases of purchase of foreign exchange from public, irrespective of
whether the Currency Declaration Form (CDF) has been submitted or not by the
tenderer of foreign exchange or request made by him.
Existing Guidelines Revised guidelines
Certificate is to be issued on a Certificate on security paper
security paper dispensed with.
If the amount of foreign currency Instead, when requested by customers,
encashed exceeds Rs 15000/- in ECF duly authorized by the officials of the
value and in other cases, on the Authorised Branch on the letter head of
letter head of the branch with the the branch with logo printed on it may
logo printed on it be issued irrespective of the amount.
Customers should be advised that in the
absence of the ECF, unspent local
currency held by non-resident visitors will
not be allowed to be converted into
foreign currency. At the time of
reconversion, Authorised Branches have
to retain the encashment certificates
tendered by non residents for record
VKV/03/2011

PRUDENTIAL ACCOUNTING NORMS –

INCOME RECOGNITION, ASSET CLASSIFICATION & PROVISIONING
01. What are Prudential Norms?

Income Recognition, Asset Classification, Provisioning & Maintenance of
Capital Adequacy by Banks.
02. What is the basic principle of Income Recognition norms?

Record of Recovery.
03. What are the losses to Bank if an account becomes NPA?

a. The account stops generating income to Bank.
b. The income already booked on that account is reversed.
c. It requires provisioning (10% to 100%) out of profits of the Bank.
04. What is the present specified period for identification of NPAs?

90 days.
05. How is a CC / OD account classified as NPA?

a. If the O/S continuously exceeds the Limit/D.P. for more than 90
days.
b. If the O/S are within the limit & D.P. but there are no credits in the
account.
c. If the O/S are within the limit & D.P. and the credits are not enough
to cover the Interest Debits during preceding 90 days period.
d. If the limits are not renewed / reviewed within 180 days from the
due date
e. If the irregular drawings continue for more than 90 days.
06. What are irregular drawings?

If the drawings are made against stock statement of more than 3
months old.
07. What is the special treatment given for Agril. Loans?

Where repayment is synchronised with harvest, and the loan is granted
for short duration crops the loan will be treated as NPA if the
installment of principal or interest thereon remains overdue for two
crop seasons. In respect of a loan granted for long duration crops if
the installment of principal or interest thereon remains overdue for one
crop season.
Long duration crops would be crops with crop season longer than one
year and crops which are not ‘long duration’ crops will be treated as
‘short duration crops’.

The crop season for each crop, which means the period up to
harvesting of the crops raised, would be determined by SLBC in each
state.
08. What is the treatment given for Consortium advances?

The asset status is to be determined by the member Banks,
individually, depending on the Record of Recovery in the accounts with
them.
09. What is the amount of interest to be reversed when an account is

identified at NPA?
Total unrealized interest, not only pertaining to current year but for
earlier years also.
10. What is interest suspense and what is shadow liability?

Periodic interest in NPA account can be debited to the borrowal a/c, but
not booked as income, unless it is realized. Some banks show such
interest as interest suspense and some banks maintain shadow
liability, including the up to date interest.
11. What are the categories of additional facilities sanctioned to

existing NPA a/cs that are exempted from Asset Classification &
Provisioning norms for 1 year from the date of disbursement?
a. Facilities sanctioned under rehabilitation package approved by BIFR
& Term Lending Institutions.
b. Facilities sanctioned under rehabilitation package approved by
Individual Bank to MSME units.
c. Facilities sanctioned under rehabilitation package approved by
Consortium to units.
12. NPA can be under Sub-standard category for period of-

12 months .
13. After how much period a NPA will become a Loss Asset?
NPA will not become loss asset on the basis of age of NPA. An account
can be directly identified as loss asset by auditors/inspectors taking
into consideration the aspects like availability and realisability of
security, threat of recovery, etc.
14. What are the provisioning norms?

a. Sub Standard Asset --- flat 10% on outstanding balance.
10% in respect of accounts with unsecured exposures(additional)
.(If realizable value of the security is less than 10%, as assessed by
bank or accepted by RBI Inspectors, then the same is an unsecured
exposure
b. Doubtful assets ---
20% on sec portion + 100% on un-Sec portion

-- doubtful up to 1 year,
30% on sec portion+ 100% on un-Sec portion
--- 2nd & 3rd year
100% on sec portion + 100% on un-Sec portion --- more than 3
years.
c. Loss Asset --- flat 100% on outstanding balance
d. Standard Asset ---
i. flat 0.25% on outstanding balance on AGRL. and SME
Advances.
ii. 1% for commercial Real Estate
iii. flat 0.40% on Outstanding balance on all other advances.
iv. Provisioning on Standard Assets is made at Head Office.
15. What is the basic principle of compromise ?

To recover maximum amount with minimum sacrifice.
16. Willful Default is defined by RBI as,

a. Deliberate non-payment of the dues despite adequate cash flow and
good net worth.
b. Siphoning off of funds to the detriment of the defaulting unit.
c. Assets financed have either not been purchased or have been sold
and proceeds have been misutilised.
d. Misrepresentation/falsification of records.
e. Disposal/removal of securities without Bank's knowledge.
f. Fraudulent transactions by the borrower.
17. What is PNPA?

Potential NPA is a loan or advance where interest and / or installment
of principal remains overdue for a period of 30 days but below 90 days.
18. What is Slippage Ratio?

Fresh additions of NPAs during the year as % to the Standard assets at
the beginning of the year.
19. What are the types of reduction in NPAs?

Actual Recovery, Compromise, Write-off & Up gradation.
20. Why do we go for technical/prudential Write-off?

Clean and transparent balance sheet of the Bank.
21. What is the periodicity of valuation of securities?

Collateral securities shall be got revalued once in 2 years. For accounts
of Rs.5 crore and above, once in a year.

22. Who has to bear the revaluation fee, in respect of Suit-filed A/Cs,
Shall be borne by the Bank.
23. What is Net NPA?

Gross NPA LESS (Provisions held towards NPAs + Balances in Interest
Susp A/c + Part Payments received in Suit-filed a/cs and kept in
Sr.Susp + Claims received from CGC and kept in Sr. Susp a/c)
24. What are the exempted category of advances?

Advances against Bank's own deposits, NSCs, IVPs, Kisan Vikas Patras,
& Life Insurance Policies eligible for surrender.
25 What are the remedies available to reduce NPAs?

•USE SARFAESI ACT
•VERIFY DOCUMENTS AND SUBMIT SUITFILING PROPOSALS
WHERE EVER NECESSARY
•DRTs
•LOK ADALAT
•COMPROMISE
•WRITE OFF
26 SARFAESI ACT –2002 is a combination of……..
• 1.Securitisation Act 2002
• 2.Reconstruction of Financial Assets Act 2002
• 3.Enforcement of Security Interest Act 2002
27.what is the cut-off limit for enforcement of security interest as

per the provisions of the Act ?
Any security interest for securing repayment of any financial asset

exceeding Rs.1.00 lack provided the amount due is not less than 20% of
the principal amount and interest thereon.
28. What are points to be considered as Qualification for Action

under SARFAESI Act ?
•1.Account classified as NPA
•2.NPA amount should be above Rs 1 lakh
•3.NPA should be backed by secured assets
•4.Amount due is not less than 20 % of the principal and
interest thereon
•5. Account is not time barred
29. Mention a few steps of action under Sarfaesi Act

•1. Issue 60 days demand notice
•2.Send reply to borrowers objection
•3.Take physical possession of secured asset
•4.Serve and publish Possession Notice
•5.Valuation and fixation of Reserved Price
•6.Insurance and safe custody

•7.Service& publish 30 days sale notice

•8.Sale & Appropriation
•9.Filing of suit for balance unrecovered
30. Whether demand notice u/s 13(2) could be issued in cases where
legal action is pending before the D.R.T./Civil Court/BIFR?
Yes. The D.R.T./Civil Court/BIFR as the case may be is to be informed

suitably, simultaneously with the initiation of action under the
securitisation Act through Bank’s dealing advocate.
31. If the demand notices sent to the borrower /guarantor are returned
unnerved/undelivered what is the next step to be taken?
Authorised Officer may affix the notices on the outer door or some other
Conspicuous part of the house/building where the borrower is residing or
Carrying on the business or working for gain and should also publish them
in two leading newspapers (one in vernacular language) having sufficient
circulation in that locality.
32. Whether 60 days has to be reckoned from the date of notice or

the date of receipt of notice by the borrower/ guarantor?
The time period of 60 days should be reckoned from the date of
receipt of notice and not from the date of notice.
33. If the amount mentioned in the demand notice is not paid within
the time specified, what measures can the Authorised officer take to
realize the amount?
The authorized officer may adopt one or more of the following measures
as specified in sub-section (4) of section 13 of the Act.
•
Take possession of the secured assets of the borrower including the
right to transfer by way of lease, assignment or sale for realizing
the due.
• Take over the management of the secured assets of the borrower
including the right to transfer by way of lease, assignment or sale
and realize the secured asset.
• Appoint any person to manage the secured assets the possession of
which has been taken over by the secured creditor.
• Require, at any time by notice in writing, any person who has
acquired any of the secured assets from the borrower and from
whom any money is due or may become due to the borrower, to
pay the secured creditor so much of the money as is sufficient to
pay the secured debt.
34. Whether demand notice under Section 13 (2) of SARFAESI Act,
2002 is required to be issued to guarantors also.

The Demand Notice contemplated under section 13 (2) of the SARFAESI Act,
2002 is a procedural requirement before enforcing the security interest. Looking
at the purpose of SARFASI Act, 2002, it is possible to take a view that notice to
guarantor is not stipulated in the statute, save in those cases where the property
over which the security interest is created and enforced belongs to the
guarantor. Hence the notice to guarantor is required to be given only when it is
a part of contractual covenant or the security interest sought to be enforced is
derived from the guarantor’s property. However for the sake of good order, a
copy of the notice issued to the borrower may be marked to the guarantor.
35. Debt Recovery Tribunal deals with;

The cases involving total dues of Rs.10 lakh & above
36. What is Ever greening ?

a. Re-schedulement of a loan for the purpose of avoiding an account
becoming NPA,
b. Recovery of Interest / installments by sanctioning additional
facilities to avoid showing an account as NPA,
37.What is High value NPAs as per our Bank guidelines?

NPAs with balance of Rs.25.00 lacs & above.
38.What is the exception to treat all the credit facilities of a borrower

as NPAs, if one of the credit facilities becomes NPA?
Credit facilities sanctioned to PACS/FSS
39.How is surplus recovery treated?

Surplus recovery can be advance recovery towards principal but not
towards future interest debits.
40. What is the treatment given to restructured accounts?

The status of the account remains same for at least one year of
satisfactory performance under the restructured terms.
41.What is CDR?
Corporate Debt Restructuring deals with restructuring of accounts with
exposure of Rs.10 crore and above.
42.What is the structure of CDR?

CDR system will have three-tier structure
i. CDR Standing Forum
ii. CDR Empowered Group
iii. CDR Cell.

FEE BASED PRODUCTS & ANCILLARY SERVICES
1. For issuing Master card, the applicant should have a minimum proven yearly
net income of rupees?
1. 25000 2. 96000 3. 60000 4. 75000 5. 100000
2. For issuing Gold Cards, the applicant should have a minimum proven yearly
net income of rupees :
1.50,000 2.72,000 3. 1,20,000 4. 1,20,000 5. 2,00,000/ -
3. Add on card facility is available to :
1. Classic card 2. Master Card 3. Gold Card 4. 1,2 & 3 5.
only 3
4. Drafts/TTs for sum of Rs. and above are to be routed (issue and encashment)
through account as per RBI's guidelines :
1. 20000 15000 3. 50000 4. 75000 5. 100000
5. Where duplicate draft is issued and original is presented for payment, following
should be done :
1. Return the original with remark 'original reported to have been lost,
duplicate issued and will be paid on presentation'
2. While returning write on the Face of the D.D. in red ink a line reading
payment of original Draft is stopped, duplicate is issued and Duplicate draft
will only be paid on presentation"
3. 1 & 2, both should be done
4. return with remark 'payment stopped by issuing branch'
5. none of these
6. What is the agency commission payable for “Payments other than Pensions”?
1 .0.09 ps / 100 2. 0.06 ps / 100 3. 45 Rs 4. 60 Rs 5. none of
these
7. What is the maximum cash advance facility allowed in credit card based on the
limit?
1. 100% 2. 50% 3. 75% 4. no facility 5. depends on
the natue card
8. As per guidelines issued by RBI banks may allot lockers to public on the basis
of
1. deposit given by the prospective hirer
2. first come first serve' for all the available lockers
3. ' first come first serve' to the extent of at least 80% of the available, lockers
4. the sole discretion of the manager
5. none of these
9. On the articles kept by the hirer in the locker, the banker has
1. Right of set-off 2. Particular lien 3. General lien under Section 171 of
the contract Act 1872 4. All of these 5. None of these
10. A minor may be allotted a locker :
1. provided he is 12 years of age
2. provided he is 16 years of age
3. provided the court permits
4. provided he takes it jointly with natural guardian
5. cannot be allotted
11. The hirers of lockers are required to deposit the rent of lockers in advance on
•
1. monthly basis 2. quarterly basis 3. half-yearly basis 4. yearly basis

5. at their will
12. At the time of allowing a party to operate the locker, his identity is to be
established by :
1. Signature 2. Password 3. Signature & password 4. Introduction
5. None of these
13. Which of the following keys are to be used for opening a locker
1. hirer's key 2. Master key 3. both 1 & 2 4. anyone of these 5. None
of these
14. How many times a hirer be allowed to operate a locker:
1. once in a day 2. once in a week 3. Once in a month
4.50 times n a half year 5. Any number of times
15. A hirer is allowed to operate the locker in the presence of :
1. the custodian of lockers 2. any official of the bank
3. An independent witness 4. Any of 1 or 2 or 3
5. Nobody should be present except the hirer/s
16. In our bank we accept articles in safe-custody from
1. customers only 2. from our branches only 3. from other banks
only 4.2 & 3 only 5. any person
17. Which of the following acts govern the transactions relating to safe-custody
1. The Banking regulations Act 1949 2. NI act 1881 3. The Indian contract
act 1872 4. All of these 5. None of these
18. Articles received for safe custody must be sealed with:
1. Bank's seal only 2. Depositor's seal only 3. Both of these
4. Seal of the third party 5. None of these
19. What is the annual net income criteria for classic card
1. Rs96000 2. Rs 90000 3. Rs100000 4. Rs25000 5. None of
the bove.
20. What is the minimum period for which commercial paper can be Issued
1. 15 days 2. 1 month 3. 3 months 4.60 days 5. None of t
21. The object of mutual Fund is:
1. An intermediary between SBI & other Banks
2. An intermediary bi RRI and other Banks
3. An intermediary which is resources & pools them together and invests in
lucrative and profitable channels 4. Investment of funds 5. None of these
22. Venture Capital implies :
1. Investments in Turn key projects
2. Investment of Long term equity on high risk projects with high reward
3. Investment of huge amount without any reward
4. Equity for EOU's
5. None of these
23. In India Merchant Banking assumes:
1. the activity of merger of companies 2. the activity of voluntary winding up of
companies 3. the activity of management of public issues and loan syndication .
4.All of these 5. Non of these
24. A Commercial Bank-desirous of starting Merchant Banking activity has to be
authorised by:
1. Reserve Bank of India 2. S E B I 3. 1 & 2
4. National Stock Exchange 5. Non e of the above

25. The activities of leasing and hire purchase can be undertaken by a

Commercial Bank
1. As a departmental activity 2. through a subsidiary
3. 1 or 2 as per the choice of the Bank 4. as per specific permission given
by RBI to each Bank 5. as per permission given by Ministry of
Finance
26. O T C E I stands for:
1. Odd-lot Trading Counter of India 2. Option Trading Counter Exchange of
India
3. Over the Counter Exchange of India 4. Open Trading Counter Exchange of
India
5. Organisation for transacting country's exports and imports
27. Which of the following is not a Credit Rating Agency:
1. CARE 2. CRISIL 3. DF.HI 4. I CRA
28. Which of the following do not require Credit rating ;
1. Company fixed deposits 2. Commercial paper
3. Non-Convertible debentures 4. Debentures convertible after 18 months
5. 2 & 4
29. What is the agency commission payable to the Bank on account of each
transaction of Government business relating to “Receipts”?
1. Rs.40 2.Rs.50 3.Rs.60 4.Rs.45 5.None of these
30. The first Mutual fund in India is:
1. Canbank mutual fund 2. Indbank mutual fund 3. SBI Mutual
fund 4. Unit Trust of India
31. The maximum amount Up to which Certificate of Deposit can be issued by a
bank s
1.10% of the aggregate average deposits of the previous year
2.10% of the aggregate deposits at the end of the previous year
3. 10% of incremental deposits of the previous year
4. 5% of the aggregate deposits at the end of previous year
5. There is no ceiling
32. Which of the following is not a pre-condition for issuing a Commercial Paper
by a Company :
1. The C.P. should be given a credit rating
2. The account should be classified under Health Code 1
3. The net worth of the company should be atleast Rs. 4 Crore
4. Current ratio of 1.33:1
5. Company should have net profit for the last 5 years
33. The Money market in India consists of two sectors, namely, the Organised
sector and the Unorganised sector. Which of the following do not fall under
organised sector-
1. RBI, SBI .and Commercial Banks
2. Life Insurance Corporation of India & General Insurance Corporation
3. Unit Trust of India 4. Indigenous Bankers 5. IDBI/SIDBI, EXIM
Bank
34. Number of Add- on Cards permitted on account of a card holder
1. 1 2. 2 3.3 4. 4 5. None of these
35. A Scheduled Bank means a bank:
1. Incorporated under companies act 1956 2. Authorized to transact
government business 3. Governed by Banking Regulation Act 1949 4.

included to the second schedule to the RBI Act 1934. 5. None of

these
36. Commercial Banks are now permitted to undertake the business of :
1. Equipment leasing 2. Mutual funds 3. Factoring 4. All of the above 5.
only I & 3
37. Which of the following does not fall in the category of Developmental Banks
1. The Industrial Finance Corporation 2. The Industrial Credit Investment
Corporation of India 3. The-Industrial Development Bank of India 4.
Export Credit Guarantee Corporation 5. NABARD
38. Dematerialisation of share refers to:
1. Buy Back of Shares 2. Conversion of shares in physical form into
Electronic Form 3. Forfeiture of shares 4. Pledge of shares with
Depository 5. none of the above
39. A Treasury Bill is
1. A bill drawn by the treasury bench in the parliament
2. Bill drawn by a sub-treasury office
3. Instrument for short term borrowing by the central government
4. Bill drawn by World Bank
5. Bill kept by the government as a treasure.
40. Who can issue a Certificate of Deposit:
1. RRBs 2. only private banks 3. consortium leader
4. only scheduled Banks 5. SBI group
41. While effecting remittances the instrument is handed over to the remitter in
case of:
1. Telegraphic transfer 2. Demand Draft 3. mail transfer 4. All of these 5. 1 & 3
42. Which of the following does not fall under remittances
1. Travellers cheques 2. Mail transfer 3. pay orders
4. Free mail transfer 5. Telegraphic transfer
43. Demand drafts payable to bearer are:
1. issued by banks
2. issued by banks at the request of the party
3.not issued as they are prohibited under the Ground rules and Code of
Ethics issued
4. issued by SBI
5. not issued as they are prohibited under law
44. Our Bank Introduced Credit card in the year
1. 1981 2. 1982 3. 1979 4. 1980 5. 1983
45. AB Classic Card is valid in:
1. India 2. All over the world 3. India & Nepal
4. India, Nepal & Srilanka 5. India & USA
46. All items of pay orders which are stale by more than--------------years as on
30th June should be transferred to Central Accounts:
1. one year 2. two years 3. three years 4. four years
5. as and when the branch has 50 such items outstanding
47. What is the agency commission payable to the Bank on account of each
transaction of Government business relating to “Payments of Pensions”?
1. Rs.50 2.Rs.40 3.Rs.60 4.Rs.45 5.None of these
48. For Corporate Cards, the applicant company should have a minimum net-
worth of Rs.
1.1 lakh 2.3 lakhs 3. 25 lakhs 4. 10 lakhs 5. 15 lakhs

49.What is the rate of interest to be charged on Credit Card liability, if the

minimum payment is made on time(UNDER ROLL OVER)
1. 1.75% 2. 1.5% 3 2.5% 4. 2.00% 5. no interest
50. Lockers can be hired by:
1. Individuals 2. Firms & Limited companies
3. Associations & clubs 4. Trusts 5. All of them
51. Who is the Third Party Administrator in Arogya daan Scheme
1. General Health Plan 2. Good Health Plan 3.UIICo. 4. LIC 5. Family
Health Plan
52. What is the maximum Insurance Coverage available under Arogyadaan
Scheme
1. 1 Lac 2. 2 Lacs 3. 4 Lacs 4. 5 lacs 5. 10 Lacs
53. PAN number is compulsory if Investment is more than
1. 1 Lac 2. 2 Lacs 3. 25000 4. 50000 5. For any amount.
54. Gold Coins for sale by branches , are available in
1. 4 gms 2. 8 gms. 3. 10 gms. 4. 1 & 2 5. 1,2, &3
55. In Gold Coins, the following is permitted:
1. Credit Card Transaction 2. Swarnabharana 3. Gold Loan
4. 2 & 3 5. None of these
56. In credit cards what is the maximum “ ROLL OVER “ facility permitted in the
total outstanding amount ?
1. 95% 2. 5% 3. 20% 4. 100% 5.None of these
57. Liability Insurance Premium is Payable on
1. Monthly 2. Quarterly 3. Annual 4. Single Premium 5. None of
these
58. As per the latest guidelines what is admission fees for issuing credit card
1. 500. 2. 5000. 3. nil. 4. 2000. 5. 100
59. What is the age limit for taking AB Arogyadaan
1. 70 years 2.65 years 3. 50 years 4. 45 years 5. 60years
60. What is minimum term deposit for master card electronic
1.Rs.10000 2.Rs. 25000 3.Rs. 20000 4.Rs. 100000 5. None
of the above.
61.Liability Insurance Scheme is offered to the borrowers of
1. Educational Loans 2.Housing Loans 3. Vehicle Loans
4. 1, and 2 5. 1 2 and 3
62. India First Life Insurance is Floated by
1. Andhra Bank 2. Bank of Baroda 3. Legal & General 4. 1 & 2
5. 1,2, 3
63. Income Eligibility under Platinum Card is
1. 10 lakhs 2. Rs. 1 lakh 3. Rs. 5 Lakhs 4. Rs. 2 Lakhs
5. Rs. 96000
64. India First Life Insurance Introduced the following Plans.
1. Savings Plan 2. Children Education Plan
3. Future / Retirement Plan 4. India First Smart Save Plan & Young
India Plan 5. 1,2 & 3
65. The discretionary powers to sanction corporate credit cards is vested with:
1. The DGM credit card division. 2. The Asst. Gen Man. CCD. 3. The General
Manager, HO. 4. The Zonal Manager. 5. The branch Manager.
66. Corporate cards are renewed once in:
1. one year. 2. 2 years. 3. 3 years. 4. 18 months. 5. NOA.
67. How many add on cards are allowed for an executive on corporate card?

1. 2. 2. 1. 3. 3. 4. No add on card allowed. 5. NOA.

68. What is the period of Hospitalisation required under AB AROGYADAAN?
1.One month 2. One week 3.72 hours 4. 48 hours 5. 24 hours
69. What is the accidental coverage available on a Platinum Card ?
1. Rs.10 lakhs. 2.Rs. 20 lakhs. 3. Rs 10.00 lacs to the Main cardholder and Rs
5 lacs to the Add-on Cardholder. 4. Rs.50 lakhs. 5. Rs. 5 lakhs.
70. What is the permissible aggregate limit of the corporate credit cards to any
company?
1. 25% of its net worth
2. Overall limit of Rs. 50.00 lakh.
3. not exceeding Rs. 10.00 lakh per card.
4. 1, 2 and 3.
5. 1and 2.
71. Which of the following precautions you would take if a consultant/broker
approaches you to open an account for the specific purpose of obtention of
balance certificates For his client going abroad?
1. Issue Balance Certificate only in accounts which are opened during the normal
course.
2. Not to encourage opening of accounts introduced by consultants/ brokers
3. Not to encourage accounts of consultants/brokers from whose account funds
are transferred to the newly opened accounts for the purpose of obtaining
certificate.
4. Issue certificates in the approved format only, retaining a copy for branch
records.
72. What is the annual subscription for a Gold Card, in the first year?
1. 500. 2. 750. 3. 800. 4. 1000. 5. No such fees.
73. Branches are advised to pay Penal charges to the Customers for the period of
delay to credit amount under Electronic fund Transfer scheme, (E. Money) beyond
T+I day at the rate of
1. No Penal charges yet. 2. 6% simple interest for 15 days. 3. 15 days tenor of
applicable Fixed deposit rates. 4. COD rate of interest. 5. Actual Delay.
74. What is the income criteria for consideration of a businessman to become
eligible for AB Credit Cards from Andhra Bank?
1. Net Profit. 2. Taxable Income. 3. profit before depreciation and tax
4. Total of Income from profits and other sources if any. 4. Annual turn over. 5.
NOA
75. What is the upper limit of an individual e-money transaction in our bank?
1. no limit. 2. 5 laks. 3. 1 crore only. 4. 10 lakhs. 5. Any amount.
76. In our Bank Demat account is available in

1. All the Branches 2. Metro Branches 3. Urban
Branches 4. Selected Branches 5. None of these.
77. To sell the India First Life Insurance Policies, One has to Qualify the
examination conducted by
1. SEBI 2. IRDA 3. BSRB 4. UPSC
5. IIB
78. What is the age upto which Arogyadhan policies can be renewed without
break?
1. 85 years 2.70 years 3.60 years 4.65 years 5.80 years

79. What is the maximum amount permitted by Reserve Bank of India For our
Customers/General Public, in any single remittance under the western money
transfer Scheme
1. USD. 5000. 2. USD. 10000. 3. USD. 2500 4. USD. 1500. 5. No restrictions at
all.
80. What is the maximum Number of remittances that can be received by a single
individual in a year?
1. 10 only. 2. 12 3.. 15 only. 4. 8 only. 5. Any number of times.
81. Which of the following statements is not correct in case of dealing with
payments under western money transfer services?
1. Branches should receive the filled in Application Form in triplicate along with
copy of Photo identification from the Customer.
2. One copy to be given back to Customer as acknowledgement,
3. One copy to the Branch
4. Third copy to be sent to IBD, Mumbai
82. When will Branches receive their Payments from IBD Mumbai under western
money transfer service?
1. within 10 days. 2. within 2 weeks. 3. within 1 week. 4. immediately after
the payment. 5. NOA.
83.What is the minimum amount of Insurance under AB AROGYADAAN Scheme?
1. Rs.20000 2. Rs.25000 3.Rs.30000 4.Rs.1 Lakh 5.
Rs.50000
84. In order to increase our Non-interest Income, with which company in an
external country, our Bank has entered into 'Representation Agreement' for
offering Money Transfer Service?
1. SWIFT. 2. The World Net. 3. The world bank net. 4. The Pan Western Express.
5. Western Union Financial Services.
85. Which is the largest Money Transfer Organization in the world?
1. Western Union Financial Services Inc., USA.
2. First Data Corporation.
3. SWIFT.
4. The Trans World Fin-net.
5. NOA.
86. According to Reserve Bank of India guidelines, What type of Remittances are
permitted in Service provided under the Western Union money transfer?
1. Any remittance.
2. only personal remittances, foreign tourists visiting India.
3. trade related remittances only.
4. purchase of property.
5. credit to NRE/FCNR Accounts.
87. In compliance of Reserve Bank of India guidelines, the present ceiling for
immediate credit of outstation cheques/local cheques is:
1. Rs. 5000. 2. Rs. 7500. 3. 10000. 4. 15000. 5. 12500.
88. In the event of cheque being returned unpaid, the branch can recover
interest at the rate of:
1. the period for which the bank is out of funds. 2. From the date of the
check.
3. From the date on which the check was sent for collection. 4. From the date of
bouncing the check. 5. No interest should be charged. 6. NOA.

89. Which of the following statements is not correct in case of instant credit of
local/out station checks?
1. No interest should be charged for the period between the date of credit of the
outstation cheque lodged and its, return
2.Interest should be charged from the date of return of the cheque till the
reimbursement of money to the bank.
3. Where the cheque is credited to a savings bank account no interest will be
payable on the amount so credited if the cheque is returned unpaid.
4. Only 1 + 2 are correct. 5. 1 + 2 + 3 are correct.
90. Andhra Bank Is the Corporate Agent, who can sell the Policies of
1. LIC 2. UIICo 3. India First Life Insurance Co.
4. 1&2 5. 2&3
91. What is the ‘ABNORMAL DELAY’ in case of collection of out-station cheques as
per the recent IBA guidelines?
1. More than 30 days after the date of the check received for collection. .
2. More than 60 days. 3. More than 90 days. 4. More than 14 days.
3. 5. More than 45 days.
92. What is the rate of interest to be paid by the bank in case of abnormal delay
in collection of out-station checks?
1. Bank Rate + 2%. 2. FD Rate + 2%. 3. SB Rate + 2%.
4. Commercial rate of Interest. 5. NOA.
93. What is the extent of discretion available with the branch manager for
allotment of lockers
1.10%. 2. 15%. 3. 25%. 4. 20%. No discretion.
94.Will the pre existing disease be covered under AB Arogyadaan
1.from 4th year onwards, if there is no claim on account of such disease
during 3 years
2. from 3rd year onwards, if there is no claim on account of such disease
during 2 years
3..from 2nd year onwards, if there is no claim on account of such disease
earlier
4.No coverage 5.Automatic coverage
95. What is the no claim bonus admissible under AB Arogyadaan
1.10% 2.3% 3.5% 4.1% 5.No no claim bonus
96.Can the sum assured be increased during the policy period of AB Arogyadaan
1.cannot be increased 2.Can be increased with the consent of UIICO
3.Can be increased up to 10% of the original amount
4.Can be increased but premium to be paid at 200%
5.None of the above
97. Liability Insurance is covered by
1. UIIC 2. L I C 3. India First Life Insurance Co. 4. General Insurance
Co. 5. Oriental Insurance Co.
98. Under AB Arogyadaan, waiting period of 30 days is not applicable for
1. Accident 2.Sudden Illness 3.Pre existing disease 4. Death 5.None of these
99. The following Mutual Fund is not sold by us.
1. Principal Mutual Fund 3.TATA Mutual Fund 4. SBI Mutual fund
4.UTI Mutual Fund 5.ING Vysya fund
100. What is the period of 8% GOI bonds
1.5years 2. 6 years 3. 7years 4. 8years 5.10years

ANSWERS
1.2 2.3 3.4 4.3 5.3 6.1 7.2 8.3 9.2 10.5
11.4 12.3 13.3 14.5 15.5 16.4 17.3 18.3 19.1 20.1
21.3 22.2 23. 4 24.3 25.3 26.3 27.3 28.3 29. 4 30.4
31.5 32.5 33.4 34.2 35.4 36.5 37.4 38.2 39.3 40.4
41.2 42.1 43.5 44.1 45.3 46.3 47.3 48.3 49.3 50.5
51.2 52.4 53.5 54.5 55.3 56.1 57.4 58.3 59.5 60.1
61.5 62.5 63.3 64. 4 65.4 66. 1 67.4 68.5 69.3 70.4
71.4 72.5 73.3 74.3 75.1 76.4 77.2 78.5 79.3 80.2
81.5 82.3 83.4 84.5 85.1 86.2 87.4 88.1 89.4 90.5
91.3 92.2 93. 4 94. 1 95.5 96. 1 97. 3 98. 1 99. 5 100. 2

IT QUESTIONS
1. How many digits is the account number in Core Banking solution?
15 digits starting with 4 digits branch code
2. Name the websites through which our registered customers can access
Internet Banking?
www.andhrabank.in or www.onlineandhrabank.net.in
3. What are the two Passwords issued to a registered customer under Internet
Banking?
LOGIN Password and TRANSACTION Password
4. Where will the user id and passwords be delivered?

Internet Banking cell will send User Id and Login Password to the
customer directly and transaction password to the Branch. Branch in
turn will have to hand over the transaction password to the customer
duly obtaining his / her acknowledgement.
5. What are the types of accounts that can be linked to internet banking
Operative Accounts, Loan accounts, Deposit Accounts
6. The range of services available under Internet Banking (Retail) are
1. Viewing details of all accounts (including transactions) under the

customer ID
2. Generation of Account Statement
3. Funds Transfer among own accounts (all operative accounts linked
to the customer ID)
4. Funds Transfer to any third party (operative account with any
branch of our bank)
5. Funds Transfer to any third party (account with any branch of any
bank - thru NEFT)
6. Credit Card Bills Payment (Andhra Bank Credit Cards)
7. Online Shopping
8. Utility Bills Payment
9. Online Income Tax Payment
10.Applying for shares (IPOs / FPOs) thru ASBA
7. Branches are required to take standard form from customers of WUMT:

To Receive Money Form
8. What is MTCN?
Money Transfer Control Number
9. What are the features of Non-Personalised Debit cards?

It is a generic debit card with the Card Number only. These debit
cards are without the Name and Photo of the customer

10.The various delivery channels through which we deliver various services

are:
ATM, Internet Banking, Mobile Banking, Tele-banking, Online Trading, POS
11.What are the remittances permitted under Western Union Money Transfer
as per RBI guidelines
Family Maintenance and expenses for foreign tourists visiting India
12.What does welcome-Kit issued to new account holders contain?

The pre-packaged welcome kit will contain the debit card, its Pin and
welcome letter to the customers opening new account.
13.Where are the internet registration forms available?

Andhra Bank Website and Branches
14.What are the documents to be collected from foreign tourist for photo
identification under WUMT?
Passport alongwith VISA endorsement
15.How many copies of registration form to be submitted by a customer for

internet banking?
Two
16.What are the different SMS alerts?

Push and Pull Alert. Transaction/Balance in the a/c information is given in
push alerts.
Pull alert facility is given for the time being to internet banking customers
using which they can know the balance, cheque fate enquiry etc.
17.The following type of Joint account customers are NOT eligible for
Internet Banking
Joint account with Joint operation, Minor and illiterate account holders are
ineligible.
18.Internet Banking customers are advised not to browse their accounts at

Internet Café
19.For Funds transfer which pin has to be keyed in by the customer as an

additional authentication in Internet Banking?
Transaction Password
20.Can the address furnished different by the customer for Internet Banking
registration be different from normal account operations
NO
The address of the customer has to be updated by the branch in:
Customer master as communication address.
21.Where will be the Transaction Password of the customers be delivered:

Branch

22.Generation of Login user IDS and Pins for Internet Banking is done by ……
Internet Banking cell
23.When will the internet banking user id be disabled for a customer by typing
wrongly the password
5 times
24.What are the mandatory details to be filled in for a WUMT transaction:
A. MTCN No , Name of the person who has sent money , Place from
where the money was sent. , The amount sent
25.Two declarations have to taken from a WUMT customer:
26.12 transactions have not exceeded and Not a trade and commercial
transaction
27.Limits for Internet banking transactions:
Rs.50,000.00 per day

Rs.2,00,000.00 per week
Rs.5,00,000.00 per month
Rs.10,00,000.00 per year
28.In case of failed ATM transactions, at which branch should the customer
lodge the complaint?
Customer will lodge complaint at branch where he/she maintains account

to which his/her ATM Card is linked
29.. What is AB BillPay?
It is Utility Bills Payment through Internet Banking using the payment

gateway services provided by M/s Billdesk.
30.What is AB Online Shoppe?
Online Shopping using the payment gateway services provided by M/s.

CC Avenue.
31.WHY RTGS IN INDIA?

Reserve Bank of India has initiated Real Time Gross Settlement
System (RTGS) for the purpose of an effective Funds Transfer System
for High Value Inter Bank Funds Transfer between Banks and customers
on real time basis.
RTGS is an efficient, secure, economical, reliable and instant system of
inter bank funds transfer through out India. Reserve Bank of India has
advised all the Nationalized Banks to implement the facility at large
number of Branches for customer convenience.
32.WHAT IS THE NODAL BRANCH FOR OUR BANK WITH RBI?

Our Bank had set up an exclusive RTGS Branch (IBR Code 1250) in
Mumbai along with our Participant Interface (PI) Gateway with RBI to
facilitate smooth Fund transfer. All the RTGS transactions of the Bank will
be routed through this Branch.
33.WHICH TYPE OF TRANSACTIONS ARE PERMITTED UNDER RTGS ?

Customer Payments, Inter-Bank Payments
34.WHAT IS A CUSTOMER PAYMENT TRANSACTION?

Remittance by one customer of a bank branch from his/her account to a
Customer of another Bank Branch.
35.WHAT IS AN INTER-BANK PAYMENT?

Remittance by one bank branch, the proceeds of bills/ cheques, to another
Bank branch anywhere – Settlements between banks.
36.HOW is THE BRANCH SELECTED FOR RTGS TRANSACTION IDENTIFIED?
Branch is identified for participating in RTGS transactions is communicated to

RBI and the branch is allotted an IFSC (Indian Financial System Code) by
RBI, which is a 11 character code (Example ANDB0001028, first four digits,
ANDB, will be Bank Identification and the last four digits represents branch
code).
37.WHAT IS THE DIFFERENCE BETWEEN THE EXISTING CUSTOMER

REMITTANCE AND REMITTANCE THROUGH RTGS?
In the existing system a Customer issues a cheque to the beneficiary

which will be sent in collection (either in Clearing/Collection) and the after
a certain days the Account of the beneficiary will be credited. In the RTGS
system the customer account is debited and the proceeds are sent
through a message to the beneficiary’s account on the same day and the
beneficiary’s bank has to credit the proceeds within two hours of receipt
by them on the same day
38.CAN A BRANCH ACCEPT TO REMIT FUNDS THOUGH RTGS FROM A PERSON

WHO IS NOT A CUSTOMER BUT THE BENEFICIARY HAS AN ACCOUNT WITH
THE OTHER BANK BRANCH?
No. The remitter of funds must have an account with the bank from
where the funds are being remitted to the beneficiary.
39.IS THERE ANY STANDARD FORMAT FOR TAKING A REQUEST FROM THE
CUSTOMER FOR RTGS TRANSACTION ?
Yes. The Customer must give a Standard requisition form along with the
Cheque for debiting the account.
40.AT WHAT POINT OF TIME THE CUSTOMER CAN REVOKE/CANCEL THE

REMITTANCE?
The Customer must give a Standard requisition form along with the Cheque
for debiting the account. The customer can revoke/cancel the remittance

before the authorisation at the Branch level only where the transaction is
processed.
41.HOW THE BRANCHES WILL KNOW THAT A PARTICULAR BANK BRANCH IS

ELIGIBLE FOR RTGS TRANSACTION?
In the RTGS menu module of the branch you can find the directory of all
IFSCs alloted by RBI who have registered with them for doing RTGS
transactions when you click the concerned help tree.
42.WHAT ARE THE BENEFITS TO THE CUSTOMERS FOR DOING THE

TRANSACTION THROUGH RTGS?
Customers get a new banking services based on reliable, faster,

irrevocable high value funds transfer system between two different bank
accounts.
43.WHAT ARE THE BENEFITS OF THE BANK DOING TRANSACTION THROUGH

RTGS?
It offers immediate and irrevocable settlement. It provides for high
value inter bank funds transfer. It has the potential to formulate new
products by individual banks based on RTGS.
44.What is the increased threshold value limit for RTGS transaction?
The threshold value limit for RTGS transactions has been increased from the
present limit of Rs. 1 lakh to Rs. 2 lakhs.
45.The details of the existing service charges and the revised service charges
for RTGS/NEFT are as under:
Inward Inward Free. No Charges to
Transactions RTGS/NEFT/ECS be levied
Outward Value Band Charges to be levied
Transactions to customers
RTGS Existing Revised
Rs. 1 lakh to Rs. 2 lakhs 25 -
Above Rs. 2 lakhs to Rs. 5 25 25
lakhs
Above Rs.5 lakhs 50 50
NEFT up to Rs. 1 lakh 5 5
Above Rs.1 lakh to Rs. 2 25 15
lakhs
Above Rs. 2 lakhs 25 25
46. WHAT IS NEFT SYSTEM?
National Electronic Funds Transfer (NEFT) system is a nation wide funds

transfer system to facilitate transfer of funds from any bank branch to any
other bank branch.

47. Whether the system is centre specific or has any geographical

restriction?
No, there is no restriction of centres or of any geographical area inside the

country. The system uses the concept of centralised accounting system and
the bank's account, that are sending or receiving the funds transfer
instructions, gets operated at one centre, viz, Mumbai only. The individual
branches participating in NEFT could be located anywhere across the country,
as detailed in the list provided on our website.
48. What is the funds availability schedule for the beneficiary?
The beneficiary gets the credit on the same Day or the next Day depending
on the time of settlement. .
49. Is there any way a remitting customer can track the remittance
transaction?
The remitting customer can track the remitting transaction through the
remitting branch only, as the remitting branch is informed about the status of
the remitted transactions.
50. What is IFS Code (IFSC)? How it is different from MICR code?
Indian Financial System Code (IFSC) is an alpha numeric code designed to

uniquely identify the bank-branches in India. This is 11 digit code with first 4
characters representing the banks code, the next character reserved as
control character (Presently 0 appears in the fifth position) and remaining 6
characters to identify the branch. The MICR code has 9 digits to identify the
bank-branch.
51. How a customer will know, what is the IFS Code of his bank-
branch?
RBI had since advised all the banks to print IFSC on cheques leaves issued to
their customers. You may also contact your bank-branch and get the IFS
Code of that branch.
52. Is it necessary to have a bank account to originate the NEFT

transaction?
Yes, NEFT is an account to account funds transfer system. NEFT is not applicable
for inter-bank funds transfer.
53. Is it necessary that the beneficiary should have an account at the

destination bank-branch?
Yes, NEFT is an account to account funds transfer system.
54. Can a customer receive foreign remittances through NEFT?

This system can be used only for remitting Indian Rupee among the participating
banks within the country.
55. Can a customer send remittances abroad using the NEFT?
Ans No
56. Can a customer originate a transaction to receive funds from

another account?
Ans No
57. Can a customer send/receive funds from/to NRI accounts?
Ans: Yes, subject to applicability of provisions of FEMA
58. Would the customer receives an acknowledgement of money

credited to the beneficiary?
Ans: No, however electronic acknowledgement is generated for the customer

that his money is received by the beneficiary at the sender branch.
59.Who can receive funds through NEFT?
Individuals, firms or corporates maintaining accounts with a bank branch can

receive funds through the NEFT system The NEFT system also facilitates one-
way cross-border transfer of funds from India to Nepal. This is known as the
Indo-Nepal Remittance Facility Scheme. A remitter can transfer funds from
any of the NEFT-enabled branches in to Nepal, irrespective of whether the
beneficiary in Nepal maintains an account with a bank branch in Nepal or not.
The beneficiary would receive funds in Nepalese Rupees.
60. Would the remitting customer get back the money if it is not
credited to the beneficiary’s account?
Ans: Yes, the remitting customer gets back the money if it is not credited to the
beneficiary account.
61. Till what time NEFT service window is available?
There are hourly settlements from 9.00 a.m. to 7 p.m. on week days and from
9 a.m. to 1.00 p.m. on Saturdays..
62. What is the essential information that the remitting customer

would have to furnish for the remittance to be effected?
The essential information that the remitting customer has to furnish is:
Beneficiary details such as beneficiary name and account number
Name and IFSC of the beneficiary bank branch.

63.For RTGS/NEFT Transactions, ___________ or _____________ is made

compulsory.
Mobile Number or email id.
64.ECS stands for Electronic Clearing Service
65.ECS supports the following clearings.

Both debit and credit
66..ECS mandate is given by customer

Once, till it is revoked it is valid.
67..ECS mandate can be given for

All operative a/cs
68.NEFT stands for National Electronic Funds Transfer
69.NEFT is launched by
RBI
70.The ceiling limit for putting through an individual NEFT transaction is

No limit
71.NEFT uses SFMS as a messaging system..
72.NEFT originated at branch reaches RBI

via NEFT Service center at Mumbai.
73.What services are available under ATM?

1. a) Balance enquiry b) Mini Statement c) Withdrawal of cash d)
Cash advance - Credit card e) Utility payment f) e-Hundi g)
Transfer of funds h) Payment of credit card bills and (i) Mobile
charging. j) Registration for mobile alerts k) PIN Change
74.Name two advantages of Debit Card over ATM card?

2. (a)Can be used at Point of sale transactions
3. (b) Can be used in internet
4. (c) Can be used in Visa affiliated ATMs
75.When opted for “fast cash “ option in ATM, which a/c is accessed?
Only primary a/c can be accessed, no other a/c can be accessed.
76.CTS stands for-----------

Cheque Truncation system
77.. ASBA stands for -------------

Application supported by blocked amount

78.Short notes on Core Banking Solutions (CBS)
The mission of the “Core Banking Solution” project is to “Create an IT platform

which shall support a ‘Customer Centric Organization’, involving multiple
‘Delivery Channels’ and providing business growth in addition to meeting
regulatory and statutory requirements”
Benefits of CBS
Centralized Server. Better control/uniformity over programs,

masters and parameters
No SOD/EOD/Backup at branch level
Timely and accurate MIS
Unified view of all accounts of a customer for various delivery
channels
Optimum utilization of HR
New e-products can be introduced
Easier or No reconciliation
Enabling introduction of back office or processing centres to reduce
load on branches and for better manpower utilization.
Centralized audit
Easier implementation of ABB, RTGS, NEFT, ECS, Internet Banking
etc.
Supports multi-currency operations.
System Integrator/Technology Partner for CBS project: M/s HP

(Hewlet Packard)
Package Name : Finacle
Package supplied by: M/s Infosys
Main Server of CBS : Data Centre, Hyderabad
Disaster Recovery Site (Backup Server): Chennai
Two types of programs available in Finacle: ONS and Web

ONS programs are more user friendly with more usage of mouse .
(eg HOAACSB)
Web programs use more Function keys, but they are fast. (eg TM)
Branch environment: Finacle is a browser based application , hence

everyone is provided with a Windows PC unlike legacy system
where diskless nodes were given to many. Click on the Finacle icon
provided on the desktop to login and work.
79. What are the Value Added Services offered through CBS.
SMS Pull Alerts

Internet Banking
Tele-Banking

Mobile Banking with Funds Transfer facility

ASBA
Online Trading
Monthly Account Statement through e-mail
80.What is MPAY?
It is the mobile banking service provided by the bank.
81.What are the facilities MPAY provide?

Balance Enquiry b) Mini Statement c) Cheque Status d) Stop payment of
Cheque e) Funds transfer to A/c. or Mobile F) Trust Donations
82.Where can the customer register for MPAY?

Customer can register for MPAY at any of our Bank ATMs
83.Who are eligible to register for MPAY?

A customer having SB/CA account with Andhra Bank and having ATM/Debit
card are eligible to register for MPay
84.How many accounts can be linked to the mobile?

Customer can link any account(CASA group) linked to the card with the
mobile number. While registering through ATM, customer needs to select the
account number which is to be linked for mobile banking application.
85.What is the maximum amount that can be transferred under mobile banking
in a day?
Customer can transfer Rs. 10,000/- in a day.
86.What are the two passwords used in MPay?

Two passwords required for using MPay application are MPIN (Transaction
password) & application password (Login password).
87.What is Tele Banking facility?

Tele Banking is a facility operated with Interactive Voice Response System
(IVRS). This facility offers to the customers through any Land Line or Any
Mobile Phone, facilities like balance inquiry, last five transactions, account
statement request, term deposit account details like data of opening,
principal amount, interest rate, date of maturity and maturity amount and
loan account details like original loan amount, installment amount and due
date, loan interest rate, last installment amount and payment date.
88.Who can avail tele banking facility ?

Customers having Savings/Current Accounts/Deposit Accounts/Loan
Accounts can avail the facility by registering themselves through toll free
number 18004251515
89.What are the charges for registration to Tele Banking facility

No charges are levied.
90.What is SMS Banking?

SMS Banking is a service that allows customers to access their account

information via mobile phone. SMS banking services are operated using
both push and pull messages.
91.What are the different types of ATM cards?

Different Types of ATM/Debit Cards are ATM Card , Debit Card - Non-
Personalized (No photo and no name on the card) and Debit Card –
Personalized (With specific recommendation of the branch with prior
permission)
92.What are the admission fee and Annual Maintenance charges for ATM
cards?
Type of Card Admission Fee Main Card From Add-on Card from
2nd Year Onwards 2nd year onwards
ATM Card NIL Rs.75 pa + Rs.8(S.T*) Rs.75 pa +
Rs.8(S.T*)
Debit Card NIL Rs.75 pa + Rs.8(S.T*) Rs.75 pa +
Rs.8(S.T*)
93.What is the validity period of ATM cards?
Validity period of the card is 5 years and there after the card is renewed
automatically and is to be collected by the customer
94. What is the revised procedure for internet banking registration for retail
customers?
In view of increasing number of Internet Banking registrations and with a

view to reduce time taken in user creation process and other users’
requests Branches can undertake the following types of jobs at their end
without sending the applications to Internet Banking Cell
1) Processing of Retail Internet Banking Application

2) Regeneration of User Passwords
3) Change Facility
4) Reactivate (Enable) User for Internet Banking
95.What are the limits for Debit cards?

The card carries a overall withdrawal limit of Rs. 40,000/- (subject to
availability of funds in the account) with a sub-limit of Rs. 25,000/- in cash
per day through ATMs
96.What is the limit for ATM/Debit card withdrawals from other Bank ATMs?
As per RBI guidelines, a ceiling of Rs.10,000/- per transaction is fixed on
cash withdrawals done by our Bank cardholders at other Bank ATMs and
other bank cardholders on our ATM network.
97. Who are ineligible for obtaining ATM/Debit card?
Minors, illiterates, visually impaired persons, other handicapped persons

who can not operate an ATM and Mandate/Power of attorney holders are
not eligible for obtaining ATM/Debit Card.Accounts operated jointly with
minors as joint depositors, proprietary and Partnership accounts, Company
Accounts, Trust accounts etc are not eligible

98. What is the ATM transaction fee for Our Bank ATM/Debit cardholders for
usage at other Bank ATMs
Rs.20/- per transaction (inclusive of service tax) for more than FIVE
transactions in Savings Bank accounts and for every transaction in Current
Accounts
99.Who can avail Cash advance facility from our ATMs?
Our ATM/Debit Cardholders and our Bank credit cardholders also can avail
cash advance facility over our ATM network as per the ceilings fixed by
Credit Card department.
Other bank VISA/Master affiliated cardholders also can withdraw cash from
our ATMs subject to the ceilings fixed by the card issuing banks for the type
of cards issued, with a maximum amount of Rs. 10,000/- per transaction,
as stipulated by Reserve Bank of India
100. Where is TPIN used?
It is used in Tele Banking facility.

राजभाषा OFFICIAL LANGUAGE
1. 1, 2, 3,4,5,6,7,8,9 numerals are called.

1. English
2. Roman
3. Indo -Arabi
4. International form of Indian numerals
5. Hinduja
2. According to articles 348 of the constitution, for the time being, which
language is to be used in Supreme Court / High Court?
1. Hindi
2. English
3. Regional language
4. Depending on the case to which region it pertains
5. Any Indian languages
3. According to O.L. Rules 1976, Gujarat comes under which region?
1. A region
2. B region
3. C. region
4. A&B region
5. Not applicable
4. According to rule 2 (B) of O.L. rules "Central Govt. Offices means what?
1. Ministry, Dept or Offices of Central Govt.
2. Commission, Committee or Tribunal Constituted by Central Govt.
3. Corporation, Company owned or controlled by Central Govt.
4. 1,2 & 3, above
5. According to which rule reply of Hindi letters should be given in Hindi only?
1. Rule 10 of O.L. Rules
2. Section 3. (3) of O.L. Act
3. Rule 5 of O.L. rules
4. Section 7 of O.L. Act
5. Not necessary
6. All the stationery items, name plates, forms, rubber-stamps, invitation
cards of Indian offices located abroad, should be invariably got prepared in
1. French
2. Any language
3. Both Hindi & English
4. English only
5. Hindi only
7. As per the directives of Govt. of India, the international agreements are to
be prepared in
1. Hindi only.
2.English only
3.Official Language of foreign country
4.Hindi, English & French
5.Hindi and English
8. Can a Central Govt. employee ask for translation of a letter received by
him in Hindi?
1. No
2. Yes
3. Only when he is not having working knowledge of Hindi,

4. Only when the letter is of legal/Technical nature
5. 3 & 4 above
9. Can a Central Govt. employee do his official work in Hindi only?
1. Yes
2. No
3. Can do in "A" region only
4. Can do in "C" region but he has to submit English version also.
5. He has to take consent of his superiors.
10. English language was accepted to use along with Hindi for official purpose
for how many years?
1. Forever
2. Till next revolution
3. 10 yrs from Independence
4. 15 Yrs from commencement of the constitution
5. Till the revision of constitution
11. Hindi became official language of the union, because of -
1. One vote
2. Speakers vote
3. One vote more than half the strength.
4. Unanimous
5. Majority
12. How many languages have been recognised under schedule VIII of the
constitution so far?
1.2
2.14
3.15
4.21
5.20
13. If a communication is sent in Hindi to the offices of Central Govt. situated
in "C" region.
1. English translation is to be sent
2. English translation need not be sent.
3. English translation is to be sent, if the office is situated in Tamilnadu
4. English translation is to be sent, if the office is not notified under rule 10
(4)
5. Communication is to be sent in English only.
14. In which script Hindi is accepted as official language of the union?
1. Hindi
2. Sanskrut
3. Devanagari
4. Marathi
5. Roman
15. Inclusion of a session on Official language policy of Govt. of India in every
training programmes is -
1. Compulsory in ”A" region
2. Optional in "B" & "C" region
3. Compulsory in all regions
4. Institutions discretion
5. On demand from the participants
16. Languages to be used for business transactions of parliament

1. Hindi
2..English
3. Hindi or English
4. Hindi & English
5. Any Indian language
17. Languages to be used in parliament by Members.
1. Hindi
2. English
3. Hindi by North Indian members & English by South Indian members
4. Hindi, English or Mother tongue (with permission from speaker)
5. Any Indian language
18. Official language policy came in to force from-
1. 26-1-1950
2. 15-8-1947
3. 14-9-1949
4. 26-1-1965
5. 16-8-1947
19. Official Language Policy of Govt. of India (Constitution provisions, Official
Language Act, Official Language Rules etc.) applies to -
1. Central Govt. offices only
2. Banks & Financial institutions only
3. All Organizations owned and controlled by Central Govt.
4. Railways only
5. Central Offices
20. On which date Hindi was declared as official language of the union?
1. 26-1-1950
2. 15-8-1947
3. 14-9-1949
4. 26-1-1965
5. 16-8-1947
21. Reply of a letter written in English and signed in Hindi must be in-
1. Hindi only
2. English only
3. Hindi or English
4. Bilingual (Hindi & English)
5. To be replied in English and signed in Hindi
22. Training programmes in A & B Regions should generally be conducted in-
1. Hindi
2. English
3. Local language
4. As per the target group
23. Under which Act specified documents should be issued in bilingual form?
1. Section 8 of O.L. Act:
2. Section 3(3) of O.L. Act
3. Section 6 of O.L. Act.

24. Under which rule / Act /order, our country has been divided in to three
regions,
language wise?
1. O.L. Rules 1976
2. O.L. Act 1963
3. Presidents order 1952
25. Under which rule / Act parliamentary committee on official language has
been constituted?
1. Section 4(1) of O.L. Act
2. Section 3 (3) of O.L. Act
26. What is "Proficiency"?
1. Those who can converse well in Hindi.
2. Studied Hindi at Intermediate level
3. Studied Hindi as an optional subject at degree level.
4. Those who gives a declaration stating that he has Proficiency in Hindi
5. 3 or 4 above
27. What is "Working knowledge"?
1. Capable to work in Hindi
2. Hindi as mother tongue
3. Hindi as a subject at Matriculation
4. Those who gives a declaration stating that he has Working knowledge of
Hindi
5. 3 or 4 above
28. What is the target for Dictation in Hindi in 'C' Region as per Annual Action
Plan for the year 2010-2011?
1.10%
2.20%
3.30%
4.Nil
29. What is the target for Noting in Hindi for 'B' Region for the year 2010-
2011?
1. 10%
2. 20 %
3. 30 %
4. 50%
30. What is the target for Preparation of Bilingual website for the year 2010-
2011?
1.100% for Region 'A' only.
2.100% for Region 'B' only
3.100% for Region 'C' only
4.100% for all Regions
5.No target has been prescribed
31. What is the target of Hindi correspondence between the Central Govt.
organizations of "A" to "C" region during the year 2010-2011?

1. 100%
2. 90%
3. 85%
4: 65%
5. 45%
32. What is the target of Hindi correspondence for Central Govt. Organization
of "C" region to the State Govt offices of "A" & "B" region; during the year
2010-2011?
1. 100%
2. 90%
3. 85%
4. 55%
5. 45%
33. What should be the medium of instruction in training institutions?
1. Hindi in A & B regions & English in C region
2. Hindi in A region & English in B & C region
3. Hindi in A & B regions & as per target group in C region
4. English in all regions
5. English for officers, Hindi for Clerks, & regional, language for sub-staff
34. What should be the order of languages in trilingual form?
1. English-Telugu-Hindi
2. Hindi-English.-Regional language
3. Regional language-Hindi-English
4. English-Hindi-Regional language
5. Hindi-Regional language-English
35. When was the Official Language commission constituted?
1. 1949
2. 1950
3. 1955
4. 1963
5. 1976
36. When was the parliamentary committee on Official language constituted?
1. 1949
2. 1950
3. 1957
4. 1965
5. 1976
37. Where the Town official language implementation committee (TOLIC) is set
up?
1. At all the major towns
2. Where 50 or more Central Govt Offices are situated
3. Where 20 or more Central Govt Offices are situated.
4. Where 10 or more Central Govt Offices are situated.
5. Where scope for Hindi implementation is more
38. Which articles of constitution deals with official language?
1. 237 to 246
2. 317 to 325
3. 343 to 351
4. 372 to381
5. 390 to 397
39. Which Central Govt. Office has to be notified under rule 10 (4)?

1. Where 80% or more employees have working knowledge of Hindi

2. Where 20% or more employees have proficiency in Hindi.
3. Where 50% or more employees have working knowledge of Hindi
4. Where 1/3 or more employees have working knowledge of Hindi
5. Where 2/3 or more employees have working knowledge of Hindi
40. Which language is to be used for enquiry in disciplinary proceedings in
respect of officers/employees in "A" region?
1. Hindi
2. English
3. Mixed language
4. Hindi, provided the enquiry officer possesses working knowledge of
Hindi
5. Any language
41. Which language is to be used for the agenda & minutes of meetings to be
circulated to Central Govt. Offices in "A" region?
1. Bilingual only
2. Hindi only
3. May be in English
4. May be in Hindi
5. Hindi-English & regional language of the state.
42. Which language is to be used in departmental examinations of Central
Govt. Organization?
1. Hindi in "A" region and English in "B" & "C" region
2. Hindi in "A"& "B" region and English in "C" region
3. Hindi in all the regions
4. Bilingual in all the regions.
5. English in all region.
43. Which Language should be used for preparation of training material?
1. Hindi.
2. English
3. Hindi & English
4. Hindi in A & B region & Bilingual in C region
5. 1 or 2 above
44. Which numerals should be used for official purpose of the union?
2. English
3. Hindi
4. Devnagari
5. Arabi
6. International form of Indian numerals
45. Which of following is not applicable to Tamilnadu state?
1. O.L. Rules 1976
2. O.L. Act 19.63
3. Articles related to O.L:
4. O.L. Policy
5. Section 7 & 8 of O.L; Act 1963
46. Who is responsible for compliance of O.L. Policy of Govt. of India?
1. Prime Minister
2. Members of parliament
3. Ministers of Central Cabinet
4. Administrative heads of dept. concerned
5. Concerned R.B.Adhikari

47. Who is the Convener of Coordination Committee of RBI on Trainings in

Hindi medium?
1. NIBM
2. CAB/RBI
3. IBPS
4. SBI
5. CBI
48. Who is the ex-officio Chairman of Official Language implementation
Committee of Govt. of India?
1. President
2. Prime minister
3. Home Minister
4. Finance Minister
5. Defence Minister
49. Who was the first Chairman of Official Language Commission.?
1. Sardar Vallabh Bhai Patel
2. Bal Gangaghar Kher
3. Dr. Rajendra Prasad
4.Govind Vallabh Pant
5. Bal Gangadhar Tilak
50. Who was the first Chairman of Parliamentary committee on official
language?
1. Sardar Vallabh Bhai Patel
2. Bal. Gangaghar Kher
3. Dr. Rajendra Prasad
4. Govind Vallabh Pant
5. Bal Gangadhar Tilak
OFFICIAL LANGUAGE – ANSWERS

01-4 02-2 03-2 04-4 05-3 06-3 07-5 08-5 09-1 10-4
11-4 12-4 13-4 14-3 15-3 16-4 17-4 18-1 19-3 20-3
21-1 22-1 23-2 24-1 25-1 26-5 27-5 28-2 29-4 30-4
31-4 32-3 33-3 34-3 35-3 36-3 37-4 38-3 39-1 40-4
41-2 42-4 43-3 44-5 45-1 46-4 47-2 48-3 49-2 50-4

Banking concepts
Management of Forex reserve
To deal with sudden stops and reversals of capital flows, a certain

level of foreign exchange reserves is necessary. However, India does not have a
policy of actively accumulating reserves as a measure of self-insurance. Any
accumulation of reserves is partly an incidental byproduct of our exchange rate
policy which is to check undue volatility in the foreign exchange market so that
the
exchange rate reflects the underlying macroeconomic fundamentals.
Incidentally, the increase in our reserves also reflects valuation changes. In this
context, it is also important to note that our foreign exchange reserves comprise
not just dollars but also other hard currencies such as the euro and the sterling
pound and also gold.
Capital Account convertibility-India's approach
Our goal is to travel towards capital convertibility along a gradual path – the
path itself being recalibrated on a dynamic basis in response to domestic and
global developments. Capital account liberalization also has to keep pace with
reforms in other sectors. The second Tarapore Committee provided a roadmap
for fuller capital account convertibility and included fulfilment of certain pre-
conditions such as fiscal consolidation, lower inflation and a stronger financial
system. Our forward movement has been calibrated by the macroeconomic
conditions, the state of financial sector development, the risk management
capabilities of financial institutions, the depth of the financial markets and global
developments. In certain respects, we have moved ahead of the Tarapore
Committee recommendations. Illustratively, non-resident foreign corporates and
foreign institutions enjoy currency
convertibility going farther than the Tarapore recommendations
Financial Inclusion Plan
• Close to 2,00,000 BCs/CSPs (customer service points) to be deployed.

• Over 4,000 rural brick-and-mortar branches to be opened in unbanked
villages.
• Over 10 crore no-frills accounts to be opened.
• Over 3 crore KCCs and about 70 lakh GCCs to be issued.
The banks will really have to gear up for implementation of these plans
Managing volatile capital Flows
The importance of capital flows in determining exchange rate movements leaves

the domestic foreign exchange markets susceptible to international capital flows.
In India, capital flows have been a dominant source of volatility for not only the
exchange rate but also other market segments. When FII investors exit from
equity and securities market abruptly in a herd, stock and bond prices get

affected, and when investors take the redemption proceeds out of the country,
the exchange rate is affected. Reserve Bank’s foreign exchange market
operations to contain exchange rate volatility, in turn, could tighten domestic
liquidity and thereby affect money market. Since capital flows are sensitive to
both global developments as well as domestic fundamentals, at times the
domestic financial markets may be solely driven by capital flows. Thus, the risk
of adverse external shock transmitting through financial markets will have to be
recognised and managed timely.
FII flows are volatile and could pose policy challenges during both surges and
sudden stops. But it is also difficult to identify, especially in real time, the
permanent and temporary components in the capital flows.India's approach to
managing capital flows, therefore, is calibrated to respond to both domestic and
global developments. We deploy both quantity and price instruments as well as
end-use restrictions. Our FDI policy is fairly liberal. Foreign investment in a vast
majority of sectors is approved under an automatic-route. In fact, government
approval is required for foreign investment only in a few select sectors. FII
investments, on the other hand, are allowed both in the debt and equity
markets. India typically used control levers on the debt side. An important
factor in managing capital flows is the absorptive capacity of the economy.
Despite large FII inflows in recent months, the rupee has not appreciated much
because of our widened current account deficit. Nevertheless, India is carefully
monitoring the size and nature of flows and take measures as and when needed.
BASEL II
The Basel Committee on Banking Supervision (BCBS) released "capital

measurement and capital standards" on 26.06.2004, which was updated with
addition of Market Risk aspects in November 2005. This document is known as
"BASEL II Frame Work".
Basel II Frame Work offers a new set of international standards in respect of

minimum capital requirement for Banks. It deals with three aspects known as 3
Pillars.
Pillar I stipulates minimum capital requirement for Banks according which the
regulatory capital is to be maintained for credit risk, market risk and operational
risk. It provides a menu of different approaches from simlified to advanced for
determining the capital requirement.
Pillar II of the frame work deals with the "Supervisory Review process" (SRP).
Under this pillar Banks are expected to develop Internal Capital Adequacy
Assessment Process (ICAAP) and the supervisors would conduct a detailed
examination of the ICAAP of the banks, and if warranted could prescribe a higher
capital requirement, over and above the minimum capital ratio envisaged in
pillar I.
Pillar III of the frame work, Market discipline focuses on public disclosures to
be made by banks which compliment the other two pillars.

Under the norms all the foreign Banks operating in India and those of the Indian
banks having foreign operations migrated to Basel II norms from 31.03.2008.
All other banks( Excluding LABs and RRBs) migrated to BASEL II frame work
from 31.03.2009.
ASSET REVALUATION RESERVE
With the implementation of Basel I and the implementation of Basel II under

way, a lot of importance is attached to minimum capital requirement under
regulatory supervision.
Asset Revaluation Reserve is considered a category of the equity for Banks and
is qualifying under Tier II capital at a discount of 55%.
ARR is an accounting concept and represents a reassessment of the value of a

capital asset (properties) as at a particular date. The enhancement in the vale
of the asset to the book value is taken to reserve account and treated as capital.
The properties of most of the PSBs would considerably add to reserve , when
revalued at market price.
BANKING OMBUDSMAN SCHEME 2006
The scheme originally launched in 1995 is revised in 2002 and in 2006.

The scheme is executed by Banking Ombudsman who is appointed by RBI.
The scheme covers all Scheduled Commercial banks, RRBs and Co-op Banks.
Banking Ombudsman is grievance redressal mechanism and deals with

deficiency in banking service, delayed collection of cheques, non issuance of
drafts, interest rate disputes, failure to honour LC/BG commitments, delay in
disposal of loan applications, non acceptance of small denomination notes and
credit card operations.
The aggrieved customer would prefer a complaint with the Banking Ombudsman
where the bank does not respond to his written complaint within 30 days from
the date of complaint. The Banking Ombudsman would take up the case where
the value of the dispute does not exceed Rs.10 lacs. The BO would conduct
proceedings for settlement of dispute through conciliation and where settlement
could not be reached issues an award which is binding on the parties. However
an appeal can be made to Appellate Authority (Deputy Governor, Reserve bank
of India) with in 45 days of the award.

BANKING CODES AND STANDARDS BOARD OF INDIA
BCSBI has been set up by RBI based on the recommendations of " The
Committee on Procedures and Performances Audit on Public Services" (Tarapore
Committee).
BCSBI is an independent Society with all the banks as members who would pay
annual subscription. It conducts field visits of banks.
BCSBI oversees implementation of Fair Practce Code evolved by IBA.
Under the scheme each of the customers should be made to know what are
services they can avail and the price of the products, charges etc.,
Bank customers can now hope a minimum level service as BCSBI ensures that
bank follows codes and the standards set by the Industry.
e - Learning
e- learning is a computer - enhanced learning technique. Its computer based
training or computer aided instruction.
e- learning also refers to educational web sites and on-line education/training.
The advantages of e-learning are , the learner can access it from anywhere,
anytime and at his convenience.
To be effective and successful three things should be in place for e-learning,
namely infrastructure, technology and sustainability.
ISLAMIC BANKING
Islamic Banking does not involve charging and payment of interest.

Interest free banking is a recent concept and is based of profit & loss sharing
concept.
The products are just like the ones in conventional banking only viz., Current
a/c. SB a/c and reinvestment deposits etc., but interst is not paid on SB and
reinvestment deposits.Instead profit of the Bank is shared. These banks adopt
different modes of acquiring assets or financing projects like investment, trade
and lending. Other services like remittances and foreign exchange transactions
are charged.
MOBILE BANKING
Mobile banking or M- Banking is a concept where banking transactions are done

through mobile phones by way of SMS alerts.
Account related queries, real time transaction alerts and investment services are
possible through M- Banking for the present.
M- Banking in future will enable the customers to make payments at point of

sale more efficiently than credit/debit cards.
M- Banking is viewed more as a tool for inclusive banking rather than an

enhancement in delivery of services.
*****

SPECIAL ECONOMIC ZONE
Special Economic Zones are geographical areas which enjoy certain privileges,
which encompass duty free development and are deemed as foreign territories
for the purpose of duties, taxes and tariff. The units operating in SEZs enjoy
exemptions from customs, excise duties and income tax.
The concept is mooted by Ministry of Commerce on the lines of Chinese

experiment in 1980s. In our country the policy was introduced in the year 2000.
SEZs can be developed in Public, Private or Joint sector. The aim of setting up
SEZs is to promote exports. Secotr specific SEZs are allowed for specific sectors.
RIGHT TO INFORMATION ACT
The Govt. of India enacted RTI Act 2005, which provides for access of
information to citizens, in order to promote transparency and accountability in
the working of every public Authority.
Under the act it is obligatory on the part of all public authorities to maintain all
records systematically and to provide the information to any one on a written
application with a requisite fee without asking reasons for seeking such
information.
Each public Authority should designate one Central Public Information Officer for
each administrative unit followed by Assistant Central public Information Officer,
who will receive applications for information under the act. In PSBs the Branch
heads are the ACPIOs.
Any citizen who desires to obtain any information under this act would make a
written application with requisite fee (Rs.10/-) , whereupon the ACPIO should
provide the information with in 30 days from the date of the request.
The Govt. of India has set up an autonomous body under the Act called Central
Information Commission to oversee the implementation of the act.
Hopefully, RTI would influence in betterment of society and transparency in the

work of public authorities. Nevertheless there is scope for frivolous applications
and misuse of provisions of the Act. But the aim is to ensure a high standard of
transperancy.
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
PFRDA was established by Govt. of India on 23.08.2003. PFRDA is the regulator

for the New Pension Scheme which is compulsory for all the Central Govt.
employees who joined service on or after01.01.2004.

NPS will be available to all others persons on a voluntary basis including those
who are self employed professionals and who are in unorganized sector. NPS
provides income security after retirement.
PFRDA will ensure that Pension Fund Managers, Central record keeping Agency
and others players in the pension sector have experience, capability, reach,
capital adequacy etc., to manage the scheme in a fit and proper manner.
CARBON CREDITS
Global Warming is a potential threat to life on earth and world over experts has
been propounding various measures to mitigate the same. Global warming is the
result of emission of green house gases called green house effect. To manage
the issue it is imperative that emission of green house gases has to be controlled
/reduced.
In this regard countries in the world have met at KYOTO and came to an
understanding to tackle the issue of emissions which is known as KYOTO
PROTOCOL, which lays down that developed countries should reduce their
emission levels to 5.2% below their 1990 level which has to be achieved by
2012.
This envisages putting in place a Clean Development Mechanism by erecting

necessary equipment and innovating processes to restrict emission levels. Where
reduction is not possible for some of the countries/units they can purchase
credits of emission certificates from those whose emission levels are low or are
reduced. These certificates are called CARBON CREDITS, which are traded on
climate exchanges as is done in the case of stock market.
Commercial Banks have an opportunity in this activity in financing the

equipment required for reduction of emission levels and the trading of the
certificates can also be financed.
*****

Banking concepts
Commercial Real Estate

The definition of “Commercial Real EstateExposure” (CRE) was rationalised to
make it
consistent with the definition of CRE given in theBasel II framework. An
exposure should be
classified as CRE, if the funding results in the creation/acquisition of real estate
where the
prospects for repayment, as also the prospect of recovery would depend
primarily on the cash flows generated from such funded asset which is taken as
security. Further, exposures will also be classified as CRE in certain cases where
the exposure may not be directly linked to the creation or acquisition of CRE but
the repayment would come from the cash flows generated by CRE.
Modifications to Prudential Norms Governing Banks’ Exposure to Infrastructure

Sector
With a view to providing incentive to SCBs for financing infrastructure,
investment by them in
the long-term bonds with a minimum residual maturity of seven years, issued by
companies
engaged in executing infrastructure projects is now allowed to be classified
under held-to-maturity (HTM) category. Banks were permitted to treat annuities
under build-operate-transfer (BOT) model in respect of road/highway projects
and toll collection rights, where there are provisions to compensate the project
sponsor if a certain level of traffic is not
achieved, as tangible securities, subject to the condition that banks’ right to
receive annuities and
toll collection rights is legally enforceable and irrevocable. Infrastructure loan
accounts which are classified as sub-standard will attract a provisioning of 15
per cent instead of the current prescription of 20 per cent. To avail of this benefit
of lower provisioning, banks should have in place an appropriate mechanism to
escrow the cash flows and also have a clear and legal first claim on these cash
flows. Risk weight for banks’ exposures to infrastructure finance companies
(NBFC-IFCs) would be linked to the ratings assigned to such companies by the
rating agencies registered with the SEBI and accredited by the Reserve Bank.
This
will result in lower risk weight than hitherto for well rated NBFC-IFCs.
Modification to Prudential Norms for Projects under Implementation
Asset classification guidelines applicable to projects under implementation were

modified
during the year so as to provide some flexibility in cases where completion of
project, particularly the infrastructure projects, got delayed. The modifications
were made within the restructuring
framework thus ensuring that the modifications would not lead to dilution of
prudential standards.
VI.24 An infrastructure project loan where the project is not able to commence
operations on due

date, can now continue to be classified as standard asset for a maximum period
of four years (against two years allowed earlier) from the original date of
commencement of commercial operations. Similarly, non-infrastructure project
loans not being able to commence commercial operations on due date, can also
continue to be classified as standard assets up to a maximum period of one year
(against six months allowed earlier). These modifications are subject to certain
conditions including a requirement for higher provision.
IFRS Implementation in Indian Banks
As part of the efforts to ensure convergence of the Indian Accounting Standards

(IASs) with the
International Financial Reporting Standards (IFRSs), the roadmap for banking
companies and
non-banking financial companies (NBFCs) has been finalised by the Ministry of
Corporate Affairs
in consultation with the Reserve Bank. As per the roadmap, all SCBs will convert
their opening
balance sheet on April 1, 2013 in compliance with the IFRS converged IASs. A
Working Group has been constituted by the Reserve Bank to address
implementation issues and facilitate formulation of operational guidelines in the
context of convergence of IFRSs for the Indian banking system.
BASE RATE
To bring transparency in lending rates and enabling better assessment of

transmission of monetary policy ,RBI directed Banks to adopt Base Rate system
which will replace the BPLR system with effect from 1.7.2010. Base rate include
all those elements of lending rates that are common across al categories of
borrowers. Bank may determine the actual lending rates on loans and advances
with reference to the Base Rate and by including such other customer specific
changes as considered appropriate. The actual lending rates charged may be
transparent and consistent and made available for supervisory review as and
when required.
Banks are not permitted to lend below the Base Rate. It will be applicable for all
laons except:
1. DRI advances
2. Loans to Banks own employees
3. Loans to bank depositors against their deposits
The regulation for lending at PLR for loans up to Rs 2 lakhs is withdrawn with
the introduction of Base Rate. For export credit RBI will issue separate
guidelines.

SUBVENTION SCHEME
Subvention is the act or process of giving some sort of aid usually by the
government. For example, in India, there have been subvention schemes for
farmers and the export sector and generally takes the form of interest rate
subvention whereby the government bears a part of the interest rate burden on
behalf of the beneficiaries of the subvention scheme. For example , under the
subvention scheme for exporters , exporters can get loans at 2% less than RBI
prescribed concessional rate for exports and this would be reimbursed to the
Banks by the government.
FINANCIAL STABILITY AND DEVELOPMENT COUNCIL
An apex level institution proposed to be set up with a view to strengthening and

institutionalizing the mechanism for maintaining financial stability of the country.
At present the financial sector is having different regulatory bodies like RBI for
banking, IRDA for insurance and SEBI for capital market. The government has
decided to set up this apex level council to monitor macro prudential supervision
of the economy, including the function of large financial conglomerates and
address inter regulatory coordination issues. It will also focus on financial
literacy and financial inclusion
DIRECT TAX CODE
The direct tax code (DTC) will replace the Income tax Act 1961 and come in to
effect form April 01, 2011 if enacted .All the direct taxes have been brought
under a single code and compliance procedure s unified. And eventually a single
reporting system ,reducing the scope for litigation and improved delivery
mechanisms of government.
BANK BALANCE SHEET : DISCLOSURES : The users of the financial

statements of banks (such as shareholders, bank customers, employees, govt.
authorities etc.) need information about the financial position and performance
of the bank in making economic or investment decisions. They are interested in
the liquidity and solvency of the bank concerned and the risks related to the
assets and liabilities recognised on the balance sheet of the bank and to its off
balance sheet (i.e. non-fund based) items. In the interest of full and complete
disclosure, some very useful information is better provided, or can only be
provided, by notes to the financial statements, rather than making them part of
the balance sheet.
Market discipline Recently, a lot of attention has been paid to the issue of
market discipline in the banking sector. Market discipline has been given due
importance under Basel II by recognizing it as one of its three Pillars. But
market discipline can work successfully only if market participants have
access to timely and reliable information, which enables them to assess
banks’ activities and the risks inherent in these activities. Hence the role of
disclosures increases
NEGOTIATED DEALING SYSTEM : Negotiated Dealing System (NDS) is an

electronic platform for facilitating dealing in Government Securities and

Money Market Instruments. It facilitates electronic submission of

bids/application by members for primary issuance of Government Securities
by RBI through auction and floatation. The system of submission of physical
SGL transfer form for deals done between members on implementation of
NDS, has been discontinued. NDS also provides interface to Securities
Settlement System (SSS) of Public Debt Office, RBI, thereby facilitating
settlement of transactions in Government Securities including treasury bills,
both outright and repos.
Members of NDS: NDS uses INFINET, a closed user group network, as

communication backbone. Hence, membership to the NDS is restricted to
members of INFINET. Membership of INFINET entails holding SGL and/or
Current Account with RBI or as may be prescribed from time to time.
Revocation of the deals: Once the settlers’ approvals have been accorded
to the deal, the deal can not be revoked from the system. However, prior to
the settlers’ approval, either the dealer or the settler of the dealing member
can reject the deal entered into the system.
Member's back office system interface to the NDS : There can be no

direct input from the member’s back office application system to the NDS, for
security reasons.
Types of trades settled through NDS: All Outright and Repo transactions
in Treasury Bills and Government dated securities (Central and State
governments) are settled through NDS.
Kind of instruments: The instruments which are under the regulatory

jurisdiction of RBI are envisaged for trading over the NDS platform. These
include Government Securities and Money Market Instruments - Call,
Notice/Term Money, CPs, CDs and Repo in Government Securities.
Brokers and membership of NDS: The basic requirement for NDS is

membership to INFINET. Since INFINET membership is restricted to those
entities having SGL and/or Current account with RBI or as may be prescribed
from time to time, brokers are not eligible to become members of NDS.
Dealing on behalf of constituent SGL account holders : A member can

deal on NDS on behalf of its own constituent account holder in government
securities, based on the price given by the client but only for outright
transactions.
Report about trades concluded over phone : One of the basic objectives
of NDS is dissemination of on-line price information of transactions in
government securities and money market instruments. In order to achieve
this objective, transactions not concluded over NDS will have to be
necessarily reported through the NDS. Relationship of NDS to Clearing
Corporation of India Limited (CCIL) : NDS is an electronic trading platform
which also provides interface to Securities Settlement System. CCIL is an
agency which extends guaranteed settlement for trades done/reported on

NDS in government securities including Treasury Bills, both outright and

Repos through process of Novation.
Novation and advantages of settling trades through the CCIL :

Novation is the process by which government securities transactions are
settled through CCIL. This means that CCIL acts as a buyer to the seller of
security and simultaneously acts as a seller to the buyer of the security. This
in effect, removes the credit risk faced by members vis-à-vis their
counterparties. Besides, CCIL provides the additional comfort of improved
risk management practices through daily marking to market of collateral,
maintenance of daily margins by members & through a Guarantee Fund.
Trades settled through CCIL: Once a trade is done/reported over NDS it

can be settled either though CCIL or directly through RBI – SGL. Settlement
through CCIL will be on Delivery Versus Payment II (DVP II) mechanism. DVP
II refers to settlement of securities on gross basis (trade by trade basis)
while funds will settle on net basis. Settlement through RBI-SGL will follow
DVP-I mechanism i.e. settlement of both securities & funds on gross basis.
Types of trades settled through the CCIL: In order to widen the repo
market and provide improved risk management practices, all repo
transactions in government securities done/reported on NDS are settled
through CCIL.
INFORMATION TECHNOLOGY : E-BANKING RISKS : In India, the banks

have been continuously achieving new benchmarks in implementation of
information technology with the aim of remaining in forefront, in the race for
increasing their market share. The E-banking has been replacing the brick &
mortar (i.e. branch) banking quickly. However, these developments have
exposed these banks to new risks although the banks are trying to create a
robust control environment and risk management set up. The summary of
various new risks that the banks are facing is given:
Money laundering risk- This risk arises because through e-banking the
transactions can be carried by the customers even at remote locations, where
it is not possible to detect and prevent undesirable criminal activities. This
could lead to financial penalties and legal sanctions for non-compliance of RBI
directives on Know Your Customer. To take care of such risk, the banks are
required to design appropriate customer identification systems, screening
techniques, development of audit trails and come out with systems to locate
suspicious activities in e-transactions.
Security risk – This arises due to unauthorised access to the critical

information system of a bank. Such breach can cause direct financial loss in
the form of loss of valuable data, tampering with customer information,
infringement of customer privacy, disabling of internal systems of the bank
etc. Besides, the banks are exposed to internal frauds by the employees
familiar with various systems by managing to acquire authenticated data and
access to the customer accounts causing loss to the bank. In order to
mitigate such risk, it is essential to have authentication control as a basic and
essential requirement of e-banking security.

Legal risk – Such risk is the result of violation or non-conforming of various

Laws, rules and regulations and stipulated processes. These may also arise
on account of non-establishment of rights and obligations with the 3rd parties
appropriately. The mitigation of such risk is possible by taking regular
precautions & understanding transactions, in the light of e-form of banking.
Reputation risk – It is the risk relating to negative public opinion which

leads to impairing the banker-customer relations and adversely impacting the
business development. The risk may arise due to bank’s own actions or
inactions or 3rd party actions, where services are outsourced. Such risk can
be avoided by proper testing before implementation, back-up facilities,
contingency planning etc.
Strategic risk – The risk is associated with development of business plans

by the bank for which the bank introduces new products and services and
also makes use of new technologies, at times taking outside expertise. The
risk can be mitigated by appropriate selection of vendors, audit of their
performance, alternative plans to meet vendor’s failure to meet his
obligations, periodic evaluations of new technologies.
Cross border risk – As the transactions in e-banking can take place without
any geographical limits across the globe, the e-banking poses risks
associated with non-compliance of legal and regulatory requirements of other
countries or their central bank, that may require additional record keeping
and reporting stipulations, privacy rules etc. Banks will be required to take
necessary precautions in mitigating these risks.
Operational risk- The risk arises due to failure of processes, people and
systems. It may occur on accounts of inappropriate processing of financial
transactions, non-enforceability of contracts; unauthorized access to bank’s
system, fraudulent activities of the bank employee etc. The above type of
risks can be mitigated by being pro-active on all matters concerning
information system security. Only a pro-active approach can help in averting
major losses arising in the e-banking environment, to take maximum
advantage of leverage of the technical strengths.
FLOATING PROVISIONS IN BANK BALANCE SHEETS : Floating provision are

the provisions that the banks create for meeting the contingencies, which may
arise in the times to come. Such provisions are made by banks with a view to
stablise their profits, particularly in lean years, when they have to make huge
provisions by putting their profit position to greater stress. These provisions are
not made in respect of specific non-performing assets and are made in excess of
regulatory provisions for standard assets. Floating provisions add to overall
financial strength of the banks and provide financial stablity to the financial
sector.
RBI's Regulatory guidelines : RBI (DBOD) has issued prudent guidelines

on such provisions vide its circular dated February 4, 1994 on ‘Income
Recognition, Provisioning and Other Related Matters’, in terms of which the
banks can set-off the floating provisions, wherever available, against
provisions required to be made as per prudential guidelines. Further, as per

RBI Master Circular dated July 1, 2005 on Prudential norms on Income

recognition, Asset Classification and Provisioning pertaining to Advances,
banks have been encouraged to set apart provisions above the minimum
prescribed level as a desirable practice. RBI has reviewed the extant
guidelines (June 23) and has issued revised instructions on, utilization,
creation, accounting and disclosures of floating provisions .
Know Your Customer (KYC): The main objective of the policy is to properly
identify the customer at the time of entry to the Banking fold itself. KYC policy is
to setout procedures to verify bonafide identification of individuals / corporate
applications for opening of an account and setout procedures to monitor the
transactions in the accounts with due diligence as well as to set out the
procedures to report the transactions of suspicious nature on an ongoing basis.
The very purpose of KYC is to know the antecedents, business records, financial
health and reputation of the customer thorough enquiry to minimize / prevention
of frauds/malpractices. It is of paramount importance in the present day
Banking.
Credit Information Bureau (India) Limited (CIBIL): CIBIL has set up in

2000 with a view to develop an Institutional Mechanism for sharing of
information on Borrowers/Potential Borrowers among Banks/Financial
Institutions and collecting, processing and sharing Credit Information on the
Borrowers of Credit Institutions.
Corporate governance is the system by which companies are directed and

controlled by the Management in the best interest of the shareholders and
others ensuring greater transparency and better and timely financial reporting.
Regulatory bodies for the capital market also feel that corporate governance is a
necessary requirement for the existence of entity in the market as a whole and
as a precondition to the listing requirement. The Audit Committee has been
given an important role to play in the implementation of corporate governance.
Similarly, the Auditor of an entity also plays a crucial role in the implementation
of corporate governance. Under ‘Corporate Governance’, Bank articulates
Corporate Values, Codes of conduct and standards of appropriate behaviour etc
and has systems and controls to ensure compliance with them. It is the joint
responsibility of Board of Directors and Management. In a Nutshell, Corporate
Governance means
¾ Doing every thing better
¾ Should protect shareholders rights and enhance shareholders value.
¾ It is beyond ‘Profit Maximization’ and considers the effect of company’s
operations on Stakeholders and community at large.
¾ Acting 'Transparently'
¾ Meeting Informational needs of stakeholders
What is ethical but not legal should not be done and at the same time
what is legal but not ethical should not be practiced.

PERFORMANCE HIGHLIGHTS
FOR THE YEAR ENDED 31st MARCH 2009
• Total Business surpassed Rs 1 Lakh crore mark and reached

Rs.1,03,818 Crore , with a growth 23.60 %.
• All the 1432 branches, 52 Extension Counters, 18 Service Centres
of the Bank are brought under “Core Banking Solutions (CBS)”much
ahead of schedule.
• Accelerated growth of 28.56% achieved in Credit at Rs. 44,428
crore
• Total Deposits rose to Rs. 59,390 crore – A growth at 20.13%
• Operating Profit improved to Rs.431.80 cr. in Q4 (a growth of
37.90%)
• Net Profit in Q4 reached Rs.201.21 Crore recording an increase of
61.94%.
• Interest Income during Q4 -2008-’09 increased to Rs.1506.71 Cr.
With a growth rate of 31.15% over Q4 of 2007-’08.
• Net Interest Income grew by 21.45%
• Net Interest Margin (NIM) for the year was 3.03 % against 3.00%
in the previous year.
• Other Income increased by 22.18%
• Percentage of Gross NPAs to Gross Advances improved from 1.07%
as on 31.3.’08 to 0.83 % as on 31.03. 09
• Percentage of Net NPAs to Net advances stood at 0.18%.
• CRAR improved from 11.61% as on 31.3.2008 to 13.22% as on
31.3.2009. This performance is against RBI norm of 9%
• Return on Assets stood at 1.09%
BUSINESS LEVELS
• The Bank has surpassed the landmark of Rs 1 Lakh crore in Total
Business. The Total Business reached Rs.103818 Crore as on
31.03.09 from Rs. 83,993 crore as on 31.03.08, with a growth of
23.60 % Spurt in Bank's Credit from Rs. 34,556 Crore as on 31.03.08
to Rs. 44,428 crore 31.03.09, a YoY growth of 28.56%.
• Total Deposits grew by 20.13% from Rs. 49437 crore as on
31.03.08 to Rs. 59,390 Cr as on 31.03.09

• The Credit Deposit ratio is 75.04 % as at the end of Mar’09.

TECHNOLOGY FRONT INITIATIVES
• Bank has migrated all its 1432 branches, 52 Extn. Counters and 18
Service Centres to “Centralized Core Banking Solution” in a record
time of less than one year and is a unique achievement amongst
Public sector banks in India .
• “Internet banking” with customer transaction facility launched for
Retail as well as Corporate CBS customers.
• “Online Tax Payment (eTax) “ was launched along with “Internet
banking” for Retail as well as Corporate customers.
• “SMS Alerts” facility over mobile phones made available to 3 lakh
clientele registered for this facility. This has enhanced the levels of
Customer Service significantly.
• Facility of issuing non-personalised debit cards and transaction PIN
across the counter at the time of opening of account also
introduced.
• Bank is operating three ATMs with biometric facility , out of which
two ATMs are Mobile ATMs.
• Number of Debit cards increased from 28.42 lakh as on 31.3.2008
to 35.40 lakh as on 31.3.2009.
SOUNDNESS
• Capital to Risk weighted Assets Ratio (CRAR) is at 13.22% as on
31.3.2009 against 11.61% as on 31.3.2008 and also against RBI
prescribed norm of 9%.
• Return on Assets stood at 1.09% as on 31.3.2009
• The Client base of the Bank improved from 17.1 million as at the
end of Mar’08 to 20 million by the end of Mar’09.
• Total Number of Business Delivery Channels increased from 2128
(31.03.08) to 2248 (31.03.09).
• Total Number of branches increased from 1366 (31.03.08) to 1,432
(31.03.09) covering 22 states and 2 Union Territories.
• Number of ATMs increased from 656 as on 31.03.08 to 726 as on
31.03.09.
• Average per Employee Productivity improved from Rs.5.40 crore as
on 31.03.08 to Rs. 6.26 crore as on 31.03.09.

• Bank aims at surpassing Business level of Rs.1, 50,000 crore by

30.9.2010.
EFFICIENCY OF OPERATIONS
• Total Income improved by 26.96% from Rs. 4836 crore to Rs.6140
Crore as on 31.3.2009
• Interest Income increased by 27.68% from Rs. 4210 crore to
Rs.5375 crore.
• Net Interest Income increased by 21.45% from Rs. 1340 crore to
Rs.1627 crore.
• The Net Interest Margin is at 3.03% compared to 3.00% in the
previous year.
• Other Income improved from Rs.626 crore as on 31.03.08 to
Rs.765 crore as on 31.03.09
• Operating Profit stood at Rs.1,288 Crore as at the end of Mar’09
Compared to Rs. 1057 cr as on 31.03.08 with a yoy growth of
21.86%.
• During Q4 the Operating Profit increased by 37.90%
• Net Profit improved to Rs. 653.05 Crore as at the end of March
2009, a YoY growth of 13.46%, while in Q4, Bank achieved growth
of 61.94%.
PRIORITY SECTOR CREDIT

• Priority Sector Advances are at Rs. 14,955 crore, constituting 43.28
% of Advances and against the prescribed norm of 40%.
• Agricultural Advances are at Rs. 6,834 crore, constituting 19.78%
of Advances and against the prescribed norm of 18%.
• 1, 70,850 new farmers taken into Bank’s fold during the current
financial year.
• Under “Debt Swapping Scheme” to Farmers/ SHGs, Bank extended
credit of Rs.176 crore.
• Credit extended to MSME Sector improved from Rs.3989 crore
(31.03.08) to Rs.5357 crore with Y-o-Y growth of 34.29%
RECOVERY MANAGEMENT
• The percentage of Standard Assets to Total Advances increased to

99.17% (31.03.09) from 98.93% (31.03.08).

• In absolute terms, Gross NPAs declined from Rs. 372.43 crore
(31.03.08) to Rs.368.14 crore (31.03.09).
• Gross NPAs as a percentage to Gross Advances improved from
1.07% (31.03.08) to 0.83% (31.03.09).
• Net NPAs are at Rs. 79 crore, representing 0.18% of Net Advances.
• The Slippage Ratio (Total fresh NPAs added during the year as a
percentage to Standard Assets at the beginning of the year)
improved from 0.72% as on 31.03. 08 to 0.59% as on 31.03. 09.
PRODUCTS INTRODUCED
• "AB Premium Current Account" and "AB Privilege Corporate Salary
Savings Bank account" Schemes with value added services to
customers launched.
• Bank has introduced 'AB Anand Jeevan Loan (Reverse Mortgage)”
for the benefit of senior citizens
SERVICES INTRODUCED
• Sale of Gold Coins launched on 1.1.2009. During Q4 the response
was phenomenal.
• Bank entered into Tie Ups with Mutual Fund organizations such as
M/S Reliance Mutual Fund, Kotak Mutual Fund, Fidelity Mutual Fund
and Birla Sun Life Mutual Fund for sale of their Mutual Fund
Products.
• Bank has signed MOU with M/s.Maruthi Suzuki Ltd and Tata Motors
for financing vehicles.
• Bank has approved the revised Manpower Policy during the year
2008-'09 and inducted officers from campuses which included
Specialist Officers.
==============

PERFORMANCE HIGHLIGHTS
FOR THE YEAR ENDING MARCH 2010
Andhra Bank came out with another stellar performance with annual profit for
the year zooming to Rs. 1,046 Crore, up from Rs 653 Crore, an increase of
60.15 %. Business grew 29.26% y-o-y from Rs. 1,03,818 Crore to Rs.1,34,194
Crore. All the more creditable is the fact that the Asset Quality continues to be
excellent, with Gross NPA standing capped at 0.86% (net NPA at 0.17%), one of
the best in the industry.
Growth of credit was contributed mainly by MSME (54.66% growth) , Retail

(47.63 % growth) and Agriculture (34.23% growth). The growth in retail has
come mainly from increase in gold loans and home loans.The Operating Profit of
the bank continued its scorching pace of growth from Rs. 1288 Crore to Rs.
1810 Crore, a growth of 40.51%, on the back of increased non-interest income
by 26.03%. Net Interest Income (NII ) improved from Rs. 1627 crores to Rs.
2195 crores, with an increase of 34.90% over last year. Consequently, Net
Interest Margin(NIM) moved up to a healthy 3.21% from 3.03% last year.
The Return on Assets worked out to 1.39% as compared to 1.09% last year,
whereas Book Value per share has increased from Rs. 75.20 to Rs.96.76 as at
31.3.2010.The Capital Adequacy was 13.93 % as on 31.3.2010 as against RBI
mandated requirement of 9%. Provision Coverage ratio stood at 91.56% as
against the RBI stipulation of 70%. The high Capital adequacy as well as
coverage ratio brings out the inherent strength of the Bank.
The Board of Directors has recommended a dividend of 50% for the year,
subject to approval in the Annual General Meeting.
During the year, Verticals were created at Head Office for major business
segments like Resources, Large Corporate, Mid Corporate, Retail, MSME, New
Branches, Stagnating Branches etc., These verticals are headed by GMs and
DGMs who are responsible for achieving the targets. The Bank opened 125
new branches during the year, predominantly in the North, West and Eastern
parts of the country, thus increasing its pan India footprint. IndiaFirst Life
Insurance, a joint venture of the Bank with Bank of Baroda and Legal & General
insurance, (UK) was launched on 1st Jan’10 for rolling out products. In the first
three months itself the Bank has sold 19689 policies and collected premium of
Rs.53.44 crore and earned commission of approx Rs. 2 crore. Setting up of
Banking subsidiary jointly with Bank of Baroda and Indian Overseas Bank in
Malaysia is in the final stages.
Performance Highlights:
Profitability:
a. Net Profit: Net profit of the Bank for the FY ended March 2010 increased by
Rs 393 crore (60.15 %) from Rs 653 crore in March 2009 to Rs.1046 Crore.
The Net profit of the Bank for the Quarter (Q4) ended March 2010 is up by 19.42
%. The Net profit was at Rs.240.29 Crore , as compared to Rs.201.21 Crore for
Q4 of the previous fiscal, recording an increase of Rs 39.08 crore.

The Net Profit per employee increased to Rs.7.32 Lacs from Rs.4.58 Lacs in
March 2009.
The Net Profit per branch increased to Rs.67.17 Lacs from Rs.45.60 Lacs in
March 2009.
b. Operating Profit: Operating Profit of the Bank for the FY ended March 2010
increased by Rs.522 Crore (40.51%) from Rs.1,288 Crore in March 2009 to
Rs.1,810 Crore.
The Operating Profit of the Bank for the Quarter (Q4) ended March 2010 is up by
22.10%.
c. Net Interest Income: The Net interest income increased by Rs.568 Crore
from Rs 1627 crore to Rs. 2195 crore in March 2010, recording an increase of
34.90 % on y-o-y basis.
During Q4 of the financial year, the net interest income was Rs.656 Crore , in
comparison with Rs 395 crore in Q4 of the previous fiscal.
d. Net Interest Margin (NIM): The Net interest margin, which was 3.03%
last year, moved up significantly to 3.21 % this year.
e. Non-Interest Income: The non-interest income was at Rs 964.62 crore ,

as compared to Rs 765.38 crore in 2008-09. While profit on sale of investments
increased by Rs 86.89 crore this fiscal, the Fee based income has gone up by
Rs. 27.32 crore from Rs 80.20 crore in 2008-09 to Rs 107.52 crore in 2009-
10.
Business Growth:
a. Total Business : Total Business of the Bank as on 31.3.2010 stood at Rs.

1,34,194 crore. The total business increased by Rs. 30,376 crore from Rs.
1,03,818 crore as on 31.3.2009, recording a growth of 29.26%.
b. Deposits: Total deposits of the Bank increased by Rs.18,298 crore to Rs.

77,688 crore from Rs. 59,390 crore as on 31.3.2009, recording a growth of
30.81 %.
c. CASA Deposits: CASA deposits increased from Rs. 18,653 crore as on

31.3.2009 to Rs. 22,864 crore as on 31.3.2010, registering a growth of 22.57%.
The share of CASA deposits stood at 29.43%.
d. Advances : The Gross Bank Credit stood at Rs. 56,505 crore as on

31.3.2010, registering an increase of Rs. 12,077 crore over the previous year,
with growth rate of 27.19 %. The Credit Deposit ratio stood at 73.05 %. MSME
Advances stood at Rs. 8,285 crore as at the end of March 2010, as against
Rs. 5,357 crore as at the end of March 2009, reflecting an annual growth of
54.66%.

Retail Advances also recorded a substantial growth of 47.63% over last year,
reaching Rs. 8,920 Crore by 31.3.2010, as against Rs. 6,042 crore as on
31.3.2009.
Advances to Agriculture sector increased from Rs. 6,834 crore as on 31.3.2009

to Rs. 9,173 crore as on 31.3.2010, registering a growth of 34.23%.
Total Priority Sector advances constituted 42.79 % of Adjusted Net Bank Credit
which is well above the RBI norm of 40%. Like wise, Agricultural advances
constituted 20.65% of Adjusted Net Bank Credit against RBI norm of 18%.
Network : The Bank’s network spread across 2,502 business delivery channels
comprising 1557 branches, 48 Extension counters and 859 ATMs spread across
23 States and 3 Union Territories. During the year, the Bank opened 125
branches.
Clientele expansion: 16.44 lakh new accounts were opened in the CASA group
during the year.
Financial Inclusion:
AB Smart Card project is implemented for Electronic Benefit Transfer of Govt.

Schemes covering 10.17 lakh members. As a part of educating the rural
population about the various banking services, four Financial Literacy and Credit
Counseling Centres (FLCCs) were set up in the four districts of A.P., where our
Bank is the lead bank. The bank has finalized a road map as per the directions of
RBI to provide banking service outlets in the villages having population above
2,000 by the year 2011. The plan will be implemented with Business
Correspondent network (i.e., Branchless banking mode).
Asset Quality & Recovery
a. NPAs : Gross NPAs stood at 0.86% as compared to 0.83 % as on

31.3.2009 . Net NPAs stood at 0.17 % as on 31.3.2010 compared to 0.18
% as on 31.3.2009. In absolute terms, the Gross NPA was Rs 487.87
crore (previous year Rs.368.14 Crore) and Net NPAs stood at Rs.95.72
crores (previous year Rs 79.22 crore).
b. Provision coverage: The NPA Provision coverage ratio stood at 91.56 %

as at 31.3.2010, compared to 91.08 % as at 31.3.2009.
Capital
a. Capital Adequacy Ratio: The Capital Adequacy Ratio under Basel II norms
was 13.93 % as on 31.3.2010 as compared to 13.22 % as on 31.3.2009.
b. Networth : The Networth of the Bank stood at Rs. 4,692.82 crore as on

31.3.2010, compared to Rs.3,646.99 Crore as on 31.3.2009.
c. Return on Equity: The Return on Equity was 25.08 % for the year ended
31.3.2010 as compared to18.94% for the previous year.

d. Earning Per Share: The Earnings per share has gone up from Rs.13.46 in
FY 2008-09 to Rs. 21.56 in FY 2009-'10 with an increase of 60.18 %.
e. Book Value Per Share: The Book Value Per Share was at Rs 96.76 as at
31.3.2010 as compared to Rs.75.20 as at 31.3.2009, an increase of 28.67 %.
Productivity Ratios :
a. ROA: The Return on Assets worked out to 1.39 % as compared to 1.09 % as

at March 2009.
b. Cost to Income Ratio: The Cost to Income ratio improved to 42.72 % for
the year ended March 2010 compared to 46.16% in the year ended March 2009.
c. Cost of Deposits: The Cost of deposits stood at 6.10 % p.a as against

6.96% in 2008-09.
d. Yield on advances: Yield on Advances stood at 10.92 % p.a compared to

11.41 % in 2008-09.

आन्ीा बैंक ANDHRA BANK
COMPARISION OF WORKING RESULTS FOR THE YEAR 2008-09 & 2009-10
March 2009 March - 2010
Actuals on YoY Actuals on YoY
31.03.2009 Growth 31.03.2010 Growth
01 Total Business 103818 Cr. 23.60% 134194 Cr. 29.26%
02 Deposits 59390 Cr. 20.13% 77688 Cr. 30.81%
03 Credit 44428 Cr. 28.56% 56505 Cr. 27.19%
04 Net worth 3646.99 Cr. 4692.82 Cr. 28.70%
05 Net Profit 653 Cr. 13.46% 1046 Cr. 60.20%
06 Operating Profit 1288 Cr. 37.90% 1810 Cr. 40.51%
79.22 cr 95.72 Cr. 20.80%
08 Net NPA
0.18% 0.17% -0.95%
368.14 cr 487.87 Cr. 32.52%
09 Gross NPA
0.83% 0.86% 3.61%
22864 Cr.
10 CASA 18653 Cr. 22.57%
29.43%
11 Non Interest Income 765.38 Cr. 964.62 Cr. 26.03%
12 ROA 1.09% 1.39% 27.52%
13 ROE 18.94% 25.08% 32.42%
14 Yield on Advances 11.41% 10.92% -4.30%
Net Profit
16 4.58 Lac 7.32 Lac 60%
per employee
Net Profit
17 45.60 Lac 67.17 Lac 47.30%
per Branch
18 Cost to Income Ratio 46.16% 42.72% -7.45%
18 Net Interest Income 1627 Cr. 21.45% 2195 Cr. 34.90%
19 NIM 3.03% 3.21% 5.94%
20 CRAR 13.22% 13.93% 5.37%
21 Fee based Income 80.20 Cr. 107.52 Cr. 27.32%
22 Cost of Deposit 6.96% 6.10% -12.35%
23 Earning per Share 13.46% 21.56% 60.18%
24 Retail Advances 6042 Cr. 8920 Cr. 47.63%
25 Book Value per Share 75.20 96.76 28.67%
27 Delivery Channels 2248 2502 11.30%
27 Branches 1432 1557 8.72%
28 ATMs 726 859 18.32%
29 CD Ratio 75.04% 73.05%

PRESS RELEASE
31.01.2011
ANDHRA BANK
PERFORMANCE HIGHLIGHTS FOR DECEMBER 2010
Q3 FY11 9M FY11
Net Profit 20.36% 18.36%
Operating Profit 30.08% 32.66%
Net Interest Income 44.08% 53.28%
Total Business 25.26%
Performance Highlights for the Q3 FY’11 and 9M FY’11 ended December 2010
Profit
• Net Profit of the Bank for Q3 for FY ’11 improved to Rs. 331Crore as against
Rs. 275 crore for FY ‘10, an increase of 20.36%.
• Net Profit for nine months ended Dec’10 (9M FY’11) improved to Rs.954
crore as compared to Rs. 806 crore last year, registering a y-o-y growth of
18.36%.
• Operating Profit for Q3 FY’11 stood at Rs. 627 crore as against Rs.482
crore in Q3 FY’10, registering a Y-o-Y growth of 30.08%.
• Operating profit grew by 32.66% to reach Rs.1702 crore in 9M FY’11 as

compared to Rs. 1283 crore for 9M FY’10.
TOTAL BUSINESS
• Total Business of the Bank stood at Rs.1,47,682 crore, recording a Y-o-Y

growth of 25.26% over Rs.1,17,899 crore in Dec’09.
• Deposits at the end of Dec’10 amounted to Rs.82,095 crore as compared to

Rs.66,547 crore in Dec’09, exhibiting a growth of 23.36% on Y-o-Y basis.
• Advances recorded a robust growth of 27.72% (y-o-y) reaching the level of

Rs. 65,587 crore as at Dec’10 from Rs. 51,352 crore as at Dec’09.
• CASA deposits increased to Rs. 23,428 crore in Dec’10 from Rs. 20,030
crore in Dec’09, recording a growth of 16.96%.
CASA share in total deposits is 28.54% at Dec’10 end.
Saving deposits increased by 22.55% to Rs.18,212 crore
INCOME
• Total income during Q3 FY’11 rose by 26.98% to Rs. 2320 crore.
• Total income during 9M FY’11 increased to Rs.6,526 crore, recording a

growth of 21.75% .
• Non-Interest Income in Q3 FY’11 amounted to Rs 198 crore and Rs. 598

crore for 9M FY’11 as compared to Rs. 224 crore in Q3 of FY’10 and Rs. 696
crore for 9 months FY’10. Excluding Treasury Income, Core Non-Interest
Income for Q3 stood at Rs. 188 crore as compared to Rs. 176 crore for Q3
’09.
• Net interest income during Q3 FY 11 improved to Rs.840 crore recording a

growth of 44.08% over Q3 FY 10.
• During 9M FY’11 NII improved by 53.28% to Rs. 2359 crore.
IMPORTANT RATIOS
• Gross NPA ratio stood at 1.33% as at Dec’10 while Net NPA ratio is 0.47%.
• Provision Coverage Ratio is at 80.42% as against minimum stipulated 70%.
• Net Interest Margin (NIM) improved to 3.91% for the quarter ended Dec’10
and 3.85% for nine months ended Dec’10, as against 3.35% and 3.12%
during previous year.
• Return on Assets stood at 1.41% in the Q3 FY’11. (Nine Months ended

Dec’10: 1.42%).
• Cost of Deposit stood at 5.84% for Q3 FY’11 and 5.66% for 9M FY’11.
• Cost to Income ratio stood at 39.77% in Q3 FY’11 and 42.51% in 9M FY’11.
• Earnings Per Share was Rs. 19.68 for the period ended Dec 10 against
Rs.16.61 last year.
• Book Value per Share improved to Rs. 110.60 in Dec ’10 as against Rs.
91.80 in Dec’09.
• CRAR of the bank is 12.00 % under BASEL-II (Tier-I Capital: 7.06%; Tier-II
Capital: 4.94%), without taking into account accrued profits for the three
quarters in FY ‘10-‘11.
DELIVERY CHANNELS
• PAN India presence with 2615 delivery channels consisting of 1587

branches,36 Extension Counters,38 satellite offices and 954 ATMs.
PRIORITY SECTOR
• Priority Sector Advances improved to Rs.21585 crore as on 31.12.2010

from Rs.17548 crore as on 31.12.2009, reflecting a growth of 23.01%.
• Priority Sector as % of Adjusted Net Bank Credit (ANBC) is 38.20%
AGRICULTURE
• Advances to Agriculture have gone up to Rs.10057 crore as on

31.12.2010, from Rs.8252 crore as on 31.12.2009, recording a growth of
21.87%.
• Agricultural Lending as % of ANBC is 17.80%, as against a minimum of 18%

to be reached by 31.03.2011.
MSME
• MSME Advances registered a growth of 29.25% and stood at Rs.9832 crore

as at the end of December 2010 against Rs.7607 crore in Dec'09.
RETAIL CREDIT
• Retail Credit increased to Rs.10,019 crore from Rs.7,902 crore, with a

growth of 26.79%.
FINANCIAL INCLUSION
In order to strengthen Financial Inclusion, the Bank has opened 8.60 lakhs
‘No Frill Accounts’ under Branch Banking
FINANCIAL INCLUSION PLAN
• A road map has been submitted to Reserve Bank of India to provide

banking service outlets in villages with population above 2000 by
March 2012. The outlets will function through Business
correspondents (BCs) mode by leveraging technology. Bank planned
to implement the plan in 1144 villages by March 2012 and cover 500
villages as an interim target by March 2011. So far Bank has already
covered 195 villages under FIP.
SELF HELP GROUPS (SHGs)
• Bank has lent Rs.2297.30 crore to Self Help Groups by the end of
Dec’10.
• Bank has commenced serving the SHG members through Smart cards
at their doorsteps through Business Correspondents. The pilot project
is rolled out in four branches i.e., Rayavaram, Kadiam, Anaparthi &
Bibinagar covering about 2400 SHGs through branchless banking
mode. Plans are afoot to implement in more number of branches.
ABRDT
• Bank has established 10 Rural Self Employment Training Institutes,

which are imparting need based training to farmers, SHG women,
Rural Unemployed youth, and Artisans. The institutes have trained
over 96864 people till 31.12.2010.
• Bank has established 4 Financial Literacy and credit Counseling

centres in all Lead Districts of A.P. State. The centers are functioning
with the aim of educating the rural people on banking services and
financial education.
TECHNOLOGY BASED INITIATIVES FOR CUSTOMER GRIEVANCE

REDRESSAL
Bank has launched a customer friendly initiative involving complaint redressal
mechanism through Mobile SMS called "UPSET"
Any customer having any type of inconvenience with the Bank's service can
give an SMS to 96666 06060 by typing the word "UPSET".
Immediately the Bank will call the customer back to elicit the details of the
grievance/complaint and take steps to redress the same.
This is a fast method of Customer Dissatisfaction Resolution
AWARDS AND ACCOLADES
Best Public Sector Bank Banking

Excellence Award by the State
Forum of Banker’s Clubs, Kerala.
Best Bank Performance

on Key Parameters
under CAMEL Rating
adjudged by The
Analyst – Magazine.
Best Bank (Mid –

Size) Award by
Business World.
Best Bank for the Quality of

Assets Awarded by Business
Today.
***
TEST
1. Sterilization operations are carried by RBI control _____?

a. Inflation
b. Deflation
c. Liquidity due to Forex inflow
d. Over heated Stock market
e. All the above.
Ans: ( c )
2. The term ‘WAN’ stands for –
a. World Area Network

b. Wide Area Network
c. World Application Net
d. Wide Application Network
Ans: (b)
3. In India, the Cyber Law is called
a. Computer Misuse Act

b. Information Technology Act
c. Computer related Offences Act
d. Fraudulent Access to Computers Act
Ans: (b)
4. What time is available to the customer to lodge complaint with

Ombudsman :
(a) 1 year from receipt of reply with which customer is not satisfied
(b) 1 year where reply not received by the customer for one month
(c) 1 year from date of lodging the complaint with the bank
(d) a and b above
Ans: (d)
5. A decision has been given by an Ombudsman and the customer has

given his consent for acceptance of the same. Within how many days the
decision has to be implemented by the bank:
a. 30 days from the date of award

b. 30 days from the date of acceptance by the customer
c. 60 days from the date of award
d. 60 days from the date of acceptance customer
e. none of these
Ans: (b)
233
6.What is the periodicity of submission of CTR by branches as per KYC-

AML regime?
a) Weekly
b) Monthly
c) Quarterly
d) Half yearly
e) None of the above
Ans: (b)
7. What is the guideline from RBI about issuing Pass Books in Savings
accounts?
a. Customers should be issued with passbooks

b. If they are willing to receive statements, Monthly statements should be sent
c.Name and Address of the Bank should be clearly mentioned in the passbooks
d. All of the above
Ans: (d)
8. At present what type of Risk approach is being implemented by the

banks as regards to Credit and operational Risk.
a. Standardized & Basic Indicator Approach

b. RBIA
c. Adv. RBIA
d. None of these
Ans: (a)
9. Inflation occurs when aggregate supply is________.
a. Less than aggregate demand

b. More than aggregate demand,
c. Equal to aggregate demand
d. No relation between demand and supply
e. None of the above.
Ans: (a)
10. What is John Shephard Baron’s contribution to Banking , the idea of

which struck him as he stretched out in his bath after a long wait at the
bank counter?
a. Credit Card
b. Debit Card
c. ATM
234
d. Master Card
e. VISA card
Ans: (c)
11. In a computer software , the term ‘morphing ‘ refers to which of the

following:
a. Animation technology in which one image is gradually turned into another .

b. Data conversion technique by way of use of codes,
c. Conversion of digital picture to analog images
d. A softer that saves a network form intrusion,
e. Software that links one server to another
Ans: (a)
12. ‘MICR’ technology used for clearance of cheques by banks refers

to______.
a. Magnetic Ink Character Recognition
b. Magnetic Intelligence Character Recognition
c. Magnetic Information Cable Recognition
d. Magnetic Insurance Cases Recognition
Ans: (a)
13. TDS on interest paid on term deposit, be deposited with Income tax
department within:
a. 7 days of the deduction of tax
b. 7 days from the close of month, in which tax is deducted,
c. 10 days of the deduction of tax
d. 10 days from close of month, in which tax deducted,
Ans: (b)
14. The word “FTP’ stands for __________.
a. File Translate Protocol

b. File Transit Protocol
c. File Typing Protocol
d. File Transfer Protocol
Ans: (d)
15. In terms of Section 20(1) of the Banking Regulation Act, 1949, a

bank cannot grant any loans and advances:
a. On the security of its own shares

b. On security of privately held Companies
c. On security of publicly held Companies
235
d. All of the above
Ans: (a)
16. Which one of the following best explains the term "Shell Bank"?
a. A Bank, which is incorporated in a country where it has no physical presence.

b. A bank which is incorporated to take deposits only and invests in 100%
secured Govt securities only.
These banks normally charge huge service charges from their depositors to earn
profits. These types of
banks are normally in Switezerland & other small European countries.
c. A bank which is having 100% of its branches in a country in which it has been
incorporated i.e. no
foreign branch.
d. A bank incorporated in Islamic country on the, principles of Islamic Banking.
Ans: (a)
17. Minor can draw, negotiate, transfer, endorse negotiable instruments

but:
a. He is liable if cheque is dishonoured

b. he is liable for endorsement
c. he is not liable personally
d. he is liable personally but nothing can be recovered from him
Ans: ( c)
18. Garnishee order can be served if the relationship of banker and

customer is that of :
a. creditor and debtor

b. debtor and creditor
c. agent and principal
d. trustee and beneficiary
Ans: ( b)
19. An order cheque is endorsed in blank:

A: It becomes payable to bearer
B: Its further endorsement becomes restricted
C: Its negotiation features has been terminated
D: it does not need further negotiation
Answer: (A)
236
20. The penalty imposed by RBI on a commercial bank is required to be

disclosed by the bank under:
A: the notes on accounts in its balance sheet

B: auditor’s report annexed to the balance sheet
C: director’s report being part of the balance sheet
D: all the above
Answer: (A)
21. Priority sector credit to Adjusted net bank credit , for Indian banks
should be:
A: 30% of ANBC
B: 35% of ANBC
C: 40% of ANBC
D: 40% of gross bank credit
Answer: (C)
22. Loans and advances granted to staff members carry a risk weight of ___ for
the purpose of capital adequacy ratio:
A: 10%
B: 15%
C: 20%
D: 50%
Answer: (C)
23. Under which section of NI Act liability of drawee bank in case of wrongful
dishonour of cheque is described :
A: 85
B: 131
C: 30
D: 31
Answer: (D)
24. A loan is secured by fixed assets of a firm but due to defect caused during
the warranty period, these defective assets are proposed to be replaced due to
which there will be substitution of security. Such substitution of security is
called:
A: Subrogation
B: Transfer
C: Novation
D: Assignment
Answer: (C)
237
TEST
GENERAL CONCEPTS
1. What is the new provision coverage ratio prescribed by RBI ?
Ans: 70%
2. Interest Rate Futures (IRF) are permitted on --------------- by RBI ?
Ans: 10 year notional coupon bearing Govt Of India securities
3. What is the mandatory limit up to which collateral free loans have to be

sanctioned to units under MSE( Micro & Small Entp) Manufacturing &
Services by RBI ?
Ans: Rs 10lakhs
4. What is the amount of limit up to which Housing Loans are treated as

Priority sector?
Ans: Rs 20 lakhs
5. What is the provision on Standard assets under Commercial real estate

stipulated by RBI ?
Ans: 1 %
6. What is the amount of cash withdrawal permitted by RBI with debit cards
per day through POS?
Ans: Rs 1000/-
6. What is the interest to be paid on overdue deposits if it is drawn without

renewal ?
Ans: 3.5 %( SB rate) for the overdue period.
7. Under Basel II norms the prescribed capital adequacy ratio in India is
Ans: 9%
8. What is the date from which the Base Rate will replace PLR in Banks?
Ans : July 1, 2010
9. What is the Base Rate of our Bank?
Ans: 9%
238
TOPICS FOR PROMOTION TEST
1. PROVISIONS ON NON PERFORMING ASSETS:
a) Sub standard assets: Flat 10% on out standing balance. 20% on unsecured
exposures.
b) Doubtful up to 1 year: 20% on secured and 100% on unsecured portion of

the liability.
c) Doubtful above 1 year and up to 3 years: 30% of secured and 100% of

unsecured portion of liability
d) Doubtful above 3 years: 100% on entire liability.( Secured and unsecured)
e) Loss asset: Flat 100% on liability.
Note: Any time if the realizable value of the security falls below 50%, the
account is to be classified as doubtful asset. If the realizable value falls below
10%, then the account is to be treated as loss asset and 100% provision is to be
kept.
Exempted categories: Advances against term deposits, NSCs eligible for

surrender, IVPs, KVPs and life policies.
Advances granted under rehabilitation packages approved by BIFR / Term

lending institutions.
Advances covered by CGTMSE guarantee - No provision need be made towards
the guaranteed portion. The outstanding in excess of the guaranteed portion
should be provided.
Advances covered by ECGC /DICGC guarantee - provision should be made only

for the balance in excess of the amount guaranteed by the Corporation.
***
2. OFFICIAL LANGUAGE:
Correspondence in Hindi:
Region A ( Bihar, Chattisgarh, Haryana, HP, Jharkhand, MP, Rajastan, UP,

Uttaranchal, Union territories: Delhi, Andaman & Nicobar islands
Region B: ( Gujarat, Maharashtra, Punjab, Chandigarh
Region C: Remaining states and union territories.
Correspondence between branches:
A TO A 100% B TO A 90% C TO A 55%

A TO B 100 B TO B 90% C TO B 55%
A TO C 65% B TO C 55% C TO C 55%

A to Individuals/offices in AB : 100%
B to Individuals/offices in AB 100%
C to individuals/office in AB 85%
3. PROVISIONON STANDARD ASSETS:
a) Agriculture and SME advances: 0.25% on outstanding balance.

b) 1.00% on Commercial real estate.
c) 0.40% on all other advances.
d) 2% on housing loans with teaser rates.
4.CDR MECHANISM :
The objective of the CDR framework is to ensure timely and transparent

mechanism for restructuring the corporate debts of viable entities facing
problems, outside the purview of BIFR, DRT and other legal proceedings, for the
benefit of all concerned. In particular, the framework will aim at preserving
viable corporates that are affected by certain internal and external factors and
minimize the losses to the creditors and other stakeholders through an orderly
and coordinated restructuring programme. The scheme will not apply to
accounts involving only one financial institution or one bank. The CDR
mechanism will cover only multiple banking accounts / syndication / consortium
accounts of corporate borrowers with outstanding fund-based and non-fund
based exposure of Rs.10 crore and above by banks and institutions. However,
there is no requirement of the account/company being sick, NPA or being in
default for a specific period before reference to the CDR system. Three-tier
structure is in place for CDR system viz., CDR Standing Forum and its Core
Group, CDR Empowered Group and CDR Cell.
i) CDR Standing Forum provide an official platform for both the creditors and
borrowers (by consultation) to amicably and collectively evolve policies and
guidelines for working out debt restructuring plans in the interests of all
concerned.
ii) CDR Empowered Group consider the preliminary report of all cases of
requests of restructuring, submitted by the CDR Cell. After the Empowered
Group decides that restructuring of the company is prima-facie feasible and the
enterprise is potentially viable in terms of the policies and guidelines evolved by
Standing Forum, the detailed restructuring package will be worked out by the
CDR Cell in conjunction with the Lead Institution.
iii) CDR Cell undertakes the initial scrutiny of the proposals received from
borrowers / creditors to decide whether rehabilitation is prima facie feasible. If
found feasible, proceed to prepare detailed Rehabilitation Plan with the help of
creditors and, if necessary, experts to be engaged from outside. If not found
prima facie feasible, the creditors may start action for recovery of their dues.
CDR-1 system is applicable only to accounts classified as 'standard' and 'sub-

standard'. CDR-2 system is applicable to the accounts where the projects have
been found to be viable but classified under ‘doubtful’ category provided
minimum of 75% of creditors (by value) and 60% creditors (by number) satisfy
themselves of the viability of the account and consent for such restructuring.

Reference to Corporate Debt Restructuring System could be triggered by any or

more of the creditor who have minimum 20% share in either working capital or
term finance, or by the concerned corporate, if supported by a bank or financial
institution. However, in case of suit filed accounts at least 75% of the creditors
(by value) and 60% of creditors (by number) shall consent for the proposal. CDR
is a non-statutory mechanism which is a voluntary system based on Debtor-
Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA).
The sub-standard/doubtful accounts which have been subjected to restructuring

would be eligible to be upgraded to the standard category only after the
specified period, i.e. one year after the date when first payment of interest or of
principal, whichever is earlier, falls due under the rescheduled terms, subject to
satisfactory performance during the period.
***
5.COMPREHENSIVE CORPORATE COMPOMISE POLICY:
Prompt recovery of loans and advances not only increases liquidity and
profitability but also keeps funds cycle moving by continuous lending for the
development of the economy. Compromise Policy is a step in this direction. The
compromise should be a negotiated settlement under which it should be ensured
to recover its dues to the maximum extent possible with a minimum sacrifice.
The important aspect in connection with settlement proposals is the concept of
opportunity cost of funds. The opportunity cost of funds in hand vis-à-vis that of
funds, which could come in hand at a later period should be calculated to
establish a comparative advantage of 'now or later'. The guiding factors for a
compromise settlement are:
Balance outstanding in the account (real account) as on date of NPA.

Provision held in the account.
Market value of the securities and time taken for realizing it.
Reasons for failure i.e. factors beyond borrower's control like natural. Calamities.
Present status of the account and the amount that can be recoverable.
Our Bank introduced a Comprehensive Corporate Compromise Policy (CCCP) and

the salient features of the policy are furnished here under:
These guidelines are applicable to NPAs and Technically Written-off accounts

including Credit Card dues.
The account should have been classified as Substandard asset as at the end of
previous quarter for settlement. All the limits enjoyed by the borrower either
with the same branch or with different branches are also settled simultaneously.
Impaired Asset Study (IAS) is to be conducted as per guidelines.
It also covers dues of employees/officers who cease to be in service on account
of retirement/death/resignation/dismissal/discharge/compulsory retirement may
be treated on par with general public.
Compromise settlement may be entered with willful defaulters/fraudulent
borrowers without prejudice to the criminal case against the borrower and those
cases of compromise settlement should be vetted by Management Committee /
Board of the Bank.

Bank may also entertain compromise proposal from the borrowers (in justifiable
cases) on whom SARFAESI notices are served for taking possession of securities,
provided the borrower comes forward for a compromise proposal.
Committee approach is to be adopted while according compromise approvals.
The committee should give justifying reasons for consideration of the
compromise while referring the proposal to the competent authority for
consideration.
An official who has sanctioned a particular loan, which has become NPA shall not
participate in the compromise committee meeting where the proposal relating to
that loan is under consideration for settlement.
Administrative clearance is required from Head Office, where the write-off
exceeds 25% of real account balance in case of Sub-standard NPA accounts.
However, this is not applicable with regard to Doubtful / Loss category accounts.
In order to have uniform approach, the shadow account is to be reworked out as

under:
Accounts with limits above Rs.2 lakhs : Real account balance + Interest at
prevailing PLR from time to time on simple basis from the date of NPA, until the
preceding month + any other charges.
Accounts with limits up to Rs.2 lakhs: Real account balance + Interest at

contractual rate from time to time on simple basis from the date of NPA, until
the preceding month + any other charges.
In case of suit filed accounts, suit expenses are to be included. However, where
the suits are decreed, it should be as below:
Accounts with limits above Rs.2 lakhs : Decreed Amount + Interest at prevailing
PLR from time to time on simple basis or decretal rate, whichever is lower, from
the date of decree, until the preceding the month + any other charges.
Accounts with limits up to Rs.2 lakhs : Decreed Amount + Interest at

contractual rate from time to time on simple basis or decretal rate, whichever is
lower, from the date of decree, until the preceding the month + any other
charges.
The Net Present Value of the compromise amount as well as realizable value of
securities may be arrived as under:
A - Fair Market value of the security

B - Less: Costs / Expenses for realization of securities
C - Total value (A-B)
D - Net Present value of (C) discounted at existing PLR ( simple )for 5 Years
E - Total amount of compromise - Payment of compromise amount due on

(where payable in installments)
F - Net Present Value of the compromise amount discounted at existing PLR

Simple for the period of payment

It should be ensured that Net Present Value of the compromise amount

discounted at existing PLR simple i.e. F should generally be not less than the Net
Present value of the realizable value of securities i.e. D.
Mode of Payment: As far as possible, before entertaining the proposal, it should
be ensured that the borrower makes upfront payment of at least 10% of
compromise amount. Payment of compromise amount within 30 days is
desirable. If not a reasonable 90 days time may be given to the borrower for full
payment in 2 to 3 installments. Depending on the case, borrower request for
making payment within 12 months may be considered on the condition that 25%
of compromise amount (including upfront amount) and the balance amount
along with interest @ PLR simple) from the date communication of compromise
till the date of final payment. However, in any case the repayment period of
compromise amount should not exceed 18 months. Branches are required to
communicate in writing to the borrower the terms and conditions of the
compromise approved and the date on which the compromise gets lapsed in
case of failure of the borrower to pay the compromise amount in full.
Proportionate release of securities could be considered on case-to-case basis.
Branch should obtain commitment letter from the borrower that the sale
proceeds are to be credited to the compromise account. (Circular No.404 Ref
45/11 dated 20.02.2008).
6. INCO TERMS
EX-Works
Goods are delivered to the buyer or his forwarding agent at the factory or the
warehouse and the freight, insurance and other paper work to be taken care of
by the buyer only.
FOB (Free On Board)
Seller delivers the goods at shipyard to the buyer or his forwarding agent and
hence, buyer has to take care of freight and insurance.
FCA (Free Carrier)
Seller arranges the transportation of goods at the risk and expense of the buyer
and delivers at a predetermined destination of buyer. The seller selects the
freight forwarder or the carrier.
FAS (Free Alongside Ship)*
Seller has to clear the goods for export and handover to buyer’s forwarder for
insurance and transportation.
CFR (Cost and Freight) or C & F:
Seller has to bear cost of goods and freight to the destination of the buyer.
Buyer has to pay insurance charges from origin to destination. Seller will choose
the forwarder.
CIF (Cost, Insurance and Freight)

Seller apart from C & F, bears the insurance also.
CPT (Carriage Paid To)
The seller while sending the goods under CIF, mentions the name of the buyer in
the insurance papers as insured.
CIP (Carriage and Insurance Paid To)
The carrier will offer insurance within the freight charges. Buyer has to insure
the goods on taking delivery of the goods.
DAF (Delivered At Frontier)
Seller delivers the goods to the buyer or his forwarding agent at the border of
the country and arrange for clearance for export. Buyer has to make
arrangements to transport the goods across the borders to his destination.
DES (Delivered Ex Ship)
Seller delivers the goods at the port of destination, uncleared. Buyer has to
make arrangements for payment of any destination charges and other local
transport.
DEQ (Delivered Ex Quay)*
The seller is responsible to deliver the goods at destination port and buyer has to
pay customs and other charges and arrange for customs clearance.
DDP (Delivered Duty Paid)
Seller is responsible for dealing with all tasks involved in moving goods from
factory to buyer’s door bearing all costs and risks.
DDU (Delivered Duty Unpaid)
This arrangement is basically the same as with DDP, except for the fact that the
buyer is responsible for the duty, fees and taxes.
7. CENTRAL STAMP DUTY
Revenue stamp on promissory note:
i. Amount up to Rs.250: 10 paise

ii. Amount above Rs.250 and up to Rs.1000: 15 paise
iii. Amount above Rs.1000: 25 paise.
Revenue stamp on money receipt:
For money receipts above Rs.5000 : Rs.1
Bill stamps:

No stamp duty on demand bills
For usance bills:
1.Usance period up to 3 months after date or sight:
Bill Not exceeding Rs.500 Rs.1.25 paise

Bill above 500 and upto Rs.1000 Rs.2.50 paise
Bill above Rs.1000 Rs.2.50 per every Rs.1000 or part there of
2. Usance period above 3 months and up to 6 months after date or sight:



Bill above Rs.1000 Rs.10.00 per every Rs1000 or part there of
5 Usance period above one year after date or sight:

8.KYC AML REPORTS
a) Risk classification of customers is to be reviewed every six months.

b) Customer identification data including photos is to be updated once in 5 years
for low risk accounts or once in 2 years in case of Medium and high risk
accounts.
9. FOREIGN TRADE
Imports:
- Import/Export code is given by Director General of foreign trade.

- Form A-1 is used for remittances against imports.
- For A-1 is not required for payments up to US $ 500

- Period of import payment: To be settled within a maximum period of 6 months

from the date of shipment. If it is delayed more than 6 months, it is to be
treated as trade credit.
- Advance remittance against imports: ( goods) Amount up to US $ 1 lakh
remittance for imports, no need of guarantee from the importers. For more than
1 lakh US $, a BG of international repute to be obtained. For amount beyond 1
lakh US dollars and up to 50 lakh dollars, Authorized dealer can waive BG/Stand
by letter of credit. For all the amounts of advance payments, importer should
have satisfactory dealings for one year and credit report of exporter is required.
- Non capital goods should come with in 6 months.
- Capital goods should come with in 3 years.
Advance remittances for Services:
- Up to remittance of US $ 5 lakhs, BG is not required.
Exceptions where import documents can be directly received by importer ( Not

through banks)
- Status holder can directly receive

- 100% export oriented units
- SEZ units
- Government & Semi Government agencies
- Limited companies.
Other than above, up to US $ 3 lakh, documents can be received directly by

importer and does not require any permission. In other cases, RBI permission is
required.
Who is status holder:
i. Export house: Rs.20 crore ( Out of 4 preceding years, any 2 years, achieving
of this level)
ii. Star export house: Rs.100 crores do
iii. Trading house : Rs. 500 crores do
iv. Star trading house: Rs.2500 crores do
v. Premier trading house: Rs.10000 crores do
Harmonious system import trade control code: (HSITC): It is a code given to

all products internationally.
Evidence of import:
Bill of entry: Authorised dealer has to insist with in 3 months from the date of
final remittance. He will wait another 3 months and report to RBI through Bill
of entry defaulter statement which is submitted half yearly in June and
December every year. Remittances below 1 lakh dollars need not be reported.
UCPDC is current policy which is effective from 1.7.2007.
Stand by letter of credit:

As long as the importer pays the bills, the exporter will not invoke the LC. If
the payment of import bill is defaulted by importer any time during the validity
period of such LC, exporter can invoke this LC. It is permitted in India now and
is covered by International stand by practices publication 1998.
FEDAI guidelines for stand by letters of credit.
Sufficient collateral required.

Risk of double payment
Satisfactory report of the exporter abroad
Counsel the importer about risk involved
When invoiced, along with a set of non negotiable documents.
Turnover of the stand by LC to be maintained in the same branch.
EXPORTS:
GR Form: Guaranteed realization , in duplicate, to be submitted by exporter to

customs at the time of export. GR form is to be submitted by exporter to
authorized dealer along with shipping documents within 21 days from the date of
shipment. This is also called Statutory declaration form.
If the export is by post, it is called PP form ( Parcel post form)
For software exports, SOFTEX form is to be submitted. ( STPI, Software

technology park of India will certify the value of software)
GR/SDF not required up to US $ 25000.
Export documents should be realized within 12 months from date of shipment.
Export to warehouse if permitted by RBI, it may be 15 months.
If amount is not realized with in the above period, authorized dealer has to
submit XOS to RBI, half yearly 30th June, and 31st December for exports above
US $ 25000. Extension of time limit can be permitted by authorized dealer 6
months at a time. No value limit. If the extension to be given is beyond 1 year,
the overdue outstanding amount should be within 10% of the average turnover
of the last 3 years or 1 million US $ which ever is higher.
All the export documents received in any manner by authorized dealer should
be submitted through ENC statement ( Export documents negotiated &
collected) to RBI fortnightly with R returns.
Advance remittance against exports:
a. When advance is received, shipment should be within 1 year from the date of
receipt of advance.
b. Rate of interest should not exceed LIBOR + 100 Basis points.
c. Export documents should be routed through the same authorized dealer
d. Retention money by importer can be maximum 10% ( undrawn balance)
e. Reduction in value up to 25% of the invoice value can be allowed. No such
ceiling for exporters with minimum 3 years good track record.

f. Write off is allowed provided the dues are outstanding for more than 1 year (
up to 10% of export realization dues of previous financial year)
Dispatch of shipping documents:
Direct dispatch to importer can be made, provided:
a. Value of not more than Rs.25000/-

b. If entire advance is received.
c. GR form should be submitted within 21 days
d. If exporter is a regular customer and made arrangement for realization, no
limit
e. If LC stipulates
f. If exporter is a status holder.
Normal transit period is 25 days as per FEDAI norms. ( Date of purchase of

documents to date of realization in to Nostro account)
Running Account Packing credit:
a. A and above rated customers

b. Good track record
c. Order or LC not insisted at the time of packing credit.
d. Realisations can be adjusted to FIFO
e. Maximum period for concessional rate of interest is 360 days.
f. For post shipment credit, 365 days can be allowed with concession.
g. Refinance against packing credit up to 270 days is allowed up to 50% of
eligible export outstanding.
Deemed exports:
Goods not going out of the boundary of the country though sales by SEZ, 100%
export oriented units, STC ( Channelising agencies). We can give PC also. Post
shipment advance up to 30 days at concessional rate can be allowed.
GOLD CARD:
Given to A + and above rated borrowers.

A +++ gets 0.50 % concession
A++ get 0.25% concession
Concession is allowed up to 365 days.
Concession in service charges will be up to 25%.
Gold card status is given for 3 years with half yearly review.
Stand by limit of 20% is given.
Preferential treatment in giving PCFC etc.,
PCFC:
Interest is LIBOR + 350 Basis points + out of pocket expenses + with holding
tax. Bank can borrow at LIBOR + 150 basis points.

10. COMMERCIAL PAPER
Commercial paper is a money market unsecured instruments which can be

issued by Corporates, Primary dealers, Satellite dealers and all India financial
institutions with following conditions:
1.Tangible Net worth of the company should be minimum Rs.4 crores

2. Should be availing working capital limit with a bank or a financial institution
3. Standard account
4.Maximum period is 12 months
5. Can be issued in Rs.5 lakh denominations and multiples.
6.Credit rating equivalent to P2 of ICRA
11. LOAN POLICY GUIDELINES
RBI EXPOSURE NORMS:
a. Single borrower: 15% of capital funds as per audited balance sheet of

previous year
b. Single borrower infrastructure: 20% of capital funds
c. Group: 40% of capital fund
d. Group infrastructure projects: 50%
Exposure to NBFCS:
a. Single NBFC: 10%

b. Single NBFC asset finance company: 15%
c. Single NBFC infrastructure company: 20%
d. Single NBFC infrastructure asset finance company: 50%
e. Group NBFC: 50%
Substantial exposure: (Large borrowal accounts)
Rs.550 crores and above borrower is called large borrower.

Rs.16500 crores is substantial exposure.
BANK EXPOSURE NORMS:
Film Industry:
Single party Rs.4 crores.

Not more than 6 parties at any time.
Infrastructure projects, per project: Rs.500 crores.
Individual/Proprietory concerns: Rs.20 crore or Rs.30 crore per group or 6

times of TNW which ever is less. CMD/ED can go up to Rs.60 crores.
Partnership firms Rs.30 crores, Group Rs.40 crores or 6 times of TNW which ever
is less. CMD/ED can go up to Rs.60 crores.
HUF : Rs.10 crores.

Trust/Association/Cooperative societies: Rs.20 crore, Rs.30 crore for group or 6

times of TNW which ever is less. CMD/ED can go up to Rs.60 crore.
Private Limited company: Rs.80 crores, Rs.100 crore for group or 6 times of
TNW which ever is less.
Closely held public limited companies: Rs.100 crore and Rs.120 crores for group
or 6 times of TNW which ever is less.
Widely held public limited companies: 15 % of bank’s capital fund, 40% per
group and 50% for infrasture projects.
Bank guarantees: 3 times of net worth of the bank

Letters of credit: 2 times of net worth of the bank
Foreign exchange commitments: equal to the net worth
Guarantees to other banks: 10% of capital funds ( tier I capital)
Finance to construction company: Not exceeding 15 times of net own funds of
the company.
Exposure ceilings do not apply to:
a. Loans against bank’s own deposits and LC/BG against deposits

b. Food credit
c. Accounts guaranteed fully by Central Government
d. Rehabilitation of sick industries
e. Bills discounted against LCs ( not in reserve)
Credit investigation:
Is applicable to all new sanctions less than Rs.1 crore and all existing accounts
irrespective of the limit, except agriculture, government sponsored schemes up
to Rs.25 lakhs.
Due diligence report:
All new advances of Rs.1 crore and above.
Restriction on Agricultural land and or rural building as collateral security for

bank guarantees :
For new accounts not more than 30% and for old accounts not more than 50%
where that is not prohibited by state government.
Minimum margin on book debts:
General: 50% and SMEs 30% and sanctioning authority can reduce the margin
up to 25% against Government dues.
Eligible book debts:
General: Maximum age: 90 days SME: 180 days ( other than discounted bills )

Financing second hand machinery:
Cost/capacity of the second hand machinery should not be more than 25% of
the cost /capacity of the total machinery. Margin is 50%.
Penal interest for non submission of papers for review/renewal of working

capital limits:
First 3 months: 1%
Beyond 3 months: 2%
Time and type of stock statements to be submitted to bank:
As on last Friday, before 10 th of the succeeding month.

Cash credit limit up to Rs.1 lakh: Monthly abridged statement
Limit above Rs.1 lakh and up to Rs.5 lakhs: Monthly abridged, quarterly
detailed.
Limit above Rs.5 lakhs: Detailed monthly.
Penalty: 1% for the period of default on the out standing amount.
Submission of MSOD :
For working capital limit of Rs.100 lakhs and above from banking system before
15th of succeeding month. 1% penal interest for failure.
Submission of QIS II:
It is a quarterly statement showing performance of the unit during the quarter.
To be submitted: Within 6 weeks from the end of the quarter:
A and above rated funded working capital limits of above 6 crore

B rating under CRS/CRAS or B ++ under CRRM for limits of Rs.2 crore and
above.
C rating under CRS/CRAS or B, B+ under CRRM for limits of Rs.1 crore and
above
Submission of QIS III:
It is a half yearly operating and funds flow statement. ( March/September)
To be submitted: Within 2 months from the close of the half year.
A and above rated funded working capital limits of Rs.3 core and above
B rating under CRS/CRAS or B ++ under CRRM for limits of Rs.2 crore and
above.
C rating under CRS/CRAS or B, B+ under CRRM for limits of Rs.1 crore and
above
Penal interest for not submitting QIS II and QIS III within time: 1% for entire
quarter.

Repayment periods:
Maximum repayment period for infrastructure projects:
A +++, A++ under CRS/CRAS: 15 years including gestation

A +, A, B Under CRS/CRAS 12 years including gestation
Maximum repayment period for RTO laons:
A +++, A++ under CRS/CRAS: 6 years including gestation

A +, A, B Under CRS/CRAS 5 years including gestation
Maximum repayment period for term loans other than RTO and Infrastructure
loans:
A +++ TO B under CRS/CRAS: 7 years excluding gestation.
Maximum repayment period for term loans with C rating under CRS/CRAS: 5
years excluding holiday.
Unit Inspections:
a. Other than OCC : Once in a quarter by officer, Once in a half year by

manager.
b. Cash credit/over draft below Rs.50 lakhs: Bi monthly by an officer.
c. Cash credit/over draft of Rs.50 lakhs and above: Once in a month by officer
and once in a quarter by manager.
Short inspection:
Advances ( fund + non fund ) above Rs.3 crores once in a year by concurrent
auditor. In case of new accounts, within 3 months after first disbursement. If
concurrent auditor is not there in the branch, inspector of branches to do for all
new accounts and take over accounts.
Unit inspection by officials of Zonal Office:
Limits above Rs.5 crores by technical officer/Sr.manager/chief manager or a

sr.branch manager of a branch in zone once in a year.
Stock & Receivable Audit:
Done by a firm of Chartered or Cost accountants for the cash credit limits once
in a year:
C rated accounts as per CRS/CRAS Rs.2 crore and above ( of which fund
based
Limit is more than 50%)
B rated accounts Rs.3 crore and above ( FB > 50%)

A and above rated accounts Rs.5 crore and above ( FB > 50%)
NPA accounts With real balance of Rs.5 crore and

above.
New/take over accounts of age Rs.2 crore and above.

Less than 3 years irrespective of
Credit rating
All cash credit accounts irrespective Rs.10 crore and above.

Of credit rating
¾ Exemption from Stock & receivable audit

• Export credit to Diamond industry
• Public sector Undertaking
• State Electricity boards
• FSCS
• Educational Institutions
• Short term loans & working capital limits to commercial real estate up
to Rs 5 cr
Monthly credit monitoring report ( MCMR):
a. Account wise report for all accounts with aggregate limits of above Rs.50
lakhs .
b. Consolidated report for accounts up to Rs.10 lakhs
c. Consolidated report for accounts above Rs.10 lakhs and up to Rs.50 lakhs.
Monitoring authorities:
Limits up to Rs.10 lakhs Branch Manager

Limits above Rs.10 lakhs and up to 3 crores Zonal Office
Limits above Rs.3 crores Head office.
Credit Rating:
1. Small loans rating for MSE loans above Rs.2 lakh and below Rs.5 lakhs ( fund
& non fund )
2. CRS for loans with fund based limits for Rs.5 lakhs and above and less than
Rs.50 lakhs. ( For new units without audited balance sheet, separate model)
3.CRAS for loans with fund and non fund limits of Rs.50 lakhs and up to Rs.5
crores. ( for new units without audited balance sheet, separate model )
4.CRRM is applicable for fund and non fund limits above 5 crores.
In case of stand alone term loans: Credit rating is applicable for limits of Rs.5
lakh and above at the time of half yearly /annual review with audited balance
sheet and interest is to be reset as per the rating.
Entry level 40 % is must. In case CRRM, 40% in each parameter is must.

CRS/CRAS not applicable to professionals.
Interest rate is fixed as per credit rating for limits above Rs.10 lakhs.
Credit rating applicable to agriculture segment:
Firms and corporate borrowers: Above Rs.5 lakh

Individuals and non corporates: Rs.25 lakhs and
above.
Submission of audited balance sheet for credit rating purpose:
If not submitted within 6 months from the date closure of financial year for fund
based limits of Rs.1 crore and above, 1% penalty from 1st October should be
levied.
Norms for take over of accounts from Banks or Financial Institutions.
o The account should be a Standard Asset with Positive Net Worth & profit
record.
o Rating as per CRS/CRAS/CRRM should be worked out basing on all the
relevant parameters excluding operational parameters.
o The account copy of the borrowal account with other bank should be obtained
for preceding 6 months and perused.
o Sanction letter copy of the Other Bank/Financial Institution to be obtained
o Satisfactory P & C report from the existing bank to be obtained before
disbursement
o The party shall secure A & above rating under CRAS and B++ under CRRM
(minimum of B rating in CRAS & B++ under CRRM in trade advances).
o The Powers to permit to take over of A/cs – Rs.10 cr- DGM as Zonal Manager
and Rs.25 cr for GM as Zonal Manager & Rs 2 cr for AGM as ZM.
o Borrower has to inform in writing to the existing banker about his intention to
shift to our Bank under copy to us.
o Enhancement may be considered within the delegated powers.
12. IMPORTANT SECTIONS OF DIFFERENT ACTS:
a. Section 18 of Limitation Act, 1963: Debt acknowledgement

b. Section 100 of NI Act: Protesting a foreign bill even for collection
c. Section 31 of NI Act: Wrongful dishonor of cheque
d. Section 131 of NI Act: Protection to collecting banker
13.CERTIFICATE OF DEPOSITS:
This scheme was introduced in July 1989, to enable the banking system to
mobilise bulk deposits from the market, which they can have at competitive
rates of interest.
The major features are:
Who can issue Scheduled commercial banks (except RRBs) and All India
Financial Institutions within their `Umbrella limit’.
CRR/SLR Applicable on the issue price in case of banks
Investors Individuals (other than minors), corporations, companies, trusts,

funds, associations etc

Maturity Min: 7 days Max : 12 Months (in case of FIs minimum 1 year and
maximum 3 years).
Amount Min: Rs.1 lac, beyond which in multiple of Rs.1 lac
Intt. rate Market related. Fixed or floating
Loan Against collateral of CD not permitted
Pre-mature cancellation Not allowed
Transfer Endorsement & delivery. Any time
Nature Usance Promissory note. Can be issued in De-materialisation from only
wef June 30, 2002
Other conditions
• If payment day is holiday, to be paid on next preceding business day
• Issued at a discount to face value
• Duplicate can be issued after giving a public notice & obtaining indemnity
14. BEP ANALYSIS
i. BEP is a point where no profit and no loss will be there.

ii. Variable cost + fixed cost + profit = Sales price
iii. Sales price - Variable cost = Contribution ( Contribution towards fixed cost
+ Profit)
iv. BEP = Fixed cost / Contribution x sales
v. P/V ratio = contribution /sales x100
15. SME/DISPOSAL TIMES/DEFINITIONS/MARGINS
Proposals up to Rs.2 lakhs: Within 2 weeks

Proposals above Rs.2 lakhs and up to Rs. 5 lakhs: With in 4 weeks
Proposals above Rs.5 lakhs: With in a reasonable time after receipt of all
papers.
Sub target of 60% of Micro and Small enterprises finance should go to Micro
enterprises as under: ( targets to be achieved)
By the year 2010-11 : 50%

By the year 2011-12 55%
By the year 2012-13 60%
16. CGTMSE:
Coverage of insurance:
Micro enterprises with credit facility up to Rs.5 lakhs: : 85% of amount in

default
Micro enterprises with credit facility above Rs.5 lakhs

And upto Rs. 50 lakhs : 75% of amount in
default
Maximum Rs.37.50 lakhs
Micro enterprises with credit facility above Rs.50 lakhs; Rs.37.50 lakhs plus 50%
of amount above Rs.50 lakhs.
Women/North east entrepreneurs for facilities

up to Rs.50 lakhs ( excluding facilities up to
Rs.5 lakhs to Micro enterprises) : 80% of the amount in
default With a maximum of Rs.40 lakhs
Women/North east entrepreneurs for facilities

Above Rs.50 lakhs : Rs.40 lakhs plus 50%
of amount Above Rs.40 lakhs.
All others for facilities up to Rs.50 lakhs : 75% of the amount in

default With a maximum of
Rs.37.5 lakhs
All others for facilities above Rs.50 lakhs : Rs.37.50 lakhs plus 50%
of Amount above Rs.50 lakhs.
When shall we apply to cover the accounts:
For limits sanctioned in the quarter, we should apply for cover before the end
of the next quarter.
When shall we pay the guarantee fee:
With in 30 days from the date of first disbursement or 30 days from the date of
demand notice which ever is later.
When shall we pay the annual service fee:
On all the accounts covered during the year fee should be debited on 31st
March every year and to be paid within 60 days from that date.
For accounts sanctioned during the year or accounts closed during the year,
prorate service fee should be paid.
Guarantee fee payable:
1. For credit facilities up to Rs. 5 lakhs : 1% on limit

2. For credit facilities above Rs.5 lakhs : 1.5% on limit
Annual Service Fee payable:
1. For credit facilities up to Rs.5 lakhs : 0.50 % on limit

2. For credit facilities above Rs.5 lakhs :0.75 % on limit

17. GOVERNMENT SPONSORED SCHEMES
PMEGP:
Margin for general public: 10 %

Margin for SC/ST/OBC/Minority/women: 5%
Subsidy for general in rural areas: 25 %
Subsidy for general in urban areas: 15 %
Subsidy for special in rural areas: 35 %
Subsidy for special in urban areas: 25 %
Max. cost of project for manufacturing: Rs.25 lakhs
Max cost of project for service : Rs.10 lakhs
Income criteria: NIL
Age criteria: Above 18 years
Qualification: To set up Manufacturing with project cost above Rs.10 lakhs and
Service unit with project cost above Rs.5 lakhs, minimum 8th pass is required.
Project cost includes 1 cycle of working capital.
Capital investment is compulsory.
For projects costing more than Rs.5 lakhs, if they do not require working capital,
ZO permission is required.
Cost of land is not part of project cost
Lease for 3 years can be included
Subsidy lock in period is 3 years
Maximum repayment period: 3 to 7 years
Working capital component utilization should touch 100% at least once in 3
years of lock in period and average for three years should be 75% minimum.
Negative list:
1.Industry connected to meat, beedi, tobacco etc.,

2. Bar, Dhaba, Hotel
3. Agricultural activities and allied activities
4.Polythine bags of less than 20 microns and recycling of plastic
5.Khadi spinning and weaving which are taking rebate
6.Rural transport
SGSY:
Reservation: SC/ST: 50% Women: 40% PH: 3%

Unit cost of farm activities by: Regional committee of NABARD
Unit cost of non farm activities by: District SGSY Committee
50% of SGHs formed at block level should be of women groups
Maximum 20 to 30% of SHG members may be from marginally above poverty
line people, but they are not eligible for subsidy.
Revolving fund: Maximum 4 times of corpus fund
Subsidy at revolving fund level: Equal to corpus with minimum 5000 and
maximum 10000 per group.
Individual subsidy: 30% of project cost maximum Rs.7500 for general public and
50% of project cost with maximum of Rs.10000 for SC/ST.

Subsidy for group: 50% of the project cost with percapita subsidy of Rs.10000
with a maximum of Rs.1.25 lakhs.
No monetary ceiling for subsidy for minor irrigation activities.

Subsidy is back ended and kept in a subsidy reserve fund. Subsidy is dependent
on prompt repayment. For working capital limit, subsidy will be adjusted to cash
credit account after 5 years.
Repayment is minimum 5 years ( as a medium term loan) and subsidy lock in

period will be like this:
Repayment period 5 7 9
Subsidy lock in period: 3 4 5
If account is closed before lock in period, pro rata subsidy will be given.
Repayment should not be more than 50% of incremental income.
No collateral security for loans up to Rs.1 lakh for individuals and up to Rs.10
lakhs for group. ( where assets are created)
For ISB sector, disbursals up to Rs.10000 may be made in cash where more
items are involved.
DRI
Target: 1% of previous year advances

40% to SC/ST
2/3RD through Rural/Semi urban branches.
Income criteria: Less than Rs.18000 in Rural areas.

Less than Rs.24000 in Semi urban/Urban/Metro branches.
Land holding criteria: For general not more than 1acre wet land or 2.5 acres dry
land.
Not applicable to SC/ST
Unit Cost: Rs.15000 composite loan
Rs.5000 for physically handicapped
Rs.20000 for housing to SC/ST under Indira Awas yojana etc.,
Repayment: 3 to 5 years.
SJSRY:
USEP: Urban Self Employment Programme:
Reservation: 30% to Women

SC/ST to the extent of their population
3% to PH
15% for minorities
Educational qualification: Not stipulated.
Maximum unit cost: Rs.2 lakhs
Margin: 5% of project cost
Collateral security: Nil.

Repayment: 3 to 7 years with 6 to 18 months gestation.

Time frame for sanction: Limits up to Rs.25000: Within a fortnight
Limits above Rs.25000: Within 8 to 9 weeks.
Rejection of applications: Branch managers ( except SC/ST) to be reviewed by
ZO.
UWSP: Urban woman self employment programme:
Eligibility: Urban poor women below poverty line with minimum 18 years.
Members in group: Minimum five.
Project cost: No maximum limit.
Margin: 5 % of the project cost.
Subsidy: 35% of the project cost with a ceiling of Rs.3 lakhs or Rs.60000/- per
beneficiary
Collateral security: Not required.
Repayment: 3 to 7 years with initial moratorium of 6 to 18 months as decided
by bank.
Revolving fund loan of Rs.2000 per member with a maximum of Rs.25000 per
group after 1 year of formation of group.
SRMS:
By Ministry of social justice and empowerment

Age limit: Above 18 years
Loan amount: up to Rs.5 lakhs and micro financing up to Rs.25000
Interest rate of subsidy:
Margin: NIL
Up to Rs.25000 limit for Women : 4%

Others : 5%
Above Rs.25000 limit for all: 6%
Capital subsidy:
Project/loan up to Rs.25000 50%

Projects above Rs.25000: 25% of project cost with Minimum Rs.12500 and
maximum Rs.20000/-
Repayment: Loans up to Rs.25000 3 years.

Above Rs.25000 5 years including holiday maximum 6
months.
Disposal of applications:
Loans up to Rs.25000 2 weeks

Loans above Rs.25000 8 to 9 weeks.
SHGs
Membership : 5 to 20 members

Critical rating index: A or B
First dose: At least 6 months regular savings required.
4 times of corpus or Rs.50000 which ever is higher

Repayment 3 to 5 years.
Second Dose:
First dose repaid promptly

A gap of 12 months from availment of first dose
10 times of corpus or Rs.1 lakh which ever is higher.
Third dose:
Based on MCP
A gap of 18 months from the date of availment of second dose
Loan as per MCP
Social needs up to 10% of MCP is allowed.
Mahila Soubhagya: ( Debt swapping )
Rural SHGs:
1st dose : 50% of regular limit or Rs.25000 which ever is higher , max:
debt.
2nd dose : 50% of regular limit or Rs.50000 which ever is higher, max.
debt.
3rd dose : 40% of MCP or Rs.2,00,000 to the extent of actual debt.
Urban SHGs:
1st dose : 50% of regular limit or Rs.25000 whichever is higher, max debt.
2nd dose : 50% of regular limit or Rs.75000 whichever is higher, max debt
3rd dose : 40% of MCP or Rs.2,00,000/- max. debt.
No collateral security up to Rs.5 lakhs loan. Loan is for groups only.
18. OMBUDSMAN
a) Awards of Ombudsman if not implemented by bank within 3 months, they are

to be placed before customer service committee of board of the bank.
Banking ombudsman scheme was revised in 2009 to include the following:
Fair practices code for lenders and Code of Bank’s commitment to customers
of BCSBI also come under banking ombudsman scheme now. For deficiency of
service in credit card transactions, ombudsman may award compensation not
exceeding Rs.1 lakh.

Non payment of bank guarantees and letters of credits are not covered under
the scheme.
Time norms for complaints:
1. Customer has to give 1 month notice to bank.

2. If reply is not received, within 1 year 1 month from the date of
complaint, has to lodge a complaint with Ombudsman.
3. If reply is received but not acceptable, within 1 year from the date of
receipt of reply from the bank, he has to lodge a complaint with ombudsman.
4. On receipt of award from Ombudsman, the complainant has to furnish his
letter of acceptance to bank within 30 days from the date of receipt of the
award.
5. Bank shall within 1 month from the date of receipt of such acceptance
from the complainant comply with the award and inform to ombudsman.
6. If the complainant is not acceptable to the award or the complaint is
rejected by ombudsman and he wants to appeal to appeallate authority, he
should appeal within 30 days from the date of receipt of award or rejection
letter.
7. In case bank wants to appeal, they have to appeal within 30 days from
the date of receipt of acceptance letter from the complainant.
19. COMMISSION ON GOVERNMENT TRANSACTIONS
Agency commission for

General receipts, PPF, Senior Citizen Savings Scheme: Rs.45 per transaction
Payments :
9 paise for every Rs.100 payment
Pension payments Rs.60 per
transaction.
Commission headed by Mr. A M Pedgaonkar is looking into revision of the

commission.
20. TIER I AND TIER II CAPITAL
TIER I CAPITAL:
1. Paid up capital
2. Statutory reserves
3. Other disclosed free reserves
4. Perpetual non cumulative preference shares ( with conditions)
5. Innovative perpetual debt instruments ( with conditions)
6. Capital reserves resulting out of profit in sale of assets
7. Quarterly profits may be included provided the books are audited by statutory
auditors.
TIER II CAPITAL:
1. Undisclosed reserves
2. Revaluation reserved ( at a discount of 55%)

3.General provision and loss reserves ( maximum of 1.25% of total risk

weighted assets)(includes provision on standard assets also)
4.Hybrid capital instruments
5.subordinated debt
6.Investment reserve account.
Upper Tier II instruments:
Should have a minimum maturity period of 15 years

No put option
May be issued with call option subject minimum running of 10 years and CRAR
position.
With a lock in clause that interest or principal will not be paid if bank’s CRAR
comes down the regulatory norm with the payment.
21. ADR, GDR, PARTICIPATORY CERTIFICATES
ADR AND GDR: An Indian Company issues its shares to a bank in India. Indian
bank in turn authorize a foreign bank to issue depository receipts basing on the
stocks held in Indian bank, to public of that country. The value of such
certificates will be moving as per the stock market movements in India.
Dividend declared on such shares will be distributed to depository receipt
holders. When to be redeemed, the underlying shares will be sold in Indian
market and money will be utilized to redeem such certificates. ADRs will be
traded in Americal stock exchanges and GDRs will normally traded in European
stock exchanges.
22.PARTICIPATORY NOTES:
FIIs who are registered with SEBI issue participatory notes to overseas
investors who are not registered with SEBI. Against issue of participatory notes,
FIIs collect money from overseas investors and invest in Indian stock markets.
SEBI observed that through the channel of participatory notes, huge hedge
funds are entering in to Indian stock markets and causing volatile market
conditions and money laundering risk is also associated. Hence, applied strict
regulations such as periodical reporting of transactions of these FIIs.
23. RTGS, NEFT TIMES.
Service window of RTGS is available for customer transactions :
On week days: 9 am to 4.30 pm

On Saturdays 9 am to 1.30 pm
Threshold limit for RTGS: Rs.2 lakhs
Charges: Up to Rs.5 lakhs: Rs.25 per transaction

Above Rs.5 lakhs: Rs.50 per transaction.
Time taken for credit to beneficiary account: 2 hours. Or return.
NEFT:

Hourly batches will be settled as under:
i. 11 batches from 9 am to 7 pm on week days

ii. 5 batches from 9 am to 1 pm on Saturdays.
No minimum or maximum limits.

Non customers also can remit up to Rs.49,999.
Charges:
For transactions less than Rs.l lakh: Rs.5 plus service tax
For transaction of Rs.1 lakh and above Rs.25 plus service tax
The facility can not be used for remittances abroad either outward or inward,
excepting to Nepal.
24. VARIOUS COMMITTEES
Here is the list of various Committees and their main Focus Areas
1. A Ghosh Committee: Modalities Of Implementation Of New 20
PointProgramme
2. A Ghosh Committee: Frauds & Malpractices In Banks
3. Abid Hussain Committee: Development Of Capital Markets
4. Adhyarjuna Committee: Changes In NI Act And Stamp Act
5. Bhave Committee: Share Transfer Reforms
6. CE Kamath Committee: Multi Agency Approach In Agricultural Finance
7. D R Mehta Committee: Review Progress And
RecommendImprovement Measures Of IRDP
8. Dave Committee:Mutual Funds (Functioning)
9. DR Gadgil Committee:Agricultural Finance
10. G Lakshmai Narayan Committee:Extension Of Credit Limits On Basis Of
Consortium
11. Goiporia Committee:Customer Service In Banks
12. Hathi Committee:Soiled Banknotes
13. IT Vaz Committee:Working Capital Finance In Banks
14. Jankiramanan Committee:Securities Transactions Of Banks &Financial
Institutions
15. Kalyansundaram Committee:Introduction Of Factoring Services In India
16. Kamath Committee:Education Loan Scheme
17. Karve Committee:Small Scale Industry
18. KB Chore Committee:To Review The Symbol Of Cash Credit Q
19. Khanna Committee:Non Performing Assets
20. KS Krishnaswamy Committee:Role Of Banks In Priority Sector And 20
Point Economic Programme
21. Mrs. KS Shere Committee:Electronic Fund Transfer
22. Nadkarni Committee: Improved Procedures For Transactions In PSU
Bonds And Units
23. Narsimham Committee: Financial System
24. P R Nayak Committee: Institutional Credit To SSI Sector
25. PD Ojha Committee: Service Area Approach

26. Pendarkar Committee: Review The System Of Inspection Of Commercial,

RRB And Urban Cooperative Banks
27. Rangrajan Committee: Computerization Of Banking Industry
28. Rangrajan Committee: Public Sector Disinvestment
29. Rashid Jilani Committee: Cash Credit System
30. RH Khan Committee: Harmonization Of Banks And Ssis
31. RK Hajare Committee: Differential Interest Rates Scheme
32. RK Talwar Committee: Customer Service
33. RV Gupta Committee: Agricultural Credit Delivery
34. S Padmanabhan Committee: Onsite Supervision Function Of Banks
35. S Padmanabhan Committee: Inspection Of Banks (By RBI)
36. SL Kapoor Committee: Institutional Credit To SSI
37.
38. SS Tarapore Committee: Capital Account Convertibility
39. Tandon Committee: Follow Up Of Bank Credit
40. Tiwari Committee: Rehabilitation Of Sick Industrial Undertakings
41. Usha Thorat Panel: Financial Inclusion
42. Vaghul Committee :Mutual Fund Scheme
43. Vyas Committee: Rural Credit
44. YV Reddy Committee: Reforms In Small Savings
45. Malegam committee: Micro finance companies
Some Recent Working Groups & Committees by RBI & Their Focus Area: (Name
of Chairmen is given)
1. High Level Committee to Review Lead Bank Scheme: Usha Thorat
2. Working Group to Review the Business Correspondent Model: P Vijaya
Bhaskar Rao
3. High Level Committee on Estimation of Savings and Investment: Dr. C.
Rangarajan
4. Working Group on Technology Upgradation of Regional Rural Banks: Shri G.
Srinivasan
5. Interest Rate Futures: Shri V.K. Sharma
6. Working Group on Rehabilitation of Sick SMEs: Dr. K. C. Chakrabarty
7. Technical Group Set up to Review Legislations on Money Lending: Shri.S. C.
Gupta
8. Working Group To Suggest Measures To Assist Distressed Farmers: Shri. S.
S. Johl
9. Working group to formulate a scheme for Ensuring Reasonableness of Bank
Charges: N. Sadasivam
10.Committee on Fuller Capital Account Convertibility: S.S.Tarapore
11.Working Group on Warehouse Receipts and Commodity Futures: Shri
Prashant Saran
12.Report on Monitoring of Financial Conglomerates: Smt.Shyamala Gopinath
13.Working Group on Instruments of Sterilisation: Smt. Usha Thorat
14.Working Group on Cheque Truncation and E-cheques: Dr.Barman, ED
15.Working Group on Introduction of Credit Derivatives in India: Shri B.
Mahapatra
16.Working Group on Electronic Money: Mr.Zarir J. Cama
17.Working Group to Examine the Role of Credit Information Bureaus in
Collection and Dissemination of Information on Suit-filed Accounts and
Defaulters: Shri S.R. Iyer

18.The Standing Committee on International Financial Standards and Codes

Standing Committee on International Financial Standards and Codes: Dr.
Y.V.Reddy
19.Internal Group to Review the Guidelines Relating to Commercial Paper:
Dr.Y.V.Reddy
20.Working Group for setting up Credit Information Bureau in India: Shri
N.H.Siddiqui
21.Working Group on Restructuring Weak Public Sector Banks: Shri M.S.Verma
22.New Monetary Aggregates: Dr. Y.V. Reddy
23.Committee on Capital Account Convertibility: Shri S.S.Tarapore
25. REPORTING OF FRAUDS IN BANKS:
Cash shortages: These shortages are to be reported as frauds:
1. Cash shortage of more than Rs.10000/-

2. Cash shortage of more than Rs.5000 if it is detected by inspecting officials
or not reported on the date of shortage.
Forged instruments:
In case of forged cheques or drafts, paying banker has to report the fraud to
RBI. But in case of fraudulent transactions in collection of cheques ex:
conversion, the collecting bank has to report the fraud to RBI.
When more branches of same bank involved in payment of fake instruments, the
paying branch has to report fraud.
Cases of theft, dacoity, burglary should not be reported as fraud.
Frauds involving Rs.1 lakh and up to less than Rs.5 lakhs: To be reported to
concerned Regional Office of RBI within 3 weeks after detection, in hard format
of FMR -1.
Frauds involving Rs.5 lakhs and above should be reported to i. Central office
of RBI, ii. Regional office where bank’s HO falls iii. Regional office of RBI where
branch falls, within e weeks of detecting the fraud in soft copy of CMR -1 .
In case of frauds in borrowal accounts, additional information in Part B of CMR-1

is also to be submitted.
When third parties like advocates, engineers, chartered accounts involved in

frauds in borrowal accounts, the fraud is to be informed to IBA also.
In case of frauds involving Rs.100 lakhs and more, apart from the above
reports, a DO letter is to be addressed to Chief General Manager of department
of banking supervision, Central office, RBI within a week with brief details.
Cases of attempted frauds of Rs.1 crore and above should be reported to fraud
monitoring cell, Central office, RBI within two weeks and the matter to be placed
before audit committee of the board of the bank.

Apart from reporting to RBI, frauds are to be reported to CBI/ State police as
under:
Frauds involving Rs.1 crore and above and up to Rs.5 crores: To CBI as under:
i. If staff involvement is there: To Anti corruption branch of CBI

ii. If staff involvement is not there: To economic offences wing of
CBI.
All cases involving more than Rs.5 crores should be reported to Banking
security and fraud cell, CBI.
Frauds involving below Rs.1 crore to be reported to State Police as under:
i. Cases involving amounts Rs.1 lakh and above where customers and staff
are involved should be reported by Regional office to a senior officer of CID/
economic offences wing of state
ii. Cases from Rs.10000 to below Rs.1 lakhs: Branch has to report to local
police station
iii. Cases below Rs.10000 involving bank officials, reported to local police
station at the discretion of regional office.
26. What is a Credit default swap and Interest rate future:
Interest rate future:
A buyer of an investment in order to have a specific rate of interest on his

investment in future irrespective of the market movements, enters into an
interest rate future contract at a specific rate of interest. In future, if interest
rates go up in the market more than the original rate, the holder of the
investment will pay the difference of the higher interest and the contracted rate
to the buyer of the future contract. In case interest rates fall as on the date of
settlement, the buyer of the future contract will pay the difference between both
the interest rates on the investment. To facilitate this calculations, interest rate
future price index is maintained.
Credit default swap:
The investor in securities backed by mortgage or otherwise is rather lending and

these instruments always carry credit risk. To do away with credit risk, the
investor will enter into a contract with another party who offers protection
against default for a fee. In case of any negative credit event such as credit
rating down grade or default. This is like insurance of credit risk.
Financial stability report was published in March, 2010 and second report will be
published in December 2010. Here after this will be published in every June and
December.
RRBs

RBI permitted RRBs to open their branches in tier 3 to tier 6 centres ( with
population up to 49,999) without prior permission of RBI.
Financial Inclusion:
It is a plan to provide banking services to villages with population of over 2000

by March, 2012. 73113 unbanked villages have been identified and were
allotted to various banks
Housing Loans:
1.Loan to value ratio should not exceed 80%

2.Risk weight for residential housing loans of Rs.75 lakhs and above is 125%,
irrespective of LTV ratio.
3.For teaser rate housing loans, standard asset provisioning will be 2%
Convergence of Indian accounting standards with International financial

reporting standards (IFRS):
As per the road map given by working group headed by Sri P.R.Ravi Mohan,
Indian banks have to convert their opening balance sheet as on 1st April, 2013 in
compliance with the accounting standards of IFRS.
Cheque truncation system in New Delhi:
Owing to CTS, MICR clearing was discontinued in Delhi since July, 2009. CTS
will be operational in Chennai by March, 2011.
BASEL II
THREE PILLARS
MINIMUM CAPITAL SUPERVISORY MARKET

CONTROL DISCIPLINE
CREDIT RISK OPERATING RISK MARKET RISK

| | |
Standardised approach Basic Indicator approach Standardised approach
IRB approach Sandardised approach Internal model approach
Advanced measurement
SUPERVISORY CONTROL:
y Concentration risk
y Interest rate risk in the banking book
y Strategic risk
y Business cycle risk etc

y Liquidity risk
MARKET DISCIPLINE:
DISCLOSURES
RISK WEIGHTS:
Claims on:
a.Central and State Governments: 0%
b. guaranteed by Central Government: 0%
c. guaranteed by State Government: 20%
d.guaranteed by ECGC : 20 %
e. corporates, Public sector etc., :
Basing on risk rating by external agencies:
AAA 20%
AA 30%
A 50%
BBB 100%
BB and below: 150%
Un rated 100%
Ratings should not be older than 15 months

For assets with repayment less than 1 year: Short term ratings are to be
obtained.
For assets with repayment more than 1 year: Long term ratings to be obtained.
ODCC: Long term.
f: banks Based on CRAR
g. Regulatory retail portfolio 75%
Exposures up to Rs.5 crores, all exposures to a single party to be taken as one

entity.
Any entity with average annual turnover of less than Rs.50 crores to be taken
as individuals and small business.
Not more than 0.20 % to total retail portfolio to a single counter party.
h. Claims secured by residential property:
y Loans upto 30.00 lakhs with LTV of 75% and less - 50%
y Loans Above Rs30.00 lakhs with LTV of 75% & less - 75%
y Loans with LTV of above 75%(Irrespective of amount)-100%

I. Claims secured by commercial estate : 100%
j. Non performing assets :
y Accounts with Specific provisions less than 20% - 150%

y Accounts with Specific provisions less than 50% - 100%
y A/cs with Specific provisions of 50% and above – 50%
Non-Performing Assets in HOUSING LOANS
y Accounts with Specific provisions less than 20% - 100 %

y A/cs. with Specific provisions of 20% and above
but less than 50% - 75 %
y A/cs. with Specific provisions of 50% and above - 50 %
NPAs fully secured by ineligible financial collaterals

• (Fully secured by Land & Building and Plant & Machinery)
Provision between 15% to 50% : 100% risk weight
Provision from 50% and above: 50% risk weight
Others 150% risk weight
** Risk weights are applicable on NPA amounts net of

specific provisions & and Eligible Financial Collaterals
Valuation of land and building should not be older than 3 years. For
machinery not older than 18 months.
k. Specified categories:
Venture capital 150%

Capital market 125%
Commercial real estate 100%
Staff 20%
l. Off balance sheet exposures:
y Depending upon the risk profile, the CCF ranges from 20% to 100%.
y Incase of fund based facilities (which are not unconditionally cancellable)

capital to be provided on undrawn balances;
y If the undrawn portion can be drawn with in 1 year the CCF is 20%;
y If the same can be drawn in more than 1 year, the CCF is 50%
27.TDS: Applicable to:

Sec 194 c: Payments to contractors: Single payment Rs.30000 or aggregate

during financial year Rs.75000
At the rate: 1% for individual/HUF and 2% for others
Sec 194 H: Commission and brokerage: Rs.5000 in a financial year. At the rate:
10%
Sec 194 I : Payment of rents: Rs.1,80,000 in a financial year At the rate: 10%
Sec 194 J: Professional fee: Rs.30000 in a financial year.

At the rate: 10%
Interest income limits to obtain Form 15 H or G:
Rs.160000 for Individuals less than 65 years

Rs.190000 for women less than 65 years
Rs.240000 for senior citizen 65 years or more.
e-Returns:
Within 15 days from the end of the quarter:
Form 24Q for salary TDS
Form 26 Q for other TDS.
Form 27 A: Manual statement of the above returns.
Failure to submit returns attracts Rs.100 penalty per day.
Remittance of tax deducted: Within one week from the end of the month in
which tax is deducted, in all cases. If interest amount is credited on last day of
the accounting year, the TDS amount is to be deposited within 2 months from
the end of the month in which credit is given.
Issue of Form 16 A: (TDS Certificate): Within one month from the end of the
month in which TDS is effected. If amount is credited on the last day of the
accounting year, then TDS certificate in Form 16A may be issued within 1 week
from the end of two months from the date of payment
Penalties :
Tax not deducted or not paid after deduction:

i. The expenditure will be added back to income
ii. Interest at 12% p.a and to be paid before filing quarterly e return.
iii. Penalty equal to the sum not deducted as TDS.
iv.Imprisionment not less than 3 months and max. 7 years with fine.
v. Failure to file quarterly return: Rs.100 per day.
Annual TDS return is dispensed with.
28. GIST OF SOME CIRCULARS
Cir No:263: Name of internet banking in our bank is AB Infinet. Now

applications can be fed in branches with following conditions:
a. Customer of the branch

b. Should have mobile banking facility

c. E mail ID should be obtained.
d. No joint operation accounts.
e. Correct communication address to be ensured.
f. Only for individual accounts.
Cir No:284: While opening salaried persons accounts, RBI advised banks not to
accept letters from employers other than from corporates and reputed entities
whose CEOs should be known to bank. Apart from this bank is supposed to
obtain on of the approved proofs as prescribed under KYC guidelines.
Cir No>233: Agro based Industries:
HO advised the processing officer to analyze while proposals from agro based
industries:
1. Availability of raw material

2. Units engaged in the same activity in the area
3.Sufficiency of the material in future.
Cir No.087 : ATM cash replenishments:
1. ATM complaints are to be resolved within 12 working days from the date of
lodgement of complaint.
2.Branch manager has to conduct surprise verification of ATM cash once in a

fortnight.
3. On receipt of reports of surprise verification from branches, Zonal office has

to submit a certificate of ATM cell within 15 days of the succeeding month.
Cir No. 104: Base rate system:
1.Base rate system was announced by RBI in Annual Policy statement for the
year 2009-10 to be implemented from 01.07.2010.
2.Base rate includes: a) Cost of funds b) Negative carry on CRR & SLR c)
Unallocatable overhead costs d) Average return on net worth.
3.Exclusions from base rate: DRI loans, Staff loans, Deposit loans, Agriculture
loans where interest subvention is available, export credit where interest
subvention is available, any restructured accounts where reduction of interest is
required for viability.
4.Base rate is to be reviewed by bank on quarterly basis with the approval or

Board or Asset liability committee of the bank as per practice of the bank.
5.Cir No.88: Credit on agricultural commodities:

While extending to credit against agriculture produce/warehouse receipts to
farmers, bank has to ascertain the land holding particulars of the farmers.
Monthly information is to be given to ZO.

6.Cir No:039: Customer service:
a. Complaints through banking ombudsman should be redressed within

maximum one month from the date of receipt of the complaint from ombudsman
or such other date as prescribed by ombudsman. As per our banks instructions
complaint is to be redressed within 10 days from the date of receipt of the
complaint.
7.Cir No.119 Dishonor of cheques :
1. Dishonoured cheques should be returned within 24 hours.

2.A letter should be written to account holder to maintain sufficient balance in
the account.
3. If 3 cheques are dishonoured in the account in a financial year, cautions
notice that cheque book will not be issued if further cheques are dishonoured in
the account.
4.If there is no positive response to the notice, branch has to issue a final notice
to close the account.
5. Any return of cheques for amount of Rs.100 lakhs and above, information is
to be given to Zonal Office.
8.Cir No.197: Pay orders:
1. Pay orders can be paid in any branch.

2. Cancellation, issue of duplicate can be done only in the issuing branch.
3.Old pay orders of above Rs.100 and beyond 3 years are being transferred to
Operations department, Head Office.
4. Such old pay orders are to be revalidated by Operations department of HO
only.
5. If any such revalidated PO is presented for payment in any branch, it should
be paid and amount to be claimed from Head office.
6. If any old and stale PO is presented for cancellation /payment, branches
should not pay and only send them to Head Office for payment. But, if such Pay
order is received through clearing, it should be paid and amount to be claimed
from HO.
7. If old pay order for Rs.100 or less is presented for payment, branch can pay it
to the debit of profit and loss account without reference to head office.
9. Cir. No. 123: Cheque truncation:
a. It is in vogue in NCR, New Delhi and going to be implemented in Chennai

before 31.03.2011.
b. Details of the cheques should not be altered even with authentication except
revalidation.
c. Legal amount: Amount in words
d. Courtesy amount: Amount in figures.
10.Cir No:26/May/2010: Complaints relating to credit:
a. All complaints relating to branch or controlling office decisions should be

heard disposed off at next higher level.
b.Fair practices code for lenders is being reviewed by Board every quarter.
c. Non execution of standing instructions

d. delay in sanction of loan

e. delay in disbursal of loan
f. Details of bank charges
g. Debiting operational accounts of customers
h. Auctioning gold
i. Charging interest on subsidy portion also
j. delay in release of securities
k. Compounding interest in educational loans
l. Non renewal of insurance
12. Cir No. 114: Exchange of notes.
a.All the bank branches should:

i. Providing clean and fresh currency and coins to public
ii. Exchange of soiled notes
iii. accepting coins and notes for transaction or exchange.
iv. Designated branches should exchange damaged and mutilated currency
notes.
v. No branch staff should reject small notes or coins when offered for
transaction or exchange.
b. As per section 28 and 58 (2) of RBI Act, 1934, no person can claim value of
any lost, mutilated, damaged currency note from RBI or Central Government.
But to mitigate hardship to public, RBI prescribed certain circumstances in which
value of such currency notes may be refunded with conditions as a matter of
grace.
c.Reserve bank of India Note refund rules, 2009:
a. Soiled notes: a note cut in to two pieces

discoloured, washed, obliterated, dirty
b. Mutilated notes: A note in more than two pieces
Some portion of the note is missing
C: Refund of mutilated notes:
i. Rs. 1 to Rs.20 notes: If a single largest piece of the note is more than
50% of the size of the note, full amount is to be refunded. If it is less than
50% claim should be rejected.
ii. Rs.50 and above notes: If a single largest piece of the note is more than
65%, full value is to given. If it is equal or more than 40% and less than 65%,
only 50% of the value can be refunded. Less than 40% should be rejected.
If a note is having two pieces which are equal to or more than 40% but less than
65%, we can refund 100% of the value in such case though single piece is not
having more than 65%.
Impounding of fake notes:
Prepare acknowledgement of the fake currency note in duplicate with the

signature of the cashier and the cash officer. Issue one copy to depositor.
Put a seal on the fake note.
Lodge an FIR with police with all the details.

Endorse a copy to forged notes vigilance cell at HO.

Monthly return to RBI and National crime records bureau
When the forged note will be returned to branch by police ?
They send it to security press for verification and there is no specific time to
complete the process.
When we should send it to RBI ?

Branch has to keep the fake note which received back from police for 3 years
and send it to RBI later.
Cir No:8 : Improvement of CASA:
- To maintain a list of accounts with balances above Rs.25000 and extend

personalized services.
- Resetting of branch working hours to suit new customers
- Accepting cheques for clearing till half an hour before clearing operations.
- State ments through e mail every 15 days
- return of the cheques of high value accounts should be in the knowledge of
the manager.
- allowing TOD in the current accounts as per rules.
- internet banking facility
- going through dormant accounts
- meeting potential customers
- neat and clean premises.
Cir 426: Committee on sick ness of SMEs ( Dr.K.C.Chakraborty)
Banks should sanction working capital loan also when they sanctioned term loan
to SMEs. In case of facilities are given by different banks, they should sanction
working capital loan in the ratio of term loans.
GENERAL POINTS FROM CIRCULARS:
1. Suspicious transaction report should be submitted within 7 days after arriving

to final concluson about the suspicious transaction.
2.Cash transactions above Rs.10 lakhs etc., should be submitted ti FIU within 15
th of succeeding month.
3.Time limit to provide informatin to applicant under right to information act is

30 days. Under right to information act, applicant will have time of 30 days to
appeal to appellate authority at HO of the bank.
4. AML for money changers:
- Purchase of foreign notes/TCs less than $ 200: details of identification

document to be maintained. For $200 and above, a copy of such document
should be kept on record.
- Cash in Indian rupees may be paid up to $1000 to resident customers.

- Cash in Indian rupees may be paid up to $ 3000 to foreign visitors/non

residents.
- All purchases with in one months should be taken as single transaction for the
purpose.
5. Notice deposits: Term deposits for a specific period withdrawable with one
banking day notice.
6.Policy for recovery agents:

- for NPA/Techincally written off accounts with real account balance of Rs.5
lakhs and above.
- Less value accounts also by ZO
- Only firms and companies to be engaged. No individuals.
- Minimum with 3 years experience
7.Rehabilitation of sick sme units:
- In substandard cagtegory for 6 months

- 50% of net worth is eroded due to losses in the previous accounting year
- The unit is commercial operations for the last 2 years.
Package:
- After identifying the viable sick unit and declaring rehabilitation scheme, it
should be completed within 6 months. During this period, holding operations to
be done.
- For working capital limit Interest at 1.5% below PLR
- Funded interest term loan: no interest chargeable
- Working capital term loan: 1.5% below Plr
- Term loan: Concession not more thaqn 2% below document rate.
- Contigency loan: at working capital rate as above.
Cir No:217: Customer service:
1. Customer service committee of the board:

- Formulation of comprehensive deposit policy
- Product approval while launching keeping focus on customer
- annual survey of depositor satisfaction
- tri-enniel audit of such services
- monitoring ombudsman awards: awards pending for more than 3 months for
implementation.
2.Standing committee on customer service:

- may be chaired by CMD or ED
- Non official members
- monitoring customer service aspects, actions of various departments of the
bank in tune with RBI instructions on customer service, micro level review of
issues.
- submits a report to Customer service committee of the board with all the
details of its performance periodically.
It acts as a bridge between various departments of the bank and board and
board committee.

3.Branch level customer service committee:
- a bridge bweteen bank and the customers at branch level

- members as customers also, a senior citezen also .
- meeting monthly once atleast
- quarterly report to customer service standing committee at HO.
4.Nodal officer for customer service:
- At HO and other controlling offices to whom customers can approach with

grievances and to act as laisoning official with ombudsman etc.,
Board approved policies:
a.Comprehensive deposit policy: Rules, charges, facilities etc., to depositors.

Tying up of services with placing of deposits is a restrictive practice.
b. Cheque collection policy: Instant credit, time frame for collection of cheques,
payment of interest for delayed collections etc. Now RBI will not prescribe all
these conditions in collection of cheques. But as per a judgement given by
National consumer disputes redressal commission, :
a. Local clearing cheque proceeds should be credited on the same day or next
day.
b. Outstation cheques on State capitals 7 days, Major cities 10 days and other
places 14 days. Delayed period interest as per CCP of the bank or fixed deposit
rate for the period of delay.
If a cheque given for collection is missing, responsibility lies on the collecting
banker even if the cheque is missing with paying bank. Collecting banker can
claim costs if any borne by them due to the loss of cheque, from the paying
banker who misplaced the cheque.
Dishonoured cheques should be returned/dispatched to customer within 24

hours.
Details of cheques with value Rs.1 crore and above, and cheques drawn in
favour of stock exchanges irrespective of amount, should be part of MIS to
higher authorities.
Customer compensation policy: Wrongful debits to accounts, payment of

interest for delayed collection of cheques, delay in issue of duplicate drafts,
unauthorised actions leading to loss to customers.
d.Customer grievance redressal policy: To address customer grievances within

certain parametres.
Financial inclusion and IT enabled financial inclusion to be ensured.
Printing material should be in trilingual form.
Obtaining photo graphs of customers:

All including non residents. Excluding Government departments, banks, local

bodies, staff. Public sector undertakings, quasi governments are not excluded.
Only one photo is sufficient for any number of accounts and proper reference is
to be maintained on all applications. Photos of all joint depositors to be taken.
For minor account, guardian photo to be obtained.
Minimum balance in savings account: One month notice to customer is required

for any changes in the minimum balance requirement or charges.
Incidences of suspension of clearing house operations:

In such cases, if the delay is a prolonged one, bank may think of purchasing
instruments like Governemnt chequesw, DDs, cheques of reputed companies,
taking in to credit worthiness of the customers.
Pass book vs. Account statements: To individuals, prefereaably, pass books

should be issued. If they request for statement, to be issued atleast monthly
once without charges.
While accepting pass books for entries, a paper token should be given with dates
of receipt and collection back. If a big back log is there in the pass book, a slip
requesting the customer to get it updated frequently to be issued along with the
pass book with entries.
Transaction codes, to transfer, by clearing etc should be used in the pass book
entries.
Address, telephone number to be in pass book/statement.
Bank can not disallow premature withdral of term deposits by individuals, HUF.
But large deposits of others may be disallowed for premature withdrawal.
Renewal of overdue deposits at the discretion of individual banks.
Term deposits attached by Government departments etc., can be renewed by

obtaining a request letter from the depositor. No new receipt. Interest payment
as per rules of the bank. Intimation to department. Interest should not be paid
to customer till deposit is released.
In frozen savings accounts, interest may continue to be paid.
Opening of SB, TD for minors with mother as guardian: Legally not allowed. But
RBI permitted to open with precautions. Account should not be allowed to be
overdrawn.
Bank should not open current accounts to borrowers of other banks without their
consent. If a bank sends intimation to other banker for consent and if reply
does not come within a fortnight from them, bank can open the current account.
ATM wrongful debits should be should be reimbursed within 12 days from the
date of receipt of complaint. If delayed, bank has to pay Rs.100 per day of delay
and to be credited to customer’s account along with ATM wrongful debit amount.
For this, customer request is not required.

Service charges of banks are delinked from IBA and each bank is empowered to
decide charges, but, reasonableness of service charges to be ensured as per a
working group of RBI recommendations.
Minimum banking hours: 4 hours on week days and 2 hours on Saturdays.
Commencement of working hours of employees may be 15 minutes before

business hours in Metro and Urban branches.
Non cash operations should be allowed up to 1 hour before close of working

hours.
All branches, other than very small branches, should have enquiry/may I help
you counter seperately or clubbed withother counters, near the entrance.
Booklets on products, guidelines etc., may be kept in a file and be made

available in counter for public.
Sick and incapacitated customers:
The thumb or toe impression is obtained on the cheque or withdrawal form and
it is to be identified by atleast two witnesses, one of whom should be a bank
officer.
If the customer is not in a position to affix his thumb impression or toe, to obtain
a mark on the withdrawal form and to be witnessed as above.
The person who is taking the payment on behalf of the costomer is also to be
identified by the witnesses.
Here, mark means, any mark on the withdrawal put by the depositor and
witnessed by two witnesses as above.( contact of the customer is important
while putting the mark)
Issue of duplicate drafts:
Duplicate draft up to Rs.5000 may be issued without seeking non payment

advice from the drawee branch.
Duplicate draft if not issued within 14 days from the date of application, fixed
deposit interest for the applicable period is to be paid. Only purchaser or
beneficiary can apply for duplicate draft.
Complaints resolved within next working day, they need not be shown statement
of complaints.
If a complaint could not be resolved within 1 month, branch has to give the
details of the complaint to nodal officer at zonal office.
Lockers:
- Deposits should not be insisted.

- Security deposit with 3 years rent and break open charges can be taken

- Waiting list to be maintained.

- copy of locker agreement to be provided to customer
- If the locker is not operated for more than 3 years in case of medium risk
customers or 1 year for high risk customers, notice to be issued for reasons. If
reply is not received, procedure to break open the locker to be initiated even if
rent is paid promptly. In case of genuine cases like NRE out of station etc.,
locker may be continued.
Nominations:
- Sole proprietory concerns also can avail nominatiuons.
- Survivor is also a trustee of the legal heirs of the deceased.
Claims of missing persons:

Nominee or legal heirs can apply to a competent court for presumption of death
of a missing person after lapse of 7 years from the date of missing of such
person.
Unclaimed deposits:
Banks have to submit to RBI, a statement of deposits which are not operated
for 10 years as on 31st December every year with in 30 days.
Account transfer:
Account transfer papers may be sealed in a cover and handed over to customer
if he requests, to hand over at the transferee branch.

BANKER`S
DIGEST
“In today’s environment, hoarding knowledge ultimately erodes
your power. If you know something very important, the way to
get power is by actually sharing it”.
Joseph Badaracco
Human Assets are playing vital role in service organizations and

they need to be harnessed with appropriate skills / knowledge an
on ongoing basis to sustain and grow further in the present
dynamic environment.
Banks being the service sensitive organizations, the Bankers need

to abreast with latest developments in the industry as well as with
the features of bank products that are being offered from time to
time for effective marketing to achieve the corporate goals.
In this endeavor, I have been coordinating the compiling activity

and releasing the “Banker’s Digest” every year for the benefit of
Andhra Bank staff since 2007 at free of cost (soft copy).
5th edition of Banker’s Digest is released duly covering the

important circulars issued by RBI/Bank up to 31st December`10.
We have taken all possible care to provide error free information,

however, readers may note that the information given herein is
merely for guidance and reference and they need to refer the
relevant circulars for full details.
I express my sincere thanks to friends and colleagues for their

active support in encouraging the idea and extending their helping
hand by contributing the required inputs for release of Banker’s
Digest in time.
I solicit your views on the content and quality of the topics for
further improvement in the ensuing editions.
Email - nsn6507@yahoo.com / Mobile 9490213002
Wish you all the Success
Date: 15.02.2011 N S N Reddy
Banker’s Digest 2011

Index
Part-I Banking & Finance

No Topic Contributed by Page nos.
1 Indian Currency – New Symbol N S N Reddy 4
2 Global Recession – Impact on Indian Economy N S N Reddy 5-7
3 Union Budget 2010-11 & RBI Credit Policy N S N Reddy 8-9
4 Bank Loans – Interest Subvention / Subsidy N S N Reddy 10 - 11
5 Financial Inclusion N S N Reddy 12 - 13
6 Banking on Aadhaar N S N Reddy 14 - 16
7 Micro Finance N S N Reddy 17 - 18
8 Self Help Groups V.Venkateshwar Rao 19 - 20
9 Branchless Banking (BC/BF) N S N Reddy 21 - 22
10 Alternate Delivery Channels
i) Any Time Banking (ATM) V.Krishna Murthy 23 - 24
ii) Mobile Banking S.Rajeshwari 25 - 26
iii) Internet Banking S.Rajeshwari 27 - 28
iv) Banking on Cards N S N Reddy 29 - 31
11 Payment Systems – RBI Initiatives N S N Reddy 32 - 34
12 Unit Linked Insurance Plans N S N Reddy 35
13 Micro, Small and Medium Enterprises S.Sudhakar 36 - 38
14 Government Schemes - PMEGP/SJSRY/SRMS P.Sreeram 39 - 41
15 Know Your Customer (KYC) C V Sarada 42 - 44
16 Retail Banking N S N Reddy 45 - 46
17 NRIs – Deposit Products N S N Reddy 47 - 52
18 Funds & Investments K.Mallikarjuna Rao 53 - 57
19 NPA & Prudential Norms K.Satish Chander Reddy 58 - 61
20 Base Rate N S N Reddy 62 - 65
21 Risk Management in Banks (Basel-II & III) Dr. MVN Reddy & Varsha 66 - 73
Banking Codes and Standards Board of India
22 Gayatri Ravikiran 74 - 75
(BCSBI) & Fair Practices
23 Right to Information Act 2005 & Banks
N S N Reddy 76 - 79
24 SARFAESI Act & Banking Ombudsman
25 Banks & Outsourcing N S N Reddy 80 - 81
26 Banks & Mergers N S N Reddy 82 - 83
27 Current Topics & Banking & Finance N S N Reddy 84 - 90

Part-II - Andhra Bank Products & Services
No. Topic Contributed by Page No.
1 Andhra Bank – Mile Stones N S N Reddy 91
2 Vision / Mission / Logo / Mascot I. Vijay Kumar 92 - 94
3 Performance Highlights – Sep`10 Dr. M V N Reddy 95
4 New Deposit Schemes
5 Insurance Linked Deposit Schemes N S N Reddy 96 - 102
6 Other Deposit Schemes
7 Deposits – Guidelines N S N Reddy 103 - 105
8 E-Products N S N Reddy 106 - 108
9 Other Services
i) Demat Account & e-trade U Vijayanand 109 -110
ii) Tele Banking – Call Center
iii) Upset N S N Reddy 111 - 112
iv) IndiaFirst Life General Insurance
Company Limited (Joint Venture)
10 AB - Credit Cards M Srinivas 113 - 115
11 Fee Based Products Prakash Kotecha 116 - 118
12 Ratio Analysis Ch.Kameshwar Rao 119 - 121
13 Loan Policy – Guidelines V K Vijaya Kumar 122 - 132
14 Bank Guarantees & Letter of Credit C V Raghunath 133 - 137
15 Priority Sector – Revised Guidelines V Venkateshwar Rao 138 - 142
16 Agriculture & Allied Activities - Products P Sreeram 143 - 147
17 Retail Lending
i) Education Loans
ii) Housing Loans
Rama Rao Chowhan 148 - 162
iii) Vehicle Loans
iv) Clean / Consumer Loans / Gold Loans
v) Other Loans
18 Corporate Debt Restructuring (CDR)
Comprehensive Corporate Compromise
19 P Sreeram 163 - 167
Policy (CCCP)
20 One Time Settlement Schemes (OTS)
21 Funds Transfer – Domestic/Abroad N S N Reddy 168 - 171
22 Clean Note Policy & Cash Management M Vasundari 172 - 174
23 Service Charges N S N Reddy 175 - 179
24 Compensation Policy N S N Reddy 180
25 Inspection & Audit A Mahipal Reddy 181 - 182
26 Welfare & Other Schemes
i) Existing Staff / Retired Staff
N S N Reddy 183 - 190
ii) Dependents of the Deceased
27 Recalled Questions / Question Bank 191 - 223

Indian Currency Symbol
India has undergone transformation from an underdeveloped country to a fast

developing nation and now emerging as one of the economic power centre of the
world. The growth story of India is intact but missing the unique identity due to non
presence of symbol to represent country’s currency. There is a strong linkage between
the currency of the country and its economic development and hence the currency
needs to be accepted globally.
In the above backdrop, Government of India expressed intention to formalize a symbol

for the Indian rupee, which reflects and captures the Indian ethos and culture in the
last budget session. Further, it was stated that the symbol would lend a distinctive
character and identity to the currency and highlight the strength and global face of the
Indian economy. The Symbol for Indian Currency was designed by Mr. D Udaya
Kumar, an IITian (Mumbai) which is as below:
After years of missing unique identity, India got a distinct symbol to distinguish from
Pakistan, Nepal, Srilanka and Indonesia countries whose currencies are designated as
Rupee or Rupiah which is similar to our currency i.e. Rupee. Further, now Indian rupee
joined the select club of currencies such as the US Dollar, Euro, British Pound and
Japanese Yen that have a clear distinguishing identity. The symbol reflects
standardized expression of the Indian rupee in different languages, both within and
outside the country. It is a perfect blend of Indian and Roman letters - capital 'R' and
Devanagri 'Ra' which represents Rupaiah, to appeal to international and Indian
audiences. The design is based on the tricolor, with two lines at the top and white
space in between.
Though the symbol is not be printed or embossed on currency notes or coins, it would
be included in the Unicode Standard and major scripts of the world to ensure that it
is easily displayed and printed in the electronic and print media. After incorporation in
the global and Indian codes, the symbol would be used by all individuals and entities
within and outside the country.
The new symbol portrays the nation's strength & stability, both politically and
economically and acts as Brand Ambassador. The new symbol is also considered as
a step towards internationalization of Indian rupee and paves the way to achieve full
capital account convertibility shortly.
Though the new symbol gives a global face to India's currency and powerful
international identity but it has to be backed by prudent fiscal measures and other
steps such as eradication of both poverty and corruption, for which concerted efforts
are required to make the dream true.
***

Global Financial Crisis - Impact on India
The later part of the last decade has witnessed unprecedented financial crises and
adversely affected the financial systems of many countries across the globe. The
economic slowdown of the advanced countries which started around mid 2007, in USA
engulfed the whole world within no time and led to collapse/verge of collapse of major
financial institutions like, Lehman Brothers, Bear Sterns, AIG, Merill Lynch etc. The
contagion has traversed from the financial to the real sector and led to global
recession.
A recession is a decline in a country's Gross Domestic Product (GDP) growth for two
or more consecutive quarters of a year. A recession normally takes place when
consumers lose confidence in the growth of the economy and spend less. This leads to
a decreased demand for goods and services, which in turn leads to a decrease in
production, lay-offs and a sharp rise in unemployment. Investors spend less as they
fear stocks values will fall and thus stock markets fall on negative sentiment.
Sub Prime Crisis - 2007: Banks in US offered Mortgage Loans to the borrowers with
No or Poor credit histories with none or little down payments and viewed as Higher
Risk. These loans carry much higher interest rates, two to five percentage points
above prime loans and attracted the attention of Investment Banks/Hedge Fund
Owners since interest charged on these loans are higher than the normal mortgage
loans. Majority of these Loans were securitized and sold to third-party intermediaries
such as Hedge Funds, Pension Funds, Private Financial Institutions and Government
Sponsored entities through Mortgage Backed Securities (MBS). The increased interest
rates coupled with down trend in home prices in US led to higher default risk of sub-
prime mortgages. As a result, banks and other financial institutions holding MBS
incurred losses and sold their assets to meet margin calls. The crisis had affected
global investment banks as they invested substantial amounts in MBS and forced them
to divert funds from overseas to US to meet the payment commitments. To ease the
situation, U.S. government announced bailout plan with an estimation of $700 billion,
to purchase large amounts of illiquid, risky mortgage backed securities from financial
institutions. The crisis is no longer confined to US and the heat is being felt by the
developing world, including India.
Dubai Financial Crisis - 2009: Dubai has been under a full throttle expansion for
quite some time. Massive spending on construction has only seen debt grow and
multiply. Fears continue about the country's ability to repay this debt. The main issue
is a lack of transparency. The United Arab Emirates has pledged support for the ailing
economy of Dubai. The central bank has put up $10 billion dollars to help ease the
mounting fears of Dubai's debt default.
European Sovereign Debt crisis - 2010: One of the long-term worldwide

consequences of the economic breakdown is the 2010 European sovereign debt crisis.
This crisis primarily impacted the four countries known as the PIGS viz., Portugal,
Italy, Greece and Spain due to habitually run large government budget deficits. Other
Euro zone countries viz., France, Ireland, Belgium, The Netherlands, Luxembourg,
Germany, Finland, Austria, and Italy. Fear of sovereign debt default by Greece has
sparked the speculation which has led to slow lending to PIGs. To ease the situation,
European Central Bank announced mutual financial aid package of €750 billion.
However, the PIGS continue to have difficulties.
The impact of the crisis on Indian economy is less severe compared to other emerging
market economies. Further, the Indian banking system is one of the least affected in
the whole world and praised by many of the economists and financial experts. Indian
banks were saved from this downturn on account of very well formulated financial
policies that acted as an insulator. The other contributing reasons to contain the
negative impact are as under:
5

¾ Indian financial sector particularly, PSBs have no direct exposure to tainted
assets and its off-balance sheet activities have been limited.
¾ The credit derivatives market is in nascent stage and there are restrictions on
investments by residents in such products issued abroad.
¾ India’s growth process has been largely Domestic Demand Driven and its
reliance on foreign savings has remained around 1.5 per cent.
¾ India’s comfortable Foreign Exchange Reserves provide confidence in our
ability to manage our balance of payments notwithstanding lower export
demand and dampened capital flows.
¾ Rural demand continues to be robust due to mandated agricultural lending
and social safety & Rural Employment Generated programs.
¾ India’s Merchandise Exports are around 15 per cent of GDP, which is
relatively modest.
Despite these mitigating factors, India too has to weather the negative impact of the
crisis due to rising two-way trade in goods and services and financial integration with
the rest of the world. Indian economy is experiencing the following incidental effects of
the Global Crisis.
Slowing Gross Domestic Product: In the past 5 years, the economy has grown at
an average rate of 8-9 per cent. Services which contribute more than half of GDP have
grown fastest along with manufacturing which has also done well. But this impressive
run of GDP ended in the first quarter of 2008 and is gradually reduced to 6 per cent in
2009-10. Hence, the slowdown in Indian economy is evident from the low GDP growth
with deceleration in the industrial activity, particularly in the manufacturing and
infrastructure sectors and moderation in the services sector such as construction,
transport & communication, trade, hospitality industries.
Reduction in Employment: The recession is likely to have a dual impact on the

outsourcing industry. Appreciating rupee along with poor performance of US
companies will affect the bottom line of the BPOs, which are operating at a net margin
of 7-8 per cent, will find it difficult to survive.
Taxation: The economic slowdown has severely dented the Center’s tax collections
with indirect taxes bearing the brunt. The tax-GDP ratio registered a steady increase
from 8.97 per cent to 12.56 per cent between 2000-01 and 2007-08. But this trend
has been reversed as the tax-GDP ratio has fallen to 10.95 per cent during current
fiscal year mainly on account of reduction in Customs and Excise Tax due to effect of
economic slowdown.
Reduction in Exports: The growth in exports was robust till August 2008, however,
export growth evinced a sharp dip and remained negative till the end of the financial
year on account of major outsourcing deals with US companies, which were effected in
the crisis.
Forex Market: The economic crisis was largely insulated by the reversal of foreign
institutional investment (FII), external commercial borrowings (ECB) and trade credit.
Its spillovers became visible in September-October 2008 with overseas investors
pulling out a record USD 13.3 billion and fall in the nominal value of the rupee from
Rs.40.36 per USD in March 2008 to Rs.51.23 per USD in March 2009, reflecting at
21.2 per cent depreciation during the fiscal 2008-09. However, now it is recovered
and hovering around Rs.46.50.
Money Market: The money market consists of credit market, debt market and
government securities market. All these markets are in some or other way related to
the soundness of banking system as they are regulated by the Reserve Bank of India.

NPAs of banks may indeed rise due to slowdown but given the strength of the banks’
balance sheets, that rise is not likely to pose any systemic risks.
Stock Market: Indian stock market crashed from 20000 to 8000 points during 2008-
09. Further, the performance of the companies remained subdued, which has led to
the bearish trend in the stock market. Recession has effected the investments made
by FIIs in Indian Stock Market since they disinvested to meet their commitments
abroad. This was led to liquidity crunch in all major sectors. However, the economy
absorbed the shocks and revived within three years, which is evident from the present
sensex i.e. 20000 in September 2010.
Recession – Business Opportunities:
a) Realty Sector: The worst hit industry across the globe is Realty Sector. It is a time
to learn, relearn and unlearn by all the concerned viz., End Users, Investors and
Developers. Recession brings the much needed discipline to people’s way of life, while
for corporate across various sectors, there are many positive ripple effects - for
instance it allows people to analyze and identify their core competencies. End Users
are more cautious and looking for value for their investment and Lenders are
exercising prudence while selecting the borrowers. Developers have started focusing
attention on affordable and mass housing with attracting plans. More cautious
spending and greater saving by consumers, more prudence by lenders, shift in focus
from premium to lower and mid-end segment of housing by developers, is exactly
what our economy needed for its long-term health and recession is having the desired
impact. The End User is going to be benefited as the supply chain started addressing
the real demand in market - affordable housing.
b) Innovation: The consumption of basic requirements such as Food, Shelter,

Clothing, Water, Electricity and Health etc., is always going to stay the same even in
the recession, which forces the consumers to look for cost effective alternatives. Hence
the providers of the basic needs are required to focus their attention to offer them at
affordable cost. Recession is an opportunity to produce cost effective / innovative
products and services to the consumers.
c) Mobile & Internet Users: India has over 55 crore mobile subscribers, which is
next to China. It provides ample opportunity to the entrepreneurs / technocrats to
build viable business models on present and prospective Mobile/Internet Users. India's
Internet infrastructure is a revolution. India has over 7 crore Internet users and
expected to increase to 20 crore in the next 5 years. This means that even the
individuals from India's remotest regions can now showcase and offer their businesses
to customers based anywhere globally.
d) Financial Discipline: The crisis has opened the eyes of the Individuals, Corporate
and Governments and made them to focus their attention on need of Savings &
Investments, which was completely ignored in the past. Now they realized the
importance of savings and financial discipline, which definitely paves the way for better
future. The concept of “Spend – Earn – Save – Repay”, which is prevalent in the
present consumerism era, need to under go a change into “Earn – Save – Spend”.
“Necessity is the Mother of Invention”. Thus, the present crisis definitely will be
an enabling factor to come up with innovative ways to handle the problems for
survival, which is need of the hour.

Union Budget 2010-11
Growth and Recovery are the twin objectives of the budget with an aim to achieve
9% GDP Growth rate and to reduce fiscal deficit in a phased manner at 6.9%, 5.5% &
4.8% for the years 2010, 2011 & 2012 of GDP respectively. Reduction of fertilizer
subsidy, simplify the FDI regime and disinvestment of PSUs (Rs.25000) crores are in
the agenda of the present budget.
Banking: More Private Banks to be encouraged by extending additional Banking

License to Private Players. It is aimed to provide banking facilities for all villages with
population of 2000 and more. It is proposed to provide Rs.16500 crore to Public Sector
Banks to maintain tier-I capital.
It is proposed to formalize a symbol for the Indian Rupee, which reflects and
captures the Indian ethos and culture and with this Indian Rupee will join the select
club of currencies viz., US $, Pound Sterling, Euro and Japanese Yen.
Agriculture: Focused thrust is paid to Food Processing Sector. Interest subvention for
timely repayment of crop loans is raised from 1% to 2%, bringing the effective rate of
interest to 5%. Agriculture Debt Relief Scheme is extended by another 6 months i.e.
30.06.2010
Infrastructure: Special thrust is paid to this segment and earmarked an amount of

Rs.1.37 lakh crore for Infrastructure Development. It is proposed to build 20 KM
National Highway every day and allotted Rs.48000 crore for Bharat Nirman Yojna
project. The renewable energy sector has got a major boost. Allotment of Rs.40100
crore is made to NREGA programme. Allotment of Rs.5400 crore & Rs.61000 crore is
made for housing in Urban & Rural development respectively. Rs.10000 crore
earmarked for Indira Aawas Yojna programme. 1% interest subvention is extended to
31.03.2011 for housing loans up to Rs.10 lakh.
Social Sector: It is proposed to set up National Social Security Fund for unskilled
labourers with Rs.1000 crore. National Health Insurance Scheme for NREGA Workers is
introduced for the persons who work for 15 days in a Month.
Unique Identification Authority of India project would provide an effective

platform for financial inclusion and targeted subsidy payments and budget of Rs.1900
crores is allotted for this purpose.
Income Tax: The income tax slabs are changed as under without any change in the
existing exemption limits.
Income Slab Tax Rate Other Benefits / Relief
Up to Rs.1.6 lakh Nil Rs.20000/- exemption for investment in
Rs.1.6 lakh to Rs.5 lakh 10% Infrastructure Bonds. With this the
Rs.5 lakh to Rs.8 lakh 20% exemption under 80C increased from Rs.1
Above Rs.8 lakh 30% lakh to Rs.1.2 lakh.
Other Taxes: Minimum Alternative Tax increased to 18% from 15%. Excise Duty
hiked from 8% to 10%. No Service Tax on News Agencies. Central Excise Tariff on
Petroleum Products hiked by Rs.1.
Impact of Budget: Petrol, Diesel, Coals, cigarettes, Cement, Large Cars, Jewellry,
Gold, TV Sets, ACs, Silver, Pan Masala have become costlier where as CNG, Mobile,
Medicines, Refrigerators, Medical Equipments, Farm Equipments, Mobile Phones,
Mobile chargers, Watches, Readymade Garments, Microwave Ovens, Toys, Foreign
Farm Equipments, Set Top Boxes, Water Purifier, LED Lights have become cheaper.
Housing prices are also likely to go up as one of the key construction materials;
cement will attract higher excise duty.
8

RBI Credit Policy - 2010
I. RBI Credit Policy - January 2010: GDP growth expected to be 7.7% and
Agriculture GDP growth is expected to be near zero. Money supply growth expected at
16.5%. Whole Sale Price Index (WPI) inflation projection raised to 8.5%. Food price
rise is spilling into other sectors. Pressures on Rupee liquidity have clearly stabilized.
Recovery justifies reversal of expansionary stance. Banks' Deposit and Credit growth is
projected at 17% and 16% respectively. Bank Rate has been retained at 6.0 per cent.
Repo and Reverse Repo rate under the Liquidity Adjustment Facility (LAF) is retained
at 4.75% and 3.25%. Statutory Liquidity Ratio (SLR) remains unchanged at 25%. CRR
hiked by 75 basis points i.e. 5% to 5.75% in two stages (0.50% from 13th February
2010 and 0.25% from 27th February 2010). The reduction in excess liquidity will help
anchor inflationary expectations. The credit policy indicates a clear and explicit shift of
RBI stance from Managing the Crisis to Managing the Recovery. Further, it is
aiming to maintain an interest rate environment consistent with price stability and
financial stability, and in support of the growth process.
II. RBI Credit Policy – November 2010: The monetary policy is aimed at
conditioning and containing inflation at the 4 to 4.5 per cent and intended to maintain
an interest rate regime consistent with price, output and financial stability. In this
direction, RBI hiked key short-term lending and borrowing rates by 25 basis points,
the Repo Rate stands at 6.25 per cent and the Reverse Repo at 5.25 per cent with
immediate effect. However, Cash Reserve Ratio (CRR) remains unchanged at 6 per
cent. RBI advised scheduled commercial banks to allocate 60 per cent of the MSME
advances to the Micro and Small Enterprises Advances was to be achieved in stages,
viz., 50%, 60% and 100% by 2011, 2012 and 2013 respectively. RBI increased the
threshold limit for RTGS transactions from the present limit of ` 1 to 2 lakh. NEFT
transactions with value bond `1 to 2 lakhs attract lower service charges i.e. `15/- per
transaction as against earlier charge of `25/- under RTGS. RBI voiced concern over
the sharp rise in asset prices and the following changes are made with regard to Home
Loans viz., Standard provisioning is increased from 0.40% to 2% on Teaser Loans,
the value ratio is fixed at 80% i.e. the borrower contribution should be minimum of
20% of property value and the Risk Weight on Home Loans of ` 75 lakhs & above is
increased to 125%. Interest rate on housing loans may go up. Housing loan borrowers
are likely to face liquidity problem since they need to mobilize substantial funds to
meet the margin money requirement (20%).
III. RBI Credit Policy – January 2011: Credit policy is announced in the backdrop
of accelerated inflation at 8.4% on account of increase of prices of fuel and food items.
Gross Domestic Product (GDP) is expected at 8.50% for 2010-11. Current account
deficit for 2010-11 is expected to be about 3.5 per cent of GDP. Repo and reverse repo
rate hiked by 25 bps each, to 6.50 per cent and 5.50 per cent, respectively, with
immediate effect. Cash reserve ratio (CRR) kept unchanged at 6.0 per cent. The RBI
will constantly monitor the credit growth and, if necessary, will engage with banks that
show an abnormal incremental credit-deposit ratio.
Impact: Repo rate being the effective policy rate, the increase of 25 basis points is
expected to be transmitted to the banking industry in the form of higher cost of funds.
Accordingly, lending rates are expected to increase further by 50 bps over the next
few months. Hike in deposit rates and relatively lower increase in lending rates would
exert pressure on the net interest margin of the banks in the coming quarters.

Bank Loans - Interest Subvention / Subsidy
1. Short Term Agricultural Credit: In order to provide short term credit (Crop
Loans, PAGCC, Kisan Vikas Cards, Rythu Mitra Groups, Joint Liability Groups,
Agricultural Gold Loans and Working Capital Loans financed to Fisheries) to the
farmers at reasonable interest rate, Government of India announced a scheme of
Interest Subvention in the year 2006. Under this, farmer receives short term credit at
7% p.a. from the date of disbursement to the end of the respective season with an
upper limit of `3 lakh on the amount. However, Agricultural Medium Term Loans are
not covered under this scheme. Government will provide Interest Subvention to the
banks viz., PSBs, RRBs, and Farmers Service Co-operative Societies, on the amounts
financed to farmers (short term) at the following rates:
Banks lending to short term agricultural credit are eligible to claim 1.50% Interest
Subvention from Government of India for the loans disbursed in Kharif (01-04-10 to
30-09-10) & Rabhi (01-10-10 to 31-03-11) during the year 2010-11. Branches are
required to submit claim half-yearly (September 2010 & March 2011) for
reimbursement of interest subvention amount from RBI.
In the Union Budget 2010-11, the said additional interest subvention is raised to 2%
with effect from 01.04.2010. Banks may credit the interest subvention to the farmers
account only after their prompt repayment as stated earlier and seek reimbursement
subsequently. This additional subvention is available to Public Sector Banks on the
condition that the effective rate of interest on short term production credit up to Rs.3
lakh for such farmers will be 5% p.a. Branches should submit one-time consolidated
claim pertaining to the disbursements made during the entire year 2010-11 latest by
05.04.2012 for reimbursement from RBI. (RBI Circular no.RBI/2010-11/192 RPCD
no.PLFS.BC.18/05.04.02/2010-11 dated 06.09.2010 & our cir.no.234 Ref 19/12 dated
21.09.2010)
2. Export Credit: Government is providing interest subvention to all Scheduled

Commercial Banks in respect of rupee export credit to the following specified
categories (RBI cir.no.DBOD.BC No.94/04.02.001/2009-10 dated 23.04.10):
Category Interest Subvention

Handicrafts, Carpets, Handlooms, SME, Leather &
Leather manufacturers, Jute manufacturing including 2% p.a.
floor covering, Engineering goods and textiles.
However, the interest rate charged by the banks on export credit should not fall below
7% p.a. after taking the said Interest Subvention in to account. The above subvention
is valid up to 31.03.2011. (Cir.no.191 Ref 26/41 dated 23.08.2010)
3. Micro & Small Enterprises: Paavala Vaddi Scheme was introduced for the benefit
of Micro & Small Enterprises set up in AP State except in the Muncipal Corporation
limits of Hyderabad, Vijayawada and Visakhapatnam. The scheme is applicable to the
term loans availed on fixed capital investment by the eligible new Micro and Small
Enterprises on or after 01.04.2008. More than 75% of the plant and machinery should
be new and not second hand. Under the scheme, interest charged over and above 3%
p.a. (i.e. 10% - 3% = 7%) will be reimbursed to the group at half yearly intervals.
However, the maximum reimbursement is restricted to 9% p.a. The benefit is available
for a period of 5 years i.e. up to the first half of 6th year or till the closure of term loan,
whichever is earlier. However, this benefit is available to only those accounts, which in
regular in payment of principal and interest. It is applicable to one-time payment
accounts also. (Circular no.333 Ref 52/2 dated 18.12.2008)
10

4. Housing Loans: The objective of the scheme is to provide interest subsidy on
housing loan as a measure to generate additional demand for credit and to improve
affordability of housing to eligible borrowers in the middle and lower income groups.
The scheme is expected to provide relief to prospective home owners and improve
home ownership in the specified target segment. Interest subvention of 1% will be
available on housing loans up to `10 lakh to individuals for construction/purchase of a
new house or extension of an existing house, provided the cost of construction/price of
the new house/extension does not exceed `20 lakh. All such loans sanctioned and
disbursed, during the period from 01.10.2009 to 31.03.2011 shall be eligible for the
said interest subsidy. It will applicable to the first 12 installments of all such loans
sanctioned and disbursed during the currency of the scheme and will be computed for
12 months on the disbursed amount. The subsidy amount will be adjusted upfront in
the principal outstanding, irrespective whether the loan is on fixed or floating rate
basis. The interest subvention is applicable for the eligible borrowers for one housing
unit only. The scheme will be implemented through Scheduled Commercial Banks.
However, Non Resident Indians for construction of farm houses and staff members of
the banks are not eligible for interest subsidy under this scheme. (Circular no.187 Ref
53/06 dated 19.08.2010)
Educational Loans – Interest Subsidy: India is one of the few countries having
large pool of young people, which is an opportunity to the country provided these
Human Assets are converted into Knowledge Assets. Providing proper education to the
students is a prerequisite to achieve the desired goal. The poor financial background of
the students is one of the major constraints for the students aspiring for higher
studies. In the recent budget, it is envisaged to ensure technical/professional
education to all the deserving students by providing required financial support by way
of Interest subsidy.
In the above backdrop, Government of India has launched a scheme “Central Scheme
to provide Interest Subsidy (CSIS)” to provide interest subsidy during the period of
moratorium i.e. course period plus one year or six months after getting job, whichever
is earlier, on loans taken by students belonging to Economically Weaker Sections
(EWS) from scheduled banks under Educational Loan scheme of the Indian Banks
Association, for pursuing any of the approved course of studies in technical and
professional streams, from recognized institution in India.
The benefits of the scheme would be applicable to those students belonging to EWS
with annual gross parental/family income upper limit of Rs.4.5 lakhs per year from
all sources. The interest subsidy shall be available to the eligible students only once,
either for the first graduate degree course or post graduate degree/diplomas in India.
Interest subsidy shall however be admissible for integrated courses (graduation plus
post graduate).
The scheme shall be applicable from the academic year 2009-10 starting 01.04.2009.
Students are eligible for interest subsidy for all loan disbursements made on or after
01.04.2009 irrespective of date of sanction of loan. Interest on any amount disbursed
for courses starting before the academic year 2009-10 would not be considered for
Interest Subsidy under the said scheme. Canara Bank is the Nodal Bank for the
scheme for release of interest subsidy to the banks on yearly/half-yearly basis as
decided by the Government of India. In order to claim the interest subsidy from Nodal
agency, bank branches are required to obtain income proof certificate from appropriate
authority as decided by state government and agreement with borrower/parents.
(Cir.no.236 Ref 53/10 dated 24.09.2010)
11

Financial Inclusion - Role of Banks
The banking industry has shown tremendous growth in volume and complexity during
the last few decades. Despite making significant improvements in the areas relating to
financial viability, profitability and competitiveness, there are concerns that banks
have not been able to reach and bring vast segment of the population, especially the
underprivileged sections of the society, into the fold of basic banking services. In the
above backdrop, the concept "Financial Inclusion” has attained utmost importance in
the recent years.
“Financial Inclusion is the delivery of banking services at an affordable cost to the

vast sections of disadvantaged and low income group. As banking services are in the
nature of public good, it is essential that availability of banking and payment services
to the entire population without discrimination is the prime objective of the public
policy. It means not only to extending banking facilities to rural people but also to
provide at their convenient time and location. RBI envisages all villages with a
population of at least 2000 should have access to banking by 2013.
No Frill Accounts: With a view to achieving greater financial inclusion, RBI directed
the banks to make available basic banking services to the needy people either through
No Frills or with Nil balance account without any service charges. However, the
restrictions on transactions and amount are to be made known to the depositors
transparently.
Simplified KYC Norms: In order to ensure that persons belonging to low income
group both in urban and rural areas do not face difficulty in opening the bank accounts
due to the procedural hassles, the 'KYC' procedure for opening accounts for those
persons who intend to keep balances not exceeding rupees fifty thousand (Rs.50000/-)
in all their accounts taken together and the total credit in all the accounts taken
together is not expected to exceed rupees one lakh (Rs.100000/-) in a year has been
simplified to enable those belonging to low income groups without documents of
identity and proof of residence to open banks accounts. However, these accounts need
to be introduced by the existing KYC compliant customer who had satisfactory dealings
with the bank for at least six months. Photograph of the customer who proposes to
open the account and his address need to be certified by the introducer.
Opening a no frills account with simplified KYC norms is only the first step in building
the relationship which would require sustained efforts on the part of Banks as well as
Customers to achieve the objective of Financial Inclusion. However, in rural areas
customers cannot be expected to come to branches in view of opportunity cost and
Time and hence banks will have to reach out through a variety of technology driven
delivery channels such as ATMs, Bio-metric ATMs, Mobile ATMs, Smart Cards and use
of Post offices.
Low Cost ATMs: The presence of ATMs mostly found in Metro/Urban centers and
banks are not keen to install at Rural/Semi Urban centers in view of high investment
and low transaction volume. Deployment of low cost ATMs at Rural/SU centers with
basic features (cash withdrawal, balance enquiry etc.,) enables the customers to have
access to cost effective convenient banking.
Biometric ATMs: The penetration of ATMs into Rural / Semi-urban areas may not
serve the purpose unless it is put to use by both Literate and Illiterates. The existing
ATMs are not being used optimally by rural folk on account of PIN and Password
related issues. Introduction of Biometric ATMs enables the illiterate and semi-literate
customers to avail ATM facilities on par with literate customers. Under this, Thumb
impression of the cardholder will be scanned and transfer the same to central server
12

as one time measure. While swapping the card customer is required to keep thumb on
the slot, system verifies the finger print and allows access to his account/s.
Mobile ATMs are designed for providing ATM facility to the rural folk as well as other
customers. The Van would move at the pre-determined places and also accessible to
Biometric card holders. It can also be used for opening of accounts during the visits to
the rural areas.
All the above initiatives warrant the banks to invest substantial amount on
infrastructure besides recurring expenditure. There is an urgent need to bank on
alternatives to overcome the said constraints and to extend branch less banking to
achieve desired goal.
Business Correspondent (BC): Recently RBI permitted the banks to avail the
services of retired teachers, bank employees, small shop keepers, agents of
government savings schemes or insurance, petrol pump owners to act as bank
representative to undertake small value transactions (deposits, insurance policies,
etc.,) without opening a Bank branch/ATM. Banks have already initiated steps to
appoint BCs to undertake the above services.
Smart Cards: State Governments are actively looking at making pension payments as
also disbursals under Rural Employment Generation Program using through smart
cards linked bank accounts. All relevant details relating to the person can be stored on
the card with bio-metric identification. In order to popularize smart cards, all
agriculture short term loans and payment of social security schemes are to be
dispensed through ATMs only.
Tie-up with Post Offices: Banks may make use the services of post offices for the
purpose of extending banking services to the persons of unbanked areas. Smart Cards
with bio-metric features may be used for remitting cash or for withdrawal.
E-Seva Centers: Banks may enter agreement with the respective state governments
for sharing of resources, so that our rural/semi-urban customers can undertake
financial transactions (Cash Deposit/Withdrawals) at these centers, which will be
updated at Banks` server every day.
Mobile Money Transfers: The reach of mobile to the remote village and its usage by
the common man has become order of the day. It enables the subscribers to manage
their financial transactions (funds transfer) independent of place and time. The
subscriber can approach to a retailer of mobile network for withdrawal/deposit of
money and the transaction takes place using SMS messages. Recently, some banks
have introduced mPAY where the funds can be transferred from one account to
another account of the same bank provided the remitter is the registered customer of
the bank and having ATM/Debit card.
T-Banking: Today, we found TV in all most all households and it has become one of
the cost effective mode to disseminate information across the country and the same
can be used as non-branch service delivery channel.
The success of IT solutions in implementation of Financial Inclusion depends on

Awareness, Education and Training to both Users as well as Service Providers
(Banks & Intermediaries).
13

Banking on AADHAAR
The Unique Identification Authority of India (UIDAI) was established by Government of

India with an objective to implement Multipurpose National Identity Card or Unique
Identification Card (UID Card) in India. This project is part of the Planning Commission
and headed by Mr. Nandan Nilekani, a former co-chairman of Infosys Technologies. It
is aimed to issue a unique identification number to all Indian residents with intent to
eliminate duplicate/fake identities and to put hassle-free, cost effective
verification/authentication system in place thereby to save considerable resources of
various User Departments as well as beneficiaries at large.
UID project gives a big push to the government’s financial inclusion agenda and also
provides the strong foundation to deliver better services and paves the way to improve
the operational efficiency of the system. It will be helpful in better monitoring and
targeting of social benefits and employment programmes. Further, it paves the way to
have synergies among various ID initiatives i.e. Voter ID, Passports, Ration cards,
Licenses, Fishing permits, Border area ID cards etc. Addressing illegal immigration and
associated risks is another goal of the program. Aadhaar has the potential to
fundamentally transform the service delivery and governance in the country. It is a 12
digit identity code and will remain a permanent identifier right from birth to death of
the individual.
The UIDAI unveiled new name and logo and the Unique ID number will now be known
with brand name AADHAAR. The logo represents a new dawn of equal opportunity for
each individual and the sun symbolizes a promise that shines on all residents equally.
To achieve the gigantic task, first of its kind in the world to cover all the residents with
demographic/biometric information, UIDAI is enrolling the organizations as registrars
to undertake enrollment process since they have access to large client base.
No Organization Client Base

1 Public Sector Banks (Accounts) 24 Crores
2 LIC of India (Policy Holders) 17 Crores
3 Central / State Governments (BPL) 15 Crores
4 Oil Companies (LPG) 11.50 Crores
5 Transport Authorities (Driving Licenses) 9 Crores
6 Income Tax Offices (Tax Payers) 7 Crores
The Registrar or its agents collect details of Demographic information and Biometric
details such as Facial Image (Photo), Finger Prints (10) and iris scan of the applicant to
establish individual’s uniqueness. De-duplication exercise ensures that nobody gets
more than one number and in case a person already enrolled approaches the registrar,
his biometric parameters will be run through the database and if matches his
application will be rejected right away. Any location which is equipped with a mobile
phone and a fingerprint reader will be able to act as an authentication point and
confirms the identity of the person online. The residents who possess AADHAAR can
avail the entitled benefits/services throughout his life across the country.
14

Financial Inclusion: Despite amplified thrust by the government on increase of
branch network across the country since 1969, still the fruits of the banking not
reached to the common man which is evident from the below:
¾ Half of the residents are out of the banking system and unable to prove their
identity on account of poor financial back ground and belongs to Below Poverty
Line (BPL) segment.
¾ 60% of farmers do not have access to credit from Banks.
¾ It is estimated that the poor pay $10-12 billion as usurious interest (30 to
40%) each year. Even Micro Finance Institutions charge 20-30% interest.
¾ More than 40% of the government’s subsidy and social spending is being
siphoned off, mostly by “ghosts” and undeserving recipients.
¾ In spite of best efforts, the various welfare/employment generated programs
aimed at poor households with huge budget allocations (NREGS, JSY and PDS)
are going in to unscrupulous hands and leading to widespread leakage of public
money.
Even after 63 years of independence and 40 years of Bank’s Nationalization, still

majority of residents are under the clutches of Money Lenders and deprived of financial
independence. The views of Sri.K C Chakrabarty, Deputy Governor, RBI on the issue is
worth noting “Our approach is that those who are borrowing from Micro Finance
Institutes must now borrow from the Banks and those who are borrowing from the
Money Lenders must borrow from Micro Finance Institutes”.
It is envisaged that the beneficiaries of the various schemes will be paid directly
through banks and this paves the way for effective control on usage of government
funds and lays strong foundation to achieve financial inclusion in the ensuing years.
AADHAAR Project - Role of Banks:
Public Sector Banks already started entering MOU with UIDAI to act as Registrars for
AADHAAR project. Banks are likely to play beyond the role of enrolling agents.
KYC compliance: Today, the major constraints faced by the banks while opening of
accounts is the absence of valid identity and address proof of the prospective
customers and it is causing inconvenience to the public and operational problems to
the banks thereby unable to achieve the desired financial inclusion. Once the project
comes to live, AADHAAR number may be treated as substitute for KYC compliance
which enables the banks to open accounts with a greater speed and accuracy besides
saving of considerable resources.
Micro ATMs: As a step towards financial inclusion, RBI has allowed banks to engage
intermediaries i.e. Business Correspondents (BC) to carry out specified financial
transactions through Public Call Office operators, Kirana Stores, Medical Shop owners
and Fair Price Shop dealers etc. The intermediaries would be provided mobile phone
and fingerprint reader and would act as a Micro ATM where a person could go to any
BC across the country to withdraw/deposit money. AADHAAR could emerge as a
payment card linked to a savings account and function as a pre-paid / smart card
where the government credits the amount to the accounts directly. On implementation
of the project, banks would have immediate access to many more potential customers
at the bottom of the pyramid through Branchless Banking; however, this requires
substantial investment in technology.
Mobile Banking: The project enables the mobile industry to create a Low-Cost High-
Volume ubiquitous transaction platform to penetrate into remote rural areas of the
country. In this every transaction point will have a mobile phone and a fingerprint
reader. The customer need to undergo the verification process and once the identity is
15

established, the financial transaction is done. Once this model is stabilized, the
distribution of financial products and services can be opened up to whoever is willing
to invest in a mobile phone and a fingerprint reader. Millions of financial
correspondents could be enrolled. The AADHAAR platform enables the banks to provide
Virtual Banking.
The distribution of financial products and services at the lowest rung of the pyramid
requires a low-cost model that allows accepting and making of a large number of micro
payments to and from the poor. The high intermediary cost of the banks is a stumbling
block to reach the poor, which need to be addressed.
In the above backdrop, Banks need to revisit their approach towards low value
accounts of vast neglected population and adopt “High Volume – Low Margin – High
Profit” business model backed by technology. This strategy enables to bring more
customers in to bank’s fold since this segment provides ample opportunities to
improve business/profit on account of cost effective solutions.
The first UID number is issued to Ranjana Sonawne of Tembhali village, Maharastra
State by Dr.Manmohan singh, Prime Minister of India on 28.09.2010. A budget of
`3000 crores is allotted for implementation of the ambitious project with an objective
to cover 60 crore residents by 2014. The first set of 10 crore AADHAAR numbers are
expected to be issued by March 2011. Government intends to pay `100/- as incentive
to the residents belongs to BPL category for enrollment to meet their wage loss and
travel expenditure.
Government propose to pay `50/- to the Registrars for each successful enrolment
which is not commensurate since the associated activities such as attending Proof of
Address, Proof of Identity and Proof of Date of Birth, biometric information etc.,
involves considerable resources. In the light of increased cost of operations, there is
an urgent need to revisit the charges payable to the Registrars.
The success of the project crucially depends on the active participation of the
Government in providing proper infrastructure/logistic support to the concerned and
committed efforts of the Registrars or its agencies in enrollment exercise especially
those who do not have documentary proof to establish their identity.
The long cherished dream of Indians to have Unique Number comes true shortly and it
definitely brings qualitative changes especially in delivery of public services through
banking channels. Banks are going to play vital role in enrollment as well as in
providing the required financial services to the target population. Banks are required to
convert the AADHAAR as an opportunity for business development by adopting
appropriate cost effective innovative strategies.
***
16

Micro Finance
Informal micro finance ventures exist in India since long but these were usually in the
form of moneylenders who were infamously popular for cheating people. In the post
independence era, micro-credit, as a concept came into existence and gained
immense popularity.
Micro Credit is defined as 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. Banks have
discretion to devise appropriate loan and savings products and the related terms and
conditions including size of the loan, unit cost, unit size, maturity period, grace period,
margins, etc. Such credit covers not only consumption and production loans for
various farm and non-farm activities of the poor but also include their other credit
needs such as housing and shelter improvements. Banks, NBFCs, NGOs and other
institutions/organizations are allowed to undertake activities relating to Micro Credit in
India.
The introduction of the ‘Self Help Groups (SHG)’ format and the nationalized banks’
lending system helped accentuate the importance of the same. SHG concept further
gained significance after Dr. Mohammed Yunus started his venture in the remote areas
of Bangladesh. There are different mechanisms through which the delivery of micro
credit loans takes place.
¾ First, Banks may lend directly to customers.

¾ Second, NABARD sponsors the Self Help Group-Bank Lending Programme
(SBLP). Under this, SHGs need to save regularly for a minimum of six months
and maintain prescribed records and accounts in order to become eligible to be
linked to local banks.
¾ Third, commercial banks or apex institutions lend to Micro Finance
Organizations (MFOs) for further lending to groups or individuals.
MFOs lend to SHGs and Joint Liability Groups, which are also known as Grameen
groups. The number of MFOs in India involved in lending activities is estimated to be
around 800 and employ about 2 lakh staff from across the board ranging from
business schools to social sciences and engineering professionals. Three organizations
viz., SHARE, SKS and Spandana, now serve more than 1.5 million families in AP, most
of them very poor when they started accessing micro-financial services. These MFOs
vary significantly in size, outreach and credit delivery methodologies. Presently, the
lending activities of MFOs are not regulated except for those registered as NBFCs.
However, microfinance customer is often deprived of basic financial and developmental

services and most vulnerable to financial risks. These clients seek a more holistic
service delivery from MFIs and to that extent need multiple credit products—for
consumption, for asset creation, for investments in working capital. They have
additional financial service needs – savings, insurance, micro pensions.
Institutional support, interest rates, government role, disclosure norms etc., are the
some of the important factors for the success of the micro finance. The said areas
17

need to be regulated / monitored to avert clash of interests among the partners and
for an orderly and sustainable growth. For example -
¾ MFIs expect that they should be able to recover the cost of delivery and expect
that their social mission be achieved.
¾ Donors expect that they make a profitable business by investing in MFIs and at
the same time, they want that poor people improve their income standard of
living through their investment.
¾ The clients expect that donors and MFIs are reasonably co-operative and
helpful in their dealings by availing financial education, and skills to manage
and engage profitably and are able to repay their loans.
Though the growth rate of Micro Finance Institutions impressive over the years, these
institutions are under attack in the recent times especially in the area of charging
exorbitant interest rates (around 50%) and unethical recovery practices adopted by
these institutions. This has attracted the attention of state governments, regulator
(RBI) and Banks since all these entities are associated with Micro Finance lending.
The Andhra Pradesh Government has issued an ordinance on 15th October 2010 to
regulate the operations of MFIs and insisted that these institutions are required to be
registered with District Rural Development Agencies for rural areas and Project
Director of MEMPA for urban areas, apart from imposing a three-year imprisonment
and/or ` 1 lakh fine on MFIs that harass borrowers.
RBI has set up a sub-committee under the chairman of Sri. Y H Malegam to study
and suggest measures to mitigate the concerns over the functioning of the MFI
registered with RBI as NBFCs and the recommendations are as under:
¾ A separate category be created for NBFCs operating in the Microfinance sector,

such NBFCs being designated as NBFC-MFI and they should maintain Capital
Adequacy Ratio at 15%.
¾ Lending should be restricted to only those households whose annual income is

below `50000/-.
¾ The loan amount should not exceed `25000/- (including the earlier loans) and
repayable by weekly, fortnightly, monthly installments as per the choice of the
borrower.
¾ There should be only three components in the pricing of the loan viz., (i) a
processing fee, not exceeding 1% of the gross loan amount (ii) the interest
charge not exceeding 24% p.a. and (iii) the insurance premium.
¾ Field staff should not be allowed to make recovery at the place of residence or
work of the borrower and all individual loans.
In order to bring pressure on MFIs to ease interest rates, the regulators and banks are
applying indirect pressure in the interest of the small borrowers. Some banks have
already initiated steps to stipulate credit rating to MFIs and disclosure norms with
regard to interest to be levied to the customers. The banks decision to raise SHG
customer base and deploy required funds at reasonable interest rate to the vast needy
segment is a welcoming sign as it enables them to come out of vicious circle of
usurious interest rates.
***
18

Self-Help Group (SHG)
Self-Help Group is a registered or unregistered group of micro entrepreneurs having

homogenous social and economic background voluntarily, coming together to save
small amounts regularly, to mutually agree to contribute to a common fund and to
meet their emergency needs on mutual help basis. The group members use collective
wisdom and peer pressure to ensure proper end-use of credit and timely repayment
thereof. It is aimed to inculcate saving habit and encourage thrift to undertake lending
among the members. In the process, it boost the confidence to carryout the activities
with ease and paves the way for self-reliance. The membership of the group could be
between 10 to 25 members. If more than 20 members are there, the group should be
registered.
Pre-requisites for financing: Groups with 6 months of savings, regular meetings,

regular thrift habit and habituated internal lending and ‘A’ or ‘B’ rating as per Critical
Rating Index are eligible for bank finance.
Dosage of Finance:
Dose Existence of Regular loan Debt Swapping* Housing

the Group
4 times of Minimum Rs.25000/-
Having regular savings / corpus or 50% regular loan
savings at least or Rs.50000/- limit whichever is
First
for 6 Months whichever is higher subject to
higher extent of debt.
Minimum Rs.50000/-
Minimum of 12 10 times of for rural SHGs and
Rs.20000/- per
Months from the savings/corpus Rs.75000/- for urban
member subject to
date of or Rs.100000/- SHGs or 50% regular
Second maximum of
availment of first whichever is loan limit whichever
Rs.100000/- per
dose of finance. higher is higher subject to
group
extent of debt.
Minimum of 18 40% of MCP or to
months from the the extent of debt
Eligibility as per
Third & date of whichever is lower
Micro Credit Plan
onwards availment of subject to maximum
(MCP)
Second dose of of Rs.200000/-
finance.
* Andhra Bank is extending credit facility to SHG Groups for the purpose of Debt Swapping
under the scheme called “AB Mahila Soubhagya”.
However, the maximum amount allowed to each SHG Group is Rs.1.75 lakhs, Rs.2.50 lakhs and
Rs.5 lakhs under First, Second and third dose respectively.
Corpus includes:
¾ Balance amount in SB account

¾ Amount held as cash with authorized persons
¾ Amount lent internally among members
¾ Amount received as interest on loans from members
¾ Any other contribution received by the group like Grants, Donations and fund
provided by Government
19

Micro Credit Plan (MCP): It includes investment credit plus social needs such as
Health, Education, Marriage, Housing and consumption etc (not exceeding 10% of
investment credit) and Debt Swapping requirements (not exceeding 40% of MCP).
Debt Swapping: Financing to the group members for repayment of loans availed by
them from non-institutional lenders i.e. Private Money lenders. It is only one time
measure.
Interest Rate: The applicable interest rate for SHGs is PLR minus 1% irrespective of
the amount of finance. State government is providing interest subsidy to SHGs which
are prompt in repayment of loan installments to Banks. It is called “Paavala Vaddi”
scheme which means 25 paise interest, which amounts to 3% p.a. Amount of interest
charged over and above 3% p.a. will be reimbursed to the group at half yearly
intervals. The reimbursement is to be credited to group’s savings bank account, but
not to the SHG loan account.
Security: No collateral security up to a loan limit of Rs.500000/-. However, assets

created out of loan should be hypothecated to the Bank.
Credit cards: SHG credit cards can be issued to ‘A’ & ‘B’ rated groups, who reached
3rd or 4th dosage of finance against a cash credit limit (maximum of Rs. 2 lakhs) for a
period of 3 years.
SHG lending is cost effective for both Banks and Borrowers since it reduces costs to a
greater extent. SHG-bank linkage program is emerged as the dominant micro finance
dispensation model in India. The other successful models that have emerged are:
¾ An Intermediate Model that works on banking principles with focus on both

savings and credit activities and where banking services are provided to the
clients either directly or through SHGs.
¾ There is also a Wholesale banking Model where the clients comprise NGOs, MFIs
and SHG Federations. This Model involves a unique package of providing both
loans and capacity building support to its partners.
¾ Further, there is an Individual Banking based Model that has its clients as
individuals or joint liability groups. While program management and client
appraisal in this Model may be a challenge, it is best suited to lending to
enterprises. (RBI Circular RPCD.MFFI.BC.No.08/12.01.001/2008-09 dated
01.07.08 and our circular no.211 Ref 19/07 dated 03.10.2008)
Society for Elimination of Rural Poverty (SERP): The introduction of SERP is

aimed at strengthening of SHG Bank Linkage program and to augment credit flow in
orderly manner in the State of Andhra Pradesh. Our Bank entered MOU with SERP to
undertake initiatives such as capacity building, rating of SHGs, preparation of Micro
Credit Plan, activating community based recovery mechanism, imparting training to
improve book keeping etc. (Cir.no.268 Ref 19/15 dated 25.10.2010)
***
20

Branchless Banking
(Business Facilitators & Business Correspondents)
RBI has taken series of initiatives to provide banking services to all the needy people
across the country in the recent years. The liberalized Branch Licensing Policy, free
entry of Private and Foreign Banks, simplified KYC norms for no-frill accounts etc., are
some of the important mile stones to drive the banks to address the financial needs of
the common man since 50% of residents of the country still deprived of basic banking
services even after 63 years of independence. Is this lot not bankable?
High Operating Costs and Low Business Volume is the major constraints of the
banks in extending banking services especially in remote rural and inaccessible areas
through Branch Banking Model. To address this issue, RBI permitted the banks to
make use the services of Business Facilitators and Business Correspondents to take
banking to un-banked in a most cost effective manner.
I. Business Facilitators (BF) Model envisages the use of intermediaries by the

banks to provide Non Financial Services to the public such as
¾ Identification of borrowers and fitment of activities.

¾ Collection and preliminary processing of loan applications including verification of
primary information/data.
¾ Creating awareness about savings and other products and education and advice
on managing money and debt counseling.
¾ Processing and submission of applications to banks.
¾ Promotion, nurturing and monitoring of SHGs, JLGs, Credit Groups.
¾ Post-sanction monitoring.
¾ Follow-up for recovery.
Banks may use intermediaries such as NGOs/Farmers' Clubs, cooperatives, community

based organizations, IT enabled rural outlets of corporate entities, Post Offices,
insurance agents, well functioning Panchayats, Village Knowledge Centres, Agri
Clinics/Business Centers, Krishi Vigyan Kendras and KVIC/KVIB units for providing
facilitation services.
II. Business Correspondents (BC) Model envisages the use of identified

institutional agents, organizations and other entities for supporting the Bank in
extending Financial Services, operating from different locations away from the Bank
branches. In addition to activities listed under the BF Model, the scope of activities to
be undertaken by the BCs will include (i) disbursal of small value credit, (ii) recovery
of principal / collection of interest (iii) collection of small value deposits (iv) sale of
micro insurance/mutual fund products/pension products/other third party products
and (v) receipt and delivery of small value remittances.
RBI defined BC as retail agents engaged by banks for providing banking services at
locations other than a bank branch or ATM and the following entities are permitted to
undertake BC related activies:
Entities:
a) Companies registered under Companies Act and profit making (FMCG, Telecom,
other Corporate entities etc.,) are permitted to act as BCs. However, NBFC
companies and profit making Micro Finance Companies are not allowed to
operate as BCs.
b) Post Offices
c) Registered Non Government Organizations (NGO)
21

d) Societies registered under Mutually Aided Cooperative societies Acts or the Co
operative Societies Acts of states
Individuals:
a) Retired Bank Employees/Government Employees/Teachers/Ex-Serviceman

b) Kirana / Medical / Fair Price Shop owners
c) Individual Public Call Office (PCO) operators
d) Agents of Small Savings schemes of Government of India / Insurance
Companies
e) Individuals who own Petrol Pumps and
f) Authorized functionaries of well run SHG linked to banks
The RBI initiatives has paved the way for banks to tie-up with companies such as
Telcom, IT and FMCG, who already have exposure and expertise in providing required
infrastructure support in reaching out to the under privileged at low cost. While
appointing individuals, banks should ensure that these individuals are permanent
residents of the area in which they propose to operate and also institute additional
safeguards to minimize agency risk.
Normally the operations of BC should be within 15 KMs of base branch located in

Rural/Semi-Urban/Urban areas and it is 5 KMs in case of Metro areas. However, the
distance criteria may be relaxed with prior approval from DCC/SLBC.
RBI has permitted Banks to collect reasonable service charges from the customer in a
transparent manner considering the profile of the clientele to whom banking services
are being delivered through the BC model. However, no fee shall be collected directly
by the BCs from the customers.
Under this the user is required to open account with a Bank and franchised to BC for
the purpose of extending approved services. Technology plays an important role to
establish link between the User, BC and Bank for seamless operations duly protecting
the interest of all the concerned. Many organized players are entering in to this area
and showing keen interest to make the model success by providing the desired
services to the Users in a most cost effective and convenient manner using innovative
technology applications.
In the absence of seamless integration, the financial transactions handled by BCs will
be updated at Bank’s server with a time lag of one or two days, which may give scope
for customer complaints on account of delayed credit or misuse of the funds by the
BCs. This aspect needs to be addressed properly to protect the interest of the
Customers as well as Bank. An institutionalized system should put in place for effective
implementation and monitoring of the model.
Banks have already commenced the process of selection of BCs, however, they are yet
to swing into action. The envisaged project definitely paves the way to create ample
employment opportunities and it provides an opportunity to the banks to improve
retail business. The ability of the banks in positioning the model and the agility of the
BCs in adoption of the approach will play key role in making the project a grand
success. Let us hope that the dream of the nation i.e. “financial independence”
comes true in the ensuing years through the innovative BC model with the active
participation of the Banks and the associated entities.
***
22

Automated Teller Machine (ATM)
Adoption of new delivery channels has become order of the day for all banks to survive
in the competitive environment to meet the emergent expectations of the customers
besides achieving the optimum utilization of resources. At present, providing
ATM/Debit cards to the customers is a default function by majority banks at the time
of opening of account itself irrespective the profile of the account holder, which has led
to steep rise in the card base. Further, the convenience coupled with cost effectiveness
has enabled the cardholders to use the card extensively for all their retail payments.
Of late, banks are paying focused attention on Branchless Banking through ATM
network since they are more customers friendly and cost effective compared to Branch
Banking. The large presence of ATMs with a card base of roughly 400 million across
the country is an evidence for the quick adaptability of the new payment systems by
the banks and cardholders. The number of ATMs is going to be outnumbering the
physical bank branches in the ensuing years. It is estimated that around 25% of retail
payments of the banks are being routed through ATM/Debit cards and it is expected to
grow further in the ensuing years.
Branch Network vis-à-vis ATM Network as on 31.03.2009
Number of Number of ATM as %

No Bank Group
Branches ATMs to Branches
1 Nationalized Banks 39376 15938 40.20
2 State Bank Group 16062 11339 29.00
3 Old Private Sector Banks 4673 2674 56.90
4 New Private Sector Banks 4204 12646 296.60
5 Foreign Banks 293 1054 357.30
Total 64608 43651 67.00
(Source: Report on Trend and Progress of Banking in India 2008-09)
During 2008-09, the total number of ATMs installed by the banks grew by 25.4 per
cent, with number of ATMs of SBI Group registering a sharp growth of 34.5 per cent.
While, the ATMs installed by new private sector banks and foreign banks were more
than 3 times of their respective branches, the ATM to branch ratio was much lower for
other bank groups. Of all the ATMs installed in the country at end-March 2009, new
private sector banks had the largest share in off-site ATMs, while nationalized banks
had the largest share in onsite ATMs
ATM is an electronic device, which acts as an independent banker without any human
intervention. ATM provides round the clock service throughout the year (24X7X365) to
the customers. It is a value-added service since customer can visit the ATM at his
convenience time to complete his transaction. Through ATMs, Bank can penetrate into
new areas without opening physical bank branches. It is most cost effective since the
investment and operational cost are low when compared to traditional Branch Banking.
All eligible individual account holders can apply for this facility. ATMs are extending the
following services:
¾ Cash Withdrawal and Balance Enquiry

¾ Cash/Cheque Deposit
¾ Bill Payments
¾ Sale of Paper Based Products (Train/Air tickets, wireless phone recharge cards,
financial products, etc.)
¾ Funds Transfer (Self & Third Party)
¾ Recharge Mobiles
23

Biometric Automatic Teller Machines (ATMs) are gaining popularity because of two
reasons viz., Prevention of PIN theft and to expand a bank's reach to the rural &
illiterate masses. The biometric ATM replaces personal identity number (PIN) with
thumb impression. The fingerprint scanner fitted in the machine only recognizes the
customer's thumb impression. These ATMs can be operated upon by the unlettered
rural folk on which petty banking transactions can be honored with near thumb
immersions with absolute elements of accuracy.
Recent Developments: Hitherto, banks used to levy charges for using their ATM
Network by other bank cardholders. In order to facilitate the cardholders RBI has
issued guidelines to all banks not to levy service charges on ATM transactions of
Savings Bank Cardholders. However, Other Bank Cardholders are allowed to withdraw
cash on our ATMs up to Rs.10000/- per transaction (maximum of 5 transactions in a
month for Savings Bank Accounts) free of charge w.e.f. 15.10.2009. However, this
facility is available only to SB customers. With this, the customer of a Bank has
become customer of all Banks, which has paved the way for Any Bank Banking. With
effect from 01.02.2011, the cardholder needs to enter password for each financial
transaction on ATM.
Complaint Resolution: The revised guidelines has led to increased volume on ATM
Network leading to deficiency in service on account of technology issues and the
resolution is taking undue long time, which is causing concern to the customers and
regulators. In the above backdrop, RBI issued the following directives to all banks:
¾ It is mandatory for the banks to reimburse the customers; the amount

wrongfully debited on account of failed ATM transactions within a maximum
period of 12 working days from the date of receipt of the customer complaint.
¾ For any failure to re-credit the customers account within 12 working days
from the date of receipt of the complaint, the bank shall pay compensation of
Rs.100/- per day, to the aggrieved customer. This compensation shall be
credited to the customer’s account automatically without any claim from the
customer, on the same day when the bank affords the credit for the failed ATM
transaction.
ATM Frauds - Preventive measures
¾ Change PIN as soon as receive it and there after at regular intervals. Never
disclose your PIN to anyone. Do not keep ATM Card and PIN together.
¾ Be aware of surroundings. Always shield your card, no matter how comfortable
with the place.
¾ Look for suspicious attachments. Criminals often capture information through
ATM skimming – using devices that steal magnetic strip information. The
skimmer will not obtain PIN numbers; however, to get that, fraudsters place
hidden cameras facing the ATM screen.
¾ Some ATMs allow deposit of checks and cash (envelope-based deposits). Make
sure they go through – if it gets jammed and it doesn‘t fully go into the
machine, the next person can walk up and take it out.
¾ Make sure that the card is collected before leaving the place (ATM / POS).
¾ Never provide information via e-mail. Phishers attempt to obtain information
about PIN, account number and personal information.
***
24

Mobile Banking - Opportunities and Challenges
The mobile-phone revolution that is transforming the world could also turn into a
banking revolution. Banks have been exploring the feasibility of using mobile phones
as an alternative channel of delivery of banking services. The swift growth in number
of Mobile users and wider coverage of mobile phone networks has made this channel
an important platform for extending banking services to customers. Today, the
number of Mobiles in India is 500 million and this number is expected to reach 600
million by next year.
SMS Alerts:
The SMS facility brings peace of mind to customers and opens doors to many more
technological possibilities and innovative services. In order to provide value added
services to the customers, banks are extending information related services (Push
Alerts) through SMS Alerts, which is enabling the customers to know the transactions
that are taking place in their respective accounts online. Similarly, customers also
request for the following services (Pull Alerts):
¾ Balance Enquiry / Last Five Transactions

¾ Cheque Book Request / Cheque payment status
¾ Statement Request / Bill Payment
¾ Demat - Free Balance Holding / Last Two Transactions
Mobile Banking:
When a customer pays cash to the shopkeeper to recharge his m-account, it is like
depositing cash in a virtual account. The customer can withdraw cash, too. For a fee,
the shopkeeper will transfer money from the customer's m-account to his own, and
then pay hard cash to the customer. This can be extended to the payment of bills.
Today, Government is allocating more funds to the poor, but not reaching the
deserved and being siphoned off by corrupt bureaucrats and contractors. Safe m-
accounts could ensure that only the intended beneficiaries get the money. Mobile
phones can create virtual accounts in virtual banks. Mobile phones transfer money
faster and cheaper than the postal system, using the shopkeeper network. At present,
Mobile Banking is providing the Bill payment and Funds Transfer facility besides
information services (balance enquiry, cheque status etc.,) to the customers. The
process associated with Mobile Payment mechanism is:
Service Provider: The Mobile Payment Application Service Provider provides the
necessary technical infrastructure (hardware and software) to facilitate mobile-
payments and acts as an intermediary between the financial institutions and mobile
network operators. There is the customer and the merchant who would like to use a
mobile-payment service.
Registration: Service Provider registers users who would like to avail of the m-
payment service. The users (customers/merchants) have to be registered with the
Mobile Application Service Provider prior to using the service. At the time of
registration the Mobile Application Service Provider collects the bank account details
(or credit card details) of the customer and merchant as well as their valid digital
certificates. The mobile phone numbers of the customer and the merchant are mapped
to their respective bank accounts and this mapping is maintained by the Mobile
Application Service Provider. The users are provided with a client m-payment
application (mobile wallet) that is either resident on their phones or else in the SIM
card.
25

Authentication: A mobile phone user communicates with a merchant and makes an
economic transaction (e.g., buying a ticket from an airline over the phone). The
merchant obtains the phone number of the customer and initiates the m-payment
transaction request stating the amount for which payment is required. The customer
confirms the request and authorizes payment. Service Provider receives the
authorization and verifies the authenticity of the customer.
Transaction: On receipt of authenticity of the customer, Service Provider debits the

customer account and credits the merchant account by interacting with the bank. Once
the electronic funds transfer is successful a confirmation message is sent to the
customer and the merchant advising them of the debit and credit respectively. The
Certifying Authority supplies digital certificates for the users in the system to provide
security. This model can be extended to handle the interaction between the Mobile
Application Service Provider and the financial system taking into account inter-bank
payments and settlement.
The recent guidelines issued by RBI on Mobile Banking are as under:
¾ Banks that wish to provide mobile banking services should seek a prior one-
time approval of the RBI by furnishing full details of the proposal. Only banks
that have implemented Core Banking Services will be allowed to provide the
services.
¾ All the transactions/services should be in Indian currency only. Cross-border
transfers through mobile banking are strictly prohibited and the operating
banks have to be based, licensed and supervised in India.
¾ Banks should offer mobile based banking service only to their own customers.
Prior registration of the customers would be necessary irrespective of the type
of service requested. For financial services one time registration should be done
through a signed document.
¾ Mobile banking customers are allowed to transfer funds of a maximum of
Rs.50000/- per day (which includes purchase of goods and services). Banks
may also put in place monthly transaction limits depending on the bank's own
risk perception of the customer.
¾ Banks may put in place end-to-end encryption of the mobile PIN number
(mPIN) for better security.
¾ Banks should file Suspected Transaction Report (STR) to Financial Intelligence
Unit-India (FID-IND) for mobile banking transactions, similar to normal banking
transactions.
Mobile banking is very advantageous compared to other delivery channels as it is easy

to use and affordable to customers besides providing real time information to
customers. Mobile Banking gives the banks an opportunity to expand their customer
base without incurring additional infrastructure costs. It would also help in financial
inclusion as it would provide a large number of un-banked people access to banking
services. Banks could save a huge amount of money on card issuance and merchant
acquiring with zero point of sale cost.
Mobile Banking is the hottest area of development in the banking sector and is
expected to replace the credit/debit card system in future. A recent survey done in the
Asia pacific countries show that 42 percent of the mobile customers use the basic
banking services, such as checking the account balance, on their mobile devices. The
increased phase of mobile usage is going to place our country on the top in the Asia
Pacific region in the ensuing years.
***
26

Internet Banking
The Indian Banking landscape has witnessed a sea change in the area of delivery of
services on account of technology initiatives during the last few years and this has
enabled the customers to complete majority of their banking transactions remotely
through alternate delivery channels. ATM proved one of the successful channel banking
and helped the customers to avail some of the banking facilities round the clock
throughout the year. Though, it is a value addition, still customers need to pay a visit
ATM, which involves sparing of scarce resources such as time and money. Today’s
discerning customers are looking beyond Branch and ATM and would like to attend
their banking requirements as per their convenience either through Home/Office or
while on travel.
The Internet, encompassing the World Wide Web (www), has reshaped the ways of
communication and information sharing and plays a major role in most people’s day-
to-day lives. With the increasing popularity of the internet, every business undertaking
is seeking ways to utilize this popular medium in an effort to keep up with the
changing technological preferences of their customers. Today consumers can do just
about anything online from grocery shopping to paying their bills through their
computer. The possibilities through the internet are seemingly endless and the banking
industry has left no stone unturned.
The impact of technology in India has altered the way of conducting business and
against this background it has become indispensable for Banks to upgrade their
technology. With the fully computerized environment and technology driven operations
there is a transformation from ledger-and-pass book banking to other banking delivery
channels like internet banking enabling the customers to have seamless and efficient
transaction access. Internet banking has revolutionized the financial sector and banks
have been able to reach out to a new generation of customers. Banks have broadened
their customer reach by unveiling their websites to disseminate information on the
various products and services being offered. Thus the technology revolution in Banks
witnessed a paradigm shift from the brick and mortar banking to anywhere banking in
the last decade.
Customers intending to avail this facility are required to furnish the mandatory details
such as Unique Customer Number (UCN), Date of Birth, Place of Birth and Account
Number/s to the branch where he is having account/s. On receipt of User ID and PIN,
account holder can have access to his accounts through Net. It is an additional service
at free of cost. Internet has emerged as an important medium for delivery of banking
products & services.
For the past few years, banks are focusing attention on Internet banking through
offering variety of services such as balance enquiries, to transfer of funds between
accounts and make requests for cheque books as well as opening of accounts, round
the clock.
Internet banking has become one of the best delivery channels for the customers since
it enables them to perform transactions, pay utility bills and enquire balances all the
days round the clock. It establishes strong relationship with a new customer and
expanding their business through the Net. The Metro and urban branches will be the
springboard for the internet banking to build their customer base besides retaining the
existing clientele. The transaction costs through internet banking are far less compared
to branch banking.
The main issue for most people is that of trust and confidence. Execution of any
financial transaction is viewed with uncertainty. The best way to overcome this
uneasiness is to print the transaction receipt or register for mobile alerts which confirm
27

the success of any transaction. There are certain risks attendants upon using the
Internet while executing financial transactions. Among these risks are the potential for
identity theft, concerns that Internet banking may be depersonalized.
While online banking and e-commerce is very safe, as a general rule one should be
careful about passing personal financial information over the Internet. The
following recommendations suggested by Anti-Phishing Working Group (USA) will help
in averting Phishing scams.
¾ Normally, legitimate companies do not ask for critical/sensitive information via

email. Phisher emails are typically NOT personalized.
¾ Do not pass personal financial information such as usernames, passwords,
credit card numbers, social security numbers, date of birth, etc., unless the
email is digitally signed.
¾ Contact the organization mentioned in the email using a telephone number you
know to be genuine, or open a new Internet browser session and type in the
company’s correct Web address.
¾ Do not cut and paste the link from the message into your Internet browser —
phishers can make links look like they go to one place, but that actually send
you to a different site.
¾ Use anti-virus/anti-spyware software, as well as a firewall, and update them all
regularly.
¾ Phishers are now able to 'spoof,' or forge both the "https://" that you normally
see when you're on a secure Web server and a legitimate-looking address. You
may even see both in the link of a scam email.
¾ Regularly log into your online accounts and check bank, credit and debit card
statements to ensure that all transactions are legitimate. Report deviations, if
any, to the bank or card issuers immediately.
Tips for safe and secure Internet Banking:
¾ Internet Banking should be accessed from Personal or office computers only

Cyber cafes should be avoided.
¾ Never reply to emails asking for password or pin.
¾ Ensure you are connected to a secure site by typing the URL in the address bar.
¾ Verify the domain name displayed on the site to avoid spoof websites.
¾ Identity theft is a real and growing problem today. Be protective of your
personal account information whenever doing transactions online.
¾ Routinely check the computer for spy ware and viruses and update the anti-
virus software.
¾ Do not reveal or share your banking information or online banking/payment
card user-ids and passwords to any third party.
¾ Verify that the banking portal has high-end encryption software in place.
In true Internet banking, any inquiry or transaction is processed online without any
reference to the branch at any time. Providing Internet banking is increasingly
becoming a "need to have" than a "nice to have" service in the present day
banking.
28

Banking on Cards
India has been witnessing a phenomenal growth in use of cards (Debit and Credit
cards) and playing an important medium of payment in the recent years.
Credit cards:
The concept of credit card was used in 1950 with the launch of charge cards in USA by
Diners Club and American Express. Credit card became more popular with use of
magnetic strip in 1970. The first Credit Card was issued in 1981 and Gold Card in 1986
by VISA. International Credit Card was issued by Andhra Bank in 1987 through the
Visa program with special permission from RBI. The credit cards are shape and size, as
specified by the ISO 7810 standard.
Credit cardholder need not carry cash and purchase goods and services at any
approved Merchant Establishments/Point of sale Terminals by tendering the card duly
signing the charge slip. Further, cardholders can make online purchases through
internet using the card and PIN. Added to this, cardholder can withdraw cash at any
ATM across the globe. However, cash advance attracts charge i.e. transaction fee as
well as service fee/interest charge. Parties involved in credit card activity are as under:
Cardholder: The person who is holding a credit card is called a cardholder; he can use
the card to make a purchase as a consumer.
Card-issuing Bank: The financial institution or other organization that issues the
credit card to the cardholder (customer) is called as card-issuing bank.
Merchant: The individual or business, who is accepting credit card payments for
products or services sold to the card holder, is called as merchant.
Acquiring Bank: The financial institution accepting payment for the products or
services on behalf of the merchant is known as acquiring bank.
Affinity Partner: Some institutions lend their names to an issuer to attract customers
that have a strong relationship with that institution, and get paid a fee or a percentage
of the balance for each card issued using their name. Examples of typical affinity
partners are sports teams, universities, charities, professional organizations, and
major retailers.
Benefits associated with Credit Cards:
¾ Cardholder can purchase goods/services on credit.

¾ Online purchases are possible through credit cards.
¾ Facility to pay the balance in installments.
¾ Offer additional benefits such as insurance cover on purchases, cash back, air
miles and discounts on holidays etc.
Associated Risks:
¾ Cardholder become an impulsive buyer and tends to overspend which may lead
the cardholder into Debt trap.
¾ Credit cards are a relatively expensive way of obtaining credit since the charges
levied are much higher than normal lending.
¾ Lost or stolen cards may give scope for misuse by the fraudsters.
¾ Remote usage of cards may invite risk as the card details may fall into the
wrong hands resulting in fraudulent purchases on the card.
The explosion of cards in the market, some times, confuses the existing / prospective
cardholders due to ambiguous clauses. Cardholders are to be very cautious with
regard selection of the card and judicious while using various services through card.
29

Credit Card Industry - Performance:
Credit card industry has experienced impressive growth in terms of issuance of cards
till 2005. However, the growth rate is subdued in the subsequent years, which is
evident from the following figures:
Year Cards (lakhs) Turnover (crore)

2005-06 173.27 33886.47
2006-07 231.23 41361.31
2007-08 275.47 57984.73
2008-09 246.99 65355.80
2009-10 182.83 62881.83
(Source: RBI Monthly Bulletin – July 2010)
However, despite stagnation in card base, the turnover on credit cards is increased
from Rs.33886 crore in 2006 to Rs.62882 crore in 2010, which indicates the
potentiality of the market.
Issues:
¾ India is primarily a debt-averse culture and consider credit card as debt trap.
The unawareness of the features of the cards and non availability of Point of
Sale Terminals in non metro cities are the contributing reasons for slow growth
of credit cards. Majority cardholders are not using the cards but holding the
cards as status symbol.
¾ The burgeoning rise of debit card base is also one of the reasons for slow
growth of credit cards in India.
¾ Annual credit loss is estimated around Rs.3420/- per card and this is causing
increased NPAs and now stood at over 20%. The incidence of high NPAs is
forcing the banks to go slow in issuance of credit cards.
¾ Cross-selling by the branches is one of the best and cost effective options
available to banks to improve card base targeting the existing deposit accounts
but in reality branches are not keen to market cards since they are otherwise
busy with normal business activities.
¾ The economic slowdown is also another contributing factor for slow growth of
credit card business in India.
Debit Cards
Debit cards known as check cards look like Credit cards or ATM cards. It operates like
cash or a personal check. Debit cards are different from credit cards. Credit card is a
way to "Pay Later" whereas debit card is a way to "Pay Now." In case of debit card,
bank account of the customer will be debited immediately on completion of
transaction. Debit cards are accepted at many locations, including retail stores, petrol
pumps, and restaurants. Debit Card industry has witnessed phenomenal growth rate in
India in the recent years and today every alternate bank customer is holding a card.
Year Number (lakh) Turnover (crore)

2005-06 497.63 5897.14
2006-07 749.76 8171.63
2007-08 1024.37 12521.22
2008-09 1374.31 18547.10
2009-10 1819.72 26418.11
(Source: RBI Monthly Bulletin – July 2010)
The liberalized norms coupled with ease of usage have led to increase debit card base
over the years. Of late, banks are consciously driving the customers to alternate
30

delivery channels by issuing debit cards on the day of opening of the account itself to
reduce the work load and to enable them to pay focused attention on core banking
activities. It is a win-win situation to cardholders as well as Banks.
Card usage – Precautions:
¾ Cardholders are advised not pass the PIN to others and Keep the same
confidential to avert misuse of cards by the fraudsters.
¾ Advisable to avoid birthday, phone number, vehicle number etc., as PIN to
ward off abuse of card.
¾ Loss/stolen of card, if any to be reported to the issuing Bank/Institution
immediately.
¾ Sign on the signature panel on the reverse of the Card immediately with a non-
erasable ball-point pen (preferably in black ink).
¾ Avoid bending the Card, exposure to electronic devices and gadgets and direct
exposure to sunlight.
¾ Be cautious about disclosing card number over phone.
¾ Do not pass the card number, PIN, Password and CVC number.
¾ Do not sign a blank charge or debit slip.
¾ Cut the card number before disposing of them.
¾ Verify account statement regularly and report discrepancies, if any,
immediately to the bank.
¾ Keep the details of the card and the telephone numbers of the bank for
immediate report of lost or stolen cards.
Smart Cards, which are known as Pre-paid/Value added cards, are gaining popularity
since last few years. These cards have magnetic strip in which value is stored. On use
of card, funds are directly debited from the card. These cards resemble credit and
debit cards in appearance and allow users to load any amount up to Rs.50000/- and
can be used at any ATM/Point of Sale Terminal. Various types of smart Cards are in
circulation such as:
a) Re-loadable Cards - The value is replenished once it is used.

b) Disposable Cards are discarded once the value is used.
c) Closed Cards can be used for a specific purpose (Phone Cards).
d) Open Cards can be used for several issuers.
Reloadable cards are most popular among “under-banked” individuals, or those who
tend not to possess conventional bank accounts. Greater pricing transparency and the
potential to use prepaid cards as a budgeting tool will continue to drive its popularity
especially in these fiscally tough times as cardholders would like to track and limit their
spending.
Smart Card is still at a nascent stage in India with a card base of 30 lakhs. The leading
players in this segment are ICICI Bank, HDFC Bank, Axis Bank and SBI. Emerging
features such as a linkage to savings accounts, online bill payment and lines of credit
and text alerts on the mobile phone are likely to draw further attention from
consumers and prospective bank issuers alike.
It is estimated that smart card has a potential of 93 billion market in India, once the
government decides to route cash transactions through prepaid cards. However, the
revenue sharing is a cause of concern to the issuing banks since the majority of
income is going to intermediaries. Hope the initiatives of the regulator and banks will
definitely paves the way to move to cashless society in the ensuing years.
31

Payment Systems – RBI Initiatives
The Reserve Bank of India has initiated several reform measures to improve safety
and efficiency in the payment modes. To achieve the desired results, RBI adopted two-
pronged strategy to popularizing new payment initiatives such as ECS, NEFT, RTGS,
Mobile payments, Card payments including Pre-paid cards etc., besides strengthening
the existing paper based mechanism to reduce delays in collection through
introduction of Speed Clearing and Cheque Truncation System. Last one decade
witnessed spurt in electronic payments due to increased adoption of technology and
regulatory guidelines. The salient features of the various new payment products are
furnished here under:
Electronic Clearing System (ECS):
The introduction and increased adoption of ECS - Credit i.e. Single Debit - Multiple
credits, helped large corporate bodies to pay their dividend, interest and refunds
electronically on the due date, which is very cost effective to corporates and its
customers. Similarly, the utility bodies are now in a position to collect their bills
through ECS Debit (Multiple Debits – Single Credit) right on the due date. The entire
process including passing the credits to the beneficiaries’ accounts take only one day,
which is convenient and cost effective to both banks and customers.
Real Time Gross settlement (RTGS):
RBI launched RTGS for transfer of funds across the banks (Rs.100000/- & above) on
the same day, which has added a new dimension to the payment system. It offers a
powerful mechanism for limiting settlement and systemic risks in the inter-bank
settlement process. It enables in expediting the settlement, control and governance
mechanism in the banking system. RTGS enabled branches can undertake transfer of
funds across the Banks/Branches within India. Funds will be transferred electronically
and credited to the beneficiary accounts instantaneously. It saves lot of time and
paper work. It is most cost effective since the charges are very low i.e. Rs.25/- &
Rs.50/- per transaction for below Rs.5 lakhs and for Rs.5 lakhs and above respectively.
The timings to undertake RTGS at branches are as under:
Days Customer Transactions Inter-bank Transactions

Monday to Friday 9:00 hours to 16:30 hours 9:00 hours to 18:00 hours
Saturday 9:00 hours to 13:30 hours 9:00 hours to 15:00 hours
Our Bank introduced the same product with a brand name AB Real Time. (Cir.311 Ref
51/18 dated 23.12.09)
National Electronic Funds Transfer (NEFT):
In order to extend the benefit of electronic funds transfer to the retail customers, RBI
introduced NEFT scheme. Under this, funds can be transferred across the banks in
batch mode (hourly) and the amount will be credited to the beneficiary account on the
same day. There is no cap on minimum and maximum amount for transfer. The
minimum charges stipulated is Rs.5/- (up to Rs.1 lakh) and maximum charge is
Rs.25/- irrespective of the amount of remittance. NEFT is currently available from 9
AM to 7 PM on week days and from 9 am to 1 PM on Saturdays. Our bank launched the
same product with title AB Xpress. For smooth transfer of funds through RTGS/NEFT,
the customer is required to enter correct IFSC code of the bank branch to where the
funds are to be remitted and the account number of the beneficiary. (Cir.no.278 Ref
55/22 dated 02.11.2010)
32

Though the thrust has been paid to move to the safer and more efficient electronic
modes of payment such as ECS, NEFT, RTGS etc., it is necessary to initiate measures
to improve the efficiency in the existing paper based modes of payments since
substantial volume of transactions are still taking place through clearing. Nevertheless,
the introduction of MICR technology in cheque processing enabled the banks to
improve efficiency in handling the volume as well as associated reconciliation related
issues to a grater extent. Further, this has facilitated faster settlement and reduction
in errors and reconciliation. However, the fact remains that beyond a point the MICR
technology could not speed up the collection process on account of logistics issues
involved i.e. physical movement of cheques from the collecting bank branch to the
drawee bank branch. Therefore, banks are unable to match the expectations of the
customers on account of operational constraints such as delay in movement of
instruments, processing time, reconciliation of inter bank accounts, clearing related
frauds and increased cost of clearing operations.
In the above backdrop, RBI has initiated the following two important measures viz.,
Speed Clearing and Cheque Truncation System for further improvement.
Speed Clearing:
Banks as part of their normal banking operations undertake collection of cheques

deposited by their customers drawn on local banks as well as on banks located at
other centers. The cheques drawn on local banks will be presented in clearing and the
outstation cheques will be sent to other centers for collection. Cheque clearing system
has vastly improved. Banks are using clearing house for collection of local cheques
which will be credited to the customer account within 1 or 2 days. Though, the time for
collection with regard to outstation cheques has come down drastically compared to
earlier, still the collection process is taking around one to three weeks time depending
on the location since cheques need to move physically from presentation centre to
drawee centre.
In order to reduce the collection time, RBI has introduced Speed Clearing where in
cheques/drafts drawn on outstation are treated on par with local cheques and
presented in the local clearing provided the presentment location is MICR centre and
the destination bank branch is CBS enabled one. However, Government cheques are
not eligible for collection under Speed Clearing. Drawee bank debits the account online
without movement of cheque and sends the proceeds to the collecting bank. Under
Speed Clearing, it would be realised on T+1 or 2 basis viz. within 48 hours. Further
customers need not incur any service charge for collection of outstation cheques of
value up to Rs.1 lakh in Speed Clearing otherwise they may have to incur if such
cheque is collected under collection basis. However, presenting branches are permitted
to levy Rs.150/- per cheque (inclusive of all charges other than Service Tax) where the
value is above Rs.1 lakh. Obtention of the status of bank branch (CBS enabled or not)
and the correct account number (preferably new number - in the range of 10 to 15
digits) of the drawer of the cheque is the prerequisites for the collecting banker to
present the cheques in Speed Clearing.
Cheque Truncation System (CTS):
RBI introduced CTS at New Delhi (National Capital Region) in the year 2008. Under
CTS, electronic image of cheque is transmitted through a secured route from
presenting bank to clearing house and clearing house to paying bank instead of
moving paper cheque. The electronic images will be added a digital signature of
presenting bank for the purpose of ensuring uniqueness of images. In case of return of
cheque in clearing, payee bank issue a copy of the image for represent, this legally
recognized replacement of original cheque is called Image Replacement Document
(IRD). The prerequisite for CTS is that the participating banker should be a member of
33

the Indian Financial Network (INFINET). The following benefits are envisaged to the
customers and participating banks.
¾ Speed up the collection of cheques and thereby enhances customer service.

¾ Shorten the clearing cycle and minimizes the cost of collection of cheques.
¾ More secure since there is no movement of instruments which eliminates the
scope of presentment of lost instruments thereby averts the element of fraud
risk in clearing operations.
¾ Enable the banks to have faster reconciliation of inter/intra bank accounts.
¾ Saves considerable man-hours to the banks since the captured images move
online and no data entry is required at branches/process centers.
Thus, CTS enabled the banks to improve operational efficiency by enhancing the speed
of clearing cycle in most cost effective manner without compromising the security
aspects of all the concerned.
For smooth implementation of the system, the instruments presented should be

written properly preferably with dark color ink without any alternations. Instruments
with alterations cheque will not accept in CTS. Further, branches should ensure that
Rubber stamp used should not overshadow important material portions like, Date,
payee name, amount, signature, cheque number, MICR field etc., for proper capture of
image of the instrument. The next roll-out is proposed at Chennai during the current
year and the remaining centers will be covered by 2013.
In order to accomplish the desired goal, RBI directed banks to ensure implementation
of the following:
¾ All large-value and time-critical payments shall be processed through electronic

mode only.
¾ All bank branches shall be enabled with IFSC and MICR codes to provide reach
of electronic products like RTGS, NEFT and NECS to the customers of all banks
including Regional Rural Banks.
¾ Advised to set up clearing house at all centres where there is presence of more
than 5 banks.
¾ The threshold limit for cheques eligible to be presented in High Value Clearing
has been enhanced from the present Rs.1 lakh to Rs.10 lakh and the high
value clearing has been discontinued at a couple of locations since the cheques
can be presented in Speed Clearing.
¾ The Centralised Funds Management System (CFMS) shall be enabled to
facilitate funds transfer between member banks as well.
¾ Appointment of Business Correspondents (BCs) to expand banking services to
the rural populace.
The Payment and Settlement Systems Act, 2007 has cast the responsibility of
regulation and supervision of payment systems on the Banks. The Act has come into
effect from August 12, 2008 and the process of authorizing payment systems and
issuing approvals to payment system products/operators has commenced.
***
34

Unit Linked Insurance Plans (ULIP)
Unit linked insurance plan (ULIP) is life insurance solution that provides for the
benefits of risk protection and flexibility in investment. The invested amount of the
premiums after deducting for all the charges and premium for risk cover under all
policies in a particular fund as chosen by the policy holders are pooled together to
form a Unit fund. The investment is denoted as units and is represented by the value
that it has attained called as Net Asset Value (NAV). The policy value at any time
varies according to the value of the underlying assets at the time. However, the
investment risk is generally borne by the investor. ULIP investors have the option of
investing across various schemes viz., Diversified Equity Funds, Balanced Funds, Debt
Funds etc., either in a lump sum (single premium) or in installments (Annual, Half-
yearly, quarterly or monthly). Investors also have the flexibility to alter the premium
(upward or downward) amounts as well as shift their investments across various plans
during the tenure of the policy. The new guidelines on ULIPs (w.e.f.01.09.2010) are
¾ The minimum lock-in term is five years for surrender as against earlier 3
years. Partial withdrawal is allowed only after fifth policy anniversary for all unit
linked products except pension/annuity products. However, in case of
pension/annuity policies, the insured will have the option to commute up to a
maximum of one-third of the accumulated value as lump sum at the time of
maturity.
¾ For policies with less than 10 years tenor, there is a cap on charges i.e. 3% of
which fund management charge should not more than 1.5%. With regard to
policies of above 10 years, the cap on maximum charges and fund
management charges are 2.25% and 1.25% respectively.
¾ The insurers are required to distribute the over all charges evenly across lock-
in-period for all policies other than single premium products.
¾ Surrender charges should not be more than 15% of fund value.
¾ The company should hold lapsed policies for a period of three years in a ‘lapsed
fund’ that earns interest at current savings deposit rate.
¾ All ULIP Pension or Annuity products shall offer a minimum guaranteed return
of 4.5% per annum or as specified by IRDA from time to time, on the maturity
date. This guaranteed return is applicable on the maturity date, for policies
where all due premiums are paid.
¾ No loan shall be granted under Unit Linked Insurance Products.
The advantage of unit-linked plans is that they are simple, clear and easy to
understand. Being transparent the policyholder gets the entire upside on the
performance of his fund. Besides all the advantages they offer to the customers, unit-
linked plans also lead to an efficient utilization of capital. Unit-linked products are
exempted from tax and they provide life insurance. Investors welcome these products
as they provide risk coverage as well as capital appreciation.
***
35

Micro, Small and Medium Enterprises (MSME)
The Small enterprises contribute nearly 40% of the country’s industrial output and
offer the largest employment after agriculture. Therefore, this sector presents an
opportunity to the country to harness its local competitive advantages for achieving
global dominance. In recognition of these aspects, Government of India enacted the
MSMED Act in the year 2006. In accordance with the provisions of the act, the
activities of MSME are broadly classified into Manufacturing Enterprises and Service
Enterprises.
Manufacturing Enterprises are those which are engaged in manufacturing or

production of goods. These are defined in terms of investment in Plant & Machinery.
Service Enterprises are the enterprises engaged in providing or rendering of

services. These are defined in terms of investment in Equipment.
The modified definitions of Micro, Small and Medium Enterprises are as under:
(` in lakhs)
Investment in Plant & Machinery / Equipment
No Category
Manufacturing Service
1 Micro Enterprise Up to 25 Up to 10
2 Small Enterprise above 25 & up to 500 above 10 & up to 200
3 Medium Enterprise above 500 & up to 1000 above 200 & up to 500
Small Enterprises: It includes all loans given to micro and small (manufacturing)
enterprises engaged in manufacture / production / processing / preservation of goods,
and micro and small (service) enterprises engaged in providing or rendering of
services which include small road & water transport operators, small business,
Professional & Self-employed persons and other service enterprises. Indirect finance to
small enterprises shall include finance to any person providing inputs to or marketing
the output of artisans, village and cottage industries, handlooms and co-operatives of
producers in this sector.
As per recent RBI guidelines - Loans granted to private retail traders with credit limits
not exceeding `20 lakh and loans to retail traders dealing in essential commodities
(fair price shops) and consumer co-operative stores without any ceiling in credit limit
are eligible for classification under Micro (service) or small (service) depending on
investment in equipment criteria as mentioned above.
Medium Enterprises: Enterprises engaged in manufacture / production /

preservation of goods and whose investment in plant and machinery should be as per
above said guidelines. Bank`s lending to medium enterprises will not be included for
the purpose of reckoning under priority sector.
Interest rates are charged as per rates prevailing at the time and are subject to
change from time to Time. Rate of Interest is determined as per credit rating system
for loans above `10 lakhs as per Internal Credit Risk Assessment Model.
No collateral security or third party guarantee is insisted for loan up to Rs Five lakhs
and for Tiny Sector up to Rs Twenty five lakhs based on the good track record and
financial position of the borrowing unit.
Banks may fix self set target for growth in advances to SME Sector in order to achieve
a minimum 20% year on year growth in credit to SMEs with the objective to double
the flow of credit to the SME sector within a period of 5 years. In order to ensure that
36

credit is available to all segments of the Small Enterprises sector, banks should ensure
that -
¾ 40% of the total advances to small enterprises sector should go to micro

(manufacturing) enterprises having investment in plant and machinery upto
Rs.5 Lakh and micro (service) enterprises having investment in equipment upto
Rs.2 Lakh.
¾ 20% of the total advances to small enterprises sector should go to micro

(manufacturing) enterprises with investment in plant and machinery above Rs.5
Lakh and up to Rs.25 lakh, and micro (service) enterprises with investment in
equipment above Rs.2 Lakh and up to Rs.10 Lakh. Thus 60% of MSE advances
should go to the Micro Enterprises.
In terms of the recommendations of Prime Minister’s Task Force on MSMEs headed by

Sri. T K A Nair, banks are advised as under:
¾ To achieve a 20 percent year-on-year growth in credit to Micro and Small

enterprises to ensure enhanced credit flow.
¾ The allocation of 60% of MSE advances to the Micro Enterprises is to be
achieved in stages viz., 50% in the year 2010-11, 55% in the year 2011-12
and 60% in the year 2012-13.
¾ To achieve a 10% annual growth in number of Micro Enterprise accounts.
¾ Banks are required to pay focused attention in opening of more MSE branch
offices at different MSE clusters and each lead bank of a district may adopt
atleast one MSE cluster.
Banks are mandated not to accept collateral security in case of loans up to `10 lakhs
extended to units in the Micro and Small Enterprises sector and all such loans are to be
covered under Credit Guarantee Scheme. (Cir.no.054 Ref 52/11 dated 31.05.2010)
Communication of the bank's decision regarding the credit assistance is done

promptly. No loan application is rejected with out approval of the next higher
authority. The applications received for sanction of loan up to Rs.25000/- & up to Rs.5
lakhs shall be disposed within 2 weeks & 4 weeks respectively. With regard to
applications of above Rs.5 lakhs should be disposed within 8 to 9 weeks.
MSME - Charter
¾ Simplified and customer friendly loan applications with checklist for speedy
sanctions. Quick disposal of loan applications from the date of receipt of
application complete in all respects.
¾ Computation of working capital limits up to Rs.600 lakhs based on Nayak
Committee Norms @ 20% of anticipated turnover.
¾ Adherence to Fair practices code.
¾ Women entrepreneurs will be given further interest rebate of 0.50%
irrespective of credit rating and size of the unit.
¾ Collateral security should not be insisted for advances up to Rs.10 lakhs. No
collateral for advances over Rs.10 lakhs and up to Rs.25 lakhs based on
good track record and financial position of the unit.
¾ Composite loan up to Rs.100 lakhs for term loan/working capital under
single window concept.
¾ Loans under 15% Credit Linked Capital Subsidy Scheme (CLCSS) to
specified industries in SSI for technology up-gradation.
¾ Units engaged in food processing are eligible for subsidy 25% of unit cost
with maximum of Rs.50 lakhs and units are located at difficult areas (J&K,
HP, Sikkim, Andaman, NE States and tribal development project areas) are
eligible for 33.33% with maximum of Rs.75 lakhs.
37

Credit Guarantee Fund Scheme for
Micro and Small Enterprises
Salient features: It provides guarantee coverage in respect of credit facilities

sanctioned to the accounts up to `100 lakhs to new or existing Micro and Small
enterprises without any collateral security and/or third party guarantees. All Micro
enterprises up to ` 10 lakhs (except) Retail Trade are to be covered under this scheme.
Eligible Accounts: All MSE units classified under Manufacturing, RTO, Business
Enterprises, and Professional & Self Employed are eligible for coverage.
i) Micro Enterprises: Manufacturing units with investment in Plant & machinery up to

Rs.25 lakhs and servicing units with investment in equipment up to Rs.10 lakhs are
eligible for the coverage.
ii) Small Enterprises: Manufacturing units with investment in Plant & machinery
above `25 lakhs and up to `5 crore and servicing units with investment in equipment
above `10 lakhs and up to Rs.2 crore are covered under this scheme.
The trust shall provide guarantee as under:
Maximum extent of guarantee where credit facility is

Category Up to `5 lakhs Above `5 & up to Above `50 to `100
`50 lakhs lakhs
85% of amount `37.50 lakhs plus 50%
default or 75% of amount of amount in default
Micro Enterprises subject to default or subject above `50 lakhs subject
maximum of to maximum of to overall ceiling of
`4.25 lakhs `37.50 lakhs `62.50 lakhs
Women Enterpr. / `40 lakhs plus 50% of

Units located in amount in default above
NE region (Other 80% of the amount in default `50 lakhs subject to
than credit facility subject to maximum of `40 lakhs overall ceiling of `65
up to `5 lakh to lakhs.
micro enterprises)
`37.50 lakhs plus 50%
75% of the amount in default of amount in default
Others subject to maximum of Rs.37.50 above `50 lakhs subject
lakhs to overall ceiling of
`62.50 lakhs
One time Guarantee Fees: For credit facility up to `5.00 lakhs - Guarantee fee 1%
and for credit facility above `5.00 lakhs - Guarantee fee 1.50%. However, in case of
credit facility up to ` 50 lakhs to the units located in North Eastern Region, the
Guarantee fee is 0.75% p.a.
Annual service fee payable for credit facility up to Rs.5 lakhs is 0.50% p.a. and for
credit facility above Rs.5 lakhs is 0.75% p.a. The fee is to be calculated on sanctioned
limit as on 31st March of preceding year and the fee collected is to be paid on or before
31st May every year.
Period of guarantee cover: Term loan - Sanctioned period of repayment; Working

Capital – Maximum 5 years. (Cir. no.360 Ref 52/07 dated 10.01.2011)
38

Prime Minister’s Employment Generation Programme (PMEGP)
Government of India introduced a new credit linked subsidy programme called Prime
Minister’s Employment Generation Programme (PMEGP) by merging the existing two
schemes viz., Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment
Generation Programme (REGP) in the month of October 2008. The objectives of the
scheme are to:
¾ Generate employment opportunities in rural as well as urban areas of the

country through setting up of new self-employment ventures / projects /
micro enterprises.
¾ Encourage traditional artisans and provide opportunities to rural/urban
unemployed youth at their place to arrest migration of rural youth to urban
areas.
¾ Increase the growth rate of rural and urban employment.
Eligibility criteria:
Category Requirement
Eligible Individuals, Self Help Groups, Societies, Production
Borrowers cooperative societies and Charitable Trusts.
Age Any individual, above 18 years of age.
Not required. However, minimum VIII standard pass for
Educational setting up of unit, whose project cost is above 10 lakhs & Rs.5
Qualifications lakhs for manufacturing & business/service sectors
respectively.
Purpose Setting up of new units only. Existing / old units are not
eligible.
The maximum cost is Rs.25 lakhs for manufacturing &
business and Rs.10 lakhs for service sectors. Project cost
includes capital expenditure and one cycle of working capita.
Cost of the land should not be included in the project cost.
Project Cost Projects without capital expenditure are not eligible for
financing under this scheme. However, projects costing more
than Rs.5 lakhs, which do not require working capital, need
clearance from controlling offices of the Bank’s branch.
Borrower margin should be 10% & 5% of project cost for
Bank finance / General and Special categories respectively.
Margin
Security No collateral security will be insisted upon for the projects
involving loan upto Rs.5 lakhs.
Rate of interest As applicable depending upon the activity.
Repayment 3 to 7 years based on the project / activity.
Certified copy of the Caste / Community certificate in case of
individuals and certified copies of bye-laws in case institutions.
Others Borrower has to submit EDP training (minimum two weeks)
certificate issued by KVIC/KVIB/DIC before release of loan.
Only one person from one family is eligible for setting up of
projects under this scheme. The “family” includes self and
spouse.
Negative List: Projects connected with Meat processing, sale of intoxicant items
(Beedi / Pan / Cigar / Cigarette / liquor / toddy), cultivation of crops / plantations /
sericulture / horticulture / floriculture, Animal Husbandry (pisiculture / piggery /
poultry), Harvester Machines, manufacturing of polythene carry bags of less than 20
microns and Rural Transport are not eligible for finance under this scheme.
39

Subsidy: Borrowers are entitled for the following rates of subsidy on project cost:
Category Urban Rural*
General 15% 25%
Special (SC/ST/OBC/Minorities etc) 25% 35%
*Note: Any area classified as village as per revenue record irrespective of population
will be treated as Rural. Even the towns, where the population does not exceed 20000
will be treated as village and treated as Rural for the purpose of Margin and Subsidy.
Subsidy amount received is to be kept in Term Deposit with no interest. The deposit
amount can be adjusted to the loan account after 3 years from the date of first
disbursement of the loan. However, the subsidy amount can be adjusted before 3
years where the advance goes bad. Projects financed jointly (two different banks /
financial institutions) are not eligible for subsidy under this scheme.
The scheme will be implemented by Khadi and Village Industries Commission (KVIC),
Nodal agency at the national level. At the State level, the scheme will be implemented
through state directories of KVIC, State Khadi and Village Industrial Boards (KVIBs)
and DICs in rural areas. With regard to urban areas, the scheme will be implemented
by DICs only. Project proposals will be invited from potential beneficiaries at district
level through electronic and print media. A Task Force, consisting of District Collector,
LBO, representatives of KVIC/KVIB/DIC and lending institutions will scrutinize the
applications received and select the candidates. Task Force meets once in two months.
The selected candidates will be sent to the lending institutions. However, the
applications received directly by the banks will be referred to the Task Force for its
consideration.
Government will provide funds (subsidy amount) under PMEGP to the Nodal
implementing agency i.e. KVIC, which in turn place the funds with the respective
implementing banks at state level. The financing branch of the bank is required to
submit subsidy claim to the Nodal Branch at the earliest possible time. Physical
verification of the units within 24 months of establishment is to be done by KVIC
through the agencies of state government or outsourcing to professional institutes.
All the units financed under this scheme are to be reported under Micro, Small &
Medium Enterprises (MSME).
(Reference - RBI/2008-09/211, RPCD PLNFS.BC.No.41/09.04.01/2008-09 dated
10.10.08 and Our Circular no.296 Ref 28/10 dated 24.11.2008)
***
40

Swarna Jayanti Shahari Rozgar Yojana (SJSRY): Government of India have
launched a rationalized poverty alleviation scheme SJSRY replacing three existing
schemes viz., Nehru Rozgar Yojana (NRY), Urban Basic Services for the Poor (UBSP)
and Prime Minister’s Integrated Urban Poverty Eradication Program (PMIUPEP).
Further, SJSRY consists of two special schemes viz., Urban Self Employment
Programme (USEP) and Urban Wage Employment Programme (UWEP). The objective
of the scheme is to provide gainful employment to the urban poor (living below the
urban poverty line) unemployed or under employed through setting-up of self-
employment ventures or provision of wage employment. The scheme is applicable to
all urban towns including urban local bodies where the population of the town is below
5 lakhs as per 1991 census. The eligibility criteria are under-employed and
unemployed urban youth whose annual income is below poverty line (on the basis of
per capita income not by annual family income) and who have got education up to 9th
standard. However, there is no minimum and maximum age limit for the candidates
under this scheme. In case of individuals the project cost is `50000/-. However, higher
amount can be considered where two or more eligible persons join together provided
the share of each person in the project cost is `50000/- or less. The subsidy amount is
to be kept as back-end with lock-in period of 2 years. The borrower/s has to bring in
5% of the project cost as margin money. The units are eligible for 15% of project cost
as subsidy subject to a ceiling of `7500/- per beneficiary. No collateral
security/guarantee is required up to `3 lakhs. Repayment schedule ranges from 3 to 7
years after initial moratorium of 6 to 18 months. All loans sanctioned under this
scheme are treated as priority sector advances and 30% of loans sanctioned should go
to women beneficiaries. 3% of loans shall be made for the disabled persons.
Development of Women and Children in Urban Areas (DWCUA): It is meant for

urban poor women who decide to set up self-employment ventures in group. The
group shall consist of minimum of 10. The loan component is Rs.2.5 lakhs and the
subsidy component is 50% of project cost or Rs.1.25 lakhs whichever is less. 5% of
the project cost will be contributed as margin money by the group. (RBI/2009-10/31
dated 01.07.09 – Our circular no.127 Ref 28/02 dated 10.08.09)
Self Employment Scheme For Rehabilitation Of Manual Scavengers (SRMS):

The objective of the scheme is to assist the remaining scavengers for rehabilitation,
which are yet to be assisted, in a time bound manner by September 2009.
Scavengers and their dependents, irrespective of their income, who are yet to be
provided assistance for rehabilitation, under any scheme of Government of India/State
Governments will be eligible for assistance. Each individual scavenger and his/her
children who are of 18 years of age and above, who are not employed (other than as
scavengers) will be identified and rehabilitated. The scheme provides for projects
costing upto Rs.5.00 lakh. The loan amount will be the remaining portion of the
project cost, after deducting the admissible capital subsidy. No margin money/
promoter’s contribution is required to be provided under the scheme. Loans up to
Rs.25000/- attracts interest rate of 5% (4% for women beneficiaries) and it is 6% for
loans of above Rs.25000/-. The period of repayment loan will be 3 years for projects
upto Rs.25000 and 5 years for projects above Rs.25000/-. The moratorium period to
start the repayment of loan will be six months. For projects costing up to Rs.25000/-
entitled 50% subsidy of project cost and for other projects, it is 25% with minimum of
Rs.12500/- and maximum of Rs.20000/-. National Safai Karmacharis Finance and
Development Corporation (NSKFDC) or any other agency identified will co-ordinate to
ensure optimum benefits to the beneficiaries. All the beneficiaries identified under the
scheme will be provided required training to acquire new skills and entrepreneurship
capabilities.
41

Know Your Customer (KYC)
The Reserve Bank of India had issued guidelines on Know Your Customer (KYC)
standards and Anti Money Laundering Measures (AML) to setout procedures to verify
bonafide identification of individual/corporate applicants for opening of an account and
to define procedures to monitor the transactions in the accounts with due diligence as
well as to specify the procedures to report the suspicious nature transactions to
regulators on an ongoing basis.
The concept of KYC should be adopted by collecting full information in respect of

identify of the prospective customer, type of transactions to be conducted, sources of
funds and other relevant matters at the entry level itself and before allowing opening
of account for any applicant. The policy guidelines are applicable not only to new
accounts but also to the existing accounts. The guidelines are applicable to all types
of deposit and advance accounts as well as new technology products such as Credit,
Debit, Smart, Add-on cards. The standards enable the banks to insulate themselves
from unscrupulous participants to avert misuse/ undue advantage of system. The
following are the key elements of the policy.
i) Customer Acceptance Policy (CAP): Bank should obtain prescribed application

from the applicant along with the documents and information that are required as per
constitution, risk perception, banking practices, legal requirements as well as
guidelines issued by RBI from to time. Banks should not open accounts in the name of
Anonymous or fictitious/benami names and Terrorist organizations notified
under POTA.
ii) Customer Identification Procedure (CIP): It means collecting information

relating to identity, activity, location of the person desiring to open an account in
single name or in joint names and verifying the information collected using reliable,
independent source documents, data or information. Further, photo identity is a must.
In case of legal person/entity (Partnership / company / trust / club / association /
other legal body), branch should obtain sufficient data/information and documents to
verify the legal status of the applicant.
Any one document, which provides identification and address to the satisfaction of the
branch, will suffice. In case where the current address differs with that of document
produced, the branch may establish the address to its satisfaction. Branches are
required to obtain any of the documents such as Passport, PAN Card, Voter’s Identity
Card, Driving License with Photo, Identity Card, Letter from employer along with latest
Photo for the purpose of identification. However, in case where employer
certificate/letter is obtained, branch is required to take atleast one of the officially valid
documents as stated above. With regard to proprietary concerns, any
registration/licensed document issued by the central/state governments will be
accepted as CIP.
The very purpose of KYC is to know the antecedents, business records, financial health
and reputation of the customer thorough enquiry to minimize / prevention of frauds /
malpractices. It is of paramount importance in the present day Banking. With regard
to address proof, branches to obtain any one of the documents such as Passport,
Voter’s Identity Card, Ration Card, Driving License, Bank Account Statement
The objective of KYC is to prevent/detect financial frauds, money laundering and

suspicious activities. Opening of accounts with banks duly fulfilling the KYC norms is
causing hardships to the common persons. To avoid hardships to the prospective
customers, RBI has clarified as under:
42

¾ Banks can accept utility bill (Telephone/Electricity Bill) or any other document
acceptable to the branch to fulfill the address proof while opening accounts.
¾ Branch to obtain identity document along with declaration from the person
(Father/Mother/Husband etc) with whom the prospective customer is staying.
However, in case of lower income group persons (balance not exceeding Rs.50000/-
and total credits not exceeding Rs.100000/- per annum), branches can open accounts
without insisting for proof of identification/address after obtaining introduction from
another account holder.
Now, “Aadhaar” number issued by the Unique Identification authority of India (UIDAI)
as an “officially valid document” to satisfy the KYC norms for opening bank accounts.
iii) Due Diligence: All the forms and documents submitted by the applicant while
opening of the account are to be verified by the officer with the originals to ensure that
the identification and address of the applicant is correct. Further, the officer should
satisfy with the identity and legal existence of the applicant and note the same in the
interview cum due diligence form. Further, the guidelines also stipulate sending a
letter to the customer in the prescribed format on the same day of opening of the
account. Branch to classify the accounts into Low, Medium and High Risk categories
based on the risk perception while opening of accounts and further reviewed once in 6
months. As per the existing guidelines, customer identification data (including photos)
is to be updated once in 5 years in case of Low Risk Category Customers and once in 2
years in case of Medium and High Risk category customers.
Monitoring of transactions: Banks are expected to fix threshold limit and monitor
the transactions closely and ongoing basis. It covers the following aspects:
¾ Transactions exceeding threshold limit for different categories of accounts.

¾ Very high turnover inconsistent with the size of balance in the account.
¾ Large amount of cash transactions in the account.
¾ High Risk Accounts.
¾ Transactions in NRE accounts and Foreign Inward and Outward Remittances.
¾ Periodical review of risk categorization of accounts.
¾ Reporting of the transactions to appropriate law enforcing authority.
With the introduction of telephone and electronic banking, increasingly accounts are
being opened by banks for customers without the need for the customer to visit the
bank branch. In such cases, apart from applying the usual customer identification
procedures, there must be specific and adequate procedures to mitigate the higher risk
involved. Certification of all the documents presented may be insisted upon and, if
necessary, additional documents may be called for. In such cases, banks may also
require the first payment to be effected through the customer's account with another
bank which, in turn, adheres to similar KYC standards. In the case of cross-border
customers, the bank may have to rely on third party certification/introduction.
Money Laundering: It is the process of transferring illegitimate money into legitimate

money. It is put through a cycle of transactions or washed so that it comes out the
other end as legal or clean money. In other words, the source of illegally obtained
funds is obscured through a succession of transfers and deals in order that those same
funds can eventually be made to reappear as legitimate income. It normally follows
from such activities as human trafficking, sale of narcotic drugs, illegal dealings in
arms and ammunition etc. It is a threat to the national security and economic activity
as it often associates with the financing of terrorism and also evasion of taxes.
43

In order to combat the menace of money laundering, Government of India introduced
“Prevention of Money Laundering Act, 2002”, which has come into effect from
01.07.2005. The main objective of the Act (PMLA) is three fold:
¾ To prevent, combat and control money laundering.

¾ To confiscate and seize the property obtained from the laundered money.
¾ To deal with any other issue connected with money laundering in India.
Banks are required to report the following type of transactions to the Financial
Intelligence Unit (FIU), New Delhi.
Report Nature of Transactions

i) All cash transactions of the value of more than Rs.10 lakhs.
ii) Series of cash transactions integrally connected to each other,
which have been valued below Rs.10 lakhs where such series of
Cash
transactions have taken place within a month and aggregating Rs.10
Transaction
lakhs.
Reports (CTR)
iii) All cash transactions where forged or counterfeit notes or bank
notes have been used as genuine and where any forgery of a
valuable security has taken place.
i) Large cash transactions
ii) Multiple accounts under same name
Suspicious
iii) Frequent conversion of currency from small to large
Transaction
denomination notes
Report (STR)
iv) Placing funds in FD and using them as security for more loans
v) Large deposits immediately followed by wire transfers
Counterfeit As and when counterfeit currency is found at branch/currency chest,
Currency the same is to be informed to FIU and Reserve Bank of India
Report (CCR) immediately.
Preservation of Records: As per Prevention of Money Laundering (Amendment) Act

2009, branches are required to preserve all the transactions for at least 10 years from
the date of transaction between the Bank and the client along with the necessary
records. Similarly, they need to preserve all the KYC documents obtained at the time
of opening and during the course of business relationship for a period of 10 years after
the business relationship ended.
Adherence to AML policies and procedures should also enhance the fraud prevention
measures that banks take to protect themselves and their genuine customers from
losses. (Circular no.268 Ref 44/28 dated 17.11.2008)
Money Mules: An individual with bank account is recruited to receive cheque deposits
or wire transfers and then transfer these funds to accounts held on behalf of another
person or to other individuals. The fraudsters adopt variety of methods including spam
e-mails, advertisements on genuine recruitment web sites, social networking sites,
instant messaging and advertisements in newspapers. Many times the address and
contact details of such mules are found to be fake and making difficult for enforcement
agencies to locate the account holder. RBI advised the banks to strictly adhere to the
guidelines on KYC/AML/CFT to protect our customers from misuse by such fraudsters.
(Cir.no.334 Ref 27/41 dated 16.12.2010)
***
44

Retail Banking
One of the most prominent developments in the Indian Banking scenario in the recent
past is adoption of Retail Banking concept by all the banks including Public Sector
Banks. Banks have been witnessing pressure on Net Interest Margin (NIM) on account
of lending to corporate borrowers at below BMPLR on one side and increased cost of
funds on the other, which has direct bearing on the bottom-line of the Banks. In order
to maintain stable growth and sustain reasonable NIM, Banks have adopted strategy of
focusing attention on Retail Segment.
Retail Banking refers to the dealing of banks with individual customers, both on
liabilities and assets sides of the balance sheet. Fixed, Current and Savings accounts
on the liabilities side and Mortgages, Loans such as Personal, Housing, Auto,
Educational etc., on the assets side of the banks are the important retail products
besides ancillary services like Credit Cards, Debit Cards, Smart Cards, Depository
Services etc.
Low Cost or No Cost deposits is the Buzz word in the present day banking and this
can be achieved through value added products such as ATM/Debit cards, Insurance
Linked deposits, Any Branch Banking, NEFT, RTGS etc. Banks have been focusing their
attention on attracting Current and Savings Bank account (CASA) deposits in order to
contain their cost of funds. Sharp increase is seen under CASA during the last five
years and may continue the same trend in the ensuing years.
Retail Lending has attained utmost importance in the light of increased urbanization,
rising income levels and adoption of Borrow & Buy concept by the Indians in the
recent past. Housing finance expanded rapidly because of investment demand and
acute housing shortage. Banks continued to incline to tap this segment as it pays
higher interest and low risk (borrower specific risk as well as systematic risk)
compared to other traditional lending products. However, Banks need to exercise
caution while selection of borrower and assessing the credit requirements.
In the above backdrop, Banks are focusing attention on Retail Banking since it is one
of the best available options to keep Net Interest Margin (NIM) intact in the present
competitive environment. Hence, NIM management has attained utmost importance
and a new found focus on low-cost deposits and retail lending is the most striking
aspect of banks in the recent years. The following are some of the compelling reasons
for bankers to shift their focus to retail banking.
¾ Fear of corporate defaults and NPA computation.

¾ Relative safety implied by the mortgage loans.
¾ Low credit off take during from the commercial and corporate sector.
¾ Lowering of cost of consumer durables and automobiles due to competition.
¾ Increasing use of credit/debit cards as plastic money.
¾ Automation of stock exchange operations, dematerialization.
¾ ATMs, Mobile and Internet banking as convenience factors.
¾ Advisory services, real estate, investments and insurance.
The key drivers of retail banking in India are:
¾ Economic prosperity and the consequent increase in purchasing power have

given a fillip to a consumer boom on account of average annual growth rate of
GDP @ 6 percent.
¾ Changing consumer demographics indicate vast potential for growth in
consumption both qualitatively and quantitatively. India is one of the countries
having highest proportion (70%) of young population i.e. below 35 years of
45

age. Improving consumer purchasing power, coupled with more liberal attitudes
toward personal debt, is contributing to India’s retail banking segment. The rise
of the Indian middle class is an important contributory factor in this regard.
¾ Technological innovations relating to increasing use of credit/debit cards, ATMs,
Online, Mobile and Internet banking has contributed to the growth of retail
banking in India.
¾ Decline in interest rates especially in corporate segment have also contributed
to the growth of retail credit by generating the demand for such credit.
Opportunities: Retail credit has been gaining momentum on account of the following
factors:
¾ Customer retention – Retail banking clients are generally loyal and not to
tend shift from one bank to another very often.
¾ Interest Spreads – To remain competitive; Banks are offering loans to
High Value Corporate Clients at below Bench Mark Prime Lending Rate
(BMPLR), which has adverse effect on Interest Spread. Retail Banking is one
of the best available option to the banks to improve spread since the
interest rates on retail lending is normally above BMPLR (except housing).
¾ Credit Risk tends to be well diversified, as loan amounts are relatively
small and these loans spread across various segments across the country.
¾ Large numbers of clients can facilitate marketing, mass selling and the
ability to categorize/select clients using scoring systems/ data mining.
Challenges: Though, there are ample opportunities for retail credit, it is fraught with
risks. The long-term nature of the mortgage loans, coupled with very low interest
rates, may also affect banks heavily if the interest rate goes up significantly. Further,
increased competition may lead to adverse selection of borrower, which may expose
the banks to higher level of risks, in the event of a fall in the real estate prices.
Majority of personal loans pertains to non-collateralized category, which is a source of
potential vulnerability in the event of default.
Reserve Bank of India cautioned banks about the need to sharpen their risk
assessment techniques so as to guard against any adverse impact on credit quality. As
a counter cyclical measure, risk containment measures were prescribed on housing
and consumer loans, and the risk weights in the case of housing loans and consumer
credit, including personal loans and credit cards were increased. KYC Issues and
money laundering risks in retail banking is yet another important issue.
India is experiencing a surge in retail banking (1/3rd of deposits and ¼th of advances of
the banking industry) and the market has decisively got transformed from a Sellers’
market to a Buyers’ market. In the liberalized and deregulated environment, banks
now need to use retail as a growth trigger, which is definitely a win-win situation to
both Customers and Banks.
***
46

Products for Non Residents
Non-Resident Accounts can be opened and maintained by Person Resident outside

India, Non-Resident Indians (NRI) and Persons of Indian Origin (PIO). Person Resident
outside India means a person who is not resident in India. It also defined as a person
who has gone out of India, or who stays outside India for the purpose of employment,
carrying on business or vocation or for any other purpose under the circumstances
indicating an uncertain period of stay. Person includes Individual, HUF, Firm, Company
and Association.
Non-Resident Indian means a person resident outside India, who is a citizen of India
or is a person of Indian Origin. Persons who visit India for temporary visit are treated
as Non-Resident Indian. Students going abroad for studies are treated as Non-
Resident Indians.
Person of Indian Origin: A Foreign Citizen (Other than citizen of Pakistan or

Bangladesh) is deemed to be a person of Indian Origin if,
¾ He/She at any time held an Indian Passport or

¾ He/She or either of their Parents or Grand Parents was citizen of India by virtue
of the constitution of India or Indian Citizen Act 1955 or
¾ He/She is a spouse of Indian Citizen or a person referred as above.
N R O – Non Resident Ordinary Account
Any NRI (Individuals of Bangladesh/Pakistan Nationality

Who Can Open
require approval from RBI) Singly or Jointly with Residents
Nominee can be a Resident or a Non Resident.
Nomination Claim Settlement – Resident Nominees – In INR, NRI
Nominee – Repatriable to that Country as per RBI Norms.
Remittances of Balances held in NRO accounts can be allowed
up to USD one million per financial year, for all bona fide
purposes to the satisfaction of Authorized Dealer(AD)
Repatriation Foreign Tourists visiting India – the balance amount in the
account (other than local credits) can be repatriated at the
time of departure from India provided the account has been
maintained for a period not exceeding six months.
Type of account Current, Savings, Recurring, Term Deposits.
Period of Deposits As applicable to Domestic Deposits.
Rate of Interest As applicable to Domestic Deposits.
Deposit Loans As applicable to Domestic Deposits.
Foreign Currency Loans Not Permitted.
Margin As applicable to Domestic Deposits.
Interest on Loans Dep. Rate + 2 %.
TDS on Int. earned @ 30% + Edn. Cess + Service Tax.,
Applicability of Local
including Interest on SB Deposits, irrespective of the amount
Taxes
of Interest. Wealth Tax, as applicable.
Transfer of funds Not permitted to NRE / FCNR accounts
Premature Cancellation
As applicable to Domestic Deposits.
of Deposits
47

N R E – Non Resident External Rupee account
Any Non Resident Indian (Individuals of Bangladesh / Pakistan
Who Can Open Nationality require approval from RBI) Singly or Jointly with Non
Residents only
Nominee can be a resident or a Non Resident.
Nomination Claim Settlement – Resident Nominees – In Indian Rupee
Non Resident Nominee – Repatriable as per RBI Norms.
Repatriation Balances in the account are Fully Repatriable.
Type of account Current, Savings, Recurring, Term Deposits.
Period of Deposits Term Deposits – Minimum one year and Maximum 10 years.
As per RBI Norms – SB – 3.5 %
Rate of Interest Term Deposits linked to LIBOR. Rate of Interest for 3 years
applicable to periods above 3 years.
Permitted to Account Holder & Third Parties subject to the
Rupee Loans
maximum of Rs.100 lakhs.
Deposit Loans
Margin 15%
Interest on Loans Dep. Rate + 2 %.
Applicability of Local No TDS on Int. earned.
Taxes No Wealth Tax. Free from all Taxes
Transfer of amount To NRO –permitted
to other types To FCNR –permitted
Penalty 1% on premature cancellation is applicable. No Interest
Premature is payable, incase of cancellation before 1 year. Conversion from
Cancellation NRE to FCNR or vice versa, before maturity is subject to Penalty.
No penalty in case the amount is placed in RFC.
Foreign Currency Non Resident account – F C N R (B)

Any Non Resident Indian (Individuals of Bangladesh /
Who Can Open Pakistan Nationality require approval from RBI) Singly or
jointly with another Non Resident only.
Nomination Claim Settlement – Resident Nominees – In Indian rupees
Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian
Designated Currency
Dollar
Repatriation Fully Repatriable without any limits.
Foreign Currency No Exchange Risk to the customer, in case of repatriation,
Exchanger Risk as account is maintained in Foreign Currency only.
Type of account Term Deposits only (FDR / Reinvestment)
Period of Deposits Minimum one year and Maximum 5 years
Linked to LIBOR. Term Deposits with a cap not exceeding
Rate of Interest
Libor + 100 basis points.
Rupee Loans
Deposit Loans maximum of Rs.100 lakhs, or Foreign Currency equivalent
to Rs. 100 lakhs.
Applicability of Taxes No TDS on Interest earned and No Wealth Tax.
Amount Transfer Permitted to NRO and NRE accounts
A/c can be opened at Designated branches. (C Category Branches)
No interest payable and no SWAP cost to be recovered for
Premature Cancellation the deposits up to USD 10000 or equivalent, where the
deposit is cancelled before the expiry of one year. However,
48

SWAP cost to be recovered in case of deposits above USD
10000 or equivalent.
Cancellation of the deposit for the purpose of renewal in the
same currency, same type of deposit/RFC, no SWAP cost is
to be recovered. If the deposit is cancelled after one year,
applicable rate is to be paid without Penalty. If the
withdrawal for any other reason applicable interest with 1%
penalty is to be levied.
R F C - Resident Foreign Currency Accounts
Non Resident Indians (NRI) returning to India who have

Who Can Open been NRIs for a continuous period of not less than one year.
NRIs returning to India for permanent stay in India
Foreign Exchange received as pension / superannuation /
other benefits from employers abroad.
Realization of assets held abroad.
Foreign Exchange acquired as gift or inheritance from person
Sources of funds who was a NRI.
Foreign Exchange acquired or received or any income arising
or accruing there on which is held outside India by any
person in terms of general or specific permission granted by
RBI.
Joint Accounts With another eligible person/s.
Types of accounts Savings, Current, Term Deposits.
Period of Term Dep. As applicable to FCNR B Accounts. Min 1 year Max 5 years
Currency
Dollar
Nomination Claim Settlement – Resident Nominees – In Indian rupees
RFC Domestic Account
Who Can Open Any person resident in India

¾ Foreign Exchange acquired in the form of currency
notes, bank notes, cheques, drafts, and travellers
cheques.
¾ Payment / honorarium / gift for services rendered in
India / abroad.
Sources of funds ¾ Unspent amount of foreign exchange acquired by him
from an authorized person for travel abroad.
¾ Gift from close relatives as defined in sec. 6 of the
company act 1956.
¾ Proceeds of Insurance policy claims / maturity /
surrender values settled in foreign currencies.
Joint Accounts Not permitted
Types of accounts Current Account
Period of Term Dep. Term Deposits are not permitted to be opened
Currency
Dollar
Interest No Interest is payable since it is a Current Account
Loan & Over drafts Not permitted.
49

Exchange Earners Foreign Currency Accounts (EEFC)
A person Resident in India may open, hold and maintain foreign
Currency account to be known as EEFC account.
Who Can Open
All Categories of Foreign Exchange Earners are allowed to credit up to
100% of their Forex earnings to EEFC Account.
Authorized Dealers (AD) are allowed to open, hold and maintain
foreign currency denominated accounts for the purpose of transacting
Purpose
foreign exchange business and other matters of the account holder.
The accounts can be maintained with one or more ADs.
The account may be maintained in the currency of the remittance or
Currency
any other permitted currency at the option of the depositor.
No credit facility, either fund based or non-fund based should be
Credit facility permitted against the security of the balances held in the EEFC
accounts.
Type of EEFC accounts should be in the form of non-interest bearing current
account accounts only. Cheque book facility is permitted.
Interest No Interest is payable
Nomination facility is permitted like any domestic account. Nominee
Nomination
can be Resident Indian only
Limit up to
which foreign A person resident in India may credit to the EEFC account 100% from
currency may out of the foreign exchange earnings
be credited
Inward remittance through normal banking channels, other than the
remittance received pursuant to any undertaking given to the Reserve
Bank or which represents foreign currency loan raised or investment
received from outside India, or those received for meeting specific
obligations by the account holder.
Payment received in foreign exchange by a unit in Domestic Tariff
Area (DTA) for supplying goods to a unit in Special Economic Zone out
of its foreign currency account.
Payment received by an exporter from an account maintained with AD
for the purpose of counter trade, in accordance with the approval
granted in terms of regulation 14 of FEMA (Export of goods &
Services) Regulations 2000.
Advance remittances received by an exporter towards export of goods
/ services.
Permissible
credits to Payments received towards export of goods/ services from India, out
EEFC accounts of funds representing repayment of state credit in USD held in the
account of Bank for foreign economic affairs, Moscow with an AD in
India.
Professional Earnings including Director's fees, consultancy fees,

lecture fees, honorarium and similar other earnings received by a
professional by rendering services in his individual capacity.
Interest earned on the funds in the account.

Re credit of unutilized foreign currency earlier withdrawn from the
account. However, the amount withdrawn in rupees shall not be
eligible for conversion into foreign currency and for re-credit to the
account.
Amount representing repayment of loans/ advances granted to the
account holder's importer customer.
50

Representing the disinvestments proceeds received by the resident
account holder on conversion of shares held by him to ADRs / GDRs
under the sponsored ADR / GDR scheme approved by the Foreign
Investment Promotion Board of Govt. of India.
Payment outside India towards any current account transactions in

terms of FEMA Current Account Transaction Rules 2000 and towards a
capital account transaction Permissible under FEMA (Permissible
Capital Account Transactions) Regulations 2000.
Payment in foreign exchange towards cost of goods purchased from
100% EOU or a Unit in EPZ / STP / Electronic Hardware Technology
Park.
Payment of Customs Duty in accordance within the provisions of
Export Import Policy of Central Government for the time being in
force.
Trade related loans/ advances, by an exporter holding such account to

his importer customer outside India subject to compliance with FEMA
(Borrowing & Lending in Foreign Exchange) Regulations 2000.
Permissible
debits to EEFC Payment in foreign exchange to a person resident in India for supply
account: of goods / services including payment for airfare and hotel
expenditure.
Branches may permit their export constituents to extend trade related
loans / advances to overseas importers out of their EEFC balance
without any ceiling subject to compliance of provisions of Notification
no. FEMA 3 / 2000 as amended from time to time.
Branches may permit exporters to repay packing credit advances
whether availed in rupee or in foreign currency from balances in their
EEFC accounts and / or rupee resources to the extent exports have
actually taken place.
The balances in EEFC accounts may be allowed to be credited to NRE /

FCNR – B account at the option / request of the account holders
consequent upon change of their residential status to Non – Resident.
There is no restriction on withdrawal in rupees of funds held in EEFC

Conversion
account. Branches should send the request to Investment &
into Rupee
International Banking (IIB), Mumbai by e-mail / fax, for conversion of
Funds
rupee funds and can take the conversion rate along with reference no.
Loans to NRIs – Against Deposits: Advances against FCNR/NRE deposit to the

depositor himself should be granted only under his specific request and after verifying
the authenticity of the signature of the depositor. Loans can be granted for any
purpose, (except for the purpose of relending or carrying on agriculture/plantation
activities or for investment in real estate business) including direct investment by way
of capital contribution to Indian firm/companies and for acquisition of residential
flats/houses on non-repatriable basis. In case of loans to third parties against NRI
deposits, normally the relative documentation should be done at the branch from
where the loan is being sought by the NRI depositor. The loan should be granted only
when the depositor himself executes the loan documents in the presence of the bank
officials and witness acceptable to the bank. Advances to third parties against such
deposits should not be granted on the basis of Power of Attorney. The maximum
loans/advances that can be sanctioned/renewed either to the depositors or to third
parties i either to the depositors or to third parties is restricted to Rs.100 lakhs against
NRI deposits. The loan amount is to be credited only to NRO account of the depositor
but not to any other account. Advances granted can be repaid by foreign inward
51

remittances, or transfer from NRE/FCNR accounts, or maturity proceeds of the deposit,
or local rupee sources held in NRO account. The interest rates to be levied on such
loans are as under:
No Category Interest Rate

Loan to depositor and repayment through
1 inward remittance or adjustment of deposit or Deposit Rate + 2%
transfer of funds from NRE/FCNR deposits
Loans to depositor – Repayment by rupee
2 Deposit Rate + 3%
funds in NRO accounts
Loans to third parties – Repayment by rupee
3 Base Rate + 5%
funds (less than one year)
Loans to third parties – Repayment by rupee
4 Base Rate + 5.75%
funds (one year & above and up to 3 years)
In case the rate of interest payable on NRE/FCNR deposit held as security is Nil due to
premature closure before the expiry of minimum period i.e. one year, the rate of
interest on the loans against such deposit is Base Rate + 7%. (Circular no.109 Ref
26/27 dated 30.06.2010)
Investment opportunities to NRIs: The permitted investment opportunities to NRIs

in India are Government Securities, Company Deposits, Units of Mutual Funds,
Company Shares/Debentures, Immovable property and Loans to residents. The
investment can be under repatriation or non-repatriation basis. However, NRIs are
prohibited from making investments in any entity, which is engaged in the activities
such as Chit funds, Nidhis, Agricultural or Plantation activities, Real Estate business,
Construction of Farm Houses without RBI`s permission. Whenever the investments are
allowed with repatriation benefits, the funds for the purpose should be received by
inward remittances from abroad or from investor’s NRE/FCNR accounts. While funds in
NRO accounts could be used in respect of investments on non-repatriation basis.
Liberalized Remittance Scheme for Residents: Under this, authorized dealers may
freely allow remittances by individuals up to USD two lakhs per financial year (April
to March) for any permissible current or capital account transactions or a combination
of both. Resident individuals are free to acquire and hold immovable property or
shares or any other asset outside India without prior approval of RBI. This limit also
includes remittances towards gift (USD 5000 per remitter/donor per annum) and
donation (USD 5000 per remitter/donor per annum) by resident individual. In addition,
the existing facility of release of exchange by Authorized Dealer up to USD 10000 or
its equivalent in a financial year for one or more private visits to any country will
continue to be available on a self declaration basis.
***
52

Funds & Investments
Indian banks generally have a large investment portfolio consisting predominantly of

government securities. The investment portfolio is classified into three categories viz.,
HTM, HFT and AFS.
¾ Held to Maturity (HTM) - securities acquired with the intention of holding till
maturity.
¾ Held For Trading (HFT) - securities acquired with the intention of taking
advantage of short-term price/interest rate movements. Securities may be sold
within 90 days.
¾ Available For Sale (AFS) - securities not classified as HTM or HFT.
Banks should decide the category of investment at the time of acquisition and allowed
to classify part of their investment portfolio, not exceeding 25% of the total
investments, to the HTM category. Investments made (recapitalization bonds of the
government of India, equities of subsidiaries and joint ventures and deposits in Small
Industries Development Bank of India and Rural Infrastructure Development Fund) to
meet SLR requirements were allowed to be transferred to HTM category. Transfers to
and from HTM category may be done only once in a year with the approval of the
board. Transfers from HFT to AFS category is permitted only under exceptional
circumstances. Depreciation, if any, on such transfers must be fully provided for.
Broadly, the investments are classified in to two categories viz., SLR and Non SLR.
¾ SLR Investments: It includes investments in Central Govt. Securities /

Treasury bills, State Development Loans and approved Securities of Central and
State Governments.
¾ Non SLR Investments: It includes investments in Bonds, Debentures, Shares,
Subsidiaries and Joint ventures and Other Investments such as Commercial
Paper, Certificate of Deposit, Venture Capital, Pass Through Certificate, Other
asset backed securities, Mutual Funds etc.
Negotiated Dealing System: The first step towards electronic bond trading in India
was the introduction of the RBIs Negotiated Dealing System in February 2002. NDS,
interalia, facilitates screen based negotiated dealing for secondary market transactions
in government securities and money market instruments, online reporting of
transactions in the instruments available on the NDS and dissemination of trade
information to the market. Government Securities (including T-bills), call money,
notice/term money, repos in eligible securities are available for negotiated dealing
through NDS among the members. The system is designed to maintain anonymity of
buyers and sellers from the market but only the vital information of a transaction viz.,
ISIN of the security, nomenclature, amount (face value), price/rate and/ or indicative
yield, in case applicable, are disseminated to the market, through Market and Trade
Watch. The benefits of NDS include:
¾ Transparency of trades in money and government securities market.

¾ Electronic connectivity with securities settlement systems, thus, eliminating
submission of physical SGL form 22 Settlement through electronic SGL transfer.
¾ Elimination of errors and discrepancies and delay inherent in manual Processing
system, and
¾ Electronic audit trail for better monitoring and control.
53

NDS-OM (Order Matching): It is an electronic, screen based, anonymous order
driven trading system introduced by RBI as part of the existing NDS system to
facilitate electronic dealing in government securities. It is accessible to members
through RBIs INFINET Network. The system facilitates price discovery, liquidity,
increased operational efficiency and transparency. It supports trading in all Central
Government Dated Securities and State Government securities in T+1 settlement type.
Since August 1, 2006 the system was enhanced to facilitate trading in Treasury Bills
and When Issued (WI) transaction in a security authorized for issuance but not as yet
actually issued. All ‘WI’ transactions are on an ‘if’ basis, to be settled if and when the
actual security is issued. Further, RBI has permitted the execution of intraday short
sale transaction and the covering of the short position in government securities can be
done both on and outside the NDS-OM platform i.e. through telephone market.
Yield: The returns to an investor in bond are made up of three components viz.,
coupon - interest from re-investment of coupons and capital gains/loss from selling
or redeeming the bond. When we are able to compare the cash inflows from these
sources with the investment (cash outflows) of the investor, we can compute yield to
the investor. Current Yield refers annual coupon receipts / market price of the bond.
This measure of yield does not consider the time value of money, or the complete
series of expected future cash flows.
Yield to Maturity (YTM): YTM of a bond is that rate which equates the discounted
value of the future cash flows to the present price of the bond. It is the internal rate of
return of the valuation equation.
Subsidiary General Ledger (SGL) account: It is a facility provided by RBI to large

banks and financial institutions to hold their investments in government securities and
treasury bills in the electronic book entry form. Such institutions can settle their trades
for securities held in SGL through a Delivery-versus-Payment (DvP) mechanism, which
ensures simultaneous movement of funds and securities. RBI has permitted NSCCL,
NSDL, CDSL, SHCIL, banks and PDs to offer constituent SGL account facility to an
investor who is interested in participating in the government securities market. All
entities regulated by RBI (including FIs, PDs, cooperative banks, RRBs, local area
banks, NBFCs) should necessarily hold their investments in government securities in
either SGL (with RBI) or CSGL account.
Primary Dealers: Primary dealers are important intermediaries in the government

securities markets and banks are permitted to undertake Primary Dealership business.
They act as underwriters in the primary debt markets, and as market makers in the
secondary debt markets, apart from enabling the participation of a number of
constituents in the debt markets. The objectives of setting up the system of primary
dealers are
¾ To strengthen the infrastructure in the government securities market in

order to make it vibrant, liquid and broad-based;
¾ To develop underwriting and market making capabilities for government
securities outside the Reserve Bank, so that the Reserve Bank could
gradually shed these functions;
¾ To improve secondary market trading system that would contribute to price
discovery, enhance liquidity and turnover and encourage voluntary holding
of government securities among a wider investor base; and
¾ To make primary dealers an effective conduit for conducting open market
operations.
54

Repo is a money market instrument, which enables collateralized short term
borrowing through sale operations in debt instruments. Under a repo transaction, a
holder of securities sells them to an investor with an agreement to repurchase at a
predetermined date and rate. In a typical repo transaction, the counter parties agree
to exchange securities and cash, with a simultaneous agreement to reverse the
transactions after a given period. To the lender of cash, the securities lent by the
borrower serves as the collateral; to the lender of securities, the cash borrowed by the
lender serves as the collateral. A repo is also sometimes called a ready forward
transaction as it is a means of funding by selling a security held on a spot (ready)
basis and repurchasing the same on a forward basis. Though there is no restriction on
the maximum period for which repos can be undertaken, generally, repos are done for
a period not exceeding 14 days. Different instruments can be considered as collateral
security for undertaking the ready forward deals and they include Government dated
securities, treasury bills.
Repo rate is the rate at which banks borrow rupees from RBI and a reduction in Repo
rate helps the banks to get funds at a cheaper rate and increase in Repo rate makes
the borrowing more expensive.
Reverse Repo is the mirror image of a repo. In a reverse repo, securities are
acquired with a simultaneous commitment to resell. Hence whether a transaction is a
repo or a reverse repo is determined only in terms of who initiated the first leg of the
transaction. When the reverse repurchase transaction matures, the counter-party
returns the security to the entity concerned and receives its cash along with a profit
spread. One factor which encourages an organization to enter into reverse repo is that
it earns some extra income on its otherwise idle cash.
Reverse Repo rate is the rate at which RBI borrows money from banks. An increase in
Reverse Repo rate can cause the banks to transfer more funds to RBI and similarly
reduction of rate may dampen the interest of the banks to lend to RBI.
Liquidity Adjustment Facility (LAF): It is a mechanism for liquidity management

through combination of repo operations, export credit refinance facilities and
collateralized lending facilities, supported by open market operations of the RBI, at set
interest rates. The RBI manages its liquidity in the market through the operation of
LAF as part of its monetary policy and money supply targets. It undertakes reverse
repo transactions to mop up liquidity and repos to supply liquidity in the market. The
two rates are different and the reverse repo rate is lower than the repo rate. The LAF
transactions are currently being conducted on overnight basis.
Secondary Liquidity Adjustment Facility (SLAF): In response to suggestions from

the market participants for fine-tuning the management of bank reserves on the last
day of the maintenance period, it has been decided to introduce a second LAF (SLAF)
on reporting Fridays, with effect from August 1, 2008. These operations are conducted
between 4.00 p.m. and 4.30 p.m. The salient features of the SLAF are the same as
those of LAF. However, the settlement for LAF and SLAF will be conducted separately
and on gross basis.
Call Money Markets: It forms an important segment of the Indian Money Market. Call
and notice money market refers to the market for short term funds ranging from
overnight funds to funds for a maximum tenor of 14 days. Under Call money market,
funds are transacted on overnight basis where as in case of notice money market;
funds are transacted for the period of 2 days to 14 days. Participants in call/notice
money market currently include banks (excluding RRBs) and Primary dealers both as
borrowers and lenders and Non Bank institutions are not permitted.
Collateralized Borrowing and Lending Obligation (CBLO): It is a product

developed by CCIL for the benefit of the entities who have either been phased out
55

from inter bank call money market or have been given restricted participation in terms
of ceiling on call borrowing / lending transactions and who do not have access to the
call money market. It is a discounted instrument available in electronic book entry
form for the maturity period ranging from one day to ninety Days (can be made
available up to one year as per RBI guidelines). In order to enable the market
participants to borrow and lend funds.
Coupon Rate: Coupon rate is the rate at which interest is paid, and is usually
represented as a percentage of the par value of a bond. It refers to the periodic
interest payments that are made by the borrower (who is also the issuer of the bond)
to the lender (the subscriber of the bond) and the coupons are stated upfront either
directly specifying the number (e.g.8%) or indirectly tying with a benchmark rate (e.g.
MIBOR+0.5%).
Zero Coupon Bond: The bond is issued at a discount to its face value, at which it will
be redeemed. There are no intermittent payments of interest. When such a bond is
issued for a very long tenor, the issue price is at a steep discount to the redemption
value. Such a zero coupon bond is also called a deep discount bond. The effective
interest earned by the buyer is the difference between the face value and the
discounted price at which the bond is bought. There are also instances of zero coupon
bonds being issued at par, and redeemed with interest at a premium. The essential
feature of this type of bonds is the absence of intermittent cash flows.
Floating Rate Bond: Instead of a pre-determined rate at which coupons are paid, it is
possible to structure bonds, where the rate of interest is reset periodically, based on a
benchmark rate. Such bonds whose coupon rate is not fixed, but reset with reference
to a benchmark rate, are called floating rate bonds. For example, IDBI issued a 5 year
floating rate bond, in July 1997, with the rates being reset semi-annually with
reference to the 10 year yield on Central Government securities and a 50 basis point
mark-up. In this bond, every six months, the 10-year benchmark rate on government
securities is ascertained. The coupon rate IDBI would pay for the next six months is
this benchmark rate, plus 50 basis points. The coupon on a floating rate bond thus
varies along with the benchmark rate, and is reset periodically.
Callable Bonds: Bonds that allow the issuer to alter the tenor of a bond, by
redeeming it prior to the original maturity date, are called callable bonds. The inclusion
of this feature in the bond’s structure provides the issuer the right to fully or partially
retire the bond, and is therefore in the nature of call option on the bond. Since these
options are not separated from the original bond issue, they are also called embedded
options.
Puttable Bonds: Bonds that provide the investor with the right to seek redemption
from the issuer, prior to the maturity date, are called puttable bonds. The put options
embedded in the bond provides the investor the rights to partially or fully sell the
bonds back to the issuer, either on or before pre-specified dates. The actual terms of
the put option are stipulated in the original bond indenture. A put option provides the
investor the right to sell a low coupon-paying bond to the issuer, and invest in higher
coupon paying bonds, if interest rates move up. The issuer will have to re-issue the
put bonds at higher coupons. Puttable bonds represent a re-pricing risk to the issuer.
When interest rates increase, the value of bonds would decline. Therefore put options,
which seek redemptions at par, represent an additional loss to the issuer.
56

Asset backed securities: It represent a class of fixed income securities, created out
of pooling together assets, and creating securities that represent participation in the
cash flows from the asset pool. For example, select housing loans of a loan originator
(say, a housing finance company) can be pooled, and securities can be created, which
represent a claim on the repayments made by home loan borrowers. Such securities
are called mortgage–backed securities. In the Indian context, these securities are
known as structured obligations (SO). Since the securities are created from a select
pool of assets of the originator, it is possible to ‘cherry-pick’ and creates a pool whose
asset quality is better than that of the originator.
Pass Through Certificate (PTC): It is a certificate that is given to an investor

against certain mortgaged-backed securities that lie with the issuer. The certificate can
be compared to securities such as bonds, debentures etc., that may be issued by
banks and other companies to investors. The only difference being that they are issued
against underlying securities. The interest that is paid to the issuer on these securities
comes to the investor in the form of a fixed income. Investors in such instruments are
usually financial institutions like banks, mutual funds and insurance companies.
Commercial Paper (CP): It is a short-term instrument to enable non-banking

companies to borrow short-term funds through liquid money market instruments. CPs
is therefore part of the working capital limits as set by the maximum permissible bank
finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to time
stipulating term, eligibility, limits and amount and method of issuance. CP can be
issued for maturities between a minimum of 7 days and a maximum up to one year
from the date of issue. The maturity date of the CP should not go beyond the date up
to which the credit rating of the issuer is valid. CP can be issued in denominations of
Rs.5 lakh and multiples thereof. Amount invested by a single investor should not be
less than Rs.5 lakh (face value). It is mandatory for CPs to be credit rated. It attracts
stamp duty.
Certificates of Deposits (CDs): It is a negotiable money market instrument and

issued in dematerialized form or as a Usance Promissory Note, for funds, deposited at
a bank or other eligible financial institutions such as scheduled commercial banks other
than RRBs / Local Area Banks and select all India Financial Institutions to raise short-
term resources within the umbrella limit fixed by RBI. CDs may be issued at a discount
on face value. CDs differ from term deposit because they involve the creation of paper,
and hence have the facility for transfer and multiple ownerships before maturity.
Banks use the CDs for borrowing during a credit pickup, to the extent of shortage in
incremental deposits. Most CDs are held until maturity, and there is limited secondary
market activity. Minimum amount of a CD should be Rs.1 lakh and in multiples thereof.
The maturity period of CDs should be not less than 7 days and not more than one
year. However FIs are allowed to issue CDs not exceeding 3 years from the date of
issue. Banks have to maintain the appropriate reserve requirements (CRR/SLR) on the
issue price of the CDs. Physical CDs are freely transferable by endorsement and
delivery. It attracts stamp duty. There is no lock-in period for the CDs. Banks/FIs
cannot grant loans against CDs. Furthermore, they cannot buy-back their own CDs
before maturity.
***
57

Banks - Non Performing Assets
A strong banking sector is important for flourishing economy. The failure of the
banking sector may have an adverse impact on other sectors. High level of Non
Performing Assets (NPA) suggests low credit quality and warrants high provisioning,
which has direct bearing on profitability and net-worth of banks and value of
shareholders. The increased incidence of NPA is one of the major concerns of Indian
Banks in the recent years.
An asset is classified as NPA, if due in the form of principal and interest are not paid by
the borrower for a period of 90 days. If any advance or credit facility granted by banks
to a borrower becomes non-performing, then the bank will have to treat all the
advances/credit facilities granted to that borrower as non-performing without having
any regard to the fact that there may still exists certain advances / credit facilities
having performing status.
Internal factors:
¾ Diversion of funds for expansion/ modernization/setting up new projects/

helping or promoting sister concerns.
¾ Imbalances of inventories/Lack of proper planning/Poor recovery of receivables.
¾ In-ability to raise capital through the issue of equity or other debt instrument
from capital markets.
¾ Dependence on single customers.
¾ Willful defaults, siphoning of funds, fraud, disputes, management disputes,
misappropriation etc.
¾ Wrong selection of borrower/Poor Credit appraisal/Non inspection of Units.
External factors:
¾ Sluggish legal system / Civil commotion / Political hostility.

¾ Government Policies / Taxation policies.
¾ Industrial recession.
¾ Infrastructure bottlenecks – Power, Transport and Raw material.
¾ Global Recession.
It is estimated that the Gross NPAs stood at Rs.69000 crores as on 31st March 2010 of
which around Rs.4800 crores locked up in 'hard-core' doubtful and loss assets. Once
the system driven classification of assets is in place, the NPA figures are likely to be
increased further.
The problem banks facing today is not lack of strict prudential norms but the legal
impediments and time consuming asset disposal procedure besides unwarranted
politically motivated packages such as Debt waiver, Debt Relief and Restructure
schemes, which are further vitiating the recovery environment of the banks.
In the changed context of new prudential norms and emphasis on quality lending and
profitability, the branches should make it amply clear to potential borrowers that
banks resources are scarce and these are meant to finance viable ventures for prompt
repayment so that banks can lend to other needy borrowers thereby improve the
economic activity of the country.
Hence, selection of right borrowers, viable economic activity, adequate finance and
timely disbursement, correct end use of funds and timely recovery of loans should be
the focus areas for preventing or minimizing the incidence of new/incremental NPAs.
58

Prudential Norms on Income Recognition, Asset Classification and
Provisioning:
Performing Asset is one which generates income to the bank. It is called as Standard
Asset.
Non-Performing Asset: An asset, including a leased asset, becomes nonperforming

when it ceases to generate income for the bank.
Loan /
Treated as NPA if:
Advance
Interest and/or installment of principal remain overdue for a period
Term Loan
of more than 90 days
1) The account remains out of order i.e., if the liability exceed
limit/DP continuously for 90 days. If liability is within limit/DP, but
Overdraft/ there are no credits continuously for 90 days or credits are not
Cash Credit enough to cover interest debited during the same period.
(OD/CC) 2) Drawings are allowed on DP calculated on stock statement older
accounts than three months continuously for a period of 90 days
3) Regular/adhoc credit limits have not been reviewed/renewed within
180 days from due date/date of adhoc sanction.
Short duration crops: Installment of principal or interest thereon
Agricultural remains overdue for two crop seasons.
Loans Long duration crops: Installment of principal or interest thereon
remains overdue for one crop season.
Bills
Purchased / Bill remains overdue for a period of more than 90 days.
Discounted
Other a/cs Any amount to be received remains overdue > 90 days.
Potential NPA (PNPA): are those accounts showing overdues and irregularities
persist beyond 30 days. These are also known as Border line Performing Assets.
Date of NPA: It is the date on which the overdues or the irregularities cross 90 days
or the date on which the account comes under Income Recognition norms.
Overdue: Any amount due to the bank under any credit facility is ‘overdue’ if it not
paid on the due date fixed by the bank.
Net NPA=Gross NPA – (provisions held towards NPAs + Balances in Interest Sundry
Suspense A/c + part payments received in suit filed accounts and kept in Sundry
Suspense.+ claims received from ECGC/CGC and kept in Sundry Suspense a/c).
Income recognition: The policy of income recognition has to be objective and based
on the record of recovery. Income from nonperforming assets (NPA) is not
recognized on accrual basis but is booked as income only when it is actually received.
However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life
policies may be taken to income account on the due date, provided adequate margin is
available in the accounts.
Reversal of Income: If an account becomes NPA for first time during the year the
unrealized interest that was taken to P&L account on accrual basis pertaining to the
current year as well as pertaining to the preceding year, if any, shall also be reversed.
This will apply to Government guaranteed accounts also.
59

Recoveries in NPA: In the absence any specific agreement between the Bank and the
borrower, any recoveries in NPA shall be adjusted towards unrealized charges and then
unrealized interest and residual amount to principal.
IRAC – 1A NPAs of Rs.25000 & above

IRAC – 1B All fresh additions of Rs.25000 & above
IRAC - 2A NPAs of Rs.25000 & below
IRAC – 2B All fresh additions of Rs.25000 & below
Valuation of Security for provisioning purposes: In cases of NPAs with balance of

Rs.5 crore and above stock audit at annual intervals by external agencies and
collaterals such as immovable properties charged in favour of the bank should be got
valued once in two years by valuers approved by the Board.
Asset classification: Banks are required to classify non-performing assets further

into the following three categories based on the period for which the asset has
remained nonperforming and the reliability of the dues:
i) Substandard Assets: A substandard asset would be one, which has remained NPA
for a period less than or equal to 12 months. It indicates credit weakness and scope
for loss if deficiencies are not corrected.
ii) Doubtful Assets: An asset would be classified as doubtful if it has remained in the
substandard category for a period of 12 months.
iii) Loss Assets: A loss asset is one where loss has been identified by the bank or
internal or external auditors or the RBI inspection but the amount has not been written
off wholly. It is considered as uncollectible and it is not warranted to continue as
bankable asset since there is little scope for salvage or recovery value.
Multiple Limits/Branches: Facilities granted by a bank to a borrower will have to be

treated as NPA (except bills discounted under LC) if any one facility of the borrower
becomes NPA. Uniform lowest classification shall be accorded to all facilities. In case of
credit facilities for a borrower at more than branch, the principal branch shall decide
the NPA status.
Advances under consortium arrangements: Asset classification of accounts under

consortium should be based on the record of recovery of the individual member
banks.
Accounts where there is erosion in the value of security: Where there are
potential threats for recovery on account of erosion in the value of security or non-
availability of security, asset should be straightaway classified as doubtful or loss asset
as appropriate.
Advances against Term Deposits, NSCs, KVPs, IVPs and LIC policies need not
be treated as NPAs. Advances against gold ornaments, government securities and all
other securities are not covered by this exemption.
Loans with moratorium for payment of interest: In the case of bank finance
given for industrial projects or for agricultural plantations etc. where moratorium is
available for payment of interest, payment of interest becomes 'due' only after the
moratorium or gestation period is over.
Agricultural Advances: In cases of conversion or re-schedulement short term

production loan as a relief measure, the term loan as well as fresh short-term loan
may be treated as current dues and need not be classified as NPA.
60

Government guaranteed advances: Advances under this category, though overdue
may be treated as NPA only when the Government repudiates its guarantee when
invoked. However, interest can be recognized only on recovery basis not on accrual
basis. State Government guaranteed advances would attract asset classification and
provisioning norms if interest and/or principal or any other amount due to the bank
remains overdue for more than 90 days.
Availability of security / Net worth of borrower/ Guarantor: The availability of

security or net worth of borrower/ guarantor should not be taken into account for the
purpose of treating an advance as NPA or otherwise, as income recognition is based on
record of recovery.
Post-shipment Supplier's Credit: To the extent Export Credit Guaranteed amount is

received from the EXIM Bank, the advance may not be treated as a nonperforming
asset for asset classification and provisioning purposes.
Ever greening: Rescheduling of a loan without assessing the viability of the activity
for the purpose of avoiding an account becoming NPA.
Provisioning norms:
Status Provision to be made

0.25% on Direct advances to agriculture and SME sectors.
Standard 1.00% on Commercial Real Estate
0.40% on all advances other than stated above.
Sub- 20% on unsecured exposures
Standard 10% on outstanding for all others
Unsecured portion: 100%
Secured portion: if asset remained in doubtful <= 1 year 20%
Doubtful
If asset remained in doubtful - 1 to 3 years 30%
If asset remained in doubtful > 3 year 100%
Loss At 100% on the outstanding
Unsecured Exposure is one where realisable value of tangible security, as assessed by

the bank/approved valuers/RBI inspecting officers, is not more than 10 percent,
abintio, of the outstanding exposure (funded and non-funded).
However, the following are the exempted categories from provisioning norms:
¾ Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life
policies.
¾ Advances granted under rehabilitation packages approved by BIFR / Term
lending institutions.
¾ Advances covered by CGTSI guarantee - No provision need be made towards
the guaranteed portion. The outstanding in excess of the guaranteed portion
should be provided.
¾ Advances covered by ECGC /DICGC guarantee - provision should be made
only for the balance in excess of the amount guaranteed by the Corporation.
***
61

Base Rate
Banks play a catalytic role in economic development by providing adequate credit to

the needy sectors on an ongoing basis. Besides availability of credit, its affordability
(Interest Rate) also plays a decisive role in determining the credit flow in the country.
Interest rates veering too high or dipping too low may spell a trouble to the credit
quality and ultimately be a cause of concern for financial stability of the banks as well
as for development of the country. Further, the lending rates of banks are expected to
conform to the changes in the Monetary Policy of RBI from time to time. The evolution
of Interest Rates on loans and advances in India can broadly be classified in to two
phases viz. Regulated and Deregulated regimes.
Regulated Interest Rate Regime: Till late 1980s, the interest rate structure on
loans and advances extended by commercial banks was largely administered by the
RBI and banks did not have any freedom to fix the interest on loan products,
irrespective of the nature of advance and the amount lent. Banks were simply advised
to follow the interest rate prescription of RBI, primarily to ensure the flow of adequate
credit to the desired productive sectors of the economy.
Deregulated Interest Rate Regime: RBI has initiated a number of steps to simplify
and rationalize the complex interest rate structure as well as to bring in transparency
in the loan pricing system.
Impact of Deregulated Interest Rates: The introduction of BPLR and deregulation

of interest rate was a major initiative taken by RBI to achieve the competitive loan
pricing in the market. Extending credit at BPLR implies that the borrower is AAA rated
and the associated risk is low. With increasing competition in the banking industry, the
BPLR lost its relevance as large chunk of bank lending to the commercial sector
happened at sub BMPLR rates i.e. around 7.50% as against average BPLR of 12.5%.
RBI report on BPLR reveals that more than two-thirds credit portfolio of the Banks
(excluding small loans and export credit) belongs to sub BPLR category and majority of
these loans pertains to Corporate Sector / Large Borrowers where as Retail and
Small borrowers continued to pay higher interest rates. Lending to Corporate Sector /
Large Borrowers at relatively low interest rates has a direct bearing on Yield on
Advances and Net Interest Margin (NIM) of the banks.
Interest Rate war among banks has caused unhealthy competition and led to
unwarranted low interest offerings to corporate/large borrowers, detrimental to the
interest of banks and stake-holders. Contrarily, banks are reluctant to revise BPLR
downwards in respect of retail loans despite reduction of key rates by RBI.
Base Rate:
In the above backdrop, RBI constituted a working group under the Chairmanship of
Shri. Deepak Mohanty to examine the related issues of BPLR and suggest a
transparent credit pricing mechanism with an objective to ensure effective
transmission of the Monetary Policy signals from time to time. The working group
suggested Base Rate in the place of existing BPLR, which is arrived, duly taking the
following components:
¾ Cost of Deposits / Funds

¾ Negative carry in respect of CRR and SLR
¾ Unallocatable Overhead Costs
¾ Average Return on Net Worth
Based on the Working Group recommendations, RBI issued guidelines to all banks to
announce Base Rate, duly taking the said criteria and directed the banks to price the
62

loans accordingly w.e.f. 01.07.2010. Under this system, banks cannot lend below
Base Rate except for certain categories such as Differential Rate of Interest (DRI)
advances, Loans to bank’s own employees, Loans to bank’s depositors against their
own deposits, Interest Subvention Schemes viz., Crop loans, Export credit and
Restructured loans. The final lending rates include the Base Rate plus variable or
product specific operating expenses, credit risk premium and tenor premium.
Banks are required to review the Base Rate at least once in a quarter with the
approval of the Board or the Asset Liability Management Committee as per the bank's
practice. Since transparency in the pricing of lending products is the key objective,
banks are required to exhibit Base Rate details to Branches, RBI and general public
through appropriate communication channels. The following scenarios were expected
on introduction of Base Rate.
Impact on Public Sector Banks: Cost of deposit constitutes the important

component of Base Rate and it crucially depends on the composition of low cost
deposits of the Bank. The Cost of deposit of Banks (Group-wise) is as under:
(Percentage)
Category 2007-08 2008-09
Public Sector Banks 5.40 5.60
Old Private Sector Banks 5.70 6.20
New Private Sector Banks 5.90 6.40
Foreign Banks 3.80 4.30
Scheduled Commercial Banks 5.40 5.70
(Source: Report on Trend and Progress of Banking in India 2008-09)
PSBs will have an edge over Private Sector Banks in offering a more competitive rate
as they have a larger deposit base which gives them access to low cost resources.
Further, PSBs are better placed with regard to access to the government/treasury
funds and thereby their cost of funds works out to be lower than Private Sector Banks.
Impact on Corporate Borrowings: On implementation of Base Rate, borrowing

funds from banks may cost more for some Corporate since the proposed rate might be
slightly higher by 50 to 100 basis points over the existing interest rate (sub BPLR).
This may warrant Corporate to look for alternate low-cost financing options such as
Commercial Paper, Qualified Institutional Placement, External Commercial Borrowing
etc., which could result in lower credit off-take of banks. However, PSBs with superior
treasury operations can partially offset competitive pressures in the short-term lending
segment by subscribing to the debt market issuances of Corporate.
Impact on Retail Segment: Reduction of interest rates by a minimum of 100 to 200

basis points for Retail borrowers since the Base Rate of the banks is estimated around
7.50% to 8.50% as against the average BPLR of 12.50%.
Impact on Macro Rates: The Base Rate of Banks should be in sync with macro rates
and Banks to effect changes in their Base Rate as and when there is a change in CRR,
SLR, Repo, Reverse Repo and Bank Rate. In the above backdrop, a need was felt to
introduce transparent and fair credit pricing mechanism to sustain Net Interest Margin
besides providing credit to the needy borrowers at reasonable interest rates.
Base Rate - Post implementation scenario: An analysis of data reveals that the
Base Rate arrived by the Banks is more herd in nature than adopting transparent and
scientific approach. Some of the observations made on Base Rate are as under:
¾ Base Rates of the Banks are in the range of 7.00% to 9.50%.
63

¾ SBI set the Base rate at 8.00% and all its subsidiaries fixed the rate at 8.25%.
¾ Majority of Public Sector Banks (other than SBI & Associates), have fixed the
Base Rate around 8.50 to 9.50%.
¾ SBI Base Rate is the lowest amongst PSBs on account of high composition of
low cost deposits.
¾ In the pre Base Rate scenario, the BPLR of Private Sector Banks was in the
range of 13.50% to 16.75%, where as it was in the range of 11.25% to
12.75% with regard to PSBs. Contrary to the trend, Private Sector Banks
announced their Base Rates much lower than SBI / PSBs.
Surprisingly, though the Cost of deposit of Private Sector Banks is high compared to
Public sector Banks, some Private Sector Banks have declared their Base Rate lower
than SBI/PSBs Base Rate. The reason for announcing low Base Rate by some banks is
to offer finer interest rate to blue chip corporate clients to retain their accounts,
besides garnering a market share in the corporate lending space post-Base Rate
regime also.
Banks continued to lend at the erstwhile sub BPLR rate with slight marginal changes to
most of the corporate clients even in the new system as they convenientely adjusted
their Base Rate to suit the requirements of their Large/Corporate Borrowers. This
aspect needs the attention of the Regulator to examine the methodology adopted by
these Banks in arriving at the Base Rate.
The maximum spread that banks used to levy on borrowers was 3.50% during BPLR
regime where as the present spread is in the range of 5% to 10% on most of the retail
segment loans, which is too high and unjustifiable.
It is expected that Banks whose Base Rate is low, should price their loan products
relatively low compared to banks having high Base Rate. Contrary to the
expectations, all banks have adjusted Spread in such a way that the effective interest
rates remain the same as that of pre Base Rate interest rates. Further, it is observed
that there is no transparency with regard to adoption of methodology by the banks in
arriving Base Rate.
Though, Banks announced Base Rate as directed by RBI, the purpose for which it is
introduced is not fulfilled since the interest rates on retail lending remains the same in
the post Base Rate regime also.
It is high time that RBI should ensure that banks adopt transparent Base Rate
methodologies especially with regard to calculation of Cost of deposits/funds and Un-
allocatable overhead costs. Further, there is an urgent need to have threshold limits on
spread to ensure appropriate pricing of loans with special reference to
Corporate/Large borrowers and also to enable the retail borrowers avail credit at
reasonable interest rates.
***
64

Risk Management - Basel-I, II & III
The growing sophistication in banking operations, online electronic banking,

improvements in information technology etc, have led to increased diversity and
complexity of risks being encountered by banks. These risks can be broadly grouped
into Credit Risk, Market Risk and Operational Risk. These risks are interdependent
and events that affect one area of risk can have ramifications for a range of other risk
categories. The New Capital Adequacy Framework has suggested various approaches
to the banks for calculation of capital charge under Credit, Market and Operational
Risk.
Basel-I Accord: It was introduced in India in the year 2002-03 in a phased manner,
covered capital requirements for Credit Risk. The Accord prescribed CRAR of 8% and
subsequently RBI increased the minimum CRAR to 9% in the year 2000. Basel
Committee has amended the accord in the year 1996 to incorporate capital charge for
Market Risk. RBI did not immediately introduce the capital charge for Market Risk as
per the above amendment for banks in India, instead prescribed an additional risk
weight of 2.5% on the investments portfolio of banks.
Basel-II New Capital Accord: In June 2004, Basel committee has come out with the
New Capital Adequacy Framework to be implemented by banks with effect from the
31.03.2007. Under the New Accord, banks have to maintain capital for Credit Risk,
Market Risk and Operational Risk. The New Capital Accord rests on three pillars viz.,
Minimum Capital Requirements, Supervisory Review Process & Market Discipline. RBI
suggested the following methodologies & time frame for the implementation of the
capital charge for various risk categories.
Risk Area Approach With Effect From

Credit Risk Standardized Approach 31.03.2008
Market Risk
Standardized Duration
For HFT & Others Method 31.03.2005
For HFT & Others + AFS 31.03.2006
Operational Risk Basic Indicator Approach 31.03.2008
Foreign banks operating in India and Indian banks having operational presence outside
India are to be migrated to the above selected approaches under the Revised
Framework with effect from March 31, 2008. All other commercial banks (except Local
Area Banks and Regional Rural Banks) migrated to these approaches under the
Revised Framework by March 31, 2009.
An analysis of the bank's CRAR under both Basel-I and Basel-II guidelines should be
reported to the Board at quarterly intervals. The minimum capital requirement
maintained by banks on implementation of the Basel-II guidelines shall be subjected to
a prudential floor which shall be higher of the following amounts:
Financial Year ending March`08 March`09 March`10

Prudential floor (as a % of minimum capital
requirement computed as per current Basel-I 100% 90% 80%
framework for credit and market risks)
The relevant periods shall be March 2009, 2010 and 2011 for banks implementing Basel
II from March 2009.
Recently, banks were advised to continue with the parallel run for a period of three
years, i.e. till March 31, 2013 and ensure that their Basel-II minimum capital
65

requirement continues to be higher than the prudential floor of 80% of the minimum
capital requirement computed as per Basel I framework for credit and market risks.
As per Basel-II norms, Banks are required to maintain minimum regulatory capital @ 9%
on an on ongoing basis. Banks are encouraged to maintain, at both solo and consolidated
level, a Tier-I CRAR of at least 6 per cent. The CRAR is computed as below:
Total Capital Funds (Tier I+ Tier II)

Risk Weighted Assets for (Credit Risk + Market Risk + Operational Risk)
Tier-I Capital includes a) Paidup Equity, Share Premium, Statutory Reserves, Other
disclosed Free Reserves, if any; b) Capital Reserves representing surplus arising out of
sale proceeds of assets; c) Innovative Perpetual Debt (limited upto 15% of Tier-I as on
31st March, last F.Y); d) Perpetual Non Cumulative Preference shares (limited upto
40% of Tier-I as on any point of time, this is inclusive of IPDI); e) Any other
instrument that may be specifically notified by RBI for inclusion in Tier-I from time to
time;
Tier-II Capital (Should not exceed 100% of Tier I Capital) includes a)

Revaluation Reserves (at a discount of 55% for inclusion in Tier II) b) General
Provision & Loss reserves (General Provisions on Standard Assets, Floating Provisions,
Provisions held for Country Exposures, Investment Reserve Account and excess
provisions which arise on account of sale of NPAs will be admitted as Tier II capital.
However, these five items will be admitted as Tier II capital up to a maximum of 1.25
per cent of the total risk-weighted assets); c) Upper Tier II Capital (Perpetual
Cumulative Preference Shares (PCPS), Redeemable Non-Cumulative Preference Shares
(RNCPS) and Redeemable Cumulative Preference Shares (RCPS)); d) Subordinated
Debts (Subject to progressive discount & limited to 50% of Tier I Capital); e) Excess of
IPDI/PNCPS, subject to overall Tier-II limits of 100% of Tier-I Capital.
However, Intangible assets and losses in the current period and those brought forward
from previous periods should be deducted from Tier I capital, DTA associated with
accumulated losses & DTA net of DTL, Gain-on-sale arising at the time of securitization
of standard assets, Minority interest that arise from consolidation of less than wholly
owned banks, securities or other financial entities, Capital charge on securitization
exposures (50% from Tier I & II) and Investments in financial subsidiaries, where
investment exceeds 30% (50% from Tier I & II) are to be deducted from capital.
Pillar-I Credit Risk - The New Accord introduces two Approaches for calculation of
capital charge for Credit Risk viz. Standardised Approach and the Internal Ratings
Based (IRB) Approach. Standardised approach involves grouping of the assets into
various categories for prescribing risk weights, which are as under:
i) Claims on Domestic Sovereign:
Claim Category Risk Weight

Direct exposures on Central Govt / State Govt 0%
Exposures to RBI, Credit Guarantee Fund Trust and DICGC 0%
Claims on ECGC/ guaranteed by ECGC 20%
Central Govt. guaranteed exposures 0%
State Govt. guaranteed exposures 20%
ii) Claims on Foreign Sovereign
S&P*/Fitch ratings AAA to AA A BBB BB to B Below B Unrated

Moody’s ratings Aaa to Aa A Baa Ba to B Below B Unrated
Risk Weight 0% 20% 50% 100% 150% 100%
66

iii) Claims on International Financial Institutions such as World Bank Group,
IBRD, IFC, Asian Devt Bank, African Development Bank, European Bank for
Reconstruction & Development, Inter-American Development Bank, European
Investment Bank, Nordic Investment Bank, Caribbean Development Bank, Islamic
Development Bank and Council for Europe Development Bank, the risk weight is 20%.
Claims on Banks incorporated in India / Foreign bank branches in India

All SCBs, RRBs, Local Area Banks Other than Scheduled Commercial
and Co-operative Banks Banks
Level of CRAR Investments within All other Investments within All other
(%) of the 10% limit (%) claims (%) 10% limit (%) claims (%)
investee bank
> 100% or the risk 20 > 100% or the risk 100
9 & above
weight$ weight
$as per the rating of the instrument or counterparty whichever is higher
6 to < 9 150 50 250 150
3 to < 6 250 100 350 250
0 to < 3 350 150 625 350
Negative 625 625 Full Deduction* 625
*Deduction should be made @ 50% each from Tier I & Tier II Capital
A banks aggregate investment in all types of instruments, eligible for capital status of
investee Banks/ FIs/ NBFCs/ PDs should not exceed 10 per cent of the investing bank’s
capital funds. The 10% limit will include Equity shares, Perpetual Non-Cumulative
Preference Shares, Innovative Perpetual Debt Instruments, Upper Tier II Bonds, Upper
Tier II Preference Shares (PCPS/RNCPS/RCPS), Subordinated debt instruments; and
any other instrument approved by the RBI as in the nature of capital. Any investment
in excess of the above limit shall be deducted at 50 per cent from Tier I and 50 per
cent from Tier II capital.
Claims on Foreign Banks

S & P*/ Fitch ratings AAA to AA A BBB BB to B Below B Unrated
Moody’s ratings Aaa to Aa A Baa Ba to B Below B Unrated
Risk Weight 20% 50% 50% 100% 150% 50%
iv) Claims on Corporates/Primary Dealers/Public Sector Entities/Asset

Finance Companies: The claims on Corporates will include all fund based and non
fund based exposures other than those which qualify for inclusion under the
“Domestic and Foreign sovereigns”, “Banks”, “Regulatory Retail”, “Commercial real
Estate”, “Specified Category” “residential mortgages”, and “NPA categories”.
Long Term Ratings - Approved Domestic Rating Agencies

Rating AAA AA A BBB BB & Below Unrated
Risk weight 20% 30% 50% 100% 150% 100%
Short Term Ratings

CARE CRISIL FITCH ICRA Risk Weights
PR1+ P1+ F1+ (Ind) A1+ 20%
PR1 P1 F1 (Ind) A1 30%
PR2 P2 F2 (Ind) A2 50%
PR3 P3 F3 (Ind) A3 100%
PR4 & PR5 P4 & P5 F4/F5(Ind) A4/A5 150%
Unrated Unrated Unrated Unrated 100%
For restructured unrated Corporate Accounts and for restructured Housing Loan
accounts, additional risk weights of 25% will be applicable.
67

v) Non resident Corporate & Foreign Public Sector Entities:
S & P*/ Fitch ratings AAA to AA A BBB to BB Below B Unrated

Moody’s ratings Aaa to Aa A Baa Below B Unrated
Risk Weight 20% 50% 100% 150% 100%
vi) Claims under Regulatory Retail portfolios – the risk weight is 75% subject to
fulfillment of the qualifying criteria viz.,
¾ Low value of individual exposures: Exposures upto ` 5 crores. All exposures

against a single party shall be reckoned as one.
¾ Orientation Criterion: Individuals, small business [any entity with less than
Rs.50 cr. Average annual turnover of last 3 years].
¾ Product Criterion: Revolving credits, lines of credits, Loans
¾ Granularity Criterion: Not more than 0.20% of overall Regulatory Retail
portfolio of the bank to one single counterparty;
Exposure means sanctioned limit or the actual outstanding, whichever is higher, for all
fund based and non-fund based facilities, including all forms of off-balance sheet
exposures. In term loans and EMI based facilities, exposures shall mean the actual
outstanding.
vii) Claims secured by Residential property - Based on sanctioned amount of loan

and Loan to Value Ratio.
I) If the exposure amount is >= 75 lacs (irrespective of LTV) 125%

II) If the LTV is 75% & below
For the exposures upto Rs. 30 lacs 50%
For the exposures above Rs. 30 lacs & < 75 lacs 75%
If the LTV is above 75% for exposures < 75 lacs 100%
In case of restructured exposures additional 25% RW shall be applied over
and above the respective rates.
LTV in respect of Housing Loans should not exceed 80%. (Exception for Priority sector
upto 90%).
viii) Non Performing Assets (NPAs):
Type Risk weights

Housing Loans
Accounts with specific provisions less than 20% 100%
Accounts with specific provision of at least 20% but less than 50% 75%
Accounts with specific provision of 50% and above 50%
Other Than Housing Loans
Accounts with specific provisions less than 20% 150%
Accounts with specific provision of 20% and < 50% 100%
Accounts with specific provisions of 50% and above 50%
In addition to the above, where a NPA is fully secured by the following forms of
collateral that are not recognised for credit risk mitigation purposes, either
independently or along with other eligible collateral a 100 per cent risk weight may
apply, net of specific provisions, when provisions reach 15 per cent of the outstanding
amount:
(i) Land and building which are valued by an expert valuer and where the valuation is
not more than three years old, and (ii) Plant and machinery in good working condition
at a value not higher than the depreciated value as reflected in the audited balance
sheet of the borrower, which is not older than eighteen months.
68

ix) Claims secured by Commercial Real estates – 100%
x) Specified Categories:
Venture Capital Funds 150%

Capital market exposures 125%
Consumer Credit (including personal loans & Credit card receivables) 125%
NBFCs (other than AFCs) 100%
Investments in paid up capital of non-financial entities, not 125%
consolidated for capital purposes
Investments in paid up capital of financial entities, not consolidated 125%*
for capital purposes
Investment in paid up equity of financial entities, specifically 100%
exempted from ‘capital market exposure’
*or as per external rating whichever is higher
xi) Other Assets:
Loans to banks' own staff which are covered by terminal benefits 20%
Loans to banks' own staff, not covered by terminal benefits 75%
All other assets 100%
xii) Off Balance Sheet Items: Exposure is multiplied by a Credit Conversion Factor,
CCF, to arrive at the Credit equivalent amount - Letter of Credit - 20%, Performance
BGs - 50%, Financial BGs -100%, Unconditional take-out finance - 100% and
Conditional take-out finance - 50%. The credit equivalent amount (exposure *CCF) will
be multiplied by risk weights. Risk weight as applicable to the counterparty or to the
purpose for which the bank has extended finance or the type of asset, whichever is
higher will be assigned.
Credit Conversion Factor on Undrawn/ Unutilized limits - Formal standby

facilities and credit lines with an original maturity of Up to One year- 20%, over one
year- 50%. Similar commitments that are unconditionally cancellable at any time by
the bank without prior notice or that effectively provide for automatic cancellation due
to deterioration in a borrower’s credit worthiness - 0%
Credit Risk Mitigation Techniques: Banks are required to adjust both the amount of
the exposure to the counterparty and the value of any collateral received in support of
that counterparty to take account of possible future fluctuations in the value of either,
occasioned by market movement. These adjustments are referred to as ‘haircuts’. The
‘haircut’ for the exposure will be a premium factor and that for the collateral will be a
discount factor. Collateral instruments, which are eligible for recognition are Cash (as
well as certificates of deposit or comparable instruments, including fixed deposit
receipts, Bullion and jewellery, Securities issued by Central and State Governments,
Kisan Vikas Patra and National Savings Certificates [with no lock in period], Life
insurance policies with a declared surrender value of an insurance company which is
regulated by an insurance sector regulator, Debt securities rated by a recognised
Credit Rating Agency with minimum investment grade and Units of Mutual Funds
ii) Internal Ratings Based (IRB) Approach: Under this approach, banks must
categorise the exposures into broad classes of assets as Corporate, Sovereign, Bank,
Retail and Equity. The risk components include the measures of the Probability of
Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective
Maturity (M). Under this approach, there are two variants i.e Foundation IRB (FIRB)
and Advanced IRB. Under FIRB, banks have to provide their own estimates of PD and
to rely on supervisory estimates for other risk components (like LGD, EAD) while under
Advanced IRB; banks have to provide their own estimates of all the risk components.
69

This approach is based on the measures of Expected Losses (EL) and Unexpected
Losses (UL). Expected Losses are to be taken care of by way of pricing and
provisioning while the risk weight function produces the capital requirements for
Unexpected Losses. IRB approach is further classified into Foundation and Advanced
Approaches.
II. Market Risk: It is a risk pertaining to the interest rate related instruments and
equities in the Trading Book i.e AFS (Available For Sale) and HFT (Held for Trading)
positions and Foreign Exchange Risk (including open positions in precious metals)
throughout the bank (both banking & trading books). There are two approaches for
measuring market risk, which are as under:
i) Standardised Duration approach: The minimum capital charge is expressed are -

Specific Risk is akin to credit risk and the capital charge for specific risk is designed to
protect against the adverse movements in the price of an individual security owing to
factors related to the individual issuer. General Market Risk charge is designed to
capture the risk of loss arising from changes in the market interest rates. The capital
charge for Market Risk will be the sum of the capital charges for Specific Risk & the
General Market Risk. Capital charge for specific Risk is to be calculated based on the
charge relevant to the nature of the investment (based on residual maturity for
Banks). The capital charge for General Market Risk is to be calculated based on the
Market Value, Modified Duration & assumed change in the yield of each individual
security.
ii) Internal Models Approach (IMA): Under IMA, banks have to move over to Value
at Risk (VaR) method for calculating the capital charge for market risk instead of
Modified Duration used in Standardised approach. RBI has already specified the time
line for implementation of IMA. Banks are gearing themselves up to meet the data and
software requirements of the advanced approach.
Operational Risk: Banks have to maintain capital charge for operational risk under
the new framework and the approaches suggested for calculation of the same are:
i) Basic Indicator Approach: Under this approach, banks must hold capital equal to
15% of the previous three years average positive gross annual income as a point of
entry for capital calculation.
ii) The Standardised Approach: Under this approach, banks’ activities are divided
into eight business lines. The capital charge for each business line is calculated by
multiplying the gross income by a factor (denoted by beta) assigned to that business
line. The total capital charge is calculated as the three year average of the simple
summation of the regulatory capital charges across each of the business lines in each
year. The details of the business lines and the beta factors are as under –
Business Line Beta Factor

Corporate Finance(β1)/Trading & sales(β2)/Payment & Settlement(β5) 18%
Commercial Banking (β4) / Agency Services (β6) 15%
Retail Banking (β3) / Asset Management (β7) / Retail brokerage (β8) 12%
iii) Advanced Measurement Approach (AMA): For adopting this approach,

supervisory approval is a must. Under this approach, the regulatory capital
requirement will equal the risk measure generated by the bank’s internal operational
risk measurement system using certain quantitative and qualitative criteria. Tracking
of internal loss event data is essential for adopting this approach. When a bank first
moves to AMA, a three-year historical loss data window is acceptable. The capital
requirement would be substantially lower if we adopt AMA based historical loss data.
RBI advised all banks to maintain capital charge for Operational Risk as per the Basic
Indicator Approach.
70

Pillar 2 – Internal Capital Adequacy Assessment Process (ICAAP): Under this,
the regulator is cast with the responsibility of ensuring that banks maintain sufficient
capital to meet all the risks and operate above the minimum regulatory capital ratios.
RBI also has to ensure that the banks maintain adequate capital to withstand the risks
such as Interest Rate Risk in Banking Book, Business Cycles Risk, and Credit
Concentration Risk etc. For Interest Rate Risk in Banking Book, the regulator may
ensure that the banks are holding sufficient capital to withstand a standardized
Interest Rate shock of 2%. Banks whose capital funds would decline by 20% when the
shock is applied are treated as ‘Outlier Banks’. The assessment is reviewed at
quarterly intervals.
Pillar 3 – Disclosure Requirements: It is aimed to encourage market discipline by

developing a set of disclosure requirements which will allow market participants to
assess the key pieces of information on the capital, risk exposures, risk assessment
processes and hence the capital adequacy of the institution. Banks may make their
annual disclosures both in their Annual Reports as well as their respective websites.
Banks with capital funds of ` 500 crore or more, and their significant bank subsidiaries,
must disclose their Tier-I Capital, Total Capital, total required capital and Tier-I ratio
and total capital adequacy ratio, on a quarterly basis on their respective websites. The
disclosures are broadly classified into two categories viz., Quantitative disclosures and
Qualitative disclosures and classified into the following areas:
Area Coverage
Capital Capital structure & Capital adequacy
Risk Exposures & Qualitative disclosures for Credit, Market, Operational,
Assessments Banking Book interest rate risk, equity risk etc.
General disclosures for all banks.
Credit Risk
Disclosures for Standardised & IRB approaches.
Credit Risk Mitigation Disclosures for Standardised and IRB approaches.
Securitisation Disclosures for Standardised and IRB approaches.
Disclosures for the Standardised & Internal Models
Market Risk
Approaches.
Operational Risk The approach followed for capital assessment.
Equities Disclosures for banking book positions
Interest Rate Risk in Nature of IRRBB with key assumptions. The increase /
the Banking Book decrease in earnings / economic value for upward /
(IRRBB) downward rate shocks.
Time lines for implementation of Advanced Approaches by Indian Banks:
Risk Area Approaches Earliest date RBI date
Internal Rating Based (IRB) Approaches
Credit Risk viz., Foundation and Advanced 01.04.12 31.03.14
Market Risk Internal model Approach (IMA) 01.04.10 31.03.11

The Standardized Approach (TSA)
01.04.10 30.09.10
Operational
Risk Advanced Measurement Approach (AMA)
01.04.12 31.03.14
The existing norms of Basel-II are much better than Basel-I since it covered
operational risk. However, risks such as Reputation Risk, Systemic Risk and Strategic
Risk (the risk of losses or reduced earnings due to failures in implementing strategy)
are not covered and exposing the banks to financial shocks. As per Basel all corporate
loans attracts 8 percent capital allocation where as it is in the range of 1 to 30 percent
in case of individuals depending on the estimated risk. Further, group loans attract
very low internal capital charge and the bank has a strong incentive to undertake
regulatory capital arbitrage to structure the risk position to lower regulatory risk
71

category. Regulatory capital arbitrage acts as a safety valve for attenuating the
adverse effects of those regulatory capital requirements that activity’s underlying
economic risk. Absence of such arbitrage, a regulatory capital requirement that is
inappropriately high for the economic risk of a particular activity could cause a bank to
exit that relatively low-risk business by preventing the bank from earning an
acceptable rate of return on its capital.
Nominally high regulatory capital ratios can be used to mask the true level of
insolvency probability. For example – Bank maintains 12% capital as per the norms
risk analysis calls for 15% capital. In a regulatory sense the bank is well capitalized
but it is to be treated as undercapitalized from risk perspective.
In the above backdrop, deliberations took place on further improvement of the existing
Basel norms to protect the economies from financial meltdowns, which has led to
Basel III norms. Fundamentally, the new standards will considerably strengthen the
reserve requirements, both by increasing the reserve ratios and by tightening the
definition of what constitutes capital. It will more than triple the amount of capital that
banks must hold in reserve to absorb losses, in order to force them to maintain a
larger cushion against potential losses. The important covenants of Basel-III are:
i) Core Capital: To protect the banks and financial institutions from the unexpected
crisis, it is decided to strengthen the existing system by focusing on core capital. The
suggested core tier-I capital ratio would be around 4.50% to 7.00% as against about
2% under Basel II accord. The core ratio will have to be in the form of retained
earnings/shares.
ii) Capital Conservation Buffer: A new buffer that will sit on top of tier-1 capital. If
a bank fails to stay above the buffer, it faces restrictions from regulators on payouts
such as bonuses, dividends and share buybacks. Size of buffer expected to be set at 2
to 2.50% but unclear what quality of capital will be required.
iii) Counter Cyclical Buffer: A new buffer banks will have to build up if regulator
observes excessive credit levels in the broader economy. It could be tapped when the
economy turns sour and sparks losses on bank loans on account of business cycles.
This buffer expected to be set at 2.50%.
Basel-III – Capital Framework (%)
Core Tier-I Capital
Category Total capital
Core Capital Tier-I Capital
i) Minimum 4.5 6.0 8.0
ii) Conservation Buffer 2.5
Sub-total (i + ii) 7.0 8.5 10.5
iii) Counter Cyclical Buffer 2.5
Total (i + ii + iii) 9.5 11.0 13.0
Basel-III proposes to increase Core Tier-1 capital, the least risky form of capital, from
2% to 7% of their risk-weighted assets. Taking conservation buffer and counter
cyclical buffer in to account, banks will need to maintain 13% capital of which Tier-1
capital is expected around 11%. The new norms also introduce a Tier-1 leverage ratio
of 3%, which would limit banks to lending 33 times of their capital, which represents a
cap on bank risk irrespective of the impact from the higher capital numbers. Though
this ratio, intended as a backstop to the risk-based measures, is targeted to be
achieved only by 2018, the banks will need to disclose their leverage ratios from 2015.
The deadline set for implementation of Basel-III norms is much longer period.
Surprisingly, the developing countries like India expressing the readiness to implement
Basel-III norms where as developed nations prefer to put in to action in phased
manner by 2018. It is interesting to observe how things will evolve in the ensuing
years. Let us wait and watch.
72

Important Concepts
Credit Risk: The risk that arises due to the inability or unwillingness of a borrower to
meet the commitments relating to payment of loan installments or interest or both is
called as Credit Risk. This is also known as default risk. Deterioration in credit quality /
reduction in portfolio value on account of deterioration in credit quality are the other
forms of credit risk.
Market Risk: This is the risk that arises because of the adverse changes in the
interest rates, foreign exchange rates, equity prices, commodity prices etc. Even a
small change in these rates may lead to / result in substantial change in banks’ income
depending on the exposures they have taken.
Operational Risk is the risk of loss resulting from breakdown in systems and
controls, inadequate or inappropriate systems, losses on account of human failures /
negligence etc. The breakdowns in systems and controls may lead to frauds,
forgeries, delays and result in financial loss and loss of reputation.
Liquidity Risk arises when banks use their short term liabilities like CD, SB, short
term deposits etc for sanctioning long term loans & advances or for investing in long
term bonds etc. This risk exposes the banks to problems in making payment of short
term liabilities and disbursal of loans sanctioned, as short-term funds mobilized are
used for long-term assets.
Technology Risk can arise on account of programming errors, failure of networks,

backup/disaster recovery systems etc. The risk may also arise due to technology
obsolescence, usage of untested technology, staff inability to respond to new
technology, non-alignment of technology with the business needs etc.
Country Risk arises when there is a possibility that a country will be unable to service
or repay its debts to foreign lenders in a timely manner. It may arise on account of
various risks like Transfer Risk, Political Risk, Cross Boarder Risk, Currency Risk etc.
Sovereign Risk arises on account of lending to government of a sovereign nation or

by taking government guarantees. This risk lies in the fact that sovereign entities may
claim immunity from legal process or might not abide by a judgment, and it might
prove impossible to secure redress through legal action.
Legal Risk can arise due to the possibility of the actions of a bank not in conformity
with the laws of a country.
***
73

Banking Codes and Standards Board of India (BCSBI)
RBI has taken initiatives in setting up of BCSBI with an objective of evolving standards
for bank services to depositors, borrowers and common persons at affordable and
reasonable price and monitoring the same in effective manner. It covers all the
products and services listed below:
¾ Deposit Accounts (Current / Savings / Recurring / Term / PPF)
¾ Collection of cheques, Lockers, Safe custody services
¾ Remittances (DD/PO/TT/NEFT/RTGS), Government transactions and Pension

payments
¾ Demat Accounts, Equity and Government Bonds
¾ Loans and Advances
¾ Foreign Exchange / Money Changing
¾ Card products (Credit / ATM / Debit / Smart)
It is an independent and autonomous watchdog to monitor and ensure that the

services are delivered as promised. Banks are required to register themselves with
BCSBI as members and have the code of commitment to customers adopted by their
respective Boards. Recently (August 2009) BCSBI has revised “The Code of Bank’s
Commitment to Customers” and the important changes are as under:
¾ Advise the customer about change in minimum balance to be maintained in

Savings / Current accounts 30 days in advance during which period, no
charges will be levied for non-maintenance of the higher minimum balance
prescribed.
¾ Provide an option to customer for giving nomination at the time of account

opening itself with due acknowledgement. On request from the depositor
name of the nominee will also be indicated on the Passbook / Term Deposit
Receipt.
¾ Acknowledge receipt of loan applications and convey in writing the reasons

for rejection of loan.
¾ Provide repayment schedule to the borrower.
¾ Return all documents / securities title deeds to mortgaged property to the

borrower within 15 days from the full payment of the dues, without waiting
for request from the borrower.
¾ Compensate the customers for delayed collection of cheques without waiting

for a request from customer.
¾ Take steps to reimburse erroneous debits arising out of failed ATM

transactions within 12 working days of receipt of a complaint.
¾ No charges will be levied for activation of a inoperative account.
74

¾ Do not insist that insurance cover for securities lodged should be obtained
from a particular Insurance Company.
¾ In case a credit facility / credit card is issued without customer’s consent

and charges levied for the same would be reversed along with
compensation.
In view of guidelines, Banks are required to make necessary changes in certain policy
and procedural aspects around their products and services.
Individual customers can report the code violations to BCSBI. This code will be
reviewed within a period of three years. The review will be undertaken in a transparent
manner.
Fair Practices code for Lender’s liability
RBI issued broad guidelines to be adopted by banks while dealing with credit
proposals. Loan application forms should be comprehensive to include information
about rate of interest, interest application intervals, penal interest, processing charges,
up-front fee, prepayment charges etc. Loan applications are to be processed within
reasonable time and communicate the terms and conditions in writing to the
borrowers. Banks should give notice to the borrower about the subsequent changes in
interest rate / charges, if any.
Credit Card - Fair practices
RBI constituted “Working Group on Regulatory Mechanism for Cards” to look into credit
card related complaints and suggest regulatory measures to encourage growth of
cards in a safe, secure and efficient manner. As per the guidelines, all credit card
issuers should provide Most Important Terms and Conditions (MITC) to customers and
prospective customers. MITC should include information such as admission fee; cash
advance charges, default charges, annualized percentage rate and grace period.
Further, card issuers should maintain “Do Not Call Registries” and should not provide
unsolicited calls / SMS / Cards / Credit facilities unilaterally. Card issuing banks are
responsible for any omission or commissions of their agents
(Sales/Marketing/Recovery agents).
Selling third party financial products/services
Of late, all banks are undertaking selling of Mutual Funds and Insurance policies of
other institutions to their customers to earn other income. In order to curb mis-
selling of financial products and services and ensure transparency, RBI advised banks
to disclose to their customers details of the commissions and other fees received by
them while selling Mutual Funds and Insurance policies of other Banks/Institutions.
***
75

Right to Information Act 2005
The Government of India has enacted the Right to Information Act, 2005, which has
come into effect from October 12, 2005. This Act is meant to give to the citizens of
India access to information under control of public authorities to promote transparency
and accountability in these organizations. However, this mechanism is meant for
seeking information only and not for making complaints.
Under this Act, Citizens of India will have the right to make the request for information
in writing, clearly specifying the information sought. The application should accompany
a fee of Rs.10/- either in cash or DD/PO. The application for request should give the
contact details (postal address, telephone number, fax number, email address) so that
the applicants can be contacted for clarifications or the information. All organizations
are required to appoint Chief Public Information Officer to deal with requests for
information. Hence, Banks also obliged to provide the following information to
members of public on request.
¾ The particulars of the organization, functions and duties.
¾ The powers and duties of its officers and employees.
¾ The procedure followed in the decision making process, including channels of

supervision and accountability.
¾ Norms set by the Bank for the discharge of its functions.
¾ Rules, regulations, instructions, manuals and records, held by the Bank or

under its control or used by its employees for discharging its functions.
¾ Particulars of any arrangement that exists for consultation with, or

representation by, the members of the public in relation to the formulation of
its policy or implementation thereof.
¾ List of Boards, Councils, Committees and other bodies consisting of two or more
persons constituted as its part or for the purpose of its advice, and as to
whether meetings of those boards, councils, committees and other bodies are
open to the public, or the minutes of such meetings are accessible for public.
¾ A directory of its officers and employees.
¾ Monthly remuneration received by its officers and employees, including the

system of compensation as provided in its regulations.
¾ The budget allocated to each of its agency, indicating the particulars of all
plans, proposed expenditures and reports on disbursements made.
¾ Particulars of recipients of concessions, permits or authorizations granted.
¾ Details in respect of the information, available to or held by it, reduced in an

electronic form.
The Right to Information Act, 2005 under Sections 8 and 9 exempt certain categories
of information from disclosures. These include –
¾ Disclosure of which would prejudicially affect the sovereignty and integrity of

India, the security, strategic, scientific or economic interests of the State.
¾ Relation with foreign State or lead to incitement of an offence.
76

¾ Information which has been expressly forbidden to be published by any court of
law or tribunal or the disclosure of which may constitute contempt of court.
¾ Disclosure of which would cause a breach of privilege of Parliament or the State

Legislature.
¾ Information including commercial confidence, trade secrets or intellectual

property, the disclosure of which would harm the competitive position of a third
party, unless the competent authority is satisfied that larger public interest
warrants the disclosure of such information.
¾ Information available to a person in his fiduciary relationship, unless the

competent authority is satisfied that the larger public interest warrants the
disclosure of such information.
¾ Information received in confidence from foreign Government.
¾ Disclosure of which would endanger the life or physical safety of any person or
identify the source of information or assistance given in confidence for law
enforcement or security purposes.
¾ Information which would impede the process of investigation or apprehension

or prosecution of offenders.
¾ Cabinet papers including records of deliberations of the Council of Ministers,

Secretaries and other officers.
¾ Information which relates to personal information the disclosure of which has

no relationship to any public activity or interest, or which would cause
unwarranted invasion of the privacy of the individual.
Under the Act, the citizen has the right to appeal if he is not satisfied with the
information provided by the organization or its decision not to provide the information
requested. In case where he is not satisfied with Appellate Authority, he can appeal to
Central Information Commission.
Role of Banks under RT Act:
All Public Sector Banks are covered under this act and they are required to furnish the
information sought by the citizens of India.
Branch Managers are designated as Central Assistant Public Information

Officers (CAIPO) and they have to forward the requests received to the Zonal
Managers concerned, who are designated as Central Public Information Officers
(CPIO). The ultimate responsibility lies with CPIO to get the matter expedited within
stipulated time of 30 days. While disposing off the request under RTI Act, CPIO is
required to mention clearly the time limit of 30 days and address of the Appellate
Authority to the complainant. The Appellate Authority is the Senior Central Public
Information Officer, who will be one of the General Managers at Head Office.
***
77

SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST ACT – 2002 (SARFAESI)
SARFAESI enables the banks to seize and sell the properties secured to the bank
without the intervention of courts resulting in realization of the amount due in NPA
accounts and reduction of NPAs.
Securitisation means acquisition of financial assets by any securitisation company or

reconstruction company from any originator, whether by raising of funds by such
securitisation company or reconstruction company from qualified institutional buyers
by issue of security receipts representing undivided interest in such financial assets or
otherwise.
Security Interest means right, title and interest of any kind whatsoever upon
property, created in favour of any secured creditor (Bank) and includes any mortgage,
charge, hypothecation, assignment other than those specified in Sec.31 of the Act.
Enforcement of secured interest means seizure and sale of the properties secured
without intervention of the court.
Procedure: As per the act, officers with a rank of Chief Manager and above are
empowered to act as Authorized Officer to initiate proceedings which includes issue
of notices, taking possession of the property and sale of property. Branches have to
identify the NPA account borrowers to whom the notices are to be issued under Sec.
13(2) of the Act. However, the following are the exceptions provided under Sec.31 of
the SARFAESI Act:
¾ Where the outstanding liability in the account does not exceed Rs 1.00 lakhs
¾ Any security interest created in agriculture land
¾ Pledge of movables / Lien on any goods
¾ Amount due is less than 20% of the principal amount and interest
¾ Creation of Security Interest in any Air Craft / Vessel
¾ Any conditional sale, hire purchase or lease or any other contract in which no
security interest is created
¾ Any right of unpaid seller / Any properties not liable for attachment /sale under
section 60 Civil Procedure Code.
The prerequisite should be that such notice should be issued one month after
identification of NPA. Notice should be issued to borrower/mortgagor advising them to
pay the entire amount due with in 60 days from the date of receipt of the notice. If the
borrower is a body corporate notice shall be sent to registered office or any of the
branches. If there are more than one borrower notice shall be sent to each one of
them. If the borrower avoids notice, the same may be served by publishing in two
leading Newspapers (English and Vernacular language). On expiry of 60 days notice
period and on default of the payment, possession shall be taken of the property
mentioned in Sec.13 (2) notice and the notice of the same shall be give to the
borrower and general public. If the possession is handed over by the borrower without
any resistance, the following procedure should be adopted.
¾ If possession of immoveable property is taken the same has to be published in

two newspapers – English and vernacular Language.
¾ The Possession of moveable property may be taken by taking inventory in the
presence of two witnesses.
¾ Authorized Officer shall keep the property either in his own custody or in the
custody of any person authorized or appointed by him who shall take as much
care of the property in his custody as an owner of the property. Insurance of
secured assets and their valuations are to be done before sale of seizure of
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secured assets. Security agents can be engaged while seizing the secured
assets.
¾ Authorized Officer may sell the secured assets of which the possession is taken
by obtaining quotations from the parties; by inviting tenders from the public;
by holding public auction; by private sale.
¾ If sale is by inviting tenders from the public or public auction the same has to
be published in two news papers viz., English and another in Vernacular
language.
¾ Sale can be affected only after issuing 30 days notice to the borrower /
mortgagor. If the property is subject to speedy decay the Authorized Officer
may sell it immediately.
¾ The authorized Officer cannot sell the property less than the reserve price.
¾ If the entire liability of the bank is not cleared after affecting the measures
under the Act, the bank is to file a suit or application before the court or DRT
for recovery of the balance amount of loan.
¾ In the accounts where the borrower failed to honour his commitment under the
compromise/OTS, then compromise/OTS permitted should be withdrawn before
initiating action under the Ordinance.
In case of resistance from the borrower to hand over the possession of assets, such
resistance should be recorded in the presence of two witnesses and application should
be made under Sec.14 of the act to Chief Metropolitan Magistrate/Dist. Magistrate
seeking their assistance for taking possession of secured assets.
Banking Ombudsman (BO) Scheme started in July 1995 but revamped in the 2006
to enlarge its extent and scope of the authority and functions to specifically cover
redressal of grievances against deficiency in banking services, including a variety of
banking products / services, such as loans and advances, credit cards, non-payment /
inordinate delay in the payment or collection of cheques, drafts, bills, issue of draft to
customers, non-adherence to the prescribed working hours by branches etc. BO
undertakes the cases where the value of dispute does not exceed Rs.10 lakhs. Under
the scheme the complainants will be able to file their complaints in any form including
online i.e. email. Currently BO offices are functioning at 15 offices across the country.
Normally, the territorial jurisdiction is limited to one state. The complainant is required
to take up the matter with the concerned branch for redressal of the grievance and
wait for 30 days. If it is not addressed in time he can approach the BO. He should not
have filed a complaint before any other forum or court or consumer forum or arbitrator
on the same subject matter and be pending when he approaches the B.O. The
complaint will be processed without any fee. On receipt of the complaint, notice will be
sent to the bank advising the bank to settle the grievance within fifteen days from the
date of receipt of the notice or else submit version and also attend a conciliation
meeting at the office of the BO. If the grievance is not settled by conciliation, it will be
taken up for passing an award. The complainant will have to accept award within
fifteen days of receipt of the award. The time limit for implementation of award is 30
days from the date of such receipt of acceptance letter. However, Bank can file a
review petition before Reviewing Authority i.e. Deputy Governor of RBI.
Compensation for mental agony, reputation loss will become a matter of subjectivity
and will not be considered as per the provisions of the Scheme.
***
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Banks & Outsourcing
Outsourcing has become the latest mantra for companies to stay ahead of competitors
in this highly competitive business environment. Banks too are not lagging behind in
this latest mania. The increasing competition in the banking sector has forced banks to
protect their eroding margins by retaining their customers by providing value-added
services through outsourcing. Banks use third parties (either an affiliate entity within a
corporate group or an entity external to corporate group) to perform the following
activities:
¾ Opening / closing of accounts.

¾ Issue and processing of Cheques.
¾ Managing of Customer queries (Call centres).
¾ Recruitment, Selection and Training of Personnel.
¾ Administration of Payroll and Taxation.
¾ Marketing of bank products.
¾ Maintaining of Computer and other electronic gadgets.
¾ Cross Selling of Bank Products like Insurance and Mutual Funds.
¾ Credit Card and Debit Card queries.
¾ Maintenance of ATMs / Hardware / Software / Data Centres / Call Centre
However, there are numerous risks involved in the process of outsourcing to a third
party, as it requires a complete security mechanism to deal with the voluminous
amount of data that they have with them.
RBI Guidelines:
¾ Banks should frame and place a comprehensive outsourcing policy approved by

Board. The contract between the banker and the service provider on
outsourcing should be in writing and the agreement should be legal. Banks
have to exercise due diligence while appointing third parties to carry out
banks’ non-core outsourcing activities.
¾ Banks have to construct managerial structure for monitoring and regulating the
outsourcing activities. It is imperative to the banks to ensure sound, effective
and responsive risk management practices to overcome various risks such as
strategic, reputation, country, and compliance / counter party risk.
¾ Banks cannot outsource the core management functions like Corporate

planning, Organizing, management, control and decision making functions like
complying KYC norms for opening deposit account, sanctioning loans and
managing portfolio.
¾ Outsourcing contracts should include contingency plans to ensure disaster

recovery and Business continuity. Banks should consider alternative service
provider or to bring activity back in process during emergency. The Outsourcing
work should be audited by the internal auditor or outside agency.
¾ The recovery agents should adhere to the instructions of fair practices code.
The service providers should not harass or ill-treat the customers.
¾ Banks should constitute grievances redressal machinery which should resolve

the problems faced by the customers. A time limit of 60 days should be given
to the customers for filing a complaint.
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¾ Bank should limit and restrict the access of customer information to service
provider in order to ensure protection and preservation of security and
confidentiality of customer information. Bank should also review, monitor the
security practices and control processes of service providers at regular basis.
Doorstep Banking:
Extending Banking services like pick up of cash, instruments and delivery of cash and
demand drafts to Corporate Customers / Government Departments / PSUs / Individual
Customers at their place through Employees and Agents is called Doorstep Banking.
Where banks engage the services of Agents for delivery of services, it should be
ensured that the policy approved by the Board lays down the broad principles for
selection of Agents and payment of fee/commission etc. The other guidelines are:
¾ Cash collected from the customer should be acknowledged by issuing a

receipt on behalf of the bank. Cash collected from the customer should be
credited to the customer’s account on the same day or next working day,
depending on the time of collection
¾ Cash delivery services may be offered to the above mentioned customers
against receipt of cheque only. No such facility, however, shall be made
available to individual customers.
¾ Doorstep services should be offered only to KYC compliant customers.
¾ The agreement/ contract with the customer shall clearly specify that the
bank will be responsible for the acts of omission and commission of its
‘agent’.
¾ The charges should be prominently indicated on brochures.
It is a win-win situation for both customers and banks. Outsourcing helps not only in
focusing on the core activities, but also reduces the total cost of ownership by reducing
the capital investment in developing infrastructure. Service providers also offer
economies of scale because they cater to the whole gamut of the outsourcing services
of various banks or companies.
Relying too much on the third party can also lead to leakage of confidential information
of clients. Such leakage can result in severe damage to the bank’s reputation. Banks
should also have realistic expectations from service providers because overestimation
of the economic benefits can put single service providers in trouble.
Future Outlook:
Outsourcing in the financial sector is in its nascent stage, but it has a promising and
bright future ahead. To make the outsourcing industry more vibrant and competitive
and to overcome the issues associated with it, proper participation is required from the
government, academic, and industry sectors. For IT, banking is considered to be the
second largest segment, next to manufacturing. So, there is a huge potential for the
third party outsourcing service providers in the banking segment. The industry needs
to move up the value chain, and infrastructure bottlenecks and data security issues
must be resolved. All these measures will help the banking industry to unleash its full
potential for outsourcing.
***
81

Banks & Mergers
In the post reform era, Recapitalization of Banks is an urgent need, which can be
attained either through Budgetary Allocation or Approaching to Capital Market. Since
the first option is ruled out, Banks are forced to go to market for additional funds. It is
difficult for weak banks to mobilize funds from market in the present scenario. As per
the existing policy of the Government, Public Sector Banks are not allowed to dilute
equity beyond 51%, thereby the chances for raising funds from market are limited.
Hence, Merger of Banks has attained focused attention in the recent years.
Narasimham Committee also envisaged 3 or 4 large banks of international character
and 8 to 10 banks with a network of branches throughout the country engaged in
Universal Banking.
The following Mergers & Acquisitions took place during the last one decade, which can
be broadly classified into two categories viz., Compulsive/Forced Mergers and
Synergy-Driven Mergers.
Compulsive/Forced Mergers:
¾ New Bank of India with Punjab National Bank

¾ Nedungadi Bank with Punjab National Bank
¾ Global Trust Bank Limited with Oriental Bank of Commerce
Synergy Driven Mergers:
¾ Bank of Punjab with Centurion Bank

¾ Lord Krishna Bank with Centurion Bank
¾ Centurion Bank with HDFC Bank
¾ Times Bank with HDFC Bank
¾ IDBI Bank Limited with IDBI
¾ United Western Bank with IDBI
¾ Bank of Madura with ICICI Bank
¾ SCICI with ICICI Bank
¾ Angram Finance with ICICI Bank
¾ ITC Classic with ICICI Bank
¾ Sangli Bank with ICICI Bank
¾ Bharat Overseas Bank with Indian Overseas Bank
¾ Bank of Tamilnadu with Indian Overseas Bank
¾ Bank of Thanjavur with Indian Bank
¾ Sikkim Bank with Union Bank of India
¾ State Bank of Saurastra with State Bank of India
¾ State Bank of Indore with State Bank of India
The arguments in favour of Mergers are as under:
a) Economies of Scale: In order to enhance the value of the stake holders, banks
need to focus their attention on profitability, which can be attained by adopting High
Volume – Low Margin – High Profit strategy through cost effective delivery
channels, which is possible through Mergers & Acquisitions.
b) Cost effective operations: The large scale operations enable the banks to bring
down the operation costs substantially thereby it facilitates to offer better rates to
customers.
c) Capital Base: Banks can undertake lending activities based on the capital base.
The bigger banks with huge capital base are able to offer loans to borrowers at
attractive rates. Banks now face tougher competition from the international banks and
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are vulnerable to economic shocks and political instability, which needs to be
addressed through strengthening of capital base. This is possible only through Mergers
& Acquisitions. Mergers enable the Banks to strengthen the capital base to comply with
Basel-II norms, which is the need of the hour.
d) Diversified Activities: The improvement in capital will enable the banks to take
up new and diversified activities, such as financing equity underwriting, distributing
investment and insurance products, issuing asset-based securities and providing new
delivery channels for their products.
e) Risk Spread: Mergers enable the banks to extend the business to various
segments at many locations across the country/globe. Hence, the risks are spread
across various regions and segments, which protect the Banks from adverse Business
Cycles and unexpected financial crisis.
However, the following areas are required to be addressed for smooth process Mergers
in the Indian Banking Industry.
a) Realistic & Scientific evaluation: The evaluation of Banks is an critical activity

since it involves, both financial and human assets. Attention must also be paid to
evolving more realistic and transparent accounting standards.
b) Identity & Cultural issues: There are bound to be problems of corporate culture,
values and approach. Integrating work forces is always a tough task, and any
incompatibility in the process may result in gross inefficiencies, defeating the very
objective of merger.
C) Change Management: Managing the merged entity by the management teams

drawn from two different banks is really a herculean task. Improving the quality of
management is yet another challenge for banks. Banks need to enhance management
effectiveness.
d) Human Assets: Human resources are another sensitive issue on the road to
consolidation. Mergers make the some of the workforce redundant; and banks are
forced to undertake large-scale redeployment exercise for effective use of human
resources.
To survive in the present competitive market, banks need to improve the operational
efficiency which includes cost efficiency and profit efficiency, which is possible only
through economies of scale. Similarly, size offers greater maneuverability in enhancing
business volume and productivity. Further, presence in large geographical area paves
the way to reduce portfolio risk on the asset side and lowering of funding risk on the
liability side. However, Banks can reap the benefit of consolidation only when the
issues such as redeployment of surplus staff, integration of technology platforms,
Systems & Procedures and Cultural issues are addressed suitably.
The recent merger of State Bank of Saurastra and State Bank of Indore with State
Bank of India has unveiled the Merger process among Public Sector Banks, and many
more may follow the suit. It is time to look for Synergy Driven Mergers rather than
Compulsive/Forced Mergers, which will be win-win situation to all the stakeholders.
***
83

Current Topics – Banking & Finance
Core Banking Services (CBS): It is an integrated solution where entire data of

branches is stored in a central server and all the transactions of the branches will be
done through this server. Under CBS, branches would be doing only the transaction
entries and processing will be done by the central server. All back office activities such
as Interest calculations, Levying Service Charges, Parameter Setting / Updation,
Generation of Reports / Returns, Providing MIS, Start of Day and End of Day
operations are undertaken by the central server. The customer’s data in a centralized
server can be accessed from various outlets at various geographical centers. It enables
the bank to provide triple “A” services (Any Branch, Any Time, Any Where) to the
customers through Multiple Delivery Channels viz., Branches, ATMs, Mobile, Lobby,
Corporate Terminals, Kiosks and Internet Banking. It enabled the banks to introduce
technology embedded value added products besides implementing Data Warehousing,
Data Mining and Customer Relationship Management concepts. CBS is an opportunity
to banks to improve customer service as well as operational efficiency, which definitely
paves the way to achieve the corporate objectives of the banks. However, it is an
imperative to have a re-look to the existing systems and procedures to suit the
changed environment.
New Delivery Channels: Hitherto, Branches are only the strategic outfits (Delivery
Channels) to achieve the corporate objectives and the customers are required to visit
the branches invariably at the specified timings to complete the transaction. Extending
service to the customers round the clock without presence of physical branch is called
as “New Delivery Channel”. IT revolution has changed the rules of the game and led to
introduction of innovative delivery channels to overcome time and geographical
constraints and to render cost effective value added services to the customers through
Automated Teller Machines, Tele Banking, Lobby / PC Banking, Mobile Banking and
Internet Banking etc.
Biometric Devices: The existing identification modes (Personal identification

Numbers/Passwords/Smart Cards) used in new delivery channels (ATM/Credit card/
Internet Banking etc) has a major drawback i.e. it recognize the PIN but not the
person. This is leading impersonation and causing financial loss to the customers.
Biometric devices have attained importance since it is a unique one and recognizes the
person before delivering the service. The popular biometric technologies are
Fingerprint Recognition, Face Recognition, Voice Authentication, Hand Geometry,
Retinal Scanning, Iris Scanning and Signature Verification. The biometric data is
compressed, encrypted and sent to the biometric server over the internet. Whenever
the user access to delivery channel, it verifies with the server and deliver the service if
found correct.
Cheque Truncation System (CTS): Though, cheque is widely used and accepted, it
is expensive for banks on account of transit loss of instruments, delay in realization
and forgeries. Clearing a single instrument requires multiple financial entities and
within each entity, the instrument undergoes several processes. In the process, errors
may creep in inadvertently since the instruments are being handled by many persons.
To overcome the problems, RBI introduced Cheque Truncation System (CTS) at New
Delhi and propose to introduce at Chennai shortly. It is an online image based clearing
system, which processes the MICR data and images captured from physical cheques at
the presenting Banks. The cheque information and images are electronically
transmitted to the clearing house via broadband communication system using Public
Key Infrastructure (PKI) architecture. CTS enables the Banks to save costs besides
avert delay in processing, loss of instruments. It also paves the way for faster
realization, which has immense benefit to the customers.
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Virtual Banking: Indian banking industry is witnessing an unprecedented competition
and to stay ahead, Banks are coming up with plethora of services to lure customers.
Services like 24hour banking, Service at door step, Telephone banking, Internet
banking, Extended Business Hours, Speedy processing are only a few to mention.
Greater part of today's bank transactions take place somewhere else other than in
branch premises. This shows the growth of "virtual" banks in India. Virtual banks are
now seen as an answer to the challenge of designing a new service channel that is
fully secure, functional and which customers can readily learn to use and trust it.
Virtual banking a powerful "value added" tool and it has become the focal point for
banks to attract and retain customers. Though, the aim of these services is to satisfy
customers, there is a need to understand customer awareness, perception and
importantly the level of satisfaction.
Proxy Banking - Indian villages were miles away from basic financial products such
as mutual funds, insurance, equity trading etc., which is evident from the facts that
only 21% of rural households have access to credit from a formal source, 58% of rural
households still do not have bank accounts, 70% of marginal farmers do not have
deposit account. Only 1% rural house-holds rely on a loan from a financial
intermediary. Further, the sanction of loans takes undue long time and involves costs
ranges to 10 to 20 per cent of the loan amount. Further, the sanction of loans takes
undue long time and involves costs ranges to 10 to 20 per cent of the loan amount.
These are required to be covered through branchless banking i.e. Proxy Banking as it
is a potential segment for banks to market financial products. Thanks to Internet Kiosk
and the ATM duo which has made it possible for rural India. The Proxy Banking is an
innovative approach and it definitely paves the way to extend better banking services
to the rural India, which is need of the hour.
Relationship Banking: Competitive pressure has led marketers to realize the

necessity of customer retention to survive in a deregulated environment. Customer
Relationship Management (CRM) is a strategic tool for marketers to acquire, retain and
maintain long-term profitable relationships with them. Eight different reasons have
been identified for customer switching viz., Core service failures, Service encounter
failures, Price failures, Inconvenience, Employee response to service failures,
Attraction by competitors, Ethical problems, and Involuntary switching. The first five
reasons mentioned above can be addressed through the use of CRM techniques.
Technology implementation has become the key to CRM implementation in an
organization as huge volumes of customer data can be stored, managed, and retrieved
using the latest technologies. Cross-selling helps the banks to increase their sales by
selling different products to existing clients. It helps improve customer retention,
reduce the cost of customer acquisition, and enhance customer lifetime profitability.
However, excessive cross-selling would be viewed by the customer as harassment.
Reverse Mortgage: The genesis of Reverse mortgage can be traced to developed

countries where Silver Line segment (people above 65 years group) constitutes major
chunk of population on account of higher standards of living, better access to health
care and higher life expectancy. The ever-rising cost of living and health care has
prompted Banks/Financial Institutions to introduce the Reverse Mortgage in the US,
UK and Australia. It works like a traditional mortgage loan, but only in reverse
direction. Under this borrower does not make regular payments to a lender; instead he
receives payments from the lender. It supplements the income of the Senior Citizens,
particularly to those whose pension or income is low. Instead of being dependent on
their children/relatives for monetary support, this would be an ideal option for elderly
people to continue with a graceful lifestyle. The borrower need not repay the loan
during their life time and can also continue to live in their house during their life time.
Thereafter, the legal heirs have the option to repay the bank loan and redeem the
property. Otherwise, the bank will sell the property and liquidate the loan. The scheme
is gaining momentum slowly.
85

Agricultural Debt Waiver and Debt Relief scheme – 2008: Government of India
announced the Debt Waiver and Debt Relief scheme in the Union Budget 2008-09 with
an objective to give the debt burden farmers a reprieve and make them eligible for
fresh loans so that the country could ensure food security and stable food prices. The
scheme covered all agricultural loans (Production credit, Term Loans, Agricultural Gold
Loans) distributed by scheduled commercial banks, regional rural banks and
cooperative credit institutions up to March 31, 2007 and overdue as on December 31,
2007. Debt Waiver – Marginal (2.5 acres) and Small farmers (2.5 to 5 acres) who
availed agriculture loans are eligible for waiver of total outstanding balance under this
scheme. Debt Relief - In case of other farmers (whose land holdings are beyond five
acres) One Time Settlement (OTS) scheme is extended for all loans where in farmers
are eligible for a rebate of 25% of outstanding liability or Rs.20000/- whichever higher.
However, farmers to pay the balance amount in three installments. The scheme has
benefited around 3 crore small and marginal farmers and one crore other farmers with
an outlay of Rs.72000 crores.
Corporate governance is the system by which companies are directed and controlled
by the Management in the best interest of the shareholders and others ensuring
greater transparency and better and timely financial reporting. It encompasses
commitment to values and to ethical business conduct to maximize shareholder values
on a sustainable basis, while ensuring fairness to all stakeholders including customers,
employees, investors, vendors, Government and society at large. Sound corporate
Governance is therefore critical to enhance and retain investors` trust. Its objective is
not mere fulfillment of legal requirements but ensuring commitment on managing
transparently for maximizing shareholder values Corporate Governance is about ethical
conduct in business. Ethical leadership is good for business as the organization is seen
to conduct its business in line with the expectations of all stakeholders. What is ethical
but not legal should not be done and at the same time what is legal but not ethical
should not be practiced. Corporate Governance in the Public Sector cannot be avoided
and for this reason it must be embraced. Good Corporate Governance, Good
Government and Good Business go hand in hand. Openness, integrity and
accountability are the key elements of Corporate Governance for any corporate entity.
Whistle Blower Policy: In compliance with listing agreement relating to Corporate

Governance, all banks are required to have a Whistle Blower Policy to enable the staff
to inform the unethical behavior, actual or suspected fraud or violation of law or
improper practice of the staff members of all cadres, direct to the Board of the Bank
without informing their superiors. The employee shall make a written disclosure to the
Audit Committee of the Bank in a closed/secured envelope along with supportive
documents. The identity of the complainant will not be revealed. In case where the
complainant is being victimized for filling a complaint, the complainant can approach
CMD/ED for redressal. It provides protection to the Whistle Blowers from unfair
termination and other unfair employment practices. The existence and functioning of
Whistle Blower mechanism is being reviewed by the Audit Committee of the Bank at
regular intervals.
International Financial Reporting Standards (IFRS): At present, the accounting

and disclosure systems are not only well laid out but also well designed to suit to the
requirements of all the stakeholders. However, convergence to IFRS will require
significant alterations to financial accounting and reporting processes and systems.
This is in fact a move towards a single set of high quality global accounting standards
which transforms the landscape of accounting into a significantly new design that has
important practical implications. The potential benefits of an integrated global capital
market regulated by a single world-wide financial reporting language would be long
lasting and it is a big step towards improving the efficiency of international capital
markets. Regulators will benefit from greater consistency and quality of information. It
also enhances the communication of the Bank’s financial results and position together
86

with other performance indicators to analysts, investors, customers as well as other
stakeholders. It also benchmarks the entity against its global peer group gaining a
broader and deeper understanding of its relative strengths by looking beyond the
country and regional bench marks. It is proposed that the Corporates are to be moved
to IFRS in a phased manner as under:
¾ Companies that are part of the nifty or listed overseas or with a net worth of
over `1,000 crore are expected to move to IFRS starting from April 2012
onwards.
¾ From April 2013, companies with a net worth of over ` 500 crore, banks and
large non-banking finance companies are expected to adopt IFRS.
¾ Starting April 2014, listed companies with a net worth of less than ` 500 crore,
NBFCs with a net worth of over ` 500 crore and urban cooperative banks with
net worth of ` 200-300 crore would be required to shift to IFRS.
¾ The unlisted companies with a net worth of under ` 500 crore and urban
cooperative banks with a net worth of under ` 200 crore are not required to
adopt IFRS.
Diamond Dollar Account Scheme in terms of which firms and companies dealing in
purchase/sale of rough or cut and polished diamonds/precious metal jewellery plain,
minakari and/or studded with/without diamond and/or other stones, with a track
record of at least 3 years in import/export of diamonds/coloured gemstones/ diamond
and coloured gemstones studded jewellery/plain gold jewellery, and having an average
annual turnover of Rs.5 crore & above during preceding three licensing years, are
allowed to open Diamond Dollar Accounts (DDA). The request for opening of DDA is
considered by RBI on a case-to-case basis, subject to the following terms and
conditions:
¾ Opened in the name of the exporter and maintained in US Dollars only.

¾ It should be in the form of current account and no interest should be paid on
the balance held in the account.
¾ No intra-account transfer should be allowed between the DDAs.
¾ Not permitted to open and maintain more than 5 DDAs.
¾ The balances held in the accounts shall be subject to Cash Reserve Ratio (CRR) and
Statutory Liquidity Ratio (SLR) requirements.
¾ Exporter firms and companies maintaining foreign currency accounts, excluding
EEFC accounts, with banks in India or abroad, are not eligible to open Diamond
Dollar Accounts.
The permissible credits in the accounts are amount of pre-shipment and post-shipment
finance availed in US Dollars; Realisation of export proceeds from shipments of rough,
cut, polished diamonds and diamond studded jewellery; and Realisation in US Dollars
from local sale of rough, cut and polished diamonds. The permissible debits in the
accounts are Payment for import/purchase of rough diamonds from overseas/local
sources; Payment for purchase of cut and polished diamonds, coloured gemstones and
plain gold jewellery from local sources; Payment for import/purchase of gold from
overseas / nominated agencies and repayment of USD loans availed from the bank.
Transfer to rupee account of the exporter.
Mutual Funds are associations or trusts of public members who wish to make
investments in the financial instruments or assets of the business/corporate sector for
the mutual benefit of its members. Mutual Funds are required to be registered with
SEBI, which is regulating the securities market. It is a mechanism for pooling the
resources by issuing units to the investors and investing the so mobilized funds in
securities in accordance with objectives as disclosed in offer document. Mutual Funds
are beneficial to their members in reducing risks and maximizing income by proper
selection of financial instruments, which will bring income flow in the form of dividends
as well as in the form of capital appreciation. Mutual Funds are being managed by
87

professionals, having expertise in Equity/Debt Markets, which enables the funds to
post impressive performance. The various types of funds are such as Open/Close
ended, Diversified, Sector, Index, Tax Saving, Debt, Income, Liquid, Money Market,
Gilt and Balanced funds.
Liberalized Remittance Scheme: RBI introduced the scheme as a step towards

further simplification and liberalization of the foreign exchange facilities available to
resident individuals. As per the Scheme, resident individuals may remit up to USD
200000 per financial year for any permitted capital and current account transactions.
Under the Scheme, resident individuals can acquire and hold immovable property or
shares or debt instruments or any other assets outside India, without prior approval of
the Reserve Bank. Individuals can also open, maintain and hold foreign currency
accounts with banks outside India. The facility under the Scheme is in addition to
those already available for private travel, business travel, studies, medical treatment,
etc. However, gift and donation remittances cannot be made separately and have to
be made under the Scheme only. It is mandatory to have PAN number to make
remittances under the Scheme.
Factoring and Forfeiting: Factoring is a method where by the factor undertakes to

collect the debt assigned by exporter where as international forfeiting is a method
whereby the exporter sells the export bills to the forfeiter for cash. Forfeiting is
resorted to for export of capital goods on medium terms and long-term credit, whereas
the factoring is mainly short-term trade finance. In respect of forfeiting, the
guarantee by the importer's banker is normally insisted upon whereas in factoring such
guarantee by the importers banker is usually not stipulated. Forfeiting is without
recourse to the seller (exporter), while factoring is undertaken both with and without
recourse to the seller.
External Commercial Borrowings (ECB): It is the borrowings by the Corporates

and Financial Institutions from International markets. ECBs include Commercial Bank
loans, Buyer’s Credit, Supplier’s Credit, Securitized Instruments such as Floating Rate
Notes, Fixed Rate Bonds etc. ECBs are usually available at interest rate of 100 to 300
basis points above LIBOR (London Inter Bank Offered Rate).
Global Depository Receipts (GDRs): These are the instruments through, which the
Indian companies raise their resources from international markets. It is a negotiable
certificate issued by a depositary company (normally an investment bank)
representing the beneficial interest in shares of another company whose shares are
deposited with the depository. It is a Dollar denominated instrument, traded on Stock
Exchange in Europe or USA or both and represents publicly traded specified no. of local
currency equity shares of the issuing Company.
Derivatives: It is a product whose value is derived from the value of one or more
basic variables, called underlying. The underlying asset can be equity, index, foreign
exchange (forex), commodity or any other asset. Derivative products initially emerged
as hedging devices against fluctuations in commodity prices and commodity-linked
derivatives remained the sole form of such products for almost three hundred years.
The financial derivatives have become very popular in the recent years. Credit
Derivatives are financial instruments designed to transfer credit risk from the person
/ entity exposed to that risk to a person / entity who is willing to take on that risk. A
credit derivative derives its value from the credit quality of the underlying loan or bond
or any other financial obligation of an underlying company.
SWAP refers to exchange of one asset or liability for a comparable asset or liability for
the purpose of lengthening or shortening maturities or raising or lowering coupon rates
to maximize revenue or minimize financing costs. This may entail selling one
securities issue and buying another in foreign currency; it may entail buying a
currency on the spot market and simultaneously selling it forward. There are various
88

types of SWAPs such as Equity swap, Currency swap, Credit swaps, Commodity swaps,
Interest rate swaps etc. These can be used to create unfunded exposures to an
underlying asset since counterparties can earn the profit or loss from actions in price
without having to post the notional amount in cash or collateral. Swaps can be used to
hedge certain risks such as interest rate risk or to wonder on changes in the expected
direction of underlying prices.
Futures & Options: An agreement to buy or sell a fixed quantity of a particular

commodity, currency or security for delivery on a fixed date in the future at a fixed
price. Unlike an ‘option’, a ‘futures’ contract involves a definite purchase or sale and
not an option to buy or sell. It may entail potential unlimited loss. However, Futures
provide an opportunity to those who must purchase goods regularly to hedge against
changes in prices.
Forward Contract: An arrangement through which the rate is fixed in advance for the
purchase or sale of foreign currency at a future date.
Option: It is a contract, which gives the holder the right but not the obligation. A call
and put option is a right to buy and sell the underlying product respectively.
Hedging: Reducing or eliminating the market risk in a position by entering into

transactions that offset the existing risk positions.
Banks - Business Process Management (BPM): Today most of the banks are
offering the similar products with more or less same interest rate / price. But it’s the
services and value-addition that can create the key differentiator and swing a
customer’s decision in either opening an account or accepting a financial product from
a bank. Speed being the key differentiator in service delivery, Banks need to relook at
improving the existing processes. The BPM solutions will not only help in ensuring
consistency of service across all locations but also enable to allocate work dynamically.
The benefits of BPM come from a variety of sources, including shorter cycle times,
lower total cost of ownership, improved productivity, cost avoidance, better integration
with systems and better exceptions handling. BPM is in fact the merging of process
technology covering 3 process categories - interactions between (i) people-to-people;
(ii) systems-to-systems and (iii) systems-to-people – all from a process centric
perspective.
Wilful Defaulters: As per RBI guidelines, a Wilful Defaulter would be deemed to have
occurred, where the unit has defaulted in meeting its payment / repayment obligations
to the lender
¾ Even when it has capacity to honour the said obligations.

¾ Where the unit has not utilized the finance for the specific purpose for which
finance was availed of but has diverted the funds for other purposes.
¾ Disposed of or removed the movable fixed assets or immovable property
offered for the purpose of securing a term loan without the knowledge of the
Bank/Lender
The classification of the borrower as Wilful defaulter is vested with Committee at HO

of the respective Bank. However, borrower should be given reasonable time for
making submission to the committee before intimating the wilful defaulter names to
RBI/CIBIL, RBI advised all Banks/Financial Institutions not to extend any additional
credit facilities to the Wilful Defaulters. The entrepreneurs, promoters of companies
are debarred from floating new ventures for a period of 5 years from the date the
name of the Wilful defaulter is published in the list of wilful defaulters by the RBI.
Banks can initiate criminal proceedings against wilful defaulters on breach of trust,
cheating and wrong certification under IPC.
89

Separate Trading of Registered Interest and Principal of Securities (STRIPS)
Any bond redeemable after at least ten years of its issue can be stripped of its interest
by physically detaching the attached biannual or annual interest coupons attached
thereto. These zero coupon bonds need not be held to maturity because if the investor
wants he can unload them in the market. STRIPS will be eligible securities for REPO
adjustment facility but with appropriate haircut. Stripping is a process of converting
government securities, on which interest is paid periodically, into tradable zero-coupon
securities. After stripping, these can be traded in the market at a discount and
redeemed at face value. Any entity, including individuals, holding balances of
government securities that are eligible for stripping/reconstitution can
strip/reconstitute these securities through a Primary Dealer. The minimum amount of
securities that needs to be submitted for stripping/reconstitution will be Rs.100 lakhs
(face value) and multiples thereof. RBI will not charge any fees for
stripping/reconstitution of Government Securities.
Securitization is an effective tool to reduce the mismatches in the maturities of

assets and liabilities. It is a financing technique that involves pooling and re-packing of
illiquid financial assets in to marketable securities. The process consists of 6 players
viz., Borrowers, Lending Banker (who becomes an originator for the Securitization
transaction), Special Purpose Vehicle (SPV), Credit Rating Agency, Investors and
Service Providers. The process of securitization involves identification of financial
assets, rating of these assets by the rating agency, creation of a SPV for handling the
securitization transaction, assignment of future receivables in favour of the SPV,
issuance of marketable securities based on these underlying financial assets and
selling the same to the investors. The service providers recover the amount
periodically and remit the same to the SPV and in turn SPV pass the benefit to the
investors.
Rating of Banks: Padmanabhan Committee suggested that supervision of banks

should focus on defined parameters of Soundness, Financial, Managerial and
Operational efficiency. Accordingly, banks are rated on important six key parameters
viz., Capital Adequacy, Asset Quality, Management effectiveness, Earnings -
Profitability, Liquidity, Systems and Controls. It is also called as CAMELS rating.
Tier - I capital consists of Paid up Equity Capital + Free Reserves + Balance in Share
Premium Account + Capital Reserves (surplus) arising out of sale proceeds of assets
but not created by revaluation of assets MINUS Accumulated loss + Book value of
Intangible Assets + Equity Investment in Subsidiaries+ Innovative Perpetual Debt
instruments.
Tier - II Capital consists of Cumulative perpetual preferential shares & other Hybrid
debt capital instruments + Revaluation reserves + General Provisions + Loss Reserves
(up to maximum 1.25% of weighted risk assets) + Undisclosed Reserves +
Subordinated Debt + Upper Tier-II instruments.
Subordinated Debt: These debts are unsecured and subordinated to the claims of all
the creditors. To be eligible for Tier-II capital the instruments should be fully paid, free
from restrictive clauses and should not be redeemable at the instance of holder or
without the consent of the Bank supervisory authorities. Subordinated debts usually
carry a fixed maturity. They will have to be limited to 50% of Tier-I capital.
SB Interest – The existing system of calculation of interest on SB Deposits i.e.

payment of applicable interest on minimum balance maintained from 10th to last day of
the month is changed to daily product method with effect from 01.04.2010.
***
90

Andhra Bank was founded by ardent freedom fighter and a grate intellectual and
multifaceted genius, Dr.Bhogaraju Pattabhi Sitaramayya. Andhra Bank was registered
on 20th November 1923 and commenced business on 28th November 1923. The
Milestones of Andhra Bank are as under:
Year Event
1923 Commenced operations at Machilipatnam
1943 Attained status of Scheduled Bank
1964 Opened 100th Branch and attained the status of “A” class Bank
1964 Amalgamation of Bharat Laxmi Bank with Andhra Bank
1969 Largest Private Sector Bank in the country
1969 Bank was entrusted with “Lead Bank” responsibility in five districts
1976 Bank opened its 500th Branch
1980 Nationalization of the Bank
1981 Sponsored the first Regional Rural Bank (Rushikulya Grameena Bank)
1981 First Bank in India to introduce “Credit Cards”
1983 Diamond Jubilee Celebrations & surpassed Business of ` 1750 crore
1984 Became convenor of “State Level Bankers Committee” in AP State
1988 Introduced Insurance Linked Savings Deposit Scheme (Abhaya)
1989 Bank opened its 1000th Branch
1997 Surpassed `10000 crore mark in Total Business
1998 First Bank to introduce farmer friendly “Kisan Credit Card” (AB Pattabhi Card)
2001 Initial Public Offer (IPO)
2002 Introduction of New Delivery Channel - First Networked ATM
2003 Achieved 100% “Branch Computerization”
Banking Technology Award for use of IT for customer service in Semi-Urban
2005
and Rural areas by IDRBT, Hyderabad
2006 Follow-on Public Offer (FPO)
2006 First Representative Office abroad (Dubai)
2006 Banking Technology Award 2006 for Payment Initiatives from IBA
2006 Conducted “BANCON 2006” Inclusive Growth – A New Challenge
2007 Ranked 532 among Top 1000 Banks in the world
2008 Opened Representative Office at New Jersy, USA
2009 100% implementation of “Core Banking”
2009 Crossed ` 1 lakh crore Total Business
2009 Entered Joint Venture with “IndiaFirst Life Insurance Company Limited”
2010 Crossed ` 1000 crore Net Profit
2010 Best Bank Award for “Quality of Assets”, “CAMEL Rating” and “Mid-size” Bank
91

LOGO
TOGETHERNESS IS THE THEME
The Symbol of Infinity denotes a Bank that is prepared to do any thing, to go to any
lengths, for the customer
The Blue pointer on the top represents the philosophy of a Bank that is always
looking for growth and newer directions.
The Key hole represents Safety and Security
The Chain indicates togetherness
The colours Red and Blue denote dynamism and solidity
Vision
Statement
Andhra Bank
Envisions to be a Trustworthy, Efficient & Strong Bank committed to increasing

our Market Share
By generating innovative Customer-Centric services and products
Igniting the Passion and Creative talents in Human resource
Leveraging Technology to expand the clientele & deliver Quality and Value
Leading to Customer Delight
Mission
Statement
Andhra Bank will ….
Amplify the front line capabilities to Serve Customers

Develop Processes leveraging Technology
Dynamically locate & empower People
Fast-cycle knowledge into innovative Products
Create Possibilities to reach the business goals
& position the Bank as a rising star in the Financial Horizon
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Corporate Slogan
With the implementation of 100% Core Banking, a customer is no more a just a

Branch Customer but a Bank Customer. One door opens to all branches and the Bank
functions as one Branch. In order to leverage Core Banking and take us forward we
need a new Corporate Slogan announcing that we have arrived to make a difference
and catering to all the needs of the customers.
Our new Corporate Slogan is a visual and word combination. The visual is the ENTER
key of the computer key board. It is perhaps the most used key in the world. The key
is universal and easily identifiable. The key depicts Tech Savvy Character of the Bank.
The words “all your needs” are simple & straight forward. The combination of Visual
and Words is an initiation to Bank with us.
The corporate slogan finds place in all our advertisements and communications
internally and externally.
***
93

MASCOT
Mascot is a term used to represent a group with a common public identity either by a
person, animal or object. Today, most of the reputed organizations across the world
are being represented by Mascot.
Bank introduced Mascot named as “DOLLE” i.e. the Dolphin, the most lovable animal
in the world. It adds good recall value and brand image to the Bank and paves the way
to go National and enter the league of Large Banks. The Mascot is used in all
communications and advertisements representing the Bank as the Friendly, Intelligent
and Responsive Brand Ambassador.
94

Financial Results (Q3 – December 2010) - Highlights
No Business Parameters Rs. in Crores

1 Deposits 82095
2 Advances 65587
3 Total Business 147682
4 ¾ Corporate / Mid Cap. / Large Advances 34434
5 ¾ Agriculture Advances 10057
6 ¾ Retail Credit 10019
7 ¾ MSME 9832
8 ¾ Other Advances 1245
9 Gross NPA 872
10 Net NPA 308
11 Net Interest Income 2359
12 Other Income 598
13 Operating Expenditure 1256
14 Operating Profit 1702
15 Net Profit 954
No Important Ratios (%)

1 CASA Deposits 28.53
2 CD Ratio 80.07
3 Cost of Deposits 5.66
4 Cost of Funds 5.31
5 Yield on Advances 10.96
6 Yield on funds 8.82
7 Net Interest Margin (NIM) 3.85
8 Return on Assets (ROA) 1.42
9 Cost to Income Ratio 39.66
10 Standard Assets to Gross Advances 98.67
11 Gross NPA to Gross Advances 1.33
12 Net NPA to Net Advances 0.47
13 Provision Coverage Ratio 91.56
14 Capital to Risk weighted Assets Ratio (CRAR) 12.00
Important Initiatives:
¾ Number of Business Delivery Channels stood at 2615 (1587 Branches, 36

Extension Counters, 38 Satellite Offices and 954 ATMs)
¾ Mobile Banking (mPAY) introduced to provide information and financial
services (funds transfer – Mobile to Mobile to account) to the registered
customers.
¾ Bank is implementing Smart Card Project in association with AP State for
distribution of government benefits (Pensions, Wages, NREGS)
¾ Implementing Financial Inclusion project.
¾ Enrollment of Business Correspondents.
¾ Bank has launched a customer friendly initiative involving complaint
Redressal mechanism through Mobile SMS (9666606060) called “UPSET”
¾ Received five awards viz., Banking Excellence Award for the Best Public
Sector Banks from State forum of Banker`s Club, Kerala, MSME National
Award for the outstanding performance in PMEGP Scheme, Best Bank
(Mid-size) Award by Business world, Best Bank (CAMEL Rating) by The
Analyst and Best Bank for the Quality of Assets by Business Today.
95

Deposits - New Schemes
Banks have been introducing various innovative deposit schemes to provide value
added services to the customers with an objective to retain existing clientele and to
expand the base further. Besides extending existing generic deposit products such as
Current, Savings, Recurring, Fixed and Kalpataruvu deposits, Bank introduced many
new deposit schemes in the recent past and the brief details of the schemes are
AB-Freedom (Flexi) Deposits:
The scheme provides features of both Savings and Term Deposits to the customers.
When SB account is opened, Fixed and Reinvestment deposit accounts also will get
opened for the customer with the same account number but without any balance. All
individuals (single/joint), Clubs, Associations, Trusts, Hospitals, Schools and colleges
are eligible to open Flexi accounts. However, special minors are not allowed to open
accounts under this scheme. Minimum balance prescribed for AB Freedom SB account
is Rs 5,000/- and the minimum period of deposit is 15 days and maximum period is 12
months for FDs/RIP Deposits. The rate of interest is as applicable to domestic term
deposits. The depositor can choose either FDR or Reinvestment deposits. The depositor
can change his choice from FDR to Reinvestment Deposit or vice versa for the future
bunches of units to be opened. Whenever, the balance in the SB account exceeds
Rs.5000/-, system transfers the balance in to Fixed or Re-investment Deposit with a
minimum deposit of Rs.5000/- or multiples thereof. Similarly, whenever the customer
presents a cheque in excess of SB balance, system cancels the term deposits
(Rs.1000/- or multiples thereof) to meet the requirement. No penalty for premature
withdrawal of deposit units under this scheme. After cancellation of units in a bunch of
units, the remaining units will continue to earn interest at the contracted rate. No
deposit loan is allowed against Flexi Deposits. Deposit Receipts will not be issued for
the units opened under the scheme. Statements will be issued for SB as well as Fixed
Deposit/ Reinvestment Deposit transactions. (Circular no. 159 Ref 44/20 dated
27.08.08 & Cir.no.381 Ref 27/55 dated 07.02.11)
AB Premium Current Account:
In order to provide value added services to the Business community, Bank introduced
special deposit scheme in the month of October 2008. The salient features of the
scheme are as under:
¾ It is meant for Current Deposit Accounts.

¾ Minimum Balance – Rs.100000/-.
¾ Free Cheque Book Facility (including Multi City Cheques).
¾ No Folio and Transaction Charges.
¾ Any Branch Banking and Instant Funds Transfer.
¾ 50% concession in Service Charges for Funds Remittance.
¾ Balance in excess of Rs.200000/- can be converted as Term Deposits (in
units multiple of Rs.10000/-) subject to the guidelines as applicable to AB
Freedom (Flexi) Deposit Scheme.
It helps the branches to improve the CASA Deposits. (Circular no.238 Ref 44/30 dated
16.10.2008)
“AB Super Salary SB Account” – The existing scheme of “AB Privilege Corporate
Salary SB Account” is re-launched with the following features:
¾ All salaried staff of any company/organization drawing salaries through our

Bank.
96

¾ The Average Minimum Balance of Rs.5000/- should be maintained except
when the account is in debit balance.
¾ No Ledger Folio / Transaction charges.
¾ Personalized Debit Card will be issued on specific request of the customer.
¾ Free ATM/Debit Card (for first year).
¾ Free Credit Card / Demat Account / Internet Banking / Online Trading
(conditions apply).
¾ Free Remittance up to Rs.25000/- per month.
¾ Free Statement of Account – Once in a month.
¾ Free issue of Cheque Books (50 leaves in a year).
¾ Free Multicity Cheques at select centers (Monthly Avg. Credit Balance
Rs.50000/-).
¾ NEFT/RTGS - Two transactions are free of cost in a month.
¾ Scheme provides for conversion of balance in excess of Rs.10000/- as
Term Deposits (units multiples of Rs.5000/-) with Sweep and Reverse
Sweep facility as in the case of AB Freedom (Flexi) Deposit Scheme.
¾ Similarly, the scheme also provides for Temporary Overdraft facility
equivalent to the latest Net salary drawn by the account holder at BMPLR.
These two options are mutually exclusive. In other words, where the
account holder opts for Overdraft facility, he/she cannot avail the flexi
deposit option facility.
(Circular no.351 Ref 27/21 dated 01.02.2010)
AB Recurring Deposit Plus Scheme:
This scheme is meant to built-up corpus fund for individuals / firms / institutions /
companies through regular monthly deposits over a period of time to meet their future
financial requirements. The salient features of the scheme are as under:
¾ Depositor has an option to choose a core installment between Rs.100/- to

Rs.100000/- and further he has option to deposit any amount not exceeding
10 times of core installment.
¾ Minimum period of deposit is 6 months and maximum period is 60 months.
¾ No penalty for late payment of installments.
¾ Interest is calculated on daily products i.e. minimum balance available
between 10th and last day of the month.
¾ No penalty for premature withdrawal. However, in case of RD account
closed within 6 months, penalty @ 0.50% on the balance outstanding
subject to a minimum of Rs.50/- and maximum of Rs.500/-.
¾ Depositor can remit monthly installment at any branch of Andhra bank
without any charges.
¾ Interest accrued is exempted from Tax Deduction at Source (TDS).
¾ Transfer of accounts between the branches is not allowed.
The other guidelines (Nomination, Payment of maturity amount, Claims etc.,) that are
applicable to existing RD Scheme holds good to AB RD Plus scheme also. (Circular
no.081 Ref 44/09 dated 20.06.2009)
AB Grama Kranthi Savings Account:
It is a new scheme with a built-in overdraft facility of `500/-, aimed at to offer basic
banking services to the financially excluded sections of the society using Smart Card
and Biometric authentication technologies through Business Correspondents. No
minimum balance and no service charges are applicable. Simplified KYC norms are
applicable. No cheque book and ATM/Debit cards will be issued. Overdraft facility of
`250/- would be extended immediately on opening the account and the interest rate is
Base Rate+3.5%. (Cir.no.319 Ref 19/18 dt. 06.12.10 & 364 Ref 19/20 dt.14.01.11).
97

AB Pattabhi Plus Deposit:
To commemorate the 88th Founder’s Day Celebrations, Bank has introduced a special
term deposit scheme and the salient features are as under:
¾ All the constituents who can make Fixed Deposits / KTD can invest under the
scheme
¾ Period of Deposit - 500 to 1000 Days
¾ Rate of Interest – 9.25% w.e.f. 05.02.2011. However, with regard to deposits
of above 2 crore, the interest rate is 9.50%.
¾ The scheme is valid up to 31.03.2011
All other guidelines applicable with regard to acceptance, payment, transfer,

premature cancellation, renewal of Deposits, allowing of loans/overdrafts, nomination
facility, payment of additional interest to staff/senior citizens apply to the deposits
accepted under the scheme. (Cir.n0.325 Ref 27/40 dated 09.12.2010)
Deposits – Other Existing Schemes
AB Easy Savings (ABESB): This scheme caters to all sections of population

especially those belonging to low income group who are not able to produce
documents such as identity proof and address proof as required under KYC guidelines.
As per RBI directions, Banks are required to adopt simplified procedure to open SB
accounts. Minimum balance stipulated for opening of SB account is Rs.5/-. All
individuals who are eligible to open normal SB accounts can open No frills accounts
subject to introduction from another account holder who complied KYC norms.
The introducer's account with the bank should be at least six month old and should
show satisfactory transactions. Photograph of the customer who proposes to open the
account and also his/her address needs to be certified by the introducer OR any other
evidence as to the identity and address of the customer to the satisfaction of the bank.
These accounts do not attract service charges / penal charges. No cheque book shall
be issued. Drawals from account shall be permitted only through numbered withdrawal
forms accompanied by passbook. AB Easy Savings accounts are not eligible for
ATM/Debit Cards and ABB facility. Once the balance in the account exceeds Rs.50000/-
or total credits in the account exceeds Rs.100000/- in a year, no further transactions
will be permitted in the account. The customer has to close the account and open
normal saving account fulfilling the complete KYC procedure. (Circular no.444 Ref
51/31 dated 26.03.2008)
AB Easy Savings for Students – SB Easy Social Welfare (ABESW): These

accounts are specially meant for students who are eligible for scholarships (post
metric) as approved by the Government of AP. Students who fulfills the said criteria
can open No Frill account with Zero Balance. Simplified account opening procedure is
adopted and the opening forms are to be attested by the respective Principal of the
College. On opening of accounts, Government makes arrangements to transfer the
scholarship / fee reimbursement amounts to the respective accounts. All the account
holders are provided with ATM facility and they have to draw the amount through
ATMs only. No withdrawals are allowed at the branch counters. No passbook or cheque
book will be issued. Since it is a welfare activity, Government agreed to reimburse
Rs.40/- per account to the respective Branch/Bank who undertakes this activity. It is
an opportunity to mobilize more number of accounts as well as cross sell our products
(Education Loans) and to improve the brand image in the market especially amongst
student community.
AB Tax Saver: It is a term deposit (Fixed/Reinvestment) scheme earns interest as

well as tax benefits under Section 80 C. It is meant for individuals and HUF (only
Income Tax Assesses with PAN). Deposit can be opened in single/joint accounts. In
case of joint accounts, tax benefit is available only to the first holder of the deposit.
98

Minimum deposit is Rs.100/- and Maximum amount allowed is Rs. 100000/-. The
minimum period of deposit is 5 Years. It earns interest as applicable to five year
deposit. At present the interest rate is 7.00%. Declaration is to be obtained from the
first depositor that the total deposits under this scheme at various bank branches do
not exceed Rs.100000/- during the year. No nomination can be made in respect of a
term deposit applied for and held by or on behalf of a minor. Deposit receipt shall
bear the name, address, PAN and signature of the depositor. No deposit loan or
no lien to any other loan. No premature cancellation. (Circular no.431 Ref 51/30 dated
13.03.08)
Capital Gains Scheme: The scheme is aimed at Income Tax Assesses to extend relief
of tax on long-term capital gains for different assets provided the assesses purchase
another specified assets within a certain time frame. The assesses are eligible for
exemption under section 54, 54B, 54D, 54F or 54G of the IT Act 1961. All branches
except Rural Branches can open SB and Term Deposit (FD/KTD) accounts of the said
category depositors. Accounts should be opened in individual names only and no joint
accounts are allowed. No cheque book is issued to SB accounts. Depositors are
required to submit withdrawal form along with form “C” to withdraw amount from the
account. Similarly, Term Deposit funds can not be directly paid to depositor and they
should route through respective SB account only. To close account, depositor has to
submit application in form “G” along with written approval from the assessing officer
having jurisdiction of the depositor. Deposit loans are not allowed and no lien should
be allowed on the said accounts. (Circular no.453 Ref 44/25 dated 16.01.2006)
AB Treasure (Fixed/Re-investment): It is aimed to mobilize terminal benefits of

retired people, savings of Senior Citizens and other segments of society by offering
competitive rate of interest. All individual customers can open these accounts. The
minimum deposit amount is Rs.5000/- and multiples of Rs.1000/- thereafter. However,
the maximum amount allowed under this scheme is Rs.15 lakhs. The minimum period
of deposit should be 8 Years and maximum period is 10 Years. Interest offered is
7.00% p.a. (0.50% extra for Senior Citizens).
AB Money Time – Monthly Income Deposit: It is like any other Fixed Deposit but
the minimum deposit is Rs.25000/- and in multiples of Rs.1000/- thereafter. Deposits
will be opened for a normal period (For example 12 / 24 / 36 / 60 months) plus 3
months extra. Interest will not be paid for the first 3 months and will be added back
to the principal amount and the monthly interest on the aggregate deposit amount
(i.e., Principal + first 3 month’s interest) will be paid thereafter on discounted basis.
Deposits should not be opened for the periods 12 months to 14 months; 24 months to
26 months; 36 months to 38 months and 60 months to 62 months. Monthly interest
will be credited to the operative account automatically by the system.
AB Double Deposits: Bank introduced a new deposit scheme in the month of August
2008. It is a reinvestment deposit scheme intended to the depositors who would like
grow the amount double after a specific period to meet their future requirements. All
constituents, who are eligible to invest under existing KTD scheme, are eligible to open
AB Double Deposit scheme. The minimum amount of deposit is stipulated as Rs.1000/-
and in multiples thereof. Under this scheme the amount deposited will be doubled.
Other terms and conditions with regard to operations, nominations, loans against
deposits etc., remains the same to that of KTD scheme. (Circular no. 143 Ref 44/17
dated 06.08.2008).
***
99

Insurance Linked Deposit Schemes
Abhaya Savings Bank (ASB):
ASB scheme is in force since 1988. This scheme is having features of Savings Bank
coupled with insurance coverage (Group Janata Personal Accidental Insurance Cover).
It is meant for all individual depositors, specially those whose lives are exposed to
accidental risks on account of their profession / employment / occupation. M/s.United
India Insurance Company is undertaking the risk coverage. Individuals and Joint
Account holders can open. All Joint accountholders are compulsorily covered. Age - 5
to 70 years. Accidental Insurance cover is available to all depositors. Rs.25000/- for
death / total disability and Rs.12500/- for partial disability. Premium – Rs.9/-; Service
charge – Rs.10/- + ST. Insurance year - 1st Sep to 31st Aug. Nomination holds good
for deposit balance and the insurance claim. Joint accountholders can specify their
nominees separately.
Abhaya Savings Plus:
ASB Plus scheme was introduced in our bank in the year 2006. It is meant for all
individual depositors, especially those whose lives are exposed to accidental risks on
account of their profession / employment / occupation. Individuals and Joint Account
holders can open. All Joint accountholders are compulsorily covered. Age: 5 to 70
years. Cover: Group Janata Personal Accidental Insurance Cover. Rs.50000/- for death
/ total disability and Rs.25000/- for partial disability. Premium – Rs.18/-; Service
charge – Rs.18/-+ Service Tax. Insurance year - 1st Nov to 31st October. United India
Insurance Company is undertaking the risk coverage. Nomination holds good for
deposit balance and the insurance claim. Joint accountholders can specify their
nominees separately.
Abhaya Gold Savings (ABG):
This scheme was introduce in the year 1996. Individuals and joint account holders are
eligible. All joint account holders are compulsorily covered. Age – 5 to 70 years. It is a
Group Personal accident Insurance Policy. M/s. United India Insurance Company is
undertaking risk coverage. Death / Total Disability – Rs.1.00 lakh. Partial disability –
Rs.50000/-. Premia Rs.45.00 and Service Charge Rs.25 + Service Tax. Insurance year
- 1st November to 31st October. Separate nomination for insurance claim. Joint
accountholders can give separate nominations for the insurance amount.
Insured Current Deposits (ICD):
Individuals, Joint A/cs, HUF, Sole Proprietors, Partnership Firms, Ltd Cos., having
CD/ODCC/Pattabhi Agricard accounts. However, office bearers of clubs / societies /
trusts / associations and account holders of inoperative accounts are not eligible to join
in the scheme. The age of the account holder should be in the range of 5 to 70 years.
ICD covers risk against accident (death / disability). It also includes snakebite,
electrocution, food poisoning, riots etc., United India Insurance Company covers
the risk upto Rs.1 lakh for death/total disability and Rs.50000/- for partial disability.
Insurance year - 21st February to 20th February. Premia – Rs.36/- per person per
annum to be collected. Branch also collects administration charges of Rs.30/- per
person per annum and service charges thereon.
100

AB Jeevan Abhaya (ABJ):
This scheme was launched in the year 2002. It is a Savings Bank account that provides
Life and Accidental death cover on payment of nominal premium and simple health
declaration. No medical examination is required. Individuals in the age group of 18 to
55 years can open this account. SB opening form can be used. The present premium
rates are as under:
Age Group Premium Administrative charges

18 to 35 Years Rs.235/- Rs.40/-
36 to 50 years Rs.407/- Rs.40/
51 to 55 Years Rs.805/- Rs.40/
*exclusive service charges
The insurance period is 1st Dec to 30th November. The risk is covered by IndiaFirst
Life Insurance Corporation Limited (IFLIC) and the amount of coverage is Rs.1
lakh in case of normal or accidental death. Joint accountholders can be covered by
opening a joint account and by paying the applicable Premia. All accounts opened
under AB Super Salary (SB account) scheme will be covered under this scheme.
(Circular no. 294 Ref 51/25 dated 16.11.2010)
AB Kiddy Bank Scheme (Kids Khazana):
Bank has re-launched the earlier the earlier Kiddy Bank scheme under the new brand
name “AB Kiddy Bank Scheme” in the year 2007. It is meant for minors (even 1 day
old minor) represented by Guardians or by the minors themselves who have
completed the age of 10 years. All existing Kiddy bank accounts can be converted.
Minimum balance to be maintained is Rs.100/-. Kid and parent/guardian (aged up to
70 years) both are covered under Accidental Insurance. Sum assured is Rs.1.00 lac
each for the kid and the parent / guardian. Insurance Premia of Rs.32/- to be debited
to the account every year on 31st of October. Bank service charges of Rs. 20/- +
Service Tax. The risk is covered by United India Insurance Company. Free Doll.
Educational Grant of Rs.5000/- (for age up to 10 years) / Rs.10000 (for age of 11-18
years) as per the age of the child in case of accident risk of the parent in addition to
accidental sum of Rs.100000/-.
Insurance Schemes at glance (Amount in lakhs)
Deposit Age Comp Accidental Insurance year Charges*

ICD 5 to 70 United 1.00 21st Feb to 20th Rs.36 + Rs.30
ASB 5 to 70 -do- 0.25 1st Sep to 31st Aug Rs.9 + Rs.10
ASB + 5 to 70 -do- 0.50 1st Nov to 31st Oct Rs.18 + Rs.18
ABG 5 to 70 -do- 1.00 1st Nov to 31st Oct Rs.45 + Rs.25
ABJ 18 to 55 IFLIC 1.00$ 1st Dec to 30th Nov Rs.40/-
Kids 1 day to
18 years United 1.00 1st Nov to 31st Oct Rs.32 + Rs.20
Khajana
*exclusive service charge, which is 10.30% w.e.f 01.10.2009
$ ABJ covers both Life and Accidental death. The premium depends on the age of the
insured
101

Insurance Linked Schemes - Guidelines
Remittance of Premium: Insurance premium should be debited to the respective

account on the date of opening of the account. The premium should be sent to nodal
branch on 1st of the succeeding month along with the details of accounts to which the
premium pertains.
Claims: Intimation of death of an account holder must be accepted in writing only.

Claim intimation shall be sent to insurance company with in 90 days from the date of
accident / death and claims forms duly filled in with all the enclosures shall be
submitted to the Insurance Company within 180 days (from the date of accident /
death). The settlement of claim is at the sole discretion of the insurance company. The
Bank will act only as a facilitator. Claim forms may be submitted to the insurance
company either directly or through the bank. Documents to be submitted along with
the claim forms are as under:
In case of death In case of disability

Death Certificate Photograph of the disability
Postmortem report with inquest report Disablement certificate issued by doctor
FIR of police / Final Investigation Report Bank's certificate of remittance of premium
Nominee's name Any other relevant document
Bank' s certificate of remittance of Police Report
premium
Any correspondence with Insurance Company/Claimant must be done only through

Registered Post Acknowledgement Due. All new accounts, a lien of 45 days imposed
for claims arising on account of Natural Death from the date of opening of account.
However, Lien clause is not applicable in case of claims due to Accidental Deaths.
Deposit Schemes – Discontinued:
Branches are not permitted to accept fresh deposits under the following deposit
schemes since they are discontinued by the Bank.
¾ AB Excel
¾ AB Super
¾ AB Supreme
¾ AB Jeevan Prakash
¾ AB Jeevan Prakash Plus
¾ Sulabh
¾ Stock Invest
¾ Samkshema
¾ Home Loan
¾ Mediclaim
¾ AB Pattabhi (w.e.f. 13.01.2011)
¾ AB 400 (w.e.f. 13.01.2011)
However, the existing deposit accounts under the above schemes will continue till
maturity.
***
102

Deposits – General Guidelines
Opening of Bank Accounts:
Branch Manager/authorized officer is empowered to allow new customers into bank's

fold. New accounts should be opened with cash remittance. In special cases, accounts
can be opened with deposit of cheques drawn on our Bank, for which the applicant
should be the first payee and his identity should be beyond doubt. Branch is required
to take the following precautions:
¾ Photos of accountholders (for accounts with cheque facility only) or authorized

signatories should be obtained.
¾ Branch to obtain declaration in either Form 60 or Form 61 from the persons
who are opening accounts and not furnishing PAN details.
¾ Cheque books should be issued for a newly opened account only after
complying with all the formalities. Conduct of the account should be monitored
at least for an initial period of 6 months.
¾ Staff members are permitted to open accounts only at the branch where they
are working and eligible for preferential interest rate (1% extra). This facility is
also available to retired staff and spouse of a deceased staff member. Staff
members are not permitted to give introduction to new account holders (except
in case of close relatives) in view of the KYC norms.
Term Deposits:
The minimum period of Term Deposit is 15 days. However, branches can accept term
deposit for 7 days also provided the amount of deposit should be Rs.1.00 lakh and
above. The maximum period should not exceed 10 years except in case court
deposits / minor deposits as special case. Payment is to be made by way of credit to
the operative account / DD / Pay Order, if the aggregate amount of deposits together
with interest held by the depositor exceeds Rs.20000/-. Any instruction pertaining to
the benefit of survivorship on term deposits would come into force only on or after the
due date of the deposit. No loan or overdraft should be sanctioned against the term
deposits placed at other branches / term deposits of other banks. Branches to seek
prior approval from General Manager (Planning), Head Office for accepting any
domestic term deposit of Rs.100 lakhs & above either for renewal / fresh deposit.
Premature cancellation of term deposits:
Unless specified otherwise in the scheme, Depositor is having discretion to cancel the
deposit at any time during the currency of the deposit. The penalty for premature
cancellation of deposits is 1% i.e. applicable interest rate (as on the date of original
deposit) for the period minus 1%. However, no penalty is to be levied for individual
deposits (including joint accounts) where the deposit is less than ` 1 lakh and in case
of corporate deposits the limit is less than `100 lakhs and contracted period up to 90
days.
Loans against Term Deposits:
Deposits loans attract 2% higher interest than the term deposit applicable rate.
However, where the rate of interest payable on term deposit held as security is “Nil”
due to cancellation of the deposit before expiry of “minimum period” prescribed for the
deposit, interest to be charged is BMPLR + maximum spread.
103

Premature renewal of term deposits:
The penalty for premature closure would not apply if the deposit is prematurely closed
for availing the benefit of enhanced rates of interest provided the amount is deposited
under the enhanced rates for a further period which is longer than the remaining
period of the cancelled deposit. The rate applicable for the expired period would be the
contracted rate or applicable rate for the period for which the deposit has run with the
bank whichever is less. If a prematurely renewed deposit is withdrawn before the
expiry of the deposit, it will amount to premature withdrawal of the original deposit
and will attract penalty from the date of original deposit.
Overdue Deposits:
Branches transfer the matured term deposits to overdue deposit head on an ongoing
basis and these deposits forms part of demand deposits. Payment of interest on
overdue term deposits is as under:
i) Renewal of an overdue deposit or a portion thereof is to be done provided the

overdue period from the date of maturity till the date of renewal (both days inclusive)
does not exceed 14 days and the rate of interest payable on the amount of deposit
so renewed shall be the appropriate rate of interest for the period of renewal as
prevailing on the date of maturity.
ii) In case of overdue deposits where the overdue period exceeds 14 days and if the
depositor places the entire amount of overdue deposit or a portion thereof as a fresh
term deposit, branches should apply the rate of interest that is appropriate for the
period for which the deposit is renewed prevailing on the date of renewal or the rate
existing on the date of maturity whichever is less. (Cir.no.97 Ref 44/6 dated
30.05.2005)
However, branches are advised to pay interest at Savings Bank Rate on maturity
proceeds of term deposits withdrawn, without being renewed, after the due date by
the depositors. (Circular no.366 Ref 44/47 dated 12.01.2009)
Inoperative Accounts:
Savings as well as Current account should be treated as Inoperative / Dormant if there

are no transactions in the account for over a period of two years. For the purpose of
classifying as above, both the type of transactions (Debit/Credit) induced at the
instance of customers as well as third party should be considered. However, charges
levied or interest credited should not be considered. Operations in such accounts may
be allowed after due diligence i.e. ensuring genuineness of the transaction, identify
verification and signature verification. Before converting the account in to Inoperative,
notice is to be issued to the depositor. The conversion may be postponed to another
one year, in case depositor undertakes to route the transactions in to the account.
Unclaimed Deposits:
In respect of operative accounts (CA/SB), in which there are no customer transactions

for the last 10 years are treated as unclaimed deposits. With regard to term deposits,
which remained unpaid even after 10 years of maturity are treated as unclaimed
deposits. As per Banking Regulation Act 1969, Branches to submit details of unclaimed
deposits to Head Office on 31st Dec of every year for onward submission to RBI.
104

Savings Bank Accounts – Payment of Interest:
Hitherto, Banks are paying interest on SB accounts @3.5% p.a. on minimum balances
available from 10th to last day of each calendar month. Now payment of interest on SB
accounts would be calculated based on Daily Products on half-yearly basis viz.,
September & March of every year. The interest calculated will be credited to the
respective accounts by 5th of succeeding month i.e. October & April. The new system
will come into force w.e.f. 01.04.2010. (Cir.no.381 Ref 27/26 dated 25.02.2010)
Nomination facility:
The act came into force from 29.03.1985 as per section 45 ZA to 45 ZF of the Banking
Reg. Act, 1949. As per the act, account holder can nominate any body of his choice as
nominee to receive money from the bank in case of death of the depositor.
¾ Nomination facility is available to all types of deposit accounts (including joint

accounts E or S), safe deposit lockers and safe custody articles. However, this
facility is available only to the accounts of Individuals in their individual capacity.
The nominee can be any individual including illiterates, minors. If a minor is
nominated, a guardian who will act on behalf of the minor is also to be specified in
the nomination. However, nominations cannot be made in favour of joint
names / Bodies (institutions / trusts etc). The only exception is safe deposit
lockers hired jointly; there can be more than one person as nominee. In case of
illiterate account holders, branch to obtain two witnesses while accepting
nomination. Consent of nominee is not mandatory.
¾ The Nomination facility is available only for deposit accounts and not for loan
accounts including credit balances in ODCC accounts.
¾ Nomination made in respect of a term deposit will continue to be in force even

on renewal of such deposit unless the nomination is specifically cancelled or
changed. The customer has option to change nomination any number of times
during the currency of the deposit. The rights of nominee arise only after the
death of the depositor.
¾ As per the recent guidelines, the name of the nominee is to be printed on the
Passbook / Term Deposit Receipt at the specific request of the depositor.
¾ Branch should take witness of Magistrate / Judicial Officer or an Officer of

Central Govt. or State Government or an Officer of a Bank or two persons
acceptable to the Bank for settlement of claims under nomination.
Deceased Deposits – Payment of deposit amount/Interest:
Legal heirs / representatives / nominees of the deceased are eligible to receive the
principal as well as interest thereon at contracted rate. However, no penalty will be in
case of premature cancellation of deceased deposits. SB interest will be paid on
maturity value from the due date of the deposit to the date of settlement to the legal
heirs of the deceased. In the case of balances lying in current account standing in the
name of a deceased individual depositor / sole proprietor concern, interest shall be
paid from the date of death till the date of repayment to the claimants at the rate of
interest applicable to savings deposits as on the date of payment.
***
105

E-Products
Non-Personalized Debit Cards (NPDC): Post CBS environment has enabled the
bank to issue NPDC to the customers on the opening day of the account itself. Bank
has taken this initiative to render faster customer service and to provide Any Time
Banking through ATM network across the country. Branch delivers the card along with
PIN. The card will be activated within 48 hours of the issue. It is a tool to branches to
attract new customers besides retaining the existing clientele for further business
development. The cards can be used on any ATM across the country to avail the
following services with free of charge.
¾ Balance Enquiry / Mini Statement

¾ Cardholders are allowed to withdraw cash up to Rs.25000/- per day. However,
with regard to purchase of goods and services the daily limit is fixed Rs.40000/-
.
¾ Credit Card holders having VISA/Master affiliation can avail cash advance
facility from any of our ATMs across the country.
¾ Funds Transfer from one account to another account of the cardholder.
¾ Cardholders can donate funds to various trust schemes of Tirumala Tirupathi
Devastanam as per their convenience using E-Hundi option.
¾ Cardholder has an option to make payment of Andhra Bank credit cards
bills/dues from any ATM of our Bank.
¾ Our Bank cardholders can avail Mobile Recharge facility.
¾ mPAY registration for our customers.
¾ Extending facility of booking of Rail Tickets and Air Tickets (Kingfisher airways)
through ATMs.
SMS Alerts:
Bank has launched Mobile Banking Services through SMS alerts - Push to the
registered customers. A customer has an option to register for Mobile Banking facility
at branch or ATM or Internet. All Savings and Current Account holders who owns
mobile are eligible to avail the following services at free of cost.
¾ All Savings Bank transactions

¾ Current and Overdraft transactions of Rs.25000/- & above
¾ ATM Withdrawals
¾ Credit Card transactions of above Rs.500/-
¾ Cheque Returns / Cheque Book Issue
¾ Term Deposit Due
¾ Balance for any transaction at end of the day for Current/ODCC accounts.
A mobile registered customer has an option to enquire Balance Enquiry, Last Five
Transactions and Cheque Status Enquiry through SMS alerts - Pull. However, the
service provider (Mobile Company) levy charge @ Rs.3/- per request to the customer.
Mobile Banking (mPAY)
Bank is providing SMS based mobile alerts to the registered customers to keep them
informed of various transactions that occur in their accounts. Further, bank is also
using the SMS media to send specific or common messages/information to the
customers. The increased customer expectations have necessitated the bank to extend
online financial services to stay in the fierce competitive environment. In the above
backdrop, Bank has introduced mPAY which provides the customers a secure and
convenient means of banking from anywhere and at anytime. Under this, customers
can check their account balances, view mini account statement, know cheque status,
note stop payment of cheques, make donations and transfer funds (Mobile to Mobile
and Mobile to Account) on press of button on mobile. All Savings Bank and Current
106

account holders having ATM/Debit card are eligible to avail this facility. Customer has
an option to link any one account (CASA group) connected to the card with the mobile
number. Customer intending to avail mPAY facility should possess mobile handset Java
enabled or Windows Mobile 5.0 & above model or Windows Mobile Professional model
with activated GPRS (General Packet Radio Service). Customer can register for mPAY
through any of our ATMs across the country. It is hassle-free paperless process and
upon registration, customer receives a registration slip which contains the default
application password and MPIN. The maximum transaction limit is fixed as `10,000/-
per day. At present, Bank is extending the said services free of cost. (Cir.no.220 Ref
55/18 dated 10.09.2010)
Internet Banking:
Our bank introduced Internet Banking with AB INFI-net brand name in the year
2008. Bank is extending the following facilities to the registered customers (Individuals
and Corporate) free of cost:
¾ Account Balance Enquiry

¾ Account Statement view / Printing / Downloading
¾ Request for Cheque Book / Term Deposit
¾ Online TAX payment (e-tax)
¾ Online IPO - Applications Supported by Blocked Amount (ASBA)
¾ Credit Card Bill payment
¾ Funds Transfer - Registered customer has an option to transfer balances
between linked operative accounts of the same customer across the branches
and also undertake third party transfers from his/her account to any other
operative account of Andhra Bank.
¾ Transfer of funds across the Banks through NEFT is allowed on Internet. The
default limit set for retail customers is Rs.50000/- per day. However, branches
can recommend for higher limits to Head Office depending on the request of the
customers. In case of corporate internet users, the maximum amount limited to
the powers delegated to the authorized signatories by the corporate.
On receipt of Internet Banking application from the retail customers, branch should
enter the details such as account number, mobile number and e-mail of the customer
in the system for registration. Internet Processing Center, Koti, Head Office directly
sends User ID & Login Password to the customer and transaction password will be sent
to the branch for onward submission to the customer with due acknowledgement.
However, branches to continue to forward the Internet requests from corporate
customers to Head Office for approval. (Cir.no.304 Ref 55/19 dated 15.12.09 &
Cir.no.263 Ref 55/21 dated 23.10.10)
Real Time Gross settlement (RTGS):
All CBS enabled branches are extending funds transfer facility across the banks to the
customers with brand name AB Real Time. Under this, funds will be transferred
electronically and credited to the beneficiary accounts instantaneously. The minimum
remittance should be `2,00,000/- and there is no cap on maximum amount. It is
most cost effective since the charges are very low i.e. `25/- & `50/- per transaction
for below Rs.5 lakhs and for ` 5 lakhs & above respectively. The timings for customer
payments are 9 AM to 4.30 PM on Monday to Friday and 9 AM to 1.30 PM on Saturday.
Similarly, for inter bank payments; the timings are 9 AM to 6 PM on Monday to Friday
and 9 AM to 3 PM on Saturday. (Cir.no.293 Ref 55/24 dated 16.11.2010)
107

National Electronic Funds Transfer (NEFT):
Bank launched this product in the name of “AB X press” for the benefit of retail
customers. There is no cap on minimum and maximum amount. The minimum charges
stipulated is `5/- (up to `1 lakh), ` 15/- for transactions of above ` 1 lakh and up to ` 2
lakhs and the maximum charge is ` 25/- for beyond ` 2lakh remittances. The timings
of NEFT are 9 AM to 5 PM from Monday to Friday and it is 9 AM to 12 Noon on
Saturday. There are 6 settlement cycles from Monday to Friday and 3 cycles on
Saturday. Customer is required to furnish IFSC Code number of the Bank Branch and
correct account number of the beneficiary for smooth transfer of funds under
RTGS/NEFT. This facility is extended to non-customers also for transactions up to `
49999/- at all branches of the Bank. (Cir.no.278 Ref 55/22 dated 02.11.2010)
Multi City Cheque facility (MCC): In order to provide value added service to the
existing customers, Bank introduced MCC facility facilitating the customers to issue at
par cheques to their clientele, so that the proceeds of the cheque gets credited to the
payee account at any of our branches across the country. It is a best facility available
for our valued customers who are holding Saving Banks account with a minimum
balance of `10000/-, Current account with a minimum balance of `50000/- and
SOD/COD with a sanctioned limit of `50000/- subject to satisfactory dealings with the
branch. Bank levy a charge of `5/- per MCC cheque leaf. This facility is an opportunity
to the branches to improve low cost deposits (CASA), which facilitates the Bank to
show better Net Interest Margin, which is need of the hour. (Circular no.307 Ref 51/16
dated 11.10.05 & Cir.no.142 Ref 51/09 dated 21.07.06)
Applications Supported by Blocked Amount (ASBA): Introduced in July 2008 by

SEBI. It is the alternative payment method (optional) for IPO application where the
IPO bidding amount remains in investors account, but blocked by the bank until
allotment is done. The purpose of the new payment option is to reduce the turn
around time for IPO Stock listing and to make the refund process faster. Technically
there is no refund process for this kind of payment option as only the required money
for allocated shares is withdrawn from the investors account. As companies cannot list
their shares before completing the refund process, ASBA enables the listing process
faster. Retail Individual Investors and Non Institutional Investors including High Net
worth Individuals (HNI) can avail this facility. Investor should have account with Bank.
Designated branches accept IPO bids at cut-off price and they can also apply through
Internet Banking. Investor receives the acknowledgement from the bank along with
the IPO Application Number. Revision and cancellation of bids are permitted till the
issue closure date and time. The application amount will remain locked until allotment
is done. An investor is not allowed to withdraw the money in locking period. The
investor continues to earn interest on the application money. Registrar transfers the
allocated shares to investor’s Demat Accounts. No charges will be levied to the
investors for this service. Registered Internet customers are now can avail ASBA
facility online. It is an opportunity to branches to improve low cost deposits and non-
interest income since bank earns commission on each application received under
ASBA. (Cir.no.333 Ref 55/30 dated 16.12.2010)
Personalized Cheque Books: In order to meet the discerning expectations of the

customers, introduced Personalized Cheque Book facility at select branches in
Hyderabad, Mumbai, Chennai and Bangalore zones. Cheque book indents will be
processed online and delivered to branches through courier. All cheque leaves bear
branch address and name of the customer, which provides value addition to the
customers.
108

Demat Accounts
(Compiled by U Vijayanand, Manager, DP Main Branch, Hyderabad)
Dematerialization (Demat) signifies conversion of securities from its physical form to

electronic form for the same number of holding which is credited to demat account of
the customer with a Depository Participant (CDSL/NSDL). This can be used for shares,
bonds and Mutual funds. Now, it is mandatory that the investor should have Demat
account to subscribe IPO/FPO. An individual resident, Non-Resident Indian, Foreign
National, HUF, Trusts, Societies, Corporate Bodies, OCBs, Financial Institution, FIIs,,
Mutual Funds, Banks, can open Demat account. The benefits associated are:
¾ Faster settlement cycle
¾ Elimination the risk of bad delivery
¾ No stamp duty
¾ Easy for the banks to lend against shares
¾ Eliminate delays, thefts, interceptions and fake certificates
¾ Online credit of Bonus/Rights/Split shares
Andhra Bank is offering value added service with a brand name “AB Demat” to
facilitate the investors to have hassle-free, fast and accurate electronic transactions.
The minimum requirements to open Demat account are submission of application
along with photograph, address proof and Bank account details. Nomination facility is
available. Investor has the option to freeze/defreeze the securities. The service
charges are as under:
No Service Charges (Exclusive service tax)

1 Agreement charges/Stamp duty Actuals as per state laws
2 Individuals Rs.300/- Corporates Rs.750/-
Annual Membership charges
No charges for staff accounts.
3 Rs.2/- per certificate + mailing charges
Demat charges Rs.20/- in India and Rs.500/- for foreign
address
4 Rs.15/- for every 100 securities or part
Remat Charges
thereof.
5 0.04% of market value or minimum of
Transaction Fee
Rs.20/-
6 Pledge – Creation/closure Rs.50 /- per instruction
Loans against Demat Stocks: Branches are allowed to sanction credit limits against
pledge of approved and unencumbered shares, Debentures, Mutual Fund units, which
are in demat form. The margin required is 50% on the market price or 52 week low
whichever is low. However, the maximum limit that can be allowed is ` 20 lakhs only.
(Cir. no. 541 Ref 51/24 dated 21.03.06, Cir. no. 326 Ref 51/26 dated 24.11.06, Cir.
no. 392, Ref 51/31 dated 22.01.07, Cir. no. 70 Ref 51/3 dated 10.06.09)
***
109

AB e-trade (Online Trading)
The scheme is meant for the customers who are interested to carry stock market
operations (Buying/Selling) at his convenience. It offers the depositor to trade from his
residence or office or while on move through Internet. The salient features of the
product are as under:
¾ It is also called as 3-in-1 account since it integrates Bank Account, Demat

Account and Broking Account of the depositor.
¾ Individual or Joint Account, HUF/Trusts, Corporates etc., who are eligible to

open Current / Savings accounts can open AB e-trade account. However, the
style and form of account holders in demat account should be the same as in
bank account.
¾ The existing KYC guidelines are to be followed strictly while opening AB e-trade
account at the branch.
¾ This facility is being offered in tie-up arrangements with M/s.Religare

Securities Limited (RSL).
¾ Once the account is opened, account holder is required to register with RSL to
undertake online trading duly indicating the scheme viz., R-Ace, R-ACE Lite and
R-Ace Professional.
¾ RSL sends the Login ID and Password to enable the customer to have access to
the website for trading.
¾ In case of purchase of stocks, his account will be debited with the value of the
stocks purchased plus brokerage/service charges and the said stocks will be
transferred to his demat account.
¾ Similarly, in case of sale of stocks, demat account will be debited with the
number of stocks sold and the proceeds will be credited to his bank account
after deducting brokerage/charges.
¾ In order to protect the customers from fraudulent transfers, customers have an

option to mark lien so that no debit operations are allowed in demat account.
It is a unique feature available in our product.
¾ Brokerage charges levied by RSL is ` 0.05% for intra day transactions and
0.50% for other transactions i.e. delivery.
This product enables the bank to improve demat accounts and low cost deposits
besides earning fee based income by way annual maintenance charges and transaction
charges. A large client base definitely provides a continuous stream of fee based
income to the bank. (Circular no.70 Ref 51/3 dated 10.06.2009)
***
110

Tele Banking – Call Center
Andhra Bank has initiated one more tech service and launched Tele Banking & Call
Center, on 04.01.2010. It provides information to the registered customers about their
accounts through Interactive Voice Response (IVR). Further, it enables the customers
to have desired information without visiting the branch personally. IVR is available
round the clock throughout the year including Sundays and Holidays where as Call
Center services are available from 8 am to 8 pm on all days except on Sundays and
National Holidays. Call center is providing the following services:
¾ Savings & Current Accounts: Details such as Balance Inquiry, Last 5

Transactions, Cheque Status in the account, Account statement request and
Cheque Payment of a Cheque.
¾ Term Deposit Accounts: Details like Date of Opening, Principal Amount,
Interest Rate, Date of Maturity and Maturity Amount.
¾ Loan Account: Details like Original Loan Amount, Outstanding Loan amount,
Next Installment Amount & Due Date, Loan Interest Rate, Last installment
Amount & Payment Date.
Caller is required to contact Toll Free Number 1800-425-1515 for the above
information. However, the caller needs to furnish Customer ID and Personal details to
know his account related information. The said details help the bank in identifying the
Caller with the details already with the bank to protect the interest of the customer.
Besides the above, Call Center disseminate information of various products of our
Bank through Customer Service Executives to the registered customers as well as
other customers/general public. To avail this facility caller need not furnish customer
ID and Personal details. Bank is not levying any charges for the said services. It is
Free, Simple, Fast, Reliable and Paperless Registration.
Upset” service: Excellence in customer service is an important tool for the banks to
register sustained business growth in the present competitive environment. Providing
prompt and efficient service is a prerequisite not only to attract new customers, but
also to retain the existing clientele. However, customer complaints are part of the
business of the banks and the customers expect that their grievances are
acknowledged and addressed immediately. Hence, branches need to pay focused
attention to resolve the complaints in a time bound manner. In this direction, bank has
launched technology embedded service “Upset” proactively wherein customers can
send their grievance through SMS direct to Head Office for immediate resolution. The
salient features of the product and the workflow is as under:
¾ Bank has procured Mobile Number 9666606060 exclusively for the purpose of
forwarding grievances/complaints by the customers to HO through SMS. The
aggrieved customer is required to type the word Upset in his/her mobile and
forward the same through SMS to 9666606060.
¾ On receipt of SMS, the service provider sends acknowledgment to the complainant
and routes all inbound SMS received to Customer Service Department, HO on daily
basis. In turn, Customer Service Department calls back the customer to elicit the
details of the grievance/complaint and forwards the same to the concerned
branch/office through email for doing the needful.
¾ Branch/Office is required to initiate necessary steps to resolve the grievance duly
following the extant guidelines and furnish the information through email to
resolution@andhrabank.co.in on the same day.
¾ The status of complaint/grievance will be informed to the complainant within 48
hours by the Customer Service Department, Head Office.
The newly introduced service ‘Upset’ is an opportunity to the bank to receive the
expectations of the customers online and enables the bank to initiate necessary steps
for speedy Redressal of the Grievances. (Cir.no.275 Ref 34/03 dated 29.10.2010)
111

IndiaFirst Life Insurance Company Limited (IFLIC)
The huge population base and large untapped Indian insurance market is a big
opportunity for banks in India. In this perspective, to keep pace with the market trend,
our Bank has entered into Insurance joint venture with Bank of Baroda and Legal &
General Group plc with 30%, 44% and 26% stake respectively. The Company is
named as IndiaFirst Life Insurance Company Limited and commenced business in
the month of December 2009. The salient features of the recently launched schemes
are furnished here under:
No Salient Features IndiaFirst Smart Save IndiaFirst Young India

It is a simple structured Customers with young
Unit Linked Plan meant for children to impart quality
1 Target Group
long term protection and education to them.
savings.
2 Entry Age 18 to 60 Years 18 to 55 Years
15, 20 and 25 Years.
However, in case of Single
3 Term 10, 15, 20 and 25 Years.
Premium the term is 15
Years.
4 Minimum Invest.
i) Regular Premium `12000/- p.a. `12000/- p.a.
ii) Limited Premium `15000/- p.a. NA

iii) Single Premium `45000/- NA
5 Maximum Invest. No limit
6 Payment options Half-yearly / Yearly – SIP facility is available
7 Fund options Debt, Equity, Balanced, Index and value Fund.
8 Sum Assured
i) Regular & Limited Higher of {105% (premium paying term x annualized
premium premium) or (10 x annualized premium)}
For age < 45 years –
125% of premium and for NA
ii) Single Premium
age >=45 years – 110%
of premium
9 Withdrawals Minimum withdrawal is `5000/-
Maximum withdrawal – 25% of the fund value, only if the
fund is left with a minimum balance equal to 110% of
annual premium after withdrawal. In case of single
premium – the fund value after the withdrawal should not
be less than `45000/-
Premium invested – Section 80C and Maturity benefits
10 Tax Benefit on
received – Section 10 (10D)
The fund value or the sum assured whichever is higher is
11 Death Benefit paid to the family/nominee on the death of the Life
Insured.
The company introduced a simplified process of getting a Life Insurance Policy Over
The Counter (OTC) with a brand name AAG viz., Ask, Apply and Get. Bank has entered
MOU for distribution of Life Insurance products of the Joint Venture Company as their
Corporate Agents and bank earns commission on the policies mobilized/sold.
(Circular no. 214 Ref 51/15 dated 08.09.2010)
***
112

Credit Cards
RBI initiated steps to popularize Credit Cards to encourage alternate payment system
in the country to minimize the risks associated with traditional modes of payments
such as cash/cheque/Demand Draft etc.
Of late, credit card has become one of the means to make payments by majority of
house-holds and it is no longer a status symbol. Buy Now - Pay Later concept is
attracting and popularizing the credit cards in the market. It is easy to carry with a
limit and hassle free payment system. Cardholders undertake purchase of goods and
services without carrying currency and make payment at a later date. In a way, Banks
are extending short term unsecured personal loans by issuing Credit Cards to their
customers. Card business augments other income of the banks through annual
subscription, service charges and interchange fee. The salient features of credit cards
offered by our bank are furnished here under:
Description VISA Classic / MASTER Card VISA Gold Card

Income:
i) Salaried Class
Gross Rs.15000 p.m Rs.20000 p.m.
Net Rs.8000 p.m. Rs.10000 p.m.
ii) Others Rs.180000 p.a. Rs.240000 p.a.
Annual Subscrip.
i) For main cards Rs.550/- Rs.1000/-
ii) For Add-on cards Rs.200/- Rs.400/-
Waiver of Annual
subscription where Rs.18,000/- Rs.23,000/-
the usage is above
Rs.50000/- & Rs.75000/-
Base Limit Rs.25000/-
where income is above 3 lacs
Cash Adv. Charge 3% 3%
Validity India & Nepal Globally Valid
Accident Insurance Rs.2.00 Lakhs Rs.5.00 Lakhs
Two Passport size colour photos with PAN card, Residence Proof
with Photo Identification. Salaried Class - Copies of Latest Salary
Documents required
slip, Form 16 IT Returns and for others– Copies of two Years IT
returns filed with computation sheets and Rating Sheet.
Other features:
Cash Advance Limit 50% of limit

ATM Compatibility Compatible
Free Credit Period 21-50 days even on availing Roll Over Facility
Add On Facility Up to 2 cards for Spouse, major children & parents
Service Charges 2.50% if MPD paid by due date; if not 2.95%
Minimum Payment
5% of Outstanding balance plus unpaid ‘MPD’ of previous month
Due (Roll over)
Lost Card Insurance Rs.1.50 Lakhs
Late Payment For Amt outstanding < Rs.5,000 Rs.200/-
Charge For Amt outstanding Rs.5,000/- to Rs.15,000/- Rs.300/-
For Amt outstanding > Rs.15,000/- Rs.400/-
113

Transaction fee:
Transaction Type Fee

Cash withdrawals/balance enquiry from Nil
Andhra Bank ATMs/Branches
Cash withdrawals from other Bank Rs.50/- for VISA Cards
ATMs/Branches Rs.70/- for Master Cards
Balance enquiry at other Bank ATMs Rs.30/- per transaction
2.5% of the transaction amount subject
Transactions at Petrol Stations
to a minimum of Rs.10/- per transaction
Purchase of Railway Tickets 2.5% on the charge slip amount
Lost/Broken/Hot listing charges Rs.200/-
AB VISA Platinum Credit Card:
Bank introduced another new card “AB VISA Platinum” in the month of Sep` 2010 with
affiliation to Visa International and the salient features are as under:
¾ Income Criteria: Minimum `5 lakh per annum. Cards are also issued against
lien on deposit with 25% margin and the minimum deposit is `1,00,000/-.
¾ Card Limit: `75000/- with 50% as cash withdrawal facility.
¾ Charges: Cash advance charges @2% p.a. and Service charges @1.50% p.a. No
surcharge on fuel drawn at petrol pumps up to `2000/- per day.
¾ Admission/Annual subscription: No admission fee. No annual subscription
in the first year, and the same is waived in the current year if the usage is
`30000/- or the minimum transactions in a year is 18. In all other cases, the
annual subscription is `1000/-.
¾ Insurance Coverage: Accidental Insurance Coverage up to `10 lakhs to the main
cardholder and `5 lakhs to add-on cardholder. Baggage insurance coverage up
to `25000/- and lost card insurance up to `1.50 lakh.
¾ Bank provides year-end summary statement with merchant-wise brake-up.
(Cir.no.237 Ref 05/01 dated 24.09.2010)
Issue of cards against Term Deposits: Master & Master Card Electronic, Visa
classic and Visa Gold cards are issued to Non Resident and Resident Indians, against
lien on Term Deposits with the following criteria:
Card Type Minimum Deposit Minimum Period Limit

Master Electronic `10000/- 24 Months 75% of deposit
VISA Classic `34000/- 24 Months 75% of deposit
VISA Gold `67000/- 24 Months 75% of deposit
AB VISA Platinum `100000/- 24 Months 75% of deposit
However, no margin is required for limit up to Rs.200000/-. Annual subscription

charges are Rs.200/- for main card and Rs.150/- for add-on card. It is valid in India &
Nepal only. A nominal charge of 2% is levied for Cash withdrawls. Accidental
Insurance coverage is not available to the cards issued under this category. The
Branch is required to mark lien on such deposits and also in the system. Branch
Manager is empowered to sanction credit cards against Term Deposits. However,
Embossing and maintenance of Cards shall be at CCD, Hyderabad. (Cir.no.121 Ref 5/2
dated 05.08.2009)
Issue of Cards to Borrowers: Visa Gold cards are Issued to the Borrowers who are
enjoying a Limit of Rs.10.00 lacs and above which are secured and Performing; Free
114

Accidental insurance up to Rs.5 lacs is available. Card details are to be noted in the
documents after sanction. Maximum Card limit is Rs.50,000/-, however, Higher Limits
are considered on submission of Income Proof.
Credit Scoring Model: Card limit is fixed based on the rating arrived using Credit
Scoring Model, which covers six important factors pertaining to the applicant such as
Own House, Employment/Occupation, Proven income, Bank Account, Age and Risk
category (KYC norms). The minimum marks to be scored for eligibility and process the
application are 18 at the branch level. Zonal Manager may improve overall scoring by
not more than 2 points, depending on merits of individual case while recommending.
Where the score ranges 18 to 22 points, the cardholder is eligible for Base limit. Higher
limit may be considered by the sanctioning authority where the score is above 22.
Corporate Cards: Banks are issuing Corporate Cards to the companies registered
under Companies Act 1956 and whose net worth should be minimum of Rs.25 lakhs.
The cards will be issued to the Executives / Officers / Employees of the company. No
admission fee and the annual subscription fee is Rs.2000/-. The aggregate limits under
various cards issued to a company should not exceed 25% of its net worth subject to a
maximum of Rs.50 lakhs in total and not exceeding Rs.10 lacs per card. Companies
availing credit facilities with Banks/DFIs are only eligible except where 100% liquid
security is offered as guarantee by way of lien on deposits / Govt. Securities for the
Corporate Credit Card limits. In case of non-customers, they are required to produce
status reports from their Financing Banks / Development Finance Institutions etc while
submitting the application for Corporate Cards. Company is required to submit copies
of Memorandum & Articles of the company, Board Resolution, Last two years audited
balance sheet, 2 colour Photographs of the card Applicants and undertaking letter to
the branch for sanction of corporate credit cards. Zonal Managers are empowered to
sanction the Corporate Cards.
Our Credit Cards - Highlights (Circular no.102 Ref 05/01 dated 08.07.09)
¾ Cards are issued to our Customers generally.

¾ Service charges at 2.50%, which is one of lowest in the Industry.
¾ Global validity on Visa Gold card and Visa Electron Debit card.
¾ Free Accidental Insurance coverage to the Main and Add on cardholder
excluding cards against Deposits.
¾ Free Credit period of 21 to 51 days even under roll over facility.
¾ Cash Advance up to 50% of the Base Limit.
¾ No Annual subscription in the First year and shall be waived in the
subsequent years if card used for stipulated minimum amount.
¾ Highly secured payment for Internet usage through VBV (Verified by VISA)
and Msecure (Verified by MASTER).
Pre Paid Acquisition (PPA) Advance: It is a facility of funding to the Merchant

Establishments against future card receivables to meet their short-term requirements.
The advance amount should not exceed immediate preceding 12 months aggregate
business turnover of the Merchant Establishment on cards. The sanctioning authority
for PPA advance is Head Office. Branch undertaking PPA advance should remit 25%
interest earned to Credit Card Department, HO.
***
115

Fee Based Income - Products
In the present deregulated competitive environment, Banks are facing difficulties in

retaining / improving profits since there is pressure on Net Interest Margin (NIM). In
order to cope up the demand, Banks are focusing their attention on other services to
improve the bottom line. Banks are entering into ancillary services in a big way. To
augment other income, our Bank is undertaking five activities viz., Selling of Mutual
Funds, AB Arogyadaan, Bancassurance schemes, Sale of Gold Coins and Liability
Insurance/Asset Insurance.
I. Mutual Funds are associations or trusts of public members who wish to make
investments in the financial instruments or assets of the business/corporate sector for
the mutual benefit of its members. Mutual Funds are launching various schemes with
different investment objectives from time to time to suit the requirement of the
investors. Mutual Funds are beneficial to their members in reducing risks and
maximizing income by proper selection of financial instruments, which will bring
income flow in the form of dividends as well as in the form of capital appreciation. Our
Bank has entered agreement with Mutual Funds viz., Principal Mutual Fund (PNB), SBI
Mutual Fund, TATA Mutual Fund, UTI Mutual Fund, Kotak Mutual Fund, Reliance Mutual
Fund, Sundaram BNP Paribas Mutual Fund, LIC Mutual Fund, Birla Sun Life Mutual
Fund and Baroda Pioneer Mutual Fund for distribution of their products. It is a win-win
situation to the Banks and customers since banks are providing value added services
to the customers and it is a source of other income to the Banks.
II. AB Arogyadaan: It is a group Mediclaim Insurance Scheme, which takes care of

the hospitalization expenses, issued as a Floater Policy, in association with M/s. United
India Insurance Company Limited. There are two plans viz., Plan-I covers a policy of
four (1+3) consisting of Policy Holder, Spouse and 2 dependent children and Plan – II
covers a family policy of SIX (1+5) consisting of Policy holder, Spouse, two dependent
children and parents (father & mother). Dependent mean “male child - below 26 years
and unmarried female child”. It is a Floater Policy, any one member or all the
members put together can avail hospitalization benefits (Room, Boarding, Nursing,
Surgeon/Consultant fee, Diagnostic charges etc.) during the policy period. M/s. Good
Health Plan Limited is acting as Third Party Administrator (TPA) and issue photo
identity cards direct to the policy holders in Metro/Urban/Semi-Urban areas and with
regard to other centers the cards will be sent to the respective branches. Policy
holders are eligible to avail cash less treatment at networked hospitals and incase of
non-networked hospitals, they may pay bills first and then claim reimbursement from
TPA.
The entry age is up to 60 years for fresh proposals and on renewal coverage is up to
80 years. Risk will be covered based on sum assured ranging from `100000/- to
`500000/-. Policy is valid for one year, however 15 days grace period is allowed for
payment of premium. The annual premium payable by the customer is depending on
the Sum Insured. Policy holder is to pay a nominal service charge i.e. Rs.55/-
(includes service tax) to the branch. The premium paid under the Scheme is eligible
for IT relief under section 80D. The first 30 days of joining the scheme is treated as
waiting period and policy holder is not entitled for reimbursement of hospitalization
charges in the said period. However, this condition does not apply in case of accidental
hospitalization. Settlement of the claims is the sole responsibility of M/s.United India
Insurance Company. The contract is between the insurer (insurance company) and the
insured (individual) and not between the Bank and insured. Bank acts as facilitator
only. (Cir. No.056 Ref 51/06 dated 31.05.2010)
116

III. Bancassurance (Life): Andhra Bank is the Corporate Agent for M/s. IndiaFirst
Life General Insurance Company Limited and providing various insurance products to
the customers of the Bank as well as General Public w.e.f. 01.01.2010.
Bancassurance (Non-Life): Bank is undertaking marketing of non-life policies issued

by M/s.United India Insurance Co. Limited to customers as well as general public
through selected branches. The important policies are Standard Fire & Special Perils
Policy, House Holders Insurance Policy, Shop Keepers Policy, UNI Care Policy,
Electronic Equipment Insurance Policy and Contractors All Risk Insurance Policy.
Besides the above, branches can also undertake insurance of loan assets (Primary and
Collateral securities) with M/s. UII, so that branches can protect the loan assets
against risk and earn income through commission. All insurance proposals processed
should bear bank Code 920100 to receive eligible commission.
IV. Sale of Gold Coins: Gold has become a preferred choice of investment for a large
number of investors across the globe in general and India in particular. In order to
provide the desired services to the customers and to improve the non-interest income,
our bank has entered the business of selling the famous Swiss 999.9 fine gold in round
shaped coins of 4 grams, 8 grams and 10 grams denominations in the first phase. All
gold coins are embossed with the logo of our bank on one side and our name & weight
of the coin on the other side. A pre-requisite for selling of gold coins is to obtain
VAT/CST license. Initially 162 branches are identified for this purpose. Branch receive
price quote every day from IIB, Mumbai. Branch will get an income of Rs.70/- per
gram as commission. No sale is to be effected against “Credit card” for purchase of
coins. However, branches can grant loan against Gold Coins under Gold Loan Scheme.
Non-customers - For purchases up to the value of Rs.20000/- no documents are

required except an application form. Identity proof is required for purchases above
Rs.20000/- and up to Rs.49999/-. Cash for Rs.50000/- and above cannot be accepted
from non-customers. For customers - For purchases below Rs.50000/- no documents
are required except an application form and cash can be accepted. For purchases of
Rs.50000/- and above PAN Card copy is required and payment is through a cheque.
V. Liability Insurance: In order to survive in the competitive world, financial

institutions are offering innovative retail loan products to the customers. In this
direction, Banks have made the loan procedures easy, offering competitive interest
rates and building value-additions in their loan products by providing insurance cover
(Accident & Life) to the borrowers. Retail loans (Housing, Vehicle, Education etc)
involve huge sums and remains in existence for longer periods as compared to the
other loans. These loans being one of the essential social needs with emotional and
psychological attachment, the family need to continue the asset even in case of any
unfortunate event to the borrower. Andhra Bank is providing cover to Housing /
Vehicle / Education loan borrowers in association with India First Life Insurance
Corporation (IFLIC) under Group Mortgage Redemption Assurance. The borrowers can
avail this facility at their option and it is not compulsory. The intending borrowers
opting for the risk cover have to submit Consent-cum-Authorization and Simple Health
Declaration Form.
Covering the borrowers under this policy helps the bank in reduction of default risk in
case of unfortunate event to the borrower. Besides earning commission on Insurance
Premia collected, bank charges Rs.55/- (including service tax) per applicant towards
service charges. It is also providing a potential avenue for earning fee-based income to
the Bank. The features of the scheme are as under:
117

Features Particulars
All new and existing borrowers between 18 to 60 years of age for
Housing Loans, 18 to 55 years for Education Loans and 18 to 55 years
Eligibility for Vehicle Loans. Coverage is available for Joint Borrowers of Housing
Loans and Vehicle Loans. In case of Joint Borrowers, any one of the
borrower will be covered provided “No Objection Letter” is obtained from
the other borrower (s). Age Proof - Copy of Date of Birth Certificate /
Passport / Voter’s ID / PAN Card / School Certificate etc. To arrive the
correct age for the purpose of calculation of premium, Age as on last
birthday should be considered.
Up to Rs.50 lakhs & Rs.20 lakhs for Housing and Vehicle loan borrowers
Maximum respectively. In case of Education Loans in India, the maximum
Cover coverage available is Rs.10 lakhs and Rs.20 lakhs for abroad studies.
However, the policy is covered with the sanctioned limit or the liability as
on date, whichever is lower.
Amount Outstanding indebtedness of the borrower to the Bank which means the
payable by amount outstanding in the loan account on the date of entry in to the
Insurance scheme for the first year and for subsequent years the indebtedness as
company reduced by the amount deemed to have been repaid through EMI
towards the liquidation of the Principal and Interest on such loan. The
amount shall not include the default in payment, if any.
Recovery of In case the amount of claim settled by the insurance company falls short
short fall of the liability outstanding in the loan account, the short fall should be
amount paid by the joint borrowers / co-obligants / guarantors / legal heirs of
the borrower.
One time Single Premium. The premium will be calculated based on
Premium sanctioned limit / liability, age of the borrower and repayment period of
the loan. However, in case of existing borrowers, outstanding liability
and Residual Repayment Period as on the date of the policy is to be
taken into consideration while calculating premium amount.
Foreclosure On request of the borrower, LIC will refund the Proportionate premium
of the Loan basing on the Residual Repayment Period.
The insurance cover for a borrower is terminated once the borrower
Termination attaining the maximum permissible age (65 years for Housing Loan, 60
of cover years for Education & Vehicle loans) or on expiry of repayment period of
the loan or on complete repayment of the loan before the due date.
***
118

Ratio Analysis
Financial statements and their analysis:
The statement which provides us the financial position of a Balance Sheet are called
“Finance Statements”, which includes:
¾ Trading Account (in case of Manufacturing concerns)

¾ Profit & Loss Account
¾ Balance Sheet
¾ Cash Flow Statement
¾ Funds Flow Statement
The analysis of Balance Sheet is a process of bringing down the difficult matter into a
simple and easily understandable one. To have a clear understanding of the financial
position of the Business concern, at least three years financial statements are to be
ascertained. They provide us treasure of information. Balance Sheet of a business
concern shows the strength of the concern on a given date but not reveal the current
state of affairs of the concerns. Balance Sheet is having certain limitations, because it
does not disclose the critical factors, such as Managerial Efficiency, Technical
competence, Marketing capabilities and Competition in the market.
Ratio means a comparison of two items which are having cause and relationship.
Ratios can be expressed in percentage or in number of times. Depending upon the
nature, the ratios are broadly classified in to four categories viz., Liquidity Ratios,
Leverage Or Solvency Ratios, Activity Ratios and Profitability Ratios.
I. LIQUIDITY RATIOS: These Ratios helps to find out the ability of the business
concern to pay the short term liability of its liquidity. Any adverse position in liquidity
leads to sudden fall of the unit.
i) Current Ratio: Current Ratio denotes the capacity of the business concern to meet
its current obligation out of the realisable value of the Current Assets. Current Ratio =
Current Assets/ Current liabilities
Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan Policy guidelines is 1.33:1
for the limits enjoying above Rs.6.00 crores and 1.15:1 for the business concerns
availing limits of below Rs.6.00 crores. Any deviation below the required ratio requires
ratification of Higher Authority.
ii) Quick Ratio Or Acid Test Ratio: This ratio is a comparision of Quick Assets to
Current Liabilities. Quick Assets mean the assets which have instant liquidity of the
business concern. Though the Inventory and Prepaid expenses are part of Current
Assets, it may be difficult to sell and realize the inventory. Hence, Inventory and
Prepaid expenses are to be excluded for arriving the Quick Asset Ratio.
Current Assets – (Inventory+Prepaid Exp)

Quick Ratio or Acid Test Ratio = ----------------------------------------------
Current Liabilities
Ideal Quick Ratio is 1:1. Current Ratio is always to be read along with Quick Ratio. A
fall in the Quick Ratio in comparison to the Current Ratio indicates high inventory
holdings.
II. LEVERAGE AND SOLVENCY RATIOS: These Ratios helps to find out the Long
Term Financial stability of the business concern
119

i) Debt Equity Ratio: Long Term Debt / Equity
Here, Equity refers Tangible Net worth. The Ideal ratio is 2:1 and the higher may also
be considered as safe.
ii) Debt Service Coverage Ratio: It helps to know the capacity of the firm to repay
the Long Term Loan Instalment and Interest. Ideal DSCR is 2:1. The higher the
DSCR, we may fix the lower repayment period. As per our loan policy guidelines, the
DSCR 1.20:1 is also can be considered where fixed income is generated, such as Rent
Receivables etc.
Net Profit After Tax + Depreciation +Int. on TL
DSCR = -------------------------------------------------------------
Int. on TL + Instalment on TL
iii) Fixed Assets Coverage Ratio (FACR): This ratio indicates the extent of Fixed
assets met out of long term borrowed funds. Ideal Ratio is 2:1
Net Block
FACR = --------------------------- (Net Block means Total Assets– Depreciation)
Long Term Debt
iv) Interest Coverage Ratio:

EBIDT
Interest Coverage Ratio = ---------------
Interest
Where EBIDT is Earning Before Interest Depreciation and Tax. This ratio indicates the
interest servicing capacity of the unit. Higher the ratio has probability of non-servicing
of interest and hence avoidance of slippage of asset.
III. ACTIVITY RATIOS:
i) Inventory Turnover Ratio: Inventory constitutes raw material, work in process,

finished goods etc. The ratio is arrived by dividing Inventory by average monthly Net
sales to arrive at inventory levels in number of months. Lower the ratio, the faster the
movement of inventories and Higher the ratio slower the movement of inventories. It
also indicates the time taken to replenish the inventories. Separate parameters are
laid down for fabrication units & seasonal industries (maintaining peak level inventories
as at March) where operating cycle is longer compared to other businesses and others
Inventory x (RM+WIP+FG) x 12 (OR ) Cost of Goods Sold

Net Sales = Average Stock ((Opening Stock+Closing stock)/2)
ii) Debtors Velocity Ratio: Debtors

------------ x period
Credit sales
Lower the collection period indicates efficiency in realization of receivables and vice-
versa.
120

iii) Creditors Velocity Ratio: Trade Creditors
---------------------- x period
Credit Purchase
Higher velocity denotes that the company is enjoying credit from its suppliers and it
has bearing on Maximum Permissible Bank Finance (MPBF)
iv) Assets Turnover Ratio:

Net Sales
ASSET TURNOVER RATIO=-----------------------------
Total Operating Assets
Total Operating Assets= Total Assets – Intangible Assets. Higher the ratio indicates
favorable situation of optimum utilization of all the fixed assets.
IV. PROFITABILITY RATIOS:
i) Gross Profit Ratio -> Gross Profit/Net Sales*100
Gross Profit Ratio indicates the manufacturing efficiency and Pricing policy of the
concern. Higher percentage indicates higher sales volume, better pricing of the product
or lesser cost of production
ii) Net Profit Ratio: Net Profit After Tax

----------------------------------- X 100
Net Sales
Overall profitability and the extent of non-business income.
A decline trend is a pointer to some unhealthy development unless the company had
made usurious profits in the past and has consciously decided to reduce its profits by
lowering the prices of its product.
iii) Return on Equity: Net Profit After Tax

----------------------------------- X 100
Tangible Networth
***
121

Loan Policy Guidelines
Objective:
¾ To improve the credit off-take of the Bank and maximize profits.

¾ To ensure that there is a balanced growth of credit. Lopsided growth of credit to
any particular sector of economy / segment of borrower is not desirable and
needs to be avoided.
¾ To ensure that the loan policy of the Bank is competitive and flexible in relation
to other Banks so as to attract and bring good Corporate/Non Corporate
borrowers into our fold.
¾ Continue to maintain thrust to priority sector advances in consonance with
Govt. of India / Reserve Bank of India guidelines and
¾ To ensure that the quality of credit is sound and the Bank is not exposed to
avoidable and unwarranted risks.
EXPOSURE NORMS:
Bank’s exposure should

No Category
not more than
1 Single Borrower 15% Bank’s capital fund*
2 Single Borrower–Infrastructure projects 20% Bank’s capital fund
3 Group 40% Bank’s capital fund
4 Group – Infrastructure projects 50% Bank’s capital fund
5 NBFC 10% Bank’s capital fund
6 NBFC – Group 15% Bank’s capital fund
7 NBFC - Asset Finance Company 15% Bank’s capital fund
8 NBFC - Asset Finance Company - Group 20% Bank’s capital fund
9 Public Limited companies (widely held) 15% Bank’s capital fund
10 Public Limited companies (widely held) – Group 40% Bank’s capital fund
11 Public Limited companies (widely held) - Infra 50% Bank’s capital fund
*Bank’s Capital Fund = Tier-I & II Capital as per audited balance sheet of the
previous year. (Circular no.041 Ref 26/11 dated 11.05.2007)
In exceptional circumstances, with the approval of the Board (individual & Group
borrowers), additional exposure up to a maximum of further 5% of Capital funds is
permitted, subject to the borrower consenting for disclosure in Bank’s annual report.
Maximum Exposure / Prudential limits:

(Crores)
Maximum prudential limit
No Category
Entity Group accounts
1 Individual 20 30
2 Proprietary concern 20 30
3 Partnership 30 40
4 HUF 10
5 Trusts / Societies / Associations 20 30
6 Private Limited Companies 80 100
7 Public Limited Companies (closely held) 100 120
8 Film Industry (Per party) Max – 6 parties 4
9 Infrastructure Project (Per project) 500
10 Construction Contractors 15 times of Net owned funds
Note: The maximum limit is to be restricted to the said limits or 6 times of net worth
of the concern as per the Latest Audited Balance Sheet, which ever is less. However, in
case of Individual / Proprietary / Partnership / HUF / Trusts / Societies / Associates the
limit can be sanctioned to Rs.60 crores by CMD/ED.
122

Non Funded Limits - Maximum Exposure / Prudential norms:
No Category Maximum
1 Bank Guarantees 3 times of Net Worth of the Bank.
2 BGs to Banks / FIIs / Other 10% of Bank’s capital funds (Tier-I capital)
agencies
3 Letter of Credit 2 times of Net Worth of the Bank.
4 Foreign Exchange Commitments Equal to the Net worth of the Bank
¾ Single borrower threshold limit will be Rs.550 Crores (10% of the capital
funds as per ABS as on 31.03.2009).
¾ Substantial Exposure Limit – The sum total outstanding of all the borrowal
accounts where the single borrower exposures is in excess of Rs.550 crore shall
not exceed Rs.16500 crore (300% of capital funds as per ABS as on
31.03.2009).
¾ Administrative clearance from H.O is required for credit facilities to Trust & HUF
borrowal accounts for the first sanction. For subsequent renewals &
enhancements it is not required provided there is no change in the composition
/ activity of HUF / Trust.
¾ The extent up to which Interest & Non-interest bearing Unsecured Loans (from
promoters, friends and relatives) can be treated as Quasi Capital/Net Worth for
exposure norms is 50% and 100% respectively.
Exposure ceilings - Exemptions
¾ Loans & Advances against security of bank’s own term deposits and LCs / BGs
covered by 100% cash margin.
¾ Food Credit.
¾ Rehabilitation of Sick / Weak Industrial units: Existing / additional credit facilities
(including funding of interest and irregularities) granted to weak / sick industrial
units under rehabilitation packages.
¾ Govt. of India Guaranteed accounts where principal & interest are fully guaranteed.
¾ Bills purchased/negotiated/discounted under LC (where the payment to the
beneficiary is not made under reserve.)
Maximum repayment period allowed for the following Term Loans
Credit Rating Repayment with in

No Category
CRS/CRAS CRRM
1 Infrastructure A+++ / A++ A++ 15 Years including gestation
2 Infrastructure A+ / A&B A+,A,B++ 12 Years including gestation
3 RTO Loans A+++ / A++ A++ 6 Years including holiday
4 RTO Loans A+ / A&B A++ 5 Years including holiday
5 Other TLs A+++ / A++ A++,A+A,B++ 7 Years excluding holiday
6 Other TLs C B+, B 5 Years excluding holiday
Due Diligence Report – Conducting due diligence is a prerequisite for all new
borrowal accounts (Rs.100 lac & above) by the branch. It helps the branch to assess
the credit worthiness of the prospective borrower and risks involved in the proposal.
The report covers the details of the prospective borrower / Promoters / Partners /
Directors, details of associate and group concerns and details of market enquiries
about the new borrower and the associate/sister/group concerns. Due diligence is to
be done by Zonal Office in case of accounts of Rs.300 lac and above. However,
branches to obtain Credit Investigation Report for all advance accounts of below
Rs.100 lac, other than Agrl, Weaker and Govty. Sponsored accounts. (Cir.no. 6 Ref
26/03 dated 07.04.2010)
123

MARGINS AND SECURITIES:
Bank Guarantees - Value of Agricultural Land and/or Rural Buildings should not
exceed 30% of total collateral security requirement in case of new accounts and 50%
in case of existing accounts that too in states where there is no ban on acceptance of
agricultural land as security for non-agricultural purposes.
Loans against NSCs/KVPs - 75% of the purchase value plus accrued interest of
NSCs / KVPs is eligible for bank finance. However, the loans should be extended only
where the date of maturity is less than 3 years from the date of finance except
where the facility of premature cancellation/surrender value is available.
Book Debts: The margin required for financing against book debts is 50% and in case
of MSME it is 30%. However, sanctioning authority can reduce margin to 25% on book
debts of Government departments. While arriving Drawing Power, only Book Debts 90
days and below are to be taken in to consideration. With regard to MSME advances the
stipulation is 180 days & below.
Security Norms – Crop Loans / Agriculture Term Loans
No Credit Limits Security

1 < = Rs.50000/- Hypothecation of Crops/Assets financed
2 > Rs.50000 to Rs.100000 Co-obligation / Third party guarantee besides
hypothecation of crops / Assets financed
3 > Rs.100000/- Besides above, 100% collateral security in the
form mortgage of land / creation of charge
TURNOVER METHOD: (for WC limits up to & inclusive of Rs.6.00 Crore)
A. Accepted Projected Sales Turnover

B. 25% of Sales Turnover
C. Margin @ 5 % of Sales Turnover
D. Actual NWC available as per latest Audited Balance Sheet
E. B-C
F. B-D
G. M.P.B.F = E or F, whichever is less.
INVENTORY METHOD: (For WC limits up to & inclusive of Rs.6.00 Crore)

C. Working Capital Gap =A-B
F. C-D
G. C-E
H. M.P.B.F = F or G, whichever is less.
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INVENTORY METHOD: (For Working Capital limits above Rs.6.00 Crore)

C. Working Capital Gap =A–B
F. C-D
G. C-E
H. B.F = F or G, whichever is less.
Note: If actual NWC is less than required margin, the borrower has to bring in the
short fall and sanctioning authority has to ensure the same.
¾ Maximum Working Capital credit limit up to which Turn Over method can be
extended is Rs.6 Crores.
¾ Assessment system under which seasonal industries can be financed is Cash
Budget System.
¾ The past inventory levels shall be the basis for accepting future projections in the
build up of Current Assets and Other Current Liabilities. However the sanctioning
authority will have flexibility to accept higher levels provided there is enough
justification on a case to case basis.
¾ Minimum acceptable Current Ratio in case of working capital credit facility up to
Rs.6 Crore when assessed as per Turnover Method or Inventory Method is 1.15.
¾ Minimum acceptable Current Ratio in case of Working Capital credit limit of above
Rs.6 Crore is 1.33.
¾ Maximum acceptable level of Total Debt- Equity Ratio is 6.
¾ Maximum permissible Gearing Ratio while assessing the eligibility for non-funded
limits is 10.
¾ Standard average DSCR specified for all Term Loans is 1.50 to 2.00. However, in
case of assured source of income, it can be taken as 1.20. Lower DSCR can be
accepted for Rural Godowns.
¾ Working Capital Limits – Renewal - For "A” and above rated accounts it is 24
months with yearly review. Others 12 months.
¾ Penal interest – Non submission of data for review/renewal:
For the first 3 months of the overdue period Penal interest of 1%

Beyond 3 months of overdue period till Penal interest of 2%
submission of all the required data / information
Stock Statement/Book Debts:
¾ All borrowers availing working capital limits are required to submit stock
statement as on the last Friday of the month before 10th of succeeding month.
¾ Penal Interest of 1% for the period of default on working capital
outstanding.
¾ The minimum working capital limit to accept Book Debts as security is above
Rs.5 lakh.
¾ Book Debt statement is to be certified by the borrower every month and it
should be certified by a Chartered Accountant every quarter.
MSOD
¾ All accounts with working capital limit of Rs.100 Lakh & above from the Banking
system is required to submit MSOD.
¾ MSOD is to be submitted on or before 15th of next month.
¾ Penal interest of 1% to be charged in case of accounts with fund based
working capital limits of Rs.100 lakhs & above for the period of default.
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QIS II is a Quarterly Statement showing the performance during the quarter. Time
stipulation for the submission of QIS II is within six weeks from the close of the
quarter. Cut-off limits for obtention of QIS form II.
¾ Funded working capital limits of above Rs.6.00crore (A & above rated)

¾ “C” rated accounts, with fund based working capital limits of Rs.1.00 crore
and above
¾ “B”(CRS/CRAS)& B++(CRRM) rated accounts, with fund based working
QIS III is a Half-yearly Operating and Funds-Flow statement. Time stipulation for the
submission of QIS III is within two months from the close of the half year. Cut-off
limits for obtention of QIS form III.
¾ Funded working capital limits of Rs.3.00 cr and above (A and above rated)
C”(B+ & B under CRRM) rated accounts, where fund based working
¾ “B”(B+ under CRRM) rated accounts, where fund based working capital
limits of Rs.2.00 crore and above
Penal interest @ 1% p.a for one full quarter on the working capital
outstanding will be levied for non submission of QIS II / III. However, maximum over
all penal interest chargeable in an account for any reason should not exceed 2% p.a.
Unit Inspections & Audits:
No Account Type Periodicity

Cash Credit Limits
1 Below Rs.50 lakhs Bi-monthly by branch
2 Rs.50 lakhs & above Once in a month by Officer & once in a quarter
by Manager / Stock Audit by Concurrent Auditor
3 Rs.100 to Rs.200 lakhs Once in a month by Officer & once in a quarter
by Manager / Stock Audit by Concurrent Auditor.
Once in a year by Inspector of Branches.
4 Rs.200 to Rs.300 lakhs Once in a month alternatively by Officer/Branch
Manager/Concurrent Auditor; Short Inspection
by Concurrent Auditor/IOB once in a year; Stock
& Receivable Audit once in a year.
5 Above Rs.300 lakhs Once in a month by ZO officials (Technical
Officer/Senior Manager-Credit) or CM/SM
heading branches.
6 Other than Cash Credit Once in a quarter by an Officer; Once in half
year by the Manager.
Stock Audit is to be done for all Cash Credit Accounts with limits of Rs.50 Lakh &
above by the Concurrent Auditor.
Short Inspection is applicable to Advances of Rs.100 lakhs & above. Short Inspection
will be conducted by Concurrent Auditors/Inspectors of Branches. In case of Fresh
Advances, Short inspection is to be conducted within 3 months from the date of first
disbursement. In case of Existing Advances, the periodicity is once in a year preferably
six months after the regular inspection of the branch.
Stock & Receivable Audit - Minimum Cash Credit Limit for conducting audit is
Rs.2.00 Crore. Accounts for which conducting “Stock & Receivable Audit” is applicable
(Cir. no.463 ref 26/83 dated 31.3.2009)
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C – Rated Accounts Rs.2 Cr. & above(with min. of 50% fund based limits)
B – Rated Accounts Rs.3 Cr. & above(with min. of 50% fund based limits)
A – Rated Accounts Rs.5 Cr. & above(with min. of 50% fund based limits)
NPA Accounts With balances of Rs.5 Crore & above
New/Take-over Where Working Capital Limits enjoyed are Rs.2 Crore &
accounts < 3 years above irrespective of Credit Rating.
W.C. Limits of Rs.10 crore & above (fund based and non
To all accounts
fund) irrespective of rating.Cir.311 ref 26/37 dt 16.11.06
Audit is to be done by a firm of practicing Chartered / Cost Accountants once in a year.

Zonal Office has to review the Stock and Receivable Audit Reports.
Pre-sanction Unit Inspection report is to be done preferably by Manager himself

within in one month of disbursement of loan. However, it is to be done before sanction
of Fresh / Renewal / Enhancement of the limits.
CREDIT RATING:
¾ Credit Rating is required for Small Loans of above Rs.2 Lakh and below
Rs.5 Lakh – Fund and Non-Funded (SSI, RT, BE, PSE, RTO)
¾ Credit Rating System (CRS) for Fund Based Limits of Rs.5 Lakh & above
but less than Rs.50 Lakh
¾ Credit Risk Assessment System (CRAS) for both Fund Based and Non-Fund
based Limits of Rs.50 Lakh & above up to Rs 500 lakh
¾ Credit Rating Model for New units without Audited Balance Sheet for Limits
of Rs.5 Lakh & above but less than Rs.50 Lakh.
¾ Credit Rating Model for New units without Audited Balance Sheet for Limits
of Rs.50 Lakh & above up to Rs 500 lakh
¾ Credit Risk Rating Model for credit limits of above Rs 500 lakh (fund & non-
fund based) is applicable.
¾ Risk Rating Model is to be applied for Stand alone Term Loans of Rs.5
Lakh & above. As per CRS/CRAS/CRRM (as applicable) at the time of half
yearly / annual review basing on latest Audited Balance Sheet and pricing
shall be reset as per the credit rating so arrived at by the sanctioning
authority.
¾ CRS/CRAS is applicable for the borrowal accounts with both working
capital and term loan limits under the industry / business / trade /
agriculture segments including import and export proposals. Rating is
required for non-fund based limits also. However, it is not applicable to
Professionals.
¾ Interest Rate as per Credit Rating finalised by the sanctioning authority is
applicable for advances of above Rs.10 Lakh. However, interest rates of
import/export credit shall be fixed as stipulated by RBI/Bank from time to
time but not as per CRS/CRAS/CRRM rating.
¾ CRS is applicable for Rice Mill accounts with limits of above Rs.10 Lakh
irrespective of any upper limit.
¾ A+ & above rated Rice Mills have a concession of 50% of the processing
¾ Charges on fund based working capital limits and 0.50% of interest.
¾ For agriculture segment – Credit rating is required for firms/corporate
borrowers with above Rs.5 lakh limit and Rs.25 lakhs & above for
Individuals and non-corporate borrowers.
However, DWCRA / SHGs / IRDP / SGSY / SCAP / STAP / FSCS / LAMPS / Cold
Storages, Rural Godowns Scheme / storages financed under capital investment
subsidy scheme of NABARD are exempted from the above rating.
Audited Balance Sheet of the latest financial year shall be the basis for arriving at
the various financial parameters at the time of renewal / sanction under CRAS /
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CRS/CRRM. In the absence of audited balance sheet of the latest financial year, the
least of ratings arrived based on the latest provisional balance sheet
OR last audited balance sheet shall be awarded. In such cases, the audited balance
sheet for the latest financial year is to be obtained within 6 months to finalise credit
rating and re-fix interest accordingly. If the audited balance sheet of the latest
financial year is not submitted within 6 months from the date of closure of financial
year for arriving at credit rating in case of fund – based advances of Rs.1 Crore &
above, additional interest of 1% is to be charged from 1st OCTOBER onwards till
submission of audited balance sheet.
Renewal of ‘C’ rated accounts (B under CRRM) under the branch/zonal office
powers shall be considered by Zonal Manager & DGM as II level official at ZO. At HO
respective sanctioning authorities can renew the “C” Rated A/cs. For Enhancement one
level higher to the sanctioning authority upto GM (Credit). ED/CMD is empowered to
sanction enhancements under their delegated powers the limits. For D rated limits
renewal/review powers are with one level higher to the sanctioning Authority.(Cir.274
ref.26/35 dt.11.11.2008). General Manager (Credit) at HO is empowered to assign
A+++ and A++ Grades under Credit Rating. The date of approval of CRAS / CRS by
the sanctioning authority is the effective date for revision of interest rates in normal
course. CRAS/CRS once assigned shall be normally valid for a minimum period of six
months. In the event of slippage based on any control statement, CRAS/CRS should
be reviewed / revised immediately. The entry level norms for taking up exposure
under CRS/CRAS and rating system for small loans is 40%. A minimum score of above
40%* against the score allotted to each parameter of Industry; Management,
operational& Financial Risks (CRAS). (* proposal for builders/property developers
minimum A rating required)
Working Capital Term Loans for Traders & small units:
¾ Maximum limit up to which Working Capital Term Loans can be sanctioned

to Traders and Small Units is Rs.10 lakhs.
¾ Permissible repayment period of Working Capital Term Loan to Traders and
Small Units is 60 equal monthly installments.
¾ Periodicity for obtaining Stock-Statements in case of WCTL to Traders and
Small Units is once in a quarter.
¾ Margin on Primary Security in case of WCTL to Traders and Small Units is
10% for limits up to Rs.5 lakhs and for others it is 25%.
¾ The units are to be inspected once in a Quarter.
¾ Collateral Security is to be obtained minimum of 125% of the value of
Limit.
Financing of Poultry Units: New Borrowers intending to establish a poultry unit

having satisfactory net worth shall only be considered. Established units owning sheds,
cages and poultry equipment, which approach the bank for short-term finance, can be
considered now. Collateral norms for existing a/cs with minimum 3 years satisfactory
track record continues to be 100% and for new farmers/units the collateral norm is
150% of the loan amount. (Cir no 412 Ref 26/55 Dt. 12.02.2007)
Legal Audit: The objective is to verify whether the branch has obtained all documents
to secure the repayment in compliance with all terms and conditions of the sanction in
the form and manner required in terms of documentation procedure. All new/ renewal
borrowal accounts with aggregate credit limits of Rs.25.00 lakh and above are covered
under Legal Audit. From limits of Rs.25 lakhs to Rs.100 lakhs empanelled Advocate
who has not given legal opinion or Law Officer at Zonal Office. For limits above Rs.100
lakhs law officer at ZO has to conduct the legal audit (He has to subsequently
scrutinize the documents if Advocate conducts legal audit in his absence). It covers
other aspects such as documents relating to Primary & Collateral securities. Legal
Audit is to be completed before release of loan amount. After the completion of Legal
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Audit, permission from Zonal Office is required, in respect of the borrowal accounts
with aggregate credit limits of Rs.50 lakhs& above (fund based & non fund based
inland and foreign business limits) for release of sanctioned limits.
Loan Delivery System - Borrowal accounts with fund based working capital credit
limits of Rs.10 Crore and above from the banking system. The total disbursement for
WCDL and Cash Credit should not exceed 80% and 20% of the sanctioned limits.
However funds can be released either as Cash Credit or as Demand Loan basing on the
request of the borrower.
Take over of accounts: Norms for take over of accounts from Banks or FIs:
¾ The account should be a Standard Asset with Positive Net Worth & profit record.
¾ Rating as per CRS/CRAS/CRRM should be worked out basing on all the relevant
parameters excluding operational parameters.
¾ The account copy of the borrowal account with other bank should be obtained
for preceding 6 months and perused.
¾ The party shall secure A & above rating under CRAS and B++ under CRRM
(minimum of B rating in CRAS & B++ under CRRM in trade advances).
¾ The Powers to permit to take over of A/cs – Rs.10 cr- DGM as Zonal Manager
and Rs.25 cr for GM as Zonal Manager & Rs 2 cr for AGM as ZM.
¾ To obtain the Credit Information of the Associate / Sister / Group concern of
the new borrower, who is starting a new business activity and not having any
banking dealing for the proposed business activity.
¾ Borrower has to inform in writing to the existing banker about his intention to
shift to our Bank under copy to us.
¾ P&C Report on new borrower: Satisfactory P&C Report should be obtained
before disbursement of credit facilities. (for waiver of P & C, powers delegated
as per Cir 271 ref 26/54 dt 20.11.09)
Corporate Loans are sanctioned to meet margin requirement for Working Capital,
Margin for Long Term Project Finance, commitment of the Corporate or for any other
purpose related to the financial needs of the company. However, corporate loans
should not be extended to meet the financial commitments of sister concerns.
Maximum repayment period for a Corporate Loan is 60 Months.
Other miscellaneous:
¾ Term Loan installments falling due for payment in next 12 months are to be
taken as Term Liability for the purpose of calculation of Current Ratio and
MPBF.
¾ Inter-corporate deposits are to be treated as Non-Current Assets.
¾ When it is not possible to bi-furcate term liability component of Mobilization
Advance in case of Construction Company account, 50% of advance is to be
taken as Term Liability and another 50% as Current Liability.
¾ The Cost/Capacity of proposed second hand machinery shall not exceed
25% of total Cost/Capacity of machinery of the proposed scheme stipulated
margin on second hand machinery is 50%.
¾ Sensitivity Analysis is made mandatory in respect of all Term Loans of Rs.50
Lakhs & Above.
¾ Sanctioning authority can allow credit limit beyond 10% increase over the
eligible amount as per Scale of Finance in case of PAGCC.
¾ Advances with aggregate credit facilities (both Fund & Non-fund put
together) of Rs.1 Crore & above are subjected for Half-yearly review of
large borrowal accounts. The review is to be done within 6 to 9 months from
the date of first sanction / renewal of credit facilities.
¾ Banks can extend credit facilities against the guarantees issued by other
Banks.
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¾ Financing second hand vehicle under RTO loans is not allowed.
¾ Banks can issue Guarantees & Co-acceptances favoring financial
institutions, other Banks and other lending agencies for the loans sanctioned
by them subject to RBI / FEMA guidelines.
Valuation of Properties – All properties mortgaged to the Bank are to be valued

before disbursement of loans. The frequency of valuation of properties by approved
engineer for fund & non funded working capital limits including Non Performing and
Suit filed accounts is 2 years. However, Branch Manager is allowed to value
Agricultural lands up to Rs.5.00 lacs, Above Rs.5.00 lacs should be valued by RDO and
countersigned by Manager. In case of vacant sites up to Rs.25,000 Branch Manager is
empowered to undertake valuation.
Restructure of Advance Accounts: A restructured account is one where the bank,

for economic or legal reasons relating to the borrower’s financial difficulty, grants to
the borrower concessions that the bank would not otherwise consider. Restructuring
would normally involve modification of terms of the advances / securities, which would
generally include, among others, alteration of repayment period / repayable amount /
the amount of installments / rate of interest (due to reasons other than competitive
reasons). It is applicable to all type of credit facilities including working capital limits
extended to Industrial Units, provided they are fully covered by Tangible
Securities. No account will be taken up for restructuring by the banks unless the
financial viability is established and there is a reasonable certainty of repayment from
the borrower, as per the terms of restructuring package. The viability should be
determined by the banks based on Return on Capital Employed, Debt Service
Coverage Ratio, Gap between the Internal Rate of Return and Cost of Funds etc., on
case-by-case depending merits of the account. Any restructuring done without looking
into cash flows of the borrower and assessing the viability of the projects/activity
financed by banks would be treated as an attempt at ever greening a weak credit
facility and would invite supervisory concerns/action. The accounts not considered
viable should not be restructured and banks should accelerate the recovery measures
in respect of such accounts. Banks can not reschedule / restructure / renegotiate
borrower accounts with retrospective effect. Restructuring of advances could take
place either before commencement of commercial production/operation; or after
commencement of commercial production / operation but before the asset has been
classified as Sub-standard or Doubtful.
Upon restructuring, the accounts classified as 'standard assets' should be immediately

re-classified as Sub-standard assets. Accounts which have been classified as non-
performing assets upon restructuring would be eligible for up-gradation to the
'standard' category after observation of 'satisfactory performance' during the 'specified
period'. Any additional finance to the account may be treated as 'standard asset', up to
a period of one year after the first interest / principal payment, whichever is earlier,
falls due under the approved restructuring package. However, in the case of accounts
where the pre-restructuring facilities were classified as 'sub-standard' and 'doubtful',
interest income on the additional finance should be recognized only on cash basis. If
the restructured asset does not qualify for up gradation at the end of the above
specified one year period, the additional finance shall be placed in the same asset
classification category as the restructured debt.
Accounts that are restructured for the second time or more on account of natural
calamities would retain in the same asset classification category on restructuring.
Hence, restructured accounts on account of natural calamities would not be treated as
second restructuring. (Cir.no.269 Ref 19/16 dated 25.10.2010)
Disbursement of Term Loan by way of reimbursement for the assets already

created by the borrower: It shall be permitted by the sanctioning authority,
provided:
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¾ Such reimbursement is within 12 months from the date of purchase /
acquisition of the assets.
¾ It should be supported by satisfactory proof of investment / source of funds
supported by Invoice/receipt/voucher followed by auditor’s certificate.
¾ Such funds should have been remitted through a bank account.
Penal interest on over due limits.
First 3 months from the due date of the credit facility Penal interest of 1%
Beyond 3 months from the due date of the credit facility Penal interest of 2%
till submission of renewal application with full information
Adhoc Limits - Branch can allow adhoc limits maximum of 3 times during the validity
period of the Working Capital Limit. The maximum period for which adhoc limit can be
sanctioned is 3 months. Branch Managers (I, II & III) do not have any powers to allow
Adhoc limits for the sanctions made by higher authorities except in case of ‘A’ & above
rated Micro, Small Enterprises borrowers. Up to 20% of the Working Capital facility
can be allowed as adhoc to the eligible accounts. The Adhoc limit shall be regularized
on or before due date either by adjustment or by considering the need based regular
limits where the Adhoc limit is also reckoned. The concept of Adhoc Limit is not
applicable to Non-funded limits. The details of Adhoc limits allowed within the
discretionary powers are to be reported in ADA - IX along with monthly sanctions.
Excess Drawals: The general guidelines for allowing Excess Drawals / Adhoc limits
are as under:
¾ The account is standard and performing and the conduct of the account is
satisfactory.
¾ These facilities shall be given to borrowers who are already enjoying regular
sanctioned limits.
¾ There shall not be any irregularity or over dues in any of the credit facilities of
the borrower.
¾ The sanction should be current and not overdue.
¾ The due date of adhoc/excess drawal should not be after the due date of the
regular limits.
¾ Both adhoc and excess drawals should not be allowed simultaneously.
¾ Normally excess drawals should not be allowed for cash payments. If they are
allowed to meet some urgent cash payments such as payment of wages or
urgent cash purchases, proper justification for such cash drawals should be
kept on record.
Branch Managers can allow excess drawals up to 20% of the Working Capital facility
subject to the following ceilings.
Branch Manager Secured Unsecured

Scale I Manager Rs.1.00 Lakh Rs.0.10 Lakh
Scale II Manager Rs.2.00 Lakh Rs.0.20 Lakh
Sclae III Manager Rs.3.00 Lakh Rs.0.30 Lakh
¾ The maximum period for which Excess Drawals can be sanctioned is for a
period not exceeding 15 days.
¾ Excess Drawals shall be allowed in a Working Capital account not more than 6
times during the validity period of the working capital limit.
¾ Branch should obtain a letter from the constituent requesting for the Excess
Drawal facility specifying the amount; purpose and the time limit.
¾ Excess Drawals/Adhoc limits attract 2% additional interest.
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¾ In case of SOD against Real Estates - ADHOC Not permitted. Excess Drawls can
be allowed (Cir.No.215 Ref.No.26/24 dated 08.10.2008)
¾ Excess drawals allowed are to be reported in ADA - X along with monthly
sanctions.
Temporary Over Draft is a facility by which a constituent is permitted to draw money

from his Current Account in excess of his credit balance. TOD facility can be allowed
only six times in a year in an account. TODs can be allowed in SB accounts with
satisfactory transactions up to Rs.1000/- per account subject to a total amount of
Rs.10,000/-.TODs allowed at the Branch as part of specially launched schemes. TODs
should not be allowed in accounts of our staff members.
The Current Account holder should have undoubted reputation, integrity and
satisfactory transactions in the account for a minimum period of six months. Branch
should obtain a letter from the constituent requesting for the TOD facility specifying
the amount; purpose and the period for which the facility is required. Discretionary
powers of Branch Managers for allowing TODs are JM-I Rs.5000, MM-II Rs.10000, MM-
III Rs.25000, SM IV Rs.100000 and SM V Rs.200000. All TODs allowed are to be
reported in ADA-XI every month to ZO. When the TOD is allowed beyond discretionary
powers, the compliance is to be prepared and a copy of it should be enclosed to the
letter seeking confirmation.
(Loan Policy Guidelines – Cir. no.381 Ref 26/66 dated 31.01.2009 & Substantial
Exposure Limits – Cir. no.388 Ref 26/83 dated 02.03.2010)
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Monitoring of Bank Guarantee Portfolio
As a part of Banking Business, Bank Guarantee (BG) Limits are sanctioned and
guarantees are issued on behalf of our customers for various purposes. The
guarantees comprise both performance guarantees and Financial Guarantees
depending on the purpose i.e. for EMD, Mobilization advance, Procurement of Material
etc. Though, BG facility is a Non-fund Facility, it is a firm commitment on the part of
the Bank to meet the obligation in case of invocation of BG. Hence, monitoring of Bank
Guarantee portfolio has attained utmost importance.
The purpose of the guarantee is to be examined and it is to be spelt out clearly if it is

Performance Guarantee or Financial Guarantee. Due diligence of client shall be done,
regarding their experience in that line of activity, their rating/grading by the
departments, where they are registered. In case of Performance Guarantees, banks
shall exercise due caution to satisfy that the customer has the necessary experience,
capacity and means to perform the obligations under the contract and is not likely to
commit default. Hence, the borrower needs to have sound financials.
The Financial Indicators / Ratios as per Banks Loan Policy guidelines are to be
satisfactory. The position of receivables and delays if any, are to be examined
critically, to understand the payments position of that particular activity. The financial
position of counter party, type of Project, value of Project, likely date of completion of
Project as per agreement are also to be examined. The Maturity period, Security
Position, Margin etc. are also to be as per Policy prescriptions and are important to
take a view on charging BG Commissions.
Branches shall use Model Form of Bank Guarantee Bond, while issuing Bank
Guarantees in favour of Central Govt. Departments/Public Sector Undertakings. Any
deviation is to be approved by Zonal Office.
It is essential to have the information relating to each contract/project, for which BG

has been issued, to know the present stage of work/project and to assess the risk of
invocation and to exercise proper control on the performance of the Borrower. It is to
be ensured that the operating accounts of borrowers enjoying BG facilities route all
operations through our Bank accounts.
To safeguard the interest of the bank, Branches need to follow up with the Borrowers
and obtain information and analyse the same to notice the present stage of
work/project, position of Receivables, Litigations/Problems if any leading to temporary
cessation of work etc. (Cir.no.309 Ref 26/60 dated 30.11.2010)
133

Letter of Credit
A Letter of Credit is an arrangement by means of which a Bank (Issuing Bank) acting

at the request of a customer (Applicant), undertakes to pay to a third party
(Beneficiary) a predetermined amount by a given date according to agreed stipulations
and against presentation of stipulated documents. The documentary Credit are akin to
Bank Guarantees except that normally Bank Guarantees are issued on behalf of Bank’s
clients to cover situations of their non performance whereas, documentary credits are
issued on behalf of clients to cover situation of performance. However, there are
certain documentary credits like standby Letter of Credit which are issued to cover the
situations of non performance.
All documentary credits have to be issued by Banks subject to rules of Uniform

Customs and Practice for Documentary Credits (UCPDC). It is a set of standard rules
governing LCs and their implications and practical effects on handling credits in various
capacities must be possessed by all bankers. A documentary credit has the following
parties:
¾ Applicant (Opener)
¾ Issuing Bank (Opening of LC Bank)
¾ Beneficiary
¾ Advising Bank (advises the credit to beneficiary)
¾ Confirming Bank - Bank which adds guarantee to the credit opened by another
Bank thereby undertaking the responsibility of payment / negotiation /
acceptance under the credit in addition to Issuing Bank)
¾ Nominated Bank - Bank which is nominated by Issuing Bank to pay/to accept
draft or to negotiate.
¾ Reimbursing Bank - Bank which is authorized by the Issuing Bank to pay to
honour the reimbursement claim in settlement of negotiation / acceptance /
payment lodged with it by the paying/negotiating or accepting Bank.
Types of Letter of Credit
¾ Revocable Letter of Credit - is a credit which can be revoked or cancelled

or amended by the Bank issuing the credit, without notice to the
beneficiary. If a credit does not indicate specifically it is a revocable credit
the credit will be deemed as irrevocable in terms of provisions of UCPDC
terms.
¾ Irrevocable Letter of credit – is a firm undertaking on the part of the

Issuing Bank and cannot be cancelled or amended without the consent of
the parties to letter of credit, particularly the beneficiary.
¾ Payment Credit – is a sight credit which will be paid at sight basis against
presentation of requisite documents as per the terms of LC to the
designated paying Bank.
¾ Deferred Payment Credit – is a usance credit where payment will be

made by designated Bank on respective due dates determined in
accordance with stipulations of the credit without the drawing of drafts.
¾ Acceptance Credit - is similar to deferred credit except for the fact that in
this credit drawing of a usance draft is a must.
¾ Negotiation Credit - can be a sight or a usance credit. A draft is usually

drawn in negotiation credit. Under this, the negotiation can be restricted to
a specific Bank or it may allow free negotiation whereby any Bank who is
willing to negotiate can do so. However, the responsibility of the issuing
Bank is to pay and it cannot say that it is of the negotiating Bank.
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¾ Confirmed Letter of Credit – is a letter of credit to which another Bank
(Bank other than Issuing Bank) has added its confirmation or guarantee.
Under this, the beneficiary will have the firm undertaking of not only the
Bank issuing the LC, but also of another Bank. Confirmation can be added
only to irrevocable and not revocable Credits.
¾ Revolving Credit – is one where, under the terms and conditions of the
credit, the amount is revived or reinstated without requiring specific
amendment to the credit. The basic principle of a revolving credit is that
after a drawing is made, the credit reverts to its original amount for re-use
by beneficiary. There are two types of revolving credit viz., credit gets
reinstated immediately after a drawing is made and credit reverts to original
amount only after it is confirmed by the Issuing Bank.
¾ Installment Credit – calls for full value of goods to be shipped but

stipulates that the shipment be made in specific quantities at stated periods
or intervals.
¾ Transit Credit – When the issuing Bank has no correspondent relations in

beneficiary country the services of a Bank in third country would be utilized.
This type of LC may also be opened by small countries where credits may
not be readily acceptable in another country.
¾ Reimbursement Credit - generally credits opened are denominated in the

currency of the applicant or beneficiary. But when a credit is opened in the
currency of a third country, it is referred to as reimbursement credit.
¾ Transferable Credit – Credit which can be transferred by the original

beneficiary in favour of second or several second beneficiaries. The purpose
of these credits is that the first beneficiary who is a middleman can earn his
commission and can hide the name of supplier.
¾ Back to Back Credit – is also called countervailing credit. Under this the
credit is opened with security of another credit. Thus, it is basically a credit
opened by middlemen in favour of the actual manufacturer/supplier.
¾ Anticipatory Credit - Under this payment is made to beneficiary at pre-

shipment stage in anticipation of his actual shipment and submission of bills
at a future date. But if no presentation is made the recovery will be made
from the opening Bank.
¾ Red Clause Credit - it contains a clause providing for payment in advance

for purchasing raw materials, etc.
¾ Green Clause Credit – is an extended version of Red Clause Credit in the

sense that it not only provides for advance towards purchase, processing
and packaging but also for warehousing & insurance charges. Generally
money under this credit is advanced after the goods are put in bonded
warehouses etc., up to the period of shipment.
General Guidelines: LC is to be opened for our own customers known to be

participating in the trade. The importer should have Import Export (IE) code number
allotted by Director General of Foreign Trade. The importer should have adequate
sanctioned limits and/or funds provision for clearance of goods. Exchange control copy
of license to be obtained in case of the item of import falls under negative list. If the
import is freely permissible obtain a declaration from the importer to that effect.
Import LCs is to be advised through our Foreign Correspondents. Date of dispatch of
goods should be after the date of opening of the LC. When the LC is opened against
third party licence, the applicant should hold a proper letter of authority issued by the
import licence holder along with the exchange control copy of the licence. The
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description of goods, validity for shipment, country of shipment and origin are as per
the provisions of Policy/Licence etc. Branch is required to obtain confidential report on
the overseas seller at the time of opening of LC in case where the value of LC is $
25000 and above, however, in case of borrowers with credit rating of A+ the limit is
above USD 1 lac. Confidential report is a must in case where the importer dealings
with the branch are less than 1 year irrespective of the value.
LC should be opened only in favour of overseas supplier/manufacturer or shipper of

goods and not in favour of the applicant himself or his nominee. Terms of shipment
such as FOB/C&F/CIF etc are to be clearly mentioned. For C&F and FOB, applicant
should hold insurance cover note/policy in the joint names of the Bank and the
Opener. The policy should cover at least 110% of the CIF value, and is valid for entire
shipment period. Usance period should not exceed 180 days. LC should not be opened
for import of goods from banned countries. LC should be signed by two officers, where
the value of LC is Rs.10000 and above, where it is not issued through SWIFT. LC
should invariably contain a clause that the credit is subject to the provisions of UCPDC
600 and URR 725
LC should stipulate a condition that the shipments should be made only by conference
vessels, which are on the approved list of Lloyds or any certificate to show that the
vessel is seaworthy & not more than 25 years old. LC should insist for an inspection
certificate issued by a well known international Inspection Agencies. Last date of
shipment should be within the validity of Licence.
Goods are to be consigned only in the name of LC opening bank and never directly to
the buyer. Similarly Documents of title to goods should be required to be sent only to
the LC opening Bank but not to the importer directly. The origin of the goods is to be
specifically mentioned in the application. No onerous clause is incorporated in the LC,
which is detrimental to the interest of the Bank. Payment to be claimed only against
presentation of full set of documents. Currency in which payment for import is to be
made is in accordance with the permitted methods of payment. Documents to be
called for in the Letter of Credit:
Bill of Lading: It should be in complete set and be clean and should generally be to
order and blank endorsed. It must also specify that the goods have been shipped on
board and whether the freight is prepaid or is payable at destination. The name of the
opening bank and applicant should be indicated in the B/L.
Airway Bill: Airway bills/Air Consignment notes should always be made out to the
order of Issuing Bank duly mentioning the name of the applicant.
Insurance Policy or Certificate: Where the terms of sale are CIF the insurance is to
be arranged by the supplier and they are required to submit insurance policy along
with the documents.
Invoice: Detailed invoices duly signed by the supplier made out in the name of the
applicant should be called for and the invoice should contain full description of goods,
quantity, price, terms of shipment, licence number and LC number and date.
Certificate of Origin: Certificate of origin of the goods is to be called for. Method of

payment is determined basing on the country of origin.
Inspection Certificate: Inspection certificate is to be called for from an independent

inspecting agency (name should be stipulated) to ensure quality and quantity of
goods. Inspection certificate from the supplier is not acceptable.
Lloyds Certificate: Shipments should be made only by Conference Vessels, which are
in the approved list of Lloyds Register of Shipping and classified as Lloyds 100 A1 or its
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equivalent classification. Age of the vessel should not be more than 25 years and it
should be seaworthy.
Other documents: Any other documents required by the applicant, such as weight
certificate, packing list, quality certificates should be mentioned in the application.
Other concepts:
Trade Credit refers to credits extended for imports directly by the overseas bank, and
financial institutions for original maturity of less than three years.
Suppliers’ Credit relates to credit for imports in to India extended by the overseas
supplier.
Buyers’ credit refers to loans for payment of imports into India arranged by the
importer from a bank or financial institution outside India for maturity of less than
three years. Issue of Letter of Comfort /Letter of Undertaking/ Guarantee is applicable
for Buyers’ Credit.
LoC/LoU is issued for making payment of Import Bills received either under FLC or on
collection basis for imports made into India in favour of Overseas Bank or Financial
Institution outside India to the extent of US $ 20 million or its equivalent per
transaction. The period of such LoC / LoU / Guarantee has to be co-terminus with the
period of credit, reckoned from the date of shipment. No roll-over/extension will be
permitted beyond the permissible period. The precautions & Conditions for issuance of
LOC/LOU are:
¾ The facility may be considered in cases where there is mismatch between cash
flows to meet the FLC commitment on the due date.
¾ At any point of time the liability under FLC, FIBC and LoC/LoU/Guarantee put
together shall not exceed the sanctioned FLC limit.
¾ The stocks procured under FLC/Letter of Comfort are to be deducted to ensure
Working Capital limits are fully secured by adequate Drawing Power.
¾ Multi currency option is not available to the importer.
¾ In case the import is made on collection basis, branch should ensure strict
compliance of KYC/AML regulations.
¾ Commission to be collected upfront @ 0.50% per quarter or part thereof for the
specified period of liability i.e. actual validity period of LOC / LOU / Guarantee.
¾ Importer is required to pay all-in-cost (with a ceiling over 6 months LIBOR minus
200 basis points) to the Overseas Bank / FI outside India. All-in-cost includes
arranger fee, upfront fee and management fee. (Circular no.289 Ref 26/60 dated
02.12.2009)
***
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Priority Sector - Guidelines
As per RBI guidelines, the categorization of the priority sector lending is as under (Our
circular no.126 Ref 19/07 dated 20.07.2010):
i) Agriculture - Direct Finance to Agriculture includes:
¾ Finance to individual farmers (including Self Help Groups - SHGs or Joint

Liability Groups – JLGs) for Agriculture and Allied Activities such as dairy,
fishery, piggery, poultry, bee-keeping, etc.
¾ Short-term loans for raising crops, i.e. for crop loans, which include
traditional/non-traditional plantations and horticulture.
¾ Advances up to Rs.10 lakh against pledge/hypothecation of agricultural produce
(including warehouse receipts) for a period not exceeding 12 months,
irrespective of whether the farmers were given crop loans for raising the
produce or not.
¾ Working capital and term loans for financing production and investment
requirements for agriculture and allied activities.
¾ Loans to small and marginal farmers for purchase of land for agricultural
purposes.
¾ Loans to distressed farmers indebted to non-institutional lenders, against
appropriate collateral or group security.
¾ Loans granted for pre-harvest and post-harvest activities such as spraying,
weeding, harvesting, grading, sorting, processing and transporting undertaken
by individuals, SHGs and cooperatives in rural areas.
Finance to others like corporate, partnership firms and institutions for Agriculture
and Allied Activities such as dairy, fishery, piggery, poultry, bee-keeping and the
following activities are treated as direct finance to agriculture:
¾ Loans granted for pre-harvest and post harvest activities such as spraying,
weeding, harvesting, grading, sorting and transporting.
¾ One-third of loans in excess of one crore in aggregate per borrower for
agriculture and allied activities.
Indirect finance to agriculture includes lending to
¾ Food and agro-based processing units with investments in plant and machinery
up to Rs.10 crore.
¾ Purchase and distribution of fertilisers, pesticides, seeds, etc.
¾ Purchase and distribution of inputs for the allied activities such as cattle feed,
poultry feed with loan amount up to Rs.40 lakh.
¾ Setting up of Agri clinics and Agribusiness Centers.
¾ Hire-purchase schemes for distribution of Agrl. Machinery and implements.
¾ Primary Agrl. Credit Societies (PACS), Farmers’ Service Societies (FSS) and
Large sized Adivasi Multi Purpose Societies (LAMPS) for lending to farmers.
¾ Cooperative societies of farmers for disposing of the produce of members.
¾ Construction/running of storage facilities (warehouse, market yards, godowns
etc.,), including cold storage units irrespective of their location.
¾ Custom Service Units managed by individuals, institutions or organizations who
maintain a fleet of tractors, bulldozers, well-boring equipment, threshers,
combines, etc., and undertake work for farmers on contract basis.
¾ Dealers in drip irrigation/sprinkler irrigation system/agricultural machinery,
irrespective of their location, subject to a ceiling Rs.30 lakh per dealer.
¾ Commission Agents in rural/semi-urban areas functioning in markets/ mandies
for extending credit to farmers, for supply of inputs as also for buying the
output from the individual farmers/SHGs/JLGs.
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¾ National Co-operative Development Corporation, NBFCs for lending to individual
farmers or their SHGs/JLGs.
¾ NGOs/MFIs for lending to individual farmers or their SHGs/JLGs.
¾ RRBs for lending to agriculture and allied activities sector.
¾ Overdrafts, up to Rs.25000 (per account), granted against ‘no-frills’ accounts
in rural and semi-urban areas.
¾ Further, Credit outstanding under General Credit Cards (GCC) and deposits
placed in RIDF with NABARD by banks on account of non-achievement of
priority sector lending targets/sub-targets are treated as indirect finance to
agriculture.
ii) SME - Small Enterprises: It includes all loans given to micro and small
(manufacturing) enterprises engaged in manufacture/production/processing /
preservation of goods, and micro and small (service) enterprises engaged in providing
or rendering of services which include small road & water transport operators, small
business, Professional & Self-employed persons and other service enterprises. Indirect
finance to small enterprises shall include finance to any person providing inputs to or
marketing the output of artisans, village and cottage industries, handlooms and co-
operatives of producers in this sector.
Medium Enterprises are those engaged in manufacture / production / preservation

of goods and whose investment in plant and machinery should be as per above said
guidelines. Bank’s lending to medium enterprises will not be included for the purpose
of reckoning under priority sector.
Manufacturing Enterprises are those which are engaged in manufacturing or

production of goods. These are defined in terms of investment in Plant & Machinery.
Service Enterprises are the enterprises engaged in providing or rendering of

services. These are defined in terms of investment in Equipment. The modified
definitions of Micro, Small and Medium Enterprises are as under:
Investment in Plant & Machinery / Equipment

No Category
Manufacturing Service
1 Micro Enterprise Up to Rs.25 lakhs Up to Rs.10 lakhs
2 Small Enterprise Rs.25 to Rs.500 lakhs Rs.10 to 200 lakhs
3 Medium Enterprise Rs.500 to Rs.1000 lakhs Rs.200 to 500 lakhs
Indirect finance to the small (manufacturing as well as service) enterprises sector

will include credit to: Persons/co-operatives involved in assisting the decentralized
sector (Artisans, village and cottage industries) in supply of inputs and marketing of
output.
¾ Loans granted by banks to NBFCs for lending to small and micro enterprises.
¾ Special bonds issued by NABARD for financing exclusively non-farm sector are
to be classified as indirect finance.
¾ The deposits placed with SIDBI by foreign banks, having offices in India, on
account of non-achievement of priority sector lending targets/sub-targets and
outstanding as on 30.04.07 would be eligible for classification as indirect
finance.
All advances granted to units in the Khadi and Village Industries Sector, irrespective of
their size of operations, location and amount of original investment in plant and
machinery. Such advances will be eligible for consideration under the sub-target (60
per cent) of the small enterprises segment within the priority sector.
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iii) Retail Trade shall include retail traders/private retail traders dealing in essential
commodities (fair price shops), and consumer co-operative stores etc with credit limits
not exceeding Rs.20 lakhs.
iv) Micro Credit : Provision of credit and other financial services and products of very
small amounts not exceeding Rs.50000 per borrower, either directly or indirectly
through a SHG/JLG mechanism or to NBFC/MFI for on-lending up to Rs.50000 per
borrower, will constitute micro credit.
v) Education loans: Education loans include loans and advances granted to only
individuals for educational purposes up to Rs.10 lakh for studies in India and Rs.20
lakh for studies abroad, and do not include those granted to institutions.
vi) Housing loans: Loans up to Rs.20 lakh to individuals for purchase/construction

of dwelling unit per family, (excluding loans granted by banks to their own employees)
and loans given for repairs to the damaged dwelling units of families up to Rs.1 lakh in
rural and semi-urban areas and up to Rs.2 lakh in urban and metropolitan areas.
vii) Weaker Sections: Loans to the following categories will come under priority
sector:
¾ Small and marginal farmers with land holding of 5 acres and less, and landless
labourers, tenant farmers and share croppers.
¾ Artisans, village and cottage industries where individual credit limits do not
exceed Rs.50000/-.
¾ Beneficiaries under Swarnjayanti Gram Swarozgar Yojana (SGSY) / Scheduled
Castes and Scheduled Tribes / Differential Rate of Interest (DRI) scheme /
Swarna Jayanti Shahari Rozgar Yojana (SJSRY) / Liberation and Rehabilitation
of Scavengers (SLRS) / Self Help Groups (SHG) schemes/programs.
¾ Loans granted to persons from minority communities for the said purposes.
viii) Differential Rate of Interest Scheme (DRI): As per RBI guidelines, the target
stipulated for lending under DRI scheme is 1% of previous year total advances of the
Bank. The existing loan limit is increased from Rs.6500/- to Rs.15000/- and the
housing loan limit is also increased from Rs.5000/- to Rs.20000/-. The borrower`s
family income eligibility criteria is revised to Rs.18000/- & Rs.24000/- p.a. for Rural &
Semi-Urban/Urban areas respectively. At least two third of DRI advances should be
granted through rural/semi-urban branches. 40% of DRI advances should go to SC/ST.
2/3rd of total DRI lending is to be routed through Rural and Semi Urban branches.
Branches can assist the handicapped/disabled persons for acquiring aids, appliances
and equipment needed especially by students for pursuing studies and vocational
training – example Braille Typewriters for blind etc. (Circular no.299 Ref 28/7 dated
23.11.2010).
ix) Agricultural Labourer: Land holding up to 0.50 acre of land or having a home-
stead; should have income of more than 50% by way of agricultural wages.
x) Marginal/Small farmer: In order to classify the farmer under Marginal / Small

farmer category, the land holding should not be more than the following:
Category Irrigated Land Holding Un-irrigated Land Holding

Marginal 1.25 Acres Or 2.5 Acres
Small 2.50 Acres Or 5.0 Acres
Others Above 2.50 Acres Or Above 5 Acres
xi) Credit flow to SC/ST: RBI has issued the following instructions/directives to the
banks on the credit flow to SC/ST (Circular no.207 Ref 28/08 dated 01.10.08)
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Scheme Reservation / Relaxation
DRI 40% of Advances. Land holding criteria is not applicable
SGSY 50% of the families assisted
SJSRY Credit to be extended to the extent of their strength in the local
population
PMRY 22.50% of Advances. Age relaxation – 10 Years
Collateral security norms:
Agriculture: No collateral security/Guarantee is required for agriculture loans

(Hypothecation of crops/assets for crop loans/Agricultural Term Loans) up to and
inclusive Rs.50000/-. In addition to hypothecation of Crops and/or Assets, Co-
obligation and Third party guarantee is to be obtained where the loan amount is above
Rs.50000/- and inclusive of Rs.100000/-. Collateral security is to be obtained in the
form of mortgage of lands where the loan amount exceeds Rs.100000/- Deviation in
collateral security norms for agricultural advances may be permitted on case to case
basis by HO (Cir No.213 26/47 dated 16.10.2009) Margin/security should not be
insisted for Agriculture loans up to Rs.100000/- as per the recent RBI guidelines.
(Cir.no.107 Ref 19/06 dated 30.06.10)
MSME: No collateral security or third party guarantee is insisted for loan up to Five
lakhs and for Tiny Sector up to Twenty five lakhs based on the good track record
and financial position of the borrowing unit.
Adjusted Net Bank Credit (ANBC) denotes NBC plus investments made by banks in
non-SLR bonds held in HTM category. However, investments made by banks in the
Recapitalization Bonds and Inter-bank exposures will not be taken into account for the
purpose of priority sector lending targets/sub-targets. Lending to the following
activities is treated as Priority sector:
¾ Investments by banks in securitized assets provided they are originated by banks

and financial institutions.
¾ Outright purchases of any loan asset provided they are purchased after due
diligence and at fair value from banks/financial institutions, without any recourse to
the seller and these assets shall not be disposed off within a period of six months
from the date of purchase.
¾ Investments by banks in Inter Bank Participation Certificates, on a risk sharing
basis provided they held for at least 180 days from the date of investment.
¾ Loans to distressed persons other than farmers to prepay their debt to non-
institutional lenders, against appropriate collateral or group security.
Targets & Sub-targets set under priority sector lending for domestic and foreign
banks operating in India are furnished below:
Category Domestic commercial banks

Priority Sector 40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent
advances amount of Off-Balance Sheet Exposure, whichever is higher.
18 per cent of ANBC or credit equivalent amount of Off-Balance Sheet
Exposure, whichever is higher.
Agricultural Of this, indirect lending in excess of 4.5% of ANBC or credit
advances equivalent amount of Off-Balance Sheet Exposure, whichever is
higher, will not be reckoned for computing performance under 18 per
cent target. However, all agricultural advances under the categories
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'direct' & 'indirect' will be reckoned in computing performance under
the overall priority sector target of 40 per cent of ANBC or credit
equivalent amount of Off-Balance Sheet Exposure, whichever is
higher.
Advances to small enterprises sector will be reckoned in computing
Small
performance under the overall priority sector target of 40 per cent of
Enterprise
ANBC or credit equivalent amount of Off-Balance Sheet Exposure,
advances
whichever is higher.
40 per cent of total advances to small enterprises sector should go to
micro (manufacturing) enterprises with investment in plant &
machinery up to Rs.5 lakh and micro (service) enterprises having
Micro investment in equipment up to Rs.2 lakh;
enterprises
within Small 20 per cent of total advances to small enterprises sector should go to
Enterprises micro (manufacturing) enterprises with investment in plant &
sector machinery above Rs.5 lakh and up to Rs.25 lakh, and micro (service)
enterprises with investment in equipment above Rs.2 lakh and up to
Rs.10 lakh. (60% small enterprises advances should go to the micro
enterpr).
Export credit is not a part of priority sector for domestic commercial
Export credit
banks.
Weaker 10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet
sections Exposure, whichever is higher.
1 per cent of total advances outstanding as at the end of the previous
Differential
year. It should be ensured that not less than 40 per cent of the total
Rate of
advances granted under DRI scheme go to SC/ST. At least two third
Interest
of DRI advances should be granted through rural and semi-urban
Scheme
branches.
Foreign Banks – priority sector advances is stipulated as 32 per cent of ANBC or

credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. In case
of Small Enterprises it is 10 per cent of ANBC or credit equivalent amount of Off-
Balance Sheet Exposure, whichever is higher. The target for export credit is 12 per
cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is
higher.
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AB - Agricultural Lending Products
I. Direct Agriculture
i) Pattabhi Agri credit Card (PAGCC / Kisan Credit Card): It is common crop loan
extended for growing of different crops. Loan amount is arrived for both the seasons
Kharif (Financing from 1st April to 30th September) and Rabi (Financing from 1st
October to 31st March) based on scale of finance approved by District level technical
committee. The amount for different crops in different seasons will vary from different
districts. This is production credit limit sanctioned to the farmers for a period of 3
years with annual review. Documentation is valid for a period of 3 years and accidental
insurance coverage is available up to Rs.50000/- to the farmer.
ii) Kisan Green Card: The facility of extending the production credit along with
investment credit considering the consumption needs of the farmer is provided under
this scheme. Existing PAGCC loan holders having three years satisfactory track record
with own land are eligible under this scheme. The value of the agricultural land to an
extent of 50% is considered as limit and this limit also includes PAGCC limit sanctioned
to the farmer already. The facility includes both crop production needs and also
investment needs like purchase of any farm implements, other farm inputs and
draught animals or dairy animals. Hence this facility comprehensively covers all the
needs of the farmer including his consumption needs also. Minimum limit is Rs.25000
and max is Rs.5 lacs.
iii) Kisan Sampathi (Produce Marketing loans) aims at preventing distress sale of the
farmers’ agricultural produce. The crops that can be financed under this scheme
include Paddy, Ground nut, Bengal gram, Turmeric, Maize, Millets, Yam, Black and
Green gram. Bank sanctions loan amount based on the 75% of procurement prices or
the minimum support prices issued by Govt. from time to time. Bank entered into an
agreement with NCMSL (National Collateral Management Service Ltd) for extending
produce loans up to Rs.10 Lakh without collateral security provided the produce is
stored at Central Ware House / State Ware House / Food Corporation of India / NCMSL
approved ware Houses and branch should obtain personal guarantee of two persons.
In case where produce stored with the cultivator, loan up to Rs.2 lakh can be
sanctioned with out collateral security, however, branch should take personal
guarantee of the borrower. For loans beyond 2 lakh branches should obtain collateral
security with value not less than 100% of bank loan component. These loans are to be
repaid within 12 months. Interest Rate for loans up to Rs.2 lakh – Base Rate + 1%
and for loans beyond Rs.2 lakh & up to Rs.10 lakh – Base Rate + 2.5% (cir.no.379 Ref
19/21 dated 07.02.11)
iv) Gold Loans: Loans are sanctioned for agricultural purposes on pledging gold
ornaments. The unforeseen short term debt requirements of the farmers are covered
in this loan. It is a short term loan repayable in one year or in commensuration with
crop harvesting season. These loans attract interest rate that is being charged to short
term agriculture production loans. The maximum loan amount that can be allowed
shall be lowest of the following (Cir.no.124 Ref 26/29 dated 17.07.2010)
a) Amount of the loan applied for b) Eligible amount arrived as permissible scale of
finance of crops and the extent of land for each crop as declared by the applicant c)
85% of the value of gold ornaments as certified by the Appraiser d) Amount eligible as
per “Rate of Advance (per gram)” stipulated by the bank from time to time.
v) Kisan Chakra: Under the scheme, Vehicle loans are given to farmers for
supporting transport facilities. Two-wheeler loans up to Rs.40000 and four-wheeler
loans up to Rs.3 lakh can be sanctioned under this category. Loans to the children of
farmers having 2 acres of wet land or 5 acres of dry land are eligible.85% of onroad
price of vehicle is sanctioned to small and marginal farmers where as 75% is
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sanctioned to Other farmer. Loan should be repayable in 5 years either yearly or half
yearly or quarterly as per the cropping pattern and income generation of the farmer.
vi) Kisan Bandhu (Finance to Tractors): Bank entered MOUs with all leading
tractor manufacturers for financing to Tractors. Farmer should have 3 acres of
wet/double cropped land or 6 acres of dry/single cropped land. Loans upto Rs 3.5 lakh
will be disbursed against hypothecation only and no collateral security is required (Cir
No.666/19/100.4/1609 dt 25.11.2004). Finance can also be extended for second hand
tractors aged up to 7 years. At present 7 companies’ viz., Eicher, Mahendra &
Mahendra, Bajaj Tempo, TAFE, New Holland, HMT and International Tractors, and the
dealer will offer one additional free service during the first year. Margin: For
small/Marginal farmers - 15%. For others – 25%. Rate of Interest - BMPLR minus
Spread + Term Premia (Circular no.237 Ref 19/08 dated 16.10.2008).Minimum of
1000 working hrs per year on own farm/customer land should be ensured. Under this
scheme power tillers are also sanctioned to the farmers having 1 acre of wet land or 2
acres of dry land.Minimum working hours are 600. Collateral security is not required
up to 1 lakh.
vii) Finance to Horticulture: National Horticulture Board (NHB) is providing 20% of

unit cost as subsidy subject to maximum of Rs.25 lakhs. The activities covered under
this program are Grape, Mango, Sweet orange, Lime, Banana, Amla, Pomegranate and
other horticulture activities. The farmer is required to receive Letter of Intent (LOI)
from the NHB and avail loan from Banks within 12 months and claim subsidy. The
subsidy is to be kept as Back End subsidy. The subsidy component is 20% in case of
Medicinal plantations provided by National Aromatics Board, Hyderabad.
vii) Finance to Land Purchase: Up to max of Rs. 2 lakh Loan is sanctioned to small
and marginal farmers for purchasing agril land meant for cropping purpose as per last
5 years registration value.
ix) Mandal Mahila Samakhyas consists of maximum 500 SHGs as members

covering 20 to 30 Village Organisations (VOs) operating in a mandal. VOs/SHG
Federation/MMS are to be registered under AP Mutually Aided Cooperative Societies
Act 1995 to avail finance from Banks subject to fulfilling the following:
¾ Minimum two years of existence with audited balance sheet

¾ “A” rating by External Agency i.e. Chartered Accountant
¾ The maximum eligible amount is 10 times of the Networth of VOs (savings
contributed by each SHG to VOs on monthly basis, interest earned on savings
and internal lending, revolving fund if any) or 80% of Micro Credit Plan (MCP)
whichever is lower subject to borrowing clause incorporated in the byelaws.
x) Rythu Mitra Groups (RMG): Optimum size is 15 farmers. Marginal, Small and
tenant farmers can become members of the group. Objective of RMG is to provide
technology transfer, market information and credit facilities to the farmers. Quantum
of eligible finance is 20 times of corpus of the group. Finance can be provided for crop
production. The maximum finance is Rs.7.5 lakhs subject to scale of finance as per
land holdings of each member of the group. The ceiling stipulated for each member is
Rs.50000/-. No collateral security up to Rs.5 lakhs. Govt. of AP provides subsidy for
term lending taking by RMGs who undertake Dairy, Input Dealers/fertilizers and
Compost Pit/Vermi Compost activities. However, the maximum unit cost is Rs.1 lakh
and the maximum subsidy available is Rs.25000/-.
xi) Joint Liability Groups (JLG): Tenant farmers with minimum 4 – 5 people
(members of existing RMGs or freshers) can form as group under JLG. The members of
JLB should be from the same socio economic status living in the same village and
carrying the similar activity (For example – cultivation). The acreage of the members
should not be more than 2.5 acres in case of irrigated land and 5 acres in case of dry
144

land. Banks can extend maximum credit facility for crop production to each member is
Rs.25000/- against group guarantee of the members of the group.
II. Indirect Finance to Agriculture
Kisan Vivek (Finance to Agri Clinics and Agri Business Centers): Government of
India directed the banks to finance unemployed Agriculture Graduates (Horticulture,
Animal Husbadry, Forestry, Dairy, Veterinary, Poultry farming and Pisiculture) to set
up Agri Clinics and Agri Business Centers (ACABC) with an objective to provide
technical support and guidance (Pre and Post harvesting) to the farmers. It paves the
way to improve the production and income of the farmers. It can be undertaken by
individuals as well as in groups. In case of group (five or more), one of them should be
agriculture graduate and others can be non-agricultural graduates with experience in
business development and management. Assistance under the scheme would be
purely credit linked and subject to sanction of the project by the bank branch based on
economic viability and commercial considerations. Up to Rs. 5 lakhs, no margin and
collateral security is required. In case of group of individuals limits can be sanctioned
up to Rs.50 lakhs. 15% margin is required for the loans beyond Rs.5 lakhs to general
category entrepreneurs. Credit linked capital subsidy @ 25% of the capital cost of the
project funded through bank loan would be eligible. The subsidy would be 33.33% in
respect of candidates belonging to SC/ST/Women and other disadvantage sections.
The capital subsidy will be back-ended with minimum 3 years lock-in period. In
addition to the capital subsidy, full interest subsidy would be eligible for the first Two
Years of the project.
Dairy Agents and Sheep Agents: Loans are sanctioned to agents engaged in dairy
and sheep rearing. Dairy agents who procure minimum 100 liters of milk for local milk
processing units/milk dairies will be sanctioned up to a max of Rs.1 lakh and Rs.2 lakh
for 200 liters. For sheep agents maximum loan amount of Rs.1.5 lakh for purchase of
500 Ram Lamb units is sanctioned. Besides hypothecation of the animals, these loans
are to be collaterally secured up to 150% of the loan.
Andhra Bank Rural Credit Card (ABRCC): A scheme to provide hassle free credit
to customers having more than 3 years banking with branches/having sizable
deposits - based on the assessment of income and cash flow of house holds. The limit
should not exceed 20% of eligible production credit and/or 20% of annual income of
the applicant from know sources or Rs25000 which ever is less. It is overdraft/ cash
credit limit for 3 years with no end use stipulation and every year the account is to be
brought into credit. Maximum limit is Rs25000. Entire credit outstanding under ABRCC
shall be treated as Indirect Finance to agriculture.
Surya Shakthi Scheme: Under this scheme, banks are financing for Solar Water
Heater systems. The rate of interest charged for these loans is BMPLR. Interest
subsidy is available. The net interest rate (BMPLR – Subsidy) is 2% for individuals, 3%
for institutions and 5% for industrial/commercial organizations. The interest subsidy is
to be claimed upfront within 180 days from the date of loan. The margin requirement
is 15% and repayment period 5 years.
Kisan Samraksha (Rural Godowns): The objective of the scheme is creation of

scientific storage capacity with allied facilities in rural areas to meet the requirements
of the farmers for storing farm produce, processed farm produce and agricultural
inputs. This scheme is meant for construction of Godowns in Rural areas only (not in
municipal areas) with capacity ranging from 100 metric tons to 10,000 metric tons.
The project can be undertaken by individuals, farmers, growers, Partnership /
proprietary firms, SHGs, NGOs, Companies, Corporations, Co-operatives and Local
Bodies. Govt. of India through Directorate of Marketing and Inspection (DMI) and
NABARD administers Capital Investment Subsidy Scheme. Government of India
provides 25% of unit cost as subsidy subject to maximum of Rs.46.87 lakhs in case of
145

farmers and with regard to others the eligible subsidy is 15% of unit cost subject to
maximum of Rs.28.12 lakhs. Subsidy of 33.33% in case of Women, SC, ST, SHG, Co-
operative societies and projects located in North Eastern states with a maximum of
Rs.62.50 lakhs. Cost of construction (NABARD approved) is Rs.2500 per Metric Tonne
for 1000 capacity and Rs.1875 per Metric Tonne for beyond 1000 MT capacity. The
rate of interest for these loans is BMPLR – Spread (2.25) + Term Premia. No collateral
is required up to 200 MT capacities. In case of above 200 MT capacities, collateral not
required if Tie-Up with FCI/SWC/CWC is there. If there is no tie-up, 100% collateral
security besides mortgage of the godown site is required if there is no tie-up.
Normally, the margin stipulated is 25% of the unit cost. But the same can be only 10%
where tie-up with FCI/CWC/SWC is available. Repayment: 9 years + 1 year holiday.
AB Kisan Rakshak: The objective of the scheme is to provide Bank credit to the
indebted farmers to repay loans taken from non-institutional lenders i.e., private
money lenders. It covers the Existing farmer borrowers of the bank, who have been
regular in repaying loans with interest in the past, except on occasions when they
could not do so on account of factors beyond their control and non-borrower farmers in
the service area of the bank branch also. The eligible finance under this scheme for the
existing crop loan borrowers is 50% of Pattabhi Agri Card sanctioned limit subject to a
maximum Rs.50,000/- (or) to the extent of debt whichever is lower. The maximum
limit allowed to new borrowers is Rs.25000/- (or) to the extent of debt which ever is
lower. The loan amount should be released by way of Cheque/Demand Draft/Pay
Order to the creditors who lent money to the farmer against the discharge of the
financial instrument. The discharged instrument should be kept along with the
documents. The rate of interest is BMPLR - Spread + Term Premia. The loan is
repayable in 7 years with a gestation period of one year. The yearly installment in
Term Loan should be recovered along with Pattabhi Agri Card Loan i.e., on or before
30th June of every year or marketing the produce which ever is earlier. No collateral
security is required for the aggregate limit of Rs.100000/- and if it exceeds, branch to
obtain collateral security with value equivalent to bank loan shall be offered.
AB Kisan Pragathi: To meet the need based miscellaneous expenditure connected to

farming & allied activities, a new scheme "AB KISAN PRAGATHI" has been
introduced. The scheme aims at providing hassle free credit to the farmer in the areas
where it is difficult to assess the small credit requirement in strict banking terms
towards cost incurred like
¾ Land leveling, bunding, contour formation, land reclamation etc.,
¾ To purchase miscellaneous agricultural implements like sickles, harrows,
Cultivators, seed drills etc.
¾ To purchase plant protection equipment like sprayers, dusters and power
Sprayers etc.
¾ To carry out the repairs for the existing agricultural implements and plant
Protection equipment.
¾ To grow live hedge, coconut, teak, vegetable cultivation on bunds etc.
¾ To carryout small repairs to the existing minor irrigation structures like wells,
tube wells, electric motors and pump sets, oil engines, replacement of
pipelines, etc.
¾ To meet the working capital requirements of existing livestock like dairy, sheep,
goat, backyard poultry etc.
All existing and new farmers who are owner cultivators and availed crop loan facility
with the branch. Credit Limit - Up to a maximum credit limit of Rs.10, 000/- (or) to the
extent of crop loan limit availed by him, which ever is lower per borrower who is owner
cultivator. The finance can be extended on the basis of self declaration that the
farmer requires the amount to carry out the certain miscellaneous activities mentioned
above during the current crop season. Loan should be repayable in 5 annual
installments. However, overdue installment attracts compound Interest. Margin - 15%
146

of the proposed requirement towards the miscellaneous activities mentioned in the self
declaration. Security - The existing norms of agriculture loans are equally apply to this
scheme. (Cir.no.046 Ref 19/02 dated 22.05.2010)
National Agricultural Insurance Scheme (NAIS): It is operated by Agriculture

Insurance Company of India Limited, New Delhi. In consultation with State Level
Coordination Committee of State Government, identifies notified crops district-wise
and also premium rates. This scheme is operating on Village as unit for insurance
coverage in specified crops like paddy and mandal-wise for other crops. Coverage of
crops under crop insurance is District specific but not uniform for all districts in the
state. However, Mandal is taken as unit in case of Rabi season.
SLBC: The SLBC comprises of representatives of all Commercial Banks and Chairmen
of Regional rural banks operating in the state. Representatives of the state
Cooperative banks, Reserve Bank of India, NABARD shall also be invited to attend the
meetings of the committee. The level of participation is the Zonal/Regional heads of
banks stationed at the state headquarters, for expeditious decision-making. The
activities of SLBC are as under:
¾ Take up issues raised by member banks or State Government authorities and

resolve them.
¾ Analyze the deposits and advances of banks and review the credit deployment
position for improving it wherever, it is unsatisfactory.
¾ Serve as a focal point of the banking system for securing better liaison with the
state government authorities. The SLBC shall liaise with the Secretary
(Institutional finance) of the State for contact in the matters relating to the
implementation of Lead Bank Scheme / Government sponsored schemes.
¾ Serve as the clearing house in respect of Inter Institutional Coordination
problems remaining unresolved at the level of district consultative committee.
¾ Consolidate all the District Credit Plans and prepare State Credit Plan, launch
and monitor the progress of its implementation.
¾ Review the progress made under various Government sponsored programmes
of poverty alleviation and monitor its progress through Lead District Managers
stationed at the District Head quarters.
¾ Maintains liaison with Government departments on behalf of Banks in the State
and represent problems of the member Banks to the Government for solution.
Lead Bank: The main object of the scheme is a planning exercise for providing credit
to develop banking in Rural and semi urban areas and extension of credit to neglected
areas for balance regional development of district as a unit. Our Bank is having Lead
Bank responsibilities in Six Districts in the country, of which four are in Andhra
Pradesh viz. Srikakulam, East Godavari, West Godavari, Guntur and the other two
districts are in Orissa (Ganjam and Gajapathi)
Potential linked Credit plan (PLP): To get more realistic for building a more
meaningful annual credit plan, NABARD acts as a catalyst and provide accurate Dist
information to Lead District Managers about the potentialities available, potential
already exploited, availability of infrastructure, strengths and weakness of credit
institutions before finalization & preparation by the LDM. In turn LDM provides
information to all Branches as back ground paper to Branches.
Service Area Approach is applicable only to implement Government sponsored

schemes. Banks are free to lend to any area under other schemes subject to obtaining
No Objection / No Due Certificate from the banks operating in the command area.
Banks should not insist for No Objection Certificate for agricultural loans up to
Rs.50000/- to existing farmers and should obtain the self declaration of not having any
loan from other banks. Banks as per RBI guidelines should also not to charge any such
fee for giving any no objection certificate/ no due certificate to farmers.
147

Retail Loans
EDUCATIONAL LOANS
STUDIES IN INDIA
Eligibility Secured admission through test/selection process

Age Criteria 12-30 yrs.
Course All courses including schooling
Loan Amount Need based genuine expenditure related to the course
Maximum Loan Rs. 10.00 Lac (Max.2 Loans)
Up to Rs.4 L Above Rs.4 Lac
Margin
Nil 5%
Repayment 5-7 Yrs
1 Year after completion of course or 6 Months after getting job
Gestation period
whichever is earlier.
Up to Rs.4 Lac-Parents co-obligation. Above Rs.4 & up to 7.5 Lac-
Security / Guarantee Satisfactory third party guarantees. Above Rs.7.5 Lac - Collateral
security of suitable value & Co obligation of parents
Up to 4 Lac - BMPLR-1.25
Above 4 Lac - BMPLR+0.50
Rate of Interest
Staff Children - BMPLR-1.25% (Irrespective of limit)
Simple interest during course & gestation period
Penal Interest 2% for limit above 2.00 Lakh
Concessions 0.50% in interest rates for Girl students
Exemptions Processing/ Administrative/ Upfront fee/ Pre-payment Charges
EDUCATIONAL LOANS
STUDIES ABROAD
Eligibility Secured admission in overseas institution

Age Criteria 17-35 yrs
Course Graduation and above
Maximum Loan Rs.20 Lac
Up to Rs.4 Lac Above Rs.4 Lac
Margin
Nil 15%
Repayment 5-7 Yrs
Gestation period
Up to Rs.4 Lac-Parents co-obligation. Above Rs.4 & up to 7.5 Lac-
Security / Guarantee Satisfactory third party guarantees. Above Rs.7.5 Lac - Collateral
security of suitable value & Co obligation of parents
Up to 4 Lac – Base Rate + 2.75%
Above 4 Lac – Base Rate + 4.50%
Rate of Interest
Staff Children – Base Rate + 2.75%% (irrespective of limit)
Penal Interest 2% for limit above 2.00 Lakh
Exemptions Processing /Administrative/ Upfront fee/ Pre-payment Charges
148

EDUCATIONAL LOANS
PREMIER MANAGEMENT INSTITUTIONS
Secured admission in 25 Premier management institutions

Eligibility
selected.
Each institution is attached with one Branch for speedy
Nodel Branch
sanction of loan.
Course Management /Technical/ Professional courses
Maximum Loan Rs. 10.00 Lac
Margin 10%
Repayment 5-7 Yrs
Gestation period 6 Months after getting job whichever is earlier.
Security/Guarantee Guarantee of earning parents / Guardian
Up to 4 Lac–Base Rate + 2.75% > 4 Lac – Base Rate + 4.50%
Rate of Interest Staff Children – Base Rate + 2.75%% (irrespective of limit)
Panel Interest 2% for limit above 2.00 Lakh
EDUCATIONAL LOANS
Private Medical & Dental Colleges Management seats (AP)
Secured admission under EAMCET Ranking based

Eligibility
Management seats
Course Medical & Dental
Loan BG
Loan Amount MBBS Rs. 10.00 Rs.8.20 L (5 Yrs.)
BDS Lacs 348750/- (4 yrs.)
Maximum Loan First year fee reimbursement should not be considered
Margin 10%
Repayment Max. 72 Months
Gestation period
For Loans- Security as in case of Studies India
Security / Guarantee
For Bank Guarantee - 100% collateral security
Up to 4 Lac–Base Rate + 2.75%; > 4 Lac–Base Rate + 4.50%
Exemptions Processing / Admin./ Upfront fee/ Pre-payment Charges
149

EDUCATIONAL LOANS
Commercial Pilot Training
Secured admission in Flying training Institutes approved by

Eligibility
DGCA & Reputed Abroad Institutes.
Course SPL PPL & CPL Courses
Need based & Max. of
Loan Amount
Inland -10 Lacs & Abroad -20 Lacs
Maximum Loan First year fee reimbursement should not be considered
Margin As in the case of Studies India & Abroad schemes
Repayment 5-7 Yrs
1 Year after completion of course or 6 Months after getting
Gestation period
job whichever is earlier.
As in case of Studies India & Studies Abroad scheme
Sufficient Insurance coverage for the life of the student.
Up to 4 Lac–Base Rate + 2.75%; > 4 Lac–Base Rate + 4.50%
Exemptions Processing/ Admn./ Upfront fee/ Pre-payment Charges
EDUCATIONAL LOANS
ABCALS
Eligibility Permanent employees of reputed organization.

Age Criteria Balance service not less than 10 yrs.
Course Higher studies/Skills
Maximum Loan Rs.7.5 Lac
Margin 10%
Repayment 60EMI
Gestation period One month
Security 100 % Collateral
Guarantee Not to be insisted
Rate of Interest Base Rate + 4%
Exemptions Processing / Admin. / Upfront fee / Pre-payment Charges
150

EDUCATIONAL LOANS
Employment Abroad
Eligibility Qualified Technical & Professional graduates

Age Criteria Below 30 yrs.
Course To go abroad for employment
Loan Amount For Air fare & Initial expenses
Maximum Loan Rs.1 Lac
Margin 25 %
Repayment 36 EMI
Gestation period One month
100 % Collateral & LIC Policy
Two co-obligants
Rate of Interest Base Rate + 4%
EDUCATIONAL LOANS
Private Professional Colleges
Merit & Poor Students (Family income should not be more than 1
Eligibility
Lac p.a.)
Course Graduation & above Technical & Professional courses
Maximum Loan Rs.15000/-Free seat Rs.50000/-Payment
Margin Nil
Repayment 5 Yrs incl. gestation
Gestation period 2 yr. after completion of course or 6 Months after getting job
NIL
Bond / undertaking from borrower to pay the loan
Rate of Interest 12%
Exemptions Processing/ Administrative/ Upfront fee/ Pre-payment Charges
151

HOUSING LOANS (General Housing Finance)
In any area like Rural, semi urban, urban, Metro etc.

Individual either singly or jointly with spouse & Children –
Eligibility
Sanction at Branch level.
With other blood relations- Sanction at HO level.
Construction or Purchase of house / Extension / Renovation/
Purpose
Repairs to existing house
Borrower - 21-65 yrs.
Age Criteria
Independent House - Below 25 Yrs / Flat - Below 20 Yrs
Co-applicant Spouse of the applicant
48 times of Monthly gross salary / 4 times of Annual income or
75% Cost of construction / 85% of Out-right Purchase,
Loan Amount whichever is less.
50% of expected rental income can be added to income to
arrive at more eligibility
Rural-25 Lac, Semi-urban-Rs.75 Lac. Urban- 150 Lac,
Maximum Loan
Metro- Rs. 250 Lac
Take home pay 30 %
Repayment Max. 20Yrs.
18 Months (24 Months in case of housing board) from
Gestation period disbursement of first installment or immediately after
completion of house / taking possession
Repairs/Renovation Up to 5yrs- 2.0 Lac; Above 5 & up to 25 years 8 Lacs
Security House/Flat to be constructed / purchased
Guarantee/ Co-obligation/ Satisfactory third party guarantee may be
Co obligation stipulated
Classification Up to 20 Lac - Priority# Above 20 Lac -Non Priority
Repayment Above 5 & up
Up to 5 Yrs Above 10 Yrs.
Rate of Interest period to 10 Yrs
Up to 30 lacs BR + 1.25% BR + 1.50% BR + 1.75%
Above 30 lacs BR + 2% BR + 2.25% BR + 2.50%
0.50% of loan amount subject to maximum of Rs.10000/- At
Processing Charges
the time of processing loan application
Administrative Up to 10 Lac Rs.100, Above 10 L& upto15 L-Rs 150/- Above 15
Charges Lacs 250/- Per quarter
2 % flat on pre-paid amount, where the repayment is fixed
Pre-payment
beyond 36 months. However, charges may be waived, incase
charges
the payment is from own savings / windfall gains.
# Up to 1.00Lac in R/SU & <2.00 Lac in U/ Metro areas to be treated as Priority.
Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) is introduced by
Government of India with an objective to enable the Economic Weaker Sections (EWS)
and Lower Income Group (LIG) segments in the urban areas to construct or purchase
houses by providing an interest subsidy of 5% on loan amount of maximum `1.00
lakh. The scheme is in effect from 26.12.2008 and will close in 2012. EWS and LIG are
defined as households having an average monthly income up to `5,000 and `5,001 to
`10,000 respectively. The borrowers under the scheme must have a plot of land for
the construction or have identified a purchasable house. The preference under the
scheme should be given to SC/ST/Minorities/Women/ persons with disabilities in
accordance with their population in the total population of the area as per 2001
census. The scheme will provide a subsidized loan for 15-20 years for a maximum
amount of ` 1 lakh for an EWS individual for a house at least of 25 sq. mts, and `1.60
lakh for a LIG individual for a house at least 40 sq.mts, will be admissible. However,
subsidy will be given for loan amount up to ` 1 lakh only. (Cir.no.316 Ref 28/09 dated
04.12.2010)
152

HOUSING LOANS
Golden Jubilee Rural Housing Finance
In rural areas & Towns having population not more than 50000 as
per census 1991.
Eligibility Individual either singly or jointly with spouse & Children –Sanction at
Branch level.
With other blood relations- Sanction at HO level.
Construction or Purchase of house / Extension / Renovation/ Repairs
Purpose
to existing house
Age Criteria
48 times of Monthly gross salary / 4 times of Annual income or
75% Cost of construction / 85% of Out-right Purchase, whichever is
Loan Amount less.
50% of expected rental income can be added to income to arrive at
more eligibility
Maximum Loan No maximum limit
Take home pay 30 %
Repayment Max. 15 Yrs.
18 Months (24 Months in case of housing board) from disbursement
Gestation period of first installment or immediately after completion of house / taking
possession
Repairs/
Max. 0.50 Lac
Renovation
Where mortgage of primary security is not feasible, other securities
Security
can be accepted.
Guarantee/ Co Co-obligation/ Satisfactory third party guarantee may be stipulated
obligation
Classification Priority (Irrespective of loan amount
Rate of Interest Up to 5 Yrs Above 10 Yrs.
period to 10 Yrs
Up to 30 lacs BR + 1.25% BR + 1.50% BR + 1.75%
Processing 0.50% of loan amount subject to maximum of Rs.10000/- At the
Charges time of processing loan application
Administrative Up to 10 Lac Rs.100, Above 10 L& upto15 L-Rs 150/- Above 15 Lacs
Charges 250/- Per quarter
2 % flat on pre-paid amount, where the repayment is fixed beyond
Pre-payment
36 months. However, charges may be waived, incase the payment is
charges
from own savings / windfall gains.
153

HOUSING LOANS
Non-Resident Indians – General
Non-resident Indians & Persons of Indian origin Individually or jointly

with resident close relatives
Eligibility Persons of Indian origin and residents of Pakistan, Bangladesh,
Srilanka, Afghanistan, China, Nepal & Bhutan have to obtain prior
permission from RBI
Construction or Purchase of house / Extension / Renovation/ Repairs
Purpose
to existing house
Age Criteria
48 times of Monthly gross salary/4 times of Annual income or 75%
Cost of construction/85% of Out-right Purchase, whichever is less.
Loan Amount
50% of expected rental income can be added to income to arrive at
more eligibility
Maximum Loan Max. of Rs. 250 Lac
Take home pay 30 %
Max. 20Yrs.
Repayment Installment shall be paid by remittances outside India or out of funds
in his NRE, FCNR Accounts or out of rental income.
18 Months (24 Months in case of housing board) from disbursement of
Gestation period first installment or immediately after completion of house / taking
possession
Repairs/
Up to 5yrs- Rs.2 lac and Above 5 & up to 25 years Rs.8 lac.
Renovation
House/Flat to be constructed / purchased plus Lien on other assts in
Security
India
Guarantee/ Resident close relative as Co-obligant / Guarantor
Co obligation
Classification Non Priority (Irrespective of loan amount)
Up to 30 lacs BR + 1.25% BR + 1.50% BR + 1.75%
Processing 0.50% of loan amount subject to maximum of Rs.10000/- At the time
Charges of processing loan application
Administrative Up to 10 Lac Rs.100, Above 10 L& upto15 L-Rs 150/- Above 15 Lacs
Charges 250/- Per quarter
2 % flat on pre-paid amount, where the repayment is fixed beyond 36
Pre-payment
months. However, charges may be waived, incase the payment is from
charges
own savings / windfall gains.
154

HOUSING LOANS
Non-Resident Indians – DUBAI
Non-resident Indians residing in Dubai, UAE & Sharajah,

Individually or jointly with resident close relatives
NRI account holders and valued constituents with minimum of one
Eligibility
year of abroad service
Investment in Immovable property in India by NRI is subject to
FEMA guidelines.
Purpose Construction or Purchase of House / Sites
Age Criteria
HOUSE -48 times of Monthly income or 80% Cost of construction/
Purchase, whichever is less.
Loan Amount
SITE - 12 times of Monthly income or 80% Cost of site, whichever
is less.
Maximum Loan Max. of Rs. 250 Lac
Take home pay 30 %
Max. 20 yrs for House, 36 Months for Site
Repayment Installment shall be paid by remittances outside India or out of
funds in his NRE, FCNR Accounts or out of rental income.
18 Months for Construction
Gestation period
3 Months for Purchase of house / Site
Repairs/ Up to 5yrs- 2.0 Lac.
Renovation Above 5 & up to 25 yrs.-8.0L
House/Flat to be constructed / purchased plus Lien on other assts
Security
in India
Guarantee/ Resident close relative as Co-obligant / Guarantor
Co obligation
Classification Non Priority (Irrespective of loan amount)
Up to 30 lacs BR + 1.25% BR + 1.50% BR + 1.75%
Processing 0.50% of loan amount subject to maximum of Rs.10000/- At the
Charges time of processing loan application
Administrative Up to 10 Lac Rs.100, Above 10 L& upto15 L-Rs 150/- Above 15
Charges Lacs 250/- Per quarter
Pre-payment
36 months. However, charges may be waived, incase the payment
charges
is from own savings / windfall gains.
155

AUTOMOBILE LOAN
Any individual having minimum gross Income of Rs.1.0 Lac-pa for 4 W,

Eligibility
Rs.60000/- pa for 2W & Rs.40000/- pa for battery operated e-bikes
4 Wheeler - NEW - Least of Road price minus margin or 3 yrs. gross
income. USED- (Not more than 3 years old) - Least of 60% of garage
value or 3yrs.gross income. Max. of Rs.5.00 Lac. 2 Wheeler - NEW-
Road price minus margin with a Max. of Rs.60000/-
Loan amount
Road Price- Invoice price, Registration, Life Tax, Insurance & accessories
up to Rs.5000 for 4 W & Rs.1000 for 2 W.
Margin: Salaried class with salary deduction - 15%;
SME/Corporate borrowers with standard assets with B rating & above:
15% and Other borrowers 20%
Security Hypothecation of vehicle purchased
Guarantee/
Good third party guarantee acceptable to the Bank.
Co obligation
Net Pay 40% after proposed installment
Repayment 4 W- New-12-72 EMI - 4 W- Used-60EMI - 2 W- 12-60EMI
4 W- BR+3.25%
Interest
2 W- BR+4.25%
Term Premia (TP) of 0.25% Extra for loans repayable beyond 3 Yrs
Pre-payment
charges
AB VANITHA VAHAN
Salaried/ professional & self employed Women having min. gross Income
of Rs.1.0 Lac pa for 4W - Rs.60000 pa for 2W & Rs.40000/- pa for
Eligibility
battery operated e-bikes. 50% of Husband's salary will be taken for
computing eligibility provided he is working and stands as Co-obligant.
4 Wheeler - NEW - Least of Road price minus margin or 3 yrs. gross
income. USED- (Not more than 3 years old) - Least of 60% of garage
value or 3yrs.gross income. Max. of Rs.5.00 Lac. 2 Wheeler - NEW-
Loan amount Road price minus margin with a Max. of Rs.60000/-
Road Price- Invoice price, Registration, Life Tax, Insurance & accessories
up to Rs.5000 for 4 W & Rs.1000 for 2 W. Margin: Salaried class with
salary deduction 15%; SME/Corporate with standard assets with B rating
& above 15% and other borrowers 20%
Guarantee/
Father /Husband of the applicant or suitable third party guarantee.
Co obligation
Repayment 4 W- New-12-72 EMI - 4 W- Used-60EMI - 2 W- 12-60EMI
4 W-BR+2.75%; Term Premia (TP) of 0.25% Extra for loans repayable
Interest
beyond 3 Yrs. 2 W-Up to 36 months-BR+3.75%; Above 36 months-
BR+4.00+0.25 (0.5% Concession for prompt repayment as back end.)
Pre-payment
charges
156

VEHICLE LOAN-MOU-M/S GENERAL MOTORS INDIA & TATA MOTORS LTD
Borrower should have salary account with our Bank or installment
Eligibility shall be remitted by employer. For other customers with satisfactory
dealings for the last 12 months, we may relax the above condition.
Income Gross annual Income shall be not be less than Rs.2.00 Lacs for Cars
80 to 85% of the Road Price or 3 years Gross Income, whichever is
Loan amount
lower
Salaried class with salary deduction 15%; SME/Corporate borrowers
Margin with standard assets with B rating & above 15% and Other
borrowers 20%
Guarantee/
Co obligation
Repayment Maximum 5 yrs. and normally 3 years only.
Base Rate + 3.25%. Term Premia - 0.25% for loans repayable >3
Interest
Yrs.
Proc. charges Rs.1000/- for loans above Rs.75000/-
Pre-payment
36 months. However, charges may be waived, incase the payment is
charges
from own savings / windfall gains.
Clean Loan
Any individual having repayment capacity. Age not above 75yrs in
Eligibility
case of Pensioners & 55 yrs in case of LIC Agents.
Salaried Persons: Fresh- 8 Times. Max. of Rs.1.00 Lac. Renewals -
10 Times. Max. of Rs.1.50 Lac 8 Times of gross salary by ZO level.
NonSalaried – ZO Sanction - 2 Times of avg. annual income Max
Loan amount 0.50 lac
Pensioners - 8 Times of monthly Pension Max.1.00 Lac.
LIC Agents - 2 Times of average of last 3 yrs. annual renewal
Commission for IT Assesses and 50% of average of 3Yrs. annual
renewal Commission for Non IT Assesses. Max 2 Lac
Security NIL
Renewals After payment of 1/3rd regular installments
Good third party guarantee acceptable to the Bank. (Incase of Clean
loan to Pensioners- Nominee of the pensioner/ family pensioner shall
Guarantee/
join as Co obligant / Guarantor. In case of Clean loan to LIC Agents-
Co obligation
Spouse or one of the family members and one LIC Agent.
Maximum of 60 EMI (In case of Pensioners aged above 65 yrs. & LIC
Repayment
Agents-36 EMI)
Interest Base Rate+7%. Term Premia (TP) 0.25% for loans repayable > 3 Yrs
Consumer Loan
Any individual having repayment capacity. (Non-Salaried
Eligibility
persons- Minimum Income Rs.30000/- pa
Equal to 10 Months gross salary- 40 % on annual Income in
Loan amount
case of non-salaried persons or 75% of cost of articles,
whichever is lower.
Security Hypothecation of goods purchased
Guarantee/co-oblig Good third party guarantee acceptable to the Bank.
Repayment Max.60EMI
Interest Base Rate+7.50% Term Premia (TP) of 0.25% Extra for loans
repayable beyond 3 Yrs
157

LOANS AGAINST GOVT. SECURITIES
Employees/ Pensioners / Professional & Self-employed holding
Eligibility
Govt. securities (except IVPs)
Purpose Not specific
Equal to 75% of purchase value of security including Accrued
Loan amount interest / Surrender value of LIC Policies. Securities where
premature cancellation is not available, the date of maturity
should be less than 3 years from the date of finance.
Margin / Security 25 % margin and pledge of receipts.
Guarantee/co-oblig Limit above Rs.50000/- Co obligation is required
Repayment Max.60EMI
Interest Base Rate+4.0% Term Premia (TP) of 0.25% Extra for loans
repayable beyond 3 Yrs
Processing &
Nil
Upfront Fees
Gold Loans: Bank is paying focused attention on lending against gold as this segment
is safe and source of high yielding advance. The rate per gram is as below:
Category Rate per gram

I. Hallmarking Gold
22 Carat (Hallmarking Rs.1400/- per gram or 80% of the market value of gold
916) whichever is less
21 Carat (Hallmarking Rs.1350/- per gram or 80% of the market value of gold
875) whichever is less
II. With out Hallmarking Gold
Rs.1300/- per gram or 80% of the market value of gold
22 Carat
whichever is less
21 Carat
whichever is less
20 Carat
whichever is less
19 Carat
whichever is less
III. Gold Coins
24 Carat whichever is less. However, the rate is Rs.1450/- per
gram in case of loan against Gold Coins of our Bank.
22 Carat
whichever is less
Loan is to be sanctioned for productive purposes and consumption purposes such as
meeting marriage/medical/educational expenses and other expenses of like nature
may also be sanctioned subject to the rules in force. Loans should not be extended
for speculation/money lenders. Minimum amount of loan is Rs.300/- The loan should
be repayable in 12 months and attracts interest @ 14.75%.
Loans should not be allowed against non-ornamental gold or ornaments of fineness
less than 19 carat. Loans can be allowed against gold coins sold by banks.
Ornaments subjected to domestic wear and tear only should be accepted. New
ornaments should not be accepted unless branch is satisfied with the trustworthiness
of the customer. Ornaments with large percentage of stones or other extraneous
material should be avoided. As a rule, ornaments like Kante, Addiga, Nagaram,
Ragidi should not be accepted. Very small ornaments also should not be accepted.
Right relinquishing letter is to be obtained from owner of the ornaments if any
names are there on the ornaments. Gold coins of our Bank with tamper proof Assay
certificate intact need not be appraised. (Cir.no.215 Ref 53/08 dated 08.09.2010)
158

Liquid Gold Scheme (SOD against Gold Ornaments)
Secured Overdraft against gold jewellery shall be encouraged to

individuals/firms who are small players in Industry, Service and
Purpose of the
Business sectors up to `10 lac without submission of financial
loan
statements. However, pawn brokers are not eligible for finance
under this scheme.
Minimum limit ` 2 lac, Maximum limit ` 10 lac. Calculated as per
Amount eligibility per gram as per HO guidelines issued from time to
time. At present, it is 75% of appraised value.
Loan Period 24 months and can be renewed.
Rate of interest Base Rate + 6.25% (At present 15.25%)
1% of loan amount with a minimum of Rs.10/- Out of which:
Appraising
0.35% to appraiser with Min. Rs.3/- - 0.65% to branch P& L
Charges
Account. Min.Rs.7/-
Premature closure Allowed. No prepayment charges.
Nomination Not available
Commitment Charges @ 2% p.a. on the unutilized portion of the
Other conditions limits, if the limits are not utilized for at least 75% in any
quarter. Branch to levy `300/- for partial delivery of ornaments.
(Cir.no.311 Ref 26/61 dated 30.11.2010)
AB Nightingale
Candidates passed B Sc (Nursing) or equivalent and currently
Eligibility
employed in Private/ Corporate / Govt. Hospitals
Purchase vehicles, consumer goods, contingency loans & go
Purpose
abroad
Loan amount Max. Rs.1.00 Lakh
Margin 15% (No margin for travel abroad and contingency loans)
Security Above 25000/- Colleteral security of 50% of exposure
Guarantee/Co0blig. Two sureties including one close relative
Repayment Max.36 EMI
Interest Base Rate + 4.50%
Pre-payment Not applicable
Processing&Upfront Rs.250/-
AB Doctor +
Individuals, Partnership firms/ Ltd co. /Trusts. Key promoters
Eligibility
should be qualified Medical practitioner and Doctors
To purchase equipments, Vehicles, Ambulance, medical
software, Setting up clinics, to travel abroad to attend
Purpose
seminars, to Meet domestic expenses, any other activity
related to medical profession.
Priority Sector - Rural & S/U- 15 Lac with sub-limit of Rs.3
Loan amount Lac for WC; Urban- 10 Lac with sub-limit of Rs.2 Lac for WC.
Non-Priority - Rural – No, SU - 25 Lac and Urban - 50 Lac
Margin: 20% (No margin for travel abroad and to meet
Margin
domestic exp.)
Collateral security of 50% of loan amount by way of EM of
Security
immovable property or lien on NSC/KVP/LIC etc.
Guarantee/Co-oblig Third party guarantee
Repayment Max. Of 60EMI or 20EQI - Gestation- 6 Months
Priority Sector- Base Rate+4.75% - Non- Priority Sector-Base
Interest Rate + 5.50%. TP - 0.25% extra where the repayment is
beyond 36 months.
Processing& Upfront 0.50%
159

Rent Receivable
Individuals, Proprietorship, Partnership, Public/Private ltd.

Companies, Trusts etc. owning properties in Urban/Metro areas
Eligibility
only. However, with regard to landlords of our branch premises
in Rural/Semi Urban can be considered.
Tenants must be of Reputed Public / Private sector /
Purpose
undertakings, Banks, National / International Airlines etc.
Minimum loan ` 25 lakhs and the maximum loan is ` 5 & ` 10
Loan amount crore for individual and other borrowers respectively. However,
limits beyond ` 10 crores falls under MC powers.
15% of rent receivable towards maintenance and 25% of
Margin
margin in collateral security of NSCs, Deposits etc.
Equitable mortgage of the property of the value not less than
150% of the loan. However, in case of deficit, liquid securities
Security
such as NSCs, Bank Deposits etc., can be accepted with 25%
margin.
Guarantee/ One Co-obligation / Guarantor. However, no Co-obligation /
Co obligation Guarantor for our Bank premises.
84 Months (120 months in case of leased premises of our
branches) or unexpired certain lease period whichever is less
Repayment
after making adjustments for TDS, Property Tax and 15% rent
towards maintenance.
Interest Base Rate + 5%
Pre-payment 0.50% on outstanding liability for the unexpired period
Processing &
1% of loan with a minimum ` 25000/- plus service tax.
Upfront Fees
(Cir.no.352 Ref 26/66 dated 04.01.2011)
AB ANAND JEEVAN (REVERSE MORTGAGE)
Single or Jointly with spouse; Age - First borrower -Above 60

Eligibility
Yrs, Spouse- Above 55 Yrs.
Purpose To meet any genuine needs.
90% of realizable value of House /Flat i.e. 70% of Market
value. Min. Rs.5 Lac. Max.Rs.100 Lac. Loan installment
Loan amount payable to the borrower in Monthly, Quarterly, and Lump
sum @ Rs.223/-, 663/- & 20082/-respectively per lac for loan
tenor of 15 years (max).
Margin Not Applicable.
Equitable Mortgage of House/Flat, against which loan is
Security sanctioned.
(To be registered with Sub- Registrar)
Guarantee/
Borrower has to execute a Will
Co obligation
Payable in Lump sum after the last surviving Borrower dies or
Repayment
opt to sell the home or permanently moves out the home.
10.75 % Fixed (ROI will be reset at the end of every 3
Interest
years})
Pre-payment Allowed without any charges.
Processing& Upfront No
160

MORTGAGE LOAN
Any individuals holding house/flat in their/spouse/Major children's

Eligibility names. Age-21-60 yrs. Above 60 yrs, jointly with spouse or major
children.
18 Times of gross pay/ pension and for Non-salaried persons-
Loan amount depending on the repayment capacity assessed on the basis of IT
returns/ Assessment order or Max. of 50% of value of the property.
Security Mortgage of House/Flat
Guarantee/
Co obligation
Repayment Maximum of 60 EMI
Interest Base Rate + 6.5% + Term Premia for loans repayable > 3 Yrs
AB Equipment Finance: Bank introduced a scheme to purchase New equipment like

JCBs, Excavators, Concrete Batch Mixing Plants, Lifts, Steel scaffolding Material etc.,
generally to be replaced within 2 to 3 years and to meet the needs of Service Industry
including Civil Contractors/Builders. The nature of facility is Term Loan. All the
existing borrowers with 2 years satisfactory dealings and in case of others, minimum 3
years experience in the respective field with profit track record are eligible for the
above facility. Maximum amount of loan to be disbursed is 90% of the cost of the
machinery/equipment. Interest rate for existing borrowers is Base Rate + 3.75%
and for new borrowers it is Base Rate + 4.50%. Repayment should be within 24 to 60
months. Wherever the repayment is beyond 36 months, the loan attracts additional
interest of 0.25% towards Term premia. Collateral security need not be insisted for
both existing and new borrowers. However, suitable co-obligation / guarantee shall be
obtained. Processing charges are to be collected @ 0.25% of loan amount. Zonal
Managers are authorized to sanction loans under the scheme even for the borrowers
enjoying limits under HO powers subject to the following ceilings.
Sanctioning Authority Maximum Limit

AGM as Zonal Manager Rs.200 lakhs
DGM as Zonal Manager Rs.300 lakhs
GM as Zonal Manager Rs.500 lakhs
(Cir.no.92 Ref 26/21 dated 01.07.09)
Liberalized Trade Finance:
All existing traders (Individual, Proprietary, Partnership and limited companies) in

operational area of the branch/Trade Finance Centers Preferably with Sales Tax
Registration Certificate whether maintaining account with the branch or not are eligible
for working capital credit under Liberalized Trade Finance scheme. Branches can
sanction loans as per the eligibility of the borrower subject to a maximum of Rs.100
lakhs. In case of WCTL, the maximum loan is Rs.10 lakhs only. The interest rates are:
Up to Rs.50.00 Lakhs Base Rate + 4.00

Above Rs.50.00 Lakhs & Upto 100 laks Base Rate + 5.00
WCTL-upto 3 Yrs-(Max.10 Lakhs) Base Rate + 4.00
WCTL-above 3 & upto 5Yrs-(Max.10 lakhs) Base Rate + 4.00
Audited balance sheet need not be insisted for limits below Rs.10 lakhs. However,
audited balance sheet is required where the turnover of the borrower exceeds Rs.40
lakhs per annum. The collateral security norms for the limits up to Rs.10 lakhs is as
under:
161

Age of the business Collateral Security Remarks
Less than 5 years 100% However, in case where the limits
5 to 10 years 75% are beyond Rs.10 lakhs, branch to
Above 10 years NIL obtain 125% of limit as collateral
Note: All term loans where the repayment is fixed beyond 36 months attract
prepayment charges @ 2% on the advanced payments made. Similarly, all term loans
are to be levied with the following Processing and administrative charges
Administrative Charges
Loan Amount Processing Charges (One time)
(Once in a quarter)
Up to 0.25 lakhs Rs.150 Rs.50
> 0.25 – 2.00 lakhs Rs.300 Rs.75
> 2.00 lakhs Rs.300 per lac or part thereof Rs.100
Credit Rating for Personal Banking Schemes:
In order to have better credit risk management system, Bank decided to have regular
rating for Clean Loans (Contingency), Personal Loans (Consumer), Vehicle Loans,
Housing Loans and Mortgage Loans.
For all new loans the rating is based on important parameters such as Age,
Qualifications, Residence, Stay, Transferability, Employment/Profession, Gross Income,
Spouse employment, No. of dependants, dealings with the bank, Net Take Home Pay,
Loan recovery mechanism, Loan Repayment History, Margin contribution and
Networth. The prospective borrower is expected to score minimum of 40 marks out of
100 marks to entertain the credit proposal.
All existing personal banking schemes of the branches are subjected for annual review
during the month of December every year duly taking parameters such as Availability
of the borrower, Transferability of employment, Loan Recovery Mechanism, History of
Repayment of existing loans, availability of securities (primary/collateral). (Circular
no.163 Ref 26/34 dated 06.08.2010)
***
162

Corporate Debt Restructuring (CDR)
The objective of the CDR framework is to ensure timely and transparent mechanism
for restructuring the corporate debts of viable entities facing problems, outside the
purview of BIFR, DRT and other legal proceedings, for the benefit of all concerned. In
particular, the framework will aim at preserving viable corporates that are affected by
certain internal and external factors and minimize the losses to the creditors and other
stakeholders through an orderly and coordinated restructuring programme. The
scheme will not apply to accounts involving only one financial institution or one bank.
The CDR mechanism will cover only multiple banking accounts / syndication /
consortium accounts of corporate borrowers with outstanding fund-based and non-
fund based exposure of Rs.10 crore and above by banks and institutions. However,
there is no requirement of the account/company being sick, NPA or being in default for
a specific period before reference to the CDR system. Three-tier structure is in place
for CDR system viz., CDR Standing Forum and its Core Group, CDR Empowered Group
and CDR Cell.
i) CDR Standing Forum provide an official platform for both the creditors and
borrowers (by consultation) to amicably and collectively evolve policies and guidelines
for working out debt restructuring plans in the interests of all concerned.
ii) CDR Empowered Group consider the preliminary report of all cases of requests
of restructuring, submitted by the CDR Cell. After the Empowered Group decides that
restructuring of the company is prima-facie feasible and the enterprise is potentially
viable in terms of the policies and guidelines evolved by Standing Forum, the detailed
restructuring package will be worked out by the CDR Cell in conjunction with the Lead
Institution.
iii) CDR Cell undertakes the initial scrutiny of the proposals received from borrowers /
creditors to decide whether rehabilitation is prima facie feasible. If found feasible,
proceed to prepare detailed Rehabilitation Plan with the help of creditors and, if
necessary, experts to be engaged from outside. If not found prima facie feasible, the
creditors may start action for recovery of their dues.
CDR-1 system is applicable only to accounts classified as 'standard' and 'sub-

standard'. CDR-2 system is applicable to the accounts where the projects have been
found to be viable but classified under ‘doubtful’ category provided minimum of 75%
of creditors (by value) and 60% creditors (by number) satisfy themselves of the
viability of the account and consent for such restructuring.
Reference to Corporate Debt Restructuring System could be triggered by any or more

of the creditor who have minimum 20% share in either working capital or term
finance, or by the concerned corporate, if supported by a bank or financial institution.
However, in case of suit filed accounts at least 75% of the creditors (by value) and
60% of creditors (by number) shall consent for the proposal. CDR is a non-statutory
mechanism which is a voluntary system based on Debtor-Creditor Agreement (DCA)
and Inter-Creditor Agreement (ICA).
The sub-standard/doubtful accounts which have been subjected to restructuring would

be eligible to be upgraded to the standard category only after the specified period, i.e.
one year after the date when first payment of interest or of principal, whichever is
earlier, falls due under the rescheduled terms, subject to satisfactory performance
during the period.
***
163

Comprehensive Corporate Compromise Policy (CCCP)
Prompt recovery of loans and advances not only increases liquidity and profitability but
also keeps funds cycle moving by continuous lending for the development of the
economy. Compromise Policy is a step in this direction. The compromise should be a
negotiated settlement under which it should be ensured to recover its dues to the
maximum extent possible with a minimum sacrifice.
The important aspect in connection with settlement proposals is the concept of
opportunity cost of funds. The opportunity cost of funds in hand vis-à-vis that of
funds, which could come in hand at a later period should be calculated to establish a
comparative advantage of 'now or later'. The guiding factors for a compromise
settlement are:
¾ Balance outstanding in the account (real account) as on date of NPA.

¾ Provision held in the account.
¾ Market value of the securities and time taken for realizing it.
¾ Reasons for failure i.e. factors beyond borrower's control like natural.
Calamities.
¾ Present status of the account and the amount that can be recoverable.
Our Bank introduced a Comprehensive Corporate Compromise Policy (CCCP) and the
salient features of the policy are furnished here under:
¾ These guidelines are applicable to NPAs and Technically Written-off

accounts including Credit Card dues.
¾ The account should have been classified as Substandard asset as at the end
of previous quarter for settlement. All the limits enjoyed by the borrower either
with the same branch or with different branches are also settled
simultaneously.
¾ Impaired Asset Study (IAS) is to be conducted as per guidelines.
¾ It also covers dues of employees/officers who cease to be in service on account
of retirement/death/resignation/dismissal/discharge/compulsory retirement
may be treated on par with general public.
¾ Compromise settlement may be entered with willful defaulters/fraudulent
borrowers without prejudice to the criminal case against the borrower and
those cases of compromise settlement should be vetted by Management
Committee / Board of the Bank.
¾ Bank may also entertain compromise proposal from the borrowers (in justifiable
cases) on whom SARFAESI notices are served for taking possession of
securities, provided the borrower comes forward for a compromise proposal.
¾ Committee approach is to be adopted while according compromise approvals.
The committee should give justifying reasons for consideration of the
compromise while referring the proposal to the competent authority for
consideration.
¾ An official who has sanctioned a particular loan, which has become NPA shall
not participate in the compromise committee meeting where the proposal
relating to that loan is under consideration for settlement.
¾ Administrative clearance is required from Head Office, where the write-off
exceeds 25% of real account balance in case of Sub-standard NPA accounts.
However, this is not applicable with regard to Doubtful / Loss category
accounts.
164

In order to have uniform approach, the shadow accounts is to be reworked out as
under:
Category Calculation
Accounts with Real account balance + Interest at prevailing PLR from time to
limits above Rs.2 time on simple basis from the date of NPA, until the preceding
lakhs the month + any other charges.
Accounts with Real account balance + Interest at contractual rate from time to
limits up to Rs.2 time on simple basis from the date of NPA, until the preceding
lakhs the month + any other charges.
In case of suit filed accounts, suit expenses are to be included. However, where the
suits are decreed, it should be as below:
Category Calculation
Accounts with limits Decreed Amount + Interest at prevailing PLR from time to time
above Rs.2 lakhs on simple basis or decretal rate, whichever is lower, from the
date of decree, until the preceding the month + any other
charges.
Accounts with limits Decreed Amount + Interest at contractual rate from time to
up to Rs.2 lakhs time on simple basis or decretal rate, whichever is lower, from
the date of decree, until the preceding the month + any other
charges.
The Net Present Value of the compromise amount as well as realizable value of
securities may be arrived as under:
A - Fair Market value of the security

B - Less: Costs / Expenses for realization of securities
C - Total value (A-B)
D - Net Present value of (C) discounted at existing PLR for simple 5 Years
E - Total amount of compromise - Payment of compromise amount due on (where
payable in installments)
F - Net Present Value of the compromise amount discounted at existing PLR Simple for
the period of payment
It should be ensured that Net Present Value of the compromise amount discounted at
existing PLR simple i.e. F should generally be not less than the Net Present value of
the realizable value of securities i.e. D.
Mode of Payment: As far as possible, before entertaining the proposal, it should be

ensured that the borrower makes upfront payment of at least 10% of compromise
amount. Payment of compromise amount within 30 days is desirable. If not a
reasonable 90 days time may be given to the borrower for full payment in 2 to 3
installments. Depending on the case, borrower request for making payment within 12
months may be considered on the condition that 25% of compromise amount
(including upfront amount) and the balance amount along with interest @ PLR simple)
from the date communication of compromise till the date of final payment. However, in
any case the repayment period of compromise amount should not exceed 18 months.
Branches are required to communicate in writing to the borrower the terms and
conditions of the compromise approved and the date on which the compromise gets
lapsed in case of failure of the borrower to pay the compromise amount in full.
Proportionate release of securities could be considered on case-to-case basis. Branch
should obtain commitment letter from the borrower that the sale proceeds are to be
credited to the compromise account. (Circular No.404 Ref 45/11 dated 20.02.2008).
165

One Time Settlement (OTS) Schemes
Bank has formulated One Time Settlement (OTS) scheme for Small Loans and MSME
Loans with an objective to improve the recoveries under bad debts and for better funds
management.
I. OTS for Small Loans:
All loans of Rs.2.00 Lacs & below under Govt sponsored schemes and retail segment
loans are covered under this scheme. The salient features are as under:
¾ The scheme covers all small NPA & Technically Written-off accounts with real
account / Technically written-off balance of Rs.2.00 lacs and below and classified
as Doubtful/Loss assets as on 31.03.2010 irrespective of security available in
the account.
¾ The scheme is now made non-discretionary and non-discriminatory.
¾ Settlement amount is linked to the date of NPA as under:
Settlement (as % of Real account balance

Date of NPA
minus recoveries after date of NPA)
01.04.08 to 31.03.09 80%
01.04.06 to 31.03.08 75%
On or after 31.03.06 70%
Technical written-off accounts 60%
¾ Special incentives to the borrower by way of cash discount of 10% of the OTS
amount if the entire settlement amount is in lump sum on acceptance.
Sanctioning authority of OTS proposal is Branch Manager and reviewing authority is

Zonal Manager. Loans sanctioned by the manager cannot be settled by the same
manager under scheme. The settlement amount arrived at as above, should be paid in
one lump sum amount without interest within 30 days of sanction or in installments
within 60 days, by collecting at least 25% of the settlement amount as down payment
on case to case basis. This scheme is operative up to 31.03.2011. (Cir.no.164 Ref 45/4
dated 01.09.2009 & Cir. no. 242 Ref 45/09 dated 01.10.10)
II. OTS for MSME Loans:
As per RBI working committee recommendations Non Discretionary and Non

Discriminatory OTS scheme is devised for settling bad loans under NPA / technically
written off accounts of above Rs.2 lacs and up to Rs.10 crore under MSME category.
The OTS Scheme shall cover:
¾ Scheme covers all small NPA / Written-off accounts with real account /
technically written-off balance of above Rs.2.00 lacs and up to Rs.10 Crore
as on 31.03.2010.
¾ Small loans up to Rs.2 lacs under Micro, Small Enterprise segment classified as
Sub-standard assets as on 31.03.2010, which are not covered under the
small loans OTS scheme, are covered under the present MSME OTS scheme.
¾ Suit filed accounts irrespective of stage of suit.
166

¾ The scheme will not cover cases of Fraud, Malfeasance, Wilful default, Decreed
accounts by courts and Cases where settlement has been confirmed by Lok
Adalat.
The settlement under OTS is applicable as per formula given under:

Category Settlement formula
Amount in default + 6% simple interest from the date of
Sub-Standard Assets
NPA on reducing balances
Doubtful Assets Amount in default
Loss Assets 90% of amount in default

Tech. Written off 90% of amount in default
Amount in default=Real account balance as on date of NPA minus recoveries after
date of NPA
However, in case of loan accounts with real liability of Rs.10 lacs and above as on the
date of NPA, the formula will be as above or Net Present value (NPV) of available
securities (Primary as well as Collateral) and securities attached by the court before
judgment whichever is higher. NPV will be calculated with 3 years realization period at
prevailing BMPLR.
If the settlement amount is negative as per above formula, a nominal amount of

Rs.1000/- is to be collected from such borrowers towards full and final settlement of
account. Sanction powers are given to Zonal Manager and if the loan is sanctioned by
the Zonal manager in his individual capacity, then it is to be referred to the RMD/Head
Office.
Borrowers are eligible for a special incentive of 10% of the OTS amount provided the
entire OTS amount is paid in lump sum on acceptance. This scheme is operative up to
31.03.11. (Cir.nos. 329 Ref 45/8 dated 08.01.10 & 243 Ref 45/10 dated 01.10.10)
Recovery Agents:
In order to address the issue of mounting NPAs as well as resource constraints, bank has
framed a policy to engage Recovery / Asset Investigation Agents to help the branches.
All NPA accounts (including technical written-off accounts) with Real Account
outstanding of `5 lakhs and above and which are more than 2 years old will be entrusted
to the Recovery Agents. However, in exceptional cases the mandatory period of 2 years
can be waived.
The agency should be either Partnership or Corporate entity with required expertise to
handle NPA accounts. The agents appointed under this scheme are required to adhere
the BCSBI code and Bank’s Model Code of conduct for collection of dues and
repossession of secured assets. However, the agency shall not have any right to sub-
delegate or appoint any sub-agent. The engagement of agent is account specific and for
a specified period only.
Bank also engaging the services of Investigation Agents for the purpose of locating the
whereabouts of borrowers/guarantors or details of assets other than charged /
mortgaged to the bank to expedite the process of recovery of suit filed accounts.
(Cir. no.343 Ref 45/09 dated 27.01.10 & Cir.no.244 Ref 45/11 dated 01.10.10)
***
167

Funds Transfer Products - Domestic
RBI has been playing an important role in the area of national payment system, which
is the backbone of economic activity and has taken several initiatives for a safe,
secure, sound and efficient payment system in India. Last one decade witnessed spurt
in electronic payments due to increased adoption of technology and regulatory
guidelines. The evolution of e-payment systems in India are:
Speed Clearing:
Banks as part of their normal banking operations undertake collection of cheques

deposited by their customers drawn on local banks as well as on banks located at
other centers. The cheques drawn on local banks will be presented in clearing and the
outstation cheques will be sent to other centers for collection. Cheque clearing system
has vastly improved. Banks are using clearing house for collection of local cheques
which will be credited to the customer account within 1 or 2 days. Though, the time for
collection with regard to outstation cheques has come down drastically compared to
earlier, still the collection process is taking around one to three weeks time depending
on the location since cheques need to move physically from presentation centre to
drawee centre.
In order to reduce the collection time, RBI has introduced Speed Clearing where in
cheques and drafts drawn on outstation are treated on par with local cheques and
presented in the local clearing provided the presentment location is MICR centre and
the destination bank branch is CBS enabled one. However, Government cheques are
not eligible for collection under Speed Clearing. Drawee bank debits the account online
without movement of cheque and sends the proceeds to the collecting bank. Under
Speed Clearing, it would be realised on T+1 or 2 basis i.e. within 48 hours. Further
customers need not incur any service charge for collection of outstation cheques of
value up to Rs.1 lakh in Speed Clearing otherwise they may have to incur if such
cheque is collected under collection basis.
Implementation of CBS in the banking industry has enabled the banks to extend Any
Bank Banking. It has considerably reduced the collection time since all banks located
in MICR centers can present cheques drawn on other banks across the country in local
clearing treating the instruments on par with local cheques. It attracts charges @
Rs.150/- per cheque of above one lakh. However, no charges should be levied for
cheques up to Rs.1 lakh. Obtention of the status of bank branch (CBS enabled or not)
and the correct account number (preferably new number - in the range of 10 to 15
digits) of the drawer of the cheque is the prerequisites for the collecting banker to
present the cheques in Speed Clearing. (Cir.no.259 Ref 55/20 dated 19.10.2010)
Electronic Clearing System (ECS): The introduction and increased adoption of ECS -
Credit i.e. Single Debit - Multiple credits, helped large corporate bodies to pay their
dividend, interest and refunds electronically on the due date, which is very cost
effective to corporates and its customers. Similarly, the utility bodies are now in a
position to collect their bills through ECS Debit (Multiple Debits – Single Credit) right
on the due date. The entire process including passing the credits to the beneficiaries’
accounts take only one day, which is convenient and cost effective to both banks and
customers.
AB Real Time (Real Time Gross settlement - RTGS): RBI launched RTGS for
instant transfer of funds across the banks (`200000/- & above) across the banks
within India. It offers a powerful mechanism for limiting settlement and systemic risks
in the inter-bank settlement process. It enables in expediting the settlement, control
and governance mechanism in the banking system. Funds will be transferred
electronically and credited to the beneficiary accounts instantaneously. It saves lot of
time and paper work. It is most cost effective since the charges are very low i.e.
168

`25/- & `50/- per transaction for below `5 lakhs and for `5 lakhs and above
respectively. The timings for customer payments are 9 AM to 4.30 PM on Monday to
Friday and 9 AM to 1.30 PM on Saturday. Similarly, for inter bank payments; the
timings are 9 AM to 6 PM on Monday to Friday and 9 AM to 3 PM on Saturday.
Transfer of funds below ` 200000/- are not allowed under RTGS. (Cir.no.293 Ref
55/24 dated 16.11.2010)
AB Xpress (National Electronic Funds Transfer - NEFT): For the benefit of retail
customers, RBI introduced NEFT scheme and it is launched in our bank with brand
name AB Xpress. Under this, funds can be transferred across the banks
instantaneously. There is no cap on minimum and maximum amount for NEFT. The
present service charges (w.e.f 15.11.2010) are as under:
No Range of amount Service charges

1 Up to ` 1 lakh ` 5 plus service tax
2 Above ` 1 lakh & up to ` 2 lakhs ` 15 plus service tax
3 Above ` 2 lakhs ` 25 plus service tax
The timings of NEFT are 9 AM to 7 PM from Monday to Friday and it is 9 AM to 1 PM on

Saturday. Customer is required to furnish IFSC Code number of the Bank Branch and
correct account number of the beneficiary for smooth transfer of funds under
RTGS/NEFT (Cir.no.278 Ref 55/22 dated 02.11.2010)
Funds Transfer Products – Abroad: Informal unregulated systems of money

transfer like hand delivery by Hawala or Hundi played significant role till mid 1990s.
NRIs preferred these channels as the transfer of funds is fast and cost effective (no
charges/commission) when compared formal channels i.e. Banks and Financial
Institutions. However, it is observed that such informal businesses are gradually
declining, with more and more banks and other intermediaries entering into this field.
The important channels are:
Western Union Money Transfer: In order to extend speedy transfer of funds from
abroad, Our Bank entered agreement with Western Union Money Transfer Company to
act as agent for payment of Inward Remittances. Select branches of the Bank are
provided with PC, which is connected to WUMT network. Transfer of funds is
instantaneous and not location specific i.e. Beneficiary can withdraw funds from any
location (WUMT agents across the Globe). Any single remittance under this scheme
shall not exceed $ 2500 or its equivalent. The maximum number of remittances in a
year is 12 per recipient. While making payment, bank is required to verify the details
of the remittance furnished by the beneficiary with that of available on the system and
obtain Xerox copy of the approved document (Passport, Driving License, PAN, Credit
Card etc.,) as a measure of proper identification. In case, the Inward Remittance is
beyond Rs.50000/-, the payment should be made by way of DD/PO or through
account. All charges should be borne by the remitter. It is simple and hassle free
system of funds transfer across the globe. However, it is expensive when compared to
traditional mode of transfers.
Society for Worldwide Interbank Financial Telecommunications (SWIFT):

Banks are offering this facility to NRIs and their family members for transfer of funds
from abroad to India through NOSTRO account. The remitter abroad is required to
furnish the information such as Correspondent Bank Name, Currency, SWIFT Code,
NOSTRO Account No. of the Beneficiary Bank and Beneficiary Account No. Remittance
through SWIFT takes 3 to 4 working days and the charges are reasonable (approx. 6%
of the value of the remittance) and out of pocket expenses (around Rs.300/-) provided
Remitter Bank and Beneficiary Bank is the same or remittance is effected through
Correspondent Bank Branch. Additional charges are levied if the remittance is through
any other mode mentioned above. Remittance proceeds will be credited to the
beneficiary accounts duly converting the foreign currency in to Indian Rupees. Banks
169

are required to have proper mechanism in place to retransmit funds from SWIFT
Regional Processing Centre to Beneficiary Branches.
Speed Remittance Facility: Andhra Bank entered an agreement for Speed

Remittance Facility with UAE Exchange Centre, Abu Dhabi with an objective to extend
value added service to Gulf NRIs in remittance of funds to India. Under this scheme,
Gulf NRIs deposit the funds with UAE Exchange branches in Middle East Countries to
the credit of either their accounts or their relative/friends accounts in India. UAE
Exchange passes the data to IIB, Mumbai electronically on the same day, which in turn
send the credits to the various branches across the country through E-BA1 on the next
day. The remitter is required to furnish the correct name of the branch and beneficiary
name and account number for immediate credit and to avoid delay/complaints.
(Circular no.219 Ref 15/10 dated 18.09.2007).
Cheque Mail Box Facility: NRIs in United States of America (USA) can now send the
remittances to the credit of their or their family member accounts (joint) by way of
cheques without any delay. NRIs can now deposit their personal cheques in a local
Post Box of Bank of America in USA and get proceeds credited in Indian Rupees in
Andhra Bank Account very fast. It saves the time since the cheque need not travel
from USA to India and back. It is cost effective. However, the beneficiary of remittance
should be complied with KYC guidelines. The procedure is as under:
¾ Remitter is required to draw a cheque on any of the Local Banks in USA in

favour of "Andhra Bank" duly furnishing the beneficiary details such as branch
name, 15 digit account number and name of the beneficiary in deposit slip.
However, the remitter is required to submit undertaking letter as one time
activity for the first time of activity.
¾ Mail it either by First class mail or Courier through Fedex, DHL or local
courier to the address give below:
First Class Mail Courier

Andhra Bank(Mumbai) BANK OF AMERICA LOCK BOX SERVICES
P.O.Box 841810 LOCK BOX 841810 1950 N. STEMMONS
DALLAS, TX 75284-1697 USA FREEWAY, STE 5010, DALLAS, TX 75207USA
¾ The cheque sent will be presented in Local clearing by Bank of America and
provisional credit will be given to Bank account after two business days.
¾ The Credit will be processed by our International Division at Mumbai and
passed on to the beneficiaries account as per Deposit Slip.
¾ The credit given by Bank of America is a Provisional Credit. Hence, the
beneficiary needs to wait for a period of 12 days from the date of credit from
our International Division.
¾ Under this facility, the remittance charges are low comparatively other mode of
transfer of funds. The charges for cheque mail box facility is as below:
Cheque amount Charges including Postage

Up to USD 1000 USD 4.00
> USD 1000 upto USD 3000 USD 5.00
> USD 3000 upto USD 5000 USD 7.00
> USD 5000 upto USD 10000 USD 8.00
Above USD 10000 USD 10.00
NRE-Wire: A wire transfer allows transfer of money from bank account abroad to
India in 48 hours. The remitter is required fill the complete transaction and handover
the Remittance Confirmation Page to the bank, which will transfer money from
remitters` bank account to the other bank account for a fee. It has option to remit
funds to any NRE savings or deposit account in India from any account overseas with
out any limit on remittance. It offers best Exchange Rate. Remittance from abroad
170

involves conversion of currency (foreign currency to Indian Rupees), where exchange
rate plays an important role. To arrive at the total cost of the remittance, it is
necessary to know the exchange rate applied to the conversion at the remitters` end
or while making payment to the beneficiary in India. The remitting agency adds a
margin over the inter-bank rate while quoting the price to the remitter. Such margins
will vary depending on the uncertainty about the inter bank rates available to the
remitting agency. Normally, the margin will be around 0.25% to 1%.
AB Speed way: It is a Speed, efficient, secure, web based, completely online Forex
Remittance product. To avail this facility, the overseas remitter need to complete the
under mentioned one time registration process.
Step-1: The user need to register giving the details called for on logging in. Further,
user to furnish email ID at the time of registration and further process has to be
through the link given therein.
Step-2: The registration process involves the verification of the bank account given by
the remitter by initiating a sub-dollar (Less than one Dollar amount) debit to the
account number given. The customer has to confirm the amount reported after
verifying from his Bank account. This verification process normally takes 2 to 3
business days to complete.
Step-3: On completion of the said process, the remitter can log in any time
(day/night) and remit the amount to the credit of beneficiaries’ accounts in any of
Andhra Bank branches in India.
The remitter need to click www.andhrabank.in which redirects to a secure URL

http://abspeedway.andhrabank.in. Under this, NRIs residing anywhere in USA are
allowed to remit money to account holders of Andhra Bank in India. Further, the
remitter can add any number of beneficiaries for one remittance. Like wise he can also
set up more than one funding account to do his remittance by way of transfer from his
bank accounts in USA. Once the remittance is affected, the amount will be held by our
correspondent bank till Day 3 for processing and confirmation and will be credited to
our Nostro A/c on Day 4. Bank releases the credit to the beneficiary on the day 5
excluding holidays and Saturdays in both the countries. The limit for remittance under
this scheme is as under:
¾ Minimum amount - Nil

¾ Maximum amount per day (for verified users) – USD 10,000
¾ Maximum amount per month – USD 15,000
¾ Maximum amount per annum – USD 100,000
Charges: The amount remitted less USD 4 (irrespective of amount remitted) and plus
`10/- towards charges will be credited to the beneficiary’s account at the prevailing
exchange rates on that day of credit. (Cir.no.206 Ref 15/09 dated 01.09.2010)
***
171

Cash Management – Guidelines
Clean Note Policy:
The usage of stapling is causing mutilation of notes and shortening the life of the
currency. RBI prohibited the banks from stapling currency notes under section 35A BR
Act with an objective to provide clean notes to public. As per policy, Banks should
¾ Issue clean notes to the public and accept small denominations such as Rs.1/,
Rs.2/- & Rs.5/-.
¾ Not issue number cut notes to public. Any deviation in this regard attracts
penalty.
¾ Desist from writing anything whatsoever on the Bank Notes.
¾ Educate the customers and members of the public in this regard.
¾ Ensure sorting all notes by branches and only Clean Notes/issuable notes are
put into circulation amongst general public.
¾ Ensure that branches are not hoarding any Fresh Notes and coins and to be
distributed to the customers.
Counterfeit Notes:
In order to combat the menace, RBI has issued guidelines to all Banks/Financial
Institutions on detection and impounding of counterfeit notes. It is necessary that
¾ Currency notes received are carefully examined and impound counterfeit notes
wherever detected to curb circulation of such notes to public.
¾ Counterfeit Notes detected shall be branded with a stamp (size of 5 cm x 5 cm)
“Counterfeit Bank Note” with branch/office name, date and signature.
¾ Branch/Office is required to issue acknowledgement to the tenderer of
counterfeit note. The acknowledgement is to be signed by the tenderer of
counterfeit notes and counter cashier with details such as serial number,
denomination and number of pieces.
¾ FIR is required to be filed in respect of each case and acknowledgement is to
be obtained from the concerned police authorities.
¾ All Counterfeit Notes received back from police authorities are to be preserved
in the safe custody of the branch / office for a period of 3 years. Thereafter,
these notes are to be sent to the concerned issue office of RBI with full details.
¾ In no case, the Counterfeit Notes should be returned to the tenderer or
destroyed by the bank branches / treasuries.
¾ Banks should put in place adequate safeguards / checks before loading
currency notes in ATMs.
(Circular no.93 Ref 55/6 dated 03.07.09 – Master Circular on Detection and
Impounding of Counterfeit Notes)
172

Cash Remittances:
Cash movement takes place from one branch to another branch and branch to
currency chest and vice versa on a regular basis. Branches / Offices are required to be
adhered the following guidelines since it is an important and sensitive one. The
guidelines are as under:
Remittance Staff / Security Personnel to be accompanied
Low Risk Branches High Risk Branches
Up to Rs.10 lakhs Clerk and Sub-staff Clerk and Sub-staff
Rs.10 to 20 lakhs Clerk and Sub-staff Clerk, Sub-staff and Armed Guard
Officer, Sub-staff and Officer, Sub-staff and 2 Armed
Rs.20 to Rs.50 lakhs
Armed Guard Guards
Officer, Sub-staff and 2
Rs.50 to 100 lakhs
Armed Guards Officer, Sub-staff and 2 Armed
Officer, Sub-staff and Police Escort
Above Rs.100 lakhs
Armed Police Escort
The guidelines for cash remittance in cash van within municipal limits are as under:
Remittance Bank Guards / Escorts
Below Rs.20 lakhs One Bank Guard (if available)
Rs.20 lakhs to Rs.300 lakhs Two Bank Guards
Rs.300 lakhs to Rs.500 lakhs Three Bank Guards
Above Rs.500 lakhs Police Escort
General Precaution in Remittances:

¾ Remittance is to be done in Cash Van or Four Wheeler Vehicles. Cash Van must
have Alarm system and Fire Extinguishers.
¾ Avoid Three Wheeler Vehicles. Two Wheeler Vehicles should not be used.
¾ Cash Remittance may be done on foot provided the distance is short (within the
complex) and the remittance must not be over Rs.2 lakhs.
¾ Cash must be carried in Steel Boxes only.
¾ Armed Guard must sit in front.
¾ Remittance is to be done during Day time only.
¾ Probationary Officers are not to be detailed for cash remittance.
¾ In case of non availability staff, a clerk can be substituted for sub-staff and an
offer for a clerk.
(Cir. no.286 Ref 22/01 dated 01.11.06 & Cir. no.217 Ref 22/7 dated 10.10.08)
Incentives & Penalties: RBI introduced scheme in the month of September 2008 for
providing incentives to banks for extending enhanced services in the area of
mutilated/soiled notes & coin distribution and levying penalties for deficiency in
providing services to members of the public.
No Activity Incentives
1 Adjudication of Mutilated Bank Notes Rs.2.00 per piece
One rupee per packet in Rs.5/-
2 Exchange of Soiled Notes Rs.10/- Rs.20/- and Rs.50/-
denomination
3 Distribution of Coins over the counter Rs.25/- per bag.
Capital Cost-Urban/Metro Centers
4 Establishment of coin vending machines 50% - Rural & SU centers 75%
Operational cost @ Rs.25 per bag.
Bank is passing the incentive received from RBI to the concerned branches/currency
chests. (Circular No. 188 Ref 55/11 dated 23.09.2009)
Scheme on Penalties (Circular no.164 Ref 55/12 dated 06.08.2010)
173

Activity Penalties
Rs.50/- per piece in addition to the loss
(shortage) in case of notes in denomination
up to Rs.50/-.
Shortage in soiled note remittances
and currency chest balances However, for notes in denomination of
Rs.100/- and above, the penalty is equal to
the value of the denomination per piece in
addition to the loss.
Counterfeit notes detected in soiled Equal to the value of the counterfeit note in
note remittances and currency addition to the loss.
chest balances
Mutilated notes detected in soiled Rs.50/- per piece irrespective of the
note remittances and currency denomination.
chest balances
Non compliance of operational Rs.5000/- for each irregularity. Penalty will
guidelines such as non-functioning be enhanced to Rs.10000/- in case of
of CCTV, non utilization of NSMs repetition.
and keeping branch
cash/documents in strong room.
Violation of any term of agreement
with RBI or deficiency in service in
currency area as detected by RBI
officials viz.,
i) Non issue of coins over the
counter to any member of public,
despite having stock.
ii) Refusal to exchange soiled notes
all bank branches / adjudicate
mutilated notes (Currency Chest
branches) tendered by any member ¾ Rs.10,000/- for any violation of
of public. agreement in this regard/deficiency
iii) Not conducting surprise of service
verification of chest balances, at
least at bimonthly intervals by ¾ Rs.5.00 lakhs in case there are
officials unconnected with the more than 5 instances of violation
custody thereof. by the branch. The same will be
iv) Denial of facilities/services to placed in public domain.
linked branches of other banks.
v) Non acceptance of lower
denomination notes (Rs.10/-
Rs.20/- and Rs.50/-) tendered by
members of public and linked bank
branches.
vi) Detection of mutilated /
counterfeit notes in ‘reissuable’
packers prepared by the chest.
RBI during their Incognito visits to Branches may levy penalty with regard to non
adherence of above guidelines and the same will be recovered from the officials
responsible for such lapses. Hence all branches have to follow the laid down norms
scrupulously without any deviation.
***
174

AB Products – Service Charges
Bank is levying the following service charges w.e.f. 01.10.2009 (Cir.no.169 Ref 44/19
dated 09.09.2009)
Service Charges
Non- Individuals Pensioners/
No Category / Type Individuals Sen.Citi./Indiv.
in Rural Areas
1 Cheque Issue / Return
Cheque Book – SB Rs.2.50 per leaf (25 leaves free in a year)
Cheque Book - CD Rs.3/- per leaf (No free cheque leaves)
Cheque Stop payment – Per leaf Rs.60/- Rs.55/- Rs.50/-
Max.Rs.250/- Max.Rs.225/- Max.Rs.200/-
Cheque Return - Inward
CD cheque – Up to Rs.20000/- Rs.100/- Rs.75/- Rs.50/-
SB cheque – Up to Rs.20000/- Rs.75/- Rs.60/- Rs.40/-
CD cheque – Above Rs.20000/- Rs.200/- Rs.150/- Rs.100/-
SB Cheque – Above Rs.20000/- Rs.100/- Rs.80/- Rs.60/-
Cheque Return - Outward Rs.100/- plus other bank charges, if any plus out
of pocket expenses.
2 Balance Enquiry for an item more Rs.115/- per Rs.110/- per Rs.100/- per
than 12 months old – Per item item item item
3 Account closure
SB (closed within 12 months) Rs.200/- Rs.150/- Rs.100/-
SB (closed after 12 months) Rs.100/- Rs.80/- Rs.60/-
CD (closed within 12 months) Rs.500/- Rs.350/- Rs.250/-
CD (closed after 12 months) Rs.300/- Rs.200/- Rs.150/-
No account closure charges for AB Easy accounts (No frills account)
4 Signature verification (per attestn) Rs.125/- Rs.110/- Rs.100/-
5 No Due Certificate (No charges for Rs.150/- Rs.125/- Rs.100/-
weaker section loans)
6 Passbook / Statement charges
Issue of Balance Certificate Rs.100/- per certificate
Duplicate Passbook / Statement Rs.15/- per Passbook/Statement
with latest balance only
Duplicate Passbook / Statement Passbook - Rs.75/- plus additional Rs.50/- per
with previous entries only bunch of every 40 entries.
Statement – Rs.25/- for each 40 entries.
7 Collection of local cheques (Other than clearing cheques)
SB Group Accounts Rs.50/- Rs.35/- Rs.30/-
CD Group Accounts Rs.100/- Rs.80/- Rs.60/-
8 Collection of Cheques - Others No out of pocket expenses should be levied
¾ Up to Rs.10000/- Not exceeding Rs.50/- per instrument.
¾ Rs.10001 to Rs.1 lakh Not exceeding Rs.100/- per instrument.
¾ Above Rs.1 lakh Not exceeding Rs.150/- per instrument.
9 Safe Custody Charges
Scrips Rs.100/- per scrip per annum
Sealed cover Rs.500/- per sealed cover per annum
Sealed Boxes 20x20x20 c.m. Rs.500/- per annum
30x30x30 c.m. Rs.600/- per annum
175

Service Charges
Non- Individuals Pensioners/
No Category / Type
Individuals Sen.Citi./Indiv.
in Rural Areas
10 Inward/Outward Bills
Up to Rs.1000/- Rs.60/- plus out of pocket expenses
Above Rs.1000/- up to Rs.5000/- Rs.80/- plus out of pocket expenses
Above Rs.5000/- up to Rs.10000/- Rs.100/- plus out of pocket expenses
Above Rs.10000/- up to Rs.1.0 lakh Rs.9/- per thousand plus out of pocket expenses
Above Rs.1.0 lakh up to Rs.10 lakh Rs.8/- per thousand plus out of pocket expenses
Above Rs.10 lakh Rs.7/- per thousand plus out of pocket expenses
11 Issuance of DD/TT/PO
Up to Rs.1000/- Rs.20/- Rs.15/-
>Rs.1000/- to < Rs.5000/- Rs.30/- Rs.25/- Rs.20/-
>Rs.5000/- to < Rs.10000/- Rs.30/- Rs.25/-
>Rs.10000/- to < Rs.1 lakh Rs.2.50 per Rs.2.25 per Rs.1.75/- per
thousand thousand thousand
>Rs.1 lakh to < Rs.10 lakhs Rs.2.25 per Rs.2.00 per Rs.1.50/- per
>Rs.10 lakhs and above Rs.2 per Rs.1.50 per Rs.1.25 per
Maximum commission Rs.20000/- Rs.18000/- Rs.15000/-
Cancellation of DD/TT/PO Rs.100/- per instrument
Duplicate DD/TT/PO Rs.100/- per instrument
DD/PO Revalidation Rs.100/- per instrument.
12 Standing instructions (SI)
Noting charges Rs.25/-
Transfer between accounts No charges
Other standing instructions Remittance charges plus out of pocket expenses
Nonexecution of SI–Insufficient bal. Rs.100/-
13 Folio charges – CD & ODCC Rs.80/- for every 40 entries after availing free
accounts (Quarterly) entries referred as below
Free entries are allowed per Balance up to Rs.25000/- Nil
quarter for the accounts where the >Rs.25000/- up to Rs.50000/- 60
average credit balance in the >Rs.50000/- up to Rs.1 lakh 100
account is above >Rs.1 lakh up to Rs.2 lakhs 400
Above Rs.2 lakhs No charges
Note: No free entries to C & IFD accounts.
14 Inoperative Accounts – Service Charges (Yearly)
No Service Charges if stipulated minimum balance
SB Group Accounts
requirement adhered to
Account should be closed and balance should be
Below Rs.50/- balance
appropriated.
Rs.51/- to Rs.100/- balance Rs.50/- per year
Above Rs.100/- balance No charges
No Service Charges if stipulated minimum balance
Current Accounts
requirement adhered to
Account should be closed and balance should be
Below Rs.100/- balance
appropriated.
Rs.101/- to Rs.500/- balance Rs.100/- per year
Rs.501 to Rs.2500/- balance Rs.50/- per year
Above Rs.2500/- Rs.20/- per year
176

Service Charges
Non-Individuals Individuals Pensioners/
No Category / Type
Sen.Citi./Indiv.
in Rural Areas
15 Cash handling charges Cash receipts under CD and ODCC accounts
Up to one bundle No charge
More than one bundle Rs.100/- per bundle maximum of Rs.10000/-
Note: OD a/cs of existing/retired staff are exempted from cash handling charges
16 Addition/Deletion of names Rs.100/-
17 Change in Operation instructions Rs.100/-
18 Record copy of cheque/DD/PO Rs.100/- per item
Minimum Balance violation charges: The minimum balances stipulated for deposit
accounts (Current and SB group accounts) are as under:
No Category Rural SU Urban Metro

1 CD & ICD 1000 2000 3000 5000
2 SB with Cheque Book 250 250 500 500
3 SB without Cheque Book 100 250 250 500
4 ASB with Cheque Book 300 500 500 500
5 ASB without Cheque Book 150 250 250 300
6 Abhaya Gold / Abhaya Jeevan 1000
7 ASB plus- Cheque book 400 500 500 500
8 ASB plus - without cheque book 200 300 300 300
9 Kids Khazana 100
The mode of calculation of minimum balance is based on Quarterly Average Balance

(QAB) in the account. Non maintenance of QAB attracts the following penal charges as
per circular no.169 Ref 44/19 dated 09.09.2009.
Category Charges
Current Accounts Rs.200/- per quarter
AB Premium Current Account Rs.400/- per quarter
Rs.100/- quarter - Metro/Urban/SU areas
Savings Bank Accounts
Rs.50/- per quarter - Rural areas
AB Privilege SB Accounts Rs.150/- per quarter
Safe Deposit Lockers: The rents on lockers have been revised as under w.e.f
01.10.2009. (Cir.no.170 Ref 44/20 dated 09.09.2009)
Locker Type Metro Urban S.Urban / Rural

A & A1 1000 900 750
B 1100 950 800
C 1150 1000 900
D 1250 1100 1000
E & H1 2000 1500 1300
F 2200 1800 1600
G 2500 2000 1800
H 5000 4000 3000
L 6000 5000 4000
Other conditions: Rentals for built-in lockers shall be 25% more than the rents noted
above. The locker operations are restricted to 10 in a quarter. Any operation beyond
10 in a quarter attracts a charge of Rs.50/- per transaction. A concession of 20% in
rent is allowed to our existing and retired staff members.
Note: All the above service charges attract tax @ 10.30% with effective from
01.10.2009. (Circular no.169 Ref 44/19 dated 09.09.2009)
177

i) Purchase of Local cheques against clearing:
¾ At par for salaries cheques of employees of Central/State government and

Public Sector Units maintaining SB accounts with our Bank.
¾ Cheques presented by Rice Millers – Applicable cash credit interest rate to the
respective Rice Mill accounts.
¾ With regard to others – Interest @ 15.50% p.a.
ii) Purchase of cheques other than local cheques: The charges are 40 paise for
every Rs.100/- besides applicable collection charges. If the cheque is returned unpaid,
interest @ 14.75% p.a. (Base Rate + Spread @6.50%) is to be collected. (Cir.no.109
Ref 26/27 dated 30.06.2010)
E-Products – Service charges
No Category Service charges

1 RTGS – Outward
Above Rs.2 lakh & up to Rs.5 lakhs Rs.25/- per transaction.
Above Rs.5 lakhs Rs.50/- per transaction.
2 NEFT (AB Xpress)
Up to Rs.1 lakh Rs.5/- per transaction.
Above Rs.1 lakh & up to Rs.2 lakhs Rs.15/- per transaction.
Above Rs.2 lakhs Rs.25/- per transaction.
3 Electronic Clearing Services (ECS)
Registration of ECS Rs.100/-
Cheque Return charges (ECS Debits) Rs.100/- for each ECS debit return.
4 Speed Clearing
Up to & inclusive of Rs.1.00 lakh No charge
Above Rs.1.00 lakh Rs.150/- per instrument
Up to Rs.10000/- Rs. 50/-
Speed clearing return charges Up to Rs.10000/- to Rs.1.0 lakh Rs.100/-
Above Rs.1.00 lakh Rs.150/-
Any Branch Banking (ABB)
Cash withdrawals by self No charges for cash transactions up to
Cash deposits by self Rs.50000/-
Cash remittances by others
i) Up to Rs.1000/- Rs.10/-
ii) Rs.1001/- to Rs.50000/- Rs.2/- per thousand
Non cash transactions
i) Up to Rs.1.00 lakh No charges
ii) Above Rs.1.00 lakh Rs.50/- per transaction
SB Accounts – No charge
Deposit of clearing instruments at non-
CD Accounts – No charge up to Rs.1.00 lakh
home branch drawn on non-CBS
6 and Rs.50/- per instrument for Rs.1.00 lakh &
branch / other banks
above.
7 Multi City Cheques (MCC) Rs.5/- per leaf.
8 ATM / Debit Card
Annual maintenance charges Rs.75/- per annum at the start of second year
Transactions on our ATMs No charges
Five transactions (Maximum of Rs.10000/- per
Transactions on other Bank ATMs transaction) are free in a month for SB
accounts only.
9 SMS
Push Alerts Free
Pull Alerts Rs.3 per request.*
10 Internet Banking No charges
* Service provider levy charges
178

Charges – Loans & Advances
Processing Charges: The processing charges are as follows:
I. Working Capital Limits (Fund & Non-Fund Based)

Up to Rs.25000/- Rs.150/-
> Rs.25000/- & up to Rs.2 lac Rs.300/-
Above Rs.2 lac Rs.300 per lac or part thereof with a
maximum of Rs.30 lac.
However, Rice Mills with credit rating of A+ are exempted from processing charges
II. Loans against Shares & Securities Rs.300/- per lac
III. Mortgage Loans 1% of the loan amount
IV. Rent Receivables Minimum Rs.5000/- or 1% of the loan
whichever is higher.
Branches have to collect 25% of the normal processing / upfront fee in advance for
new accounts involving fund / non fund based credit limits of more than Rs.2 lacs. If
the loan is sanctioned, this amount will be adjusted against processing charges/upfront
fee to be collected at the time of disbursement of limits. In cases where borrowers
come into our fold through Loan Syndicate or on taking a share under consortium
arrangement, processing charges/upfront fee shall be collected on the share allocated
to our Bank at the time of documentation or at the time of disbursement of limits in
line with other member banks.
Upfront Fees: 1% of the term loan amount is to be collected for all categories of
borrowers and no ceiling is prescribed for collection of upfront fee on term loans.
Concession/Waiver of Processing Charges/Upfront fee: Powers are delegated for

permitting concession/waiver up to 50% of processing charges/upfront fee to ED.
Powers for permitting concession/waiver up to 100% of processing charges/upfront fees
are vested with CMD for all accounts including MC sanctions. (Cir.no.5 Ref 26/02 dated
07.04.2010)
Commitment charges are to be levied for term loans of above Rs.5 crores at 1% p.a.
for delay in draw down schedule beyond one month. Similarly, working capital limits of
Rs.1 crore and above to all corporate borrowers shall be levied @ 0.50% p.a.
commitment charges (exclusive of overall ceiling of 2% penal/additional interest) on
the unavailed portion of fund based working capital limits subject to a tolerance level
of 20% i.e. the utilization of the limit shall not be less than 80% of the sanctioned
limit. However, limits sanctioned to Sick/weak units, export credit, banks, public sector
undertakings and seasonal industries are exempted from commitment charges. (Cir.
no.143 Ref 26/29 dated 25.07.2007)
Pre-closure charges are to be levied on Term Loans (repayable beyond 36 months)

@ 2% flat on the pre-paid loan amount. However, the following categories of loans are
exempted from levy of the said charges (Circular no.5 Ref 26/3 dated 08.04.2008):
¾ Education Loans.
¾ Housing Loans provided the borrower makes payment from own
savings/windfall gains against the documentary evidence (Cir.no.166 Ref 53/04
dated 09.08.2010)
¾ Loans sanctioned under Government Sponsored Schemes and Weaker Sections
as defined by RBI.
¾ Housing Loans sanctioned under AB Saral Scheme.
¾ Self Help Groups.
¾ Loan accounts where loans are pre-paid due to death of borrower.
179

Compensation Policy
Providing better and timely service to the customers is a prerequisite for banks since
their survival and growth crucially depends on the clientele base. Despite best efforts,
some times, omissions and commissions may creep in which may lead to
inconvenience to the customers. In order to protect the interest of the customers,
banks formulated compensation policy based on the principles of transparency and
fairness in the treatment of customers. The expected action and compensation payable
to the customers in the event of deficiency of service are as under:
Category Compensation payable

Bank should reverse the amount immediately and compensate
Unauthorized / the customer to the extent of financial loss incurred such as
Erroneous debits interest or service charges. In case the unauthorized debit is
on account of third party, customer should be compensated
up to Rs.50000/- or actual debit amount whichever is less.
Bank should compensate the customer to the extent of
ECS Debits –
financial loss incurred along with service charges levied, if
Execution failure
any.
Where the cheque is paid despite stop payment instructions,
Stop payment -
bank should reverse cheque amount along with charges, if
Payment of cheques
any, with value date within 2 days of the intimation.
Unsolicited Credit Bank should reverse the charges immediately and also pay a
Cards – Levy of penalty without demur amounting to twice the value of the
charges charges reversed.
SB Interest plus 2% is to be paid where the amount is up to
Collection of foreign
Rs.10 lakhs and the delay is beyond 10 days or where the
cheques / currencies
amount exceeds Rs.10 lakhs and delay is beyond 3 days from
- Undue delay
the date of receipt of credit advice.
SB interest rate for the delay period of delay (Metro - 7 days,
Payment of interest
State Capitals – 10 days and other places – 14 days).
on delayed collection
Applicable term deposit rate where the delay is beyond 45
of outstation
days. Term Deposit rate plus 2% interest in case where the
cheques
delay is beyond 90 days.
The fact should be informed to the customer immediately and
Cheques/instrument
provide the required assistance to obtain duplicate instrument
s lost in transit / in
from the drawer of the instrument. The compensation policy
clearing or paying
that is applicable to ‘Collection of outstation cheques’ is
bank branches
equally applicable to this category of customers.
RTGS/NEFT/ECS Applicable Repo Rate plus 2% to be paid for delayed period.
In case where the compliant is not resolved within 12 working
Delay in settlement
days from the date of complaint made by the cardholder,
of wrong ATM Debits
bank should pay Rs.100/- per day.
Violation of the code Bank shall take appropriate steps to investigate the complaint
by Banks` Agent and to compensate the customer for financial loss, if any.
The above initiatives will definitely paves the way for better service and the instances
of referring the customer grievances to Ombudsman or any other forum will come
down to a grater extent. (Cir.no.105 Ref 34/1 dated 22.06.07 & Cir.no.455 Ref 34/20
dated 31.03.2008)
180

Inspection & Audit
The overall objective of internal Audit and Inspection is to aid the Bank’s Management
in achieving efficiency and effectiveness in all its operations. The focus of internal
inspection/audit is to identify measure, control and mitigate the various inherent
business, control, and internal risks. The types of inspections and its periodicity are
furnished here below:
No Inspection Periodicity Coverage

Depending on Risk rating
of the branch in previous
inspection:
Branch Low Risk – 15 months
1 Total Functioning of Branches
Inspection Medium Risk and above –
12 months (irrespective
of size of the branch)
Risk profile of the branches
covering following risk
parameters:
Business Risks viz., Credit
Risk, Earnings Risk, Liquidity
Along with regular
RBIA Risk, Physical & Environmental
2 Inspection of the branch
Risk and Operational Risk
Control Risks viz., Internal
control Risks (credit / non-
credit), Compliance Risk and
Technology Risk
Cash, Long outstanding items
in Sundry Debtors / Sundry
Creditors / Sundry Suspense /
Surprise CRA /Items-in-transit,
3 Verification Quarterly Remittances to branches, Long
of Cash outstanding CBPs / IBRs / OBC,
Maintenance of Security items
and gold loans at random
To ensure improvement in
areas where branch lost marks
For C & D rated branches under rating parameters.
within 6 months from the
date of completion of To ensure improvement in risk
inspection. status to Medium/Low Risk by
Verification
4 verifying the points where
Audit For High Risk and above branch got ‘0’ marks or low
rated (under RBIA)
marks. Ver-Audit is to be done
branches – within 60 days by Senior Manager and above
from the date of
working in Controlling Office.
completion of inspection. The report is to be submitted
to HO (Ins Dept) for review.
5 Short After 6 Months from last For Borrowal accounts with
Inspection inspection aggregate limits Rs.100.00
lakhs and above
Systems Total Functioning of Controlling

Inspection & offices
6 Once in a year
Financial
Audit
181

All day – today transactions
at the branch. As per RBI
guidelines, 50% of Aggregate
Deposits, 50% of Advances of
Concurrent
7 Monthly Total Advances of the bank are
Audit
to be covered. Branches will
be identified by H.O for
Concurrent Audit every year.
The existing RBIA template is revised segregating the Risks in two viz., Business Risks
and Control Risks.
Business Risks covers Credit Risk, Earning Risk, Liquidity Risk, Physical and
Environment Risk and Operational Risk. The maximum marks allotted under each
category are as under:
Business Risk - Category Marks

Credit Risk 175
Earning Risk 105
Liquidity Risk 50
Physical & Environmental Risk 30
Operational Risk 140
Total 500
Control Risks covers Internal Control Risk (Credit Area), Internal Control Risk (Non
Credit Area), Compliance Risk and Technology Risk. The maximum marks allotted
under each category are as under:
Control Risk - Category Marks

Internal Control Risk – Credit Area 254
Internal Control Risk – Non Credit Area 126
Compliance Risk 70
Technology Risk 50
Total 500
Rating matrix as under:
Risk Based Internal Audit ( RBIA)

separate for both Business Risks & Composite Rating
Control Risks
Score Rating Score Rating
70% & Above Low Risk 90% & above Excellent
50% to <70% Moderate Risk 80% to < 90% Very Good (A)
60% to < 80% Good (B)
Below 50% High Risk 40% to < 60% Satisfactory (C)
< 40% Unsatisfactory (D)
The Branch which secures Medium Risk rating both under Business Risks and Control
Risks will place itself in High Risk level in the Risk Matrix. High Risk branches under
RBIA and C & D rated branches under overall rating are subjected to verification audit.
(Cir.no.073 Ref 02/01 dated 14.06.2010)
Closure of Inspection Reports: First Compliance to be submitted to Controlling

office within 2 weeks from the date of completion of Branch Inspection. The report
should be closed within 3 Months from the date of completion of Inspection.
***
182

Guide to Staff – Welfare/Other Schemes
Bank has been extending various facilities/financial assistance under different schemes
from time to time for the benefit of staff members and the gist of such schemes is
1) Reimbursement of Expenses incurred towards Food and Beverages: All

employees on the rolls of the Bank including Part Time Sweepers on graded scale
wages are covered under the scheme. Bank reimburses Rs.300/- per month to
employees, who attends office for more than 10 days in a month, towards Food and
Beverages expenses. The amount is to be claimed before the end of succeeding month
to which it relates and no arrears will be paid. (Cir.no.555 Ref 20/100 dated 29.03.08)
2) Subsidized Canteen: Bank is providing subsidized canteen facility to the

employees where the staff strength exceeds 50. The subsidy is being paid to the
canteen contractor @ Rs.25/- per employee per month at Hyderabad and Rs.22/- per
employee per month at other centers.
3) Incentives for Excellence in Education to the Children of Employees: Bank is

providing cash incentive every year to the children of employees (maximum of two) to
encourage them for further studies. It covers all children who are studying First
Standard to Post Graduation. However, this scheme is applicable to only those children
who are wholly dependent and whose age is below 25 years. The quantum of incentive
per annum per child is as under:
No Standard Incentive amount

1 First Standard to SSC (X or equivalent) 2000
2 Intermediate (XI & XII classes) 2500
3 Graduation to Post Graduation 4000
To claim the incentive, eligible employees are required to submit application (April to
December) along with proof of pass and continuation of studies to the branch/office for
onward submission to controlling office for sanction. Courses pursued under Distant
Education mode or in a Foreign Country are not covered under the scheme.
(Cir.no.118 Ref 03/24 dated 12.07.10)
4) Merit Awards to the Children of Employees: In order to encourage meritorious

students among the children of staff, Bank introduced Zone-wise Merit Award Scheme.
Head office is also considered as a separate zone for this purpose. Merit Awards will be
given for Boys and Girls separately for four categories viz., Officers, Clerks, Sub-staff
and PTS. Zonal office will call applications every year. Students who have passed the
examinations conducted during March to August are eligible to apply for awards. The
toppers of each group will be given the following cash incentives.
Intermediate
Rank VII Class SSC/SSLC/HSC
MPC/BZC Comm./Arts
First 800 900 1000 1000
Second 700 800 900 900
Third 600 700 800 800
Fourth 500 600 700 700
(Cir.no.555 Ref 20/100 dated 29.03.08)
183

5) Andhra Bank Employees Group Insurance Scheme – Payment of Premium:
Bank entered agreement with LIC of India to cover the life risk of all the employees
and the relevant premium is being born by the Bank. The premium calculated for all
employees who are on rolls as on the last working day of February every year and paid
to LIC. The amount of coverage is as under:
No Cadre Risk coverage

1 JM-I to General Manager 375000
2 Clerks 200000
3 Sub-staff 100000
4 Part Time Sweeper (Full wages) 100000
5 Part Time Sweeper (3/4 wages) 75000
6) Holiday Homes: All employees (including retired employees) of the bank, who are
proceeding on holiday or leave, can avail Holiday Home facility with nominal rate at 15
centers viz., Bangalore, Bhubaneshwar, Chennai, Goa, Haridwar, Jaipur, Ooty, Manali,
Mysore, New Delhi, Shirdi, Tirupathi, Tirumala, Varanasi and Gagtok. At present the
tariff for the room is Rs.10/- per day in case of Officer Staff and Rs.5/- per day in
case of Award Staff. The maximum stay allowed is 4 days only. However, it is
restricted to maximum of 3 days with regard to stay at Bangalore, Chennai, Mysore,
Shirdi and Varanasi holiday homes. Employees desirous of availing the facility are
required to send an application through Branch/Office to Staff Welfare Department,
Head Office for allotment of room. (Cir.no.118 Ref 03/24 dated 12.07.10)
7) General Health Check-up: All staff members/spouse who are on the rolls of the
Bank and who have completed 40 years of age are eligible to claim for reimbursement
of expenses for general health check-up subject to maximum of Rs.2500/- in Metros
and Rs.2000/- at other places. However, additional reimbursement of expenses for
Mammography test subject to maximum of Rs.600/- is available to all eligible women
employees / spouse of employees’ (who have completed 40 years) w.e.f. 24.03.2006.
The reimbursement of expenses is subject to production of relevant receipts/bills of
approved Hospitals/Diagnostic centers. This scheme is applicable to spouse of the staff
members also. This facility can be availed by the eligible staff once in 2 years.
(Cir.no.346 Ref 3/45 dated 26.12.2008)
8) Eye Check-up & Spectacles: All staff members who are on the rolls of the Bank
are eligible to claim reimbursement of expenses for Eye Check-up and purchase of
spectacles subject to maximum of Rs.1000/-. This is a one time reimbursement in
the entire service. (Cir.no.555 Ref 20/100 dated 29.03.2006)
9) Hospitalization Expenses – Major ailments: Reimbursement of hospitalization

expenses for major ailments (By-pass surgery, Angio-plasty, Kidney transplantation,
Cancer, Gastro enterology, Brain Surgery and Orthopedic surgery and other rare and
costly ailments approved by HO) over and above IBA package will be reimbursed
subject to maximum of Rs.100000/- under Staff Welfare Schemes. However, the
difference in sanctioned amount and the amount claimed by the employee should be
above Rs.25000/-. All staff members and their dependants are covered under this
scheme. (Cir. no.555 Ref 20/100 dated 29.03.06 & Cir.no.191 Ref 3/29 dated
23.09.09)
10) Mentally retarded children – Financial Relief: Bank is reimbursing an amount

of Rs.10000/- per annum to the staff whose children are mentally retarded. This
facility is available up to the age of 25 years of the child. (Cir.no.413 Ref 20/72 dated
29.02.2008)
184

11) Physically Challenged Employees / Children: All staff members who submit
disability certificate are eligible to avail this facility. Under this scheme bank reimburse
the following expenses once to all eligible employees.
Category Amount Periodicity

Actual cost or Rs.10000/-
Wheel Chair / Crutches Once in 5 years
whichever is less
Actual cost or Rs.15000/-
Artificial Limb / Hearing aid Once in 2 years
whichever is less
The above reimbursement is also available to the spouse / children of staff who are
physically challenged. (Cir.no.413 Ref 20/72 dated 29.02.08 & Cir.no.191 Ref 3/29
dated 23.09.09)
12) Group Personal Accident Insurance (GPA): Bank has taken Group Accident
policy from M/s.United India Insurance Company Limited to cover the employees
against risks round the clock. It covers death, permanent disablement and partial
disablement. The risk coverage of various categories is as follows:
No Category Coverage (Rs. in lakhs)

1 CMD 10.00
2 Executive Director 8.00
3 General Managers 7.00
4 Deputy General Managers 6.00
5 Asst. General Managers 5.00
6 Chief Managers 4.00
7 Senior Managers 3.00
8 Deputy Managers 2.00
9 Asst. Managers 1.50
10 Clerks 1.00
11 Sub-staff (including PTS/Security guards) 0.50
12 Pilots & Drivers 1.00
13) Group Savings Linked Insurance Scheme (GSLI): All employees (except
sweepers on consolidated wages and contract employees) in the age group of 18 to 60
are entitled to become members of the scheme. Bank collects monthly contributions
from the members and remits to LIC of India. The monthly contribution includes two
components viz., Savings & Insurance Premia in the ratio of 70:30. The saving
component earns interest @ 8% p.a. and will be paid to the employee/legal heirs when
the scheme comes to an end due to retirement/resignation/demise of the employee.
The monthly premium payable and risk coverage of various categories is furnished
here under:
Monthly Premium
No Category Sum assured
(Savings plus Risk)
1 Scale IV & above 127.50 120000
2 JM-I to MM-III 95.63 90000
3 Clerks 63.75 60000
4 Sub-staff (including PTS) 31.88 30000
In case of expiry of an employee due to accident, double the sum assured will be paid
by LIC of India. (Circular no.113 Ref 20/23 dated 09.07.2008)
14) Liability Insurance: It covers the lives of the employees to the extent of
liabilities outstanding in Housing / Vehicle Loan as on 31st March every year and also
185

on fresh disbursal by IFLIC of India. Premium is payable by the employee to the debit
of respective loan accounts and the details of the coverage is as under:
Category Coverage Insurance Premia

Liability as on 31st March every year
Housing
subject to maximum of Rs.13.50 lakhs Rs.3.86 per
Loans
(inclusive of addl.HL). thousand per annum
Liability as on 31st March every year on outstanding
Vehicle subject to maximum of Rs.3.50 lakhs & balance as on 31st
Loans Rs.0.60 lakh for four & two wheeler March
loans respectively.
15) Silver Jubilee Awards: Employees who have completed 25 years of service are
honoured by presentation of an award with a cost not exceeding to Rs.2000/- and
the same is to be presented in a staff meeting at branch/office.
Facilities to Retired Employees: Besides terminal benefits (Pension / PF / Gratuity /

Leave encashment etc.,) the retired employees are entitled to avail the following
benefits / facilities from the Bank:
1. Memento/Gift on the day of Retirement on superannuation: In recognition of

the service rendered by the employees (including PTS) Bank is presenting a
Memento/Gift worth Rs.10000/- on the eve of retirement from service. (Cir.no.555
Ref 20/100 dated 29.03.2006)
2. Reimbursement of Transport Charges: Employees who retire on superannuation

are eligible to claim reimbursement of transport charges (luggage) incurred on account
of shifting of luggage from the office where he took retirement to the place of
permanent settlement in India by submitting TA Bill. Employee is eligible to claim all
expenses on par with normal transfer TA Bill except DA.
3. Retention of Residential Furniture: Officers who availed residential furniture can

retain the items on retirement by paying the following amounts to the Bank. (Cir.no.20
Ref 3/06 dated 21.04.2010)
Age of the furniture Amount to be paid

Where the cost is Rs.5000/- or less - 50% of original
Below 5 Years cost or book value whichever is higher and where it is
>Rs.5000/- present book value is to be recovered.
5 Years & < 7 Years 40% of original cost or book value whichever is higher.
7 Years & above 25% of original cost or book value whichever is higher.
4. Holiday Homes: Bank is extending Holiday Home facility to the retired employees
also. Retired employees can avail this facility at select centers with nominal rate. At
present the tariff for the room is Rs.10/- per day in case of Officer Staff and Rs.5/-
per day in case of Award Staff. The maximum stay allowed is 4 days only. For
allotment of rooms they need to submit application to Staff Welfare Department, Head
Office. (Cir.no.555 Ref 20/100 dated 29.03.08)
5. Hospitalization Scheme for retired employees on super annuation: Bank is

reimbursing medical expenditure incurred on surgery of major ailments to the tune of
Rs.2.5 lakhs for self and Rs.1.5 lakhs for spouse with a margin of 10% and 25% for
self and spouse respectively. However, in case of cancer treatment (without surgery)
the reimbursement is allowed up to Rs.100000/- per year. (Cir.no.413 Ref 20/72 dated
29.02.2008)
186

Guide to Bereaved Families
Taking care of family members is the sacred responsibility of the family head and he is
also required to take all possible care so that the spouse / children should not to face
financial problems even in his absence i.e. untimely demise. Our bank has been
extending various facilities/benefits to the bereaved families through different
schemes. Hence, staff and their family members are necessarily to have an idea of
these schemes and the associated benefits thereon. The nominees/legal heirs are
entitled to avail the following financial benefits/facilities from Bank and other
organizations:
1) Family Pension: In case of an employee who opts for pension and expired after
completion of 7 years of service, higher family pension equal to 50% of pay last drawn
by the deceased employee or twice the ordinary rate of family pension whichever is
less is payable.
2) Provident Fund: The actual contribution made by the employee/bank, and interest
thereon, which includes Voluntary Provident Fund. However, PF Loan, if any, will be
adjusted from the above contributions.
3) Gratuity: Employee is eligible for 15 days for every completed 26 working days
and accordingly the eligible amount will be paid subject to the ceiling, if any. This
amount will be paid immediately.
4) Future Service Gratuity Insurance: Bank has taken master policy for the said
purpose. In case of death of any employee, Bank submits the claim to LIC and the
same will be paid to the nominees of the deceased on receipt of claim amount from
LIC. Normally, the settlement of claim takes 3 to 6 months. (Cir.no.360 Ref 20/62
dated 01.01.2008)
5) Leave Encashment: Bank pays the amount for the unavailed Privileged Leave, if
any, subject to maximum of 240 days. The last drawn salary is the basis for
calculation and payment.
6) Exgratia: Bank pays an amount of Rs.150000/- towards exgratia to the families

(Nominees/Legal heirs) of the employee who die in harness. Branch/Office releases an
amount of Rs.25000/- as advance to meet the funeral related expenses and however,
the same will be adjusted from the exgratia amount. (Cir.no.413 Ref 20/72 dated
29.02.2008)
7) Financial Aid to Bereaved Families of the Employees who die in harness

(FABF): It is a voluntary contributory scheme and the interested employees can
become member of the scheme by submitting option-cum-nomination letter to Head
Office. The members are required to contribute Rs.5/-, Rs.3/- and Rs.2/- for officers,
clerks and sub-staff respectively for each death. The average amount payable under
the scheme is around Rs.50000/-. (Cir.no.560 Ref 20/112 dated 09.03.2004)
8) Educational Grant to the children: The children of the deceased are entitled to
claim reimbursement of Rs.2400/- for X class, Rs.3000/- for Intermediate and
Rs.5000/- for Graduation/Post Graduation for each child every year subject to
maximum of two children. However, they are eligible to avail this facility only up to the
age of 25 years or superannuation date of the deceased whichever occurs earlier. The
application is to be forwarded through the branch where the deceased employee
worked. (Circular No.555 Ref 20/100 dated 29.03.2006)
187

9) Residential Furniture: Family of the deceased is allowed to retain the furniture
provided by the bank under Officers Residential Furniture Scheme without payment of
any amount/charges to the bank. (Cir.no.131 Ref 4/1 dated 20.06.2005)
10) Leased Accommodation: Family members of the deceased employee are

entitled to retain the quarters till completion of the succeeding month or current
academic year whichever occurs later.
11) Reimbursement of Transport Charges: Family members are eligible to claim

reimbursement of transport charges (luggage) incurred on account of shifting of
luggage from the place of work of the deceased to the place of permanent settlement
in India by submitting TA Bill and they are entitled to claim all expenses and the TA Bill
is treated on par with normal transfer TA Bill except Dearness Allowance.
12) Group Savings Linked Insurance Scheme (GSLI): Bank collects monthly
contributions from the members and remits to LIC of India. The monthly contribution
includes two components viz., Savings & Insurance Premia in the ratio of 70:30. In
case of death on account of accident, LIC pays the double the amount of assured.
Bank submits the claim to LIC as per the eligibility. The monthly premium payable and
risk coverage of various categories is furnished here under:
No Category Premium (M) Sum assured

1 Scale IV & above 127.50 120000
2 JM-I to MM-III 95.63 90000
3 Clerks 63.75 60000
4 Sub-staff (including PTS) 31.88 30000
13) Others: The family members of the deceased are entitled to claim the
reimbursement of News Paper, Conveyance and Refreshments of the current
month/quarter and arrears if any from the branch.
14) Special Grant of exgratia: Bank is paying Rs.1000/- per month to the spouse
of the deceased, who retired on or before 31.12.1985 and had rendered at least 25
years of continuous service prior to their reaching the age of superannuation and are
not getting any pensionary benefits from the Bank. (Cir.no.249 Ref 20/41 dated
10.10.2006)
15) Liability Insurance: All liabilities of staff members under Housing and Vehicle
loans are insured and bank claims the amount from LIC of India in case of death of the
employee and adjust the same to the respective loan accounts. The maximum
coverage for Housing and Vehicle loans is Rs.7.5 lakhs and Rs.3.5 lakhs
respectively. However, in case of two wheeler the maximum coverage available is
Rs.60000/- only. (Cir.no.438 Ref 3/67 dated 15.03.09)
16) Appointment of dependant of the deceased: Bank may consider the

appointment of one of the dependants of the deceased employee, who expired while
performing official duty as a result of violence, terrorism, robbery or dacoity.
However, this is applicable only to those deceased employees who have completed 5
years of service or before reaching the age of 30 years, whichever is later. The
appointment shall be made only in the clerical and sub-staff cadre.
17) Compensation & Reward for resisting crime against Bank: In order to
protect the interest of the family members of the employee who dies on account of
resisting crime against bank, the following facilities are extended to the bereaved
family.
188

No Facility Remarks
1 Compensation on JM-I to MM-III Officers - Rs.3 lakhs
death SM IV & above officers - Rs.5 lakhs
Bank continues to pay last pay drawn by the deceased
officer, till one of the children attains age of 21 years
2 Pay & Allowances
or normal retirement age of the deceased whichever is
earlier.
3 Educational Exp. Up to Degree for children.
4 Employment Family member subject to eligibility.
In case of survival – Cash reward of Rs.50000/- will be paid besides eligible
for out of turn promotion or advance increment or Special Leave.
18) Group Insurance Scheme (CODST): This is a Group Policy taken by the Bank
with LIC to cover the lives of the employees of the Bank with the following coverage.
No Category Coverage
1 Officers (JM-I to SM-VII) 375000
2 Clerks 200000
3 Sub-staff 100000
4 PTS – ¾ wages 75000
5 PTS – ½ wages 50000
6 PTS – 1/3 wages 33000
19) Group Personal Accident Insurance (GPA): Bank has taken Group Accident
policy from M/s.United India Insurance Company Limited to cover the employees
against risks round the clock. It covers death, permanent disablement and partial
disablement. The risk coverage of various categories is as follows:
No Category Coverage (Rs. in lakhs)

1 CMD 10.00
2 Executive Director 8.00
3 General Managers 7.00
4 Deputy General Managers 6.00
5 Asst. General Managers 5.00
6 Chief Managers 4.00
7 Senior Managers 3.00
8 Deputy Managers 2.00
9 Asst. Managers 1.50
10 Clerks / Pilots / Drivers 1.00
11 Sub-staff / PTS/Security guards 0.50
20) Scheme of payment of ex-gratia in lieu of appointment of dependants on

compassionate grounds: This scheme is applicable to employees who die in harness
and employees who seek premature retirement due to incapacitation before reaching
the age of 55 years. Bank grants ex-gratia to the family of the eligible employee
subject to the ceilings specified below, provided the monthly income of the family from
all sources is less than 60% of the last drawn salary (net of the taxes) of the
employee:
¾ Officers Rs.8 lakhs
¾ Clerks Rs.7 lakhs
¾ Sub-staff Rs.6 lakhs
The dependents should make an application within 6 months from the date of the
death of the employee. The ex-gratia amount in eligible cases will be paid within 3
months of receipt of application, if the same is complete in all respects. (Cir.no.517
Ref 3/31 dated 06.03.2006)
189

Other Institutions / Organizations
1) Surety Loan: In case where the deceased employee availed loan from Andhra
Bank Employees Co-operative Bank Limited, the balance under Thrift and MMBF
contributions are adjusted to surety loan and the remaining balance will be written-off
through insurance cover. The family members need not to pay liability under surety
loan of Andhra Bank Employees Co-operative Bank.
2) Funeral Expenses: Andhra Bank Employees Co-operative Bank pays Rs.2500/-

to the family members of the deceased towards funeral expenses.
3) Andhra Bank Officers` Federation is extending exgratia of Rs.50000/- to the

family members of the deceased officer. However, this scheme is meant for those
officers who are members of the federation only. (Federation cir.no.4/SW/2007 dated
17.01.2007)
4) Insurance Claims: The family members of the deceased are entitled for the sum
assured mentioned below provided the deceased maintains/avails the
accounts/facilities.
No Account / Product Coverage Remarks

1 AB Visa Platinum 1000000 Accidental Death
2 AB Gold Card 500000 Accidental Death
3 AB Classic Card 200000 Accidental Death
4 Abhaya 25000 Accidental Death
5 Abhaya Savings Plus 50000 Accidental Death
6 Abhaya Gold 100000 Accidental Death
7 AB Jeevan Abhaya 100000 Natural / Accidental Death
Note: Claims will be settled by the respective insurance companies as per the
eligibility and Bank acts as facilitator only.
Important Points:
¾ All staff members should ensure that nomination is submitted for Pension, PF,
Gratuity, FABF, GSLI, Credit card, Andhra Bank Employees Co-operative Bank,
Insurance Linked Accounts etc., to avoid delay in settlement of claims.
¾ Branch/Office to communicate the demise of the employee to Welfare

Department, Head Office, Andhra Bank Employees Co-operative Bank, Credit
Card Department etc., immediately.
¾ Branch/Office to submit the death certificate of the deceased to Head Office to

settle terminal benefits (Pension, PF, Gratuity etc.,) immediately. In case of
accidental death, branch to should send death certificate along with copy of
FIR/Post Mortem Report.
¾ Wherever the deceased staff member has not submitted nomination, the
branch/office has to obtain claim forms from the legal heirs as per the
procedure laid down for payment of amounts by Bank. However, in such cases,
the claims will be settled only at HO.
¾ With regard to Abhaya, Abhaya Plus, Abhaya Gold and Abhaya Jeevan, the
claim is to be submitted at the respective branches where the deceased
maintained said accounts.
¾ Any expenditure under staff welfare has to be claimed before the expiry of the
following financial year failing which the same stands lapsed.
***
190

Memory Recalled Questions (MM-III to IV – Jan`08)
(Compiled by Appa Rao, IBD, Mumbai)
Objective Questions:
1. As per the bank's policy, valuation of single property of Rs.50 crore & above,
valuation reports shall be obtained
a) From minimum of two independent valuers (chartered engineers) and the lower of
two valuations shall be taken into consideration for determining the value of the
property. b) From minimum of two independent valuers (chartered engineers) and the
average of two valuations shall be taken into consideration for determining the value
of the property. c) From a independent valuer (chartered engineers)
2. The following advances are not covered under WTPCG. Which is not correct?
a) Advances granted for exports made on deferred terms of payment, turnkey

projects, construction works and service contracts b) Advances grated to Government
Companies c) Advances granted against exports against export orders d) Advances
granted by OBUs, SEZ, EPX e) Advances granted to exporters against their export
entitlements like CCS/DDB
3. As per loan policy of the bank, internal exposure ceiling for off balance sheet
commitments for Bank Guarantees is ……….. times of net worth of bank
a) 2 times b) 3 times c) 5 times d) 4 times e) None
4. Failure of internal systems, processes and people is a
a) Credit Risk b) Market Risk c) Liquidity Risk d) Operational Risk e) Technology Risk
5. Abhaya Savings Bank Account – Minimum and maximum age for opening of the
account
a) 0 & 70 years b) 0 & 65 years c) 5 & 70 years d) 5 & 65 years e) 5 & 60 years
6. As per the banks loan policy advance against book debts should not exceed ……. %
of working capital limits.
a) 10% b) 50% c) 25% d) 100% e) no such ceiling
7. The difference between the selling rate and buying rate of foreign exchange is called
a) Exchange Margin b) Exchange Spread c) Exchange Profit d) Dealers Spread
8. PCFC advance generally allowed for a maximum period of
360 days b) 270 days c) 180 days d) 90 days e) no such limit
9. TDS deducted by bank, is to be remitted to Income Tax authorities within.
a) within 15 days from the date of deduction b) within 7 days from the date of
deduction c) within 15 days in the succeeding month d) within 10 days in the
succeeding month e) within 7 days in the succeeding month
10. What will be the BCCT to be recovered from an individual for withdrawal of
Rs.60000 from SB account and Rs.30,000 from current account and Rs.15000
from OCC account
191

a) Rs.105 b) Rs.45 c) Rs.60 d) Rs.90 e) Nil
11. In an office building the entire computer systems are inter-connected. What is it
called?
a) Wide area network b) Intra departmental network c) Satellite link d)

Local area network
12. Ceiling on Subsidy under PMRY scheme for Self Help Groups is …..per beneficiary
and ……..for Self Help Group.
a) Rs.7,500 and Rs.15,000 b) Rs.12,500 and Rs.1,00,000 c) Rs.15,000 and

Rs.1,50,000 d) Rs.15,000 and Rs.1,25,000 e) Rs.15,000 and Rs.1,00,000
13. Educational loans given by a bank through NBFCs for on lending. Maximum ceiling
to be eligible to classify under priority sector for loans for inland studies and foreign
studies are
a) Rs.4 lacs and RS.10 lacs b) Rs.7.50 lacs and Rs.15 lacs c) Rs.10 lacs and Rs.20
lacs d) Rs.4 lacs and Rs.8 lacs e) No ceiling
14. Validity of a cheque for 6 months is defined in ……….Act
a) Indian Contract Act b) B R Act c) Negotiable Instruments Act d) RBI Act e)

Not defined in any Act
15. In case of housing loans to old residential buildings, the age of building shall not
be more than
a) 10 years b) 5 years c) 20 years d) 15 years e) 25 years
16. Banks are required to submit XOS statement to RBI, in respect of
a) Foreign exchange transactions b) Import transactions c) Overdue export bills

d) Overdue import bills e) FCNR accounts
17. Under whistle blower policy of the bank, an employee can complain directly to
………. for unethical behaviour, actual or suspected transactions, or violation of law or
improper practice of superior officer.
a) CMD b) Board of Directors c) Audit Committee of the Board

d) Risk Management Committee e) Customers grievances committee of Board
18. A counterfeit note is impounded by the branch at the time of receipt of cash. The
acknowledgement has to be signed by
a) Cashier b) Manager c) Cashier and remitter d) Casher and Manager e)

Cashier if remitter refused to sign the acknowledgement
19. Foreign exchange reserves of our country as on 31.12.2007 are above …
a) USD 240 billion b) USD 200 billion c) USD 260 billion d) USD 280 billion e)
USD 300 billion
192

20. A letter of credit stipulates last date of shipment as 21.10.2007 and last date of
negotiation as 21.11.2007. The documents tendered by customer shows that the
actual date of shipment is 18.10.2007. In this case the documents can be negotiated
on or before.
a) 21.10.2007 b) 11.11.2007 c) 18.11.2007 d) 21.11.2007 e) 30.1.2007
21. For transfer of funds through NEFT (National Electronic Fund Transfer) and
minimum and maximum amount that can be transferred are
a) Rs.1,000 and maximum Rs.5 lacs b) Rs.1,000 and maximum no limit c)

Rs.5,000 and maximum Rs.1 lacs d) No minimum amount and no maximum amount
e) None of the above.
22. A term deposit of NRO can be accepted for a minimum period of
a) 1 year b) 2 years c) 6 months d) 7 days e) 3 years
23. Recently RBI imposed penalty on 10 banks in IPO scam. Under powers vested by
which act RBI imposed the penalty.
a) NI Act b) RBI Act c) SEBI Act d) Banking Regulation Act e) None
24. Zonal Offices/Branches have to seek prior permission from Treasury, Mumbai
a) For accepting fresh deposits of RS.15 lacs and above

b) For accepting fresh deposits of Rs.1 crore and above
c) For accepting fresh deposits of Rs.5 crores and above
d) For accepting/renewal of deposits of Rs.5 crores and above
e) For accepting/renewal of deposits of Rs.1 crore and above
25. Why do RBI levies penalty on currency chests for wrong reporting of currency
holdings by them?
a) To enforce discipline among currency chests b) To make good the loss on account
of wrong reporting c) Under powers derived under RBI Act d) None
26. As per the loan policy of the bank, for conduct of stock and receivables audit, one
of the following statements is wrong.
a) Can not be conducted by Statutory Audit b) Can not be conducted by Concurrent

Auditor c) Can not be conducted by firm of practicing Chartered Accountants/Cost
Accountants d) A FCA of the firm of chartered accountants should have a minimum
practice of 5 years e) A firm need not have any minimum practice
27. What the first item of sequence is followed in risk management.
a) Monitoring b) Measurement c) Identification d) Mitigation e) None of the above
29. Which of the following criteria is not stipulated in the Andhra Bank Rural Credit
Card Scheme?
a) Limit will be based on the assessment of income and cash flow of the household b)
Collateral security has to be offered by the beneficiary c) The purpose of loan has to
be ascertained d) The end use of the funds to be ensured.
193

30. International banks with presence in India and Indian banks with branches abroad,
have to implement Basel II w.e.f.31.3.2008 and follow ……………approach for credit risk
and …………for operational risk.
a) Advanced approach and Standardized approach b) IRB approach and Advanced

Measurement approach c) Standardized approach and Basic indicator approach d)
Standardized approach and Standardized approach
31. A cheque is received by the branch for payment issued by one of the customers. In
the meanwhile a request is received by a public prosecutor informing that the
customer who issued the cheque is imprisoned for criminal activity and directs the
branch not to make payment of the cheque.
a) Branch should not make the payment b) Branch should ask for a order of the court
regarding imprisonment of the customer c) Branch should insist written request from
the public prosecutor d) Branch can make the payment.
32. Based on the recommendations of the committee on Procedures and performance

Audit on Public Services (CPPAPS), RBI issued guidelines on various issues relating to
safe deposit lockers. Which of the following guideline is not issued by the RBI?
a) Branches are to link the allotment of lockers to placement of fixed deposits b)

To ensure prompt payment of locker rent, branch are to obtain a Fixed Deposit which
would cover 3 years rent and charges for breaking open the locker c) Branch
Manager can allot the 1/3rd of vacant lockers d) Wait list of
lockers need not be maintained.
33. Within the bank's aggregate capital market exposure of ………of its net worth the
bank's direct investment in shares/convertible bonds/debentures, units of equity
oriented mutual funds/Venture Capital funds should not exceed ……..of its net worth.
a) 40% & 15% b) 30% & 15% c) 40% & 20% d) 80% & 50% e) No ceiling
34. As per the compensation policy for customers of the bank, bank shall pay
compensation to the customer for collection cheques of foreign currencies if dealy of
credit is beyond ………..days of credit and after taking into account ………….days of
cooling period.
a) 5 days & 10 days b) 7 days & 10 days c) 7 days & 21 days d) 7 days & 14 days
35. Official Language Implementation Committee meetings are to be held in Region A

once in …….
a) Two months b) Three months c) Six months d) Twelve months e) None
36. In terms of direction of RBI & IBA on simplified procedure for settlement of claims
preferred by the legal heirs of the deceased constituents, bank has to settle the death
claims involving amount upto Rs………
a) Rs.10000 b) Rs.50000 c) Rs.100000 d) Rs.25000 e) None
37. Annual subscription for credit cards is waived if the stipulated minimum card
spends is achieved and repayments are regular. For the cards not achieving the
stipulated minimum Card spend and defaulters, annual subscription shall be levied on
an annual basis at…..for Classic/Master Card and Rs…..for Gold card.
a) Rs.550&Rs.1000 b) Rs.500&Rs.1000 c) Rs.750& Rs1000 d) Rs.1000&Rs.1000
194

38. CDR mechanism, which of the following is not correct.
a) Multiple Bank Accounts b) Rs.10 crores & above c) Fund & Non-fund based d)
Preserving viable corporates e) Account should be NPA
39. Branches can negotiate bills drawn under LC for non-constituents, if
a) LC is restricted to our bank only, subject to the condition that the Proceeds will be
remitted to the regular banker of the beneficiary b) LC is not restricted and proceeds
will be remitted to the beneficiary c) LC bearing the clause without recourse
40. X depositor approached the branch with term deposit receipt of Rs.2 lakhs which
was due in the year 2008 and not interested for renewal of the matured deposit and
requesting for payment of interest for overdue period. How do you act?
a) No interest will be paid since the deposit is not renewed b) Term Deposit applicable
interest at the time of maturity will be paid for the overdue period c) Interest
rate at the time of maturity or at the time of renewal whichever is lower will be paid
for overdue period d) SB interest will be paid for the overdue period
41. HO interest subsidy for branches under transfer pricing for priority sector advances
for rural and urban branches.
a) 1% b) 2% c) 3% d) 4% e) 5%
42. RBI imposing penalty on Currency Chests for incorrect reporting of daily cash
position because
a) It is causing financial loss to RBI b) To inculcate discipline c) Non adherence of

Owners` instructions d) None of the above
43. To be eligible for classification under priority sector, the ceiling prescribed for
dealers in irrigation equipment is.
a) Rs.10 lakhs b) Rs.20 lakhs c) Rs.30 lakhs d) Rs.40 lakhs e) No limit
44. In case of agricultural loans the repayment period of the loan is ……………..and the
bank can extend the repayment period by……….., in some of the cases.
45. A term deposit of Rs.50000/- with one year tenor is cancelled prematurely. The
penalty for premature closure is….
a) 0.50% b) 1.00% c) 1.50% d) 2.00% e) No charges
46. In case of BLD deposit, the balance outstanding in the deposit is to be informed to
the depositor once in a ……
a) Every Day b) Weekly c) Fortnightly d) Monthly e) Half-yearly
47. No claim for the death of the depositor can be entertained for the first …..days
from the entry date except for the reason of cause of death due to the accident.
a) 10 days b) 30 days c) 60 days d) 90 days e) 180 days
195

48. within the overall target of 40%, the target of Micro Service a…..Micro
Manufacturing
49. A bank can prefer appeal on the award passed by Banking Ombudsman within 6
months from the date of
a) Passing Award b) Accepting the Award by the complainant c) Receipt of the copy of
the Award d) None of the above
50. NPA account acquired by the bank shall be treated as standard asset in the books
of purchasing banking for ……days.
51. A leader of consortium can collect the following amount as service charges.
a) 0.25% p.a b) 0.50% p.a. c) 0.30% p.a. d) 0.60% p.a. e) Nil
52. What is the standard provision on the assets other than SME/Agriculture?
a) 0.25% b) 0.40% c) 0.50% d) 1.00% e) Nil
53. A customer's cheque realized for Rs.2 lacs is credited to his account by mistake as
Rs.2000. Subsequently cheque presented for Rs.20000 returned unpaid by the bank.
What is the responsibility of the banker?
a) Responsible b) Not responsible c) Customer to ensure balance before issuing

the cheque d) None of the above
54. Which of the following statement is not correct with regard to RTGS?
a) Meant for above Rs.100000 remittances only b) Remittance should be through

account transfer only c) Maximum charges should not be more than Rs.50 per
remittance d) Charges to be collected from the Beneficiary only
55. Banks to extend Interest subvention to the farmers on production loans
a) 1% b) 2% c) 3% d) 5% e) None of the above
56. Gold card to exporters….which statement is not correct.
a) Bank issue VISA Gold Cards to all Exporters b) Exporters can avail interest free
loan facility c) Allowed to avail credit facilities beyond 20% of sanctioned limits d)
None of the above
57. Complement of staff for cash remittance of above Rs.20 lacs
a) Officer and Clerk b) Officer and Armed Guard c) Officer, Clerk and Sub-staff d)
Officer, Clerk and Armed Guard
58. Recurring Deposit – guidelines for waiver of penalty
a) Senior Citizen b) Staff Account c) Deposit beyond 5 years d) Can be set off
with advance installments e) None
196

59. AB easy savings deposit – minimum deposit.
a) No deposit b) Rs.5 c) Rs.100 d) Rs.500 e) Rs.1000
60. Illiterate account – Nomination. Which statement is correct?
a) Can extend in favour of literate only b) Nomination facility is not available c)

Consent from Nominee is required d) Witness is a must e) None
Descriptive Questions:
1. What are the recent modifications/changes made in Credit Guarantee Fund Trust for
Small Industries (CGTSI) scheme.
2. What are the guidelines issued by RBI for precautions to be taken by banks in the
light of Anti Money Laundering activities in case of Wire transfers?
3. What are the salient features of AB – Tax saver scheme and how does it differ from
ordinary term deposit.
4. Operational procedures of Any Branch Banking (ABB)
5. What are the features of the hybrid capital instruments raised by the banks to shore
up their capital?
6. What is sub-prime crisis?
7. What is the Cash Budget Method?
8. What is AB-Real?
9. AB Money Time Deposit Scheme.
10. What advise will you give to a guarantor for OCC limit of Rs.1 lac, who want to
withdraw guarantee and the liability in OCC is Rs.60 lacs
***
197

Memory Recalled Questions (MM-III to Scale IV) - May 2010
(Compiled by N S N Reddy, DBK Murthy & V Murali Krishna)
01. As per loan policy, the acceptable Current Ratio is_____for loans up to 6 crores
and _________ for loans above 6 crores.
a) 2:1 b) 1.15:1.33 c) 1:2 d) 1.33:2 d) 1.33:1.15 e) 1.20:1
02. As per recent 2010-11 Union Budget, the farmers are entitled for Interest
subvention of
a) 2% on short term credit disbursed during Khariff & Rabi b) 1% for prompt
repayment c) 2% prompt repayment d) a & b e) a & c
03. Bank can not proceed against the borrower under SARFAESI Act where
a) Security is agril. land b) Liability is less than 1 lac c) Liability is less than
20% of the principal d) Pledge of movables e) All of the above
04. As per RBI guidelines on Disclosure norms (disclosures to be made at the

footnote of Balance sheet) Which one of the following is not true?
a) Movement of NPAs b) Large exposure - Deposit /advances c)

Capital structure & Capital adequacy d) Industry-wise distribution
exposure e) Market Risk in Trading Book
05. Periodicity for making surprise visits to a rural branch is once in _________ by
ZM and once in _________by 2nd level officials.
a) 12 Months & 3 Months b) 6 Months & 3 Months c) 24 Months & 12

Months d) Once in a year by ZM & second level officials e) Once in a year
either by ZM or second line officials
06. Financial Inclusion means_________________
a) Opening of bank accounts to all rural people b) Finance to BPL

group under government schemes c) To spread financial literacy d) To
make available the banking services to the people who are in need of
them but unable to access them e) None
07. Which type of account can be opened by a Non-Resident Indian jointly with a
Resident Indian
a) NRO b) NRE c) FCNR d) a &b e) all
08. Under ‘Whistle Blower’ the information can be directly submitted to
a) Board b) Audit Committee of the Board c) Management Committee

d) Central vigilance Commission e) Reserve Bank of India
09. Dispute regarding ATM payments is not settled within _______days, penalty of
Rs.____per day will be levied
a) 10 days & Rs.100 b) 12 days & Rs.100 c) 12 working days & Rs.100
d) No penalty will be paid if the card is used at other bank ATMs
10. Under Transfer Price Mechanism, the weightage for priority sector advances for
Rural and Semi Urban branches is_______
198

a) 2% b) 5% c) 7% d)10% e) No weightage
11. As per recent instructions on nomination
a) All deposit applications should have provision for nomination b) The

depositor is required to exercise option with Yes or No c) Branch to issue
acknowledgment to the depositor wherever nomination is exercised d) The
name of the nominee should be printed on Passbook/Receipt wherever the
depositor express willingness e) all
12. The age limit for coverage of Educational loan under liability insurance
a) No age limit b) 21 to 60 c) 18 to 55 d) 21 to 55 e) None
13. Charges for ABB transactions up to 50,000/-
a) Applicable DD charges b) Rs.2/- per thousand c) Applicable

NEFT charges d) No charges e) None
14. NEFT – the clearing settlement is done _____ times on all days from Mon to Fri
and _____times on Sat.
a) 7 & 4 b) 9 & 5 c) 11 & 5 d) 11 & 6 e) None
15. The maximum Housing finance under DRI advance
a) Rs.12500/- b) Rs.25000/- c) Rs.15000/- d) Rs.20000/- for SC/ST

e) c & d
16. Preservation time for applications of closed accounts
a) 3 years b) 5 years c) 10 years d) Permanent e) None
17. Foreign tourist who visits India can retain US dollars--------
a) 1000 b) 2000 c) 3000 d) 5000 e) None
18. The powers vested to ZM headed by DGM for Takeover of accounts is
a) 500 lakh b) 1000 lakh c) 1500 lakh d) 2000 lakh e) No limit
19. The approach adopted to measure Operational Risk under Basel-II
a) Basic Indicator b) Standardized c) IRB d) Standard duration e)

None
20. For ‘A’ rated accounts, half yearly QIS II is to obtained for limits of
Rs_______crores and above and quarterly QIS III is to be obtained for limits
Rs_______lacs and above
a) Rs.600 lakhs & Rs.200 lakhs b) Rs.200 lakhs & Rs.600 lakhs c)
Rs.200 lakhs & Rs.100 lakhs d) Rs.800 lakhs & Rs.600 lakhs e) none
21. Provision coverage ration should be ………….. by March 2010
a) 50% b) 70% c) 80% d) 90% e) No stipulation
199

22. Prepayment charges to be collected for loans against Rent Receivables.
a) 2% irrespective of tenor b) 1% for loans above 3 years c) 2% for loans

with repayment period of above 3 years d) No prepayment charges
e) None
23. The interest rate on NRE deposits is fixed based on
a) LIBOR + 100 basis points b) LIBOR + 75 basis points c) LIBOR +

175 basis points d) Discretion of the Bank e) None
24. Which statement is not correct under e-trade
a) Savings cum demat account b) Account holder can buy & sell
shares online c) Online settlement d) Lien can be marked e) None
25. Under CDR minimum number ___________and _______
a) 75% creditors by value and 60% creditors by number b) 60%

creditors by value and 75% creditors by number c) 50% creditors by value
or number d) None
26. Guarantee available for women borrower of Rs.60 lakhs Under Credit Guarantee
Fund Scheme is
a) Rs.30 lakhs b) Rs.45 lakhs c) Rs.48 lakhs d) Rs.50 lakhs e) None
27. % of subsidy allowed on Priority sector advances by HO to Rural Branches

under Transfer Price Mechanism is
a) 2% b) 5% c) 7% d) 10% e) No subsidy
28. Under Agril financé , advances up to Rs________lacs against pledge/hyp .of

agril produce up to ___ months can be treated as priority sector advance
a) Rs.3 lakhs & 12 months b) Rs.10 lakhs & 36 months c) Rs.10 lakhs
& 12 months d) All loans repayable with in 12 months e) None
29. Loans sanctioned to………………………….. exempted from exposure ceilings.
a) Priority Sector b) Export c) State/Central Government d) Real

Estate e) None
30. RD Plus Scheme - Which statement is not correct?
a) Interest is exempted from TDS b) Flexible payment of installments c)

Interest calculation method as to that of Savings Bank Deposit d) No penalty
for premature cancellation for below one year e) Loan against deposit is
available
31. For the delay in collection of cheque beyond 90 days. Bank to pay Interest @
to the customer.
a) Applicable SB Interest (3.5%) b) Applicable Term Deposit Interest c)

Applicable Term Deposit Interest + 2% d) BMPLR e) No interest
32. NPA of Rs.15 lakhs doubtful as on 30.09.2009. Value of the Security is Rs.10
lakhs. What is the provision to be made as on 31.03.2010 ---- lakhs.
200

a) Rs.5 lakhs b) Rs.6 lakhs c) Rs.7 lakhs d) Rs.7.5 lakhs e) None
33. The amount of deposit branch insist for locker is
a) Manager Discretion b) One year Rent c) 3 years Rent d) 3 years

rent plus charges e) c & d
34. The NPA should remain in banks` books for a minimum period of ……… before
selling to other banks.
a) 12 months b) 24 months c) 36 months d) Any time after becoming

NPA e) None
35. A cheque was issued for Rs.8000/- leaving blank space both at figures and
words column, and the bearer of cheque made it Rs.80000/- and withdrew
amount. Customer made a claim for Rs.72000/- against the bank.
a) Bank to reimburse the amount since the cheque was issued for Rs.8000/-
only
b) Customer is liable since he is negligent having blank space at
figures and words
c) Bank and Customer equally responsible
d) None
36. Retail trade (other than essential commodities) loans upto Rs………….. classified
as Priority sector and under which head
a) Rs.10 lakhs & SME b) Rs.40 lakhs & SME c) Rs.20 lakhs & SME
d) Rs.50 lakhs & SME e) None
37. Payment of Term Deposits beyond Rs.20000/- in cash is violation of IT rules

and attracts
a) Penalty & Imprisonment b) Penalty – Double the amount c)

Penalty – Not more than deposit amount d) No penalty
38. How much percentage of advances should go to Micro (Manufacturing) up to

Rs.5 lakhs and Micro (Service) up to Rs.2 lakhs under SME advances.
a) 25% b) 30% c) 40% d) 50% e) No cap on minimum
39. Penalty for delayed RD payment of RD installments.
a) No penalty b) 5 paise per Rs.10 per month c) 10 paise per Rs.10 per
month d) 10 paise per Rs.100 per month e) None
40. AB Tax Saver – Which of the statement not correct?
a) Deposit amount is eligible for Tax exemptions b) It is a Term Deposit

c) Minimum period of deposit is 5 years d) The maximum amount allowed is
Rs.1,00,000/-. e) Loan facility is available against the deposit
41. Total current assets 300 lakhs, Long term sources 300 lakhs, Balance sheet
total 500 lakhs. What is the networking capital and current ratio of the
company?
a) 200 lakhs & 1.50:1 b) 300 lakhs & 1:1.5c) 100 lakhs & 1.50:1 d) 100
lakhs & 1:1
201

42. Can a Private Limited company join as a partner in a partnership firm?
a) Yes b) No c) Yes with limited liability d) None
43. What is the limitation period for public to approach Consumer forum for
redressal of their grievances against Bank?
a) No limitation period b) One year from cause of action c) Two years

from cause of action d) Ten Years from cause of action e) None
44. When PMEGP subsidy can be adjusted to loan account?

a) At the request of the borrower before closure of the account
b) After 3 years provided if there are no recoveries in the account
c) Discretion of the Bank
d) A & B
e) None
45. Account opened in the name of A&B jointly and nomination is given in favour of
‘C’ . Branch received request from the nominee for payment of deposit as ‘A’
expired. What is the course of action?
a) 50% of deposit can be paid to the nominee

b) Nominee has no right since other joint depositor is alive
c) Amount will be paid to nominee with the consent of legal heirs of ‘A’
d) Nomination facility is not available to Joint accounts
46. Cheque signed by the drawer with initials “R N Das” instead full signature and
paid in due course. Drawer demanding for reimbursement on the ground that
signature differs.
a) Bank is liable to pay the amount to the customer since the payment made is
not in due course as signature on the cheque differs from specimen
signature on record. b) Bank is not liable on the ground that the
amount was paid to the customer and the contention of the
customer is not tenable since it is not a forgery. C) Bank to share 50%
of the amount since there is negligence on the part of the official passed the
cheque. d) None of the above
47. What is the discount for inclusion of Subordinate Debt under Tier-II capital
where the Sub-ordinate Debt maturity is less than18 months?
a) 50% b) 60% c) 70% d) 80% e) None
48. Objective of Audit Trail
a) Monitoring of transaction b) Authorization of transaction c) Submission of

data to RBI d) Identification of transaction along with User ID and
time stamp e) None
49. Liability of the drawer in Usance bill
a) Primary b) Secondary c) Primary/Secondary d) No liability e) None
50. Account is classified as NPA for non-submission of stock statement within

…………days.
202

51. Who is empowered to write-off operational losses (fraud cases) of Rs.200
lakhs?
a) General Manager b) Executive Director c) Chairman & Managing Director

d) Management Committee of the Board e) Board
52. Loans for Commercial Real Estate include ______________
a) Plantations b) Housing c) Special Economic Zones d)

Construction of Malls e) Hotels & Restaurants
53. What is the time limit allowed to the bank to implement the award issued by
Banking Ombudsman?
a) 30 days b) 60 days c) 90 days d) One year e) Within one month of

receipt of acceptance of the award from customer
54. Investment in plant and machinery in Micro (Manufacturing) and Micro

(servicing) units.
a) Rs.25 lakhs & Rs.10 lakhs b) Rs.10 lakhs & Rs.25 lakhs c) Rs.500 lakhs
& Rs.200 lakhs d) Rs.25 lakhs & No limit e) None
55. What is the time limit to furnish the requested information under Right to
Information Act (RTI) and what is the penalty for non-compliance of the said
norm?
a) 30 days & Rs.100 per day b) 60 days & Rs.100 per day c) 30 days &
Rs.250 per day maximum of Rs.25000/- d) 60 days & Rs.250 per day e) None
56. What is the percentage of CRAR is required to be maintained by the banks on

Housing Loans where risk weight is 75%?
a) 8 b) 9 c) 10 d) 6.75 e) None
57. Received request from your borrower for a loan of Rs.300 lakhs for purchase of
equipment @ 12% interest repayable in 60 months. The estimated Net Profit
and depreciation is Rs.100 and Rs.20 lakhs respectively. What is the DSCR?
a) 1.20 b) 1.30 c) 1.50 d) 1.62 e) 1.75
Descriptive Questions:
01. What are the housing loans that can be classified under Priority Sector?
02. Assessment of limits under AB Equipment Finance.
03. How many ways a borrower can mislead the inspecting official while inspecting
the stocks under hypothecation and book debts?
04. What are the steps suggested by your Zonal office for recovery PNPAs.
05. You are posted as manager to a branch where complaints from the customers
are more. What steps you would take to reduce the complaints?
06. Define ‘Hypothecation’ charge; in which act it is covered; What are salient
features?
07. Write a brief note on how the Ombudsman deals with customers grievances?
08. What is Cheque Truncation scheme? Explain.
09. Can you open account in the names of blind persons? What are the risks
involved?
10. Define Money Laundering and explain the role of banks to deal with PML
guidelines and penalties thereof.
203

Memory Recalled Questions ‐ Scale III to IV – Jan`11
(Compiled by D B K Murthy, Kishore Kumar & N S N Reddy)
1. ------ Cannot become Partner in a Partnership Firm?
A) HUF B) Partnership C) Public Limited Company D) Trust E) None
2. What is the maximum claim under ABJ and the Insurance Period ----?
A) Rs.50000/- & Calendar Year B) Rs.100000 & Financial Year C) Rs.100000/- &
1st December to 30th November D) Rs.200000/- & 1st December to 30th November
E) None
3. Liability Insurance claims occurring within --- days of date of debit of premium to
the loan account are not payable except for death due to accidents.
A) 10 Days B) 30 Days C) 45 Days D) 90 Days E) None
4. Placard can be exhibited indicating that the customers can deposit their cheques
meant for collection may be tendered at the counter and acknowledgement can be
obtained while extending the service of “Cheque Collection Box”
A) Right at the entrance B) Notice Board C) On the counter D) Right on the

Cheque Collection Box E) Need not be displayed
5. What are the recent RBI guidelines on Nomination?
A) Nomination is mandatory for all accounts B) Pass Book/Deposit Receipt is to bear

stamp with “Nomination Registered” , where the depositor exercised nomination
facility C) Nominee name is to be printed on the Pass Book/Deposit Receipt wherever
the depositor requests for D) B & C E) None
6. Simplified KYC procedure is to be followed for the accounts with balance not
exceeding -------- and total credits is not expected to exceed -----
A) 40000 & 80000 B) 40000 & 100000 C) 50000 & 100000 D) No cap E) None
7. Preservation period for records pertaining to identification documents obtained

while opening the account is ----------------
A) 3 years after the business relationship is ended B) 10 Years after the business
relationship is ended C) 20 years after the business relationship is ended D) 10
years from the date of opening of the account E) None
8. Loans to food and agro-based processing units with investments in plant and
machinery upto ------ is treated as priority sector advance.
A) 1 crore B) 5 crore C) 10 crore D) 50 crore E) None
9. As per recommendations of the Prime Minister’s Task force, the allocation of 60% of
the MSE advances to the micro enterprises is to be achieved in 2010-11 and 2011-12
…..
A) 40% & 50% B) 45% & 50% C) 50% & 55% D) 55% & 60% E) None
10. The limit for collateral free loans to the Micro and Small Enterprises is ---- ?
204

A) 10 lakhs B) 5 lakhs C) 2 lakhs D) 100 lakhs E) None
11. CDR of Suit Filed accounts -- Consent of ---- is required ?
A) 75% Creditors by Value and 60% Creditors by Number

B) 60% Creditors by Value and 75% Creditors by Number
C) 50% Creditors by Value and 75% Creditors by Number
D) 50% Creditors by Value and 60% Creditors by Number
E) None
12. Which of the following statement is correct with regard to recently introduced
system of computer generated acknowledgement for cash receipts at the branches?
A) Dispensation of counter-foil B) Applicable to receipts of below Rs.50000 only

C) Acknowledgment is to be signed by the cashier only D) Applicable to Deposit
accounts only E) None
13. After taking possession of the immovable property, copy of the possession notice
is to be published in two local newspaper not later than ----- days
A) 7 days B) 15 days C) 30 days D) 60 days E) None
14. Collateral Security on Agriculture loans is waived upto ------ ?
A) 25000 B) 50000 C) 100000 D) 200000 E) No collateral required
15. AB Visa Platinum Card ---- Annual Subscription Fee is not levied if the card usage
is --------------- or ------------ transactions done in the previous year.
A) 20000 & 12 B) 30000 & 18 C) 25000 & 18 D) 50000 & 12 E) None
16. Cash Budget System is useful in case ------------------
A) Service Industries B) Where the fluctuations in Current Assets and Liabilities are
low C) Where fluctuation in current assets and current liabilities is wide
D) None
17. Stock & Receivable audit for accounts having ‘A’ rating and above is Borrowal
accounts with aggregate fund and non-fund based working capital limit of ------- and
above from our Bank out of which fund based limits are more than ---
A) 1 crore & 40% B) 2 crore & 50% C) 5 crore & 50% D) 10 crore & 50%
E) None
18. Which of the following sector is not eligible for interest subvention of 2% on
Rupee Export Credit
A) Leather B) Handloom C) Textiles D) Jute E) Gems & Jewellary
19. Current Ratio on Turnover Method & MPBF
A) 1.15 & 1.33 B) 1.25 & 1.33 C) 1.15 & 1.30 D) 1.50 & 1.30 E) None
20. Penalty under Right to information act if not furnished within 30 days
A) 100 per day B) 250 per day subject to maximum of 25000 C) 250 per day
D) No penalty to be levied E) None
205

21. Within how many days Bank has to reimburse the customers with the amount
wrongfully debited on account of failed ATM transactions and compensation for not
crediting the same within the stipulated period?
A) 10 days & 100 per day B) 12 days & 100 per day C) 12 working days & 100
per day D) 12 days & 100 per day or not exceeding the transaction amount
E) None
22. Bank’s goal for Reduction by recovery/up-gradation in existing NPA accounts and
recovery in technical written off accounts for the year 2010-11.
A) 110 cr & 270 cr B) 270 cr & 110 cr C) 250 cr & 120 cr D) None
23. Interest Subsidy of 1% on Housing Loans for the first year is available to the
borrowers where the loan amount does not exceed ------ and cost of house should be
within ------
A) 10 lakhs & 15 lakhs B) 10 lakhs & 20 lakhs C) 10 lakhs & 25 lakhs

D) 10 lakhs & No cap E) None
24. Interest Subvention of 1.5% on short term crop loans for 2010-11 and additional
subvention of 2% for proper paying farmers is available to Public Sector Banks on the
condition that the effective rate of interest on such loans to farmers will be ------
A) 7% B) 8% C) 5% D) 4% E) None
25. In case of Whole Turnover Packing Credit insurance, “Report of Default” in respect
of an account shall have to be submitted by the branches within ____ from the date of
calling up of the advances by the branch or within ------ from the due date/extended
due date of the outstanding Packing Credit advances as the case may be, whichever of
the two is earlier in point of time.
A) 1 month & 2 months B) 1 month & 4 months C) 2 months & 4 months

D) 2 months & 2 months E) None
26. Present minimum limit for RTGS transactions is ------
A) 1 lakh B) Below 2 lakh C) 5 lakh D) Above 2 lakh E) None
27. NEFT batches on Week days and on Saturday
A) 9 & 4 B) 11 & 6 C) 10 & 5 D) 11 & 5 E) 12 & 6
28. The validity period of Cheque is mentioned in
A) BR Act B) RBI Act C) NI Act D) IT Act E) None
29. The limitation period under Consumer Protection Act
A) 30 days B) 60 days C) 90 days D) 180 days E) 2 years from cause of action

30. Commission on receipts relating to Govt. Business
A) 25 per transaction B) 30 per transaction C) 45 per transaction

D) 60 per transaction E) 0.50% of the transaction or 45 whichever is higher
31. ANBC means
A) NBC plus investments made by banks in non-SLR bonds held in HTM category
206

B) NBC plus investments made by banks in SLR bonds held in HTM category
C) NBC plus investments made by banks in non-SLR bonds held in HFT category
D) NBC plus investments made by banks in non-SLR bonds held in AFS category
E) None
32. Subsidy received for SGSY loan accounts is kept in ---------------
A) Adjusted to Loan Account B) Will be paid to borrower C) Fixed Deposit

D) Sundry Suspense Account E) Others
33. Maximum Project cost under USEP of SJSRY
A) 1 lakh B) 2 lakh C) 5 lakh D) 10 lakh E) 50000
34. CGTMSE cover for limit of 80 lakhs in case of normal borrower
A) 40 lakhs B) 60 lakhs C) 65 lakhs D) 52.50 lakhs E) None
35. Claused Bill of Lading refers to
A. Declaring that some of the goods are spoiled/torn
36. The following of which are kept at 6% by RBI
A) Repo Rate B) SLR C) Bank Rate D) CRR E) CRR and Bank Rate
37. Risk Weightage on Consumer Credit/Credit Cards
A) 50% B) 75% C) 100% D) 125% E) None
38. Minimum and Maximum period of Certificate of Deposits
A) 15 days & 1 year B) 30 days & 1 year C) 7 days & 1 year

D) 7 days & no limit E) None
39. Purchasing Bank of an NPA asset can sold it to other Banks after ------ months
A) 12 months B) 15 months C) 24 months D) Any time E) None
40. Customer does not keep Cheque book under lock and key. One cheque was stolen
and forged and payment made against the same.
A) Customer is liable since he is negligent B) Bank is not liable as the cheque was
stolen C) Bank is liable since the payment is made against forged signature
D) None
41. M/s. XYZ Company approached the bank for a term loan of Rs.300 lakhs for
purchase of Machinery repayable in 6 years. The interest on Term Loan is 12% p.a.
The Net Profit of the company is Rs.54 lakhs and the depreciation on fixed assets is
Rs.48 lakhs. What is the DSCR?
A) 1.60 B) 1.72 C) 1.35 D) 1.80 E) None
42. Loans not exempted from Base Rate Purview?
A) Consortium Advance B) Deposit Loans C) Export Credit

D) Loans to staff members D) DRI Loans E) None
207

43. Under UCP 600, bank can accept/reject documents within maximum of --- days.
A) 5 Banking days B) 7 days C) 10 days D) 15 days E) None
44. Which of the following is not prescribed in Narasimhan Committee on Banking

Reforms?
A) Deregulation of Interest Rates B) Prudential Accounting Norms C) Obtaining

Photographs of Customers D) Liberalized Branch Expansion E) Bank Mergers
45. Which of the following is not correct regarding Safe Deposit Lockers?
A) Branch need not issue acknowledgement B) Branch to maintain wait list

C) Branch to provide agreement copy D) Branch may keep fixed deposit to meet
locker rent E) all
46. Margin on loan against FCNR (B) --- if the maturity period is less than one year
and if the maturity period is more than one year
A) 15% & 25% B) 10% & 20% C) 5% & 10% D) 25% irrespective of tenor of
the deposit E) Discretion of the Bank
47. Which of the following facility cannot be offered to visually challenged persons?
A) Cheque Book B) Debit Card C) ATM Card D) Locker E) All
48. Financial Inclusion does not cover the following
A) Access to Banking Services B) Opportunity to avail credit C) Low income group

D) Providing access to ATM E) Organizing High Income Group
49. Provision Coverage ratio of the Bank as on 31.03.2010 is ---- as against RBI
stipulated percentage of ------ as on 30.09.2010
A) 85 & 70 B) 90 & 70 C) 91.56 & 70 D) 95 & 70 E) None
50. Interest subsidy on Education Loans is allowed only where the family income of the
house-hold should not be more than
A) 2.5 lakh per annum B) 3 lakhs per annum C) 4 lakhs per annum
D) 4.5 lakhs per annum E) 6 lakhs per annum
51. TDS is to be deductible on which of the following account
A) NRE SB B) FCNR C) NRE Term D) NRO SB E) None
52. If Inward remittance of Foreign Currency is more than -----, it should be paid
through Account only.
A) USD 500 B) USD 1000 C) USD10000 D) USD 15000 E) None
53. In case of payment of Fake DD, who has to lodge complaint with police, when it is
identified as fake upon presentation – as per recent IBA guidelines.
A) Issuing Bank B) Collecting Bank C) Purchaser of the Draft D) Beneficiary

E) Paying Bank
208

54. Innovative Perpetual Debt Instruments should not exceed ------ of Tier I capital
and upto ---- can be raised in Foreign Currency
A) 50% & 50% B) 15% & 50% C) 49% & 15% D) 15% & 49% E) None
55. If interest debited on a loan account in a quarter is not recovered, when the same
can be identified as NPA.
A) 30 days B) 60 days C) 90 days D) 180 days E) None
56. When can a Bank review its Investment Portfolio (HTM)?
A) Half-yearly 30th sep & 31st Mar B) Half-yearly 30th June & 30th December
C) Yearly – Jan to December D) Yearly – First Quarter E) None
57. Customer Service Standing Committee Meeting does not covers
A) Customer Grievances B) Staff matters C) Credit D) New Products E) B,C & D
58. CIBIL does not collect information on the following customers
A) Commercial Borrowers (Corporates/MNCs/SMEs) B) Consumer Borrowers

(Individuals) C) Government Agencies D) A & B E) A & C
59. In exceptional circumstances, with the approval of the Board (individual & Group
borrowers), additional exposure up to a maximum of further 5% of Capital funds is
permitted
A) Subject to Borrower consent B) Disclosure in Bank’s Annual Report

C) Not permitted D) A & B E) None
60. Rate of Interest in Call Money Market
A) Bank Rate B) LIBOR C) MIBOR D) Market Rate E) None
61. Advances covered by ECGC guarantee – How much provision to be made
A) No provision is required B) Provision is required only in case of NPA accounts C)

Provision is required for the balance in excess of the amount covered under
ECGC D) None
62. When Current Liabilities are more than Current Assets ….
A) Interest burden is less B) Company can meet its obligations C) Company may
not meet its obligations D) Increased Networth E) None
63. Why ‘A/c Payee’ cheques are to be credited the payee’s account only.
A) To protect under section 131 of NI Act B) To comply KYC guidelines C) RBI

guidelines D) To avert fraudulent conversions E) C & D
64. Business Correspondent should not undertake the following:
A) Disbursal of small value credit B) Recovery of Principal/interest

C) Collection of small value deposits D) Small value remittances (Inward /
Outward) E) Collection of fee for extending services from the customers
65. Cap on Rate of Interest on FCNR deposits
209

A) LIBOR + 1.75% B) LIBOR + 1% C) LIBOR + 2% D) LIBOR – 0.50%
E) LIBOR – 0.75%
66. Which one of the following is not excluded while covering export finance insurance
under ECIB (WTPS)?
A) Advances granted for export made on deferred terms of payment

B) Advances granted to Government Companies
C) Advances granted against exports under Letters of Credit
D) Advances to exporters against export entitlements
E) Consortium advances
67. If the complaint is resolved within ________hours the same need not be
Reported for the purpose of further monitoring/follow-up.
A) 24 hours B) 36 hours c) 48 hours d) none of the above
68. As per AML norms, suspicious transactions are to be reported within_____days:
A) 5 days B) 10days C) 7 days D) 15 days E) 30 days
Descriptive Questions
1. What are the recent guidelines (Nov 2010) of RBI with regard to RTGS, Housing
Loans and Monetary Policy?
2. As per RBI guidelines, what is the percentage of Weaker Section advances to the
total Priority Sector? Name five categories belonging to Weaker Sections.
3. Under what circumstances, the Banking Ombudsman can reject the complaint?
4. Mention the steps for calculation of provisions for Doubtful Asset as on 31.03.2008,
where the liability is Rs.35 lakhs and the value of the security is Rs.25 lakhs.
5. What are the innovative strategies that a branch can adopt to attract ladies of a
town to mobilize 400 accounts?
6. A cheque issued to X was wrongly credited to Y. Y withdrawn the amount and
closed the account. As a Branch Manager, how you deal with the case?
7. “A” stood as guarantor for loan given to “B”. When Bank proceeds against “A”, he
objects with the reason that Bank has not acted properly since “B” sold the
hypothecated assets to X. How to deal with the case?
8. What is Repo Rate? What is the impact of the recent RBI changes in Repo and
Reverse Repo rates? How it is different from other RBI controls?
9. What are the penalties under section 138 of N.I.Act in case of dishonor of cheque
for insufficient funds?
10. Salient features of Liberalized Remittance Scheme.
210

Question Bank
1. The present rate of service tax including cess is
a) 12.36% b) 12% c) 10.30% d) 10% e) None of the above
2. CDR covers the accounts having the following minimum and maximum liability.
a) Rs.1 crores & Rs.10 crores b) Rs.10 crores & Rs.100 crores c) No minimum &
maximum Rs.100 crores d) Rs.10 crores and no ceiling on maximum e) None
3. Banks obtain photograph at the time of opening of the account with a view to
a) Avoid benami accounts b) Verify the identity of the customer c)

Verify with police records d) a & b e) a to c
4. Service charges levied are to be displayed by the bank in
a) Bank’s own Website b) RBI Website c) Branch Premises d) IBA Website e) a to c
5. Interest rate on pre-shipment credit up to 270 days should be BMPLR + or –
a) 0.50% b) 1.00% c) 1.5% d) 2.50% e) None
6. The form SDF is used for exports where
a) Custom office is not computerized b) Custom office is computerized c) Software d)

Sent by Post e) None of the above
7. Banks to submit Wilful Defaulters list to
a) RBI with all accounts irrespective of liability b) CIBIL c) RBI where the liability is
Rs.25 lacs & above d) Banking Division, New Delhi e) None of the above
8. Banks are required to submit CTR (Cash Transaction Report) to ------- by ----- of
succeeding month.
a) FIU, 30 days b) FIU, 15 days c) FIU, 7 days d) RBI, 7 days e) RBI, 15 days
9. Premium payable on deposit insurance on every Rs.100 per annum is
a) 10 paise b) 5 paise c) 25 paise d) 50 paise e) None of the above
10. Bank introduced e-trade (online trading) in association with
a) NSE b) CDSL c) M/s.Religare Securities Ltd. d) M/s.Karvy Securities e) None
11. What is the provision to be made for the financial year ending March 2010 on loan
account which had become out of order in the month of December 2007?
a) 10% b) 20% c) 30% d) 50% e) 100%

12. Who is not eligible to convert general crossing to special crossing?
a) Holder b) Drawer c) Payee d) a & b e) None of the above
211

13. Collateral security is not required for agriculture loans up to
a) Rs.10000 b) Rs.25000 c) Rs.50000 d) Rs.100000 e) Rs.300000
14. Banks can create assignment on
a) Book Debts b) Stocks c) Land & building d) Deposits e) Immovable
15. Banks are required to preserve old records as per
a) BR Act b) RBI Act c) Indian Contract Act d) NI Act e) Evidence Act
16. Tax Deduction at Source (TDS) is exempted to
a) Savings b) Fixed c) NRE d) Recurring e) c & d
17. What is the maximum loan that can be allowed to farmer against agriculture
produce stored in warehouse?
a) Rs.50000 b) One Lakh c) to the extent of production loan availed d)

Ten Lakh e) Loan can not be allowed
18. Which is statement is not correct with regard to advances against shares?
a) Maximum loan allowed is Rs.10 lacs against physical shares

b) Maximum loan allowed is Rs.20 lacs against demat shares
c) Margin requirement is 50% for physical shares
d) Margin requirement is 25% for demat shares
19. Garnishee order is not applicable
a) Credit balance in SB b) Credit balance in CD c) Credit balance in Cash Credit

account d) Term Deposits in the Joint names e) None of the above
20. What is the minimum and maximum period for fixed deposit of Rs.500000 in case
of individuals?
a) 7 days & 10 years b) 15 days & 10 years c) 15 days & 5 years d) discretion of
the bank e) None of the above
21. Exposure ceiling for infrastructure projects for single and group are
a) 20% & 50% of capital fund b) 15% & 40% of capital c) 5 times of net worth
d) 15% & 40% of capital fund e) None of the above
22. The method of levying interest on agriculture advances is
a) Monthly b) Quarterly c) Half-yearly d) Yearly e) None
23. RBI injects liquidity through
a) Increase Bank Rate b) Reduction of Repo Rate c) Reduction of Reverse Repo

d) Increase CRR e) Increase SLR
212

24. Provisioning norms are not applicable to loans sanctioned to
a) Agriculture b) Exports c) DRI d) Govt. Sponsored Schemes e) Against Deposits
25. As per Basel-II norms, banks to move to new approach to assess Operational Risk
with effective from 01.04.2010
a) Standardized Duration b) Standardized c) Internal Rating Based d)

Internal Model e) None of the above
26. Fixed Deposit is maturing on Sunday. It shall be deemed to be payable on
a) Monday b) Immediate succeeding working day c) Preceding Day i.e. Saturday d)

a&b e) None of the above
27. What is the maximum amount that can be allowed to Software Development under
priority sector?
a) Rs.10 lacs b) Rs.20 lacs c) Rs.100 lacs d) Not eligible to cover under priority
28. Exporter may avail pre-shipment credit at the request of the issuing bank on the
basis of
a) Green Clause Credit LC b) Revocable LC c) Red Clause LC d) Back to Back LC
29. A person appointed by the court to look after the properties of the insolvent person
is called
a) Administrator b) Liquidator c) Assignee d) Attorney e) None of the above
30. Banker is required to disclose the details of the account under the following acts:
a) RBI Act b) BR Act c) Baker’s Books of Evidence Act d) IPC e) a to c
31. Banks are required to pay a penalty of Rs.100/- per day for the delayed settlement
of ATM failed cash transactions if not resolved within ………. days from the date of
receipt of complaint from the Card Holder by the Card Issuing Bank.
a) 7 Days b) 10 Days c) 12 Working Days d) 30 Days e) None of the above
32. Clayton’s rule applies to
a) Deposit Accounts b) Demand Loans c) Term Loans d) Overdrafts / Cash credits

33. What is the percentage of DRI advances should go to Rural/Semi Urban Branches
a) 50% b) 25% c) 66.66% d) 75% e) None of the above
34. What is the maximum amount that Bank Branch can extend instant credit to the
customers against outstation cheques?
a) Rs.15000 in Rural/Semi Urban Branches b) Rs.25000 in Urban/Metro Branches c)

Rs.10000 at all Branches d) Discretion of the Branch Manager e) None
213

35. Which of the following statements are not correct with regard to MSME?
a) Investments in Plant & Machinery is to be taken as criteria for Manufacturing

Enterprises b) Investment in Equipment is to be taken as criteria for Service
Enterprises c) No collateral security or third party guarantee is required for loans up to
Rs.5 lakhs d) No collateral security or third party guarantee is required for loans up to
Rs.25 lakhs in case of Tiny Sector e) None of the above
36. One of your SB account holder requested to include his wife and daughter as
nominees after one year opening of the account. Will it be accepted?
a) It can be accepted since the nominees are the family members of the depositor b)
Can not be considered since the request is not received at the time of opening of
account c) Can be considered with 50% share each d) Nomination should be made
only in favour of single name. Hence can not be considered e) None of the above
37. What is the relationship between the Bank and Overdraft Customer where the
account is showing credit balance?
a) Creditor & Debtor b) Principle & Agent c) Trustee & Beneficiary

d) Debtor & Creditor e) None of the above
38. The objective of RTGS is to address the following risks
a) Settlement Risk b) Systemic Risk c) Legal Risk d) Credit Risk e) a & b
38a. UCPD guidelines are issued by
a) FEDAI b) RBI c) Ministry of Finance d) IBA e) ICC Paris
39. What is the maximum period for which FCNR deposit can be opened?
a) One Year b) Two Years c) Three Years d) Five Years e) Ten Years
40. Which of the following can not be a nominee?
a) Illiterate Person b) Minor c) NRI d) HUF e) None of the above
41. In case of dishonour of cheques on financial grounds, the holder is required to

issue notice to the drawer within ………. Days to claim remedy under section 138 of NI
Act
a) 7 Days b) 30 Days c) One Year d) Three Years e) None of the above
42. Bank has right to cancel the allotment of locker, if the customer does not operate
or surrender within ………. despite notice sent to the locker holder.
a) Three Years b) Five Years c) Ten Years d) Banks discretion e) None
43. The minimum amount of deposit under Certificate of Deposit is
a) One Lakh b) Two Lakh c) Five Lakh d) Ten Lakh e) None
44. FCNR account can not be allowed to open with
a) Euro b) US Dollar c) Singapore Dollar d) Japanese Yen e) Australian Dollar
214

45. Which of the following is not a negotiable instrument as per section 13 of NI Act?
a) Treasury Bill b) Commercial Paper c) Certificate of Deposit d) Bill of Lading e)

None of the above
46. Apiculture relates to
a) Mulberry Production b) Apple Production c) Flower Production d) Bee-keeping e)

Fruit Production
47. Interest calculation procedure for RD Plus is
a) As that of Fixed Deposits b) As that of Recurring Deposits c) As that of FCNR

Deposits d) As that of Savings Bank Deposits e) None of the above
48. Andhra Bank is the Corporate Agent for selling of
a) LIC Life Policies b) IndiaFirst Life Insurance Company Limited c) a & b d) None
49. What is the rate called when the Indian currency is shown as fixed and foreign
currency is shown as fluctuating?
a) TT Rate b) Selling Rate c) Direct Rate d) Indirect Rate e) None of the above
50. What is the maximum spread that is allowed by banks to levy on borrowers
besides BMPLR?
a) 5% b) 3% c) 3.5% d) Not exceeding Bank Rate e) Discretion of the Bank
51. Allotment of Safe Deposit Locker is not allowed to
a) Illiterate b) Minor c) Charitable Trust d) HUF e) NPA Borrower
52. Borrowers who are having satisfactory dealings with bank for a minimum period of
………. Years are allowed to avail LUCC facility.
a) 5 Years b) 3 Years c) 2 Years d) 1 Year e) None of the above
53. Bank extends financial assistance to borrowers under AB Equipment Scheme for
the purpose of
a) Working Capital limits to Contractors b) Purchase of second hand machinery by

contractors c) Purchase of New equipment to service industry including contractors d)
b&c e) None of the above
54. Which of the following statement is not true with regard to AB Swarnabharana
scheme?
a) Purchase of Gold / Gold ornaments by Women only.

b) The minimum loan amount is Rs.20000/- and the maximum loan is Rs.2 lac.
c) No collateral security is required for any amount.
d) Maximum repayment period is 60 months.
e) Co-obligation of father/husband or suitable third party guarantee is required.
55. The applicable cheque book charges for Current Account is
a) Rs.2 per leaf b) Rs.3 per leaf c) Rs.3 per leaf in MICR center and Rs.2 per leaf in
Non MICR center d) 25 free cheque leaves and Rs.3 per leaf thereafter e) None
215

56. High Debt Service Coverage Ratio (DSCR) indicates
a) Unable to meet the installment obligations b) Able to meet payment of

installments comfortably c) Liquidity problem d) a & c e) None of the above
57. X Company approached the Bank for sanction of working capital limit of Rs.800
lakhs and the Current Ratio of the company is 1.15:1. What is the course available to
the branch?
a) Proposal can be considered as the current ratio is acceptable.

b) Proposal can be declined since current ratio is below 1.33:1.
c) Advise the company to increase capital to bring the current ratio to 1.33:1.
d) Proposal is to be referred to next Higher Authority for sanction.
e) None of the above.
58. Which of the following statement is not true with regard to Capital Gains Deposit
Scheme?
a) Income Tax Assesses who are eligible for exemption under section 54 of the IT
Act are alone can open account with Banks.
b) Accounts can be opened under Savings, Fixed and Term Deposits.
c) Cheque book can be issued to eligible accounts.
d) No lien or deposit loan is allowed against such deposits.
59. Which of the following features are not applicable to AB Tax Saver Scheme?
a) Tax exemption is available for the deposit amount under section 80C of IT Act b)
Period of deposit is allowed up to 5 Years c) TDS is applicable, if interest payment is
above Rs.10000/- in a financial year d) Maximum amount of deposit allowed is Rs.5
lakhs e) c & d
60. Branches to obtain Application and ID proof while selling Gold Coins against cash
for the following:
a) For all transactions irrespective of the amount b) Transactions of Rs.50000/- &

above for existing customers c) Transactions of Rs.20000/- to Rs.49999/- in case of
non-customers d) b & c e) None of the above
61. Public Sector Banks are required to follow the under mentioned security norms
while extending Educational Loans to students to pursue higher studies abroad?
a) No collateral security is required for loans up to Rs.10 lakhs provided the student
pursuing the studies in Premier Institutions abroad b) Parent co-obligation only
required for loans up to Rs.4 lakhs c) For loans above Rs.4 lakhs and up to Rs.7.5
lakhs, satisfactory third party guarantee is required besides parent co-obligation d)
Collateral security of suitable value (minimum of 100% of loan) is to be obtained for
all loans exceeding Rs.7.5 lakhs e) b, c & d
62. Educational Loans are exempted from the following charges.
a) Processing & Administrative charges b) Upfront & Prepayment charges c)

Processing charges only d) a & b e) It is left to the Discretionary of the Bank
216

63. A fall in Quick Ratio in comparison with Current Ratio indicates
a) High Inventory Holdings b) Low Inventory Holdings c) Decrease in Current

Liabilities d) None of the above
64. Financial statements includes
a) Balance Sheet b) Profit & Loss Account c) Cash & Funds Flow statements d)
a & b e) a, b & c
65. Which of the following statement is not correct?
a) All accounts with working capital limit of Rs.100 lakhs & above are required to
submit MSOD every month b) QIS-II is to be submitted every Quarter within six
weeks from the close of the quarter c) QIS-III is to be submitted every Half-year
within two months from the close of the half-year d) Non submission of MSOD, QIS-II
and QIS-III attracts penal interest e) None
66. Banks are permitted to take over borrowal accounts from other Banks & Financial
institutions provided
a) Account should be Standard Asset with positive net worth b) Copy of the borrowal
account for preceding 6 months is to be obtained c) P&C report is to be obtained from
other bank before disbursement d) Branch to take approval from next sanctioning
authority e) All above
67. The guidelines on extending Adhoc Limits to the borrowers are
a) Allowed in fund and non-fund based limits b) Can be allowed maximum of 3 times
during the validity of limit and the maximum period allowed is 3 months for each
adhoc limit c) Adhoc Limit can be allowed up to 20% of the sanctioned working capital
limits to all eligible borrowers d) a & b e) b, c & d
68. Which of the following statement is not true with regard to TOD?
a) Can be allowed in Savings Bank Account b) Can be allowed in Current Deposit

Account c) Can be allowed only 3 times in a account in a year d) Should not be
allowed in staff accounts e) None of the above
69. Sanction of Tractor Loans to farmers under Kisan Bandhu scheme, the eligibility
criteria is
a) 3 Acres of Wet / Double cropped land b) 6 Acres of Dry / Single cropped land c)
Minimum of 2000 working hours per year on borrower land d) a & b e) b & c
70. The applicable net interest rate (BMPLR - Subsidy) on loans sanctioned under
Surya Shakthi Scheme is
a) 2% for individuals b) 4% for institutions c) BMPLR for industrial & commercial

organizations d) a & b e) None of the above
71. With regard to lending to farm sector, the guidelines on obtention of No Due / No
Objection certificate are
a) Banks should not insist for the above certificate for loans up to Rs.50000/- b)
No charges are to be levied for issuance of certificate c) Self declaration from the
farmer is to be obtained d) All above e) None of the above
217

72. OTS Small Loans is applicable to
a) All loans of Rs.2 lacs & below, which are classified under NPA as on 30.06.2009 b)
All loans up to Rs.5 lacs which are not backed by tangible security c) All suit filed
accounts up to Rs.10 lacs where the suit is pending for more than 3 years d) All
Technical Written-off accounts irrespective of liability e) a & b
73. AB Speed way is meant for
a) Inward remittances from Middle East Countries b) High Value remittances within
India c) Inward & Outward Remittances from/to USA d) Inward Remittances from
USA only e) None of the above
74. RBI extending incentives to Banks for the following services
a) Adjudication of Mutilated Bank Notes b) Exchange of Soiled Notes c)

Distribution of Coins over the counter d) Establishment of Coin vending Machines e)
All above
75. Which of the following statement is not correct with regard to OTS MSEME Loans?
a) It covers all NPA & Technically Written-off accounts of above Rs.2 lacs & up to
Rs.10 crores as on 30.09.2009 b) In case of Loss assets the formula is 90% of Real
Account balance as on date of NPA minus recoveries made after date of NPA c) The
scheme covers the loans where fraud and willful default is involved d) Validity period
of the scheme is 30.06.2010 e) Sanction powers are rest with ZO/HO
76. What charges the bank levy to the Current Account customers for non
maintenance of Quarterly Average Balances?
a) Metro/Urban Branches - Rs.300/- Per Quarter b) Rural / Semi Urban Branches –

Rs.250 per quarter c) Rs.200/- per quarter irrespective of branch location d) a & b
e) No charges
77. Scheme of payment of ex-gratia in lieu of appointment of dependents on

compassionate grounds for officers is
a) Minimum of Rs.500000/- b) Maximum of Rs.800000/- c) Maximum of

Rs.700000/- d) Maximum of Rs.600000/-
78. Which of the following statements are not true with regard to Locker operations?
a) The rent for “A” type locker is Rs.1000/- p.a. at all branches b) Rentals for in-built
lockers shall be 25% more than the approved rents c) Levy additional charge of
Rs.50/- per transaction where the operations are beyond 10 in a quarter d)
Staff /Retired staff hiring the lockers eligible for 20% concession in rent e) None
79. GSLI scheme covers risk (other than accident) of General Manager Cadre up to
a) Rs.150000/- b) Rs.120000/- c) Rs.100000/- d) Rs.90000/- e) Rs.60000/-
80. Mascot of our Bank represented by
a) Corporate Slogan b) Logo c) Vision d) Mission e) Dolle
81. All Corporate entities including Banks are required to remit taxes electronically
provided the sales turnover or gross receipts from business exceeds Rs………. Lakhs in
the previous year.
218

a) Rs.10 lakhs b) Rs.20 lakhs c) Rs.30 lakhs d) Rs.40 lakhs e) Rs.100 lakhs
82. Diamond Dollar Account can be opened
a) By the company dealing with exporting of rough/cut diamonds b) Whose turnover

shall be Rs.5 crore & above in the preceding three licensing years c) Current account
in US Dollars only d) a & b e) a, b & c
83. The objective of Cheque Truncation scheme is
a) To implement Speed Clearing at all places b) Online image based clearing system
by dispensing movement of instruments across centers c) To arrest frauds d) All
above e) None
84. Branch sanctioned OCC limit of Rs.10 lakhs against hypothecation of stocks worth
Rs.15 lakhs with 30% margin. What would be the notional drawing power when the
present value of stocks is Rs.20 lakhs.
a) Rs.10 lakhs b) Rs.14 lakhs c) Rs.20 lakhs d) Rs.10.50 lakhs e) None
85. The funds available under short term sources is greater than short term uses,
which indicates
a) Low Current Ratio b) High Debt Equity Ratio c) Higher Current Ratio d)
Low Debt Equity Ratio e) None
86. Most appropriate method to pay dividends to the share holders across the country
is through
a) NEFT b) RTGS c) ECS – Debit d) ECS – Credit e) Payable at Par Cheques
87. What would be the applicable interest rate payable to the legal heirs of the
deceased on overdue period of matured Term deposit?
a) SB Interest Rate b) Contracted Interest rate of matured deposit c) Simple

interest applicable to FD for the period the deposit remained with bank after maturity
d) Applicable FD interest will be paid if renewed for further period e) No interest
88. Stamped receipt is to be obtained for all cash transactions of above
a) Rs.100/- b) Rs.500/- c) Rs.1000/- d) Rs.2000/- e) Rs.5000/-
89 The net of Exports & Imports and the services including foreign inward remittances
forms part of
a) Balance of Payments b) Capital Account c) Current Account d) Trade Surplus e)

Invisibles
90. Current Ratio of 1.33:1 was recommended by
a) Tandon Committee – First Method b) Tandon Committee – Second Method c)

Shetty Committee – Cash Budget System d) Nayak Committee - Turnover Method e)
None of the above
91. Under Door Step Banking, Banks are extending Cash delivery service to
219

a) Individual Customers b) Illiterate Customers c) Remote Rural Public d) Corporate
/ Government / PSUs e) None of the above
92. Which of the following documents do not attract stamp duty?
a) Promissory Note b) Mandate c) Power of Attorney d) Form-A e) None
93.Banks are empowered to take possession of securities (other than rural properties)
under provisions of……………Act, when the borrower fails to repay the loan as per the
agreement.
a) Indian Contract Act b) Revenue Recovery Act c) DRT Act d) SARFAESI Act e)
Banking Regulation Act
94. What is the net interest rate (Interest Rate minus Interest Subvention) applicable
for short term agriculture production loans (Crop Loans) up to Rs.3 lacs for the year
2009-10?
a) BMPLR b) BMPLR – 1% c) 10% d) 8% e) 7%
95. BMPLR of the Banks will be fixed by
a) Indian Banks Association b) Reserve Bank of India c) Planning Department of

the Bank d) Asset Liability Committee (ALCO) e) Discretion of the Bank
96. While renewing the credit limits of the company, you find that the Debt Equity
Ratio is 3 compared to that of 2.5 in the previous year. It indicates
a) Increase of Profit enabled the Company to add to Reserves b) Decrease of Debt

Burden on the Company c) Adverse Impact on Profit on account of increased interest
burden d) None of the above
97. Banking Codes and Standards Board of India (BCSBI) deals with
a) Inspection & Audit of Banks b) Funds & Investments in Banks c) Sanctioning of

Loans d) Customer Service e) Banking Ombudsman
98. Banks can issue draft against accepting cash up to
a) Rs.50000/- b) Rs.20000/- c) Rs.100000/- d) Rs.49999/- e) Any amount
99. Transaction Password relates to
a) Core Banking b) ATM operations c) Internet Banking d) Tele banking e) None
100. Capital to Risk weighted Assets Ratio (CRAR) of our Bank as on 31.12.2009.
a) 12.55% b) 13.75% c) 14.95% d) 15.25% e) None
220

Question Bank - Key
Question Answer Question Answer Question Answer

1. C 34 D 67 E
2. D 35 E 68 E
3. B 36 D 69 D
4. E 37 D 70 A
5. D 38 E 71 D
6. E 39 D 72 A
7. C 40 D 73 D
8. B 41 B 74 E
9. A 42 A 75 C
10. C 43 A 76 C
11. C 44 C 77 B
12. E 45 E 78 A
13. D 46 D 79 B
14. A 47 D 80 E
15. A 48 B 81 D
16. E 49 D 82 E
17. D 50 C 83 B
18. D 51 B 84 B
19. D 52 B 85 A
20. A 53 C 86 D
21. A 54 C 87 A
22. D 55 B 88 E
23. B 56 B 89 C
24. E 57 D 90 B
25. B 58 C 91 D
26. D 59 D 92 B
27. D 60 C 93 D
28. C 61 E 94 E
29. C 62 D 95 D
30. E 63 D 96 C
31. C 64 E 97 D
32. D 65 E 98 D
33. C 66 E 99 C
100 C
Descriptive Questions
1. What is Financial Inclusion? How BC/BF Models are going to help the banks to
achieve the goal?
2. Unique Identification Card Project – Relevance to Banks
3. AB Speed way Scheme
4. Cheque Truncation Scheme
5. Will RTGS and NEFT products help the banks to improve CASA business?
6. How OTS schemes are helpful to the Banks?
7. How Internet Banking is going to help Customers and Banks?
8. Recent guidelines on Nomination
9. Salient features of Liberalized Remittance Scheme.
10. Importance of Loan Policy.
11. Our ATMs are being used by other Bank Card holders. Is it drain on our resources
or beneficial to our Bank?
12. Name the deposit schemes where the interest is exempted from TDS?
13. Is it worth proposition to lend below cost of deposits?
14. Do you feel that SARFEASI Act is helping the banks in recovery of Bad Loans?
15. What are the precautions the branches have to take with regard to Intersol
transactions in CBS environment?
16. Corporate guidelines with regard recovery of overdue Agriculture Gold Loans.
221

Banking Statistics at Glance
No. Major Indicators Number As on
1 No. of Schedule Commercial Banks 171 30.06.10
2 No. of Bank Branches 79933 30.06.10
3 No. of ATMs 58850 30.03.10
4 Aggregate Deposits (Crores) 4983000 31.01.11
5 Bank Credit (Crores) 3735000 31.01.11
6 Credit Deposit Ratio (%) 74.95 31.01.11
7 Forex Reserves (Crores) 1233000 31.01.11
No Macro Rates Percentage

1 Bank Rate (w.e.f.29.04.03) 6.00
2 IDBI Minimum Term Lending Rate (w.e.f. 30.01.04) 10.25
3 Saving Bank Rate 3.50
4 Cash Reserve Ratio (w.e.f. 24.04.2010) 6.00
5 Statutory Liquidity Ratio (w.e.f. 18.12.2010) 24.00
6 Repo Rate (w.e.f. 25.01.2011) 6.50
7 Reverse Repo Rate (w.e.f. 25.01.2011) 5.50
No Andhra Bank – Interest Rates Percentage

1 Deposit Rate (500 days to 1000 days) 9.10
2 Base Rate (w.e.f. 05.02.2011) 9.50
3 BMPLR (w.e.f. 05.02.2011) 13.75
222

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पदोन्नित परीक्षा अूैल 2011

आन्ीा बैंक कमर्चारी महािवद्यालय

है दराबाद Hyderabad-500 032

इस पुिःतका को ूःतुत करते हुए हमें बहुत ूसन्नता है ।

We are glad to present this Study Kit for Promotion

ूाचायर् व संकाय सदःय,

Sl. िवषय Topics Page No.

RBI ACT & BANKING REGULATION ACT

01. Present Bank Rate of RBI is

03. RBI was established in the year

04. RBI was nationalised in the year …...

06. The percentage of NDTL, Commercial banks have to maintain as Statutory

08. Scheduled Bank is a

09. RBI Governor is

10. The percentage of the issued share capital of R.R.B. to be subscribed by

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

Instruments Act 1881 4. Acquisition of Banking Companies Act 1970

12. Total No. of nationalised banks today are

13. Our Andhra Bank was nationalised on

15. Nomination facility for payment of depositors money is governed under

NEGOTIABLE INSTRUMENT ACT

17 Which amount is payable when there is a discrepancy in words and figure

18. A crossed cheque with the words ."Not negotiable" means/denote

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

4. The customer's account is opened as per KYC norms

23. Who can cross a cheque

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

31. Whether the following payments can be deemed as Payment in Due

32. An order cheque is payable to a woman in her maiden name Miss

33. An order cheque is payable to Dr M.A. Rahim, MD. He has to endorse it

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

35. Your bank has opened a joint SB Account of A & B payable to E or S. A

36. When a mutilated cheque is presented for payment

37. When a bearer cheque with 2 endorsements is presented for payment

38. Identify the regular endorsement in following cases when payees

39. When an order cheque is presented for payment

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

42. A bill falling due for payment on 15.8.05 is payable on

43. A demand bill dated 15.8.05 is payable on

44. In respect of a demand bill, stamp duty payable

45. Usance bill can be drawn for a maximum period of

46. When a bill is drawn, accepted and endorsed without consideration it

49. Bill of Exchange accompanied by Document of title to goods is known

50. When usance bill of exchange is presented to drawee for acceptance

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

52. A person incompetent to endorse a negotiable instrument

54. When a cheque issued in discharge of debt/liability is dishonoured for

57. When a cheque was wrongfully dishonoured by drawee bank it may

58. Novelty Package Industries (P) Ltd is maintaining 2 current accounts

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

59. Our Bank has returned the capital of ______________amount to Govt

60. What is the percentage of share holding of the Government in the

ANSWERS – BR & NI Act

NOTES ON COMMERCIAL BANKS

2. Commercial Banks have to maintain SLR as per-----------------------------------.

5. Selective Credit Control is

NOTES ON BANKING & NI ACT

पदोन्नित परीक्षा अूेल 2011 के िलए अध्ययन साममी

2. Rights of Holder of a Negotiable Instrument:

3. Privileges of a Holder in Due course (HIDC)

4. Payment in due course: means

5. If payee of negotiable instrument is illiterate person, he may endorse the