T.MUTHUKUMAR., M.Com., M.Phil., CRC, Trichy-12. Muthu_kumar39@yahoo.

com

BANK MANAGEMENT

UNIT:I reference: http://www.iba.org.in/model_deposit.asp

Policy framing planning:

From time to time IBA has been devising model policy on areas of banking to serve as
benchmark and also as guidance material to banks to formulate their own model policies. With
liberalization in the financial system and deregulation of interest rates, banks are now free to
formulate deposit products within the broad guidelines issued by RBI. Accordingly, the Model
Deposit Policy was framed.

"Code of Bank's Commitment to Customers", the comprehensive fair practice code, was released
by RBI Governor, Dr. Y V Reddy on 1st July 2006. The Banking Codes and Standards Board of
India (BCSBI) would monitor the implementation of the Code. Banks are in the process of
adopting the "Code of Bank's Commitment to Customers" a voluntary code.

The Code of Bank's Commitment to Customers makes reference to number of policies governing
bank's products and services. The Managing Committee of IBA was of the view that banks might
need to review some of these policies while implementing the Code. Accordingly, IBA had
formed a Working Group under the Chairmanship of Mr. R S Reddy, Executive Director, Union
Bank of India to draft Model Policy Documents covering areas which find mention in the Code.
To facilitate the task of the Working Group, we had sought feed-back from members on existing
policy documents they have covering various aspects of customer services.

After detailed deliberations on the suggestions received from member banks, Working Group
drafted the following Model Policy Documents;

Model Policy on Collection of Cheques/Instruments

1. Introduction

Keeping in view the technological progress in payment and settlement systems and the
qualitative changes in operational systems and processes that have been undertaken by a
number of banks, the Reserve Bank of India had, with effect from 1st November 2004,
withdrawn its earlier instructions to commercial banks on (i) Immediate Credit of
local/outstation cheques, (ii) Time Frame for Collection of Local / Outstation Instruments
and (iii) Interest Payment for Delayed Collection. The withdrawal of these mandatory
guidelines was expected to enable market forces of competition to come into play to
 improve efficiencies in collection of cheques and other instruments. This collection
policy of the Bank is a reflection of our on-going efforts to provide better service to our
customers and set higher standards for performance. The policy is based on principles of
transparency and fairness in the treatment of customers. The bank is committed to
increased use of technology to provide quick collection services to its customers. This
policy document covers the following aspects:

• Collection of cheques and other instruments payable locally, at centres within

India and abroad.
• Our commitment regarding time norms for collection of instruments.
• Policy on payment of interest in cases where the bank fails to meet time norms for
realization of proceeds of outstation instruments.
• Our policy on dealing with collection instruments lost in transit.

2. Arrangements for Collection:

2.1. Local Cheques

All cheques and other Negotiable Instruments payable locally would be presented
through the clearing system prevailing at the centre. Cheques deposited at branch
counters and in collection boxes within the branch premises before the specified cut-off
time will be presented for clearing on the same day. Cheques deposited after the cut-off
time and in collection boxes outside the branch premises including off-site ATMs will be
presented in the next clearing cycle. As a policy, bank would give credit to the customer
account on the same day clearing settlement takes place. Withdrawal of amounts so
credited would be permitted as per the cheque return schedule of the clearinghouse.
Wherever applicable, facility of high-value clearing (same day credit) will be extended to
customers.
 Bank branches situated at centres where no clearing house exists, would present local
cheques on drawee banks across the counter and it would be the bank’s endeavour to
credit the proceeds at the earliest.

2.2. Outstation Cheques

Cheques drawn on other banks at outstation centres will normally be collected through
bank’s branches at those centres. Where the bank does not have a branch of its own, the
instrument would be directly sent for collection to the drawee bank or collected through a
correspondent bank. The bank would also use the National Clearing services offered by
the Reserve Bank of India at centres where such collection services exist.

Cheques drawn on bank’s own branches at outstation centres will be collected using the
inter-branch arrangements in vogue. Branches which are connected through a centralized
processing arrangement and are offering anywhere banking services to its customers will
provide same day credit to its customers in respect of outstation instruments drawn on
any of its branches in the CBS network.

2.3 Cheques payable in Foreign Countries

Cheques payable at foreign centres where the bank has branch operations (or banking
operations through a subsidiary, etc.) will be collected through that office. The services
of correspondent banks will be utilized in country/centres where the correspondent has
presence. Cheques drawn on foreign banks at centres where the bank or its
correspondents do not have direct presence will be sent direct to the drawee bank with
instructions to credit proceeds to the respective Nostro Account of the bank maintained
with one of the correspondent banks.
2.4 Immediate Credit of Local / Outstation Cheques / Instruments:

Branches / extension counters of the bank will consider providing immediate credit for
outstation cheques / instruments up to the aggregate value of Rs…………. tendered for
collection by individual account holders subject to satisfactory conduct of such accounts
for a period not less than 6 months. Immediate credit will be provided against such
collection instruments at the specific request of the customer or as per prior arrangement.
The facility of immediate credit would also be made available in respect of local cheques
at centres where no formal clearing house exists.

The facility of immediate credit will be offered on Savings Bank / Current / Cash Credit
Accounts of the customers. For extending this facility there will not be any separate
stipulation of minimum balance in the account.

Under this policy, prepaid instruments like Demand Drafts, Interest / Dividend warrants
shall be treated on par with cheques.

In the event of dishonor of cheque against which immediate credit was provided, interest
shall be recoverable from the customer for the period the bank remained out of funds at
the rate applicable for overdraft limits sanctioned for individual customers.

For the purpose of this Policy, a satisfactorily conducted account shall be the one
a) Opened at least six months earlier and complying with KYC norms.
b) Conduct of which has been satisfactory and bank has not noticed any irregular
dealings.
c) Where no cheques / instruments for which immediate credit was afforded returned
unpaid for financial reasons
d) Where the bank has not experienced any difficulty in recovery of any amount
advanced in the past including cheques returned after giving immediate credit.
Bank shall levy normal collection charges and out of pocket expenses while providing
immediate credit against outstation instruments tendered for collection. Exchange charges
applicable for cheque purchase will not, however be charged.
2.5 Purchase of local/outstation cheques

Bank may, at its discretion, purchase local/outstation cheque tendered for collection at the
specific request of the customer or as per prior arrangement. Besides satisfactory conduct
of account, the standing of the drawer of the cheque will also be a factor considered while
purchasing the cheque.

3. Time Frame for Collection of Local / Outstation Cheques / Instruments:

For local cheques presented in clearing credit will be afforded as on the date of settlement
of funds in clearing and the account holder will be allowed to withdraw funds as per
return clearing norms in vogue.

Cheques / Instruments presented in high value clearing (with the minimum value of Rs.1
lac) shall be credited on the same day (applicable only in areas covered by high value /
same day clearing).

For cheques and other instruments sent for collection to centres within the country the
following time norms shall be applied:

a) Cheques presented at any of the four major Metro Centres (New Delhi, Mumbai,
Kolkata and Chennai) and payable at any of the other three centres : Maximum period
of 7 days.
b) Metro Centres and State Capitals (other than those of North Eastern States and
Sikkim): Maximum period of 10 days.
c) In all other Centres : Maximum period of 14 days.
d) Cheques drawn on foreign countries: Such instruments are accepted for collection on
the ‘best of efforts’ basis. Bank may enter into specific collection arrangement with
its correspondent bank for speedy collection of such instrument. Bank would give
credit to the party on credit of proceeds to the bank’s Nostro Account with the
 correspondent bank after taking into account cooling periods as applicable to the
countries concerned.

[Note : The time-limits indicated above may normally be taken as the maximum period
for collection of cheques / instruments. Individual banks can specify shorter time-limits
depending upon the collection arrangements / technology platform used by them.
However, banks with limited network of branches and depending predominantly on
correspondent banks/drawee banks for collection of outstation instruments may
indicate longer time periods based on their experience in the past. If necessary they may
also notify in their policy documents, centres/areas from where they would be giving
credit for collection instrument only upon realisation.]

The above time norms are applicable irrespective of whether cheques/instruments are
drawn on the bank’s own branches or branches of other banks.

4. Payment of Interest for delayed Collection of Outstation Cheques:

As part of the compensation policy of the bank, the bank will pay interest to its customer
on the amount of collection instruments in case there is delay in giving credit beyond the
time period mentioned above. Such interest shall be paid without any demand from
customers in all types of accounts. There shall be no distinction between instruments
drawn on the bank’s own branches or on other banks for the purpose of payment of
interest on delayed collection.

Interest for delayed collection shall be paid at the following rates:

a) Savings Bank rate for the period of delay beyond 7/10/14 days as the case may be in
collection of outstation cheques.
 b) Where the delay is beyond 14 days interest will be paid at the rate applicable to for
term deposit for the respective period.
c) In case of extraordinary delay, i.e. delays exceeding 90 days interest will be paid at
the rate of 2% above the corresponding Term Deposit rate.
d) In the event the proceeds of cheque under collection was to be credited to an
overdraft/loan account of the customer, interest will be paid at the rate applicable to
the loan account. For extraordinary delays, interest will be paid at the rate of 2%
above the rate applicable to the loan account.

It may be noted that interest payment as given above would be applicable only for
instruments sent for collection within India.

5. Cheques / Instruments lost in transit / in clearing process or at paying bank’s

branch:

In the event a cheque or an instrument accepted for collection is lost in transit or in the
clearing process or at the paying bank’s branch, the bank shall immediately on coming to
know of the loss, bring the same to the notice of the accountholder so that the
accountholder can inform the drawer to record stop payment and also take care that
cheques, if any, issued by him / her are not dishonoured due to non-credit of the amount
of the lost cheques / instruments. The bank would provide all assistance to the customer
to obtain a duplicate instrument from the drawer of the cheque.

In line with the compensation policy of the bank the bank will compensate the
accountholder in respect of instruments lost in transit in the following way:

a) In case intimation regarding loss of instrument is conveyed to the customer beyond

the time limit stipulated for collection (7/10/14 days as the case may be) interest will
be paid for the period exceeding the stipulated collection period at the rates specified
above.
 b) In addition, bank will pay interest on the amount of the cheque for a further period of
15 days at Savings Bank rate to provide for likely further delay in obtaining duplicate
cheque/instrument and collection thereof.
c) The bank would also compensate the customer for any reasonable charges he/she
incurs in getting duplicate cheque/instrument upon production of receipt, in the event
the instrument is to be obtained from a bank/ institution who would charge a fee for
issue of duplicate instrument.
6. Force Majeure

The bank shall not be liable to compensate customers for delayed credit if some
unforeseen event (including but not limited to civil commotion, sabotage, lockout, strike
or other labour disturbances, accident, fires, natural disasters or other “Acts of God”, war,
damage to the bank’s facilities or of its correspondent bank(s), absence of the usual
means of communication or all types of transportation, etc beyond the control of the bank
prevents it from performing its obligations within the specified service delivery
parameters.

7. Charging of Interest on cheques returned unpaid where Instant Credit was given:

If a cheque send for collection for which immediate credit was provided by the bank is
returned unpaid, the value of the cheque will be immediately debited to the account. The
customer will not be charged any interest from the date immediate credit was given to the
date of return of the instrument unless the bank had remained out of funds on account of
withdrawal of funds. Interest where applicable would be charged on the notional
overdrawn balances in the account had credit not been given initially.

If the proceeds of the cheque were credited to the Savings Bank Account and was not
withdrawn, the amount so credited will not qualify for payment of interest when the
cheque is returned unpaid. If proceeds were credited to an overdraft/loan account, interest
shall be recovered at the rate of 2% above the interest rate applicable to the overdraft/loan
 from the date of credit to the date of reversal of the entry if the cheque/ instrument was
returned unpaid to the extent the bank was out of funds.

Model Policy For Grievance Redressal In Banks

1. Introduction

In the present scenario of competitive banking, excellence in customer service is the most
important tool for sustained business growth. Customer complaints are part of the
business life of any corporate entity. This is more so for banks because banks are service
organizations. As a service organization, customer service and customer satisfaction
should be the prime concern of any bank. The bank believes that providing prompt and
efficient service is essential not only to attract new customers, but also to retain existing
ones. This policy document aims at minimizing instances of customer complaints and
grievances through proper service delivery and review mechanism and to ensure prompt
redressal of customer complaints and grievances. The review mechanism should help in
identifying shortcomings in product features and service delivery. Customer
dissatisfaction would spoil bank’s name and image. The bank’s policy on grievance
redressal follows the under noted principles.

 Customers be treated fairly at all times

 Complaints raised by customers are dealt with courtesy and on time
 Customers are fully informed of avenues to escalate their complaints/grievances
within the organization and their rights to alternative remedy, if they are not fully
satisfied with the response of the bank to their complaints.
 Bank will treat all complaints efficiently and fairly as they can damage the bank’s
reputation and business if handled otherwise.
 The bank employees must work in good faith and without prejudice to the interests of
the customer.
 In order to make bank’s redressal mechanism more meaningful and effective, a structured
system needs to be built up towards such end. Such system would ensure that the
redressal sought is just and fair and is permissible within the given frame-work of rules
and regulation. The policy document would be made available at all branches. The
concerned employees should be made aware about the Complaint handling process.

1.1 The customer complaint arises due to;

a. The attitudinal aspects in dealing with customers

b. Inadequacy of the functions/arrangements made available to the customers or

gaps in standards of services expected and actual services rendered.

The customer is having full right to register his complaint if he is not satisfied with the
services provided by the bank. He can give his complaint in writing, orally or over
telephone. If customer’s complaint is not resolved within given time or if he is not
satisfied with the solution provided by the bank, he can approach Banking Ombudsman
with his complaint or other legal avenues available for grievance redressal.

2. Internal Machinery to handle Customer complaints/ grievances

2.1 Customer Service Committee of the Board

This sub-committee of the Board would be responsible for formulation of a

Comprehensive Deposit Policy incorporating the issues such as the treatment of death of
a depositor for operations of his account, the product approval process and the annual
survey of depositor satisfaction and the tri-enniel audit of such services. The Committee
would also examine any other issues having a bearing on the quality of customer service
 rendered. This Committee would also review the functioning of Standing Committee on
Customer Service.

2.2 Standing Committee on Customer Service

The Standing Committee on Customer Service will be chaired by the Managing Director/
Executive Director of the bank. Besides two to three senior executives of the bank, the
committee would also have two to three eminent non-executives drawn from the public
as members. The committee would have the following functions.

 Evaluate feed-back on quality of customer service received from various quarters.

The committee would also review comments/feed-back on customer service and
implementation of commitments in the Code of Bank’s Commitments to Customers
received from BCSBI.
 The Committee would be responsible to ensure that all regulatory instructions
regarding customer service are followed by the bank. Towards this, the committee
would obtain necessary feed-back from zonal/regional managers/ functional heads.
 The committee also would consider unresolved complaints/grievances referred to it
by functional heads responsible for redressal and offer their advice.
 The committee would submit report on its performance to the customer service
committee of the board at quarterly intervals.

2.3 Nodal Officer and other designated officials to handle complaints and grievances *

Bank would appoint a Nodal Officer of the rank of General Manager (or its equivalent)
who will be responsible for the implementation of customer service and complaint
handling for the entire bank. The bank may also appoint Customer Relation Officer at
 Zonal/Regional offices to handle complaint grievances in respect of branches following
under their control.

[* Individual banks may decide on the appointment of officials at various levels to

handle complaints and grievances depending upon its administrative structure/
channels used for delivery of product and services.]

3. Mandatory display requirements

It is mandatory for the bank to provide;

 Appropriate arrangement for receiving complaints and suggestions.

 The name, address and contact number of Nodal Officer(s)
 Contact details of Banking Ombudsman of the area
 Code of bank’s commitments to customers/Fair Practice code

4. Resolution of Grievances

Branch Manager is responsible for the resolution of complaints/grievances in respect of

customer’s service by the branch. He would be responsible for ensuring closure of all
complaints received at the branches. It is his foremost duty to see that the complaint should
be resolved completely to the customer’s satisfaction and if the customer is not satisfied, then
he should be provided with alternate avenues to escalate the issue. If the branch manager
feels that it is not possible at his level to solve the problem he can refer the case to Regional
or Zonal Office for guidance. Similarly, if Regional or Zonal office finds that they are not
able to solve the problem such cases may be refereed to the Nodal Officer.

4.1 Time frame

Complaint has to be seen in the right perspective because they indirectly reveal a weak
spot in the working of the bank. Complaint received should be analyzed from all possible
 angles. Specific time schedule may be set up for handling complaints and disposing them
at all levels including branches, zonal and head office. Branch manager should try to
resolve the complaint within specified time frames, decided by the bank.

Communication of bank’s stand on any issue to the customer is a vital requirement.

Complaints received which would require some time for examination of issues involved
should invariably be acknowledged promptly.

Branch and zonal office must send action taken report on complaints received to the head
office at the end of every month.

5. Interaction with customers

The bank recognizes that customer’s expectation/requirement/grievances can be better

appreciated through personal interaction with customers by bank’s staff. Structured
customer meets, say once in a month will give a message to the customers that the bank
cares for them and values their feed back/suggestions for improvement in customer
service. Many of the complaints arise on account of lack of awareness among customers
about bank services and such interactions will help the customers appreciate banking
services better. As for the bank the feed back from customers would be valuable input for
revising its product and services to meet customer requirements.

6. Sensitizing operating staff on handling complaints

Staff should be properly trained for handling complaints. We are dealing with people and
hence difference of opinion and areas of friction can arise. With an open mind and a
smile on the face we should be able to win the customer’s confidence. It would be the
responsibility of the Nodal Officer to ensure that internal machinery for handling
complaints/grievances operates smoothly and efficiently at all levels. He should give feed
back on training needs of staff at various levels to the HR Dept.

Model Compensation Policy

Introduction

Technological progress in payment and settlement systems and the qualitative changes in
operational systems and processes that have been undertaken by various players in the
market have enabled market forces of competition to come into play to improve
efficiencies in providing better service to the users of the system. It will be the bank’s
endeavor to offer services to its customers with best possible utilization of its technology
infrastructure. Withdrawal of the Reserve Bank of India instructions to banks on time
frame for collection of outstation cheques, payment of interest on delayed collection of
outstation cheques/instruments, with effect from 1st November 2004, had offered bank
further opportunities to increase its efficiency for better performance. This Compensation
policy of the bank is therefore, designed to cover areas relating to unauthorized debiting
of account, payment of interest to customers for delayed collection of
cheques/instruments, payment of cheques after acknowledgement of stop payment
instructions, remittances within India, foreign exchange services, lending, etc. The policy
is based on principles of transparency and fairness in the treatment of customers.

The objective of this policy is to establish a system whereby the bank compensates the
customer for any financial loss he/she might incur due to deficiency in service on the part
of the bank or any act of omission or commission directly attributable to the bank. By
ensuring that the customer is compensated without having to ask for it, the bank expects
 instances when the customer has to approach Banking Ombudsman or any other Forum
for redressal to come down significantly.

It is reiterated that the policy covers only compensation for financial losses which
customers might incur due to deficiency in the services offered by the bank which can be
measured directly and as such the commitments under this policy are without prejudice to
any right the bank will have in defending its position before any forum duly constituted
to adjudicate banker-customer disputes.

1. Unauthorised / Erroneous Debit:

If the bank has raised an unauthorized/erroneous direct debit to an account, the entry will
be reversed immediately on being informed of the erroneous debit, after verifying the
position. In the event the unauthorized/erroneous debit has resulted in a financial loss for
the customer by way of reduction in the minimum balance applicable for payment of
interest on savings bank deposit or payment of additional interest to the bank in a loan
account, the bank will compensate the customer for such loss. Further, if the customer
has suffered any financial loss incidental to return of a cheque or failure of direct debit
instructions due to insufficiency of balance on account of the unauthorized/erroneous
debit, the bank will compensate the customer to the extent of such financial losses.

In case verification of the entry reported to be erroneous by the customer does not
involve a third party, the bank shall arrange to complete the process of verification within
a maximum period of 7 working days from the date of reporting of erroneous debit. In
case, the verification involves a third party, the bank shall complete the verification
process within a maximum period of one month from the date of reporting of erroneous
transaction by the customer.

Erroneous transaction reported by customers in respect of credit card operations which

require reference to a merchant establishment will be handled as per rules laid down by
card association.

2. ECS direct debits/other debits to accounts

The bank will undertake to carry out direct debit/ ECS debit instructions of customers in
time. In the event the bank fails to meet such commitments customer will be
 compensated to the extent of any financial loss the customer would incur on account of
delay in carrying out the instruction/failure to carry our the instructions.

The bank would debit the customer’s account with any applicable service charge as per
the schedule of charges notified by the bank. In the event the bank levies any charge in
violation of the arrangement, the bank will reverse the charges when pointed out by the
customer subject to scrutiny of agreed terms and conditions. Any consequential financial
loss to the customer will also be compensated.

Where it is established that the bank had issued and activated a credit card without
written consent of the recipient, the bank would not only reverse the charges immediately
but also pay a penalty without demur to the recipient amounting to twice the value of
charges reversed as per regulatory guidelines in this regard.

3. Payment of Cheques after Stop Payment Instructions:

In case a cheque has been paid after stop payment instruction is acknowledged by the
bank, the bank shall reverse the transaction and give value-dated credit to protect the
interest of the customer. Any consequential financial loss to the customer will be
compensated as provided under para 1 above. Such debits will be reversed within 2
working days of the customer intimating the transaction to the bank.

4. Foreign Exchange Services:

The Bank would not compensate the customer for delays in collection of cheques
designated in foreign currencies sent to foreign countries as the bank would not be able to
ensure timely credit from overseas banks. It is the bank’s experience that time for
collection of instruments drawn on banks in foreign countries differ from country to
country and even within a country, from place to place. The time norms for return of
instruments cleared provisionally also vary from country to country. Bank however,
would consider upfront credit against such instrument by purchasing the
cheque/instrument, provided the conduct of the account has been satisfactory in the past.
However, the bank will compensate the customer for undue delays in affording credit
once proceeds are credited to the Nostro Account of the bank with its correspondent.
Such compensation will be given for delays beyond one week from the date of credit to
Nostro Account/ due date after taking into account normal cooling period stipulated. The
compensation in such cases will be worked out as follows:
 a) Interest for the delay in crediting proceeds as indicated in the collection policy of the
bank.
b) Compensation for any possible loss on account of adverse movement in foreign
exchange rate.

5. Remittances in India:
The compensation on account of delays in collection of instruments would be as
indicated in the bank’s collection policy which is reproduced below for information:

“Payment of Interest for delayed Collection of Outstation Cheques:

As part of the compensation policy of the bank, the bank will pay interest to its customer
on the amount of collection instruments in case there is delay in giving credit beyond the
time period mentioned above. Such interest shall be paid without any demand from
customers in all types of accounts. There shall be no distinction between instruments
drawn on the bank’s own branches or on other banks for the purpose of payment of
interest on delayed collection.

Interest for delayed collection shall be paid at the following rates:

e) Savings Bank rate for the period of delay beyond 7/10/14 days as the case may be in
collection of outstation cheques.
f) Where the delay is beyond 14 days interest will be paid at the rate applicable to for
term deposit for the respective period.
g) In case of extraordinary delay, i.e. delays exceeding 90 days interest will be paid at
the rate of 2% above the corresponding Term Deposit rate.
h) In the event the proceeds of cheque under collection was to be credited to an
overdraft/loan account of the customer, interest will be paid at the rate applicable to
 the loan account. For extraordinary delays, interest will be paid at the rate of 2%
above the rate applicable to the loan account.

It may be noted that interest payment as given above would be applicable only for
instruments sent for collection within India”.

The bank’s compensation policy for financial loss suffered by the customers due to loss
of instrument after it has been handed over to the bank for collection by the customer
would also be as indicated in our collection policy. The same is extracted below for
information:

“Cheques / Instruments lost in transit / in clearing process or at paying bank’s

branch:

In the event a cheque or an instrument accepted for collection is lost in transit or in the
clearing process or at the paying bank’s branch, the bank shall immediately on coming to
know of the loss, bring the same to the notice of the accountholder so that the
accountholder can inform the drawer to record stop payment and also take care that
cheques, if any, issued by him / her are not dishonoured due to non-credit of the amount
of the lost cheques / instruments. The bank would provide all assistance to the customer
to obtain a duplicate instrument from the drawer of the cheque.

In line with the compensation policy of the bank the bank will compensate the
accountholder in respect of instruments lost in transit in the following way:

d) In case intimation regarding loss of instrument is conveyed to the customer beyond

the time limit stipulated for collection (7/10/14 days as the case may be) interest will
 be paid for the period exceeding the stipulated collection period at the rates specified
above.
e) In addition, bank will pay interest on the amount of the cheque for a further period of
15 days at Savings Bank rate to provide for likely further delay in obtaining duplicate
cheque/instrument and collection thereof.
f) The bank would also compensate the customer for any reasonable charges he/she
incurs in getting duplicate cheque/instrument upon production of receipt, in the event
the instrument is to be obtained from a bank/ institution who would charge a fee for
issue of duplicate instrument.

6. Violation of the Code by banks agent

In the event of receipt of any complaint from the customer that the bank’s representative /
courier or DSA has engaged in any improper conduct or acted in violation of the Code of
Bank’s Commitment to Customers which the bank has adopted voluntarily, bank shall
take appropriate steps to investigate and to handle the complaint and to compensate the
customer for financial losses, if any.

7. Transaction of “at par instruments” of Co-operative Banks by Commercial Banks

*

The RBI has expressed concern over the lack of transparency in the arrangement for payment

of “at par” instruments of co-operative banks by commercial banks resulting in dishonour of

such instruments when the remitter has already paid for the instruments. In this connection it

is clarified that the bank will not honour cheques drawn on current accounts maintained by

other banks with it unless arrangements are made for funding cheques issued. Issuing bank

should be responsible to compensate the cheque holder for non payment/delayed payment of

cheques in the absence of adequate funding arrangement.

 [* para 7 is applicable only for policy documents of commercial banks]

8. Force Majeure

The bank shall not be liable to compensate customers for delayed credit if some
unforeseen event (including but not limited to civil commotion, sabotage, lockout, strike
or other labour disturbances, accident, fires, natural disasters or other “Acts of God”, war,
damage to the bank’s facilities or of its correspondent bank(s), absence of the usual
means of communication or all types of transportation, etc beyond the control of the bank
prevents it from performing its obligations within the specified service delivery
parameters.

Model Policy on Collection of Dues and Repossession of Security

1. Introduction:

The debt collection policy of the bank is built around dignity and respect to customers.
Bank will not follow policies that are unduly coercive in collection of dues. The policy is
built on courtesy, fair treatment and persuasion. The bank believes in following fair
practices with regard to collection of dues and repossession of security and thereby
fostering customer confidence and long-term relationship.

The repayment schedule for any loan sanctioned by the bank will be fixed taking into
account paying capacity and cash flow pattern of the borrower. The bank will explain to
the customer upfront the method of calculation of interest and how the Equated Monthly
Installments (EMI) or payments through any other mode of repayment will be
appropriated against interest and principal due from the customers. The bank would
expect the customers to adhere to the repayment schedule agreed to and approach the
bank for assistance and guidance in case of genuine difficulty in meeting repayment
obligations.
 Bank’s Security Repossession Policy aims at recovery of dues in the event of default and
is not aimed at whimsical deprivation of the property. The policy recognizes fairness and
transparency in repossession, valuation and realization of security. All the practices
adopted by the bank for follow up and recovery of dues and repossession of security will
be inconsonance with the law.

2. General Guidelines:

All the members of the staff or any person authorized to represent our bank in collection
or/and security repossession would follow the guidelines set out below:

1. The customer would be contacted ordinarily at the place of his/her choice and in the
absence of any specified place, at the place of his/her residence and if unavailable at
his/her residence, at the place of business/occupation.
2. Identity and authority of persons authorized to represent bank for follow up and
recovery of dues would be made known to the borrowers at the first instance. The
bank staff or any person authorized to represent the bank in collection of dues or/and
security repossession will identify himself / herself and display the authority letter
issued by the bank upon request.
3. The bank would respect privacy of its borrowers.
4. The bank is committed to ensure that all written and verbal communication with its
borrowers will be in simple business language and bank will adopt civil manners for
interaction with borrowers.
5. Normally the bank’s representatives will contact the borrower between 0700 hrs and
1900 hrs, unless the special circumstance of his/her business or occupation requires
the bank to contact at a different time.
6. Borrower’s requests to avoid calls at a particular time or at a particular place would
be honored as far as possible.
7. The bank will document the efforts made for the recovery of dues and the copies of
communication set to customers, if any, will be kept on record.
8. All assistance will be given to resolve disputes or differences regarding dues in a
mutually acceptable and in an orderly manner.
 9. Inappropriate occasions such as bereavement in the family or such other calamitous
occasions will be avoided for making calls/visits to collect dues.

3. Giving notice to borrowers

While written communications, telephonic reminders or visits by the bank’s

representatives to the borrowers place or residence will be used as loan follow up
measures, the bank will not initiate any legal or other recovery measures including
repossession of the security without giving due notice in writing. Bank will follow all
such procedures as required under law for recovery/repossession of security.

4. Repossession of Security

Repossession of security is aimed at recovery of dues and not to deprive the borrower of
the property. The recovery process through repossession of security will involve
repossession, valuation of security and realization of security through appropriate means.
All these would be carried out in a fair and transparent manner. Repossession will be
done only after issuing the notice as detailed above. Due process of law will be followed
while taking repossession of the property. The bank will take all reasonable care for
ensuring the safety and security of the property after taking custody, in the ordinary
course of the business.

5. Valuation and Sale of Property

Valuation and sale of property repossessed by the bank will be carried out as per law and
in a fair and transparent manner. The bank will have right to recover from the borrower
the balance due if any, after sale of property. Excess amount if any, obtained on sale of
property will be returned to the borrower after meeting all the related expenses provided
the bank is not having any other claims against the customer.

6. Opportunity for the borrower to take back the security

 As indicated earlier in the policy document, the bank will resort to repossession of
security only for the purpose of realization of its dues as the last resort and not with
intention of depriving the borrower of the property. Accordingly the bank will be willing
to consider handing over possession of property to the borrower any time after
repossession and before concluding sale transaction of the property, provided the bank
dues are cleared in full. If satisfied with the genuineness of borrower’s inability to pay the
loan installments as per the schedule which resulted in the repossession of security, the
bank may consider handing over the property after receiving the installments in arrears.
However, this would be subject to the bank being convinced of the arrangements made
by the borrower to ensure timely repayment of remaining installments in future.

. Managing Committee of the Association examined the above documents at its meeting held on
30th December 2006 and approved the same for circulation among member banks for their
consideration. While approving the policy documents, the Committee felt that these Model
Documents would help member banks in framing their own policy documents and banks could
make necessary changes to meet their business/operational requirements.

Customers may be guided by policy documents of respective banks.