banker's digest 2014

BANKER`S

DIGEST-2014

Banker’s Digest-2014 [email protected] Mobile 9490213002

“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

Employees play vital role in service organizations and they need to be transformed into Knowledge Assets to remain competitive in the dynamic environment and it is more so with Banks as they are very service sensitive. Thus it is imperative for the bank staff to serve the clientele with updated information of bank’s products & services to accomplish corporate objectives. In this endeavor, I have been compiling and releasing the “Banker’s Digest” every year for the benefit of Andhra Bank staff since 2007. Eighth edition of Banker’s Digest is released duly covering the important guidelines issued by RBI and Bank from time to time. For the benefit of the readers, the present edition is divided into two parts. The first part covers contemporary banking topics and Andhra Bank - Products & Services. The second part deals with Computer Awareness, Staff Welfare Schemes (Serving as well as retired staff) and Question Bank. The Computer Awareness is meant for Senior Officers appearing promotion tests. All possible care is taken to provide error free information, however, readers may note that the information given herein is merely for guidance/reference and they need to refer the relevant circulars for full details. I express my sincere thanks to friends/colleagues for their support in encouraging the idea and contributing the required resources for release of Banker’s Digest on time. I solicit your views on the content and quality of the topics for further improvement.

Email - [email protected] / Mobile 09490213002 Wish you all the Success

Date: 09.03.2014 N S N Reddy


Banker’s Digest - Index No Topic Page I Banking & Finance 1 Deposits - Guidelines 1-7 2 NRIs – Products & Services 8-13 3 Know Your Customer (KYC) 14-17 4 Alternate Delivery Channels 18-20 5 Electronic Payments 21-24 6 Financial Inclusion 25-30 7 Priority Sector – Revised Guidelines 31-38 8 Micro Credit / SHG 39-40 9 Micro, Small and Medium Enterprises 41-43 10 Model Education Loan Policy 44-45 11 Housing Loans 46-47 12 Interest Subvention Schemes 48-49 13 Ratio Analysis 50-52 14 Non Fund Business (BG/LC) 53-57 15 Charges (Hypothecation/Pledge/Mortgage) 58-59 16 Joint Lending Agreement 60-61 17 Takeover of Accounts - Guidelines 62 18 Credit Management 63 19 NPA - Prudential Norms 64-67 20 Restructure of Advances 68-69 21 Risk Management (Basel-I, II & III) 70-73 22 SARFAESI / CIBIL / CERSAI 74-75 23 Clean Note Policy & Cash Management 76-78 24 Customer Service & BCSBI 79-81 25 Compensation Policy 82 26 Current Topics - Banking & Finance i) Union Budget (Interim) – 2014-15 83 ii) Monetary Policy 84-86 iii) Financial Sector Legislative Reforms 87-88 iv) New Private Sector Banks - Guidelines 89-90 v) Gold Deposit Scheme 91 vi) Inflation Indexed National Saving Securities 92 vii) Floating Rate Deposits / Bharatiya Mahila Bank 93 viii) Corporate Governance 94 ix) Retail Banking 95 x) Treasury - Concepts 96-97 xi) Rupee Dollar Dynamics 98-100 xii) External Borrowings 101-102 xiii) Fed Tapering / Volcker Rule / Bitcoins 103-104 xiv) NI Act & Other Acts 105-106 xv) Other concepts 107-112 xvi) Banking at Glance 113


II Andhra Bank – Products & Services 1 Andhra Bank – Mile Stones 114 2 Logo, Vision, Mission & Corporate Slogan 115 3 Performance Highlights – March 2012 & 2013 116 4 Deposit Schemes 117-120 5 Insurance Linked Deposit Schemes 121-122 6 E-Products 123-126 7 Credit Cards 127-131 8 Fee Based Products 132-136 9 Loan Policy – Guidelines 137-148 10 Agriculture - Loan Products 149-155 11 Retail Loans 156-167 12 Impaired Asset Study 168 13 One Time Settlement Schemes (OTS) 169-172 14 AB Products – Service Charges 173-176 III Question Bank 178-204 IV Computer Awareness 205-232 V Staff Welfare Schemes i) Serving Employees 233-235 ii) Retired / Resigned 236 iii) Dependants of Deceased Employees 237-240

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Deposits – General Guidelines One of the important functions of the Banks is to accept deposits from the public for the purpose of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area of the regulatory framework for banking in India and Reserve Bank of India has been issuing broad guidelines to the banks from time to time. Various deposit products offered by the Bank are assigned different names. The deposit products are categorized broadly into the following types. a) “Demand Deposits” means a deposit received by the Bank, which is withdrawable on demand; b) “Current Deposit” means a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount. These accounts are meant purely to meet the business needs of customers. Hence, no interest is paid on balances in Current accounts. RBI prohibits banks from paying interest in Current accounts. While opening of current accounts for business entities, banks should make reference to CIBIL to ensure that the entity does not have borrowing arrangement and it is not on the list of defaulters. In either case a reference should be made to the lending banks before the current account is opened to ensure credit discipline among the borrowers. c) “Savings Deposits” means a form of demand deposit which is subject to restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the Bank during any specified period. Banks have discretion to introduce special schemes with insurance coverage and other benefits to the specified group of customers with or without additional charges depending on the scheme terms and conditions. d) “Term Deposit” means a deposit received by the Bank for a fixed period withdrawable only after expiry of the fixed period and includes deposits such as Recurring / Cumulative / Annuity / Reinvestment deposits / Cash Certificates, etc. 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 `1 lakh & above. The maximum period should not exceed 10 years except in case court/minor deposits as special case. e) ”Notice Deposit” means term deposit for specific period but withdrawable on giving at least one complete banking day’s notice; Bank may, from time to time design/come out with new deposit products, with certain additional benefits with or without payment of certain charges to cater to needs of specified categories of depositors and the same may not be made available to other customers. Joint Account – Deposit accounts can be opened by an individual in his own name or by more than one individual known as Joint Account. The account can be operated by single individual or by more than one individual jointly as per the mandate. The mandate for operations can be viz., Individual; or Jointly; or Either or Survivor; or Former or Survivor; or Any one or Survivor. If the account is held by two individuals – Either or Survivor, the final balance with interest, if applicable, will be paid to survivor on death of anyone of the account holders. If the account is held on former or survivor basis, the final balance along with interest, if applicable, will be paid to survivor on the death of Former. The bank may at the request of all the joint account holders allow addition or deletion of name/s of joint account holder/s if the circumstances so warrant or allow an individual depositor to add the name of another person as a joint account holder. However the name of the first joint account holder cannot be replaced.

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Accounts of Firms / Companies / Trusts / Associations, etc – The above constituents can open domestic deposit accounts i.e. current, term deposits by producing necessary documents as specified in the application. All the members of the organization like partners, directors, trustees, etc. are subject to compliance of KYC norms. Only certain types of institutions are eligible to open Savings accounts. Branches should adhere to the following guidelines while opening of Government / Quasi Government / Public Sector Undertakings / Other Institutional Accounts.

� Obtain Government order or notification authorizing the concerned officer to open and operate the account

� Verify the identity of the officer authorized to operate the account � Obtain photographs of the persons authorized to operate the account � Address letter to next higher authority after opening of the account � Not to make payment of maturity proceeds of term deposits in cash � Obtain balance confirmation letter for operative and term deposits every quarter from the said accounts

Minors’ Accounts – Savings Bank/Recurring Deposit Account can also be opened by a minor jointly with natural guardian or with mother as the guardian. Minors above the age of 10 will also be allowed to open and operate saving bank account independently. However, no overdrafts will be granted to these minors. On attaining majority, the erstwhile minor should confirm the balance in his / her account and if the account is operated by the natural guardian / guardian, fresh specimen signature of erstwhile minor duly verified by the natural guardian would be obtained and kept on record for all operational purposes. Illiterate Accounts – The Bank may at its discretion open deposit accounts in the name of illiterate individuals. However, opening of Current Deposit Account requires prior permission from higher authorities. While opening of the account, the depositor needs to call on the Bank personally along with a witness who is known to both the depositor and the Bank. The Bank official shall explain the terms and conditions governing the account including safe keeping of Passbook, Cheque Book, Debit Card etc., to the illiterate person. At the time of withdrawal/repayment of deposit amount and/or interest, the account holder should affix thumb impression in the presence of the authorized officer who should verify the identity of the person. Visually Impaired Persons – Visually Impaired Persons may be allowed to open all types of deposit accounts, except current accounts, either singly or jointly with other persons. Opening of Current Accounts for visually impaired persons at the branch level requires prior permission from higher authorities. The terms and conditions governing the accounts including special conditions, if any, should be read and explained to the visually impaired person by the bank official in the presence of a witness in view of his physical infirmity. Branch should obtain witness signature (known to the bank) on Personal Data Form and the Account Opening Form along with specimen signature of the depositor at the time of opening of the account. Basic Savings Bank Deposit Account: With a view to achieving greater financial inclusion, RBI directed the banks to make available basic banking services to the needy people with Nil balance account without any service charges. However, the restrictions on transactions and amount are to be made known to the depositors transparently. 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 `50000/- in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed `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.

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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. It is also known as No Frills Accounts. Pension Accounts are opened on receipt of advice from pension disbursing authorities with all the relevant documents sent to the Bank at identified places / branches. Payment of pension will be made as directed by the pension disbursing authority. The terms and conditions for opening of accounts in the name of pensioners are available at these selected branches of the Bank. The other terms and conditions will be informed by the Bank from time to time. Senior Citizens: Senior citizens who have completed 60 years of age and residing in India are given certain privileges such as 0.50% additional interest rate over and above the card rate. The depositor is required to furnish Proof of age to the bank. Joint accounts with another senior citizen or with person who is not a senior citizen is permitted. In the latter case, only if the senior citizen is the first named depositor, the privileges are applicable.

Staff Accounts – Banks can offer additional interest of 1% on the deposits placed by the staff members either working or retired subject to conditions laid down by the respective banks. The spouse of the deceased also can also avail this facility. In case of Joint accounts, the first name in the deposit should be the staff or ex-staff or spouse of the staff. However, staff rate of interest is not applicable for NRE/NRO/FCNR deposits. Mandate – At the request of the depositor, the Bank register mandate/power of attorney authorizing another person to operate the account on his behalf. Interest on Term Deposits – The interest shall be calculated at quarterly rests on term deposits. However, banks are allowed to pay monthly interest at discounted value. For the purpose of calculation of interest on domestic term deposits repayable in less than three months or where the terminal quarter is incomplete, interest should be paid proportionately for the actual number of days reckoning at 366 days in a leap year and 365 days in other years. Whenever interest rates are revised, the revised rates are applicable to fresh deposits as well as renewed deposits. The interest rates offered are non-discretionary and non-discriminatory and are applicable uniformly to all depositors at all branches of the Bank. The rate of interest on deposits should be prominently displayed in the branch premises and Bank’s website. Government of India advised the Banks not to pay any preferential interest on the deposits of Central Public Sector Enterprises. Premature Renewal of Term Deposit – In case the depositor desires to renew the deposit by seeking premature closure of an existing term deposit account, the bank will permit the renewal at the applicable rate on the date of renewal, provided the deposit is renewed for a period longer than the balance period of the original deposit. While prematurely closing a deposit for the purpose of renewal, interest on the deposit for the period it has remained with the bank will be paid at the rate applicable to the period for which the deposit remained with the bank reckoning from the date of deposit and not at the contracted rate. Banks are allowed to open Pension account jointly with spouse. In case pensioner expires, the spouse can continue the same account for family pension/other pension benefits. Premature withdrawal of Term Deposit – The Bank on request from the depositor, at its discretion may allow withdrawal of term deposit before completion of the period of the deposit agreed upon at the time of placing the deposit. The Bank shall declare its policy on penalty which will be levied by way of interest reduction for

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premature withdrawal of term deposit. The Bank shall make depositors aware of the applicable rate along with the deposit rate. Normally, the premature cancellation of term deposit attracts a penalty of 1%. However, at present, deposits of Individuals up to `5 lakh contracted for any maturity period and deposits of Govt / Corporates / firms / institutions / associations etc up to `100 lakh contracted up to 90 days are exempted from levying penalty. (Cir no.292 Ref 27/27 dated 17.10.2012) Overdue Term Deposits – Payment of Interest – Overdue deposits will be renewed with effect from the date of maturity at interest rate applicable as on the due date, provided such request is received within 14 days from the date of maturity. Where the overdue period exceeds 14 days and where the deposit or part thereof is renewed, the rate of interest payable on the deposit so renewed shall be the lower of i) the rate of interest applicable for the renewed period prevailing on the date of maturity or ii) the rate of interest applicable for the renewed period and prevailing on the date of renewal (Cir.no.97 Ref 44/6 dated 30.05.2005). In case where the depositor is not interested to renew the overdue deposit and would like to withdraw the amount, in such cases, the depositor is eligible for applicable Savings Bank interest for the overdue period. Tax Deduction at Source (TDS) – The Bank has statutory obligation to deduct tax at source (at present 10%) if the total interest paid/payable on all term deposits held by Resident person exceeds the amount specified, presently `10000 in a financial year under the Income Tax Act. However, TDS is exempted to the individual depositors who submits 15G (whose age is below 65 years) and 15H (whose age is above 65 years) stating that their total income from all sources including the interest on bank deposits is well within the taxable income limit. Branch should obtain 15G/15H in triplicate and return one copy to the customer as acknowledgement and it should bear round seal of the branch. As per extant Income Tax guidelines, all depositors invariably submit PAN failing which the interest income on such term deposits attracts TDS @20% with effective from 01.04.2010. It is the responsibility of the branches to download Form 16A from TIN website and also generate single interest certificate for a customer. Branches should ensure that TDS certificate (Form 16A) as well as Interest certificate should be sent to the depositor without waiting for or seeking any written request from the depositor. The Bank will issue a tax deduction certificate for the amount of tax deducted. Further, if any depositor requests for TDS certificate, the same should be issued again even though the TDS certificate was already issued. Interest received on NRE/FCNR/Recurring deposits, irrespective of amount is exempted from TDS. Inoperative / Dormant 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 treated as transaction for the said purpose. 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 requests in writing that he undertakes to route the transactions in to the account. Unclaimed Deposits: Accounts (CA/SB) where 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. In case of deceased accounts, the claim shall be settled in favour

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of the nominee where the nomination is available and where there is no nomination, claim settlement shall be as per applicable norms. Banks are required to disclose the list of unclaimed and inoperative deposit account holders, in a bid to help the claimants trace their deposits and the names of the depositors shall be displayed on the Website. The list of unclaimed deposits shall be updated on a monthly basis. Frozen Accounts – With regard to the savings bank accounts frozen by the enforcement authorities, Bank will continue to credit the interest to the account on a regular basis. However, withdrawal/debits can be allowed only when the accounts are released by the Enforcement Authorities. In the case of Term Deposit Accounts of Customers frozen by the orders of the enforcement authorities, Banks are required to obtain a request letter from the customer for renewal for a term equal to the original term, on maturity. No new receipt will be issued. However, suitable note will be made regarding renewal in the deposit ledger. Renewal of deposit shall be advised by registered letter / speed post / courier service to the concerned Govt. department under advice to the depositor. In the advice to the depositor, the rate of interest at which the deposit is renewed will also be mentioned. If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal shall be done from the date of maturity. If it exceeds 14 days, interest for the overdue period shall be paid as per Bank’s extant guidelines that are referred in this policy. Nomination facility: As per section 45 ZA to 45 ZF of the Banking Regulation Act, 1949, account holder can nominate any individual of his choice as nominee to receive money from the bank in case of death of the depositor. Nomination facility is available to all types of deposit accounts (including joint accounts E or S), safe deposit lockers and safe custody articles, which are in the name of individuals. The nominee can be any individual including illiterates, minors. 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. 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. 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. 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. Passbook/Account Statement – The Bank will provide either a statement of account or a Pass Book to Savings Bank as well as Current Deposit Account Holders periodically as per terms and conditions of opening of the account. However, in case a customer holds a pass book and still requests for a statement of account and vice versa, the same will not be denied and will be provided on payment of charges as specified by the Bank from time to time. Transfer of Accounts – The deposit accounts may be transferred to any other branch of the Bank at the request of the depositor subject to fulfillment of KYC norms at transferee branch. However, if any deposit scheme is devised with a precondition that it cannot be transferred to other places/ branches, the account will continue to be maintained at the branch where it is opened. Standing Instructions – Standing instructions can be given to the Bank for transfer/remittance of funds from one account to other account(s) maintained in the same branch, or any other branch of the bank or any other bank or any other third

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party. Applicable charges will be levied by the bank for rendering the said services. Revision in service charges, if any, will be communicated one month in advance to the customers before effecting the revision, through Bank’s website. Deposits maturing on a holiday – In respect of a term deposit maturing for payment on a Sunday or a holiday or a non-business working day, bank would pay interest at the originally contracted rate on the deposit amount for the Sunday / holiday / non-business working day also, intervening between the date of the expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day.

Form 60/61 – It is the declaration by the customer who deposit high value cash (`50000 & above) and who do not have PAN Card. Form-60 is meant for general public declaring that he is not a income tax assessee and Form-61 is for the persons who have agriculture income. Payment of Term deposits by cash – Section 269 of Income Tax Act, 1961 prohibits payment of term deposits or notice deposits in cash if the amount involved, principal plus interest is `20,000/- or more. Hence, the payment of such deposits is to be made by way of credit to the account of the party (or) by way of A/c Payee crossed demand draft or pay order only. Advances against Deposits – The Bank may consider request of the depositor/s for loan / overdraft facility against term deposits duly discharged by the depositor/s on execution of necessary security documents. Whenever loan is granted, a lien on the deposit is marked and bank shall have the right to appropriate the deposit proceeds to the loan account on the date of maturity, in case the loan remains unpaid. The interest rates applicable, margins to be maintained etc. will be made known to the customers at the time of availing the Deposit Loan and also will be placed in Bank’s website from time to time. Insurance Cover for Deposits – All bank deposits are covered under the insurance scheme offered by Deposit Insurance and Credit Guarantee Corporation of India (DICGC) subject to certain limits and conditions. At present, the insurance premium is being paid by the Bank. Each depositor in a Bank is insured up to a maximum of `100000/- for both principal and interest amount held by him in the same capacity and same right as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force. Rounding-off transactions: All transactions including payment of interest on deposits will be rounded off to the nearest rupee; i.e., fractions of fifty paise and above shall be rounded off to the next higher rupee and fraction of less than fifty paise shall be ignored. Settlement of Deceased Deposit account – In case where the depositor exercised nomination, the balance outstanding in the account of the deceased depositor will be transferred to the account of/paid to the nominee after the Bank is satisfied about the identity of the nominee. In a joint deposit account, when one of the joint account holders dies, the Bank is required to make payment jointly to the legal heirs of the deceased person and the surviving depositor(s). However, if the joint account holders had given mandate for disposal of the balance in the account in the forms such as ‘either or survivor, former / latter or survivor, anyone of survivors or survivor’, etc., the payment will be made as per the mandate to avoid delays in production of legal papers by the legal heirs of the deceased. In the absence of nomination and when there are no disputes among the claimants, the Bank will pay the amount outstanding in the account of deceased person against joint application and indemnity by all legal heirs or the person mandated by the legal heirs to receive

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the payment on their behalf without insisting on legal documents up to the limit approved by the bank’s board. This is to ensure that the depositors are not put to hardship on account of delays in completing legal formalities. Interest payable on term deposit in deceased account – In the event of death of the depositor before the date of maturity of deposit and amount of the deposit is claimed after the date of maturity, the Bank shall pay interest at the contracted rate till the date of maturity. Again from the date of maturity to the date of payment, the Bank shall pay simple interest at the applicable rate prevailing on the date of maturity, for the period for which the deposit remained with the Bank beyond the date of maturity, as per the Bank’s policy in this regard. However, in the case of death of the depositor after the date of maturity of the deposit, the bank shall pay interest at savings bank rate operative on the date of maturity (at present 4.00% p.a.) from the date of maturity till the date of payment. In the case of balances lying in current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest shall be paid only from 1st May, 1983, or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposit as on the date of payment. Service Charges – The terms and conditions for opening a deposit account and the charges that will be levied on the account will be provided to the customer at the time of opening of the account. The revised charges, if any, are to be informed to the customers well in advance either through press releases or advertisement in print media and or by displaying in Bank’s web site. Customer information & Secrecy – The information collected from the customers shall not be used for cross selling of services or products by the Bank, their subsidiaries and affiliates. If the Bank proposes to use such information, it will be strictly with the consent of the account holder. Bank should prepare a profile for each customer based on risk categorization. This profile contains the information relating to customer’s identity, social/financial status, nature of business activity etc. The customer profile is a confidential document and details contained therein will not be divulged for cross selling or for any other purposes. The Bank shall not disclose details / particulars of the customer’s account to a third person or party without the express or implied consent from the customer. However, there are some exceptions, viz. disclosure of information when the interest of our Nation is at stake and compulsion of law, where there is a duty to public to disclose and where interest of the Bank requires disclosure. Redressal of complaints and grievances – Depositors having any complaint / grievance with regard to services rendered by the Bank have a right to approach authorities designated by the Bank for handling customer complaint / grievances. The details of the internal set up for redressal of complaints / grievances will be displayed in the branch premises. The branch officials shall provide all required information regarding procedure for lodging the complaint. In case the depositor does not get response from the Bank within one month from the date of complaint or he is not satisfied with the response received from the Bank, he has a right to approach Banking Ombudsman appointed by the Reserve Bank of India. Term Deposits – Purchase of Cheques/Drafts: Hitherto, Banks were permitted to purchase cheques/drafts at par provided the entire proceeds are placed as Term Deposits for a minimum period of 6 months. Now, RBI has advised all Banks to stop the purchase of cheques/drafts at par for placing the proceeds as Term Deposits with effect from 27.01.2014. (Cir.no.430 Ref 27/47 dated 25.01.2014)

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Non Resident Indians – Products 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, he/she at any time held an Indian Passport or 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 he/she is a spouse of Indian Citizen or a person referred as above.

N R O – Non Resident Ordinary Account Who Can Open

Any NRI can open NRO account Singly or Jointly with Residents. However, individuals / entities of Bangladesh and Pakistan nationals require prior approval of RBI.

Nomination Nominee can be a Resident or a Non Resident. Claim Settlement – Resident Nominees – In INR, NRI Nominee – Repatriable to that Country as per RBI Norms.

Repatriation

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) 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 Dep. Loans Dep. Rate + 2 %. Applicability of Local Taxes

TDS on Int. earned @ 30% + Edn. Cess + Service Tax., including Interest on SB Deposits, irrespective of the amount of Interest. Wealth Tax, as applicable.

Transfer of funds Permitted to NRE account within the overall ceiling of USD one million per financial year

Premature Cancellation of Deposits As applicable to Domestic Deposits.

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N R E – Non Resident External Rupee account

Who Can Open

NRI can open NRE account Singly or Jointly with their resident close relatives. With regard to joint account with resident, the operation of the account should invariably be “Former or Survivor” and the former should be NRI. However, individuals / entities of Bangladesh and Pakistan nationals require prior approval of RBI.

Nomination Nominee can be a resident or a Non Resident. 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. Rate of Interest Saving Deposits – Deregulated – At present 4.0 %

Term Deposit – As applicable to Domestic Deposits Deposit Loans Rupee loans to be allowed to depositor / third party without

any ceiling. Margin 15% Interest on Loans Dep. Rate + 2 %. Applicability of Local Taxes

No TDS on Int. earned. No Wealth Tax. Free from all Taxes

Transfer of amount to other types Permitted to NRO / FCNR

Premature Cancellation

Penalty 1% on premature cancellation is applicable. No Interest is payable, in case of cancellation before 1 year. Conversion from 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)

Who Can Open Any Non Resident Indian (Individuals of Bangladesh / Pakistan Nationality require approval from RBI) Singly or jointly with another Non Resident only.

Nomination Nominee can be a resident or a Non Resident. Claim Settlement – Resident Nominees – In Indian rupees Non Resident Nominee – Repatriable as per RBI Norms.

Designated Currency Account can be opened in any freely convertible currency. Repatriation Fully Repatriable without any limits. Foreign Currency Exchange Risk

No Exchange Risk to the customer, in case of repatriation, 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

Rate of Interest Linked to LIBOR. Not exceeding LIBOR + 125 basis points. 360 days is taken for a year for the purpose of interest calculation. Simple interest is paid for one year deposit. However, compound interest (half-yearly, 180 days) is paid for deposits beyond one year.

Deposit Loans Foreign Currency loans to be allowed to depositor / third party without any ceiling.

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)

Premature Cancellation No interest payable and no SWAP cost to be recovered for the deposits up to USD 10000 or equivalent, where the deposit is cancelled before the expiry of one year. However, SWAP cost to be recovered in case of deposits above USD

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10000 or its 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.

Note: All branches are authorized to accept FCNR (B) deposits. Since the exchange risk is borne by the bank, branches are required to report all FCNR transactions (openings, closures, interest payments, transfers etc.,) to Investment & International Banking Division (IIB), Mumbai on the same day.

R F C – Resident Foreign Currency Accounts Who Can Open

Non Resident Indians (NRI) returning to India who have been NRIs for a continuous period of not less than one year. NRIs returning to India for permanent stay in India.

Sources of funds

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 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 Allowed with another eligible person/s or with resident close relative (Former or Survivor)

Types of accounts Savings, Current, Term Deposits. Period of Term Dep. As applicable to FCNR B Accounts. Min 1 year Max 5 years Currency Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian

Dollar Nomination

Nominee can be a resident or a Non Resident. Claim Settlement – Resident Nominees – In Indian rupees Non Resident Nominee – Repatriable as per RBI Norms.

RFC Domestic Account

Who Can Open Any person resident in India

Sources of funds

� Foreign Exchange acquired in the form of currency notes, bank notes, cheques, drafts, and 10ttest10ed cheques.

� Payment / honorarium / gift for services rendered in India / abroad.

� Unspent amount of foreign exchange acquired by him from an authorized person for travel abroad.

� Gift from close relatives as defined in sec. 6 of the company act 1956.

� Proceeds of Insurance policy claims / maturity / surrender values settled in foreign currencies.

Joint Accounts Not permitted Types of accounts Current Account / Savings Bank Period of Term Dep. Term Deposits are not permitted to be opened Currency Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian

Dollar Interest No Interest on Current Account. Banks have discretion to fix their

own interest rates on Savings Deposits Loan & Over drafts Not permitted.

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Exchange Earner’s Foreign Currency Accounts (EEFC)

Who Can Open All Categories of Foreign Exchange Earners such as Individuals, Companies etc., who are resident in India, may open EEFC account with 100% of their Forex earnings. Resident Individuals are permitted to include his close relative as a joint holder, however, the joint holder is not allowed to operate the account during the life time of

Purpose Authorized Dealers (AD) are allowed to open, hold and maintain foreign currency denominated accounts for the purpose of transacting foreign exchange business and other matters of the account holder. The accounts can be maintained with one or more Ads.

Currency The account may be maintained in the currency of the remittance or any other permitted currency at the option of the depositor.

Credit facility No credit facility, either fund or non-fund based should be permitted against the security of the balances held in the EEFC accounts.

Type of account

EEFC accounts should be in the form of non-interest bearing current accounts only. Cheque book facility is permitted.

Interest No Interest is payable Nomination Nomination facility is permitted like any domestic account. Nominee

can be Resident Indian only Limit up to which foreign currency may be credited

A person resident in India may credit to the EEFC account 100% from out of the foreign exchange earnings

Permissible credits to EEFC accounts

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 towards export of goods / services. Payments received towards export of goods/ services from India, out 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. 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.

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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.

Permissible debits to EEFC account

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.

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. Payment in foreign exchange to resident Indian for supply 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.

Conversion into Rupee Funds

There is no restriction on withdrawal in rupees of funds held in EEFC account. Branches should send the request to Investment & International Banking (IIB), Mumbai by e-mail / fax, for conversion of 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 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 is restricted to `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 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:

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No Category Interest Rate 1

Loan to depositor and repayment through inward remittance or adjustment of deposit or transfer of funds from NRE/FCNR deposits

Deposit Rate + 2%

2 Loans to depositor – Repayment by rupee funds in NRO accounts Deposit Rate + 3%

3 Loans to third parties – Repayment by rupee funds (less than one year) Base Rate + 5%

4 Loans to third parties – Repayment by rupee funds (one year & above and up to 3 years) Base Rate + 5.75%

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%. 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 2 years in import/export of diamonds/coloured gemstones/ diamond and coloured gemstones studded jewellery/plain gold jewellery, and having an average annual turnover of `3 crore & above during preceding three licensing years, are allowed to open Diamond Dollar Accounts (DDA). RBI issue DDA on a case-to-case basis, subject to the following terms and conditions: � Opened in the name of the exporter and maintained in US Dollars only. � It should be in the form of current account and no interest should be paid on the balance held in the account.

� No intra-account transfer should be allowed between the DDAs. � Not permitted to open and maintain more than 5 DDAs. � The balances held in the accounts shall be subject to CRR SLR requirements. � Exporter firms and companies maintaining foreign currency accounts (excluding EEFC accounts) 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. 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.

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Know Your Customer (KYC)

As per RBI guidelines, it is mandatory for the banks to ensure KYC norms for all the customers duly collecting full information of the account holder, type of transactions to be conducted, sources of funds and other relevant matters at the entry level itself. The policy guidelines are to be adhered 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 objective of KYC is to insulate banking from unscrupulous participants and to avert misuse/undue advantage of system. The key elements of the policy are i) Customer Acceptance Policy (CAP): Bank should obtain prescribed application from the applicant along with the documents/information that is required as per constitution, risk perception, banking practices, legal requirements and RBI guidelines. 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. Banks are advised to accept any of the document mentioned in the list can take as valid identification. In case of a married woman, her identity proof with maiden name, if supported with marriage certificate could be considered a valid ID proof. With regard to opening of Partnership, Company, Trust, Club, Association, or any other legal body accounts, branch should obtain required information/documents to verify the legal status of the applicant. In case of proprietary concerns, copy of registration/licensed document issued by government agencies shall be accepted as valid identification document. Address proof: Banks are advised to obtain any one of the documents mentioned in the list can be accepted as valid address proof.

Documents - Identity Proof Documents – Residence Proof 1 Passport or PAN Card or Voter’s Identity Card or Driving license

2 Job card issued by NREGA duly signed by an officer of the State Government(For Small Accounts)

3 The letter issued by UIDAI containing details of name, address and Aadhaar number

4 Identity card (subject to the bank’s satisfaction)

5 Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank.

6 Government/Defence ID card 7 ID cards of reputed Public Sector employers

8 Pension Payment Orders issued to the retired employees by Central/State Government Departments, Public Sector Undertakings

1 Ration Card or Electricity Bill or Telephone Bill

2 Bank account statement 3 Letter from employer (to the satisfaction of the Bank)

4 Letter from any recognized public authority (to the satisfaction of the Bank)

5 Credit Card Statement- not more than 3 months old

6 Income/Wealth Tax Assessment Order 7 Letter from Public Sector employer 8 Letter from any recognized public authority having proper and verifiable record of issuance of such certificates.

9 Voter ID Card (only if it contains the current address)

10 Pension Payment Orders issued to retired employees by Government Departments/Public Sector Undertakings, if they contain current address.

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Documents - Identity Proof Documents – Residence Proof

9 Photo ID cards issued by Post Offices

10 Photo identity cards issued to bonafide students by a University, approved by the University Grants Commission (UGC) and/or an Institute approved by All India Council for Technical Education (AICTE).

11 Photo identity issued by any public authority having proper record of issuance of identity proof which is verifiable from records

12 Ex-Servicemen Card with photograph

13 Bar Council/Medical Association / ICAI /ICWAI/ICSI Card with photograph

14 Student Identity Card with photo issued by reputed colleges with validity during the course period.

15 Defense Dependent’s Card with photograph’

16 Married woman identity proof with maiden name, if supported with a verified true copy of marriage certificate

17 Credit card with photo together with statement of such card, not more than three months old.

18 Registered Property document with photo identity

19 Arms License issued by State / Central Government of India.

20 Freedom fighter’s pass issued by Ministry of Home Affairs, Government of India with photograph of applicant.

21 Employee State Insurance Card (ESIC) with photograph supported by latest month’s pay slip.

22 Talati/Patwari (a local govt. official) attestation by way of putting rubber stamp and signature. Gram Sarpanch / Mukhiya attestation by way of putting rubber stamp and signature (For Small Accounts)

Note: If passport having current address is given as proof of identity, there is no need to give separate proof for address.

11 Copies of Registered Leave & License agreement /Sale Deed / Lease Agreement.

12 Certificate and also proof of residence, incorporating local address as well as permanent address, issued by the Hostel Warden of the University / Institute, where the student resides, duly countersigned by the Registrar / Principal / Dean of Student Welfare. Such accounts shall however, be required to be closed on completion of education/leaving the University / Institute provided the constituent does not give any other acceptable proof of residence to the Bank.

13 For students residing with relatives, address proof of relatives, along with their identity proof, can also be accepted provided declaration is given by the relative that the student is related to him/her and is staying with him/her.

14 In respect of officials of Central/State Governments and Public Sector undertakings, who are low risk customers for Bank, Branch Heads may verify the photo/identity and confirm residential address of such officials from independently verifiable sources, to their satisfaction, and permit opening of accounts. This facility is extended only to the Gazetted officers of Central / State Government and Senior Management and above functionaries of Public Sector Undertakings.

15 Latest telephone bills from any telephone service providers and mobile service providers not more than 2 month old, postpaid.

16 Consumer gas connection card / book / Pipe gas bill

17 Certificate from ward/equivalent rank officer, maintaining election roll certifying address of the applicant

18 Post Office Savings Pass Book 19 Domicile Certificate with communication address and photograph

20 Certificate by Village Extension Officer (VEO) / Village Head or equal or higher rank officer. Branch to confirm the authenticity of the certificate and that it has been issued by the person who is holding the said office.

21 Court divorce order – Marriage annulment order issued by Court

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KYC verification of all the members of SHGs need not be done while opening the SB account of SHG and KYC verification of all the office bearers would suffice. With regard to opening of accounts in the name of proprietary concern, they are required to submit complete income tax return of the sole proprietor where the firm’s income is reflected along with copy of any of the utility bills such as electricity, water, telephone bills in the name proprietary concern. Foreign Students: Banks are permitted to open resident accounts in the name foreign students studying in India with ATM card facility by obtaining documents viz., Pass Port, Valid Visa with photograph, Proof of Admission – Letter from University/College, Address Proof – A letter from College/Hostel or certificate from embassy or any certification of registration issued by Foreigner Registration Regional Office (FRRO).

Common man is facing hardships while opening Bank account on account of adherence of stringent KYC norms. To address the associate issues, RBI advised banks to accept utility bill (Telephone/Electricity Bill) or any other document acceptable to establish address proof. However, banks to obtain declaration from the person (Father/Mother/Spouse/Son/Daughter) with whom the prospective customer is staying. In case of small value accounts branches are allowed to open accounts without insisting for proof of identification/address on proper introduction of another bank customer. With regard to the migratory workers, branches to open accounts by obtaining photo and permanent residential address with introduction.

Banks are advised to accept “Aadhaar” number issued by the Unique Identification authority of India (UIDAI) as a proof of identity but not of address for opening of accounts. According to the new guidelines, if the address on the document submitted for identity proof by the prospective customer is the same as that declared in the account opening form, the document may be accepted as a valid proof for identity and address. KYC once done by one branch of the bank should be valid for transfer of the account within the bank provided the customer submits his address proof at new place. This is causing inconvenience to many customers. To address the issue, RBI permitted the banks to obtain self declaration from the account holder about his/her current address, however, the address proof is to be submitted within 6 months. 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. iv) Risk Categorization: RBI advised the banks 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 monitoring of high risk accounts, NRE accounts, accounts with high turnover, large amount of cash transactions and Periodical review and reporting of the transactions to appropriate law enforcing authority.

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Non face to face customers: 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. 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. Government of India introduced “Prevention of Money Laundering Act, 2002” and the objectives are – To prevent, combat and control money laundering; To confiscate and seize the property obtained from the laundered money and 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

Cash Transaction Reports (CTR)

a) All cash transactions of the value of more than `10 lakhs. ii) Series of cash transactions integrally connected to each other, which have been valued below `10 lakhs where such series of transactions have taken place within a month and aggregating `10 lakhs. 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.

Suspicious Transaction Report (STR)

b) Large cash transactions ii) Multiple accounts under same name iii) Frequent conversion of currency from small to large denomination notes iv) Placing funds in FD and using them as security for more loans v) Large deposits immediately followed by wire transfers

Counterfeit Currency Report (CCR)

As and when counterfeit currency is found at branch/currency chest, the same is to be informed to FIU and Reserve Bank of India 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. Reserve Bank of India directed all banks to implement KYC guidelines for new accounts in 2002 and subsequently made it mandatory for all accounts including retail investors with effective from 1st January 2011. It is used by financial institutions and other regulated companies to identify clients and acquire relevant information in order to prevent identity theft, identity fraud, money laundering, terrorist financing, etc. Thus KYC has quickly become an important global due diligence list.

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Alternate Delivery Channels & E-products Hitherto, Branches were only the strategic outfits (Delivery Channels) and invariably the customers are required to visit the branches at the specified timings to complete their transactions. Extending service to the customers round the clock without presence of physical branch is called as “Alternate Delivery Channels”. Adoption of new delivery channels (ATM, Mobile and Internet Banking) has become order of the day for banks to survive in the competitive environment to meet the emergent expectations of the customers besides achieving the optimum utilization of scarce resources. At present, banks are issuing ATM/Debit cards to the customers on opening of the account itself. The convenience coupled with cost effectiveness has enabled the cardholders to use the card extensively for all their retail payments. ATM/Debit Card will be issued to Account holder based on his request. ATM Card is used for withdrawal of cash from Automated Teller Machines. Debit Card is a payment card used to with draw cash from ATM, purchase of goods and payment for services automatically debiting to the card holder’s bank account instantly, to the extent the credit balance exists. In ATM / Debit card the customer can draw cash from ATM up to the balance available in his account subject to daily caps prescribed by Bank from time to time. While providing ATM / Debit card, a customer is provided a PIN number to facilitate withdrawal of amount. Debits to the account using ATM / Debit Card through PIN Number are treated as mandate for withdrawal of the cash by the customer from the account.

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. ATMs extend services such as Cash Withdrawal, Balance Enquiry, Cash/Cheque Deposit, Funds Transfer, Bill Payments, Payment of Direct Taxes, Mobile Recharge, Mobile Banking Registration etc. Cardholder needs to enter password for each financial transaction on ATM.

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 `10000/- per transaction and the maximum number of transactions allowed are 5 per month at free of charge. The number of free transactions shall be inclusive of all types of transactions, financial or non-financial. With this, the customer of a Bank has become customer of all Banks, which has paved the way for Any Bank Banking.

White Label ATMs are purely managed by third party service providers and have their label. These are branded non bank ATM machines. Cash handling, management and logistics are provided by third party. Debit cards of all banks can be operated through these machines. The role of the concerned bank is only limited to provide account information and back end money transfers to the third parties managing these ATM machines. This initiative will enable the excluded segments to avail ATM services as at present majority ATMs are confined to Urban/Metro areas only. However, service provider levy charges which are to be either bear by the Bank or the customer. RBI has allowed white label ATM’s in India to have more penetration of ATM machines. Tata Communications Payment Solutions has become the first company to launch this service in India under the brand name “Indicash”. It has a tie up with majority commercial banks and now you will soon see branded non bank third party white label ATM machines in your vicinity.

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Brown Label ATM – We always think that the bank branded ATM machines operated by the bank concerned, but this is not the case. Banks only handle part of the process that is cash handling and back-end server connectivity. The ATM machine is owned by the third party service provider along with the physical infrastructure. This type ATM is called as “Brown Label ATM” and acts as intermediate between Bank owned ATM and White Label 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:

� ATM failed transactions are to be resolved within a maximum period of 7 working days from the date of receipt of the customer complaint.

� In case of delay in resolution of the complaint within 7 working days, the bank shall pay compensation of `100/- per day, to the aggrieved customer and shall be credited to the customer’s account automatically on the same day when the bank affords the credit for the failed ATM transaction.

� However, the cardholder (customer) is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank within 30 days of the date of the transaction.

As per recent guidelines, Banks are advised to issue debit cards with photographs with a view to reducing the instances of misuse of lost / stolen cards. Further, banks are asked to ensure full security of the cards and any loss incurred by the cardholder on account of breach of security or the failure of the security mechanism would be borne by the banks. Through ATMs, Bank can penetrate into new areas without opening physical bank branches and provide value added service to its customers. It is most cost effective since the investment and operational cost are low when compared to traditional Branch Banking. Internet Banking is leveraging the potential of Internet to facilitate customer access to his account from any place at any time. Apart from viewing the transactions in his account for any period, the customer is able to effect transfer of funds and request for various services. Internet is one of the cost effective channel for delivery of banking services. Internet Banking is provided to Individual/Joint/Sole proprietary concerns, Corporate etc. at their request. The terms and conditions governing Internet banking are displayed on the Bank’s website. Any change in the terms and conditions of “Internet Banking” will be displayed on the website only and not by any means of communication directly to the user of internet banking. The opening and maintenance of the account is subject to rules and regulations introduced or amended from time to time by Reserve Bank of India. Bank can, at its sole discretion, withdraw any of the services / facilities given for the account either wholly or partially at any time without giving any notice. The services available through Internet banking are:

� View account balances and download statements � Transfer of funds within Bank and across the Banks � Request for Cheque Book / Fixed Deposit � Payment of Utility bills viz., Electricity, Telephone, Income Tax etc. � Booking of Train/Bus/Airline tickets � Recharge of Moble / Online shopping � Online Equity Trading – Primary and Secondary market

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Internet Banking system interfaces between the customer computer and the Bank’s Core Banking system (CBS). Customer access is controlled through “Customer ID” and “Password”. However, the customer is not allowed to access the CBS directly to ensure safety. It is protected with “firewalls” to prevent unauthorized access, hacking and virus infection. Advanced encryption technology is used to ensure that messages from/to the customers are not intercepted and misused by others. With regard to financial transactions, banks are providing another layer of security i.e. Online Transaction Password (OTP) to the customers on their mobile or through e-mail. Though it is convenient and cost effective delivery channel for customers and banks, there is an imperative need on the part of the banks to educate the customers with the importance of “Password” to protect them from hacking/fishing. Mobile Banking: 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 crossed 1000 million of which 1/3rd mobiles are in Rural India alone. At present, Mobile Banking is providing the Bill payment and Funds Transfer facility besides information services to the customers. The recent guidelines issued by RBI on Mobile Banking are as under:

� RBI approval is required to extend mobile banking services. � 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.

� Registered customers can only avail this facility from banks. For financial services one time registration should be done through a signed document.

� Hitherto, RBI stipulated a transaction limit `50000/- per customer per day (which includes purchase of goods and services). However, RBI has removed the cap and now banks may place per transaction limits based on their own risk perception with the approval of its Board.

� Banks are allowed to provide cash-out through ATMs or BCs subject to cap of `10000/- per transaction and maximum of `25000/- per month per customer.

� Banks may put in place end-to-end encryption of the mobile PIN number (mPIN) for better security.

� Banks should file Suspected Transaction Report (STR) to Financial Intelligence Unit-India (FID-IND) for mobile banking transactions, similar to normal banking transactions.

The regulatory environment has helped mobile banking take off in India. In 2010, the National Payment Corporation of India (NCPI) launched the intermediate payment service i.e. Inter Bank Mobile Payment Service (IMPS), a 24/7 real-time electronic Interbank fund transfer on a Person-to-Person (P2P) or Person-to-Merchant (P2M) basis, which has boosted mobile banking. 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. The increased phase of mobile usage is going to place our country on the top in the Asia Pacific region in the ensuing years.

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Electronic Payments 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: i) Speed clearing: Banks as part of their normal banking operations undertake collection of cheques/drafts deposited by their customers drawn on other banks and the collection process is taking 7 to 14 days 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/ECCS centre and the destination bank branch is under CBS platform. 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 working on T+1 or 2 basis. No charges for cheques up to `1 lakh. For above one lakh the maximum amount that can be levied is `150/-. In case of return of cheques, the charges ranges from `50 to `500 depending on the value of the instrument. The facility of immediate credit would not be applicable to cheques collected under speed clearing arrangements. ii) Cheque Truncation System (CTS) is a new system of clearing implemented in the National Capital Region (NCR) New Delhi and Chennai. It is the process in which the physical movement of cheque within a bank or between banks and the clearing house is curtailed, being replaced in a whole or part, by electronic records (images) for further processing and transmission. It improves faster reconciliation of inter/intra bank accounts besides saving considerable man-hours and enables the banks to improve operational efficiency. However, domestic instruments, where both presenting and drawee banks are the same are not allowed in the CTS. All Government cheques and all instruments which fail in Image Quality Assessment (IQA) test will have to be physically handed over to the Paying Bank. To facilitate the transformation to an image based processing scenario, cheque leaves are required to be image friendly and uniform. RBI directed all banks to issue cheques confronting to CTS-2010 standard with uniform features in terms of size, paper quality and fields such as the MICR band, signature and date details w.e.f. 1st August 2013. Besides security features such as watermarks, and the bank’s logo are also standardized in the new cheque leaves. Now, CTS is being extended to all the MICR centres in a phased manner with the introduction of Grid Based Cheque Truncation clearing. iii) Electronic Clearing System (ECS): The introduction 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 Bank 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. iv) Any Branch Banking (ABB): Under CBS, Branch customer has become Bank customer and they are allowed to approach any branch across the country for deposit of cheque or cash and withdrawal of cash or transfer of money. No cash payment will be made to third party (bearer). However, payment to third party up to `20000/- is allowed to NRE / NRO accounts and branch should ensure identity of the bearer while making payments. With regard to deposit of cash / transfer of funds among the bank branches is allowed at par for any amount.

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v) 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 and cost effective (Not exceeding `55/-). The timings for customer payments are 9 AM to 4.30 PM on Monday to Friday; and 9 AM to 2 PM on Saturday. Similarly, for interbank 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. vi) National Electronic Funds Transfer (NEFT): For the benefit of retail customers, RBI introduced NEFT scheme. Under this, funds can be transferred across the banks instantaneously. There is no cap on minimum and maximum amount for NEFT. RBI has given discretion to the banks to levy charges, however, the service charge should not exceed 25/- per transaction. The timings of NEFT are 8 AM to 7 PM (12 batches) from Monday to Friday and it is 8 AM to 1 PM (6 batches) 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. vii) Applications Supported by Blocked Amount (ASBA): ASBA is an 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. It enables the listing process faster. It is made mandatory for non-retail investors also to apply only through ASBA. The investors have option to bid IPO either through designated branches or Internet Banking. Revision and cancellation of bids are permitted till the issue closure date and time. 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. 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. viii) 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. 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. ix) Debit cards known as check 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. 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 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. In order to make Credit/Debit Card transactions more secure, RBI mandated the card holders to enter PIN while transacting at POS terminals with effect from 1st December 2013.

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x) Charge Card: Charge card is like any Credit or Debit Card. These cards neither offer revolving credit like the Credit Card nor debit the account instantaneously like Debit Card. However, the cardholder is required to settle the bill in full by the due date each month. Charge cards make a good option to develop financial discipline which likely to enable the cardholders to improve their credit history. Further, charge card offers a dynamic limit, while rewarding good payment 23ttest23e. xi) Prepaid Card: A prepaid card looks like a credit card and works like a debit card. These cards resemble credit and debit cards in appearance and allow users to load any amount up to `50000/- and can be used at any ATM/Point of Sale Terminal. On use of card, funds are directly debited from the card. Cardholders preload the cards with funds via a cash deposit or wire transfer. There are no finance fees or interest payments as charges are deducted from the prepaid balance. It is an opportunity for people who have had little or no access to the mainstream financial system by loading funds onto a prepaid card. It is a secure and convenient alternative to cash. Various types of Prepaid Cards are – Re-loadable Cards (value is replenished once it is used), Disposable Cards (discarded once the value is used), Closed Cards can be used for a specific purpose (Phone Cards) and Open Cards (multi-purpose). Re-loadable cards are most popular among “under-banked” individuals, or those who tend not to possess conventional bank accounts. xii) RuPay Cards: It is a domestic card payment network established by National Payment Corporation of India (NPCI) having more than 100 Banks in India as members with its ATM network spread across the country. These cards can be used in all the ATMs of NPCI network and POS terminals & e-com transactions (Internet) enabled for RuPay acquiring. The various types of RuPay cards are as under:

Card Type Meant for RuPay Kisan Farmers availing Agriculture production loans (Crop Loans) RuPay Aadhaar Beneficiaries of Electronic Benefit Transfer (EBT) scheme RuPay Debit Beneficiaries under Financial Inclusion schemes The existing identification modes used in new delivery channels has a major drawback as it recognize the PIN but not the person. Sometimes, it leads to impersonation and may cause financial loss. To overcome the problem, biometric technologies such as Fingerprint Recognition, Face Recognition, Voice Authentication, Hand Geometry, Retinal Scanning, Iris Scanning and Signature Verification have come in to force. Whenever the user access to delivery channel, it verifies with the server and deliver the service if found correct. Electronic Payments – Recent developments: Government of India urged the banks to take appropriate effective measures for promotion of transactions through electronic mode, such as:

� Popularizing NEFT/RTGS platforms for transfer of funds among public and at par NEFT for transactions upto `1 lac.

� Issuance of Debit cards to all eligible accounts.

� Any Branch Banking is allowed without any charges.

� Encouraging institutions and organizations to pay wages and salaries of their employees through banking channels preferably e-mode.

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� It is directed that all payments handled by banks to their customers, vendors, suppliers will be done electronically from 1st July 2012 onwards.

� The validity period of cheques/demand drafts is reduced from 6 months to 3 months with effect from 1st April 2012 to discourage discounting of negotiable instruments.

� NPCI initiated steps to popularize ‘RuPay’ where Debit/Credit card payments are being routed through Indian e-service intermediaries which bring down the costs and improve their acceptability.

� Merchant Discount Rate (MDR) is the fee that merchant establishment pays to the terminal deploying bank (Acquiring Bank), which play vital role in Point of Sale (POS) transactions. Recently, RBI advised banks to cap MDR at 0.75 percent for transactions up to `2000/- and 1 percent for transactions above `2000/- to popularize POS transactions using Debit Cards.

� Banks are advised to promote Credit/Debit cards to pave the way for cashless economy. Further, card based transactions leave adequate audit trails and hence disincentives black money generation.

� The practice of taking Post-dated Cheques (PDCs) from the borrowers is stopped forthwith and advised banks to obtain ECS (Debit) mandate from borrowers.

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Financial Inclusion 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. Availability of banking services means to provide Basic Savings Bank Deposit Account (formerly known as No-Frills account) with Overdraft facility; Remittance product for Electronic Benefit Transfer (EBT) and other remittances; Variable Recurring Deposit and General Credit Card or Kisan Credit Card etc.

Evolution of Financial Inclusion: Social Banking is an instrument for Financial Inclusion. Though, social banking initiatives were introduced in India long back through measures such as co-operative banking movement, nationalization of banks (in 1969 & 1980), creation of Regional Rural Banks etc., their success was largely constrained by the size and population of the country (1.21 billion) and non-availability of banking services. In the above backdrop financial inclusion has received a big boost and greater efforts have been laid on inclusive banking. The following are the steps initiated for enhancing financial inclusion in India.

� Introduction of Basic Saving Bank Deposit account (known as No-Frill account) for all individuals with simplified KYC norms.

� Information and Communication Technology (ICT) based Business Correspondent model for delivery of low cost door step banking services in remote villages is being implemented.

� All villages with population above 2000 are already covered under FIP. Process of covering the remaining villages with population below 2000 is underway.

� Opening of 25% of new branches by banks in unbanked rural centers is made as mandatory.

� Mobile and network companies have been allowed to partner with banks in offering services collaboratively.

� Government has encouraged a multi-channel approach including mobiles, handheld devices, smart cards, micro ATMs, kiosks etc., for providing financial services to the target group.

� A village is considered to be covered by banking service if either a Brick & Mortar Branch or Ultra Small Branch or Business Correspondent.

Opening a Basic Savings Bank Deposit account 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.

i)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.

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ii) 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 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.

iii) 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): The BC model allows the bank to use third parties (Individuals/associations/institutions/26ttest26ed) to extend the basic banking services. Normally the operations of BC should be within 30 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. BCs are provided with laptop with connectivity to have seamless operations with the respective bank’s central server. BCs use biometric smart cards, in which customer data including finger prints are stored and works on PoS machines with key management. Business Facilitators (BF) Model envisages the use of intermediaries by the banks to provide Non Financial Services to the public such as creating awareness about banks’ products/services, identification of borrowers/processing of applications, post sanction monitoring and follow-up etc.

Ultra Small Branches: Recently, the Government has directed banks to set up “Ultra Small” branches in all villages under financial inclusion scheme by March 2012, typically in a premises spread 100 to 200 sft. It aims to provide a wide range of banking services, including credit transactions, in villages where only cash transactions are being provided by BCs. A designated officer will visit the village on a prefixed date and time every week with laptop and will be connected to Bank’s central server (CBS).

Grama Kranthi General Credit Card (GK-GCC) Scheme: It is an Entrepreneurial credit scheme for covering the general credit needs of the Bank’s customers in FI villages. The nature of the loan is by way of overdraft/ cash credit with no end use stipulation. All Savings Bank Account holders having active Smart card with satisfactory transactions at least for a period of 3 to 6 months are eligible to avail General Credit Card. Account is in the nature of cash credit. Quantum of limit will be based on the assessment of income and cash flow of the entire household. The maximum limit per household shall be `25,000/-. No collateral security should be insisted upon. The card holder is entitled to draw cash from the Point of Sale Terminals deployed at the custody of the CSP stationed at the particular village through authentication of fingerprints using smart card. Account will be reviewed every year and renewed after 3 years.

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Financial Inclusion – Progress: Government/RBI has adopted a structured and planned approach towards FI by not just focusing on improving access to financial services but also encouraging demand for financial services through financial literacy initiatives. Adopted a bank-led model for FI, but have permitted non-bank entities to partner banks in their FI initiatives. Banks are advised to adopt innovative business models and delivery channels to expand FI efforts. There is a need for banks to develop new products and design new delivery models that are customized to the unique needs of the financially excluded population, both in the rural and urban areas. The progress made so far in quantitative terms is as under:

Financial Inclusion – Progress Report No Particulars 2010 2011 2012 2013 I Branches / BCs i) Rural Branches 33378 34811 37471 40845 ii) Business Correspondents – Rural 34174 80802 141136 221341 -

Urban 447 3771 5891 27124 iii) Other Modes 142 595 3146 8424 Total 68141 119979 187644 297734 II Deposit Accounts i) Basic Savings Bank Deposit

Accounts (No. in lakh) 735 1048 1385 1833 ii) BC-ICT Accounts (No. in lakh) 133 316 573 810 Total 868 1364 1958 2643

III Loan Accounts i) Kisan Credit Cards (No. in lakh) 243 271 302 338 ii) General Credit Cards (No. in

lakh) 14 17 21 36 iii) Basic Savings Bank Accounts with

OD facility (No. in lakh) 2 6 27 39

IV ICT Transactions (No. in lakh) 265 842 1411 2547 SLBCs are advised to prepare a road map for provision of banking services in all unbanked villages with population below 2000 in a time bound manner. About 485000 unbanked villages are identified and allotted to banks. Banks have been advised to Prepare Board approved FIPs for the period 2013-2016 and to put structured, comprehensive monitoring mechanism in place for evaluating banks’ performance against their FIP plans. Further, banks are advised to open 25% of all new branches in unbanked rural centres. It is also emphasized to open accounts of all eligible individuals in camp mode with the support of local Government authorities and seed the existing and new accounts with Aadhaar numbers to ensure smooth roll out of the Government’s Direct Benefit Transfer (DBT) initiative.

Common Service Centers: Under the National e-Governance Plan (NeGP), the Common Services Centers (CSCs) have been established with front end service delivery points at the village level, for delivery of Government, Social and Private Sector services in the areas of agriculture, health, education, entertainment, FMCG products, banking and financial services, utility payments, etc. The infrastructure at the CSC includes a fixed place of business say 100 to 150 sq. ft, specified working hours, a Personal Computer/Lap top with internet connectivity web-cam, printer, power backup, biometric scanner. CSC acts as BC and providing ICT based banking services in unbanked villages. The Service Provider would be required to appoint BC. The Identified BC should not have been defaulters to any financial institution and

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should not have been blacklisted by any bank in the last two years for deficiency of service. The BC must be responsible to receive and pay money, to transfer money from one to another. BC may also be used for deposit mobilization and recovery of loans. The BC is responsible for routing all transactions of all villages in the assigned villages so that effective marketing and follow up, can take place.

Indicative charges to be paid to the Service Provider Activity Remuneration Savings Bank Account opening `20/- per account Recurring Deposit account opening `5/- per account Fixed Deposit `5/- per account

Overdraft/Retail Loans/KCC/GCC

0.5% of loan amount sanctioned subject to a minimum of `25/- and maximum of `5,000/-; 50% of the amount payable shall be paid after the first disbursement of the loan and the rest 50% shall be paid one year thereafter if the account continues to be standard asset till then.

3rd Party financial products like Life & non-life Insurance, Pension etc. with prior approval of the concerned Bank

25% of the commission bank earns

SHG & JLG: For formation and promotion including credit linkage

Not exceeding `1000/- per SHG/ JLG formed and credit linked with the Bank in stages as under.

Stationary and overhead expenses after saving linkage of SHG `300/- 4 months after saving linkage `300/- After credit linkage of SHG `400/- Non cash transactions Remittance/Fund transfer `10/- per transaction Balance Enquiry Nil

In addition to these charges, the Service Provider will be paid fixed charges @ 2,500 per month for each outlet for a period of six months from the date of activation of each outlet, at least 80% or more of which must be passed on by the BC to BCA. The date of activation would be the date of first transaction. The fixed charges will be paid subject to the condition that the BC records at least 25 transactions (enrolment of new accounts or transactions in existing accounts) during each month. Direct Benefit Transfer (DBT): The Central and State Governments have been earmarking substantial budgetary allocations towards social security and welfare schemes through various subsidies with an aim to improve the standard of living of vast majority of people who require social assistance. The fundamental challenge for any subsidy framework is to ensure effective targeting of beneficiaries which is a complex task and fraught with two types of errors viz., errors of Inclusion and errors of Exclusion. The former involves the wrongful inclusion of beneficiaries ineligible for subsidy, while the later concerns the exclusion of eligible beneficiaries. In the process, the lion share of subsidies has not been reaching the target group defeating the very purpose of the schemes. In order to ensure electronic transfer of subsidies directly into the accounts of the beneficiaries, they need to have bank account. Accordingly, banks have been advised that the service area bank in rural areas and banks assigned the responsibility in specific wards in urban area ensure that every household has at least one bank account. In this direction, the Government has taken the following initiatives:

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� All Banks are advised to provide basic banking services at all villages having population of above 2000 either opening a bank branch or appointing a Business Correspondent Agent in each of the FI village.

� All banks must complete the mapping of their respective service area to ensure that one BC is available in each Gram Panchayat. The collection of account opening data including Aadhar number is to be done by BC.

� Banks are advised to establish a regular “Brick and Mortar” or “Ultra Small Branch” in all habitations with population of 5000 and above in under-banked districts and 10000 and above in other districts. Further, Banks are advised to provide onsite ATMs at all branches across the country.

� Further, it is stipulated that a BCA has to be made available within a radial distance of 2 KM and a branch within a radial distance of 5 KM. Banks should issue Debit Cards to all eligible account holders.

Schemes covered under Direct Benefit Transfer

1 Post Matric Scholarship for SC Students 2 Pre-Matric Scholarship for SC Students 3 Pre-Matric Scholarship for Children of those engaged in unclean occupations 4 Upgradation of merit of SC Students 5 National Overseas Scholarship Schemes for SC Students 6 Post Matric Scholarship for OBCs 7 National Overseas Scholarship for OBCs 8 Post Matric Scholarship for economically backward class students 9 Post Matric Scholarship for students with disabilities 10 National Overseas Scholarship for persons with disabilities 11 Scholarship for top class education for students with disabilities 12 Top Class Education Scheme 13 Scholarship to Universities/College Students 14 Fellowship Schemes of UGC. 15 Fellowship Schemes of AICTE 16 Subsidy on Fee to Students 17 National Means cum Merit Scholarship 18 National Scheme for Incentive for the girl child for secondary education 19 National Overseas Scholarship for ST students 20 Post Matric Scholarship Scheme 21 Upgradation of Merit Scheme 22 Top Class Education System 23 Rajiv Gandhi National Fellowship 24 Matric Scholarship Scheme 25 Maulana Azad National Fellowship 26 Merit cum Means Scholarship Scheme 27 Indira Gandhi Matritva Sahyog Yojana (IGMSY) 28 Dhanalakshmi Scheme 29 Janani Suraksha Yojana 30 Scholarship to the Children of beedi workers 31 Housing subsidy to beedi workers 32 Stipend to children in the special schools under the Child Labour Project 33 Permanent Disability Benefits, Dependent benefits, Sickness State Insurance Corp. to the insured persons and their families 34 Pension withdrawal of PF, Premature withdrawal of pension, payment related to Employees Deposit Linked Insurance 35 Domestic LPG Subsidy Scheme 36 PDS Kerosene 37 Targeted Public Distribution System (in Uts)

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DBT Scheme is a Game Changer for Banks as it would enable large number of retail customers into the banking fold. This scheme has potential to bring about a second revolution in the banking industry in the post nationalization era.

Financial Inclusion – Challenges: The goal of universal financial access is yet to receive the complete conviction/ commitment of the Board/top management of banks. This is often due to a lack of genuine belief that this can be pursued as a profitable business activity. The expenses incurred on FI initiatives need to be viewed as an investment instead of being considered as expenses, and the same should be weighed against present/future benefits likely to accrue from the same. Another major challenge is that banks are yet to develop sustainable and scalable business and delivery models to guide their FI initiatives. While several alternate models have been tried out, the time has come for banks to zero in on the models that they find most suited to their goals and to focus on scaling up the same. While access to financial services has improved, the usage of the financial infrastructure continues to be tardy. While more than 2.70 lakh banking outlets are available across the country, the number of transactions in these accounts remains unimpressive. For instance, nearly half of the Basic Savings Bank Deposit accounts are not seeing transactions. This not only restricts the potential benefits that could accrue from increased financial access but also reduces the viability of FI activities for banks and BCs. The reduced viability, in turn, impacts the scalability of the model, thereby hampering FI efforts. While banks have innovated on technology, the same has not resulted in significant reduction in the cost of providing financial services. Beneficiaries/ stakeholders often complain of constraints in digital/ physical connectivity. The process of seeding the bank accounts with Aadhaar numbers is faced with various constraints which could impact the roll out of the Government’s DBT initiatives. Financial Inclusion and Financial Literacy are two sides of the equation. Financial Inclusion acts from supply side by providing financial market/services that people demand whereas Financial Literacy stimulates the demand side by making people aware of what they can demand. Therefore, access to financial services and Financial Education must happen simultaneously. It must be continuous, an ongoing process and must target all sections of the population. Financial inclusion has a critical role to play in India’s growth story. Capital formation through credit and financial services is necessary for inclusive and sustainable growth and a well-functioning financial system is important for socially inclusive growth. Banks, especially public sector banks, have played a lead role in financial inclusion and will be the main drivers in making financial services available to the grass-root level. Considering the enormity of the task, the combined will power of the society is required to ensure success in this challenging objective. All stakeholders, including policy makers, regulators, state and district administration, IT solution providers, software and hardware vendors, civic society, media and public at large have to come together and pool their collective might if we have to ensure that the goal of meaningful financial inclusion and leveraging financial access as a means for economic empowerment of the excluded masses, is successfully achieved.

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Priority Sector – Revised Guidelines The need for commercial banks to improve Priority Sector advances was emphasized since 1968 with special focus on Agriculture and Small Scale industries. Initially there was no specific target fixed in respect of priority sector lending but in the year 1974 banks were advised to raise the share of these sectors to 1/3rd of their aggregate advances by March 1979. Subsequently, on the basis of the recommendations of the Working Group on the Modalities of Implementation of Priority Sector Lending and the Twenty Point Economic Programme by Banks under the chairmanship of Dr. K. S. Krishnaswamy, all commercial banks were advised to achieve the target of priority sector lending at 40 percent of aggregate bank advances. Sub-targets were also specified for lending to agriculture and the weaker sections within the priority sector. The Internal Working Group of the RBI headed by Shri C. S. Murthy and the Shri Y.H.Malegam committee constituted to study issues and concerns in the Micro Finance institutions (MFI) sector, inter alia, had recommended review of the guidelines on priority sector lending. Subsequently, RBI has setup a Committee headed by Shri M V Nair to re-examine the existing classification and suggest revised guidelines with regard to Priority Sector lending classification and related issues. Accordingly, revised guidelines on Priority Sector are issued in July 2012.

1. Agriculture

i) Direct Finance to Agriculture: Loans to individual farmers including SHGs/JLGs engaged in agriculture and allied activities viz., dairy, fishery, animal husbandry and sericulture are treated as direct lending to agriculture irrespective of the amount. However, loans to 31ttest31ed including farmer’s producer companies of individual farmers, partnership firms and co-operatives of farmers for the said activities up to an aggregate limit of `2 crore per borrower is treated as direct lending to agriculture. The various activities that come under direct lending to agriculture are:

� Short-term loans for raising crops, i.e. for crop loans, which include traditional/non-traditional plantations, horticulture and allied activities.

� Medium & long term loans for agriculture and allied activities (purchase of agricultural implements and machinery, loans for irrigation and other developmental activities undertaken in the farm, and development loans for allied activities).

� 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.

� Loans to farmers up to `25 lakh against pledge/hypothecation of agriculture produce for a period not exceeding 12 months.

� Export credit to farmers for exporting their own farm produce.

If the aggregate loan limit per borrower is more than `2 crore for the above said purposes, the entire loan should be treated as indirect finance to agriculture.

ii) Indirect finance to agriculture: Lending to the following activities is treated as indirect finance to agriculture:

� Corporates / partnership firms / institutions engaged in Agriculture and Allied Activities (dairy, fishery, animal husbandry, poultry, sericulture etc.)

� Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS)

� MFIs for on-lending to farmers for agricultural and allied activities � NGOs for on-lending to members of SHGs under SHG-Bank Linkage Programme for agricultural and allied activities.

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� RRBs for on-lending to agriculture and allied activities. � Dealers/sellers of fertilizers, pesticides, seeds, cattle feed, poultry feed, agricultural implements and other inputs up to `100 lakh per borrower.

� Setting up of Agri clinics and Agribusiness Centres. � Custom Service Units managed by individuals, institutions or organizations who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers, combines, etc., and undertake farm work for farmers on contract basis.

� Construction and running of storage facilities. 2. Micro and Small Enterprises: Bank loans to Micro and Small Enterprises (MSE) engaged in providing or rendering of services will be eligible for classification to MSE sector under priority sector up to an aggregate limit of `10 crore per borrower/unit, provided they satisfy the investment criteria for equipment as defined under MSMED Act, 2006. 3. Medium Enterprises: Units which are engaged in manufacture/production/ preservation of goods and whose investment in plant and machinery should be as per the guidelines are treated as Medium Enterprises. i) Manufacturing Enterprises are those engaged in manufacturing or production of goods. These are defined in terms of investment in Plant & Machinery. Loans extended to Medium Manufacturing Enterprises shall be classified as Priority Sector advances. ii) Service Enterprises are the enterprises engaged in providing or rendering of services. These are defined in terms of investment in Equipment. Loans extended to Medium Service Enterprises up to `10 crore shall be classified as Priority Sector advances. The modified definitions of MSM Enterprises are as under: No Category Investment in Plant & Machinery / Equipment

Manufacturing Service 1 Micro Enterprise Up to `25 lakhs Up to `10 lakhs 2 Small Enterprise `25 to `500 lakhs `10 to 200 lakhs 3 Medium Enterprise `500 to `1000 lakhs `200 to 500 lakhs

Indirect finance to the small (manufacturing as well as service) enterprises sector 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. 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. 4. Housing Loans: Loans up to `25 lakh to individuals for purchase/construction of dwelling unit per family in Metro centers with population above ten lakh and `15 lakh in other centers excluding loans granted by banks to their own employees are treated as priority sector. Further, loans given to individuals for repairs to the damaged dwelling units of families up to `2 lakh in rural and semi-urban areas and up to `5 lakh in urban and metropolitan areas are treated as priority sector. Further, housing loans to the following are also treated as priority sector:

� Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to a ceiling of `10 lakh per dwelling unit.

� Loans sanctioned for housing projects exclusively for the purpose of construction of houses only to economically weaker sections and low income groups, the total cost of which does not exceed `10 lakh per dwelling unit, will

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qualify for priority sector status. However, the family income of the borrower should not exceed `1.2 lakh per annum irrespective of location.

� Loans to Housing Finance Companies (HFC), for on-lending for the purpose of purchase/construction/reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of `10 lakh per borrower, provided the all inclusive interest rate (Interest rate, processing fee and service charges) charged to the ultimate borrower is not exceeding lowest lending rate of the lending bank for housing loans plus 2% per annum. However, this segment should not exceed five percent of the individual bank’s total priority sector, on an ongoing basis.

5. Education Loans: Education loans include loans and advances granted to only individuals for educational purposes up to `10 lakh for studies in India and `20 lakh for studies abroad, and do not include those granted to institutions. 6. 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 `20 lakhs. 7. Micro Credit: Provision of credit and other financial services and products of very small amounts not exceeding `50000 per borrower, either directly or indirectly through a SHG/JLG mechanism or to NBFC/MFI for on-lending up to `50000 per borrower, will constitute micro credit. 8. Lending to Micro Finance Institutions (MFI): Bank credit to MFIs for on-lending is eligible for categorization as priority sector advance if aggregate amount of loan, extended for income generating activity, is not less than 70% of the total loans given by MFIs. Weaker Sections: Loans to Small and marginal farmers with land holding of 5 acres and less, and landless labourers, tenant farmers and share croppers, Artisans, village and cottage industries where individual credit limits do not exceed `50000/-, Beneficiaries under SGSY/ SC&ST/ DRI / SJSRY / Liberation and Rehabilitation of Scavengers (SLRS) / SHG schemes and loans granted to persons from minority communities for the said purposes are treated as weaker section. Differential Rate of Interest Scheme (DRI): 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 `6500/- to `15000/- and the housing loan limit is also increased from `5000/- to `20000/-. The borrower’s family income eligibility criteria is revised to `18000/- & `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.

Classification of Farmers 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

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Credit flow to SC/ST 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 PMEGP 22.50% of Advances. Age relaxation – 10 Years

Priority Sector – Targets & Sub-targets Category Domestic commercial banks Priority Sector

40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Agricultural advances

18 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. Of this, indirect lending in excess of 4.5% of ANBC or credit 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 ‘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.

Small Enterprise advances

Advances to small enterprises sector 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.

Micro enterprises within Small Enterprises sector

40 per cent of total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant & machinery up to `10 lakh and micro (service) enterprises having investment in equipment up to `4 lakh; 20 per cent of total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant & machinery above `10 lakh and up to `25 lakh, and micro (service) enterprises with investment in equipment above `4 lakh and up to `10 lakh. (60% small enterprises advances should go to the micro enterpr).

Export credit Export credit is not a separate category. Export credit to eligible activities under agriculture and MSE will be reckoned for priority sector lending under respective categories.

Weaker sections

10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Differential Rate of Interest Scheme

1 per cent of total advances outstanding as at the end of the previous year. It should be ensured that not less than 40 per cent of the total advances granted under DRI scheme go to SC/ST. At least two third of DRI advances should be granted through rural and semi-urban branches.

Foreign Banks with 20 and more branches are brought on par with domestic banks (40% advances to priority sector) in a phased manner of five years starting from 1st April 2013. With regard to foreign banks with below 20 branches, the target is stipulated 32% of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. In case of Small Enterprises and export credit the target is set as 10% & 12% respectively.

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Government Sponsored Programs Prime Minister Employment Generation Programme (PMEGP): Prime Minister’s Employment Generation Programme (PMEGP) by merging the two schemes that were in operation till 31.03.2008 namely Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP) for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas. The Scheme will be implemented by Khadi and Village Industries Commission (KVIC) and the details are as under:

Category

Project Cost Borrower contribution

Subsidy Urban Rural

General 10% 15% 25% Special (SC/ ST/OBC/Minorities/Women/ Ex-servicemen / Physically handicapped/ NER / Hill and Border areas etc.)

05%

25%

35%

� The maximum cost of the project/unit admissible under manufacturing sector is `25 lakh.

� The maximum cost of the project/unit admissible under business/service sector is `10 lakh.

� The balance amount (excluding MM/subsidy) of the total project cost will be provided by Banks as term loan

Eligibility Conditions of Beneficiaries

� Any individual, above 18 years of age � There will be no income ceiling for assistance for projects under PMEGP. � For setting up of project costing above `10 lakhs in the manufacturing sector and above `5 lakhs in the business/service sector, the beneficiaries should possess at least VIII standard pass educational qualification.

� Assistance is available only for new projects under the PMEGP. � Self Help Groups (including those belonging to BPL provided that they have not availed benefits under any other Scheme) are also eligible for assistance under PMEGP.

� Institutions registered under Societies Registration Act 1860; Production Co-operative Societies, and Charitable Trusts. Existing Units (PMRY / REGP or any other scheme of Central / State Government) and the units that have already availed Government Subsidy (including units registered & certified khadi institutions who have availed subsidy from central/state government) are not eligible.

To claim Margin Money (Subsidy), the borrower is required to submit caste/community certificate or relevant document issued by the competent authority. In case of institutions, a certified copy of the bye-laws is required.

Project cost will include Capital Expenditure and one cycle of Working Capital. Cost of the land should not be included in the Project cost. Projects costing more than `5 lakh, which do not require working capital, need clearance from controlling office. PMEGP is applicable to all new viable micro enterprises, including Village Industries projects except activities indicated in the negative list of Village Industries. Existing/old units are not eligible. Only one person from one family is eligible for obtaining financial assistance for setting up of projects under PMEGP. The ‘family’ includes self and spouse.

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No collateral security will be insisted upon by Banks in line with the guidelines of RBI for projects involving loan upto `10 lakhs in respect of the projects cleared by the Task Force. The borrower is required to undergo EDP training at least 2 weeks duration. Thereafter, the bank will release first installment of the Bank Finance to the beneficiary. The margin money (subsidy) is to be kept in Term Deposit for three years at branch level in the name of the beneficiary/Institution. No interest will be paid on the TDR and no interest will be charged on loan to the corresponding amount. Repayment schedule may range between 3 to 7 years after an initial moratorium as may be prescribed by the concerned bank/financial institution. Swarnajayanti Gram Swarojgar Yojana (SGSY): It is a Scheme which is a restructure of the erstwhile schemes like IRDP, TRYSEM, DOWCRA, SITRA, GKY & MWS etc., with the objective to bring the assisted poor rural families above poverty line. The scheme aims at establishing a large number of micro enterprises in the rural area. The identification of the borrowers will be done by Grama Sabha. Productive and viable activities under Agriculture & ISB are eligible under this scheme with 50% coverage by SC/ST, 40% coverage by women and 3% to Physically Handicapped borrowers. The size of the loan under the scheme would depend on the nature of the project. The loans under the scheme would be composite loan comprising of Term Loan and Working Capital. Subsidy admissible is @ 30% or maximum `7500/- (For SC/ST- 50% or maximum `10000) & for groups – 50% or maximum `1.25 lac (no ceiling for minor irrigation projects). For all individual loans exceeding one lakh and group loans exceeding `10 lakh, in addition to primary security such as hypothecation/mortgage of land or third party Guarantee as the case may be, suitable margin money/other collateral security in the form of insurance policy; marketable security/deeds of other property etc. may be obtained. The upper ceiling of ` 10 lakh is irrespective of the size of the group or prorate per capita loan to the group while deciding the limit for collateral security, the total project cost. The repayment period – minimum of 5 years and branches should ensure that repayment not to exceed 50% of incremental income. In the event of unfortunate/untimely death of the borrower, LIC make payment of `6000/- for natural death and `12000/- for accidental death to the legal heirs of the borrower. (Cir no. 189 Ref 28/3 dated 2.8.2012) Self Employment scheme for rehabilitation of Manual Scavengers (SRMS): The objective of the National Scheme for Liberation and Rehabilitation of Scavengers and their dependents is to liberate them from their existing hereditary and obnoxious occupation of manually removing night soil and filth and to provide for and engage them in alternative and dignified occupations. The Scheme would cover primarily all scavengers belonging to Scheduled Castes community. Scavengers belonging to other communities would also be covered. The scheme covers rural and urban areas and the identification will be done by Ministry of Social Welfare & National SC/ST financial development corporation. The beneficiaries are eligible for term loan up to ` 5 lakh and Micro finance up to `25000/- is allowed without any margin. The loans sanctioned under this scheme are eligible for subsidy @ 50% for the projects where the unit cost is up to `25000/- and 25% for projects above `25000/- with minimum of `12500 and maximum of `20000/-. Rate of Interest – For loans up to `25000 @ 4% for women; others 5%. For loans above `25000/-, the interest rate is @ 6% p.a. Swarna Jayanti Shahari Rojgar Yojana (SJSRY): The objective of the scheme is to address Urban poverty alleviation, the scheme seeks to provide gainful self-employment to the urban poor (living below the urban poverty line) either unemployed or under employed, through setting up of self-employment ventures or provision of wage employment. The scheme has components such as Urban self Employment Programme (USEP), Urban Women Self-help Programme (UWSP), Skill

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Training for Employment promotion amongst Urban Poor (STEP-UP), Urban Wage Employment programme (UWEP), Urban Community Development Network (UCDN). The defaulter to any nationalized bank / financial institution / cooperative bank is not eligible to avail loan under SJSRY. The loans granted under this scheme should be treated as advances under priority sector. The scheme is meant for Urban Poor who are under below poverty line and aims to cover 30% Women & 3% physically handicapped and SC & ST borrowers as per proportion to their population. Urban Self Employment Programme (USEP) – Operational details in regard to Self-Employment Individual through setting up of Micro-Enterprises

Urban Women Self-Help Programme (UWSP) – Operational details in regard to self-employment (group) through setting up of Micro-Enterprises

1 Identification Survey by ULB

2

Eligibility

Urban poor (unemployed / under employed) living below the poverty line, in any city/town. Minimum 18 years at the time of applying for Bank Loan. Residing in the town for at least three years. No minimum and maximum educational qualification.

3

Nature of Activities

Town services requiring no special skills / Micro-manufacturing units requiring skills. Assistance should also be made available under agricultural and allied activities / small scale services/small business activities

4 Project Cost The maximum unit project cost for individual cases can be `2 lakh. If two or more eligible persons join together in a partnership, the project with higher costs would also be considered provided share of each person in the project cost is ` 2 lakh or less.

5 Subsidy Subsidy would be provided at the rate of 25% of the project cost subject to a ceiling of `50,000/- per beneficiary. In case more than one beneficiary join together and set a project under partnership, subsidy would be calculated for each partner separately.

6 Margin Money

Each beneficiary is required to contribute 5% of the project cost as margin money in cash.

7 Interest Interest applicable to priority sector. 8 Collateral No collateral is required. 9 Repayment Repayment schedule ranges from 3 to 7 years after initial

moratorium of 6 to 18 months as decided by Bank.

1 Identification Survey by ULB

2 Eligibility

Urban poor women living below the poverty line, in any city/town with preference performing urban women SHGs. Minimum number of women in a group is five. 18 years at the time of the group applying for Bank Loan. No minimum and maximum educational qualification.

3 Activity Any group activity/enterprise development for income generation by the urban poor women

4 Subsidy Subsidy would be provided at the rate of 35% of the project cost subject to a ceiling of `3 lakh or `60,000/- per beneficiary.

5 Margin Money 5% of the project cost 6 Interest Interest applicable to priority sector. 7 Collateral No collateral is required. 8 Repayment Repayment schedule ranges from 3 to 7 years after initial

moratorium of 6 to 18 months as decided by Bank.

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STEP-UP, UWEP & UDCN – Inputs under the scheme would be delivered both through the medium of community structures to be set up along with Urban Local Bodies (ULBs) like Community Development Society-CDS/ town-Urban Poverty Alleviation-UPA Cell. Differential Rate of Interest (DRI): The income criteria to eligible for DRI loan is `18,000/- pa in Rural areas and `24000/- in Urban areas. With regard to farmers, the land holding should not exceed one acre wet land or 2.5 acres dry land. However, it is not applicable to SC/ST borrowers. The unit cost is `15000/- for general purposes but it is `20000/- for Housing Loans to SC/ST borrowers. The repayment of the loan ranges from 3 to 5 years. These loans attract interest @ 4% p.a. The target for the banks is 1% of previous year advances, of which 40% should go to SC/STs & 2/3rd through Rural/Semi-urban branches. Rajiv Gruha Kalpa Scheme

� EWS house in urban areas. � Income range is minimum `2,000/- per month and maximum `36, 000/- per annum

� Unit Cost of `75,000/- with 10% margin from borrower with Bank loan of `67,500 per house. 10% increase in unit cost is permitted.

� Site will be allotted by Govt. of A.P. at free of cost. � Interest Rate 8% fixed

Valmiki Ambedkar Awas Yojana (VAMBAY): Housing Finance Scheme was launched in Andhra Pradesh on 01.11.2002 with an objective to provide shelter or upgrade the existing shelter for people below the poverty line and EWS in urban slums. The ultimate objective of the Scheme is to have “Slum Less Cities”. The funding pattern is 50% Government, 40% bank Loan and 10% Borrower Margin. These loans attract interest @ 10% p.a. Tripartite agreement between Beneficiary Bank & APSHCL.

***

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Micro Credit / SHG 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 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 carry out 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. Dose Period Regular loan Debt Swapping Housing

First

Having regular savings at least for 6 Months

4 times of savings / corpus or `50000/- whichever is higher

Minimum `25000/- or 50% regular loan limit whichever is higher subject to extent of debt. `20000/-

per member subject to maximum of `100000/- per group

Second

Minimum of 12 Months from the date of availment of first dose of finance.

Rural SHGs: 10 times of savings / corpus or `100000/- whichever is higher. In case of Urban SHGs, the eligibility is 1.50 lakh.

Minimum `50000/- for rural SHGs and `75000/- for urban SHGs or 50% regular loan limit whichever is higher subject to extent of debt.

Third & onwards

Minimum of 18 months from the date of availment of Second dose of finance.

Eligibility as per Micro Credit Plan (MCP)

40% of MCP or to the extent of debt whichever is lower subject to maximum of `200000/-

Note: Minimum savings of the group should not be less than 10% of the loan amount. Corpus includes Balance amount in SB account, Amount held as cash with authorized persons, Amount lent internally among members, Amount received as interest on loans from members, any other contribution received by the group like Grants, Donations and fund provided by Government 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.

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However, for Rural SHGs – the maximum amount allowed to each SHG Group is `1.75 lakhs, `2.50 lakhs and `5 lakhs under First, Second and third dose respectively; and for Urban SHGs, the maximum amount allowed to each SHG Group is `1.75 lakhs, `3.25 lakhs and `5 lakhs under First, Second and third dose respectively. Recently, the upper ceiling limit is increased from `5 lakh to `10 lakh without collateral security for the groups undertaking income generation activities under agriculture/allied activities. Credit facility to SHGs up to `7.50 lakhs (with less than 36 months) and up to `10 lakh (Above 60 months) in other cases are classified under SME category. (Cir no.453 Ref 19/46 dated 06.02.2013) In order to mitigate the hardships faced by SHGs with regard to documentation, Banks are advised to extend finance (renewals/fresh) by way of Cash Credit facility only. Further, they advised to convert all outstanding term loan accounts into Cash Credit immediately. The validity period of the limit is 5 years subject to annual review. No cheque book is issued to this account. No excess drawals and adhoc limits are allowed in these accounts. Interest Rate: The applicable interest rate for SHGs is Base Rate + 3.25% irrespective of the amount of finance. AP State Government has introduced “Vaddi Leni Runalu (VLR)” scheme where the state Government reimburse the full interest for the SHG loans who repay the loans promptly and the reimbursement will be done to the group at half yearly intervals. However, this facility is limited to the loans upto `5 lakh only. The reimbursement is to be credited to group’s savings bank account, but not to the SHG loan account. 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 Minimum two years of existence with audited balance sheet; “A” rating by External Agency i.e. Chartered Accountant; 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. 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)

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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. Recently, activities such as Seed Processing (for genetic enhancement) involving collection of germplasm, cleaning, gravity separation, chemical treatment etc., and Composite unit in Poultry with Chicken (Meat) Processing are treated as Manufacturing units under MSME. Service Enterprises are the enterprises engaged in providing or rendering of services. These are defined in terms of investment in Equipment. Recently activities such as Medical Transcription Service, Production of TV serials / program, Ripening of Raw Fruits under controlled conditions and Service Rating Agency are treated as Service Enterprises under MSME. The modified definitions of Micro, Small and Medium Enterprises are as under:

No Category Investment in Plant & Machinery/Equipment (`lakh)

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 `5 lakh and for Tiny Sector up to `25 lakh based on the good track record and financial position of the borrowing unit.

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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. Further, banks should ensure that – i)40% of the total advances to micro and small enterprises sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to `10 Lakh and micro (service) enterprises having investment in equipment up to `4 Lakh.

ii) 20% of the total advances to micro and small enterprises sector should go to micro (manufacturing) enterprises with investment in plant and machinery above `10 Lakh & up to `25 lakh, and micro (service) enterprises with investment in equipment above `4 Lakh & up to `10 Lakh. Thus 60% of MSE advances should go to the Micro Enterprises. Further, banks are advised to

� Achieve a 20 percent year-on-year growth in credit to Micro and Small enterprises to ensure enhanced credit flow.

� Allocate 60% of MSE advances to the Micro Enterprises. � Achieve minimum 10% growth in number of Micro Enterprise accounts. � 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. Banks may, on the basis of good track record and the financial position of the MSE units, increase the limit of dispensation of collateral requirement for loans up to 25 lakh (with the approval of the appropriate authority). Women entrepreneurs will be given further interest rebate of 0.50% irrespective of credit rating and size of the unit. Composite loan (Term Loan and Working Capital) up to `100 lakhs should be processed under single window concept. Units undergoing technology up-gradation are eligible for 15% Credit Linked Capital Subsidy Scheme (CLCSS). Units engaged in food processing are eligible for subsidy 25% of unit cost with maximum of `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 `75 lakhs. Communication of the bank’s decision regarding the credit assistance is done promptly. As per Ministry of Finance, Government of India, all credit proposals for additional limit, rescheduling for loan or any other facility should be disposed in 15 days from the date of receipt of application at the branch. With regard to new cases for sanction, the time norm stipulated is 30 days from the date of receipt of application at the branch. No loan application is rejected without approval of the next higher authority.

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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/existing MSE units without any collateral security and/or third party guarantees. All Micro enterprises up to ` 10 lakh 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 `25 lakh and servicing units with investment in equipment up to `10 lakh 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 `2 crore are covered under this scheme. The trust shall provide guarantee as under (Cir.no. 405 Ref 52/16 dt. 7.1.14):

Category Maximum extent of guarantee where credit facility is Up to `5 lakhs

Above `5 & up to `50 lakhs

Above `50 to `100 lakhs

MSME

85% of amount default or subject to maximum of `4.25 lakhs

75% of amount default or subject to maximum of `37.50 lakhs

50% of loan irrespective of the borrower, location of the unit / credit facility w.e.f 16th December 2013

Women Entrepreneurs / Units located in NE region (Other than credit facility up to `5 lakh to micro enterprises)

80% of the amount in default subject to maximum of `40 lakhs

Others 75% of the amount in default subject to maximum of `37.50 lakhs

Any credit facility which has been sanctioned by Banks, under CGS, to an eligible borrower with interest rate more than 4% over its Base Rate will not be eligible for coverage under CGS.

Composite all-in Guarantee Fee Credit Facility

Annual Guarantee fee (% p.a.) Women, Micro Enterprises and units in NE region Others

Up to `5 lakh 0.75% 1.00% Above `5 lakh & up to `100 lakh 0.85% The lending institution may invoke the guarantee in respect of credit facility within a maximum period of two years from the date of NPA. The initiation of legal proceedings as a pre-condition for invoking of guarantees shall be waived for credit facilities upto `50000/-. The trust shall pay 75% of the guaranteed amount on preferring of eligible claim within 30 days. The trust shall pay interest at prevailing Bank Rate to lending institute for the period of delay beyond 30 days.

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Model Educational Loan Scheme (IBA) Education is central to the human resources development and empowerment in any country. Knowledge and information would be the driving force for economic growth in the coming years. The current rate of economic growth of the country demands technically and professionally trained man power in large numbers. Though government intends to provide education to all through public funding, it is not feasible in view budgetary constraints. At the same time the cost of education has been going up in recent times and it has become financial burden to the parents of the students. Hence, there is a clear case for institutional funding in this area. As the focus is on development of human capital, repayment of the loan is expected to come from future earnings of the student after completion of education. Hence the assessment of the loan will be based on employability and earning potential of the student upon completion of the course and not the parental income/family wealth.

Eligibility Criteria: The student should be an Indian National and should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/Merit Based Selection process. However, entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programs. In such cases, banks will have to adopt appropriate criteria based on employability and reputation of the institution concerned.

Minimum Age: There is no specific restriction with regard to the age of the student to be eligible for education loan. However, if the student was a minor while the parent executed documents for the loan, the bank will obtain a letter of ratification from him/her upon attaining majority.

Courses Eligible: Approved courses leading to graduate/post graduate degree and PG diplomas conducted by recognized colleges/universities recognized by UGC/Govt./ AICTE / AIBMS / ICMR etc; Courses like ICWA, CA, CFA etc; Courses conducted by IIMs, IITs, IISc, XLRI. NIFT, NID etc; Regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping, if the course is pursued in India. Approved courses offered in India by reputed foreign universities. However, banks may approve other job oriented courses leading to technical/professional degrees, post graduate degrees / diplomas offered by recognized institutions under this scheme. Courses other than the above offered by reputed institutions may also be considered on the basis of employability.

Expenses considered for loan: Tuition, Hostel, Library, Laboratory and Examination fee; Caution deposit, Building fund/refundable deposit; Purchase of books, uniforms, equipments & instruments including computer/Laptop and study tour & project work costs etc., are to be considered as cost of education for the purpose of loan. It is to be noted that reasonable lodging and boarding charges will be considered in case the student chooses / is required to opt for outside accommodation. In case of studies abroad, Travel expenses/passage money and Insurance charges should also be considered as cost of education. However, the maximum expenses other than Tuition fee may be capped at 20% of the total tuition fees payable for completion of the course. The scholarship / assistantship, if any, is to be excluded from the total cost while arriving eligible loan amount.

Quantum of finance: Banks may consider sanction of maximum up to `10 lakh for studies in India and `20 lakh for studies abroad. It may also be noted that even loans in excess of `10 lakhs qualify for interest subsidy under Central Sector Interest Subsidy Scheme for loans up to `10 lakhs.

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Top up loans: Banks may consider top up loans to students pursuing further studies within the overall eligibility limit, if such further studies are commenced during the moratorium period of the first loan. The repayment of the loan will commence after the completion of the second course and further moratorium period, as provided under the scheme. Margin: No margin is required to bring in by the borrower for the loans up to 4 lakh and for loans above 4 lakh, 5% margin is stipulated. In case of studies abroad the margin stipulated is 15%. Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis. Security: The loan documents should be executed by the student and the parent / guardian as joint-borrower. Loan Security / Co-obligation Up to `4 lakhs Parent as Joint borrower. In case of a married person, joint

borrower can be spouse or the parent(s)/parents-in-law. Above `4 lakh & up to `7.5 lakh

Beside the parent as joint borrower, suitable third part guarantee.

Above `7.5 lakh Parent/spouse as joint borrower and suitable tangible collateral security

The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, and shares/mutual fund units/debentures, bank deposit in the name of student / parent / guardian / any other third party or any other tangible security acceptable to the bank with suitable margin. Wherever the land/ building is already mortgaged, the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount.

Rate of Interest: Interest to be charged at rates linked to the Base rate as decided by individual banks. The loan attracts simple interest during the study period. Servicing of interest during study period and the moratorium period till commencement of repayment is optional for students. Accrued interest will be added to the principal amount borrowed while fixing EMI for repayment. 1% interest concession may be provided by the bank, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment. No processing / upfront charges may be levied on loans sanctioned under the scheme.

Repayment: Repayment of the loan starts after one year from the date of completion of course or 6 months after getting the job whichever is earlier. The repayment should be in Equated Monthly Installments (EMI) and maximum repayment period allowed for loans up to `7.5 lakhs & above `7.5 lakhs 10 & 15 years respectively. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. Educational loans can be sanctioned either at the Bank branch near to the residents of the parents or to the educational institution. Existence of an earlier education loan to the brother(s) and/or sister(s) will not affect the eligibility of another meritorious student from the same family obtaining education loan as per this scheme from the bank. Loan applications have to be disposed of in the normal course within a period of 15 days to one month, but not exceeding the time norms stipulated for disposing of loan applications under priority sector lending. Branches should not reject any eligible loan proposal for the reason that the applicant’s residence does not fall under service area of the Bank/Branch.

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Housing Loans

In pursuance of National Housing Policy of Central Government, Reserve Bank of India has been facilitating the flow of credit to housing sector. Since housing has emerged as one of the sectors attracting a large quantum of bank finance, the current focus of RBI’s regulation is to ensure orderly growth of housing loan portfolios of banks. Banks with their vast branch network throughout the length and breadth of the country occupy a very strategic position in the financial system and were required to play an important role in providing credit to the housing sector in consonance with the National Housing Policy. Eligibility Criteria: The following are the eligible categories to avail housing loans under Direct Housing Finance:

� Bank finance extended to a person who already owns a house in town/village where he resides, for buying/constructing a second house in the same or other town/village for the purpose of self occupation.

� Bank finance extended for purchase of a house by a borrower who proposes to let it out on rental basis on account of his posting outside the headquarters or because he has been provided accommodation by his employer.

� Bank finance extended to a person who proposes to buy an old house where he is presently residing as a tenant.

� Bank finance granted only for purchase of a plot, provided a declaration is obtained from the borrower that he intends to construct a house on the said plot, with the help of bank finance or otherwise, within such period as may be laid down by the banks themselves.

� Banks may consider requests for additional finance within the overall ceiling for carrying out alterations/additions/repairs to the house/flat already financed by them.

� In the case of individuals who might have raised funds for construction/ acquisition of accommodation from other sources and need supplementary finance, banks may extend such finance after obtaining paripassu or second mortgage charge over the property mortgaged in favour of other lenders and/or against such other security, as they may deem appropriate.

Age Criteria – The age of the borrower should be between 21 to 65 years at the time sanction of the loan.

Assessment of Loan – The quantum of loan will be arrived based on the gross & net income of the borrower and other factors like spouse income, assets, liabilities, stability of income etc. Further, the loan amount also depends on the tenure of the loan and interest rate of the loan as these variables determine outflow which in turn depends on disposal income of the borrower/spouse.

Loan To Value (LTV) Ratio – In order to prevent excessive leveraging, the LTV ratio in respect of housing loans should not exceed 80 per cent. However, for small value housing loans i.e. housing loans up to `25 lakh (which get categorized as priority sector advances), the LTV ratio should not exceed 90 per cent. In order to ensure proper LTV, banks should not include charges such as stamp duty, registration/document charges in the cost of the asset.

Interest Rate – It is the discretion of the banks to levy their own interest rates.

Gestation Period – Normally, the gestation period allowed is 12 to 18 months. However, it can be extended maximum period of 30 months from the date of first disbursement.

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Repayment – The maximum period allowed for repayment of home loan is 30 years or up to the age of 75 years of the borrower whichever is earlier.

Equated Monthly Installment – Normally, banks fix EMI which covers Principal as well as Interest. Some banks offer Floating and Fixed Interest Rates and it is up to the borrower to choose. Under Floating Interest, the interest rate is subject to changes from time to time by the Bank with reference to Bench Mark rate (Base Rate) where as Fixed Interest Rate is a rate which continues to be the same during the entire tenor of the loan. Banks are also offering flexible repayment options viz., Step-up and Step-down, depending on the future cash flows of the borrower. Under Step-up option, the lower EMI in the initial years and EMI increases as years roll by. It is convenient for borrowers who are in the beginning of their careers. In case of Step-down option, EMI is high initially and decreases in the subsequent years, which is useful who are close to their retirement.

Other conditions:

i)In cases where the applicant owns a plot/land and approaches the banks/Fis for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained by the Banks/Fis before sanctioning the home loan.

ii) An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executants to obtain completion certificate within 3 months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs and other usual bank charges.

iii) An Architect appointed by the bank must also certify at various stages of construction of building that the construction of the building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained.

iv) In cases where the applicant approaches the bank/Fis for a credit facility to purchase the built up house/flat, it should be mandatory for him to declare by way of an affidavit-cum-undertaking that the built up property has been constructed as per the sanctioned plan and/or building bye-laws and as far as possible has a completion certificate also.

v) An Architect appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and/or building bye-laws.

vi) No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid.

vii) No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan.

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Interest Subvention Schemes 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 2% Interest Subvention from Government of India for loans disbursed in year 2012-13. Further, farmers are eligible for another 3% interest subvention who repays the loan promptly. 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 `3 lakh for such farmers will be 4% p.a. Branches are required to submit claim half-yearly (September & March) for reimbursement of interest subvention amount from RBI. For crop loans up to one lakh disbursed in AP State attracts zero interest rate as state government is reimbursing the entire interest to the banks for prompt payment. Further, RBI has advised the Banks to ensure that all crop loans against which they are claiming interest subvention should satisfy, inter alia, the following criteria:

� The borrower should be an agriculturist � The rate of interest charged should not exceed the rate stipulated by the Govt of India

� The amount of loan is fixed according to the prescribed scale of finance for agricultural loans and the loan is used for stated purpose

� Seasonality is observed in regard to both disbursement and recovery

2. Export Credit: Government is providing interest subvention at 3% p.a. to all Scheduled Commercial Banks in respect of rupee export credit (Pre & Post shipment) extended to employment oriented export sectors such as Handicrafts, Handlooms, Carpets, Readymade garments, processed agriculture products, Sports goods, Toys, Engineering items, ITC and Textile goods. 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 31.03.2014. Branches should submit the interest claim to Head Office every quarter along with External Auditor Certificate.

3. Micro & Small Enterprises: Paavala Vaddi Scheme was introduced for the benefit of Micro & Small Enterprises set up in AP State except in the Municipal 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.

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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 `15 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 `25 lakh. All loans sanctioned and disbursed on or after 01.10.2009 are 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.

5. 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 `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. However, in the budget-2014, the benefit of interest subsidy is also extended to loans sanctioned/disbursed prior to 31st March 2009 and still outstanding are eligible for interest subsidy and need to submit claims on a ONE TIME basis for all outstanding cases and the process of interest claims should be completed on or before 30th April 2014. 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. 6. SHG Loans: AP State Government introduced “Vaddi Leni Runalu” scheme with effective from 01.01.2012 for all repayments made after that date for the outstanding SHG Bank loans, including any fresh loans given thereafter. The interest incentive will be available only to those accounts who repay the loans regularly. The incentive will be released directly to the credit of SHG account once in Half-year.

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Ratio Analysis

Financial statements: The statement which provides us the financial position of a Balance Sheet are called “Finance Statements”, which includes – Trading Account (in case of Manufacturing concerns), Profit & Loss Account, Balance Sheet, Cash Flow Statement and 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. Current Ratio: Current Ratio denotes the capacity of the business concern to meet its current obligation out of the 50ttest50ed50 value of the Current Assets. Current Ratio = Current Assets / Current Liabilities. 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 /MPBF. Inter-corporate deposits are to be treated as Non-Current Assets. Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan Policy guidelines is 1.33:1 for the limits enjoying above `6.00 crores and 1.15:1 for the business concerns availing limits of below `6.00 crores. Any deviation below the required ratio requires ratification of Higher Authority. Quick Ratio Or Acid Test Ratio: This ratio is a comparison 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 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

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the DSCR, we may fix the lower repayment period. However, banks may also consider DSCR 1.20:1 where fixed income generation is assured, 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: 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. 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: c) 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.

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ii) Net Profit Ratio: Net Profit After Tax ----------------------------------- X 100 Net Sales 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 Working Capital Assessment

i) Turnover Method: (for WC limits up to & inclusive of `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.

ii) Inventory Method – For WC limits up to & inclusive of `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 H. M.P.B.F = F or G, whichever is less.

� Maximum Working Capital credit limit up to which Turn Over method can be extended is `6 Crores. Where the limits of above `6.00 Crore, the margin is to be taken as 25% projected current assets. If actual NWC is less than required margin, the borrower has to bring in the short fall.

� The minimum acceptable Current Ratio for working capital credit facility up to `6 crore & above `6 crore is 1.15 & 1.33 respectively.

� Maximum acceptable level of Total Debt- Equity Ratio is 4. � Maximum permissible Gearing Ratio while assessing the eligibility for non-funded limits is 10.

� 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.

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Non Fund Business

Bank Guarantee: As a part of Banking Business, Bank Guarantee (BG) Limits are sanctioned and guarantees are issued on behalf of our customers for various purposes. Broadly, the BGs are classified into two categories: Financial Guarantees are direct credit substitutes wherein a bank irrevocably undertakes to guarantee the payment of a contractual financial obligation. These guarantees essentially carry the same credit risk as a direct extension of credit i.e. the risk of loss is directly linked to the creditworthiness of the counter-party against whom a potential claim is acquired. Example – Guarantees in lieu of repayment of financial securities/margin requirements of exchanges, Mobilization advance, Guarantees towards revenue dues, taxes, duties in favour of tax/customs/port/excise authorities, liquidity facilities for securitization transactions and Deferred payment guarantees. Performance Guarantees are essentially transaction-related contingencies that involve an irrevocable undertaking to pay a third party in the event the counterparty fails to fulfill or perform a contractual obligation. In such transactions, the risk of loss depends on the event which need not necessarily be related to the creditworthiness of the counterparty involved. Example – Bid bonds, performance bonds, export performance guarantees, Guarantees in lieu of security deposits/EMD for participating in tenders, Warranties, indemnities and standby letters of credit related to particular transaction. 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. 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 analyze the same to notice the present stage of work/project, position of Receivables, Litigations/Problems if any leading to temporary cessation of work etc.

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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 seven parties viz., Applicant (Opener), Issuing Bank (Opening of LC Bank), Beneficiary, Advising Bank (advises the credit to beneficiary), 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), Nominated Bank – Bank which is nominated by Issuing Bank to pay/to accept draft or to negotiate, 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. The various types of LCs are as under: i) 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. ii) 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. iii)Payment Credit is a sight credit which will be paid at sight basis against presentation of requisite documents as per LC terms to the designated paying Bank. iv) 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. v) Acceptance Credit is similar to deferred credit except for the fact that in this credit drawing of a usance draft is a must. vi) 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. vii) 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. viii) 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

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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. ix) 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. x) 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. xi) 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. xii) 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. xiii) Back to Back Credit/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. xiv) Red Clause Credit – It contains a clause providing for payment in advance for purchasing raw materials, etc. xv) 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. xvi) 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. Other concepts i)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. ii) 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. iii)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. iv) 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. v) 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. vi) 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. vii) 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

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100 A1 or its equivalent classification. Age of the vessel should not be more than 25 years and it should be seaworthy. Any other documents required by the applicant, such as weight certificate, packing list, quality certificates should be mentioned in the application. 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: � The facility may be considered in cases where there is mismatch between cash

flows to meet the FLC commitment on the due date. � At any point of time the liability under FLC, FIBC and LoC/LoU/Guarantee put

together shall not exceed the sanctioned FLC limit. � The stocks procured under FLC/Letter of Comfort are to be deducted to ensure

Working Capital limits are fully secured by adequate Drawing Power. � Multi currency option is not available to the importer. � In case the import is made on collection basis, branch should ensure strict

compliance of KYC/AML regulations. � 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. � 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.

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 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 `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

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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. LC – Operational Guidelines: LC covering letter should be addressed to the bank to whom LC is being forwarded and signed by authorized officer of the branch duly mentioning Full name of the signatory of the letter, His/her Designation, Signature number/Power of Attorney number allotted by the bank, Authorized Email ID of the branch and Clearly mentioning that the any information relating to the said Letter of credit can be obtained by email id as provided in the letter by quoting the LC no and date. On receipt of LC, advising bank to send e-mail through its authorized mail ID seeking confirmation from LC opening bank in having issued the said LC. LC opening bank is required to give confirmation by email on the same email id of the LC advising bank, through its authorized e-mail ID only. The confirmation should normally be under the signature of signatories other than those to LCs. Effort may be made to verify the same through search engines such as google whether the firm exists, if so its addresses and other information positive or negative against the firm. Certain information is available on the internet in public domain such as sales tax defaulter or whether registration with sales tax still valid or not. Information is available state wise and within the state circle wise. The same may be confirmed by LC opening and advising banks.

LC discounting/negotiating bank to send confirmation by an email on the authorized email ID of the LC opening bank informing that the name of the courier, its docket no and list of documents dispatched. It has been ascertained that all the necessary details such as name of the beneficiary, date of last shipment, details of goods to be purchased under LC, name of LC advising bank etc is captured in CBS system while opening LC. Even all amendments such as amendment in last date of shipment, date of expiry and even change in usance and the amount of LC are also captured in CBS. Therefore LC confirmation work can also be centralized within the bank. Confirmation needs to be sent though the authorized email of the LC opening bank to the authorized email ID of LC negotiating bank.

The recent development in issuance of Inland Letter of Credit is implementation of Structured Financial Messaging System (SFMS) with effect from 1st January 2013. It is aimed at establishing a safe and secure environment in banking industry for conducting trade finance business and for sending and receiving messages for LC instruments. This serves as the basic platform for transmitting messages of Inland Letter of Credits by all banks in India.

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Charges

Banks do business with depositors’ funds. The Banks have to honor their commitment to return the deposits whenever demanded by the depositors. The primary source of funds for repayment is the business itself; hence banks take considerable care to evaluate the profitability and sustainability of the business financed by them. Despite all care and due diligence some of the businesses could fail. The cause of failure may be changes in the external environment or mismanagement. Banks have to ensure that even if the business fails, their funds are recoverable by invoking the “Security” offered by the borrowers. Security is an asset like land, building and machinery, stocks (raw materials / finished goods), receivables and other securities which are charged to the bank. Charge is the legal right given by the borrower to the bank to take possession of dispose of the security in the event of default. The types of charges are: Pledge is a charge where the borrower hands over possession of asset to the bank. For example loans against gold jewellery, warehouse receipts, key loan etc. The relationship between borrower and the bank is “Pledgor” and “Pledgee”. Under this, the ownership of the goods remains with the borrower but the possession of the goods is in the hands of the bank. The bank enjoys Right of Sale in case the loan is not repaid and the bank can sell the pledged goods after giving adequate notice of sale to the borrower. It is the responsibility of the bank to take as much care of the goods pledged as a man of ordinary prudence would under similar circumstances. When the loan is fully paid, it is the responsibility of the bank to handover the possession of the goods back to the borrower. Hypothecation – Normally banks lend funds to the borrowers to acquire raw material / assets to undertake their business activities and these assets continues to be in the possession of the borrower. It is as if the borrower holds the asset on behalf of the Bank. Hypothecation gives the Bank right to take possession and sell the asset, in case of default. However, bank need to initiate action either under SARFEASI or Court/DRT to take possession of the asset. Pledge Vs Hypothecation – Thus, while under pledge the ownership remains with the borrower but the possession passes on to the bank, under hypothecation, both ownership and possession remains with the borrower. While under pledge the bank can sell the asset without going to court, under hypothecation it can be done only through the legal process. Hypothecation creates “floating charge” on assets created out of bank funds. Though hypothecation is the most prevalent form of charge for bank finance, it is inferior to pledge. To protect their assets, banks need to inspect the hypothecated assets periodically.

Mortgage – While movable assets can be pledged or hypothecated, immovable assets (land and buildings) can only be mortgaged. It is similar to hypothecation – both ownership and possession remain with the borrower (mortgagor) and the bank (mortgagee) gets the right to take possession and sell the mortgaged property by of SARFEASI or legal action. During the subsistence of the mortgage, the borrower can’t sell the mortgaged property without the consent of the bank.

Simple Mortgage: A simple mortgage does not involve giving the possession of the mortgagor’s property to the mortgagee. It is under mutual agreement that in case of non-payment by the mortgagee to the mortgagor within the specified time, the mortgagee can cause the mortgaged property to be sold in accordance with law and have the sale proceeds adjusted towards the payment of the mortgage money.

ii) Mortgage by Conditional Sale: This type of mortgage entails the apparent sale of property by the mortgagor to the mortgagee on a conditional basis, that on

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default by mortgagor, the sale shall become absolute and complete. If the mortgagor repays his loan, the sale shall become null and void.

Usufructuary Mortgage: It is a mortgage, by an express or implied term gives possession to the lender and gives him rights to accrue the rents or income coming from that property as repayment for interest and mortgage money till the time repayment is complete. There is no time limit for payment of the mortgage money.

English Mortgage: The mortgagor transfers the mortgaged property to the mortgagee in entirety. However there is a condition that on complete repayment of the repayment money, he will re-transfer the property back to himself.

Anomalous Mortgage: A mortgage that does not fall under the purview of any of the mortgage types is called an anomalous mortgage.

Conditions attached with mortgage: While mortgaging property, only legal rights are transferred to the mortgagee but not the possession. An instrument of mortgage deed is mandatory. On sale of a mortgaged property, the mortgage flows along with the property.

Assignment of Debt – While tangible assets are pledged or hypothecated or mortgaged, “actionable claims” are charged to a lender by executing a deed of assignment. Actionable claims cover debts, receivables, subsidy or duty drawback receivable from Government, amount receivable under Insurance Policy, valid contract like guarantee or indemnity. The person who assigns the debt is called the assignor and the person in whose favor the debt is assigned is called assignee. It is similar to hypothecation of a movable asset. The ownership and possession, in terms of the right to recover the debt, remain with the borrower. There are two types of assignments viz., Legal assignment and equitable assignment. Legal assignment is done by the assignor executing a deed of assignment. For example – Granting loan against LIC policy. Under equitable assignment, the assignor executes an irrevocable power of attorney in favor of the bank to collect payment. Advances against Supply Bills falls under this category. Lien – It means the right to hold another’s property till his debt is repaid. Section 171 of the Indian Contract Act 1872 confers the right of general lien on bankers. In the absence of any specific document or charge, Banks can exercise the right of lien on any asset of the borrower which has come into their possession. Thus, banker’s line is considered as an implied pledge. Bank can recover the dues by selling the asset only after giving the notice to the owner. Negative Lien – It is an undertaking by the borrower not to create any charge on his assets without the consent of the bank. It does not confer any right on the bank.

Banker Customer Relationship

Service Relationship Bank Customer

Deposit Debtor Creditor Loan Creditor Debtor Pledge Pledgee Pledgor Cheque/Bill Collection Agent Principal DD/NEFT/RTGS/ECS Fiduciary Agent Principal Safe Deposit Locker Lessor Lessee Advisory services Advisor Recipient

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Joint Lending Agreement

Large banks do have the capability to meet the credit needs of most of their business clients. However, when the amount involved is huge, the bank may ask the borrower to approach other banks for the part of the credit requirements as they may not wish to take up the risk of lending the entire amount. Multiple banks may finance the borrower under two arrangements viz., Consortium arrangement and multiple banking arrangements. Consortium of Banks – Under this the banks come together and collaborate with each other in assessing the credit requirements of the borrower duly sharing the credit facilities as well as sharing securities with “Pari Pasu” charge. Normally, the bank which has larger exposure act as leader who conduct meetings, assess the credit requirements of the borrower and share all the information with member banks from time to time. However, the decisions taken at the consortium meetings are not binding on the individual banks and the management of each bank has to approve in its respective boards. Multiple Banking – Under this, the borrower approaches various banks and avails credit facilities across banks. Each bank undertakes their own assessment of risk, decide the mix of credit facilities and stipulate their own terms and conditions. Each of the banks takes the security and gets the charges registered with the ROC in their favour. Practically there is no co-ordination between the banks and they compete with each other to protect their business and interests. This is giving scope to the borrowers to take undue advantage from the banking system i.e. excess borrowings and interest concessions. In order to ensure financial discipline RBI issued guidelines on sharing of information between banks and making the lead bank responsible for ensuring proper assessment of credit requirements of the borrower so that over financing can be averted. Joint Lending Arrangement (JLA) – Under the existing system of Credit Delivery, credit requirements of large borrowers are being met under Consortium or Multiple Banking arrangement systems. It is observed that high value borrowers have been availing credit limits through Multiple Banking over the years which has led to dilution of asset quality as well as control on the borrowers. In order to address the challenges associated with Multiple Lending, Govt. of India has introduced ground rules governing Joint Lending Arrangements. The scheme shall be applicable to all lending arrangements, with a single borrower with aggregate credit limits (both fund and non-fund based) of `150 crore and above involving more than one Public Sector Bank. Further, all borrowers with external rating of below BBB or equivalent to be brought under JLA irrespective of the amount of exposure. Borrowers having multiple banking arrangements below `150 crore may also be encouraged to come under joint lending arrangement, so that the wholesome view of the assessment of credit requirement as well as the entire operations of the customers can be taken by banks. New Borrowers – Lending under joint arrangement shall be mandatory for Public Sector Banks for borrowers seeking credit limits of `150 crore and above by way of term loan, working capital and non-fund based facilities, from multiple banks. The Bank from which the borrower has sought the maximum credit will be the designated Lead Bank for the JLA. Existing Borrowers – In case of borrowers presently enjoying aggregate limits in excess of `150 crore under multiple banking arrangement the Bank which has extended the highest credit, or any other Bank as mutually agreed by Member Banks, would become the leader of the JLA and take initiative for holding the meeting of all financing banks. In case of borrowers enjoying aggregate credit limits

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below `150 crore from more than one bank, where further enhancement would take the aggregate limits to `150 crore or more, should be considered jointly by the financing banks concerned and the bank, which takes up the largest share of the limits, shall be deemed to be the leader of the formalized JLA. For working capital exposure under `1000 crore, minimum share of 10% of the aggregated working capital limits is stipulated. For above `1000 crore, minimum share of 100 crore is stipulated. In the cases of existing JLA, if a member-bank is unable to take up its enhanced share, such enhanced share in full or in part could be reallocated among the other existing willing members. In case other existing member-banks are also unable to take up such enhanced share of an existing member-bank, a new bank willing to take up the enhanced share may be inducted into the JLA. In case of any contentious issue, the decision will be taken by member banks having more than 50% share in the exposure to the borrower. An existing member-bank may be permitted to withdraw from the JLA after two years provided other existing member-banks and/or a new bank is willing to take its share by joining the JLA. In case, where the other existing member-banks or a new bank are unwilling to take over the entire outstanding of an existing member desirous of moving out of the JLA after the expiry of above-mentioned period of two years, such bank may be permitted to leave the JLA by selling its debt. It is necessary that lead bank and member bank(s)/institution(s) ensure that formal joint lending arrangement does not result in delay in credit delivery. The Lead Lender will make all efforts to tie up the Joint Lending Arrangement within 90 days of taking a credit decision regarding the proposal. Lead bank will be responsible for preparation of appraisal note, its circulation, and arrangements for convening meetings, documentation, etc. In case of any contentious issue, the decision will be taken by the member banks having more than 50% share in the exposure to the borrower. (Cir.no.24 Ref 26/04 dated 15.04.2013)

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Takeover of accounts from other Banks

Corporates seeking better facilities/higher credit from Banks often approach different lenders for sanction of credit facilities. Central Vigilance Commissioner observed that sometimes existing accounts with one bank already showing signs of sickness are taken over by another bank and such accounts predictably turn NPA within a short time. To arrest unethical/unjustified practice of takeover of accounts, Department of Financial Services, Govt. of India has issued the following guidelines to all Banks.

� For taking over of any accounts, Banks must put in place, a Board approved Policy with regard to take over of accounts from another Bank and the same should be incorporated in the credit policy of the Bank.

� Normally, the accounts having ratings above the level approved by the Board should only be taken over and the concessionary facilities should be extended only in extremely deserving cases with specific reasons recorded in writing.

� In all cases of takeover of accounts, it is necessary to do proper due diligence including visit to the premises of the customer, if needed, before the account is considered for takeover by the bank.

� The guidelines of joint lending should be strictly applied in all cases where the borrower seeks to have additional exposure from the bank after taking over the account.

� No cases should be taken over by a Bank from any Bank where any of its ED or CMD had worked earlier. In case, any such cases need to be taken over, the proposal will need to be put up to the Board with specific reasons justifying the need for taking over the accounts.

The operational guidelines with regard to Take over of accounts are as under:

� The account should be a Standard Asset with Positive Net Worth & profit record. P & C Report is mandatory preferably before sanction, if not, at least before disbursement.

� Obtain credit information in prescribed format, which enables the transferee bank to be fully aware of irregularities, if any, existing in the borrower’s account with the transferor bank.

� Account Statement – The account copies of all the borrowal accounts with the present bankers/financial institution shall be obtained at least for the last 12 months and ensure that the conduct of the a/c is satisfactory and no adverse features are noticed.

� Existence & Previous profit track record - i) In existence for a minimum of 3 years with Audited B/S ii) Profit making in preceding 2 years & iii) Availing Credit facilities with the previous Banker at least for 3 years.

� Enhancement on Existing Limits with the present Banker: i) Enhancement not beyond 50% ii) No further Enhancement/ Additional Limits till one year or next ABS, whichever is earlier.

� TOL/TNW should not exceed 4:1 in case of takeover accounts. � Group Accounts – In case of having Sister / Associate concerns, Groups consolidated position has to be examined.

Branches should ensure that Assessment is to be made independently as per our Loan Policy guidelines. Administrative clearance is to be obtained from Zonal Office / Head Office. To take all existing securities and to complete the documentation expeditiously duly complying with our loan policy guidelines on takeover norms, compliance, legal audit, permission for release of limit etc. While other bank is taking over our borrowal account, Branches are advised to inform adverse features if any, in the conduct of the accounts to the transferee bank duly obtaining permission from competent authority for issuing P & C Report.

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Credit Management/Delinquency Management The success of a bank crucially depends how it manages its Asset Portfolio as it is the major source of income to the Bank. Managing credit risk plays an important role and its effectiveness lies in an efficient recovery and exit strategy. Timely follow up is the key to keep the quality of assets intact and enables the banks to recover the interest/installments in time. To have better control on the assets created out of borrowings, banks need to watch the functioning of the units by paying frequent visits and this is to be done to all the units irrespective whether the account is performing or non-performing one. Thus, Banks should focus attention on: Awareness Calling – When the first payment is due, a call is initiated to make him aware of the date of payment of installments/dues. This can be done either by the branch or by call centre. Reminder Call – When the demand is not paid, a reminder call may be made with a request to make payment of the dues and note the response or commitment. Repeat calls are made if the borrower fails to honor his promises. Demand Notice – In case where there is n response to the calls, a written communication is issued to the borrower informing him the status of the account and advising him to pay the dues. Banks can also make use of technology and notice may be sent through SMS or E-mail. Field Visits – It involves paying visits to borrower’s office or residence either by bank staff or its agents to appraise the position of the dues and need for repayment. Continuous persuasion definitely yields positive results. These visits also enable the banks to assess the functioning of the activity and quality of the assets. If they found that the financial position of the borrower is deteriorated, bank may strike a compromise deal to recover the dues. Disposal of Assets – In the event of failure of the borrower to repay the dues despite the said initiatives, the bank need to proceed to take possession of the assets including collateral duly invoking SARFEASI or through approaching Court / DRT. Repossession and sale of assets can be done by issuing Recall Notice, Pre-possession intimation, Letter of peaceful surrender of the asset, Record of inventory and notarization, Pre-sale notice to borrower and Auction of the asset. Outsourcing of Banking Services – Of late, banks have been availing the third party services for recovery of dues. RBI has issued code of conduct to ensure that the customers are not harassed, their privacy is protected and the banks code of commitment to customers is not violated. Outsourcing agencies should be appointed only after proper due diligence with approved Board policy. Banks should publish the names of outsourcing agencies and the details are to be kept on Bank’s website for the benefit of the customers and general public. The agents appointed by the outsourcing agency are to be provided with authorization letters / identify cards. All agents should undergo a mandatory 100 hours training conducted by the Indian Institute of Banking and Finance (IIBF) and get themselves certified before sending them into field. Customers are to be contacted ordinarily at the place of his choice, whether office or residence at appropriate time. In appropriate occasions such as bereavement in the family or such other calamitous occasions are to be avoided for making calls or visits. Professional and formal language is to be used in all interactions with customers. Each bank should have a mechanism whereby the borrowers’ grievances with regard to the recovery process can be addressed. The details of the mechanism should also be furnished to the borrower while advising the details of the recovery agency. The Fair Practices Code for Lenders and the Code of Commitment to Customers must be adhered to strictly.

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Non Performing Assets/Prudential Norms

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. Category Treated as NPA if: Term Loan Interest and/or installment of principal remain overdue for a period

of more than 90 days

Overdraft/ Cash Credit (OD/CC) accounts

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 there are no credits continuously for 90 days or credits are not enough to cover interest debited during the same period. 2) Drawings are allowed on DP calculated on stock statement older 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.

Agricultural Loans

A Loan is granted for short duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA, 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 would 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 the SLBC in each state. In respect of agricultural loans which are not linked to harvesting season, term loans given to non agriculturists, identifications of NPAs would be done on the same basis as non–agricultural advances i.e. 90 days delinquency norm.

Bills Purchased / Discounted

Bill remains overdue for a period of more than 90 days. 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).

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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. 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: 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. Doubtful Assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. 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.

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Agricultural Advances: In cases of conversion or reschedulement 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. 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 Standard

0.25% on Direct advances to agriculture and SME sectors. 1.00% on Commercial Real Estate 0.40% on all advances other than stated above

The provisioning norms in respect of new Restructured Standard Accounts are increased from existing 2.75% to 5% in a phased manner i.e. 3.50% by 31st March 2014; 4.25% by 31st March 2015 and 5% by 31st March 2016. Sub-Standard 25% on unsecured exposures (20% in case of infra loans) 15% on other loans

Doubtful Unsecured portion: 100% Secured portion: if asset remained in doubtful <= 1 year 25% If asset remained in doubtful - 1 to 3 years 40% If asset remained in doubtful > 3 year 100%

Loss At 100% on the outstanding

Unsecured Exposure is one where realizable value of tangible security, as assessed by the bank/approved valuers/RBI inspecting officers, is not more than 10 percent, abinitio, of the outstanding exposure (funded and non-funded). However, the following are the exempted categories from provisioning norms:

� 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 CGTSI 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.

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Asset Quality – RBI Initiatives: Deteriorating asset quality in the banking system has prompted RBI to initiate the following proactive steps to prevent slippages:

� Banks are required to carry out independent and objective credit appraisal instead depending on credit appraisal reports prepared by outside consultants.

� It is the responsibility of the banks to ascertain the source and quality of equity capital brought in by the promoters and ensures that debt of the parent company is not infused as equity.

� If any of the director’s names appears in the list of defaulters / willful defaulters, they are to be classified as “Non-co-operative borrowers”.

� Banks need to classify a new sub asset category called SMA “Special Mentioned Account” and which are further categorized into SMA-NF, SMA-1 and SMA-2 depending on the operations of the accounts. SMA-NF deals with non submission of mandatory information. SMA-1 represents a category where the principle or interest payment is overdue between 31 and 60 days, and SMA-2 where the overdue remain between 61 and 90 days.

� RBI proposes to set up a Central Repository of Information on Large Credits (CRILC) that will collect, store and disseminate credit data of the borrowers having aggregate exposure (fund ad non-fund) of Rs.5 crore and above. This applies to both Banks and Non Banking companies.

� Banks will also have to furnish details of all Current accounts of their customers with outstanding balances, both debit and credit, of Rs.1 crore and above.

� Banks will be required to submit SMA status of the borrowers to CRILC. If an account is slipped in to SMA-2 at any time or SMA-1 for any two quarters or SMA-NF for three quarters in a year, then the bank would be required to initiate corrective action.

� The proposals are in right direction, however, the challenge lies in their implementation. Let us hope the best in the ensuing years.

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Restructure of Advance Accounts 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. 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. 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.

Corporate Debt Restructuring (CDR): The objective of the CDR framework is to preserve viable 68ttest68ed 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, outside the purview of BIFR/DRT and other legal proceedings, for the benefit of all concerned. 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 `10 crore and above by banks/financial 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. CDR is a non-statutory mechanism which is a voluntary system based on Debtor-Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA). Three-tier structure is in place for CDR system. 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. CDR Empowered Group considers 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. 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.

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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 one or more of the creditors 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. Under CDR, banks extend the repayment period or moratorium on repayment or reduction of interest rate on loans or combination of any of the above. As per recent RBI guidelines, the promoters’ are required to bring minimum of 20% of banks’ sacrifice or 2% of restructured debt, whichever is higher. The promoters’ sacrifice should invariably bring upfront while extending the restructuring benefits to the borrowers. It is mandatory to obtain promoters’ personal guarantee while extending restructuring benefits to the borrowers. Existing guidelines allow regulatory forbearance on asset classification of restructured accounts subject to certain conditions i.e. standard accounts are allowed to retain their asset classification and NPA accounts are allowed not to deteriorate further in asset classification on restructuring. The asset classification benefit is also available on change of date of commencement of operation for projects under infrastructure sector as well for projects under non-infrastructure sector. The accounts classified as NPA on restructuring should be upgraded only when all the outstanding loans/facilities in the account perform satisfactorily during the specified period i.e. one year. Take-out Finance – The scheme has been designed to enable lenders to address the concern of the hitting the sectoral limit, asset-liability mismatch and liquidity issues that may arise by the long-term debt financing to core projects. Under the scheme, banks and lenders can enter in an arrangement with financial institutions for transferring the loan outstanding in their books to those of the financial institution which is taking out long-term debt. The tenor of the take-out finance is up to 15 years. The sectors eligible for Take-out finance are Road and bridges, Railways, Seaports, Airports, Inland waterways and other transportation projects; Power, Urban transport, water supply, sewage, solid waste management and other physical infrastructure in urban areas; Gas pipelines Infrastructure projects in SEZs, International convention centers and other tourism infrastructure projects. It is one of the emerging products in the context of funding of long-term infrastructure projects. Under this arrangement, the Banks financing infrastructure projects will have an arrangement with other financial institutions for transferring to the latter the outstanding in respect of such financing in their books on a pre-determined basis. The norms of asset will have to be followed by the concerned banks in whose books the account stands as balance sheet item as on the relevant date. The lending institution should also make provisions against any asset turning into NPA pending its takeover by the taking over institution. As and when the asset is taken over by the taking over institution, the corresponding provision could be reversed. At present IIFCL is providing a Take-out finance window to the banks in India.

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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. Basel-I Accord: It was introduced in the year 2002-03, which covered capital requirements for Credit Risk. The Accord prescribed CRAR of 8%, however, RBI stipulated 9% CRAR. Subsequently, Banks were advised to maintain capital charge for Market Risk also. Basel-II New Capital Accord: Under this, banks have to maintain capital for Credit Risk, Market Risk and Operational Risk w.e.f 31.03.2007. The New Capital Accord rests on three pillars viz., Minimum Capital Requirements, Supervisory Review Process & Market Discipline. The implementation of the capital charge for various risk categories are Credit Risk, Market Risk and Operational Risk. Analysis of the bank’s CRAR under both Basel-I & Basel-II guidelines should be reported to the Board at quarterly intervals. 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). 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. It 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. 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 throughout the bank (both banking & trading books). There are two approaches for measuring market risk viz., Standardized Duration Approach & Internal Models 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 – Basic Indicator Approach and The Standardized Approach. Under the first 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. The second approach suggests dividing the bank’s business into eight lines and separate weights are assigned to each segment. 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. Advanced Measurement Approach (AMA): Under this, 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.

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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 Quantitative disclosures and Qualitative disclosures and classified into the following areas:

Area Coverage Capital Capital structure & Capital adequacy Risk Exposures & Assessments

Qualitative disclosures for Credit, Market, Operational, Banking Book interest rate risk, equity risk etc.

Credit Risk General disclosures for all banks. Disclosures for Standardised & IRB approaches.

Credit Risk Mitigation Disclosures for Standardised and IRB approaches. Securitisation Disclosures for Standardised and IRB approaches. Market Risk Disclosures for the Standardised & Internal Models

Approaches. Operational Risk The approach followed for capital assessment. Equities Disclosures for banking book positions Interest Rate Risk in the Banking Book (IRRBB)

Nature of IRRBB with key assumptions. The increase / decrease in earnings / economic value for upward / downward rate shocks.

Time lines for implementation of Advanced Approaches are set as 31st March 2014. The Basel-II norms are much better than Basel-I since it coveres 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 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.

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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. Basel-III is a comprehensive set of reform measures developed to strengthen the regulation, supervision and risk management of the banking sector. The new standards will considerably strengthen the reserve requirements, both by increasing the reserve ratios and by tightening the definition of what constitutes capital. The new norms will be made effective in a phased manner from 1st July 2013 and implemented fully by 31st March 2018. The broad guidelines are:

� Banks to maintain a minimum 5.5% in common equity (as against 3.6% now) by 31st March 2015.

� Banks must create a Capital Conservation Buffer of 2.5% by 31st March 2018.

� Banks should maintain a minimum overall capital adequacy of 11.5% (against the current 9%) by 31st March 2018.

� Banks must supplement risk based capital ratios by maintaining a leverage ratio of 4.5%

The guidelines will ensure that banks are well capitalized to manage all kinds of risks. The existing norms stipulate that banks should maintain Tier-I Capital and Tier-II Capital that comprises instruments with debt like features. Basel-III rules propose to bring in more clarity and eliminate grey areas in the current rules by clearly defining different kinds of capital. Tier – I & II 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 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 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 debt usually carries a fixed maturity. They will have to be limited to 50% of Tier-I capital. Economic Capital (EC) is a measure of risk expressed in terms of capital. A bank may, for instance, wonder what level of capital is needed in order to remain solvent at a certain level of confidence and time horizon. In other words, EC may be considered as the amount of risk capital from the banks’ perspective; therefore, it differs from Regulatory Capital (RC) requirement measures. It primarily aims to support business decisions, while RC aims to set minimum capital requirements against all risks in a bank under a range of regulatory rules and guidance. So far, since economic capital is rather a bank-specific or internal measure of available capital, there is no common domestic or global definition of EC. Moreover, there are some elements that many banks have in common when defining EC. EC estimates can be covered by elements of Tier-1, 2 & 3, or definitions used by rating agencies and/or other types of capital, such as planned earning, unrealized profit or implicit government guarantee. EC is highly relevant because it can provide key answers to specific business decisions or for evaluating the different business units of a bank.

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Risk Weighted Assets (Standardized approach under Basel-II)

No Category Risk Weight 1 Credit exposure to Central / State Government 0% 2 Claims on RBI/DICGC/CGTSI 0% 3 State Govt. guaranteed claims / ECGC 20% 4 Corporates based on External Rating a) Long Term i) AAA rated 20% ii) AA rated 30% iii) A rated 50% iv) BBB rated 100% v) BB & below rated 150% vi) Unrated 100% b) Short Term i) A1+ 20% ii) A1 30% iii) A2 50% iv) A3 100% v) A4 & below 150% vi) Unrated 100% 5 Retail Portfolio 75% 6 Claims secured by Residential Property i) Where LTV Ratio up to 75% a) Loan up to 20 lakh 50% b) Above 20 lakh & up to 75 lakh 50% ii) Loan above 75 lakhs 75% iii) Restructured Housing Loans (+25% RW) iv) Loans above 75 lakh 125% 7 Commercial Real Estate 100% 8 Consumer Credit (Clean/Personal/Credit cards) 125% 9 Venture Capital 150% 10 Capital Market Exposure 125% 11 Loans and advances to staff – fully secured 20% 12 Non Performing Assets based on % of provisions a) Unsecured i) Below 20% 150% ii) 20% to < 50% 100% iii) 50% & above 50% b) Secured by Residential Property 100% i) Provision is 20% to < 50% 75% ii) Provision 50% & above 50%

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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. 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 except the following:

� Where the outstanding liability in the account does not exceed Rs 1.00 lakhs � Any security interest created in agriculture land � Pledge of movables / Lien on any goods � Amount due is less than 20% of the principal amount and interest � Creation of Security Interest in any Air Craft / Vessel � Any conditional sale, hire purchase or lease or any other contract in which no security interest is created

� Any right of unpaid seller / Any properties not liable for attachment /sale under section 60 Civil Procedure Code.

The prerequisite should be that notice be issued one month after identification of NPA advising the borrower/mortgagor to pay the entire amount due within 60 days from the date of receipt of the notice. In case, 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 in two newspapers – English and vernacular Language. The time prescribed for considering the representation / objections by the borrower on receipt of the notice is fixed as 15 days. The Possession of moveable property may be taken by taking inventory in the presence of two witnesses. 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 secured assets. Security agents can be engaged while seizing the secured assets. 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. Auction notice is to be kept on the bank’s website. 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. 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. The authorized Officer cannot sell the property less than the reserve price. 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. 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. Recent Developments: The Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Bill, 2011 was passed in the Loksabha which allows the banks to acquire immovable properties from the borrower so that they can sell the assets at a

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later date. Sometimes there are no buyers for a property or there is a cartelization from bidders, who deliberately quote lower price thus undervaluing it. The amendment will ensure that banks do not get into the situation of distress sale and get the right pricing for the assets on sale. The amendment states that banks will be heard in Debt Recovery Tribunals before granting any stay on recovery of loans from borrowers. This will ensure that the law is not misused by the borrowers to delay the settlements and payment of dues. Further, the amendment allows Asset Reconstruction Companies (ARC) to convert a part of the debt into equity. This could be a win-win situation for the borrower as well as the ARC. The borrower stand to gain because his outstanding liability decreases to the extent of equity conversion and the ARC will also become part of the management so as to aid in the turnaround of the stressed company. Credit Information Bureau India Limited (CIBIL): It is a repository of information, which contains credit history of commercial and consumer borrowers. The members of CIBIL are banks, NBFCs and Housing Finance Companies who provide borrower data to CIBIL. It collects and maintains records of an individual‘s payments pertaining to borrowal accounts including credit cards from the member institutions on a monthly basis. Members are provided access to CIBIL to generate CIR and CIBIL levy charges for the same. The CIBIL score is an objective numeric summary of the credit report generated on an individual. It takes a snapshot of a consumer’s CIR and with the use of advanced analytics moulds the information into a 3-digit number representing the probability that a consumer will default on a credit facility over the next 12 months. The possible score ranges 300 to 900. Obtaining CIR from CIBIL is mandatory before sanctioning credit limits to borrowers. The payment history has a significant impact on the score. High utilization of credit limits also play a vital role in arriving credit score of an individual. A higher concentration of home loans or secured loans is likely to be more favourable for the score than a large number of unsecured loans. More the number of unsecured loans with high utilization, larger are the payments resulting from its high rate of interest and consequently lower would be the score despite satisfactory payment track. “Credit Hungry behavior” – many applications for loans, indicates that the debt burden is likely to, or has increased and one is less capable of honoring any additional debt and is likely to negatively impact the score. CIBIL enables the lending institutions to take informed decisions while according credit sanctions. With CIBIL’s help, banks have caught many frauds like individuals trying to avail multiple loans on the same house, vehicle etc. It is a powerful tool to protect the interest of the Banks. Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI): It is a government company licensed under section 25 of the Companies Act 1956, has been incorporated to operate and maintain the Central Registry under the provisions of SARFAESI Act 2002. The objective of CERSAI is to prevent frauds in loan cases involving multiple lending from different banks on the same immovable property. The Central Registry is also an important for the development of the home loan market as lenders can now be sure that the property offered as a security has a clear title. Unlike CIBIL, where borrower information is accessible only by lenders, the records maintained by the Central Registry will be available for search by any lender or any other person. The scheme is operational w.e.f. 31.03.2011 where central database will contain details of all properties against which loans have been advanced by Banks/Financial Institutions. The lending institutions are required to make a payment of `250/- & `500/- for creation and modification of security interest to CERSAI for the loans up to `5 lakh & above `5 lakh respectively. Under this, the lenders should file details of the charge over any property with CERSAI within 30 days from the date of creation. However, the delay up to 30 days can be condoned with a penalty of `2500/- and `5000/- for loans upto `5 lakh and above `5 lakh respectively. If the delay is beyond 30 days, the penalty will be `5000/- per day during which the default continues.

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Cash Management – Clean Note Policy

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

� Issue clean notes to the public and accept small denominations such as `1/, `2/- & `5/-.

� Not issue number cut notes to public. Any deviation in this regard attracts penalty.

� Desist from writing anything whatsoever on the Bank Notes. � Educate the customers and members of the public in this regard. � Ensure sorting all notes by branches and only Clean Notes/issuable notes are put into circulation amongst general public.

� Ensure that branches are not hoarding any Fresh Notes and coins and to be distributed to the customers.

RBI has issued following plan of action with regard to withdrawal of all old series of Banknotes issued prior to 2005:

� All older series of bank notes issued prior to 2005 would be acceptable for all kinds of monetary transactions only till March 31, 2014

� Thereafter, the public will be required to approach branches which would provide them exchange facilities on an ongoing basis

� These notes will continue to be legal tender � From July 01, 2014, to exchange more than 10 pieces of Rs. 500 and Rs. 1000 notes, branches should obtain proof of identity and residence from non-customers.

All branches are advised to provide exchange facilities to stop re-issue of older series banknotes issued prior to 2005. The notes so accepted are deposited to Currency Chests. 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

� Currency notes received are carefully examined and impound counterfeit notes wherever detected to curb circulation of such notes to public.

� 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.

� Branch/Office is required to issue acknowledgement to the tenderer of counterfeit note and it should be signed by the tenderer of counterfeit notes and counter cashier with details such as serial number, denomination and number of pieces.

� FIR is required to be filed in case where the counterfeit notes found are five pieces and above in a single transaction and acknowledgement is to be obtained from the concerned police authorities. However, in other cases, a consolidated report is to be sent to Police once in a month.

� RBI reimburses to the extent of 25% of the notional value of the counterfeit notes of `100 denomination & above, detected and reported to RBI/Police.

� 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.

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� In no case, the Counterfeit Notes should be returned to the tenderer or destroyed by the bank branches / treasuries.

� Banks should put in place adequate safeguards / checks before loading currency notes in ATMs.

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 Below `50 lakh One Clerk / Officer with 1 Sub-staff and 1 Security

Guard (if available at the branch) > `50 lakh & < `100 lakh One Officer, 1 Sub-staff and 2 Armed Guards ` 100 lakh & above One Officer, 1 Sub-staff and Armed Police Escort

Security Escort for cash remittances by Cash Vans Up to `200 lakh To be escorted by 2 Bank Guards > `200 lakh & up to `1000 lakh To be escorted by 3 Bank Guards General Precaution in Remittances:

� Remittance is to be done in Cash Van or Four Wheeler Vehicles. Cash Van must have Alarm system and Fire Extinguishers.

� Avoid Three Wheeler Vehicles. Two Wheeler Vehicles should not be used. � Cash Remittance may be done on foot provided the distance is short (within the complex) and the remittance must not be over `2 lakhs.

� Cash must be carried in Steel Boxes only. � Armed Guard must sit in front. � Remittance is to be done during Day time only. � Probationary Officers are not to be detailed for cash remittance. � In case of non availability staff, a clerk can be substituted for sub-staff and an offer for a clerk.

Surprise Verification of Cash at Branches: All Branch Heads should carry out verification of cash of their respective branches every month, at different dates of the month with total confidentiality. The verification should also be rotated every month i.e. once before commencement of office hours, another time at the middle of the day and sometimes at the close of the office hours. Besides the above, branches are subject to surprise verification of cash by controlling offices once in a quarter. Surprise verification report shall cover the aspects such as maintenance of Cash Movement / Key Movement / Cash Discrepancy Registers, maintenance of cash beyond retention limit, maintenance of Bait Money and shortage/excess of cash, if any. Wherever cash position is in excess of Cash Retention Limit, the entire cash on hand should invariably be verified by the Branch Manager and necessary endorsement should be recorded thereof. Surprise Verification of Cash at Currency Chests: The balances of each currency chest should be verified at least once in a month by an officer not connected with the custody of the chest. A record of such verification should be maintained in a register at each chest. Two percent of balances in each denomination of Rs. 100/-, Rs. 500/- and Rs. 1000/- may be verified through Note Sorting Machines. The balances may be verified once in six months by the officials from the Controlling Office of the bank by packets and bundles and five percent of the balances in all denominations should be verified through Note Sorting Machines. The officials from Controlling Office after verifying the balances may send the original balance certificate to the Nodal Officer

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for Currency Management at Head Office, Operations Department. Non-conformity to the above would attract penalty. 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. (Cir no. 158 Ref 55/13 dt.19.07.12) No Activity Incentives 1 Adjudication of Mutilated Bank Notes `2/- per piece 2 Exchange of Soiled Notes One rupee per packet in `5/- `10/-

`20/- and `50/- denomination 3 Distribution of Coins over the counter `25/- per bag. 4 Establishment of coin vending

machines Capital Cost-Urban/Metro Centers 50% - Rural & SU centers 75% Operational cost @ `25 per bag.

Scheme on Penalties

Activity Penalties Shortage in soiled note remittances and currency chest balances

`50/- per piece in addition to the loss (shortage) in case of notes in denomination up to `50/-. However, for notes in denomination of `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 note remittances and currency chest balances

Equal to the value of the counterfeit note in addition to the loss.

Mutilated notes detected in soiled note remittances and currency chest balances

`50/- per piece irrespective of the denomination.

Non compliance of operational guidelines such as non-functioning of CCTV, non utilization of NSMs and keeping branch cash / documents in strong room.

`5000/- for each irregularity. Penalty will be enhanced to `10000/- in case of repetition.

Violation of norms during RBI inspection viz., i) Non issue of coins over the counter to any member of public, despite having stock. ii) Refusal to exchange soiled notes/ adjudicate mutilated notes tendered by any member of public. iii) Not conducting surprise verification of chest balances, at least at bimonthly intervals by officials unconnected with the custody thereof. iv) Denial of facilities/services to linked branches of other banks. v) Non acceptance of lower denomination notes (`10/- `20/- and `50/-) tendered by members of public and linked bank branches. vi) Detection of mutilated / counterfeit notes in ‘reissuable’ packers prepared by the chest.

`10,000/- for any violation of agreement in this regard/deficiency of service `5.00 lakhs in case there are more than 5 instances of violation by the branch. The same will be placed in public domain.

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.

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Customer Service & BCSBI

The Government and the regulator (RBI) have been emphasizing the importance and the need to extend speedy, efficient, fair and courteous customer service in banking industry. In this direction, the following committees were set up: 1975 – Talwar Committee 1990 – Goiporia Committee 2004 – Tarapore Committee 2006 – Working group under chairmanship of Sri N Sadasivan In addition to the guidelines framed based on the recommendations of the committees, RBI had been giving instructions to banks as and when required. Over the years, the customer service in banks has improved considerably with the introduction of technology based products. Further, the Government of India introduced the concept of Citizens’ Charter at all bank branches with an objective to exercise in setting benchmarks for prompt delivery of banking services, including the pricing thereof. In the year 2010, RBI constituted a committee under the chairmanship of Sri.M.Damodaran to look into the customer service aspects in Banks. The recommendations of the committee are as under:

� Bank should offer a basic bank account with privileges such as certain number of transactions, cheque facility, ATM/Debit Card etc., without any prescription of minimum balance.

� The Passbook/Statement of accounts should indicate the account number, name, address and ID of the customer, MICR Code, IFSC Code, Toll free customer care number, Ombudsman contract details, instrument number and payee name on all debit entries and the full details of TDS (Gross Interest credited and TDS debited).

� Before marking the account as inoperative, the banks must intimate the account holder by SMS. Banks should introduce Uniform Account Opening forms and Account Number Portability across the banks.

� Banks should take Unique Identification Number (issued under Aadhar project) as KYC compliance for opening of accounts.

� The term deposit renewal notices should be sent to customers preferably in electronic form. A single Form 15G/H linked to a customer ID across the branches in a bank should be issued.

� Service charges should be reasonable. No charges are to be levied on Non-Home Branch transactions.

� The users of electronic bank platforms for making collections may offer small discounts to their customers to favour electronic payments.

� Cheque Drop Box should provide receipt/acknowledgement along with the image of the cheque.

� Reason for penal interest on loan accounts, rate of interest charged should be mentioned in Passbook/Statement of Account.

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� Banks must ensure that loan statements are issued to the borrowers periodically giving full details including demand, repayments, interest component and charges.

� The title deeds should be returned to the customers within a period of 15 days after the loan closure.

� Bank should provide Most Important Terms and Conditions (MITC) of the product explicitly in Arial font and size 12 for better readability.

� All home loans should permit a switchover between fixed to floating or vice-versa at least once during the loan tenure at an appropriate and reasonable fee. Home loans backed by insurance products, the procedure should be explained upfront to the customers.

� Banks should provide prioritized service to the senior citizens/physically handicapped persons.

� Banks should put a system in a place for Automatic updation of the customers to the senior citizen category based on the date of birth.

� Pensioner may be allowed to submit the annual life certificate at any of the branches of the bank. Bank should make arrangements to disburse pension to sick and disabled pensioners at their door steps.

� SHG members should not be forced to take insurance products.

� Banks should ensure that at least one of the staff members in Tribal / North-East areas is conversant with local language.

� The staff manning Customer Service Departments in banks should receive specialized training so that customer complaints are professionally handled.

� With regard to “one-man branches” – Banks should place Proper systems for safety of cash and also continuity of services in case of leave etc.

� In case of frauds in the accounts of the customers, bank is required to credit the amount to their accounts after obtaining due affidavit.

� Banks should put in place secure systems like Multi-factor Authentication to minimize the fraud instances.

� Frauds involving cloned cards, unauthorized online transactions, ATM transactions not done by the customers etc., cannot be valid transactions as they are not authorized by the customers. The onus should be on the bank to prove that the customer has done the transaction.

� Banks to install CCTV at all ATMs. For Debit/Credit cards at POS, PIN based authorization should be made mandatory.

� Banks should ensure that ECS Mandate Management System is working effectively to comply with the mandate given by the customer.

� For transaction deficiencies, there should be in-built mechanism to pay compensation to the customers.

� Bank should provide for online registration of grievance in its website.

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Banking Codes and Standards Board of India (BCSBI) RBI has set up 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 Deposit Accounts (Current/Savings/Recurring/Term/PPF), Collection of cheques, Lockers, Safe custody services, Remittances (DD/PO/TT/NEFT/RTGS), Government transactions and Pension payments, Demat Accounts, Equity and Government Bonds, Loans and Advances / Foreign Exchange / Money Changing and Card products (Credit / ATM / Debit / Smart / Pre-paid / Travel). 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. BCSBI has revised “The Code of Bank’s Commitment to Customers” and the important changes are as under:

� 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.

� 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.

� Acknowledge receipt of loan applications and convey in writing the reasons for rejection of loan. 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.

� Compensate the customers for delayed collection of cheques without waiting for a request from customer.

� No charges will be levied for activation of inoperative account. � 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. Banks are advised to disclose the commission/fee details to the customers while selling third party products viz., Mutual Funds / Insurance policies. Fair Practices code for Lender’s liability: 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: 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). As per revised code, banks are advised to introduce simplified process for opening of Basic Savings bank accounts and extend Doorstep service to the disabled customers and senior citizens. In case of electronic frauds, if the customer incurs any direct loss due to a security breach of the internet banking system that is not contributed or caused by the customer, the bank will bear the loss, unless it is able to establish that the customer is guilty. However, the onus of responsibility lies on the bank that the customer compromised the passwords, leading to the fraud. The revised code is expected to come into force shortly.

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Compensation Policy

Providing better and timely service to the customers is a prerequisite for banks to remain stay in the competitive market. Despite best efforts, sometimes, 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

Unauthorized / Erroneous debits

Bank should reverse the amount immediately and compensate the customer to the extent of financial loss incurred such as interest or service charges. In case the unauthorized debit is on account of third party, customer should be compensated up to `50000/- or actual debit amount whichever is less.

ECS Debits – Execution failure

Bank should compensate the customer to the extent of financial loss incurred along with service charges, if any.

Stop payment – Payment of cheques

Where the cheque is paid despite stop payment instructions, bank should reverse cheque amount along with charges, if any, with value date within 2 days of the intimation.

Unsolicited Credit Cards – Levy of charges

Bank should reverse the charges immediately and also pay a penalty without demur amounting to twice the value of the charges reversed.

Collection of foreign cheques / currencies – Undue delay

Delay up to 14 days SB Interest + 0.25% simple interest Delay 15 to 45 days SB Interest + 0.50% simple interest Beyond 45 days SB Interest + 0.75% simple interest

Payment of interest on delayed collection

Outstation Cheques Local Cheques Delay < 14 days SB Interest Delay > 45 days Applicable TD Rate Delay > 90 days TD Rate + 2%

SB Interest

However, in case of loan/ODCC credits, the interest payable is applicable interest rate on loan/ODCC plus 2%

Cheques/instruments lost in transit / in clearing or paying bank branches

Bank should provide the required assistance to obtain duplicate instrument from the drawer of the instrument. The compensation policy that is applicable to ‘Collection of outstation cheques’ is equally applicable to this category of customers.

RTGS/NEFT/ECS Applicable Repo Rate plus 2% to be paid for delayed period. Delay in settlement of wrong ATM Debits

In case where the compliant is not resolved within 12 working days from the date of complaint made by the cardholder, bank should pay `100/- per day.

Violation of the code by Banks` Agent

Appropriate steps to investigate the complaint and to compensate the customer for financial loss, if any.

Delay in payment of Relief / Savings Bonds

SB Rate

Delay in credit of pension payments

8% p.a.

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 greater extent.

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Union Budget (Interim) - 2014

Finance Minister P. Chidambaram presented Interim Union Budget to parliament on 17th February 2014 for the fiscal year 2014-15. Though, there is no perceptible improvement in GDP growth rate, the fiscal deficit is declining, the current account deficit has been constrained, inflation has moderated, the exchange rate is stable, exports have increased and hundreds of projects have been unblocked during the year 2013-14. The salient features Interim Union Budget for the year 2014-15 are:

� GDP growth for the year 2013-14 expected at 4.9%. � Fiscal deficit stood at 4.6% of GDP in 2013-14 and projected at 4.1% for the year 2014-15.

� Current account deficit for 2013-14 estimated at $45 billion from last fiscal year's $88 billion.

� Plan and Non plan expenditure is expected for 2014-15 at 5.55 trillion 12.08 trillion rupees respectively.

� Total spending on food, fertilizers and fuel at 2.5 trillion rupees in 2014-15. Food subsidy estimated at 1.15 trillion rupees, fertiliser subsidy at 679.71 billion rupees and Petroleum subsidy at 634.27 billion rupees.

� 10% increase in defence spending is proposed with total outlay of 2.24 trillion rupees in 2014-15.

� Merchandise exports seen at $326 billion in 2013-14, up 6.3% year on year. Agriculture exports expected to touch $45 billion in 2013-14, up from $41 billion in 2012-13

� Govt. to provide 112 billion capital infusion in state run banks in 2014-15 � Propose to set up Public Debt Management office to start work from 2014-15 � No major change in income tax rates/slabs. � Excise duty slashed by 2% on capital goods. � Cut excise duty by 6% on Sports Utility Vehicles and 4% on small/midsized cars and commercial vehicles.

� Waiver of interest on education loans who availed prior to March 2009. � Introduction one demat account for all financial assets (shares, bonds, funds, insurance and deposits)

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Monetary Policy

Monetary Policy refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit. The main objectives of monetary policy are – Maintaining price stability, ensure adequate flow of credit to the productive sectors to support economic growth and financial stability. However, the relative emphasis among the objectives varies from time to time, depending on evolving macroeconomic developments. The various instruments available to the regulator are as under: Direct Instruments:

Cash Reserve Ratio (CRR): The share of net demand and time liabilities that banks must maintain as cash balance with the Reserve Bank. The Reserve Bank requires banks to maintain a certain amount of cash in reserve as a percentage of their deposits to ensure that banks have sufficient cash to cover customer withdrawals. At present the stipulated CRR is 4%. Regulator uses CRR for dual purpose as liquidity reserve and as a monetary policy tool. On weekly basis, Banks have to report their daily deposit position and balances with RBI to enable them to monitor maintenance of CRR. Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities that banks must maintain in safe and liquid assets, such as government securities, cash and gold. Banks are advised to invest in securities issued and guaranteed by government known as Statutory Liquidity Ratio (SLR). At present SLR requirement is 23% of demand and time liabilities of bank. It is another liquidity cushion. The SLR securities are part of the investment portfolio of the bank. The HTM book primarily consists of SLR investments which have to be held permanently. Refinance facilities: Sector-specific refinance facilities (e.g., against lending to export sector) provided to banks. Indirect Instruments: 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. 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 LAF transactions are currently being conducted on overnight basis. Consists of daily infusion or absorption of liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo (liquidity absorption) auction operations, using government securities as collateral. Repo/Reverse Repo Rate: These rates under the Liquidity Adjustment Facility (LAF) determine the corridor for short-term money market interest rates. In turn, this is expected to trigger movement in other segments of the financial market and the real economy. Repo is a money market instrument, which enables collateralized short term borrowing through sale operations in debt instruments. It is also 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. Generally, repos are done for a period not exceeding 14 days. 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. The present rate is 8%. Reverse Repo is the mirror image of a repo. Under reverse repo, securities are acquired with a simultaneous commitment to resell. Hence

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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. 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. The present rate is 7% Open Market Operations (OMO): Outright sales/purchases of government securities, in addition to LAF, as a tool to determine the level of liquidity over the medium term. Marginal Standing Facility (MSF): was instituted under which scheduled commercial banks can borrow over night at their discretion up to one per cent of their respective NDTL at 100 basis points above the repo rate to provide a safety valve against unanticipated liquidity shocks. Bank Rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. It also signals the medium-term stance of monetary policy. The present rate is 9%. Market Stabilization Scheme (MSS): This instrument for monetary management was introduced in 2004. Liquidity of a more enduring nature arising from large capital flows is absorbed through sale of short-dated government securities and treasury bills. In an expansionary monetary policy, money supply increases causing an expansion in aggregate demand through lower interest rates. This stimulates interest sensitive spending on investment for manufacture of goods, housing, export, business etc. and in turn, acting through multiplier leads to a rise in gross domestic product. The reverse process takes place when monetary policy is tightened. However, in a fully employed economy monetary expansion would primarily raise prices and nominal gross domestic product with little effect on real GDP as the higher stock of money would be chasing the same amount of output.

Withdrawal of old series Bank Notes: In a move that is likely to hit currency hoarders and counterfeiters, the Reserve Bank of India (RBI) has decided to withdraw from circulation all currency notes issued prior to 2005. This move is a well thought out exercise by RBI to capture the “money flows’’ into the system and also help flush out counterfeit notes as well as black money. RBI Notes issued after 2005 have added security features that make counterfeiting difficult. Money has value as long as it is a medium of exchange and store of value. It loses its value when it ceases to be a medium of exchange. As per the guidelines, the holders of currency notes prior to 2005 need approach banks for exchange from 1st April 2014 and they continue to be legal tender. However, from 1st July 2014, those wanting to exchange more than 10 pieces of 500 and 1000 rupee notes in a bank where they do not have an account will have to provide proof of residence and identity. With the RBI setting terms for exchange of these notes and income-tax authorities scrutinizing big spends, it will now become that much simpler for the authorities to track these transactions. Banks are advised to stop reissue of older series and these notes are to be sorted and deposited in the Currency Chests under the Linkage scheme or forwarded to the nearest Issue Office of RBI for disposal.

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Other concepts: Hot Money: Money held in one currency that is liable to switch to another currency, in a flash, in response to better returns or in apprehension of adverse circumstances. Such a flight of money might cause the currency’s exchange rate to plunge. Reserve Money (M0): Currency in circulation + Bankers’ deposits with the RBI + ‘Other’ deposits with the RBI = Net RBI credit to the Government + RBI credit to the commercial sector + RBI’s claims on banks + RBI’s net foreign assets + Government’s currency liabilities to the public – RBI’s net non-monetary liabilities. M1 – Currency with the public + Demand deposits with the banking system + ‘Other’ deposits with the RBI. M2 – M1 + Savings deposits with Post offices. M3 – M1+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the commercial sector + Net foreign exchange assets of the banking sector + Government’s currency liabilities to the public – Net non-monetary liabilities of the banking sector. M4 – M3 + Deposits with post office (excluding NSCs). Inflation: It is termed as the continual rise in the general level of prices. It is commonly expressed as an annual percentage rate of change on an index number. Hyper Inflation: An express growth in the rate of inflation whereby, money loses its value to the extent where other mediums of exchange like barter or foreign currency come into vogue. Stagflation: A condition in the economy that is characterized by the twin economic problems viz., slow economic growth and rising prices. Deflation: A sustained fall in the general price level of goods and services, usually accompanied by fall in output and jobs. Recession: A phase of dismal economic activity, usually accompanied by rising unemployment. It is defined by two successive quarters of negative GDP growth and is considered to have a cyclic character. An imminent global recession is likely as signs of dismal economic performance are being witnessed. Stagnation: It is a period during which economy does not grow or grows very slowly. As a result, unemployment increases and consumer spending slows down. Devaluation: A fall in the fixed official rate at which one currency is exchanged for another in a fixed exchange rate system. While it is mostly by a deliberate act of government policy, in recent years, financial speculation has also been identified as a responsible factor. Demonetization: Withdrawal of currency from circulation with an aim to strike at counterfeiting of currency and unaccounted money. In 1978, currency notes of denomination of `1000/-, `5000/- and `10000/- were demonetized. Arthakranthi is a suggestion which is being widely debated to address the important issues such as rampant corruption and fiscal deficit that are being confronting the country. It suggests abolition of taxes except for Customs and Import duties and introduction of bank transaction tax on receipts. It also suggests currency compression by ensuring that the highest currency denomination is `50/-, which paves the way to adopt banking system extensively and also enables to phase-out fake currency from the system which is the need of the hour. Though, the suggestion appears simple and attractive but needs political will and revamping of entire eco system.

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Financial Sector Legislative Reforms Commission (FSLRC) Financial sector being a catalyst for the real sector growth has to be dynamic enough to support the growth aspirations. The institutional framework i.e. laws, policies and organizations, governing the financial sector should enable its orderly growth in tune with such aspirations. The existing framework governing the financial sector in the country has been built up over 60 Acts and multiple rules and regulations and many of the financial sector laws date back several decades, when the financial landscape was very different from that of today. At present, India has a legacy financial regulatory architecture viz., RBI, SEBI, IRDA, PFRDA and FMC. While the objective of RBI is to manage the monetary and credit system of the country, SEBI works towards promotion of orderly and healthy growth of the securities market duly protecting the interests of the investors. Similarly, IRDA promotes and regulates insurance industry and PFRDA deals with pensions and old age income security among all citizens of the country. The Forward Markets Commission (FMC) is the chief regulator of forwards and future markets in India. The regulatory architecture evolved over the years, with a sequence of piecemeal decisions responding to immediate pressures from time to time. The weaknesses in the existing structure are:

� The present arrangement has gaps where no regulator is in-charge. � Conflicts between regulators / laws. � An approach of multiple sectoral regulators that construct ‘silos’ induces economic inefficiency.

� Fragmentation of financial firms, which responds to fragmentation of financial regulation, leads to a reduced ability to understand risk.

� Problems are likely to exacerbate. The Commission was set up at a time when the global economy was recovering from the 2008 financial crisis. At the time, lessons from what went wrong and the possible options were being debated. The Commission could, therefore, assimilate the lessons from the crisis, and at the same time, think and construct a model relevant to the Indian context in a calm and detached manner supported by quality research, extensive deliberations and detailed interaction with a host of experts and stake-holders. The FSLRC’s report proposes a sweeping reorganization of the country’s financial architecture. Indeed, the Act draws from some of the notable features of the US Dodd-Frank Act, the UK’s Financial Services and Markets Act of 2000, financial liberalization in South Korea and recent Indian government committee reports. The report is significant both for its composition and mandate. The FSLRC proposes the following structure: 1.Reserve Bank of India: It is proposed that RBI will perform three functions viz., Monetary policy, Regulation and Supervision of banking in enforcing the proposed consumer protection law and the proposed micro-prudential law, and regulation and supervision of payment systems in enforcing these two laws. It is proposed to create a separate agency to manage public debt, removing these functions from the RBI. Central Government would promulgate ‘rules’ governing inbound capital flows while the RBI would promulgate ‘regulations’ governing outbound flows. 2. Unified Financial Agency: Consolidation of regulation of securities, pensions and insurance into a single, UK Financial Services Authority-style regulator. The current work of the Securities and Exchange Board of India (SEBI), the Pension Fund Regulatory and Development Authority (PFRDA) and the Forward Markets Commission (FMC) would be rolled into a new Unified Financial Authority (UFA).

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The unified financial regulatory agency would implement the consumer protection law and micro-prudential law for all financial firms other than banking and payments. This would yield benefits in terms of economies of scope and scale in the financial system; it would reduce the identification of the regulatory agency with one sector; it would help address the difficulties of finding the appropriate talent in Government agencies. This proposed unified financial regulatory agency would also take over the work on organized financial trading from RBI in the areas connected with the Bond-Currency-Derivatives Nexus, and from FMC for commodity futures, thus giving a unification of all organized financial trading including equities, government bonds, currencies, commodity futures and corporate bonds. The unification of regulation and supervision of financial firms such as mutual funds, insurance companies, and a diverse array of firms which are not banks or payment providers, would yield consistent treatment in consumer protection and micro-prudential regulation across all of them. 3.Financial Sector Appellate Tribunal (FSAT): The present SAT will be subsumed in FSAT, which will hear appeals against RBI for its regulatory functions, the unified financial agency, decisions of the FRA and some elements of the work of the resolution corporation. 4.Resolution Corporation: The present DICGC will be subsumed into the Resolution Corporation which will work across the financial system. 5. Financial Redressal Agency (FRA): The FRA is a new agency which will have to be created in implementing this financial regulatory architecture. It will setup a nationwide machinery to become a one stop shop where consumers can carry complaints against all financial firms. 6. Public Debt Management Agency: An independent debt management office is envisioned. 7. Financial Stability and Development Council (FSDC): The existing FSDC will become a statutory agency, and have modified functions in the fields of systemic risk and development. Advantages of new structure:

� Non-sectoral approach enables the entities to focus attention on the core objectives i.e. Innovation and Consumer protection.

� It envisages that there will not be any room for conflicts of interests. � One supervisor has a micro view of the risks in the system.

The Independent regulators have become an important part of the policy landscape and the efficacy of the regulators depends on the following factors:

� The regulator is able to setup a specialized workforce that has superior technical knowledge.

� This is assisted by modified human resource and other processes, when compared with the functioning of mainstream Government departments.

� With such knowledge, and close observation of the industry, an independent regulator is able to move rapidly in modifying regulations, thus giving malleability to laws.

The unification of regulation and supervision of financial firms would yield consistent treatment in consumer protection and micro-prudential regulation.

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New Private Sector Banks

The guidelines for “Licensing of New Banks in the Private Sector” have now been released by RBI and the salient features are:

Eligible Promoters: Entities/groups in the private sector, entities in public sector and Non-Banking Financial Companies (NBFCs) shall be eligible to set up a bank through a wholly-owned Non-Operative Financial Holding Company (NOFHC).

ii) ‘Fit and Proper’ criteria: Entities/groups should have a past record of sound credentials and integrity, be financially sound with a successful track record of 10 years. For this purpose, RBI may seek feedback from other regulators and enforcement and investigative agencies.

Corporate structure of the NOFHC: The NOFHC shall be wholly owned by the Promoter/Promoter Group. The NOFHC shall hold the bank as well as all the other financial services entities of the group.

iv) Minimum Voting Equity capital requirements for banks and shareholding by NOFHC: The initial minimum paid-up voting equity capital for a bank shall be `5 billion. The NOFHC shall initially hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which shall be locked in for a period of five years and which shall be brought down to 15 per cent within 12 years. The bank shall get its shares listed on the stock exchanges within 3 years of the commencement of business by the bank.

v) Regulatory framework: The bank will be governed by the provisions of the relevant Acts, Statutes, Directives, Prudential regulations and other Guidelines / Instructions issued by RBI and other regulators. The NOFHC shall be registered as a non-banking finance company (NBFC) with the RBI and will be governed by a separate set of directions issued by RBI.

vi) Foreign shareholding in the bank: The aggregate non-resident shareholding in the new bank shall not exceed 49% for the first 5 years after which it will be as per the extant policy.

vii) Corporate governance of NOFHC: At least 50% of the Directors of the NOFHC should be independent directors. The corporate structure should not impede effective supervision of the bank and the NOFHC on a consolidated basis by RBI.

viii) Prudential norms for the NOFHC: The prudential norms will be applied to NOFHC both on stand-alone as well as on a consolidated basis and the norms would be on similar lines as that of the bank.

ix) Exposure norms: The NOFHC and the bank shall not have any exposure to the Promoter Group. The bank shall not invest in the equity/debt capital instruments of any financial entities held by the NOFHC.

x) Business Plan for the bank: The business plan should be realistic and viable and should address how the bank proposes to achieve financial inclusion.

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xi) Other conditions for the bank:

• The bank shall open at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the latest census)

• The bank shall comply with the priority sector lending targets and sub-targets as applicable to the existing domestic banks.

• Banks promoted by groups having 40 per cent or more assets/income from non-financial business will require RBI’s prior approval for raising paid-up voting equity capital beyond `10 billion for every block of `5 billion.

• Any non-compliance of terms and conditions will attract penal measures including cancellation of licence of the bank.

xii) Additional conditions for NBFCs promoting/converting into a bank: Existing NBFCs, if considered eligible, may be permitted to promote a new bank or convert themselves into banks.

Procedure for RBI decisions: At the first stage, the applications will be screened by RBI and thereafter, the applications will be referred to a High Level Advisory Committee. Based on committee recommendations RBI issues in-principle approvals. The validity of the in-principle approval will be one year. In order to ensure transparency, the names of the applicants will be placed on the Reserve Bank website after the last date of receipt of applications.

Banking Laws (Amendment) Act 2012 has been passed in the Lok Sabha on 18th December 2012 and the salient features of the bill are as under: Forward Market’s Contract: The passage of the bill was facilitated by the removal of a controversial Forward Market’s Contract clause that would have allowed banks to enter into future trading of commodities. Very few banks were keen on trading in commodities and some felt that the clause had been incorporated to provide banks a level playing field with corporate giants. Control: The amendments empower RBI to inspect books of conglomerates, make board and top management appointments in banks and control transfer of large chunks of shares. Voting Rights: The bill also allows investors to have voting rights with a higher cap of to 26% from the existing 10% in case of private sector banks and 10% from 1% at present in case of public sector banks. Existing banks will gain as their strategic shareholders will be encouraged by the move to increase voting rights. Issuance of Rights/Bonus shares: The amendment will facilitate issuance of Rights/Bonus shares making nationalized banks on par with private sector banks in serving the shareholders. v) Mergers & Acquisitions (M&A): The increased voting rights to investors, commensurate with their shareholding in existing banks, would help both private and public sector banks to get more foreign investors and help in expanding their capital base. The bill also seeks to exempt certain M&As, such as peer group mergers, from the purview of the Competition Commission of India (CCI). However, it was clarified that the banking sector will not be outside the CCI’s purview.

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Gold Deposit Scheme

With a view to bring privately held stock of gold into circulation, Govt. Of India / RBI advised banks to introduce Gold Deposit Scheme (GDS). The operational guidelines of the scheme are as under: Purpose: Mobilization of Domestic idle Gold for more productive uses. Provide customers an opportunity to earn interest on physical assets. Types of Depositors: Individuals (single/joint); HUFs; Trusts (including Mutual Funds/ Exchange Traded Funds registered under SEBI); Companies. Minimum Quantity: 500 grams (No upper limit). Period of Deposit: six months to 7 years (in multiples of three months). Rate of Interest: 0.50% for deposit up to 3 years; 0.75% for deposit of more than 3 years up to 7 years. Interest is calculated in terms of Gold Currency (XAU) based on principal quantity of deposit and applicable rate of interest. The customers can opt for cumulative as well as non cumulative calculation if interest. The interest shall be calculated in terms of Gold Currency (XAU) but paid in Rupees only. Forms of Subscription: Gold Bars/Coins/Jewellery will be accepted in scrap form only. Provisional receipt will be issued at the time of acceptance. A provisional receipt will be issued by the branch on accepting gold from the customer. Loss in weight of Gold: Gold deposited by the customer will be melted after removing the base metal and non-gold elements, if any, to identify the pure gold content of uniform fineness. The weight of gold after melting and refining to pure fineness shall be different from the weight of gold tendered. Gold Deposit Certificate (GDC): GDC will be issued by our Nodal Branch after the Gold is melted, assayed and minted at India Government Mint (IGM). GDC will be issued for pure gold content (995 fineness). Multiple certificates (up to 5) may be issued. GDC will be sent to the depositor within 90 days from deposit. Transferability: Transferable by Endorsement and Delivery. In case of certificates issued in dematerialized form, the depository rules for transfer would apply. Transfer to be noted with Nodal Branch. Repayment: Repayment of Principal either in Gold or equivalent Rupee as on the date of maturity. The gold deposited by the customer will be melted and converted into bars, and it is not possible to return gold in the same form (e.g. jewellery) as at the time of deposit. Premature Payment: Permitted after a lock in period of six months with penalty of 0.25% on applicable interest rate. Redemption Procedure: The customer will be required to submit the original certificate, duly discharged on the reverse, to reach the Nodal Branch one month before maturity (15 days in case of cash repayment). The principal quantity of deposit will be paid in cash or gold (.995 fitness) as specified by the customer in the Application Form. Any fraction quantity (below 10 grams) will be paid in equivalent Rupees. The customer has option to renew the deposit at any time after maturity as per the term and interest rate available on maturity. Loan facility: Rupee Loan available at select Branches of our Bank for up to 75% of notional value of Gold Deposited. Tax Benefits: Exempt from Income Tax, Wealth Tax and Capital Gains available. The customers would have to fulfil all KYC requirements as applicable to other deposit products. In addition, customers will be required to submit Inventory Form (giving description of gold, number of pieces and weight of gold after preliminary checking of purity). The mobilised gold with the bank will constitute an eligible asset under SLR if the banks hold such gold with themselves in physical form. Banks are required to convert the liabilities and assets denominated in terms of gold into rupees for the purpose of compliance with reserve requirements/capital prescription requirements/balance sheet translation requirements.

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Inflation Indexed National Saving Securities (IINSS)

In order to protect the investors from inflation and to provide Real Rate of Return, Government of India introduced a novel scheme called IINSS. The issue was opened for retail subscription on 23rd December 2013 and closed on 31st December 2013. Selected Bank Branches were allowed to collect subscription on behalf of GoI. The details of the scheme are as under: No Specification Details 1. Subscription Limit Minimum – `5000 Maximum – `500000 2. Interest Compounded Half yearly

3. Eligible investors

Individuals, Hindu Undivided Family (HUF), Charitable institutions registered under section 25 of the Indian Companies Act, Universities incorporated by Central, State or Provincial Act or declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956).

4. Tradability No 5. Transferability To nominee(s) on death of holder (only

individuals) 6. Tenor 10 years 7. Lock in period 1 year for senior citizens (above) 65 years & 3

years for others 8. Early redemption – Penalty Charges at the rate of 50% of the last coupon

payable. 9. Base rate of Interest* 1.5% 10. Inflation rate*

Based on final combined CPI with a lag of 3 months (final CPI for Sept 2013 would reference CPI for all days in December 2013)

11. Open / Close ended Close ended 12. Collateral Yes. Collateral for loans from banks, Fis.

13. Nomination May nominate one or more persons who shall be entitled to the bonds and the payment thereon in the event of his death and the nominee can be NRI also.

14. Joint a/c allowed Yes 15. Minors allowed Yes 16. Undertaking to be obtained Yes 17. TDS As per extant taxation provision 18. Walk-in customers Yes allowed provided KYC compliance

*Interest rate would comprise two parts viz., Fixed Rate (1.5%) and Inflation rate based on CPI compounded in the principal on half-yearly basis and paid at the time of maturity. Rate of Interest (per annum) = Real Interest Rate (fixed rate) + inflation rate. Final combined CPI will be used as reference CPI with a lag of three months (i.e. final combined CPI for September 2013 would be reference CPI for all days of December 2013). In case of change in the base year, the base splicing method will be used. For the month of December, Rate of Interest would be – (1.5%) + (Final Combined CPI for Sep’13 = 9.84%) = 11.34%

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Floating Rate Deposits – Bank Term deposits are the most preferred among the variety of investment options. However, of late the Bank depositors found unattractive as the real rate of return is low and sometimes negative since they get interest at contracted rate only while the interest rates are on the rise. Asset Liability management is the greatest challenge for the Banks as majority of the banks liabilities are of short term while the repayments of assets spread over relatively longer tenure i.e. beyond 36 months. Further, the present term deposit interest rate scenario is acting as disincentive for long term investors since the interest rate on deposits of beyond 2/3 years is low compared to short term deposits. Normally, the retail borrowing happens at floating interest rates whereas their deposits with banks attract fixed rate exposing them to interest rate risk. In the above backdrop, Banks have been examining the feasibility of introduction of floating rate term deposits, wherein the rate of interest keeps changing depending on the market rates. The interest rate is reset with reference to a benchmark/anchor rates which are directly observable and transparent to the customer. Floating rate term deposit looks ideally attractive for the retail investors. On the flip side, since the interest rate is floating, the income from term deposits may be adversely impacted when the rates fall. The floating deposit rate concept helps banks to manage their assets and liabilities better. At present, the Floating Interest Rate Deposits are being offered select banks only and the concept is yet to take momentum in India. Bharatitya Mahila Bank: With the evolution of self-help groups (SHG) in the rural areas and the financial independence of urban women, the participation of women in economic activities has taken off in a big way. Their interaction with formal and informal financial agencies has also increased considerably. Despite of considerable improvement, only 26% of women have an account with formal financial institutions, compared with 46% of men. That means an account in either a bank, a credit union, a co-operative, post office or a microfinance institution. In the above backdrop, Government of India established a Bank exclusively for Women to achieve the following objectives:

� To focus on the banking needs of women and to promote women economic empowerment.

� To provide financial services predominantly to women and women self-help groups to the small businesswomen and from the working woman to the high networth individual.

� To pay special emphasis is paid on funding for skills developments to help in economic activity.

� To promote asset ownership amongst women customers this in turn reduces their risk of suffering from domestic violence.

The first Women’s Bank was established on 19th November 2013 on the occasion of the 94th birth anniversary of former Indian Prime Minister Indira Gandhi. Dr.Manmohan Singh Prime Minister of India has inaugurated the Bank. India is the third country in the world to have bank especially for women. The Bank's initial capital consists of Rs 1,000 crores. It is proposed to open 25 branches by the end of March 2014 and 500 branches by 2017. Smt. Usha Ananthasubramanian is appointed as first CMD of the Bank.

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Corporate Governance

It is the system by which companies are directed and controlled by the Management in the best interest of all stakeholders with greater transparency and better and timely financial reporting. It encompasses commitment to values / 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. Ethical leadership is need of the hour to conduct the business on sound lines. 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. Government of India constituted a committee “Ganguly Committee” to look into the issues pertaining to Corporate Governance in banks and the major recommendations are as under: Composition – Boards should be more contemporarily professional by inducting technical and specially qualified personnel. There should be a blend of “historical skill” set and “new skill” set, i.e. skills such as marketing, technology and systems, risk management, strategic planning, treasury operations, credit recovery, etc. ii) Fit and Proper Norms – Directors should fulfill certain “fit and proper” norms viz., formal qualification, experience and track record. To ensure this, companies could call upon the candidates for directorship to furnish necessary information by way of self- declaration, verification reports from market, etc. Certain criteria adopted for public sector banks such as the age of director being between 35 to 65 years and that he/she should not be a Member of Parliament / State Legislatures, etc. may be adopted for private sector banks also. iii) Selection of Directors could be done by a nomination committee of the board. The Reserve Bank of India (RBI) also might compile a list of eligible candidates. The banks may enter into a “Deed of Covenant” with every non-executive director, delineating his/her responsibilities and making him/her abide by them. iv) Training – Need-based training should be imparted to the directors to equip them govern the banks properly. v) Board level committees – It is suggested formation of five committees of the board viz., Nomination Committee, Audit Committee, Shareholder’s Redressal Committee, Supervisory Committee and Risk Management Committee.

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Retail Banking

Retail Banking is basically a mass banking with focus on Individual customer rather than on large Corporate Houses/Groups, both on liabilities and assets side of the balance sheet. While Savings, Current and Fixed deposits, with certain flavors, remain the prominent products on the liability side; the assets side includes products like Housing, Education, Vehicle, Clean and Personal loans. Besides the above, banks are also extending ancillary services such as Credit/Debit cards, Depository services, Bank assurance products, Mutual funds etc. It is appropriate to call Retail Banking as a Life Cycle Product package for individuals to meet all their banking needs right from childhood to silver-line age. While considerable growth rate is seen under PSBs deposits, the share of low cost deposits has come down from 39.95% to 33.45% during the last five years i.e. 2006 to 2012. Similarly, Yield on advances is under strain on account of offering competitive interest rates to corporate clientele besides rise of Non Performing Assets over the years. Today, the survival and the success of the banks crucially depend on sustainability of Net Interest Margin (NIM), which is possible only through judicious deposit mix (CASA) besides augmenting Interest Income through expansion of credit portfolio with quality. In the above backdrop, banks have been focusing attention on Retail banking.

The Retail Banking segment is of heterogeneous nature as it comprises of various sets of people like Professionals, Employees, Entrepreneurs, Labour, Farmers, and Students etc. While the basic banking requirement i.e. Bank Account, remain the same for all the segments, they need specific services depending on their demographic, economic and social background. To reach the target customers the market can be segregated based on the geographic, demographic, psychographic and behavioral aspects. In order to penetrate in to the untapped market, there is an imminent need to map the banking requirements of the existing/prospective customers to the available products and channels on a priority. The sustained GDP growth has given a fillip to a consumer boom. The rise of the Indian middle class coupled with more liberal attitude towards spending and personal debt is one of the major reasons for increased retail lending in India. Further, the increased proportion of young population (70%) provides greater demand for retail banking services. Retail lending enables the banks to improve interest spread as the lending rates are normally higher than other segments and the credit risk tends to be well diversified. This segment generally loyal and tend not to shift accounts very often and facilitates cross selling. There are seven Ps viz., Product, Price, Promotion, Place, People, Process and Physical evidence, play a vital role for the banks in developing and designing of retail bank products. The appropriate mix will deliver the desired results. However, Product and People are to be very much cared in marketing strategies of retail products by the frontline staff. Today there are many players in the market to extend retail banking services on one hand and increased discerning demands of the customers on the other hand, which is making the banks to walk on the tight rope with utmost care and caution. Providing uninterrupted cost effective value added services to the customers is another major challenge for the banks. India is experiencing a surge in retail banking and the market has decisively got transformed from a Sellers’ market to a Buyers’ market in the light of evolving macro-economic environment, increased profile of Gen-Y and rapid advancement in information technology. Retail Banking is going to play significant role in Indian Banking landscape and banks now need to use retail banking as a growth trigger.

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Treasury Management – Concepts Banks not only lend money to customers but also invest in securities such as Bonds and Debentures of Government as well as Corporates. These instruments are easily tradable in the capital and money market. The tradability of securities makes investments an attractive option for banks for deployment of their funds. Further, banks buy securities not only to trade but also to hold them till maturity to take advantage of the attractive returns with relatively lower risk. Banks are allowed to invest in shares of companies. However, the volumes are low due to associated high risk besides regulatory restrictions. The investment portfolio of the banks broadly divided into three groups viz., Trading Book – Securities purchased with the intention of selling them within 90 days are held in the trading book. Trading opportunities arise in the market on account of fluctuation in interest rates and arbitrage opportunities. Available for Sale (AFS) – Securities which are bought with the intention of selling them but not necessarily within 90 days is considered to be AFS securities. They are also part of the trading portfolio of the bank but only the time frame is different. Both the trading and AFS securities have to be “Marked to Market” every quarter while finalization of quarterly results. Held to Maturity (HTM) – These securities are meant to be held till their date of maturity and the purpose investing in them is to earn reasonable steady income. These securities are carried in the books at cost or purchase price till maturity. Hence, HTM securities need not be “Marked to Market” as the bank is certain of receiving the maturity value on the specified date. Banks are not allowed to shift securities freely from trading and AFS to the HTM book as this may lead to overstating of profit figures. However, banks can opt for shifting only once in a year to adjust their overall portfolio. Banks are permitted to exceed the limit of 25% of total investments under HTM category provided (a) the excess comprises of only of SLR securities and (b) the total SLR securities held in the HTM category is not more than 23% by March 2014. Call Money Markets: 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. Coupon Rate: It is a 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 / Deep Discount Bond: The bond is issued at a discount to its face value, at which it will be redeemed. When such a bond is issued for a very long tenor, the issue price is at a steep discount to the redemption value. The effective interest earned by the buyer is the difference between the face value and the discounted price at which the bond is bought. The essential feature of this type of bonds is the absence of intermittent cash flows.

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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 `5 lakh and multiples thereof. Amount invested by a single investor should not be less than `5 lakh (face value). It is mandatory that CPs should be rated by credit rating agencies. However, recently RBI diluted the minimum rating norm from A-2 to A-3 to enable more companies to tap this route to meet their short term funding requirements for their operations. In a bid to make CPs attractive, the RBI has allowed issuers to buyback these instruments through the secondary market before maturity. 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 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 as 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. Minimum amount of a CD should be one 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. It attracts stamp duty. Banks/Fis cannot grant loans against CDs. 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. There are six 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 to the SPV and who in turn pass the benefit to the investors. Asset and Liability Management – RBI Guidelines: Of late, it is observed that PSBs have been accepting Bulk Deposits/Certificate of Deposits route to increase balance sheet size at very high interest rates, adversely affecting the profitability besides exposing the banks to ALM Risk. RBI directed banks not to accept Bulk Deposits beyond 10% of the total deposits and the total of Bulk Deposits & Certificates of Deposits should not exceed 15% of total deposits of the bank at any given point of time. An appropriate time-bound strategy for reduction of such existing bulk deposits should be put in place to achieve the same by March 2013.

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Rupee Dollar Dynamics

Foreign exchange reserves are extremely critical for the countries who deal with international trade to meet the foreign currency commitments. Normally, the international trade transactions take place in couple of major currencies of which US Dollar plays a predominant role. Exchange rates, like any other commodity, are based on supply and demand for particular forms of currency. Domestic currency supply changes as a result of a country’s fiscal and monetary policies. Similarly, demand for currency can be influenced by a large number of factors, including interest rates, inflation, and views on impending government regulation. A strong exchange rate (rupee appreciation) is often considered to be a sign of economic strength and can become a symbol of national pride. On the flipside, there are arguments that it can depress economic growth as it may tend to lead exports more expensive, therefore less demand for exports. At the same time it ignites more demand for imported goods on account of price competitiveness which pose threat to survival of domestic industry. India had chosen to adopt a fixed rate currency regime where the rupee was pegged at 4.79 against a dollar between 1948 and 1966. Two consecutive wars, one with China in 1962 and another one with Pakistan in 1965; resulted in a huge deficit on India’s budget, forcing the government to devalue the currency to 7.57 against the dollar. The rupee’s link with the British currency was broken in 1971 and it was linked directly to the US dollar. In 1975, value of the Indian rupee was pegged at 8.39 against a dollar. In 1985, it was further devalued to 12 against a dollar. During economic crisis in 1991, the government adopted a dual exchange rate regime where the importers were allowed to pay for some imports with foreign exchange valued at free-market rates and other imports could be purchased with foreign exchange purchased at a government-mandated rate. Subsequently, Floating Exchange Rate was introduced in the year 1993 where the exchange rate is determined ostensibly by market forces. During the transition period (1990 to 1993) the exchange rates witnessed sharp upward movements. However, the post floating exchange rate regime i.e. beyond 1993, witnessed gradual depreciation of rupee against US Dollar. In the post reforms era, the Indian rupee has been highly volatile. The rupee traded in the range of 40-50 between 2000 and 2010. The Indian currency has gradually depreciated since the global 2008 economic crisis. The rupee touched a new low of 68 to the dollar as heavy demand from importers along with weak domestic equities continued to weigh on sentiment. The fall in rupee against US Dollar can be attributed primarily to the following major factors:

� The investors across the globe are considering US Dollars as a safe haven for their investments on account of turbulence in European markets and weak global economic outlook. This led to an increased demand for dollars vis-à-vis the supply for rupee and thus the depreciation.

� The Indian economic scenario over the years has been plagued by high rate of inflation, hovering around 5% to 10%, and tardy growth in manufacturing sector. The cumulative effect of these factors is leading to a shift in investor sentiments towards dollar market.

� Due to a sharp increase in the dollar rates, importers suddenly started gasping for dollars to hedge their position, which led to an increased demand for dollars. On the other hand exporters kept on holding their dollar reserves, speculating that the rupee will fall further in future. This interplay between

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the two forces further fuelled the demand for dollars while sequestering its supply from the market.

� There has been shift of FIIs from the Indian markets in the recent years and this has triggered increased demand for dollars which is further leading to a spiraling rupee.

The depreciation of rupee against US Dollar has cascading impact on the economy as we are operating in a liberalized environment dealing with multiple countries / currencies and this has bearing on the following sectors: Exports – Businesses that rely on exports can find their products suddenly competitive in overseas markets as exchange rates fluctuate. The falling rupee has substantially appreciated the revenues for the exporters especially dealing with Information Technology, Pharma, Gems, Textile sectors as they receive more rupees for their dollar denominated export contracts. It is a boon to IT companies as it generates more than 80% of their revenue from overseas market and this will enhance their revenue realizations. Imports – Companies that rely on imports can see the costs of these imports rise and fall with the exchange rate. India has been importing crude and petrol to meet the growing needs of the corporate sector as well as domestic consumption. Despite drop in oil prices in international market, we are unable to take advantage due to weakening of local currency. Further, the increased gold imports added fuel to fire and widened the current account deficit. This has far reaching impact on increasing inflation with rise in energy cost to transportation cost. Falling value of rupee brings cheer to the economy only when the exports surpass imports as loss on imports is neutralized by gain on exports. However, it is alarming situation for our country as trade deficit is looming large over the years – from 2.04 lakh crore in 2006 to 10.42 lakh crore in 2013. Corporate sector – Indian corporate have been increasingly accessing international debt markets to raise resources to take advantage of low interest rates in international markets. As per Bloomberg reports, Indian corporates have borrowed more than $12 billion every year since 2010. The falling rupee has direct bearing on the interest burden as majority of the corporate borrow funds through ECB. For companies that have availed of foreign currency loans for implementation of projects, the rupee depreciation will stretch their balance sheets, as the amount of debt will increase in rupee terms. As these loans mature, the cash flows will also be impacted. The rupee depreciation especially in economic downturn scenario is compressing the corporate margins and creating difficulties in making repayments to the creditors. Exchange rate movements can have a significant impact on corporate returns. Multinational companies may see significant shifts in their profitability, as foreign exchange rates may make locally held currency more valuable. Even local companies can be affected, as changing forex rates may substantially alter their material costs, or affect their ability to sell their goods in foreign countries at competitive prices. Foreign investments – The rupee’s weakness may make foreign investors think twice before investing in India whether it is Foreign Direct Investment (FDI) or Foreign Institutional Investors (FII) or External Commercial Borrowings (ECB). Foreign capital inflows are typically at risk when the local currency weakens. Already, portfolio flows into both debt and equity have been gradually tapering, with investors subscribing to the view that the local currency could depreciate further. If the rupee touches a new low and stabilizes there, foreigners may then put in more money, as they would get more rupees for the same amount of dollars they would have put in earlier.

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Impact on economy – The major impact of the falling rupee can be seen on the rising import bill as around 70% of country’s fuel requirements are being met by imports alone. The imports have severely impacted the bottom line of majority companies as well as the subsidy bill of the government. Of late, the gold imports have added the woes further which widening the trade deficit. Increasing imbalance in trade has adverse impact on country’s fiscal deficit, alarmingly stood at 5.4% of GDP, is a cause of serious concern. A falling rupee straightaway translates into an increase in the retail prices of all products across the board on account of imported fuel costs which also termed as “Imported Inflation”. The spiraling inflation is likely to lead to stagnant growth of the economy. In order to curb the speculative forces, recently RBI introduced key policy initiatives such as intervening in the forward contracts policy whereby cancelled forward contracts cannot be rebooked. Further, RBI intermittently put trading limits for the banks in the foreign exchange market in order to tame the speculative forces and to manage the volatility and disruption to the macro-economic situation. However, the fact remains that India just does not have enough foreign exchange reserves to sell in the market to support the rupee and thus intervention is very limited. Fortunately, NRIs play an important role in bridging the current gap especially in falling rupee environment as they are remitting substantial funds to India over the years and the inflows during the current year stood at 78 billion US Dollars. While NRIs’ emotional connection to their country of origin is part of the explanation for this, the attractive domestic deposit interest rates also provide a powerful incentive. FCNR – SWAP Special Window: Banks raise FCNR funds in various foreign currencies and then sell the foreign currency in exchange for Indian rupees at the prevailing exchange rate and use the Indian rupees for domestic lending. When the FCNR deposit becomes due for maturity, banks would need foreign currency to pay the depositor. At present, in order to protect from forex risk, banks hedge their FCNR commitments by entering into forward contracts which costs around 7% p.a. In the recent years, the rupee depreciated steeply which has wide ramifications and led to alarming Current Account Deficit. In order to bailout the country from the crisis, RBI has introduced swap deal as a means to encourage banks to attract more US dollars into India. The RBI has promised banks a forward rate at a premium of 3.5% per annum for all fresh 3-year FCNR deposits raised. This acts as an incentive for banks to raise fresh FCNR funds as it lowers the cost of hedging. This swap deal is open until December 31, 2013 and only for deposits opened in US dollar for a period of over 3 years. NRIs are likely to be swarmed with offers from banks to open FCNR deposits. For an NRI, the FCNR deposit itself can be an attractive proposition because the interest rates on US dollar deposits are in the range of 3-4% per annum as compared with rates as low as 1% in the US. Further, this interest is tax free in India and there is no currency risk. According to reports, what is happening is that foreign banks are rushing to lend funds to NRIs who can invest the money into FCNR deposits to gain interest arbitrage. For instance, the interest rate on the loan in US would be say 1% p.a. where as they earn around 4% p.a. on FCNR deposit, thereby a net interest gain by 3% p.a. For banks too, this is a win-win as their loan gets covered by the FCNR deposit and they get access to funds at a lower cost. The most potent symbol of a nation’s economic strength is the soundness of its currency. If the decline in rupee continues then it will have adverse impact on all key sectors of the economy. It is therefore high time that government should push the second generation economic reforms so that Indian exports get the much needed boost and also encourage import substitute industries to augment the net trade inflows to ensure the stability and soundness of the rupee against all major currencies in the long run.

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External Borrowings & Concepts

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 400 basis points above LIBOR (London Inter Bank Offered Rate). American Depository Receipt (ADR): It is a negotiable certificate of ownership in the shares of non-American Company that trades in an American Stock Exchange. ADRs make it convenient for Americans to invest in foreign companies as ADRs carry prices and dividends in dollars, and can be traded on the US stock exchanges like the shares of US based companies. Special Drawing Rights (SDR): It is the International Monetary Fund’s own currency. The value of SDRs is set relative to a basket of major currencies. It is used only among governments and IMF for balance of payments settlement. Global Depository Receipt (GDR): 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 number of local currency equity shares of the issuing Company. Foreign Direct Investment (FDI): An investment which is made directly on the production facilities (either by buying a company or by establishing new operations of an existing company) of a country by a foreign source, usually a foreign company. These investments are more enduring than foreign investment in shares and bonds. Derivatives: 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. 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. 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 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

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an opportunity to those who must purchase goods regularly to hedge against changes in prices. An arrangement where the rate is fixed in advance for the purchase or sale of foreign currency at a future date is called forward contract. Option 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. 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 (April to March) for any permitted capital and current account transactions. 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. 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. 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. It is mandatory to have PAN number to make remittances under the Scheme. Further, Resident individuals are allowed to acquire equity shares of a foreign entity by way of/under i) qualification shares ii) professional services rendered and iii) ESOP 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.

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Fed Tapering – The US central bank (Federal Reserve) has been spending $85bn a month to boost the US economy as part of quantitative easing (QE), a policy that began as a response to the financial crisis that struck in 2007. Under the plan, the Fed has been buying assets – a mixture of US government debt and mortgage bonds. This has the effect of driving down US interest rates, including the cost of mortgages, car loans and financing for business. Quantitative easing was never intended to last forever, since each bond purchase expands the Fed’s “balance sheet” by increasing the amount of bonds it owns. “Tapering” is a term that exploded into the financial lexicon when U.S. Federal Reserve Chairman Ben Bernanke stated in testimony before Congress that that Fed may taper – or reduce – the size of the bond-buying program known as quantitative easing (QE). The Fed announced that it was scaling back – or tapering – that support to $75bn a month. The program is designed to stimulate the economy. Tapering isn’t an immediate, dramatic event instead it is likely to take place in a phased manner so as to create minimal market disruption. Tapering is going to remain dependent on economic conditions – Fed may pull back slightly if the economy continues to strengthen, but it could also increase the program again if the economy slowed or the financial markets were shocked by an unforeseen crisis. Fed tapering is not only necessity for reducing long-term inflationary pressures but it is also important from a macro-economic standpoint as US Fed balance sheet is becoming unsustainably huge. Tapering will definitely reflect confidence on the sustainability of economic growth and will be a long-term positive rather than a negative. Volcker Rule restricts deposit-taking banks from engaging in proprietary trading, prohibiting them from engaging in more complex activities that are prone to conflicts of interest, in order to safeguard the core of the banking system, i.e. commercial or traditional banking (deposit taking and lending). The rule prohibits any banking entity from engaging as principal in short-term trading in securities, derivatives, or commodity futures, i.e. activities that may not be compatible with the risk profile of the banking entities, but allows exemptions for market-making, hedging, trading in US government securities, and other activities. There is a concern that it would be a challenging task to separate proprietary trades from permissible trades. Under the Volcker Rule the reporting and compliance regime is expected to assume greater significance. The rule applies to all US banks and bank-holding companies and all foreign bank-holding companies with US subsidiaries or branches. The Volcker Rule prescriptions can affect the operations of the US banks operating in India as they are active players as market makers in domestic foreign exchange market, Government securities market and interest rate swap market. This will change the entire depth and breadth of the Indian markets. An important fall-out of this rule could well be the decline in liquidity in these markets and the resultant cost escalation for market participants. Bitcoins: It is a virtual and digital version of cash emerging as a global payment platform that can be used through smart phones, tablets, and other devices. Bitcoin was introduced in 2009 by pseudonymous developer Satoshi Nakamoto, when the global financial crisis led to distrust of Banks and Government was high. It is a peer-to-peer payment network and digital currency based on an open source protocol, which makes use of a public transaction log. When paying with Bitcoin, there will be no exchange of digital notes or tokens between buyer and seller. Instead, the buyer requests an update to a public transaction log which shows ownership of the coins and is maintained by a decentralized network that verifies and timestamps payments. What makes Bitcoin unique is that there is a record as to who possesses it, and there is a network that records transactions and there is no way to increase the number of Bitcoins in existence. It works on Cryptography proof that allows any two willing parties to transact directly with each other without the need for a trusted third party – whether it is State or Bank or Regulator. It is used to pay for products and services and the merchants have an incentive to accept the currency because transaction fees are lower than the 2-3%

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typically imposed by credit card processors. Notable vendors accepting Bitcoin are OkCupid, Reddit, WordPress, and Virgin Galactic. Bitcoin is gaining popularity in countries with problem-plagued national currencies, as it can be used to circumvent inflation, capital controls, and international sanctions besides lower processing fees compared to credit cards or money transfers. It may be well suited to facilitating cheap cross-border money transfers. However, these coins lack intrinsic value as their value depends only on the willingness of users to accept them. At present, the usage of virtual currency is not authorized by any central bank or monetary authorities. Israeli is in forefront in creating tools to facilitate the Bitcoins to be used in many ways such as buying of products, sending remittances and investments in stock market. The United States is currently considered to be Bitcoin friendly compared to other nations. On the flipside, there are concerns with regard to maintenance of its value, KYC compliance, taking undue advantage of the system (unlawful activities) by unscrupulous persons/agencies and lack of consumer protection. Recently, the Central Banks of Europe, China and India expressed their concerns about the usage of the unregulated currency i.e. Bitcoins. It is estimated that around 12 million Bitcoins are in circulation at present and the worth of Bitcoin is around $700 and the maximum potential number of Bitcoins is expected at around 21 million with a market value of about $9 billion. Definitely, it is going to be a game-changer in virtual currency arena provided it crosses regulatory hurdles.

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Negotiable Instrument Act – Important sections Section Relating to

4 Promissory Note – Definition 5 Bill of Exchange – Definition 6 Cheque (Electronic / Truncated cheque) – Definition 8 Holder – Definition 9 Holder in due course 10 Payment in due course

15 & 16 Endorsement – Definition 17 Ambiguous instruments 20 Inchoate stamped instruments 26 Capacity to make instruments 31 Banker’s obligation to pay for wrongful dishonor 45A Holder’s right to obtain a duplicate of lost bill 47 Bearer instrument – Negotiation by delivery 48 Order instrument – Negotiation by endorsement 58 Instrument obtained by unlawful means – No title passes 80 18% p.a. where interest rate is blank 85 (1) Protection to Paying Banker – Order cheque 85 (2) Protection to Paying Banker – Bearer cheque 85 (A) Protection to Paying Banker – Bank Drafts 89 Protection to Paying Banker – Materially altered instrument 123 General crossing 124 Special crossing 128 Payment in due course – Crossed cheques 130 Not Negotiable Crossing 131 Protection to Collecting Banker – Crossed Bank Drafts 138 Return of cheques for insufficient funds – Drawer’s liability

As per RBI guidelines, the validity period of Cheque/Draft is limited to 3 months.

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List of Acts governing the Indian Banking Sector 1. Banking Regulation Act, 1949 2. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (applicable to banks nationalized in 1970) 3. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (applicable to banks nationalized in 1980) 4. Companies Act, 1956 (to a limited extent) 5. Reserve Bank of India Act, 1934, rules, guidelines, master circulars, and regulations made there under 6. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 7. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 8. Foreign Exchange Management Act, 1999 (for foreign currency dealings), guidelines, rules, regulations and master circulars made there under 9. Banking Ombudsman Scheme, 2006 (not an Act, but governs resolution of consumer disputes) 10. Payment and Settlement Systems Act, 2007 11. Regional Rural Banks Act, 1976 (for rural banks) 12. Deposit Insurance and Credit Guarantee Corporation Act, 1961 13. Banking Laws (Amendment) Bill, 2011 14. State Co-operative Societies Acts (for each state) 15. Multi State Co-operative Societies Act, 2002 16. State Bank of India Act, 1955 17. State Bank of India (Subsidiary Banks) Act, 1959 18. Competition Act, 2002

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Other important concepts Base Rate: Banks are not allowed to lend below Base Rate w.e.f. 01.07.2010 except 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, loans to tribals/physically challenged persons, 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. However, Banks may charge interest at the rates prescribed under SHG schemes, National Schedule Tribes Finance and Development Corporation (NSTFDC) and National Handicapped Finance and Development Corporation (NHFDC) to the extent refinance is available. Banks are required to fix Base Rate duly taking Cost of Deposits / Funds, Negative carry in respect of CRR and SLR, Unallocated Overhead Costs and Average Return on Net Worth in to consideration. Deregulation of SB Interest Rates: As per RBI guidelines banks are free to determine their savings bank deposit interest rate w.e.f 25.10.2011 subject to the following two conditions viz., First, each bank will have to offer a uniform interest rate on savings bank deposits up to `1 lakh, irrespective of the amount in the account within this limit. Second, for savings bank deposits over 1 lakh, a bank may provide differential rates of interest, if it so chooses. However, there should not be any discrimination from customer to customer on interest rates for similar amount of deposit. Further, banks are free to determine their interest rates on NRE/NRO deposits w.e.f. 16.12.11. However, interest rates offered by banks on the said deposits should not be higher than those offered by them on comparable domestic rupee deposits. Banks are paying interest on SB accounts on Daily Products on half-yearly basis viz., September & March of every year. Though, the deregulation of interest is in vogue, at present all most all Public Sector Banks are paying 4% interest where as few Private Sector Banks are extending interest beyond 4% p.a. RBI has given discretion to the banks with regard to frequency of payment of SB interest. However, at present many banks are adopting interest credit to the depositor accounts once in half-year i.e. April & October. Dynamic Provisioning: At present, banks generally make two types of provisions viz., general provisions on standard assets and specific provisions on non-performing assets (NPAs). The present provisioning framework does not have countercyclical or cycle smoothening elements. Though the RBI has been following a policy of countercyclical variation of standard asset provisioning rates, the methodology has been largely based on current available data and judgment, rather than on an analysis of credit cycles and loss history. Since the level of NPAs varies through the economic cycle, the resultant level of specific provisions also behaves cyclically. Consequently, lower provisioning during upturns, and higher provisioning during downturns have pro-cyclical effect on the real economy. However, few banks have started making floating provisions without any predetermined rules; many banks are away from the concept which has become difficult for inter-bank comparison. In the above backdrop, RBI propose to introduce dynamic provisioning framework for banks in India to address pro-cyclicality of capital and provisioning, after the financial crisis, efforts at international level are being made to introduce countercyclical capital and provisioning buffers. Forensic Audit is defined as the application of accounting methods to the tracking and collection of forensic evidence, usually for investigation and prosecution of criminal acts such as embezzlement or fraud. It involves examination of legalities by blending the techniques of propriety, regularity and investigative and financial audits. The objective is to find out whether or not true business value has been reflected in the financial statements and in the course of examination to find whether any fraud has taken place. Forensic Auditors has a unique job because the responsibility involves the integration of accounting, auditing, and investigation skills. It involves thinking beyond the numbers

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and out of the box. It essentially presumes the existence of fake transactions. It requires a more proactive, skeptical approach in examining the books of accounts. Branch Authorization Policy: The opening of branches by domestic scheduled commercial banks (other than RRBs) in Tier-1 centres (population of one lakh & above as per Census 2001) will continue to require prior permission of the Reserve Bank. While issuing such authorization, the Reserve Bank will continue to factor in, among others, whether at least 25 per cent of the total number of branches to be opened during a year is proposed to be opened in unbanked rural centres. However, domestic scheduled commercial banks are permitted to open branches at all centres other than Tier-1 without permission from RBI, subject to reporting. Government desires to have bank branches at all villags where the population is 10000 & above and also in the villages having population is 5000 & above and where there is no bank branch within a radial distance of 5 KMs by September 2012. Rajiv Gandhi Equity Savings Scheme (RGESS) is a tax saving scheme announced in the Union Budget 2012-13 and the scheme is designed exclusively for the first time retail individual investors in securities market, whose gross total income for the year is less than or equal to `10 lakh. The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount so invested, up to a maximum investment of `50000, from his/her taxable income for that year. The objective of the Scheme is to encourage the flow of savings and to improve the depth of domestic capital markets. This would help in promoting an ‘equity culture’ in India. The Scheme aims at widening the retail investor base in the Indian securities markets and also furthers the goal of financial stability and financial inclusion. Swavalamban Scheme: The New Pension System (NPS) is aimed to inculcate the saving habit and to provide pension benefit to the citizens through systematic savings plan. Under this, the government has made a provision to pay an incentive of `1000 per year (up to 2014) to every NPS account opened subject to the minimum contribution of `1000 and maximum `12000 per annum. The age of the subscriber should be between 18 to 60 years. The subscriber is required to invest minimum 40% accumulated savings to purchase a life annuity from any IRDA regulated insurance company, in case where he opts for exit at the age of 60. If the subscriber prefers to exit before 60 years, he is required to invest minimum 80% of accumulated savings in annuity policy. In an unfortunate event, the nominee receives 100% of the NPS pension wealth in lump sum. However, the exit would be subject to the overriding condition that the amount of pension wealth to be annuitized should be sufficient to yield a minimum amount of `1000 per month. If not, the percentage of pension wealth to be annuitized would be increased so that the pension amount becomes `1000 per month, failing which the entire pension wealth would be subject to annuitisation. New Pension Scheme is introduced for Bank Employees in the year 2010 under which Bank employees are eligible for Defined Contributory Pension Scheme (DCPS). It is mandatory that all employees who have joined the service of the Bank or after 1st April 2010 enroll themselves as members of this scheme which entails obtaining of Permanent Retirement Account Number (PRAN) from NSDL who are the Central Record Keeping Agency. Under this scheme, the members shall contribute 10% of the Basic pay and Dearness Allowance towards the DCPS and the bank shall make a matching contribution in respect of these employees. The scheme is governed by Pension Fund Regulatory and Development Authority (PFDRA) and the funds are managed by approved fund managers from public and private sector with proven track record. Employees would be free to carry their PRANS to new employments or continue as individuals after change of employment status.

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Aadhaar Project: The Unique Identification Authority of India (UIDAI) was established by Government of India with an objective to implement Multipurpose National Identity Card (UID Card) in India. It is aimed 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. Central/State Governments and Public Sector Banks are acting as Registrars for AADHAAR project. 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. It is a 12 digit identity code and will remain a permanent identifier. It gives a big push to the government’s financial inclusion agenda and provides strong foundation to deliver better services and improve the operational efficiency of the system. It is aimed to cover 60 crore enrollments by 2014. 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 is called Money Mules. 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. 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. 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 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 of the banks. However, it is an imperative for banks to have a re-look to the existing systems and procedures to suit the changed environment. Unique Customer Identification Code (UCIC): The increasing complexity and of financial transactions necessitate that customers do not have multiple identities within a bank, across the banking/financial system. Government of India has proposed the introduction of UCIC for customers across different banks/financial institutions for setting up a Centralized KYC Registry. RBI advised the banks to initiate steps for allotting UCICs for their customers by providing them a relationship number. This enables the banks to identify customers, track the facilities availed, monitor the financial transactions in a holistic manner. Internal Capital Adequacy Assessment Process (ICAAP): This is intended to ensure that the capital held by the Bank is commensurate with the Bank’s overall risk profile. The ICAAP takes into account effectiveness of Bank’s risk management system in identifying, assessing, measuring, monitoring and managing various risks. ICAAP comprises all of the Bank’s procedures and measures designed to ensure appropriate definition and measurement of risks and appropriate level of internal capital in relation to Bank’s risk profile.

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International Financial Reporting Standards (IFRS): Convergence to IFRS will require significant alterations to financial accounting and reporting processes and systems. 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 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. Banking Ombudsman (BO) Scheme – It cover redressal of grievances against deficiency in banking services viz., deposits, loans, debit/credit cards, remittances (DD/PO/ECS/NEFT/RTGS) etc. BO undertakes the cases where the value of dispute does not exceed `10 lakhs. The complaints can be made in any form including online (email) and the same will be processed without any fee. The complainant is required to take up the matter with the concerned branch for redressal of the grievance and wait for 30 days and if not addressed 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. 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 approach Reviewing Authority (Deputy Governor RBI). Compensation for mental agony, reputation loss etc., will not be considered as per the provisions of the Scheme. Adjusted Net Bank Credit (ANBC) denotes Net Bank Credit 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. 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.

Indian Rupee Symbol: 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. 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 and it is

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considered as a step towards internationalization of Indian Rupee. 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. Rupay is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of banks in India. Reserve Bank permitted to issue RuPay cards which are accepted for payment at all ATMs. The Logo is a coinage which indicates coming together of ‘Rupee’ and ‘Payment’ to announce the launch of a new world-class retail payment system in India. The orange and green arrows indicate a nation on the move and a service that matches its pace. The Indian colors connote that it’s deeply rooted in India. The color blue stands for tranquility and peace which is precisely the sense that people must get from the brand ‘RuPay’. The bold and unique typeface grants solidity and symbolizes a stable entity. Currently the merchant fee is significantly high ranging from 1 to 1.50% on account of inbuilt charges of VISA / Master and Banks. The Rupay system lowers the cost of the transactions for shops and enables them to adopt electronic mode of payments. In a way it reduces the overall transaction costs for the banks, merchants and nation as a whole. The other objective of Rupay is to develop appropriate products to meet the financial inclusion needs and to provide card payment service option to many banks with simplified norms. In the long run, it paves the way to migrate from cash transactions to electronic payments system in the country which will improve the efficiency in the entire eco system. 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/harassment from the superiors. Audit Committee of the Bank reviews the Whistle Blower mechanism at regular intervals. 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 even when it has capacity to honour the said obligations or 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 or 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. It covers all non performing borrowal accounts with aggregate outstanding balance (funded facilities and such non-funded facilities converted into funded facilities) of 25 lakhs & above. The classification of the borrower as Willful defaulter is vested with Committee at Head Office. However, the borrower will be given reasonable time (15 days) for making submission to the committee. Bank is required to submit the details of willful defaulters to RBI and CIBIL. RBI advised all Banks/Financial Institutions not to extend any additional credit facilities to the Wilful Defaulters and they are debarred from floating new ventures for a period of 5 years from the date RBI publication and also liable for criminal proceedings for breach of trust, cheating and wrong certification under IPC.

Right to Information Act 2005 – The act 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

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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 `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 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. Permanent Account Number (PAN): As per section 139 (4A) of Income Tax Act 1961, all individuals whose income exceeds the tax free limit and in case where the person carrying a business, the sales turnover or gross receipts exceeds 5 lakh in a year are required to have PAN and the same is to be quoted in all returns and correspondence with IT authorities. As per the extant guidelines, it is mandatory to furnish PAN number for all transactions viz., purchase/sale of immovable property of `5 lakh and above, purchase/sale of motor vehicles (other than 2 wheeler), security transactions of above `1 lakh, purchase/sale of shares/debentures/bonds of `50000/- & more and bank transactions (cash) of `50000/- & above and payment to hotels exceeding `25000/- at any one time. Shadow Banking is relatively a new concept and it refers to the Non Banking Financial Institutions that perform some banking functions. Shadow banking entities operate outside the regular banking system and yet engage in bank-like activities such as accepting funding with deposit-like characteristics, performing maturity and/or liquidity transformation and using direct or indirect financial leverage. These typically include, pension funds, investment banks, hedge funds, money market funds, finance, leasing and factoring companies, asset management companies etc. Shadow banking institutions are typically intermediaries between investors and borrowers. Shadow banking activities are useful part of the financial system and they channel resources towards specific needs more efficiently on account of increased specialization. These activities are exposed to similar financial risks as banks. Some of these risks can be systemic in nature due to the complexity of shadow banking entities and their cross-jurisdictional reach and their links with the regular banking system. The regulators across the globe are now working in tandem to look into and understand the activities of the shadow banking system and bring them too under regulation so as to possibly prevent another global financial crisis in future. Doorstep Banking: Extending Banking services like pick up of cash, instruments and delivery of cash etc., to Corporate Customers / Government Departments / PSUs / Individual Customers at their place through Employees / Agents is called Doorstep Banking. However, banks are not allowed to extend such services to Individual Customers. 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. Doorstep services should be offered only to KYC compliant customers and the charges should be prominently indicated on brochures. It is a win-win situation for both customers and banks.

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One Person Company (OPC): In order to encourage unorganized proprietorship business entities to enter into organized corporate world, Companies Bill 2012 was passed. With introduction of OPC, a company can be started with one member and it is treated as Private Limited Company. The minimum share capital required is Rupees One Lakh. The promoter can appoint a nominee so that perpetual succession provision is ensured. OPC can be formed in three types viz., Company limited by shares, Company limited by guarantee and Unlimited company. OPCs are exempted from holding Annual General Meeting. Provisions relating to minimum board meeting, quorum is not applicable. In case OPC has more than one director, it shall conduct atleast one board meeting in each half-year and time gap between two meetings should be minimum 90 days. Relaxations and exemptions granted and benefits available will definitely encourage small and mid-size business to carryon business in corporate form.

Banking at Glance No. Major Indicators Number As on 1 No. of Schedule Banks 221 31.03.13 2 No. of Bank Branches (lakh) 1.01 30.09.12 3 No. of ATMs (lakh) 1.39 30.09.13 4 Aggregate Deposits (Lakh Crore) 69.43 31.03.13 5 Bank Credit (Lakh Crore) 54.30 31.03.13 6 Credit Deposit Ratio (%) 78.20 31.03.13 No Macro Rates % 1 Bank Rate (w.e.f 28.01.14) 9.00 2 Cash Reserve Ratio (w.e.f.09.02.13) 4.00 3 Statutory Liquidity Ratio (w.e.f.11.08.13) 23.00 4 Repo Rate (w.e.f.28.01.14) 8.00 5 Reverse Repo Rate (w.e.f 28.01.14) 7.00 6 Marginal Standing Facility (w.e.f.28.01.14) 9.00

No Andhra Bank – Interest Rates % 1 Deposit Rate (1 year to 3 years) w.e.f. 23.10.12 9.00 2 Base Rate (w.e.f. 19.08.2013) 10.25 3 BMPLR (w.e.f. 19.08.2013) 14.50 4 Saving Bank Rate (w.e.f.03.05.11) 4.00

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Andhra Bank – Milestones

Andhra Bank was founded by ardent freedom fighter and a great 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” 2005 Banking Technology Award for use of IT for customer service in Semi-Urban 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 2010

Andhra Bank, Bank of Baroda & Indian Overseas Bank has entered into a tie up for setting up a banking subsidiary in Malaysia “India International Bank (Malaysia) Bhd” and is in the process of commencing business

2011 Best Bank and Financial Institution Awards by CNBC TV18 – “Editorial Board Roll of Honour“ under Mid-sized Banks Category 2012 RSETI Rajahmundry adjudged as “Best RSETIs” in the country 2012 Special Jury Award for “ATM Operations Excellence” by NPCI 2012 Crossed “Two Lakh Crore” Business by 31st December 2012 2013 Introduced Strategic Business Transformation Initiatives – NavShakti 2013 Best R-SETI award to ABIRD, Rajahmundry

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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 – “To become a significant player, providing full range of banking services through innovative customer centric products and to maximize stake holder’s value” Mission Statement – “To work together towards delivering excellent customer service by leveraging on technology and human resources to attain world class performance standards”

Corporate Slogan

NavShakti – Bank has taken up a Strategic Business Transformation Initiative to rejuvenate the Business Process to meet the ever growing demands of the customers effectively and efficiently. Bank has taken aboard M/s McKinsey& Company as Management Consultants and the Project NavShakti was started in the Month of Feb 2013. As part of the Project a thorough Business Re-engineering of the present processes is taken up to enhance the productivity and also deliver value to the customers. New Generation Branches were designed and two pilot Branches have been rolled out at Hyderabad, steps are being taken to implement the same all over India. The New generation Branches are calibrated to give a delightful business experience for customers who visit the Branch. Besides the above SME, Retail Loan factories have been set up to reduce the turnaround time for processing and sanctioning of Loans to customers. Along with these infrastructural changes, staff is being trained in new roles and new marketing systems to increase the market share of the Bank and its products.

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Financial Results March 2012 & 2013 – Highlights (`Crore)

No Business Parameters Mar’12 Mar’13 1 Deposits 105851 123796 2 Advances 84684 100138 3 Total Business (1+2) 190535 223934 4 Composition of Advances a) Corporate (Mid & Large) Advances 46419 51575 b) Agriculture Advances 12458 16451 c) Retail Credit 11301 14328 d) MSME 13132 16863 e) Other Advances 1373 921 5 Non Performing Assets a) Gross NPA 1798 3714 b) % Gross NPA to Advances 2.12 3.71 c) Net NPA 755 2409 d) % Net NPA to Advances 0.91 2.45 6 Profit a) Interest Income 11339 12910 b) Interest Expenses 7579 9153 c) Net Interest Income (a-b) 3760 3757 d) Other Income 890 1047 e) Operating expenses 1804 2037 f) Contribution (d-e) -944 -990 g) Operating Profit (c+f) 2815 2767 h) Provisions 1470 1478 i) Net Profit 1345 1289 7 Dividend (%) 55 50 8 No. of Branches 1712 1867 9 No. of ATMs 1056 1207 No Key Ratios (%) 1 CASA Deposits 26.38 25.65 2 CD Ratio 80.07 80.94 3 Cost of Deposits 7.94 7.87 4 Cost of Funds 6.92 7.00 5 Yield on Advances 12.33 12.02 6 Yield on Investments 7.83 7.97 7 Yield on Funds 9.95 9.88 8 Net Interest Margin (NIM) 3.67 3.21 9 Return on Assets (ROA) 1.19 0.99 10 Cost to Income Ratio 42.21 42.40 11 Standard Assets to Gross Advances 97.88 96.29 12 Provision Coverage Ratio 71.13 49.57 13 Capital to Risk weighted Assets Ratio (CRAR) 13.18 11.76 i) Tier-I 9.02 8.52 ii) Tier-II 4.16 3.24

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Deposit 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 furnished here under: 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 `5,000/- and the minimum period of deposit is 15 days and maximum period is 12 months for FDs/RIP Deposits. The customer is required to specify tenor option while opening the account. In case where the customer does not exercise option, system takes 15 days for FD and 6 months for RI as default tenor. 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 `5000/-, system transfers the balance in to Fixed or Re-investment Deposit with a minimum deposit of `5000/- or multiples thereof. Similarly, whenever the customer presents a cheque in excess of SB balance, system cancels the term deposits (`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. It is meant for Current Deposit Accounts and the minimum balance required is `100000/-. They are entitled to avail Free Cheque Book Facility (including Multi City Cheques), No Folio and Transaction Charges, Any Branch Banking and Instant Funds Transfer, 50% concession in Service Charges for Funds Remittance. Balance in excess of `200000/- can be converted as Term Deposits (in units multiple of `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: a) Salaried staff of any company/organization drawing salaries through our Bank. b) The Average Minimum Balance of `5000/- should be maintained except when the account is in debit balance.

c) No Ledger Folio / Transaction charges. d) Free ATM/Debit Card (for first year). e) Free Credit Card / Demat Account / Internet Banking / Online Trading (conditions apply).

f) Free Remittance up to `25000/- per month.

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g) Free Statement of Account – Once in a month. h) Free issue of Cheque Books (50 leaves in a year). i) Scheme provides for conversion of balance in excess of `10000/- as Term Deposits (units multiples of `5000/-) with Sweep and Reverse Sweep facility as in the case of AB Freedom (Flexi) Deposit Scheme.

j) Similarly, the scheme also provides for Temporary Overdraft facility equivalent to the latest Net salary drawn by the account holder at Base Rate + 7.50%. 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. (Cir. No.351 Ref 27/21 dated 01.02.10)

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: a) Depositor has an option to choose a core installment between `100/- to `100000/- and further he has option to deposit any amount not exceeding 10 times of core installment.

b) Minimum period of deposit is 6 months and maximum period is 60 months. c) No penalty for late payment of installments. d) Interest is calculated on daily products i.e. minimum balance available between 10th and last day of the month.

e) 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 `50/- and maximum of `500/-.

f) Depositor can remit monthly installment at any branch of Andhra bank without any charges.

g) Interest accrued is exempted from Tax Deduction at Source (TDS). h) 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) All staff deposit accounts earns 1% extra interest while they are in service as well as on retirement/resignation. Further, in case of senior citizens (staff) they continue to earn applicable senior citizen deposit rate plus 1% extra. (Cir.no.4 Ref 3/1 dated 05.04.2011) AB Grama Kranthi Savings Account: It is a new scheme with a built-in overdraft facility 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. It is an Entrepreneurial credit scheme for covering the general credit needs of the Bank’s customers in FI villages with a maximum credit limit of `25000/- per household at Base Rate+3.5% without any collateral security. The limit is valid for a period of 3 years and should be reviewed every year. (Cir.no.514 Ref 19/48 dated 22.03.13). AB Basic Savings Bank Deposit Account (ABBAS): As per RBI directions, Banks are required to adopt simplified procedure to open SB accounts without any stipulation on minimum balance. 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

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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. Once the balance in the account exceeds `50000/- or total credits in the account exceeds `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 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. Minimum deposit is `100/- and Maximum amount allowed is `100000/-. The minimum period of deposit is 5 Years. It earns interest as applicable to five year deposit. Declaration is to be obtained from the first depositor that the total deposits under this scheme at various bank branches do not exceed `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) AB Smart Choice (Unfixed Deposit) Scheme: Bank has introduced a new Unfixed Deposit with an objective to extend better interest rate to the coporates, institutions and high networth individuals with a name titled “AB Smart Choice” with effective from 1st January 2014. It is a term deposit account and the minimum period of deposit should be minimum 7 days and maximum 179 days. The minimum amount of deposit should be `1.00 crore and above and no premature cancellation charges if the deposit cancelled after 7 days. No additional interest for staff/retired staff and Senior Citizens under this Scheme. At present the interest rate is 8.25% p.a. (Cir no.390 Ref.No.27/40 dated 31.12.2013 & Cir no. 476 Ref 27/53 dated 28.02.2014) 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 cannot 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) Deposit Schemes Discontinued – Branches are not permitted to accept fresh deposits under AB Excel, AB Super, AB Supreme, AB Jeevan Prakash, AB Jeevan Prakash Plus, Sulabh, Stock Invest, Samkshema, Home Loan, Mediclaim, AB Pattabhi, AB 400, AB Pattabhi Plus, AB Power as the schemes were discontinued. However, the existing deposit accounts under the above schemes will continue till maturity.

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Public Provident Fund Scheme (PPF)-1968

Tenure 15 years. Limit of Subscription

Amount not less than `500/- and not more than `100000/- in a year in one lump sum or in installments not exceeding twelve in a year.

Rate of interest 8.70% p.a. Compounded annually or as prescribed in the Official Gazette published by the GOI from time to time. Interest is paid on funds deposited before 5th of every month.

Mode of holding Any individual on his behalf or on behalf of a minor of whom he is Guardian or HUF or an association of persons or body of individuals. NRI’s cannot open accounts under this scheme.

Tax treatment The entire amount deposited in to PPF during the financial year is treated as deductible Under Sec.80C of ITR Act.

Transferability Yes. Can be transferred inter Bank and intra Bank. Nomination Nomination facility is available. Withdrawal facility

Any time after the expiry of five years starting from the end of the year in which the initial subscription was made. Only one withdrawal is permitted in a year.

Loan facility & Repayment

Permitted with the following limits. Period Shall not exceed After one year 25% of the amount at credit After four years 50% of the amount at credit Repayable within 36 months from the first day of the month following the month in which the loan is sanctioned.

Extension of a/c 5 years at the option of the subscriber. Closure of account After the expiry of 15 years from the end of the year in which the initial subscription was made.

Senior Citizen Savings Scheme (SCSS)-2004

Tenure of the scheme 5 years which can be extended by 3 more years Rate of interest 9.20% per annum Frequency of computing interest Quarterly Taxability Interest is fully taxable Whether TDS is applicable Yes, Tax will be deducted at source Investment to be in multiples of `1000/- Maximum investment limit ` 15 lakh Minimum eligible age for investment

60 years (55 years for VRS optees). However, age limit is not applicable to Defence Service personnel.

Premature withdrawal facility Available after one year of holding but with penalty Transferability feature Not transferable to others

Nomination Available Modes of holding Accounts Can be held both in single or joint holding modes.

Joint holding is allowed but only with spouse Applicability to NRI, PIO and HUFs

Non resident Indians, Persons of Indian Origin and Hindu Undivided Family are not eligible to open an account under the scheme.

Transfer of account Transfer of account from one deposit office to another in case of change of residence is permitted

Bank earns a commission @ `45/- per transaction on PPF and SCSS. (Cir.no.244 Ref 51/18 dated 20.10.2011)

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Insurance Linked Deposit Schemes

Abhaya Savings Bank (ASB) – The scheme is having features of Savings Bank coupled with insurance coverage (Group Janata Personal Accidental Insurance Cover). It is meant for all individual depositors including joint accounts, especially 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. All Joint accountholders are compulsorily covered. Age – 5 to 70 years. Accidental Insurance cover is available to all depositors. `25000/- for death / total disability and `12500/- for partial disability. Premium – `15/-; Insurance year – 1st Sep to 31st Aug. Nomination holds good for deposit balance and the insurance claim. Joint accountholders can specify their nominees separately. (Cir.no. 210 Ref 51/09 dated 17.08.2013) Abhaya Savings Plus (ASB+) – The 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. `100000/- for death / total disability and `25000/- for partial disability. Premium – `36/-; 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 introduced 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 – `1.50 lakh. Partial disability – `50000/-. Premia `70/-; Insurance year – 1st November to 31st October. Separate nomination for insurance claim. Joint accountholders can give separate nominations for the insurance amount. 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 premium rates depend on the age of the insured. 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 `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 Jeevan Abhaya “Plus” – Bank has launched a new scheme on the eve of 90th year of Foundation Day celebrations w.e.f. 01.12.2013. It is meant for individuals whose age is in between 18 to 55 years. The depositors will be covered with life insurance coverage of Rs.2 lakhs (Life and Accidental death) in association with M/s.India First Life Insurance Company Ltd. No medical tests required except for declaration of Good Health. The premium depends on the age of the depositor. The minimum deposit stipulated under this scheme is Rs.1000/- for Rural, Rs.2000/- for Semi-urban; Rs.3000/- for Urban and Rs.5000/- Metro branches. All existing guidelines that are applicable to SB accounts will apply to the new scheme. The insurance year for this scheme is from 1st December to 30th November every year. (Cir.no.353 Ref 51/19 dated 28.11.2013)

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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 1.50 lakh for death/total disability. Insurance year – 21st February to 20th February. Premia – `69/- per person per annum to be collected. (Cir no.462 Ref 51/22 dated 19.02.2013) 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 `100/-. Kid and parent/guardian (aged up to 70 years) both are covered under Accidental Insurance. Accidental insurance coverage is available up to one lakh for the kid and the parent/guardian. Insurance Premia is `54/- per annum (31st of October). The risk is covered by United India Insurance Company. Free Doll. Educational Grant of `5000/- (for age up to 10 years) / `10000 (for age of 11-18 years) as per the age of the child in case of accident risk of the parent.

Insurance Schemes at glance ( ` in lakhs) Deposit Age Comp Accidental

Insurance year Premium ICD 5 to 70 United

India 1.50 21st Feb to 20th

Feb `69

ASB 5 to 70 -do- 0.25 1st Sep to 31st Aug `15 ASB + 5 to 70 -do- 1.00 1st Nov to 31st Oct `36 ABG 5 to 70 -do- 1.50 1st Nov to 31st Oct `70 KidsKhazanaa 1 day to

18 yr United 1.50 1st Nov to 31st Oct `54

ABJ 18 to 55 IFLIC 1.00$ 1st Dec to 30th Nov Depends on age of the depositor ABJ Abhaya Plus 18 to 55 IFLIC 2.00$ 1st Dec to 30th Nov

$ covers both Life/Accidental death

The Insurance premium should be debited to the respective account on the date of opening of the account itself. Claim intimation shall be sent to insurance company within 90 days from the date of accident / death and claims forms duly filled shall be submitted to the Insurance Company within 180 days. 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 Certificate of remittance of premium Police Report 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. The settlement of claim is at the sole discretion of the insurance company. The Bank will act only as a facilitator.

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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. (Cir.no.341 Ref 55/25 dated 19.11.2012)

� Balance Enquiry / Mini Statement. � Cardholders are allowed to withdraw cash up to `25000/- per day. However, cash withdrawal per transaction is limited to `15000/- as the machine can deliver maximum of 40 pieces only.

� The maximum limit allowed for purchase of goods and services is fixed `50000/- per day.

� Credit Card holders having VISA/Master affiliation can avail cash advance facility from any of our ATMs across the country.

� Funds Transfer from one account to another account of the cardholder. � Cardholders can donate funds to various trust schemes of Tirumala Tirupathi Devastanam as per their convenience using E-Hundi option.

� Credit card bill payment (our bank). � Our Bank cardholders can avail Mobile Recharge facility. � Rail Ticket / Air Ticket booking. � mPAY registration for our customers.

SMS Alerts: Bank has launched Mobile Banking Services through “SMS Push alerts” 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 nominal charge of `15/- per quarter plus applicable service charges.

� Savings Bank transactions (Clearing/Transfer/Cash) � CD / ODCC transactions (Clearing/Transfer/Cash) � Transactions on Alternate Delivery Channels (ATM, POS, Mobile and Internet) � RTGS/NEFT/ECS and Credit Card transactions � Cheque Returns / Cheque Book Issue � Term Deposit Due date / overdue reminders for loan accounts � Balance for any transaction at end of the day for Current/ODCC accounts.

However, the customers who do not wish to avail the said facility has option to withdraw from the scheme at any time. A mobile registered customer has an option to enquire Balance Enquiry, Last Five Transactions and Cheque Status Enquiry through “SMS Pull alerts”. However, the service provider (Mobile Company) levies applicable charge. 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. In order to meet the customer expectations, 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. All Savings Bank and Current account

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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 10.09.10) 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:

� Account Balance Enquiry / Account Statement view / Printing / Downloading � Request for Cheque Book / Term Deposit � Online TAX payment (e-tax) / Online IPO – ASBA � Credit Card Bill payment � 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.

� Transfer of funds across the Banks through NEFT is allowed on Internet. The default limit set for retail customers is `100000/- per day. However, branches can recommend for higher limits to Head Office depending on the request of the customers.

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 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 304 Ref 55/19 dated 15.12.09, Cir 263 Ref 55/21 dated 23.10.10 & Cir 119 Ref 55/8 dated 12.07.11) 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 are as under:

� It is also called as 3-in-1 account since it integrates Bank Account, Demat Account and Broking Account of the depositor.

� 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.

� The existing KYC guidelines are to be followed strictly while opening AB e-trade account at the branch.

� This facility is being offered in tie-up arrangements with M/s.Religare Securities Limited (RSL).

� 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.

� RSL sends the Login ID and Password to enable the customer to have access to the website for trading.

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� 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.

� 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.

� 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.

� Brokerage charges levied by RSL is ` 0.05% for intraday transactions and 0.50% for other transactions i.e. delivery.

It enables the bank to improve low cost deposits besides earning fee based income through maintenance charges/transaction charges. (Cir no.70 Ref 51/3 dt.10.06.09) Dematerialization (Demat) signifies conversion of physical form of securities in to electronic form and the converted securities will be credited to customer account with 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. The benefits associated are – Faster settlement cycle, Elimination the risk of bad delivery, No stamp duty, Easy for the banks to lend against shares, Eliminate delays, thefts, interceptions and fake certificates and Online credit of Bonus/Rights/Split shares. Our 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. Submission of application along with photograph, address proof and Bank account details are the prerequisites to open demat account. 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 Actuals as per state laws 2 Annual Membership

charges Individuals `300/- Corporates `750/- No charges for staff accounts.

3 Demat charges `2/- per certificate + mailing charges `20/- in India and `500/- for foreign address

4 Remat Charges `15/- for every 100 securities or part thereof. 5 Transaction Fee 0.04% of market value or minimum of `20/- 6 Pledge –

Creation/closure `50 /- per instruction

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. 70 Ref 51/3 dated 10.06.09)

Personalized Cheque Books: In order to meet the discerning expectations of the customers, Personalized Cheque Book facility is introduced at all important centers across the country and the 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.

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Computer Generated Cash Receipt: The most happening of customer interaction in the bank branches are at the cash counters and customers/public likely to take impulse decisions based on the service experience at these touch points. In order to improve the customer service at cash counters further and to avert avoidable complaints pertaining to cash related issues, all branches are advised to issue computer generated receipt for all customer related cash transactions. These receipts do not require any signature since they are system generated. It is the responsibility of the respective branches to ensure that the Cash Receipt Printers are kept in working condition along with required stationery. However, in the event of absence of cash receipt printers or printers going out of order, for the reasons beyond the control of the branches, branch may issue manual counter-foil/acknowledgement, as an exceptional case. However, such counter-foils are to be countersigned by another officer apart from the signature of the staff receiving such cash. Branches are advised to display prominently near the cash cabin stating that customers are advised to demand system generated cash receipt only and it should also be mentioned that complaints made on pass book with manual entries and cash receipts issued manually will not be entertained by the bank. (Cir.no.208 Ref 55/17 dated 06.09.10 & cir.no.209 Ref 55/17 dated 20.09.10) Tele Banking – Call Center: Bank has launched Tele Banking & Call Center to provide 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 enquiry related services such as Balance Inquiry, Interest Rates, Product features etc., pertains to deposit and advance accounts. 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. 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. Bank is not levying any charges for the said services.

Upset” service: In order to minimize the customer complaints and to match the customer expectations, bank has launched technology embedded service “Upset” proactively wherein customers can send their grievance through SMS direct to HO for immediate resolution. The salient features of the product are: � The aggrieved customer is required to type the word Upset in his/her mobile and forward the same through SMS to 9666606060.

� 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.

� Branch/Office is required to initiate necessary steps to resolve the grievance duly following the extant guidelines and furnish the information through email to [email protected] on the same day.

� 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)

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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 (cir.no.92 Ref 5/1 dated 28.06.11). Description VISA Classic

Master Card VISA Gold

Card Master Card Electronic / VISA Gold & Classic (Against Deposit)

Eligibility: Cards are issued to

Customers/Non Customers and Resident Indians

Non resident Indians also

Income: Salaried Class: Gross Net Others :

`15000/- p.m `8000/- p.m `180000/- p.a

`20000/- p.m `10000/- p.m `240000- p.a

Minimum Deposit: Master Card Electronic: `10000 VISA Gold: `67000 VISA Classic: `33500

Annual Subscription: Annual Subscription for subsequent years is waived in case the usage in the previous year

No Annual subscription in the First Year `18000/-

`23000/-

Master Card Electronic / Classic/Master:`18000/-

Gold: `23000/-

Failure of the above: For main cards For add on cards

`550/- `200/-

`1000/- `400/-

Master Card Electronic `200/- `150/-

(VISA Classic/Gold as applicable to gen. category)

Validity: Globally Valid Cash Advance Charge

3% 3% 2% Accidental Insurance

`2.00 lacs `5.00 lacs Not available for Master Card Electronic

Sanctioning Authority

Branch Manager – For customers with satisfactory track record at least for 6 months. AGM/DGM (Second Line executive at Zonal Office) – For non customers and customers with operations of less than 6 months.

Other conditions: 1. Two recent Passport size colour photographs 2.Residence Proof & Photo Identification Telephone / Gas / Electricity Bill / passport / Driving License etc 3. Proof of Income: a) Salaried Class: Copies of latest salary slip and Form 16/IT Returns b) For Others: Copies of two years IT Returns filed with computation sheets. 4.Copy of PAN Card 5.Rating Sheet in the prescribed format with recommendation

1. Two recent photos 2.Copy of deposit receipt duly marking lien on the face of Deposit Receipt 3. System generated print out of lien marking of deposit.

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Titanium Credit Card: In order to issue hassle free credit cards against Term Deposit with simple documentation process, Bank has launched a new products “Titanium” in the month of July 2013. Under this, cards are issued without insisting on Income proof and Rating sheet to all eligible customers. The salient features of the card are as under: Eligibility Criteria Major, Resident & NRIs Age Limit in years 18-79 Minimum Deposit `10000 Card Limit 75% of the Deposit amount Cash advance 90% of the card limit Add on cards Up to 2 cards-Spouse, children and Parents Free credit period allowed 21 to 50 days on all merchant purchases Validity of the card 3 years Minimum payment on Roll over facility 5 % of the billing amount Accident Insurance coverage `2 lacs on payment of insurance premium of

`85 on each card Lost card Insurance `1,50,000 (Maximum) Reward points

One point on merchant usage of every `100 with a conversion price at `0.30 on each point

Fee & Charges Admission fees Nil Annual subscription on Main and Add-on cards Nil Lost card charges `200 Lost card Replacement charges `200 Hot-listing charges `200 Charge slip request charges `100 Transaction charges at Railways on the amount of charge slip

2.50%

No Surcharge on fuel purchase per day & Surcharge over & above prescribed limit is

`2,000 2.50%

Foreign Currency Markup 3.00% Service Charges i) If MPD Paid in a month 1.50% ii) No payment made or less than the MPD 1.50% Late Payment Fee Nil Cash advance charges

15% p.a. for the cash amount withdrawn, on daily products basis, with a minimum of `50 per transaction

ATM charges on cash advance d) At our Branches/ATMs Nil ii) At other Bank ATMs `25/- Circular no.155 Ref 5/1 dated 17.07.2013

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AB VISA Platinum Credit Card

Eligibility Criteria Major, Resident & NRIs Age Limit in years 21-70 Income Eligibility `3.00 lacs per annum Cards Against lien on Deposit with 25% margin and without insistence of Income Proof and Scoring model

`85,000/- Deposit amount Minimum Card Limit `60,000 Add on cards Up to 2 cards-Spouse, children and Parents Validity of the card 4 years Roll over facility 5 % Validity Global Accident Insurance coverage `10.00 lacs to the Main cardholder and `5.00

lacs to the Add-on Cardholder Baggage Insurance `25,000 (Maximum) Lost card Insurance `1,50,000 (Maximum) Cash Advance Limit 50% Fee & Charges Annual subscription `1000 & `400 for cards against Deposits Annual subscription is waived in the first year and not levied if usage in the previous year is

`30,000 or 18 Transactions in a year Add on cards `300 Lost card charges `300 Lost card Replacement charges `200 Charge slip request charges `100 Transaction charges at Railways on the amount of charge slip

2.50%

No Surcharge on fuel purchase per day & Surcharge over & above prescribed limit is

`2,000 2.50%

Foreign Currency Markup 3.00% Temporary enhancement Charges per occasion `200 Hot listing charges `200 Cash advance charges 2.00% Service Charges If MPD Paid 1.50% If MPD not Paid 2.95% Late Payment Fees Outstanding upto `5,000 `200 Between `5001 to `15,000 `300 Between `15,001 to `25,000 `400 Above `25,001 `600 Transaction fee: Cash withdrawals/balance enquiry from Andhra Bank ATMs/Branches

Nil Cash withdrawals from other Bank ATMs/Branches

`50/- for VISA Cards `70/- for Master Cards

Balance enquiry at other Bank ATMs `30/- per transaction Purchase of Railway Tickets 2.5% on the charge slip amount Lost/Broken/Hot listing charges `200/-

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The borrowers enjoying the credit facility with our branches are eligible for cards with simplified procedure (without submission of any income proof) and the details are as under: Particulars

Borrowers enjoying credit limits `5 to `10 lakh

Borrwers enjoying credit limits > `10 lakh

Card Gold Card Platinum Card Card Limit

`50000/- `60000/- However higher limits are considered on submission of income proof.

Accidental Insurance coverage

`5 lakh for main and add-on cardholders

`10 lakh for main and `5 lakh for add-on

Charges `212/- per annum per card `467/- per annum for

main card and `212/- for add-on

The details of the cards issued are to be noted in the documents. 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 `25 lakhs. The cards will be issued to the Executives / Officers / Employees of the company. No admission fee and the annual subscription fee is `2000/-. The aggregate limits under various cards issued to a company should not exceed 25% of its net worth subject to a maximum of `50 lakhs in total and not exceeding `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. Credit Cards – Highlights (Circular no.102 Ref 05/01 dated 08.07.09)

� Cards are issued to our Customers generally. � Service charges at 2.50%, which is one of lowest in the Industry. � Global validity. � Accidental Insurance coverage to the Main and Add on cardholders. � Free Credit period of 21 to 51 days even under roll over facility. � Cash Advance up to 50% of the Base Limit. � No Annual subscription in the First year and shall be waived in the subsequent years if card used for stipulated minimum amount.

� Highly secured payment for Internet usage through VBV (Verified by VISA) and Msecure (Verified by MASTER).

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Prepaid Cards: In order to provide further value added services to the customers / public, bank has launched two types of prepaid cards viz., Gift Card and International Travel Card on 30.09.2011 and the salient features of the said products are as under (Cir.no.218 Ref 5/2 dated 30.09.2011): Gift Card

� Gift cards are available for denominations starting from `250/- to `50,000/-. All ELBs, VLBs and select Large Branches are allowed to issue Gift cards.

� The Card is valid in India and valid for ONE year from the date of purchase � Cards are Non-Reloadable and not enabled for cash withdrawals � Branch issue cards with a service charge `25/- for the cards value up to `1000/- and `50/- for cards beyond `1000/-

� Wide acceptance in all Master Card affiliated merchants for transactions at POS (Merchants), Online (Internet) and IVR (Mobile/Phone) payments

� Customer will be provided with PIN for POS transactions to prevent misuse. � SMS alerts are sent for all transactions at Free of cost � Locking/Unlocking of card Account is enabled to the cardholder � No charges for Balance enquiry and Mini statement at Andhra Bank ATM � Cardholders can access the card information through Internet login � Lost/Stolen/Damaged Card Replacement at any Branch with charges

International Travel Card � The Travel cards are accepted in all countries except India, Nepal and Bhutan � Travel cards are issued under USD only � Cards are enabled for transactions at POS Merchants. POS and ATM usage require PIN for secured transactions

� Travel cards are available from USD 200 to the maximum eligibility under FEMA guidelines

� Validity period of the card is 2 years from the date of issue � Cards are re-loadable from any select Branch � The Welcome Kit contains Two cards. In case where existing card is misplaced / damaged, the Second card can be Activated after Blocking the Primary card.

� Unique feature of Locking/unlocking the card Account through IVR or through Website self care portal system

� An exclusive Internet login provided in the Website for balance enquiry, viewing transactions etc.

� No charges for Balance enquiry and Mini statement at Andhra Bank ATM � Withdrawal of cash at ATM is permitted in the upcountry at local currency

EMV Cards: Chip technology is an evolution in our payment system to strengthen security and to deter fraudulent transactions. This technology was developed jointly by Europay, MasterCard and Visa Chip cards and named as EMV. These are standard cards embedded with a micro computer chip that store and protect cardholder data. EMV chip technology is becoming the global standard for credit card and debit card payments. The microchip provides an additional level of authenticity for the transaction. EMV-enabled device will communicate with the chip inside the customer’s smart card to determine whether or not the card is authentic. Generally, the terminal will prompt the customer to sign or enter a PIN to validate their identity. This process enhances the authentication of both the card and cardholder, effectively reducing the possibility of accepting a counterfeit card or be held liable for a fraud-related chargeback. As per the recent RBI guidelines, all new Debit/Credit cards issued by banks will allow usage in India only and in case the cardholder wants to carry out international usage, the cards will have EMV chip embedded on the card and will be pin enabled with effective from 1st December 2013. Another important ruling is the liability shift where merchants who have not made the investment in chip-enabled technology will be held financially liable for card-present fraud that could have been prevented with the use of a chip-enabled POS system.

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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.

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. 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 one lakh to five lakh. 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. 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. The maximum reimbursement will be made to the policy holder is 80% of eligible claim. Bank acts as facilitator only. Settlement of the claims is the sole responsibility of M/s.United India Insurance Company (UIIC). The contract is between the insurer (insurance company) and the insured (individual) and not between the Bank and insured. Further UIIC has extended another benefit i.e. Janata Personal Accident Policy of `1.0 lakh at free of cost, to all the policy holders whose age is 45 years & below as on date of remittance of policy premium. (Cir. No.88 Ref 51/4 dated 28.05.12)

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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. Liability Insurance: Retail loans 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. Bank is providing cover to Housing / Vehicle / Education loan borrowers in association with India First Life Insurance Corporation (IFLIC) under Group Mortgage Redemption Assurance. Covering the borrowers under this policy helps the bank in reduction of default risk in case of unfortunate event to the borrower. It is also providing a potential avenue for earning fee-based income to the Bank. The scheme is optional to the borrower and the intending borrower need to submit Consent-cum-Authorization and Simple Health Declaration Form. Features Particulars Eligibility

Entry age should be between 18 to 69 years and the age at maturity should not cross 75 years. Coverage is available for Joint Borrowers. 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.

Maximum Cover

Maximum coverage is available up to `50 crore. However, the policy is covered with the sanctioned limit or the liability as on date, whichever is lower.

Death Benefit

The reducing the death benefit will be the loan outstanding as at monthly loan anniversary immediately preceding the date of death of the life assured based on loan schedule calculated at the inception cover.

Recovery of short fall amount

In case the amount of claim settled by the insurance company falls short of the liability outstanding in the loan account, the short fall should be paid by the joint borrowers / co-obligants / guarantors / legal heirs of the borrower.

Premium

One time Single Premium. The premium will be calculated based on 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 of the Loan

Member will get an option to continue the cover till the end of the term as mentioned in certificate of insurance or member can surrender the cover and get the surrender value.

Termination of cover

The insurance coverage will cease at the earliest of – member attaining age of 75 years or demise of the member or termination / discontinuation of the loan or when the policy is surrendered.

Others I Cir.no.198 Ref 51/08 dated 12.08.2013

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IndiaFirst Life Insurance Company Limited (IFLIC) Bank has entered into Insurance joint venture with Bank of Baroda and Legal & General Group plc with 30%, 44% and 26% stake respectively and offering the following schemes. No Salient Features IndiaFirst Smart Save IndiaFirst Young India

1 Target Group It is a simple structured Unit Linked Plan meant for long term protection and savings.

Customers with young children to impart quality education to them.

2 Entry Age 18 to 60 Years 18 to 55 Years 3 Term

15, 20 and 25 Years. Single Premium the term is 15 Years.

10, 15, 20 and 25 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

premium Higher of {105% (premium paying term x annualized premium) or (10 x annualized premium)}

ii) Single Premium For age < 45 years – 125% of premium and for age >=45 years – 110% of premium

NA

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/-

10 Tax Benefit on Premium invested – Section 80C and Maturity benefits received – Section 10 (10D)

11 Death Benefit The fund value or the sum assured whichever is higher is paid to the family/nominee.

IndiaFirst Secure Save Plan: It is a traditional insurance cum savings plan which enables the customer to build their savings systematically by paying regular premium based on income and sum assured chosen. The minimum age at entry of life insured is 5 years and maximum age is 65 years as on last birthday. However, the minimum age stipulated for policy holder is 18 years, in case where the policy is taken for minors. The minimum plan period is 10 years and maximum 30 years. The investor has choice to choose payment mode Monthly/Half-yearly/Yearly. The plan offers as maturity benefit, basic sum assured along with simple reversionary bonus and terminal bonus declared by the company from time to time, will be paid to the policy holder at the end of the plan term. However, in case of death, the sum assured will be paid along with simple reversionary bonus accumulated till death, to the nominee. Premium paid and benefits are eligible for tax benefits under sec 80C up to ` 1 lakh from taxable income. (Cir.no.412 Ref 51/29 dated 01.03.2011). 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)

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IndiaFirst Money Back Health Insurance Plan: The product is launched on 26th May 2011. It provides both a wide, comprehensive health insurance cover to the family and also investment opportunity to systematically save, earn market returns. The salient features of the plan are as under: (Cir.no.106 Ref 51/05 dated 06.07.11)

No Features IndiaFirst Money Back Health Insurance Plan 1 Target Group Policy holder can opt for the scheme for self, self,

spouse, parents and children (maximum 2) 2

Entry Age & Maximum age at maturity

Primary Life Assured – 18 to 60 years – Max. – 70 years Spouse & Parents – 18 to 65 years – Max. 75 years Children – 90 days to 24 years – Max. 25 years

3 Sum assured Individual – Minimum 1.50 lakh & Max. 5 lakh Family Floater – Minimum 1.50 lakh & Max. 10 lakh

4 Minimum Invest.

i) Regular Premium Age Minimum Maximum Up to 45 years `10000 `33300 46 years 60 years `14200 `47600

ii) Single Premium Up to 45 years `30000 `100000 46 years 60 years `37500 `125000

Note – In case of spouse, children and parents, the policy holder need to pay additional premium as under

Type Minimum Maximum Regular premium `900 `47500 Single premium `9400 `475500

5 Payment options Yearly 6 Fund options Debt, Equity, Balanced, Index Tracker and value Fund. 7 Withdrawals No withdrawal is followed before 5 years.

8 Hospital claim

Minimum 24 hours hospitalization required. 30 days waiting period except in case of accidents. Hospitalization of the insured upto 1% of the annual sum assured with maximum limit of `5000/- per day. ICU/ICCU expenses are covered up to 2% of the annual sum assured or `10000/- per day whichever is less.

9 Maturity Benefit / Death Benefit

The Primary Life Assured will receive the accumulated fund value. In case of death of Primary Life Assured, the amount will be paid to nominee and the policy terminates for all other life assured members. However, in case of death of other assured member, the plan will continue to be in force for remaining members.

10 Tax Benefit on Premium invested – Section 80C and Maturity benefits received – Section 10 (10D)

11 Commission to Bank 10% of premium paid in first year and 1% thereafter in case of Regular Premium accounts and 2% of premium for Single Premium accounts.

12 Third Party Adminis. E-Meditek Services Limited. Abhaya First Wealth Pack: It is a four-in-one product which provides Savings Bank account with life insurance, recurring deposit facility, ULIP equity option and group life term plan with life insurance coverage in case of unfortunate death of the account holder. The first two products are of Andhra Bank and other two products are of IFLIC. The product is available in three denominations viz., Silver (`25000), Gold (`50000) and Platinum (`100000/-). Cir no.359 Ref 51/23 dated 12.01.2012.

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Loan Policy Guidelines The objective of Loan Policy is to ensure balanced growth of credit across various sectors and to avert credit to undesirable sectors. It is aimed at to improve the credit off-take with quality with minimum risk and maximize profits. Further, it enables the bank to continue to maintain thrust to priority sector advances in consonance with Govt. of India / Reserve Bank of India guidelines. The exposure norms as per the existing policy of the Bank are as under: No Category Norms 1 Single Borrower 15% Bank’s capital fund* 2 Single Borrower–Infrastructure 20% Bank’s capital fund 3 Group Borrowers 40% Bank’s capital fund 4 Group – Infrastructure 50% Bank’s capital fund 5 Single Borrower – Oil Companies 25% Bank’s capital fund 6 NBFC Borrower 10% Bank’s capital fund 7 NBFC (IFC) Borrower 15% Bank’s capital fund 8 NBFC (IFC) – Infra 20% Bank’s capital fund 9 NBFC – Asset Finance Company (AFC) 15% Bank’s capital fund 10 NBFC (AFC) – Infrastructure 20% Bank’s capital fund *Bank’s Capital Fund = Tier-I & II Capital as per audited balance sheet of the previous year. Single Borrower threshold limit & Substantial Exposures Limit can be exceeded by Management Committee/Board. (Circular no.108 Ref 26/14 dated 21.06.2013) Maximum Exposure / Prudential limits: (Crores) No Category Maximum prudential limit

Entity Group accounts 1 Individual / Proprietary concern 20 30 2 Partnership 30 40 3 Limited Liability Partnerships 5 10 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 `60 crores by CMD/ED. Non Funded Limits – Maximum Exposure / Prudential norms: No Category Maximum 1 BGs (including Letter of Comfort /

Letter of Undertaking) 3 times of Net Worth of the Bank 2 BGs to Banks / FIIs / Others 10% of Bank’s capital funds (Tier-I capital) 3 Letter of Credit 2 times of Net Worth of the Bank 4 Bills discounted (IDBI/SIDBI) 1% of Net Worth of the Bank 5 Foreign Exchange Commitments Equal to the Net worth of the Bank Substantial Exposure Limits

� Single borrower threshold limit will be `750 Crores.

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� Substantial Exposure Limit – The sum total outstanding of all the borrowal accounts, where the single borrower exposures is in excess of `750 crore, shall not exceed `20000 crore.

The following internal exposure limits are fixed to specific industries/sectors in addition to the above exposure limits.

Industry / Sector Exposure Ceilings Fund Based Non Fund Based

1. Energy 22.00% 10.50% of which Renewable energy 2.00% 2. Real Estate 20.00% 2.00% of which Housing 15.00% - 3. Hospitals 3.00% 1.50% 4. Educational Inst. 2.00% 2.00% 5. Textiles 9.00% 4.00% 6. Petroleum products 10.00% 1.00% 7. NBFC* 10.00% 5.00% 8. Iron & Steel 10.00% 14.00% 9. Construction & Contractors 10.00% 50.00% 10. Transport 11.00% 5.00% 11. Rice Mills 6.00% 2.00% 12. Commercial Real Estate 7.00% 2.00% 13. Diamond, Gems & Jewellery 5.00% 3.00% *Sub-ceiling of 3% for NBFCs dealing in financing against gold collateral

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. 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. Capital Market Exposure: Funded & Non-funded facility to Stock Brokers including its associates/inter connected companies subject to a) 20% of Net Worth of the Bank as per the last audited balance sheet (on solo/consolidated basis) after netting exposure to Loans and advances to Individuals, Loans & advances to 138ttest138ed for meeting promoter’s contribution & Loans to individuals for investment in IPOs/ESOPs. b) For Individuals `20.00 crore, For Partnership firms `30 crore and for Private and Public Sector Companies it is `80 crore and `100 crore respectively subject to 6 times of Net worth of the borrower for Individual, Partnership & Private Ltd. Companies. (Cir.47 Ref 26/9 dated 27.05.11) Exposure ceilings – Exemptions � Loans & Advances against security of bank’s own term deposits and LCs / BGs covered by 100% cash margin.

� Food Credit. � 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.

� Govt. of India Guaranteed accounts where principal & interest are fully guaranteed.

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� 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 No Category Credit Rating Repayment with in

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 (`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 `300 lac and above. However, branches to obtain Credit Investigation Report for all advance accounts irrespective of the credit limits sanctioned. However, Agrl, Weaker and Govt. Sponsored accounts upto a limit of `25 lakh are exempted from the purview of Credit Investigation. (Cir.no. 6 Ref 26/03 dated 07.04.2010) 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 / 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 `100 lakh & above, additional interest of 1% is to be charged for the non-submission period. Credit Rating is required for Small Loans of above `2 Lakh and below `5 Lakh – Fund and Non-Funded (SSI, RT, BE, PSE, RTO); Credit Rating System (CRS) for Fund Based Limits of `5 Lakh & above but less than `50 Lakh; Credit Risk Assessment System (CRAS) for both Fund Based and Non-Fund based Limits of `50 Lakh & above up to `500 lakh; Credit Rating Model for New units without Audited Balance Sheet for Limits of `5 Lakh & above and up to `500 lakh; Credit Risk Rating Model for credit limits of above Rs 500 lakh (fund & non-fund based) is applicable. Risk Rating Model is to be applied for Stand alone Term Loans of `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. 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. CRS is applicable for Rice Mill accounts with limits of above `10 Lakh irrespective of any upper limit. A+& above rated Rice Mills have a concession of 50% of the processing. Interest Rate as per Credit Rating by the sanctioning authority is applicable for advances of above `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. For agriculture segment – Credit rating is required for

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firms/corporate borrowers with above `5 lakh limit and `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. Stock Statement/Book Debts: 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. Penal Interest of 1% for the period of default on working capital outstanding. The minimum working capital limit to accept Book Debts as security is above `5 lakh. Book Debt statement is to be certified by the borrower every month and it should be certified by a Chartered Accountant every quarter. MSOD: All accounts with working capital limit of `100 Lakh & above from the Banking system is required to submit MSOD. MSOD is to be submitted on or before 15th of next month. Penal interest of 1% to be charged in case of accounts with fund based working capital limits of `100 lakhs & above for the period of default. 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.

� Funded working capital limits of above `6.00crore (A & above rated) � “C” rated accounts, with fund based working capital limits of `1.00 crore and above

� “B”(CRS/CRAS)& B++(CRRM) rated accounts, with fund based working capital limits of `2.00 crore and above

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.

� Funded working capital limits of `3.00 cr and above (A and above rated) C”(B+ & B under CRRM) rated accounts, where fund based working capital limits of `1.00 crore and above

� “B”(B+ under CRRM) rated accounts, where fund based working capital limits of `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. Margins & 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

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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: Hypothecation of Crops/Assets financed is only be treated as security for loans up to `50000/- and for loans beyond `50000/- and up to one lakh, branches to obtain co-obligation / third-party guarantee. However, in case of loans above one lakh, 100% collateral security in the form mortgage of land / creation of charge is required. Third party Collateral norms: Borrowers are required to furnish the collateral securities in the form of immovable or movable properties as per the loan policy guidelines of the bank. In the cases where the borrowers are not having sufficient / adequate properties, the properties of third parties who are near relatives, friends etc. are being accepted as collateral security. However, in view of the risks involved in accepting the collaterals from third parties, now the branches are advised to obtain administrative clearance from the next higher sanctioning authority for all loans except loans against Bank Deposits. Third Party means any person other than the borrower, borrower’s spouse, father, mother, son and daughter, partner of the firm or Directors of the Company or Trustees of a Trust. While accepting third party collateral security, a savings account has to be opened in the name of the party depositing title deeds with due KYC compliance. An attested photo should be kept along with RF 255. Branch Managers or authorized officer should visit independently, unaccompanied by the borrowers or their representatives and make their own enquiries about ownership and valuation from the neighbours/office bearers of the resident’s society, if any. The first visit should be along with the borrower and a certificate to this effect is to be kept on record along with the loan document. (Cir.no.231 Ref 26/36 dated 13.10.2011) Unit Inspections & Audits:

No Cash Credit Limits Periodicity 1 Below `50 lakhs Bi-monthly by branch 2 `50 lakhs & above Once in a month by Officer & once in a quarter

by Manager / Stock Audit by Concurrent Auditor 3 `100 to `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 `200 to `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 `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 `50 Lakh & above by the Concurrent Auditor. Short Inspection is applicable to Advances of `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.

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Stock & Receivable Audit – Minimum Cash Credit Limit for conducting audit is `2.00 Crore. Accounts for which conducting “Stock & Receivable Audit” is applicable:

C – Rated Accounts `2 Cr. & above(with min. of 50% fund based limits) B – Rated Accounts `3 Cr. & above(with min. of 50% fund based limits) A – Rated Accounts `5 Cr. & above(with min. of 50% fund based limits) NPA Accounts With balances of `5 Crore & above New/Take-over accounts < 3 years

Where Working Capital Limits enjoyed are `2 Crore & above irrespective of Credit Rating.

To all accounts W.C. Limits of `10 crore & above (fund based and non 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 and review should be done by Zonal Office. (Cir. No.463 ref 26/83 dated 31.3.2009) 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. Review of Accounts:

Parameter Periodicity

of Review Time of review Reviewing Authority

Term Loans up to `5 lakh

Yearly

During III Quarter of the financial year

Branch Manager

Housing Loans Education Loan Deposit Loans TL/DPG above `5 lakh and below `100 lakh

Yearly

During III Quarter of the financial year

Sanctioning Authority

Large Borrowal A/cs of `100 lakh & above

Half Yearly Every 6 months Cir.no.062 Ref 26/11 dated 04.06.2011 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). Working Capital Term Loans for Traders & small units:

� Maximum limit up to which Working Capital Term Loans can be sanctioned to Traders and Small Units is `10 lakhs.

� Permissible repayment period of Working Capital Term Loan to Traders and Small Units is 60 equal monthly installments.

� Periodicity for obtaining Stock-Statements in case of WCTL to Traders and Small Units is once in a quarter.

� Margin on Primary Security in case of WCTL to Traders and Small Units is 10% for limits up to `5 lakhs and for others it is 25%.

� The units are to be inspected once in a Quarter. � Collateral Security is to be obtained minimum of 125% of the value of Limit.

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Credit Committees: In order to expedite sanction of credit proposals, a committee approach is introduced for all loans over and above the branch sanctions. The delegation of lending powers of Branch Heads will continue to exist as per the extant guidelines. Credit Committees constituted at Zonal level and Head Office level will consider credit proposals and all credit related matters in respect of proposals falling under their respective delegated authority in accordance with the respective banks Loan Policy guidelines. It is expected that this will improve the quality of decision making also. Committees at Head Office level – Credit Approval Committee headed by CMD, Credit Committee headed by ED/CGM, Credit Committee headed by GM. Similarly, Zonal level committees are – Zonal Level Credit Committee-I headed by Zonal Manager, Zonal Level Credit Committee-II headed by second level officials at Zonal Offices. The committees are expected to meet once on a fixed day in a week.

Legal Audit: All new/ renewal borrowal accounts with aggregate credit limits of `25 lakh and above are covered under Legal Audit. From limits of `25 lakhs to `100 lakhs empanelled Advocate who has not given legal opinion or Law Officer at Zonal Office. For limits above `100 lakhs law officer at ZO has to conduct the legal audit. 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 Audit, permission from Zonal Office is required, in respect of the borrowal accounts with aggregate credit limits of `50 lakh & above (fund based & non fund based inland and foreign business limits) for release of sanctioned limits. Legal Audit of Title Documents: As per RBI guidelines, the genuineness of title deeds of all accounts with credit exposure of `500 lakhs and above, existing and new accounts, are to be verified for every two years from the date of original sanction. The re-verification should be entrusted to any advocate other than one who has given the original/earlier legal opinion. The charges incurred for the above re-verification including amount payable to advocate shall be recovered from the concerned borrower. However, this can be entrusted to concurrent auditors for the branches subjected to concurrent audit. As the documents to be examined during re-verification, are original documents held by the branch for the purpose of creating mortgage, they should be examined in the Branch premises only that too in the presence of the Manager/Officer of the branch. In no circumstances, the documents should be allowed to go out of the Branch premises or left unattended during verification (Cir no.298 Ref 26/38 dated 18.10.2013 & 328 Ref 11/07 dt.5.11.13) Loan Delivery System – Borrowal accounts with fund based working capital credit limits of `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. Trust Receipt Financing: A Trust Receipt is a bridging loan that provides a buyer with financing to settle goods imported on sight terms. Under a Trust Receipt, the applicant pledges the imported goods in favour of the Bank. This means that the borrower takes possession of the imported goods, but holds them in trust for the Bank. When the goods are sold, he has to use the proceeds of the sale to repay the Bank. As security, the goods title will be vested with the Bank, and the borrower will undertake to hold the documents, the goods and the sale proceeds in trust for the Bank. Trust Receipt usually comes together with Import Letter of Credit or Import Collection Bill Service. 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

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should not be extended to meet the financial commitments of sister concerns. Maximum repayment period for a Corporate Loan is 60 Months.

Disbursement of Term Loan by way of reimbursement to the borrower: It shall be permitted by the sanctioning authority, provided:

� Such reimbursement is within 12 months from the date of purchase / acquisition of the assets.

� It should be supported by satisfactory proof of investment / source of funds supported by Invoice/receipt/voucher followed by auditor’s certificate.

� Such funds should have been remitted through a bank account. External Rating – Interest Rates: With a view to encourage borrowers to get themselves externally rated and to bring more transparency in pricing process, it is decided to introduce spreads based on External ratings of corporate exposures for pricing purposes as below: (Cir no.165 Ref 26/21 dated 25.07.2013)

Spreads applicable to Externally Rated borrower Accounts Rating Linked to Present Base Rate From To Base Rate Spread Interest Base Rate Spread Interest AAA 10.25 Nil 10.25 10.25 0.50 10.75 AA 10.25 0.50 10.75 10.25 1.00 11.25 A 10.25 1.00 11.25 10.25 2.00 12.25 BBB 10.25 2.00 12.25 10.25 3.50 13.75 BB 10.25 3.50 13.75 10.25 4.00 14.25 B 10.25 4.00 14.25 10.25 4.75 15.00 C 10.25 4.75 15.00 10.25 5.75 16.00

Operational guidelines:

� The above spreads are applicable to only those corporate accounts (existing as well as new term loans and working capital facilities) which have a latest external rating by accredited credit rating agencies such as CRISIL, CARE, ICRA etc. For term loans the existing term premia of 0.25% with repayment period of over 3 years and up to 5 years and 0.50% with repayment period of over 5 years will continue.

� The revised interest spreads as applicable to working capital limits at the time of renewal/review shall also be applicable to term loans where both working capital limits and term loan co-exist unless it is specially mentioned otherwise in sanction letters.

� The revised interest rates are applicable to all categories of corporate exposures other than Rice Mills. The interest spreads communicated vide HO Circular No.315, Ref.No.26/41, dated 31.10.2012 continue to be applicable for rice mill borrowers.

� While external rating is used for pricing, internal rating shall continue to be done for the purpose of calculating probability of defaults.

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� Approval for internal credit rating has to be obtained from Credit Rating Cell, IRMD, Head Office, before incorporating the same in the process note in respect of borrowal accounts with limits of Rs.5 cr and above in terms of HO Circular No.98, Ref.No.48/3, Dated 07.06.2012.

Penal interest on overdue 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 till submission of renewal application with full information

Penal interest of 2% 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:

� The account should be standard performing one and allowed to the borrowers enjoying regular sanctioned limits.

� Both adhoc and excess drawals should not be allowed simultaneously. � Branches are allowed to extend excess drawals up to 20% of regular limit or beyond the powers of specified for the branch manager as delegated powers the branch has to obtain prior approval from controlling office.

� Excess drawals should be allowed only to meet the urgent business requirements such as payment of wages or urgent cash purchases, etc.

� The maximum period for which Excess Drawals can be sanctioned is for a period not exceeding 15 days.

� Excess Drawals shall be allowed in a Working Capital account not more than 6 times during the validity period of the working capital limit.

� Branch should obtain a letter from the constituent requesting for the Excess Drawal facility specifying the amount; purpose and the time limit.

� Excess Drawals/Adhoc limits attract 2% additional interest. � No adhoc limits are allowed in case of SOD against Real Estates. – ADHOC Not permitted. However, Excess Drawls can be allowed.

� Excess drawals are to be reported in ADA – X along with monthly sanctions. Temporary Overdraft (TOD) 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 `1000/- per account subject to a total amount of `10,000/-.TODs allowed at the Branch as part of specially launched schemes like AB Super Salary, AB Gram Kranthi etc. 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 5000, MM-II `10000, MM-III `25000, SM IV `100000 and SM V `200000. All TODs allowed are to be reported in ADA-XI every month to ZO.

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Channel Financing is a new approach or system supporting business by a realignment of existing products, delivery process, procedures and organization structures so as to provide a comprehensive solution to the working capital requirements of an entity. It aims at extending working capital finance to authorized suppliers / dealers, whose small businesses are connected to large companies as suppliers/dealers in the business of the entity. Channel Finance provides credit facility to the suppliers of the Corporate for the supplies made is called as ‘Supplier Finance’. Similarly credit facility is provided to the dealers for the goods delivered by the corporate called as ‘Dealer Finance’. Supplier Finance: Bank pays amount directly to the main operative account of the supplier as per advise of the corporate by discounting the bills with maximum of 180 days tenor and the same will be recovered from Corporate on respective due dates. If the supplier is enjoying working capital limits with another banker, the amount shall be credited to the account maintained with the said bank. An undertaking letter is to be obtained from the Corporate to pay the amounts on the due dates of bills discounted by our Bank. Alternatively, wherever feasible, Post dated cheques of the main operative account are to be obtained from the Corporate to enable the Bank to realize the dues on the respective due dates of the bills. Dealer Finance: In case sanction of Bill facility to the Dealer as per referral letter of Corporate and agreed by the dealer(s), a suitable Bill discounting limit is assessed and post dated cheques are obtained from the dealer(s). The particulars of deliveries of the final products to the respective dealers are provided to the Bank with supporting documents such as invoices, bills of exchange and other documents evidencing delivery of goods to the dealers. The payment is made by the Bank to the credit of main operative account of the Corporate and the same will be recovered from the dealers on the respective due dates of the bills. If the Corporate is enjoying working capital limits with another banker, the amount shall be credited to the account maintained with the said bank.

Type Supplier Finance / Dealer Finance

Eligibility Criteria

Sponsoring Corporate can be a Manufacturing unit, Wholesale dealer of goods, Distributor of Goods or Provider of services, approved by Head Office with A and above rating under CRS/CRAS and B++ under CRRM. In case of external rating it should be minimum A2 rating (CRISIL or equilant). Corporate / Supplier in existence for minimum 3 years with good track record.

Assessment / Loan / Margin

Based on the quantum of supply / sales for the last 12 months and the period of credit terms between supplier and the Corporate or 20% of total amount of transactions projected between corporate and Supplier, whichever is less. Minimum loan `25 lakh and maximum `500 lakh with 10% margin.

Tenor Maximum 180 days Security

Primary – DA Bills drawn by the suppliers duly accepted by the corporate. Collateral – 25% of the limit in the form of semi urban / urban property or liquid securities.

Interest Rate Up to 45 days – Base Rate + 0.50% > 45 & up to 90 days – Base Rate + 1.75% > 90&up to 180 days – Base Rate + 2.75%

Others The finance made would not be included for MPBF calculations All other loan policy guidelines are applicable

Cir.no.271 Ref 26/45 dated 14.11.2011

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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. Software Exports – Export of software is undertaken in physical form (software prepared on magnetic tapes and paper media) as well as in non-physical form (direct transmission abroad through dedicated earth stations/satellite links). The exporter is required to submit SOFTEX forms in triplicate to the officials of Department of Electronics (DOE), Government of India within 30 days from the date of invoice for the purpose of valuation. After certifying the copies, they forward the original copy directly to the nearest office of the Exchange Control Department of Reserve Bank the day it is received or the next day and return the duplicate to the exporter. The triplicate will be retained by the Department of Electronics for their record. Within 21 days from the date of certification of the SOFTEX form, the exporter should submit the duplicate copy together with a copy of each of the supporting documents to the authorized dealer for negotiation/collection. After the documents have been negotiated/sent for collection, authorized dealers should report the transaction to Reserve Bank in a fortnightly statement in form ENC under the cover of appropriate R Return. The full value of the software exported as declared on the SOFTEX form or as certified by the officials concerned of Government of India, whichever higher should be realized on due date of payment or within 360 days from the date of invoice whichever is earlier. Poultry Finance: Bank is extending term loans and cash credit for establishment / expansion of existing poultry units. All the birds need to be insured. Of late, insurance companies are not insuring the poultry/EMU birds especially to cover the protection against the diseases, being the important terms of our sanction. To obviate this and to have risk mitigation, Bank is insisting collateral of 150% in lieu of poultry birds insurance. Where the borrowers are unable to provide collateral as above, branch should create a Risk Mitigation Fund and the borrower need to contribute one rupee per bird per annum and kept in a Recurring Deposit for 3 years under lien to the Bank. On maturity, the proceeds should be kept as term deposit for 5 years and the same has to be used for meeting the emergencies like outbreak of diseases to protect the interest of the borrower as well as Bank. (Cir.no.288 Ref 19/37 dated 08.10.2013) Contact Point Verification: In order to help the branches in strengthening the due diligence process while entertaining retail credit proposals, bank has appointed outsourcing agencies for contact point verification. These agencies undertake to verify the authenticity of the address and the documents submitted by the prospective borrowers. However, highly placed Government officials / institutions / organizations, longstanding customers with above 5 years satisfactory track record, persons having salary accounts with our bank for the last 2 years, existing borrowers enjoying credit facilities with the bank, practicing professionals like Doctors, Chartered Accountants, Cost Accountants, Company Secretaries; landlords of our Bank Premises etc., are exempted Contact Point Verification Process. Nevertheless, branch managers will have to conduct their usual due diligence while processing loan applications. (Cir no. 424 Ref 53/10 dated 30.03.2010 & Cir no 449 Ref 53/28 dated 31.03.2012) Instant Credit of Outstation/Local Cheques: The facility of instant credit facility is extended up to `15000/- to all individual account holders maintaining Savings Bank/ Cash Credit, including all insurance linked accounts provided the account is properly introduced and maintained satisfactorily for a period not less than 1 year. In case of outstation cheques, branches are to levy normal collection charges only. With regard to local cheques, service charge at flat rate of `5/- per cheque should be levied. In the event of dishonor of the cheque, interest at normal rate should be levied for the period the bank is out of funds. (cir 431 Ref 34/02 dated 31.12.2003)

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Collateral Security Norms – Agriculture (cir no.31 Ref 19/10 dated 19.04.13) Category Guideline For loans up to and inclusive of `50,000/-

Hypothecation of crops/assets to be financed without insisting for any other security /guarantee

For loans above `50,000 and up to and inclusive of `1,00,000/-

In addition to hypothecation of crop/assets, co-obligation / third party guarantee has to be obtained.

For limits above `1,00,000 or aggregate commitment per borrower up to `1,50,000/-

No collateral security is required for aggregate limits up to `1,50,000/- in case of existing farmers with prompt repayment track record for the past 3 years. However, third party guarantee besides hypothecation of crops / assets has to be obtained.

For limits above `1,50,000 or aggregate commitment per borrower up to `2,00,000

No collateral security is required for aggregate limits up to `2,00,000/- in case of existing farmers with prompt repayment track record for the past 5 years. However, third party guarantee besides hypothecation of crops /assets has to be obtained.

In case of New farmers /LEC holders : Existing guidelines will continue i.e., Loans up to `1,00,000 on Hypothecation of crop/assets and Collateral security equivalent to 100% of the loan amount for aggregate limits above `1,00,000. In cases where the aggregate sanctioned limit exceeds the above prescribed ceilings, Collateral Security equivalent to 100% of the loan amount shall be obtained. No collateral security or third party guarantee is insisted for SME loans up to Ten lakhs and for Tiny Sector up to Twenty five lakhs based on the good track record and financial position of the borrowing unit. 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 `5 lacs, Above `5 lacs should be valued by RDO and countersigned by Manager. In case of vacant sites up to `25,000 Branch Manager is empowered to undertake valuation. Properties of 50 crore and above, the valuation is to be done by minimum two independent valuers (chartered engineers) and the lower of the two valuations shall be taken into consideration. If the appreciation or depreciation in the value of the security is more than 25% per annum, the valuer may be advised to substantiate the reasons and branch and ZO should record the reasons. The valuation report should bear additional details such as longitude and latitude of the property, distress value of the property along with market value, address of the property with photo, particulars of electricity bill payments and other taxes paid on property as proof of ownership, nearest landmark, deviations in construction, if any. Revaluation of properties is not required in the case of NPA accounts where 100% provision is made. Wherever the value of the property is more than 10 crore at the time of first valuation, it should be revalued by second valuer. In case the difference of valuation is not more than 15%, the average value is to be considered. Where it is more than 15%, then the third valuer shall be appointed and the sanctioning authority shall take appropriate decision. (Cir no 189 Ref 26/23 dated 01.08.2013; 066 Ref 26/14 dated 08.06.2009 & 317 Ref 26/52 dated 14.12.2011) Prompt repayment track record means farmer repaying the loan / installment of loan within 3 months from the due date consistently for 3/5 years. Reschedulement /Rephasement of loans due to natural calamity will not be treated as an irregularity in repayment of loan. The installment of the restructured loans should have been paid within 3 months of the due date.

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Agriculture - Loan Products Kisan Credit Card (KCC): The objective of the scheme is to provide adequate and timely credit support to the farmers under single window for their short term and long term credit requirements. The short term loans covers crop loans, post harvest expenses, produce marketing loans and consumption loans. Investment credit requirements for agriculture and allied activities like pump sets, sprayers, dairy animals etc are covered under long term credit. All farmers, tenant farmers, share croppers and SHGs and Joint Liability Groups with the above categories are eligible to avail credit facilities under KCC. The short term component of KCC limit is in the nature of revolving cash credit facility and the farmer allowed to draw using cheque book, ATM/Debit Card, Mobile based transfers, Business Correspondents and Point of Sale Terminals. The credit limits under this scheme may be fixed for first year – scale of finance plus 10% of limit towards post harvest and consumption requirements plus 20% of limit for repairs/maintenance of farm assets, crop insurance etc. The limit will be fixed for successive years at first year limit plus 10% increase every year towards cost escalation. Maximum Permissible Limit will be arrived taking into crop loan needs for the 5th year plus the estimated long term loan. The validity period of the card is 5 years subject to annual review. However, branches are advised to obtain fresh letter from the borrower for every 3 years. The account need not come to Zero or Credit balance. The account is said to have been repaid if the credits are equal to original principal amount, interest and other charges during the season, within a period of one year from the date of first drawal of limit in Kharif or Rabi. The KCC holders are eligible to avail Interest Subvention/Prompt Repayment Incentive as per the guidelines in force. The collateral security norms are as under:

Credit Limit Collateral requirement Up to `100000/- No collateral Sugar cane – Tie-up

No collateral up to a limit of `3 lakh to owner cultivators. However, co-obligation of equal worth is required

Tobacco – Tie-up No collateral up to a limit of `10 lakh subject to `2 lakh per barn for maximum 5 barns

For all other loans > `100000/- Collateral equivalent to 100% of loan amount

There should be no processing fee up to a card limit of `3 lakh. Branches are advised to issue Rupay Kisan Card to all the KCC holders where ATMs are already been installed. Accidental insurance coverage is available up to `1.50 lakh to the farmer and the premium payable is 69/- per year per head. (Cir.no.209 Ref 19/29 dated 17.08.2013)

Kisan Chakra: Under the scheme, Vehicle loans are given to farmers for supporting transport facilities. Two-wheeler loans up to `75000 and four-wheeler loans up to `5 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. For Two wheeler - 85% of onroad price of vehicle is sanctioned to small and marginal farmers where as 75% is sanctioned to other farmers. In case of four wheeler 75% of onroad price of vehicle is sanctioned. The loan is repayable in 5 years in monthly/bi-monthly/quarterly/half-yearly/yearly as per option exercised by the borrower. During campaign period, the interest rate is Base Rate + 0.50% for 4 wheeler and it is Base Rate + 1% for Two Wheeler loans. However, loans repayable beyond 36 months attracts applicable Transfer Premium (TP) (Cir.no.546 Ref 19/41 dated 05.03.2004 & Cir.no.25 Ref 19/07 dated 16.04.2013)

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Gold Loans (Agriculture) - Branches are allowed to extend gold loan facility to the farmers under two types and the salient features are furnished here below: Particulars With Interest Subvention Without Interest

Subvention Target group Agriculturist Agriculturist Purpose Short term crop production

expenses All expenses relate to agriculture and allied activities (poultry / dairy / minor irrigation etc)

Maximum loan `3 lakh (including Kisan Credit Card)

No Cap on loan Documents needed Proof of Land Holding Declaration Assessment of loan Based on scale of finance Declaration Rate of Interest 7% or rate decided by RBI Base Rate + 1.75% Appraising charges Up to 2 lakh loan - 1%; Above 2 lakh – 0.50% Repayment Demand Loan - Repayment should be fixed based on the

income generation coinciding with harvest and the marketing time, total period not exceeding 12 months. Term Loan - Repayment period to be fixed 3-5 years in annual installments coinciding with the harvest and marketing season/generation of income from the activity.

Incentive for prompt repayment

Available Not available Loan eligibility will be computed at the rate per gram as decided by bank (or) 75% of market value of Gold as stated by the appraiser whichever is lower. Simple application cum letter of pledge with provision for declaration of the applicant on the purpose of the loan, Particulars of Land, survey number, extent of lands, nature of crops etc may be obtained and recorded in the application. Irrespective of the purposes, for loan amount up to `1.00 lakh documentary proof need not be insisted as the farmers avail the facility for emergent purpose only. However, it is the responsibility of the branches to ensure end use. For loan amount above `1.00 lakh, proof of activity/purpose may be insisted. (Cir no 228 Ref 19/31 dated 26.08.13 & cir no. 428 Ref 19/53 dated 25.01.14). 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 65% of average market price or `50 lakh whichever is lower. Bank entered into an agreement with NCMSL (National Collateral Management Service Ltd) for extending produce loans up to `10 Lakh per farmer 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 `2 lakh can be sanctioned without collateral security, however, branch should take guarantee of two persons of sufficient worth. 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 `2 lakh – Base Rate and loans above `2 lakh and up to `10 lakh – Base Rate + 0.50% (Cir.no.105 Ref 19/21 dated 20.06.2013)

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Kisan Bandhu (Finance to Tractors): Bank entered MOUs with all leading tractor manufacturers for financing to Tractors. The borrower should have 3 acres of wet/double cropped land or 6 acres of dry/single cropped land. No collateral security is to be insisted for loans up to `3.5 lakh. 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 – Base Rate + 2 + Term Premia. 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 for the loans up to `1 lakh. Finance to Horticulture: National Horticulture Board (NHB) is providing 20% of unit cost as subsidy subject to maximum of `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. 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 `7.5 lakhs subject to scale of finance as per land holdings of each member of the group and not exceeding `50000/- per member. No collateral security up to `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 `1 lakh and the maximum subsidy available is `25000/-. 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 acres in case of irrigated land and 5 acres in case of dry land. Banks can extend maximum credit facility for crop production to each member is `25000/- against group guarantee of the members of the group. Kisan Vivek – Finance to Agri Clinics/Agri Business Centers (ACABC): Agri Clinics are envisaged to provide expert advice and services to farmers on various technologies including soil health, cropping practices, plant protection, crop insurance, post harvest technology and clinical services for animals, feed and fodder management, prices of various crops in the market etc. which would enhance productivity of crops/animals and ensure increased income to farmers. Agri Business Centres are commercial units of agri ventures established by trained agriculture professionals. Such ventures may include maintenance and custom hiring of farm equipment, sale of inputs and other services in agriculture and allied areas, including post harvest management and market linkages for income generation and entrepreneurship development. The above schemes are open to Graduates / Diploma / Post Graduate Diploma in agriculture and allied subjects; Graduates / Post Graduation in Biological Sciences; Degree courses recognized by UGC having more than 60 percent of the course content in Agriculture and allied subjects; Diploma/Post-graduate Diploma courses with more than 60 percent of course content

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in Agriculture and allied subjects, after B.Sc. with Biological Sciences; Plus two (Inter) Agriculture related courses with at least 55% marks. Project cost ceilings `20 lakh for individuals; `25 lakh in case of extremely successful candidate and `100 lakh for a group project (minimum five individuals). No margin is required for loans up to `5 lakh and 10% margin is required for loans beyond `5 lakh. No collateral is required for loans up to `5 lakh. The repayment period will be in the range of 5 to 10 years (inclusive gestation period). The borrowers are eligible for 36% composite subsidy which will be back-ended with 3 years lock-in period. However, it is 44% for Women/SC/ST and candidates from NE and Hilly States. NABARD provides 100% refinance. (Cir.no.197 Ref 19/15 dated 10.09.11) 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 households. The limit should not exceed 20% of eligible production credit and/or 20% of annual income of the applicant from know sources or `25000 whichever 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 `25000. Entire credit outstanding under ABRCC shall be treated as Indirect Finance to agriculture. 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 `2.25 crore in case of farmers & agriculture graduates and with regard to others the eligible subsidy is 15% of unit cost subject to maximum of `1.35 crore. Subsidy of 33.33% in case of Women, SC, ST, SHG, Co-operative societies and projects located in North Eastern states is 33.33% of unit cost with a maximum of `3.33 crore. For Godowns up to 1000 tonnes capacity – Project cost as appraised by financing Bank or actual cost or `3500/- per MT of storage capacity whichever is lower. For Godowns exceeding 1000 MT capacity – Project cost as appraised by bank or actual cost or `3000/- per MT of storage capacity, whichever is low. For NE region/hilly areas, normative cost will be `4000/-per MT or as appraised by Bank/financial institution, whichever is lower irrespective of Godown capacity. The rate of interest for units up to 10000 MT is Base Rate + 1.25 + TP and in case of other units (> 1000 MT units), the interest rate is Base Rate + 2.50 + TP. 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 and 10% where tie-up with FCI/CWC/SWC is available. The loan is repayable within 7 years with maximum gestation period of 2 years. NABARD reimbursing 1.50% interest rebate to the borrowers who repay the loans as per schedule based on the bank certificate (Circular no.122 Ref 19/23 dated 29.06.2013) 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

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for the existing crop loan borrowers is 50% of Pattabhi Agri Card sanctioned limit subject to a maximum `50,000/- (or) to the extent of debt whichever is lower. The maximum limit allowed to new borrowers is `25000/- (or) to the extent of debt whichever 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 Base Rate + 2.50% + TP. 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 whichever is earlier. No collateral security is needed for the aggregate limit of `100000/- and if it exceeds, branch to obtain collateral security with value equivalent to bank loan shall be offered. New Schemes (Cir.no.375 Ref 19/38 dated 10.12.2012) Purchase of Land: The scheme aims at providing term loan to small/marginal farmers including share croppers/tenant cultivators to purchase agricultural land as well as fallow/wasteland to develop and cultivate it with a view to increase production/productivity. The maximum loan that can be sanctioned is `10 lakhs subject to last 5 years average registration value available with registrar/Sub registrar of the area (or) cost of land as per sale agreement whichever is less + stamp duty and registration charges. Borrower has to bring 20% as margin. The security of the loan should be mortgage of land to be purchased as well as Hypothecation of existing and future crops. The interest rate should be Base Rate. The loan is repayable in 7-15 years in half yearly/yearly installments including a maximum moratorium of 24 months depending on the crops grown and income generated. Estate Purchase Loans: To purchase estates growing traditional plantation crops viz. coffee, tea, rubber and cardamom, cashew, pepper, coconut and other perennial orchard crops. In addition to the above, purchase of existing poultry units, Fish tanks and Horticultural plantations can be considered under the scheme. The purchaser should have yielding estates and should be in a position to rejuvenate the Estate proposed to be purchased. The intending borrowers should have satisfactory past dealings with the Bank. The purchaser should be experienced in the activity; however new entrants who are financially sound and capable of bringing in margin and service the debt can also be considered. Maximum size of the estate to be financed should not exceed Ac.15.00. The quantum of loan shall be based on the lowest of (i) Market value (ii) Guidance value/Circle rate fixed by the State or (iii) purchase consideration, after retaining the necessary margin. Borrower need to bring 50% margin, however, in deserving cases it can be relaxed up to 25%. Since the estate to be purchased shall be the primary security, collateral security of minimum 100% of loan amount to be obtained. Rate of interest is as applicable to agriculture term loans. The loan should normally be repayable within 7 to 9 years. However, depending on the status of the Estate and rejuvenation period required, it may be extended up to 20 years. Kisan All Purpose Term Loan is introduced to create a hassle free single term loan limit to Individual farmers, Group of farmers, SHGs/JLGs engaged in agriculture and allied activities for all term loan requirements like Farm Mechanization, Land Development, Minor Irrigation, Water Conservation, Horticulture etc. It shall be single transaction Term loan limit Loan repayable within 9 years. The purposes for which the limit is granted shall not be a part of the Kisan Credit Card limit and it shall be a separate Single transaction account. However development projects with a long gestation period more than 3-4 years may not be considered in view of the specific tenor of this credit product. The quantum of loan shall be subject to 5 times of Annual income of the farmer including allied activities or 50% of the value of land

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mortgaged whichever is lower, with a maximum of `20 Lakhs. The margin required for Small/Marginal farmers is 15% and for other farmers is 25%. Rate of interest is as applicable to agriculture term loans. The loan shall be repayable within 9 years. Kisan Tatkal – An instant credit for farming community to meet the emergency requirements for Agriculture and Domestic purposes for tiding over temporary difficulties. Individual farmers/joint borrowers (not exceeding 4 farmers) who are existing Kisan Credit Card (KCC) holders having satisfactory track record of at least two years are eligible for the loan. It shall be single transaction Term loan limit Loan repayable within 3-5 years. The minimum loan is 1000 and maximum loan `50000/- subject to ceiling at 50% of KCC limit or 25% of annual income. No additional securities to be obtained. The loan shall be repayable in 3-5 years in half yearly/annual installments. Rate of interest is as applicable to Kisan Credit Cards. Financing solar Pump set – Under this scheme loan will be granted for installation of solar water pumping system. The farmers’ land should have adequate source of water. In case any Public/Government source is being used, water right certificate from the concerned authority should be produced. In case of wells they should have sufficient recouping capacity to irrigate area proposed to be brought under irrigation. The borrower should own an economic land holding with a minimum of 10 acres. However, in case where the farmer is able to sell surplus water, relaxation may be given. The loan amount shall be 75% of the cost of the equipment. These are eligible for subsidy, which may be treated as Margin Money while disbursing the loans. Hypothecation of equipments and mortgage of land is the security. The interest rate shall be Base rate + 0.75 + TP. The loan should be repaid within 5 to 7 years by annual installments. Solar Water Heaters/Solar Home Lighting – Small and marginal farmers Share’ croppers/tenant farmers and agri-Entrepreneurs are eligible to avail loans to purchase Solar Water heaters up to the cost of 75-85% of the unit. The interest rate shall be Base rate + 0.75 + TP and repayable in 3 to 5 years by annual instalments. 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. 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. 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)

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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 – Take up issues raised by member banks or State Government authorities. Liaison with the state government authorities in the matters relating to the implementation of Lead Bank Scheme/Government sponsored schemes; Analyze the deposits and advances of banks and review the credit deployment position for improving it wherever, it is unsatisfactory; Consolidate all the District Credit Plans and prepare State Credit Plan, launch and monitor the progress of its implementation; Review the progress made under various Government sponsored programmes of poverty alleviation through Lead Dist. Managers; Maintains liaison with Government departments on behalf of Banks in the State and represent problems of the member Banks to the Govt. 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) 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 `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.

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Retail Loans

Housing Loans Eligibility Individual either singly or jointly. Joint application from same

family – Spouse/father/brother etc.

Purpose

Construction or Purchase of House/Flat/Plot. Purchase of open plot is to be sanctioned in urban and metro areas only that too approved residential lay-outs. Maximum loan can be allowed 50% cost of the plot or `25 lakh whichever lower. Construction is to be completed within 12 months from the date of loan.

Age of the Borrower Minimum 21 Years & Maximum age limit 65 Years. Building age Residual life of the asset certified by approved engineer should

be atleast 10 years over and above the repayment tenor.

Loan Amount

Salaried – Maximum amount of EMI that can be permitted for the proposed loan is to be taken as 50% of net salary. While arriving net salary, IT deduction, VPF and any other temporary deductions may be added back and exclude non-regular income like bonus, arrears etc. Non-salaried – 65% of monthly average income of preceding 3 years as reflected in IT returns.

Maximum Loan Rural - `25 Lakh, Semi Urban - `75 Lakh, Urban - `150 Lakh and Metro - `250 Lakh

Interest Rate i)Rated accounts*

Limit LTV 75% or Lower LTV > 75% 10 lakh to 30 lakh Base Rate Base Rate + 0.15 Above 30 lakh Base Rate + 0.25 Base Rate + 0.40

ii)Unrated accounts & Below `10 lakh accounts

Period Up to 25 lakh >25 to 30 lakh > 30 lakh <= 5 Years B.R + 0.75 B.R + 1.00 B.R + 1.75 > 5-10 Years B.R + 1.00 B.R + 1.25 B.R + 2.00 > 10 Years B.R + 1.25 B.R + 1.50 B.R + 2.25

Repayment Maximum 30 Years Gestation period

Maximum gestation period is 30 months from the date of release of first installment or immediately after taking possession.

Repairs/Renovation `2 & `8 lakh for houses aged up to 5 years & above 5 years respectively. Interest Rate – Base Rate + 1% Security Mortgage of House/Flat/Plot Guaran/Co oblig. Co-ob/Satisfactory third party guarantee may be stipulated. Processing Charges 0.50% of loan amount subject to maximum of `10000/-.

However, at present, Bank is not levying processing charges. Administrative Charges

Up to 10 Lac `100, Above 10 L& upto15 L- `150/- Above 15 Lacs `250/- Per quarter.

Pre-payment charges

2% flat on pre-paid amount, where the repayment is fixed beyond 36 months. However, charges may be waived, in case the payment is from own savings / windfall gains.

* Borrower is required to get a minimum credit score of 60 out of 100. Cir.no.261 Ref 53/23 dated 27.09.2012

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Vehicle Loans Eligibility Any individual having minimum gross Income of `1.0 Lac p.a for 4 W,

`60000/- p.a for 2W & `40000/- p.a for battery operated e-bikes.

Loan amount

Eligible loan amount is to be worked out based repayment capacity. For 4 wheeler – the maximum permissible EMI should not be more than 60% net salary in case of employees and 70% in case of other than salaried class. In case of second sale, the vehicle should not be more than 3 years old and 60% of garage value or `5 lakh whichever is lower. For 2/4 wheelers – 85% of Road Price (includes invoice price, Registration, Life Tax, Insurance & accessories) for salaried class/SME/Corporate borrowers with credit rating “B” and 80% for other borrowers. However the upper ceiling is `1.5 lakh.

Security Hypothecation of vehicle purchased Guarantee Good third party guarantee acceptable to the Bank. Net Pay 40% after proposed installment Repayment Monthly/Quarterly/Half-yearly/Annual – Maximum period is 7 years for

new vehicles and 5 years for second hand vehicles. Interest

4 W- BR+3.25%. For loans repayable beyond 3 Yrs plus TP. 2 W – BR+4.25%. For loans repayable beyond 3 Yrs plus TP.

Proc. Fee 1% of loan maximum of `1000/-. However, at present, processing charges fully waived for accounts directly mobilized by Branches, where facilitation charges are not payable to car dealers.

Pre-payment charges

2 % flat on pre-paid amount, where the repayment is fixed beyond 36 months. However, charges may be waived, in case the payment is from own savings / windfall gains.

Special Campaign (Cir no. 289 Ref 53/17 dated 09.10.2013) Interest Rate Interest Rate for car loans – BR+o.50% and for Two Wheeler – BR+1% Term Premia & Processing fee

Waived

Facilitation charges

Not exceeding 1% of the loan sanctioned and disbursed to be paid to car dealers in respect of proposals which are sourced by the dealer to the Bank.

Others Branch Managers can continue to spend `500/- for each car loan disbursed to entreat the borrowers with refreshments as a friendly gesture from the Bank.

Car Loans to Corporates/Firms: Bank introduced 4 wheeler loans to corporate clients/firms in the month of March 2012. The guidelines are as under: Parameter Organizations availing

credit limits with us Organizations having operational accounts only

Satisfactory conduct One Year Two years Income Should be Profit making one Minimum 2 lakh profit p.a. Exposure ceilings Within 6 times of networth Within 6 times of networth Maximum Loan `50 lakh subject to 3 times

of net profit `25 lakh subject to 2 times of net profit

Cir. No. 436 Ref 53/24 dated 24.03.2012

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Educational Loans (Students 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 `10.00 Lac (Max.2 Loans) Margin Up to `4 L Above `4 Lac

Nil 5 %

Repayment

For Higher studies – The maximum repayment period can be allowed up to 10 years for loans up to `7.5 lakh and 15 years for loans beyond `7.5 lakh. In case of vocational courses it is 2 years for loans up to `50000/-; 2 to 5 years for loans above `50000/- & up to one lakh and 3 to 7 years for loans above one lakh.

Gestation period 1 Year after completion of course or 6 Months after getting job whichever is earlier.

Security / Guarantee Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5 Lac- Satisfactory third party guarantees. Above `7.5 Lac – Collateral security of suitable value & Co obligation of parents.

Rate of Interest

Up to 4 Lakh – Base Rate + 2.75% 4 Lakh to 7.5 lakh – Base Rate + 3.75%. However, the interest rate will be Base Rate + 2.75% where the loan is backed by collateral security. Above 7.5 lakh – Base Rate + 1.50% Simple interest during course & gestation period

Exemptions Processing/Administrative/Upfront fee/Pre-payment Charges

Educational Loans (Abroad studies) Eligibility Secured admission in overseas institution Age Criteria 17-35 yrs Course Graduation and above Loan Amount Need based genuine expenditure related to the course Maximum Loan `20 Lac Margin Up to `4 Lac Above `4 Lac

Nil 15% Repayment

The maximum repayment period can be allowed up to 10 years for loans up to `7.5 lakh and 15 years for loans beyond `7.5 lakh.

Gestation period 1 Year after completion of course or 6 Months after getting job whichever is earlier.

Security / Guarantee Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5 Lac- Satisfactory third party guarantees. Above `7.5 Lac – Collateral security of suitable value & Co obligation of parents

Rate of Interest

Up to 4 Lakh – Base Rate + 2.75% 4 Lakh to 7.5 lakh – Base Rate + 3.75%. However, the interest rate will be Base Rate + 2.75% where the loan is backed by collateral security Above 7.5 lakh – Base Rate + 1.50% Simple interest during course & gestation period

Exemptions Processing /Administrative/ Upfront fee/ Pre-payment Charges

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The education loan borrowers (Inland and Abroad studies) are entitled to avail interest concession @ 0.50% for the students who secure 90% and above marks in 10th or 10+2 qualifying exam for graduation courses and in case of PG courses the student should secure 80% and above in qualifying degree exam. For female students, a concession of 0.50% shall continue to be allowed. However, the effective rate of interest at any point of time after all concessions should not be below the prevailing Base Rate. (Cir no. 382 Ref 53/55 dated 11.12.2012) Educational Loans to Indian School of Business, Hyderabad and Mohali Students (Cir no. 417 Ref 53/39 dated 02.01.2013) – Indian School of Business (I.S.B.) is one of the premier educational institutes with which we have an MOU for allowing educational loans to its students. Our High Tech City branch and Mohali branches are the Nodal Branches for handling Educational Loans to students of ISB. The concessions offered on Educational Loans to students of ISB for the academic year 2013-14 are as follows: Eligibility All students admitted for the Post Graduate Programme in

Management Courses offered by ISB, Hyderabad. Amount of Loan Need based subject to maximum of `23.00 lakhs Margin Minimum 10% Rate of Interest Base Rate Floating. Presently 10.50%. No other incentives of

any sort are admissible, including female student incentive. Co-obligation Co-obligation of earning parent / spouse Collateral Security Collateral Security may be obtained but need not be insisted. Holiday Period Period of study and six months after completion of course

Repayment

Recovery of Interest component only during the first two years from commencement of repayment. However it is optional for the borrower to remit over and above the interest also at his/her convenience and without any prepayment charges. Fixing EMI from the third year onwards (after commencement of repayment) – basing on the balance outstanding and the left over tenor of the loan. The maximum repayment period can be allowed up to 10 years for loans up to `7.5 lakh and 15 years for loans beyond `7.5 lakh.

Liability Insurance Liability Insurance is mandatory, but it is optional for the student to purchase the Liability Insurance Policy from any of the service providers.

Exclusive powers of sanction

The Branch Managers of Hi-Tech City and Mohali Branch or ZLCC(A) of respective zones are empowered to sanction Education loans upto maximum of `23.00 lakhs for admissions of 2013-14.

Role of Nodal Branches— Hi-Tech City Br, Hyderabad and Mohali Br.

Nodal branches should ensure strict compliance with KYC norms for student and parent. Nodal Branches should maintain close liaison with the Institute to monitor the loan account regularly and enlist their cooperation in tracking the student for recovery of loan as well as to establish longstanding relations. The loan accounts are usually maintained and monitored at the nodal branch till closure. However requests for transfer of loan account should be considered, when any borrower, after completion of study, prefers the loan account at a branch nearer to his place of work/domicile.

Role of other Branches

Should extend support and cooperation to nodal branches in complying with KYC norms and getting the loan documents executed. Branches can entertain any reference /proposal for

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Educational Loan that comes from ISB student. Branches can process such applications along with other required documents and forward the same to the nodal branch concerned (Hyderabad/Mohali) with their remarks / recommendations. Branches other than the two mentioned above should not sanction/disburse the Educational Loan for ISB students. The loan processing and sanctioning is centralized at these two branches for the convenience of operation, monitoring, tracking the students and evaluation of repayment performance in respect of these loans. Branch Managers are advised to collect information from Nodal Branches about ISB students who secured placements nearer to the operational area of the branch to market our deposit and fee based products.

Education Loans to children of Staff Members – All Educational Loans to staff children are to be sanctioned by Zonal Offices. Rate of interest is as applicable to general public with a concession of 0.50% (for girl child additional 0.50% concession). If the students have joined an institution with whom we are having MOU with a lower rate of interest should be either MOU or non-MOU with concession whichever is lower. However, the above interest rate shall not be less than Base Rate. Wherever collateral security norms are applicable to general public depending on the limit sanctioned, only for those loans, collateral security of suitable value shall be obtained at the time of retirement of staff members for continuing such loans beyond the service period. On retirement of an employee, loans outstanding in the staff children under education loan should be reviewed and there should not be any overdues in the account. In case of retiring employee is a pensioner, the loan should be transferred to his pension paying branch. (Cir.no.416 Ref 26/57 dt.01.01.2013)

AB Vanitha Vahan

Eligibility Salaried/ professional & self employed Women having min. gross Income of `1.0 Lac pa for 4W - `60000 pa for 2W & `40000/- pa for battery operated e-bikes. 50% of Husband’s salary will be taken for computing eligibility provided he is working and stands as Co-obligant.

Loan amount

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 `5.00 Lac. 2 Wheeler – NEW- Road price minus margin with a Max. of `60000/- Road Price- Invoice price, Registration, Life Tax, Insurance & accessories up to `5000 for 4 W & `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%

Security Hypothecation of vehicle purchased Co obligation Father /Husband of the applicant or suitable third party guarantee. Net Pay 40% after proposed installment Repayment 4 W- New-12-72 EMI – 4 W- Used-60EMI - 2 W- 12-60EMI Interest*

4 W-BR+1.50%; Term Premia (TP) for loans repayable 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

2 % flat on pre-paid amount, where the repayment is fixed beyond 36 months. However, charges may be waived, incase the payment is from own savings / windfall gains.

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Special Campaign Interest Rate Interest Rate for car loans – BR+o.50% and for Two Wheeler – BR+1% Proc. fee Nil Other charges

Not exceeding 1% of the loan sanctioned/disbursed to be paid to car dealers in respect of proposals which are sourced by the dealer.

Others Branch Managers can continue to spend `500/- for each car loan disbursed to entreat the borrowers with refreshments as a friendly gesture from the Bank.

Clean Loan

Eligibility Any individual having repayment capacity. Age not above 75 years in case of Pensioners & 55 years in case of LIC Agents.

Loan amount

Salaried Persons: Fresh- 8 Times of gross salary or Maximum `1.00 Lac. Renewals -10 Times or Maximum `1.50 Lac. ZO sanction – 18 times Non Salaried–ZO Sanction – 2 Times of average annual proven income Pensioners – 8 Times of monthly Pension Maximum `2.00 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. Maximum `2 Lac

Security Nil Renewals After payment of 1/3rd regular installments Guarantee/ Co obligation

Two third party guarantors acceptable to the Bank. In case 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 members and one LIC Agent.

Net Pay 40% after proposed installment Repayment Maximum 60 EMI & 36 EMI for Pensioners aged > 65 yrs. & LIC Agents

Interest i) Salaried persons with undertaking not to shift salary accounts – Base Rate + 4% up to 36 months and Base Rate + 4% + Term Premia (TP) for loans > 36 months.

Other than salaried segment – Base Rate+7%. Term Premia (TP) for loans repayable > 3 Yrs

Consumer Loan Eligibility Any individual having repayment capacity. (Non-Salaried persons-

Minimum Income `30000/- pa Loan amount

Equal to 10 Months gross salary- 40 % on annual Income in case of non-salaried persons or 75% of cost of articles, whichever is lower.

Security Hypothecation of goods purchased Guarantee Good third party guarantee acceptable to the Bank. Net Pay 40% after proposed installment Repayment Max.60EMI Interest Base Rate + 7.50% + TP for loans repayable beyond 3 years

Loans against Government securities Eligibility Employees/ Pensioners / Professional & Self-employed holding Govt.

securities (except IVPs) Loan amount

Equal to 75% of purchase value of security including Accrued 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. Guar/co-oblig Limit above `50000/- Co obligation is required Interest Base Rate + 4% + TP – Repayable in 60 months

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AB Doctor + Eligibility

Individuals, Partnership firms/ Ltd co. /Trusts. Key promoters should be practicing qualified Medical practitioner and Doctors. Minimum practicing experience should be 2 years.

Purpose To set up clinic / diagnostic labs (x-ray/pathology/songraphic), purchase of medical equipments, Vehicles, Ambulance, medical software, furnishing of nursing homes, working capital requirement for existing nursing homes.

Facility Term Loan / Overdraft or both Loan amount Maximum 20 lakh Margin 25% for equipments Security No collateral security or Third Party Guarantee. To be covered

under CGTMSE Repayment Term Loan – Maximum 84 months – Gestation- 12 months Interest Base Rate + 3.25 Processing& Upfront 0.50% Cir.no.8 Ref 53/1 dated 05.04.2012

Rent Receivable Eligible Borrowers

Individuals, Sole Proprietorship, Partnership Firms, Public Limited Companies, Private Limited Companies, Trusts etc., owning properties including landlords of our branch premises.

Eligible Properties Unencumbered Residential/commercial Properties at Urban / Metro areas. In case of Semi-urban areas, premises let out to banks may be considered.

Eligible Tenants Reputed PSB/Multinational undertakings, Embassies/consulate offices, Banks, National & International Airlines etc. In case of Private Sector Organizations, the Net Worth of the organization should be above 5 crore.

Purpose Closure of the loan availed for development/construction of the property. In case where the property is constructed with own sources, limits can be considered for the expansion / development of existing business.

Loan amount Minimum loan ` 25 lakhs and the maximum loan is ` 5 & ` 10 crore for individual and other borrowers respectively. In case of proposals from land lords of our bank premises, the stipulation for minimum loan amount is relaxed to `5 lakhs. However, limits beyond ` 10 crores falls under MC powers.

Margin 15% of rent receivable towards maintenance and 25% of margin in collateral security of NSCs, Deposits etc.

Security Equitable mortgage of the property of the value not less than 150% of the loan. However, in case of deficit, liquid securities such as NSCs, Bank Deposits etc., can be accepted with 25% margin.

Guarantee/ Co obligation

One Co-obligation / Guarantor. However, no Co-obligation / Guarantor for our Bank premises.

Repayment 84 Months (120 months in case of leased premises of our branches) or unexpired certain lease period whichever is less after making adjustments for TDS, Property Tax and 15% rent towards maintenance.

Interest Base Rate + 4.75% + TP Pre-payment 0.50% on outstanding liability for the unexpired period Proc & Upfront Fees 1% of the limit sanctioned plus service tax. Cir.no.44 Ref 26/08 dated 23.05.2011

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Mortgage Loan

Eligibility Any individuals holding house/flat in their/spouse/Major children’s names. Age 21-65 yrs. Above 60 yrs, jointly with spouse or major children.

Loan amount The maximum eligible loan amount is calculated based on the proportion of EMI to net income. For salaried class – 50% of net salary; For non-salaried class – 65% of monthly average income of preceding 3 years as reflected by IT returns. However, the maximum quantum of loan is restricted to `100 lakhs.

Security/Margin Mortgage of House/Flat – Margin 50% Guarantee/ Co obligation Third party acceptable to Bank. Repayment Maximum of 60 EMI Interest Up to 36 months – B.Rate + 5% > 36 months – B.Rate+5%+TP Processing fee 1% of the loan amount. Administrative charges as applicable Cir.no.274 Ref 53/26 dated 04.10.2012

AB Anand Jeevan Eligibility Single or Jointly with spouse; Age – First borrower –Above 60

Years, Spouse- Above 55 Yrs. Purpose To meet any genuine needs.

Loan amount 90% of realizable value of House/Flat i.e. 70% of Market value. Min. `5 Lac. Maximum `100 Lac. Loan installment payable to the borrower in Monthly, Quarterly, and Lump sum @ `198/-, 588/- & 8335/-respectively per lac for loan tenor of 15 years (max). Lumpsum maximum `15 lac only

Margin Not Applicable. Security Equitable Mortgage of House/Flat, against which loan is

sanctioned. (To be registered with Sub- Registrar) Guarat/co-obligant Borrower has to execute a Will Repayment Payable in Lump sum after the last surviving Borrower dies or

opt to sell the home or permanently moves out the home. Interest BR + 1.25% Pre-payment Allowed without any charges. Processing& Upfront No Cir 334 Ref 26/56 dated 28.12.11 AB Equipment Finance: Bank introduced a scheme to purchase New equipment like JCBs, Excavators, Concrete Batch Mixing Plants, Lifts, Steel scaffolding Material etc., 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 + 2.75% and for new borrowers it is Base Rate + 3.25%. Repayment should be within 24 to 60 months. Wherever the repayment is beyond 36 months, the loan attracts applicable 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. (Cir.no.92 Ref 26/21 dated 01.07.09)

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Financing to Traders against property: A new scheme is introduced on 1st January 2014 with an objective to improve the credit off take to traders by extending timely hassle free flow of credit to the eligible applicants backed by adequate collateral by simplifying the existing guidelines. The salient features are:

Financing to Traders against property

Eligibility All existing traders of Individuals, proprietary concerns, partnership firms and limited company either existing customer of our Bank or new customers. The applicant should have minimum of 2 years standing and profit making for the past two years.

Facility Term Loan / Secured Overdraft Loan amount The amount of credit facility shall be above `10 lakh and up to

`300 lakh subject fulfillment of margins and security coverage.

Method of assessment

Not more than 25% of the assessed turnover and projected turnover should be in line with the earlier performance and be realistic. In case where the credit limit applied is up to `25 lakh and the turnover is up to `100 lakh, the applicant is required to furnish statutory returns like sales tax, VAT etc along with declaration. In case where the credit limit applied is above `25 lakh and turnover is above `100 lakh, it is mandatory that the applicant should submit audited balance sheet.

Security/Margin Liquid security like term deposits of our bank/NSCs/LIC policies with 10% margin. Immovable properties situated in semi-urban and urban areas (land should be non-agriculture and building age should not exceed 30 years) with 25% margin. Rural properties and third party properties should not be accepted.

Guarantee/ Co obligation The owner of the property offered as security.

Repayment Term Loan should be repayable in 60 monthly installments without gestation period. In case of SOD, two years from the date of sanction provided the operations in the account reflect the turnover.

Interest Up to `20 lakh – Base Rate + 2.50%; > `20 lakh Base Rate + 2.75% Term premia 0.25% for term loans repayable > 36 months

Processing fee Term Loan – 1% of the loan amount. SOD – `300 per lakh + service tax to be collected on yearly basis.

Stock statement Once in a six months. Unit inspection Below `50 lakh – Once in quarter by branch

Above `50 lakh – Once in two months by branch Cir.no.396 Ref 61/02 dated 01.01.2014 Financing to Micro and Small Enterprises (MSE) against property: A new scheme is introduced on 2nd January 2014 with an objective to improve the credit off take to MSE borrowers by extending timely hassle free flow of credit to the eligible applicants backed by adequate collateral by simplifying the existing guidelines. The salient features are:

165


Financing to Micro and Small Enterprises against property

Eligibility Individuals / entities engaged in manufacturing and/or service activities eligible under MSMED Act 2006. The applicant should have minimum of 2 years standing and profit making for the past two years.

Facility Term Loan / Working Capital (Secured Overdraft) Loan amount The amount of credit facility shall be up to `300 lakh (both fund and non-

fund based limits) subject fulfillment of margins and security coverage.

Method of assessment

Not more than 25% of the assessed turnover and projected turnover should be in line with the earlier performance and be realistic. Limit applied Turnover Requirement Up to `10 lakh Up to `40 lakh Declaration Above `10 lakh and up to `25 lakh

Above`40 lakh and up to `100 lakh

Declaration along with Sales Tax, VAT

Above `25 lakh Above `100 lakh Audited Balance sheet

Security/Margin

For loans up to `10 lakh it is mandatory not to insist for security. Liquid security like term deposits of our bank/NSCs/LIC policies with 10% margin. Immovable properties situated in semi-urban and urban areas (land should be non-agriculture and building age should not exceed 30 years) with 25% margin. Rural properties and third party properties should not be accepted.

Guarantee/ Co obligation The owner of the property offered as security.

Repayment Term Loan should be repayable in 60 monthly installments without gestation period. In case of SOD, two years from the date of sanction provided the operations in the account reflect the turnover.

Interest Up to `10 lakh – Base Rate + 1.75%; > `10 lakh – Base Rate + 2.75% Term premia 0.25% for term loans repayable > 36 months

Processing fee Term Loan – 1% of the loan amount. SOD – `300 per lakh + service tax to be collected on yearly basis.

Stock statement Once in a six months. Unit inspection Once in a Quarter Cir.no.398 Ref 52/15 dated 02.01.2014 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 `100 lakhs. In case of WCTL, the maximum loan is `10 lakhs only. Loans up to 50 lakhs & 100 lakhs attract a spread of 4% & 5% respectively. Audited balance sheet need not be insisted for limits below `10 lakhs. However, it is mandatory for the borrower whose turnover exceeds `40 lakhs per annum. The collateral security norms for the limits up to `10 lakhs are as under: Age of the business Collateral Security Remarks Less than 5 years 100% However, in case where the limits

are beyond `10 lakhs, branch to obtain 125% of limit as collateral

5 to 10 years 75% Above 10 years NIL

Loan Amount Processing Charges (One time) Quarterly Admn. Charges Up to 0.25 lakhs `150 `50 > 0.25 – 2.00 lakhs `300 `75 > 2.00 lakhs `300 per lac or part thereof `100

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AB Priority Gold Loans – A new loan product as a third variant captioned as ‘AB Priority Gold Loan’ is introduced covering various Micro / Small industries / Service enterprises, Retail Trade, industrial / commercial purposes in addition to the existing Agricultural and Personal needs.

Features of Product Particulars Loans up to `1 lakh Loans > `1 lakh Purpose Any genuine credit needs of activities falling under Micro/Small

industries or enterprises, Small Business/ Retail Trade Tenor Maximum 12 months Maximum 6 months Margin 25% (Loan to value should not exceed 75% of value of gold) Rate Per Gram As applicable to agricultural gold loans Maximum Loan `50 Lakh for advances wholly secured with Gold at the field level

for Micro and Small Enterprises- Manufacturing, Services. `15 lakh for small business and retail trade.

Purity of Gold The jewellery of purities of less than 22 ct are to be translated into 22 ct and valued accordingly.

Rate of Interest The interest rates are same as applicable to Non-Agricultural Gold Loans or SME whichever is lower.

Delegation of Powers

Branch Managers JM-I – `5 lakh; MM-II `10 lakh; MM-III `15 lakhs; SM-IV & above `50 lakh

a) Copy of any document which evidences existence of the unit. b) Declaration on Turnover and purpose of the loan c) Declaration on proper end use of loan proceeds. d) Application for Gold Loan – suitably amended. An additional clause to be incorporated enabling bank to demand accelerated repayment/additional security in case the market price of the gold falls down. Cir.no.431 Ref 53/27 dated 27.01.2014

Rate Per Gram Purity Up to 1 lakh (for tenor

up to 1 year) > 1 lakh (for tenor up to six months)

I. With Hall marking 22 Carat `1900/- per gram `1900/- per gram 21 Carat `1800/- per gram `1800/- per gram II. Without Hall marking 22 Carat `1950/- per gram `2000/- per gram 21 Carat `1700/- per gram `1700/- per gram 20 Carat `1600/- per gram `1600/- per gram III. Gold Coins 999.9purity `1950/- per gram `1950/- per gram 916 purity `1900/- per gram `1900/- per gram Other guidelines – Gold loans should not be extended for speculative purposes. 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. Re-appraisal of gold pledged with limits of `5 lakh & above is to be done once in every six months. Further, all gold loans outstanding beyond 18 months from the date of loan (including renewals) should be re-appraised. Gold jewels pledged with the branches should be kept in transparent and tamper proof seal packets and the cover should bear the signatures of the joint custodians.

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AB Professional Loan: In order to provide simple and hassle free credit facilities to the professionals, Bank introduced a new scheme i.e. AB Professional on 30.01.2012 and the salient features of the scheme are as under:

Features of Product Eligibility All Practicing Chartered Accountants, Architects, Engineers, Valuers,

Management/Financial Consultants, Company Secretaries, Cost Accountants etc., are eligible under this scheme. Individuals, Firms, Limited Liability Firms, Companies or Societies engaged in rendering professional services should be an assessee under income tax at least for the last two years and be a registered member with their respective professional Association/Board/Body.

Purpose To establish/renovate the office premises, Furnishing of office premises, purchase of Tools, Equipments & Books, Expenses relating to travel for professional purposes, Working Capital for carrying out day to day operations. Branches can sanction Term Loan, Overdraft or combination of both depending on the purpose of the loan. The maximum amount allowed under this scheme is `10 lakhs.

Assessment Term Loan – 75% of the cost of asset proposed to be purchased. Working Capital Limit – 75% of the revenue expenditure of the previous year as per Profit and Loss account. Total exposure should not exceed 2 times of average annual income of preceding two years.

Security Hypothecation of existing movable assets and asset/s purchased out of loan and also obtain post dated cheques for initial 18 months. The loans are to be covered under CGTMSE compulsorily. However, CGTMSE premium to be borne by the borrower.

Interest Rate Base Rate + 3.25. Loan attracts 0.50% processing / upfront charges. Repayment Not exceeding 60 monthly installments with a maximum repayment

holiday of 1 year for principal & interest for term loans and one year for working capital limits.

Cir 377 Ref 53/18 dated 30.01.2012

Term Premia (TP): For the loans falling under MSME/CPCD/CIFD/CRE, attracts TP @ 0.25% besides Base Rate + Spread where the repayment period over 36 months and up to 60 months and 0.50% where repayment period is beyond 60 months (including gestation / holiday period) Cir.no.315 Ref 26/43 dated 31.10.2012. Credit Rating for Personal Banking Schemes: In order to have better credit risk management system, Bank introduced credit rating for Clean / Personal Loans, 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, 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. (Cir.no.163 Ref 26/34 dated 06.08.2010)

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Impaired Asset Study

Lending is an integral part of bank business. Borrower is expected to use the funds for the purpose for which availed and pay interest and installments regularly. However, default may arise due to business cycles, changed environment, mismanagement and other external factors. Whenever a borrowal account slips to Non-Performing Category, the account needs to be examined closely for analyzing the systematic deficiencies if any, which has resulted in the failure of account. The Objective of IAS will be to identify the causative factors for failure of the account and to take appropriate corrective action for minimizing, if not eliminating systemic or human failures. The exercise of Impaired Asset Study (IAS) would be primarily to look into reasons for the failure of an advance account and to look into Staff accountability aspects to know the acts of Commission and Omission of the staff that might have contributed to such failure. Branch Managers (other than the Branch Manager who sanctioned the loan) will conduct IAS study for all NPA accounts of the branch with Real Account balance up to `2 lakh. The IAS study should be initiated after 90 days from the close of the respective quarter and completed within 6 months from the date of NPA. However, for above `25 lakh & up to `100 lakh, the study should be completed within 120 days and with regard to above `100 lakh loans it should be completed within 90 days. In all the cases where accountability is ascribed shall be referred to Vigilance Department, HO to examine vigilance angle. (Cir no. 51 Ref 26/9 dated 04.05.2012)

NPA – Real Account Competent Authority I. Sanctioned by Scale-IV & below Upto `2 lakh Zonal Committee consisting of ZM, second

line official & vigilance official. > `2 lakh and up to `25 lakh II. Sanctions by AGM > `25 lakh and up to `100 lakh GM(CMRD) at Head Office

> `100 lakh GMs committee at HO consisting of GM (CMRD), GM (Inspection), GM (RMD) & GM (Oper). Minimum quorum shall be three.

Cir.no.095 Ref 26/15 dated 29.06.11

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One Time Settlement Schemes (OTS) 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.

� 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.

� To impart further transparency especially with regard to high value compromise accounts, the proposals need to be vetted by Settlement Advisory Committee constituted by three independent members viz., Retired Judge, Retired ED/CMD of a Bank and Retired General Manager of a Bank.

� 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.

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Formula to rework out Shadow Account

Category Calculation Non Suit-filed Accounts

Real account balance + Interest at prevailing BMPLR or contracted rate whichever is lower on simple basis from the date of cessation of interest / NPA date whichever is earlier, until the preceding month + any other charges.

Suit-filed accounts not decreed

Real account balance + Interest at prevailing BMPLR or contracted rate whichever is lower on simple basis from the date of cessation of interest / NPA date whichever is earlier, until the preceding month + Suit expenses + any other charges.

Suit-filed accounts decreed

Real account balance + Interest at prevailing BMPLR or contracted rate whichever is lower on simple basis from the date of cessation of interest / NPA date whichever is earlier, until the preceding month + Law charges incurred after date of suit + any other charges.

Note: As and when BMPLR is phased out, from the date of such phase out, notional interest shall be calculated at prevailing Base Rate + 4%. The Net Present Value (NPV) 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 I discounted at existing Base Rate+4% for 3 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 Base Rate+4% Simple for the period of payment It should be ensured that NPV of the compromise amount discounted at existing Base Rate + 4% simple i.e. F should generally be not less than the NPV 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 @ Base Rate + 4% (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. In case of delay in payment of compromise amount, interest is to be collected at current Base Rate + 4% + 2% spread on reducing balances from the date of sanction communication until the closure of the account. 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.351 Ref 45/07 dated 26.11.2012).

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OTS for Small Loans: All NPA accounts including suit filed accounts but not decreed with real account balance of `2.00 Lakh & below and classified as Doubtful/Loss Assets as on 31.03.2013 are eligible under the scheme. Accounts technically written-off on or before 31.03.2010 are also eligible under the scheme. Further, the scheme shall not cover cases of fraud and decreed accounts. It shall also not cover accounts backed by liquid securities or salary undertaking letters. The scheme is now made non-discretionary and non-discriminatory. Settlement amount is linked to the date of NPA as under: Age of NPA

Settlement amount formula Real a/c balance of

below `1 lakh Real a/c balance of `1 lakh & above and up to `2 lakh

01.04.11 to 31.03.12 75% amount in default 80% amount in default 01.04.09 to 31.03.11 70% amount in default 75% amount in default 01.04.07 to 31.03.09 65% amount in default 70% amount in default On or before 31.03.07 60% amount in default 65% amount in default Technical w/off a/cs 45% amount in default 45% amount in default Amount in default = Real account balance as on date of NPA + CGTMSE/ECGC claim received and appropriated Minus recoveries after date of NPA

Cash Discount of 10% on the settlement amount is available where the borrower pays the amount in full at a time within 10 days of receipt of OTS offer letter from the Branch/Bank. Sanctioning authority of OTS proposal is Branch Manager and reviewing authority is Zonal Manager. 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 31.12.2013. (Cir.no.270 Ref 45/09 dated 01.10.2013) OTS for MSME Loans: The important features of the modified scheme are furnished hereunder (Cir. No. 269 Ref 45/8 dated 01.10.2013):

� Sub-Standard Accounts are not eligible under the present scheme � NPA accounts, including Suit Filed accounts but not decreed, under Micro, Small & Medium Enterprises, with real balance of above `2 lakh and up to `10 crore as on 31.03.2012 and classified as Doubtful and Loss Assets, are eligible under the Scheme

� Accounts Technically Written Off on or before 31.03.2010 are eligible under the Scheme

� Small loans up to `2 lakh under MSME shall be considered under Small Loans OTS scheme

The Settlement formula, based on the date of NPA, is as under:

Real account balance> `2 lakh and < `10 lakh Date of NPA Settlement amount

01.04.11 to 31.03.12 90% of Amt. in default 01.04.09 to 31.03.11 85% of Amt. in default 01.04.07 to 31.03.09 75% of Amt. in default On or before 31.03.07 65% of Amt. in default Tech. Written off on or before 31.03.10 65% of Amt. in default

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Date of NPA Real account Balance => `10 lakh and < `1 crore

Real account Balance => `1 crore & up to `10 crore

01.04.10 to 31.03.12 95% of Amt. in default Amt. in default 01.04.08 to 31.03.10 85% of Amt. in default 90% of Amt. in default On or before 31.03.08 80% of Amt. in default 85% of Amt. in default Tech. Written off on or before 31.03.10

80% of Amt. in default 85% of Amt. in default

Amt. in default = Real account balance as on date of NPA + CGTMSE/ECGC claim received and appropriated Minus recoveries after date of NPA

In case of loan accounts with real liability of `10 lakh and above as on the date of NPA, the settlement 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 Judgement (ABJ), whichever is higher. NPV will be calculated with 3 years realization period at prevailing Base Rate + 4%. Cash Discount of 10% on the settlement amount is available where the borrower pays the amount in full immediately or within 10 days of receipt of OTS offer letter from the Branch/Bank. Recovery Agents: All NPA accounts (including technical written-off accounts) with Real Account outstanding of `5 lakh 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 be complied 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)

***

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AB Products – Service Charges

Bank is levying the following service charges w.e.f. 01.10.2009 (Cir.no.369 Ref 27/39 dated 11.12.2013) No

Category / Type

Service Charges Non-

Individuals Individuals Pensioners/ Sen.Citi./Indiv. In Rural Areas

1 Cheque Issue / Return Cheque Book – SB `2.50 per leaf (25 leaves free in a year) Cheque Book – CD `3/- per leaf (No free cheque leaves) Cheque Stop payment – Per leaf `60/-

Max.`250/- `55/- Max.`225/-

`50/- Max.`200/-

Cheque Return – Inward CD cheque – Up to `20000/- `100/- `75/- `50/- SB cheque – Up to `20000/- `75/- `60/- `40/- CD cheque – Above `20000/- `200/- `150/- `100/- SB Cheque – Above `20000/- `100/- `80/- `60/- 100 lakh & above `500/- for all SB and Current accounts. Cheque Return – Outward `150/-+out of pocket expenses for financial

reasons and `150/- for other reasons. 2 Balance Enquiry >12 months `115/- `110/- `100/- 3 Account closure SB (closed within 12 months) `200/- `150/- `100/- SB (closed after 12 months) `100/- `80/- `60/- CD (closed within 12 months) `500/- `350/- `250/- CD (closed after 12 months) Nil Nil Nile No account closure charges for AB Easy accounts (No frills account) 4 Signature verification (per 173ttest) `125/- `110/- `100/- 5 No Due Certificate (Weak sec – nil) `150/- `125/- `100/- 6 Passbook / Statement charges Issue of Balance Certificate `100/- per certificate Duplicate Passbook / Statement

with latest balance only `15/- per Passbook/Statement

Duplicate Passbook / Statement with previous entries only

Passbook - `75/- plus additional `50/- per bunch of every 40 entries. For statement `25/- for each 40 entries.

7 Collection of local cheques (Other than clearing cheques) SB Group Accounts `50/- `35/- `30/- CD Group Accounts `100/- `80/- `60/- 8 Collection of Cheques - Others No out of pocket expenses should be levied � Up to `5000/- SB accounts – `25/- - Other accounts `50/- � `5001 to 10000/- `50/- for all accounts. � `10001 to `100000/- `100/- for all accounts. � Above `100000/- Maximum of `200/- 9 Safe Custody Charges Scrips `500/- per scrip per annum Sealed cover `500/- per sealed cover per annum Sealed Boxes

20x20x20 c.m. `500/- per annum 30x30x30 c.m. `600/- per annum

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No Category / Type Service Charges

Non-Individuals Individuals

Pensioners/ Sen.Citi./Indiv. in Rural Areas

10 Inward/Outward Bills Up to 1000/- `60/- plus out of pocket expenses Above 1000/- up to 5000/- `80/- plus out of pocket expenses Above 5000/- up to 10000/- `100/- plus out of pocket expenses Above 10000/- up to 1.0 lakh `9/- per thousand plus out of pocket expenses Above 1.0 lakh up to 10 lakh `8/- per thousand plus out of pocket expenses Above 10 lakh `7/- per thousand plus out of pocket expenses 11 Issuance of DD/PO Up to 5000/- `20/- `20/- `15/- >5000/- to 10000/- `25/ `25/- `20/- >10000/- to<1 lakh – per thousand `2.50 `2.25 `1.75/- >1lakh to<10 lakhs – per thousand `2.25 `2.00 `1.50/- >10 lakhs and above `2 `1.50 `1.25 Maximum commission `20000/- `18000/- `15000/- Cancellation/Duplicate/Revalidation

of DD/PO Up to & inclusive 10000/- `25 per instrument; > 10000/- - `100/- per instrument

12 Standing instructions (SI) Noting charges `25/- Transfer between accounts No charges Other standing instructions Remittance charges plus out of pocket expenses Non execution of SI (Insufficient) `100/- 13 Folio charges – CD & ODCC

accounts (Quarterly) `80/- for every 40 entries after availing free entries referred as below

Free entries are allowed per quarter for the accounts where the average credit balance in the account is above

Balance up to `25000/- Nil >`25000/- up to `50000/- 60 >`50000/- up to `1 lakh 100 >`1 lakh up to `2 lakhs 400 Above `2 lakhs No charges

Note: No free entries to C & IFD accounts. 14 Inoperative Accounts – Service Charges (Yearly) SB Group Accounts `50/- per quarter in Rural areas and `100/- per

quarter at all other places. Current Accounts `200/- per quarter Note: No charges if stipulated minimum balance requirement is adhered. 15 Cash handling charges Cash receipts under CD and ODCC accounts Up to one bundle No charge > one bundle `100/- per bundle maximum of `10000/- Note: ODCC/retired staff accounts are exempted from cash handling charges 16 Addition/Deletion of names `100/- 17 Change in Operation instructions `100/- 18 Record copy of cheque/DD/PO `100/- per item

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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 AB Jeevan Abhaya „Plus“ 1000 2000 3000 5000 10 Kids Khazana 100 11 Personalised Cheque facility – CD 10000 12 Personalised Cheque facility – CD 2000

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 `200/- per quarter AB Premium Current Account `400/- per quarter Savings Bank Accounts `100/- quarter - Metro/Urban/SU areas

`50/- per quarter - Rural areas AB Privilege SB Accounts `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 `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 @ 12.36% with effective from 01.04.2012. Purchase of Local cheques against clearing: At par for salaries cheques of employees of Central/State government and Public Sector Units maintaining SB accounts with our Bank. Cheques presented by Rice Millers – Applicable cash credit interest rate to the respective Rice Mill accounts. With regard to others – Interest @ 15.50% p.a. With regard to other cheques, the charges are 40 paise for every `100/- besides applicable collection charges. If the cheque is returned unpaid, Base Rate + Spread @6.50% is to be collected. (Cir.no.109 Ref 26/27 dt. 30.06.10)

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E-Products – Service charges (Cir no.412 Ref 27/45 dated 13.01.2014)

No Category Service charges 1 RTGS – Outward Transaction Time `2 to `5 lakh Above `5 lakh 9 AM to 12 Noon `25 `50 Above 12 Noon to 3.30 PM `30 `55 After 3.30 PM `30 `55 2 NEFT – Outward (AB Xpress) Up to `10000/- `2.50 per transaction > `10000/- and up to one lakh `5 per transaction > one lakh and up to `2 lakh `15 per transaction Above `2 lakh `25 per transaction 3 Electronic Clearing Services (ECS) Registration of ECS `100/- Cheque Return charges (ECS Debits) `100/- per debit 4 Speed Clearing (Cir 293 Ref 27/28 dated 17.10.2012) Up to & inclusive of `1.00 lakh No charge Above `1.00 lakh Maximum of `150/-

Cheque return charges Up to `10000/- - `50/-; Up to `10000/- to `1.0 lakh `100/-; Above `1 lakh - `200/-; One crore & above `500/-

5 Any Branch Banking (ABB) Cash withdrawals by self No charges up to `50000/- Cash deposit by self No charges Cash deposited by third party i) Up to `1000/- `10/- ii) `1001/- to `50000/- `2/- per thousand Non cash transactions i) Up to `1.00 lakh No charges ii) Above `1.00 lakh `50/- per transaction 6

Deposit of clearing instruments at non-home branch drawn on non-CBS branch / other banks

SB Accounts – No charge CD Accounts – No charge up to `1.00 lakh and `50/- per instrument for `1.00 lakh & above.

7 Multi City Cheques (MCC) `5/- per leaf 8 ATM / Debit Card

Annual Maintenance Charges (AMC)

`100/- per annum at the start of second year. However, Senior Citizens, Handicapped and Basic Saving Bank account holders are exempted from AMC

Transactions on our ATMs No charges Transactions on other Bank ATMs

`20/- per transaction. However, no charge will be levied for 5 transactions in a month for SB accounts

Re-issue of card `200/- w.e.f. 01.07.11 Re-issue of PIN mailer `50/- + Service charges

9 SMS Alerts Push `15/- per quarter + Service tax Pull Push – Free. Pull – `3/- per request* 10 Internet Banking No charges * Service provider levy charges

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Processing Charges: The processing charges are as follows: I. Working Capital Limits (Fund & Non-Fund Based) Up to `25000/- `150/- > `25000/- & up to `2 lac `300/- Above `2 lac `300 per lac or part thereof with a

maximum of `30 lac. However, Rice Mills with credit rating of A+ are exempted from processing charges II. Loans against Shares & Securities `300/- per lac III. Mortgage Loans 1% of the loan amount IV. Rent Receivables Minimum `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 `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. However, no charges will be collected upfront before sanction of loan to Micro & Small Enterprises for the loans up to `5 lakh. However, in the 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. (Cir no.163 Ref 26/26 dated 20.07.2012) 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. 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 `5 crores at 1% p.a. for delay in draw down schedule beyond one month. Similarly, working capital limits of `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, Education, Housing, SHG, Govt. sponsored scheme loans are exempted from levy of the said charges (Circular no.5 Ref 26/3 dated 08.04.2008). Agency Commission payable on Government transactions: Government is paying the following charges to the banks (Cir no. 151 Ref 51/05 dated 15.07.2013). No Type of transaction Unit Rate 1 Receipts – Physical Mode Per transaction `50 2 Receipts – e-mode Per transaction `12 3 Pension Payments Per transaction `65 4 Payments other than Pension Per `100 turnover `5.5 paise

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Question Bank

1. “No Frills account” is also known as a) Savings Bank Account b) Simple Recurring Deposit Account c) Basic Savings Bank Account d) None 2. PIN stands for a) Personal Index Number b) Permanent Index Number c) Personal Identification Number d) Permanent Index Number e) None 3. EEFC Account can be opened by a) Non Resident Indian (NRI) b) NRI who returned to India permanently c) Any Resident with local source of income d) Residents who have forex earnings e) None 4. Failure of internal systems, processes and people lead to a) Credit Risk b) Market Risk c) Liquidity Risk d) Operational Risk e) Technology Risk 5. As per IBA Model Education Loan Scheme, the minimum & maximum age criteria for the borrower (student) is…… a) 10 & 35 years b) 18 & 35 years c) 18 & 45 years d) All majors e) None 6. As per extant guidelines, advance against book debts should not exceed ……. % of working capital limits. a) 10% b) 50% c) 25% d) 100% e) no such ceiling 7. Government pays agency commission to the banks @ ………. for Pension payments a) `50 per credit b) `12 per credit c) `65 per credit d) `60 per credit e) None 8. PCFC advance generally allowed for a maximum period of a) 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) 15 days from the date of deduction b) 7 days from the date of deduction c) 15 days in the succeeding month d) 10 days in the succeeding month e) 7 days in the succeeding month 10. All the systems in Office building are inter-connected is called as a) Wide Area Network b) Intra departmental network c) Satellite link d) Local Area Network 11. Companies look for Commercial Paper since they need a) Long Term Low Cost funds b) Short Term High Cost funds c) Long Term High Cost funds d) Short Term Low Cost funds e) None

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12. Customer of your branch aged above 65 years placed a term deposit and requests TDS exemption as his total income including interest income falls below the taxable income, which form he need to submit to the branch? a) Form G b) Form H c) a or b d) No form is required e) None 13. Borrowers availing crop loans up to 3 lakh in the current year are eligible for interest subvention at …….. besides incentive of ………. for prompt repayment. a) 1% & 3% b) 2% & 1% c) 3% & 1% d) 2% & 3% e) None 14. Validity period of a cheque is defined as 3 months under ……….Act a) Indian Contract Act b) B R Act c) Negotiable Instruments Act d) RBI Act e) Not defined in any Act 15. To consider housing loan, the age of building shall not be more than a) 15 years b) 20 years c) 15 years in Rural/Semi Urban & 20 years in Urban/Metro areas d) Residual life of the building should be at least 10 years over and above repayment tenor e) Residual life of the building should be at least 15 years over and above repayment tenor 16. Bank is 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. Zero Coupon Bonds refers to a) Bond issued at face value b) Bond issued with face value & interest c) Bond issued at discount from its face value with interest d) Bond issued at discount from its face value without interest e) None 18. ATMs that are owned and managed by non-banking entities are called as….. a) Onsite ATM b) Offsite ATM c) Third Party ATM d) Red label ATM e) White label ATM 19. CDR-1 system is applicable only to accounts which are under a) Standard b) Sub-standard c) Doubtful d) a & b e) All 20. As per recent guidelines, 40% of the total advances to micro and small enterprises sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to ….. Lakh and micro (service) enterprises having investment in equipment up to ….. Lakh. a) `10 & `4 b) `5 & `2 c) `10 & `5 d) `2 & `5 e) `15 & `10 21. For transfer of funds through NEFT (National Electronic Fund Transfer) and minimum and maximum amount that can be transferred are a) `1,000 and maximum `5 lacs b) `1,000 and maximum no limit c) `5,000 and maximum `1 lacs d) No minimum & maximum amount e) None of the above. 22. Term deposit of ONR can be accepted for a minimum period of

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a) 1 year b) 2 years c) 6 months d) 7 days e) 3 years 23. In case of restructured loans, the payment of installments should commence within …… months from the date of restructure of loan. a) one month b) 3 months c) 6 months d) 9 months e) 12 months 24. It is mandatory for banks to obtain Joint Lending Agreement where the aggregate credit limits availed by the borrower from multiple banks exceeds…. a) `100 crore b) `150 crore c) `300 crore d) `500 crore e) None 25. USB means a) Urban Savings Bank account b) Ultra Small Branch c) Uniform Savings Bank account d) Unique Small Bank e) None

26. Whether borrower has any option to go for………during the currency of the loan? a) Fixed Interest Rate to Floating Interest Rate b) Floating Interest Rate to Fixed Interest Rate c) a & b d) Continue with sanctioned terms & conditions only e) None 27. Cash kept in the currency chest is owned by a) Currency Chest Branch Bank b) Central Government c) Reserve Bank of India d) State Bank of India e) None of the above 28. Bank can’t 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

29. State which one of the following statement not true with regard to Disclosure norms to be made at the footnote of Balance sheet as per RBI guidelines.

a) Movement of NPAs b) Large exposure – Deposit & advances c) Capital structure & Capital adequacy d) Industry wise exposure e) Market Risk in Trading Book 30. Under Direct Benefit Transfer (Subsidy) scheme every beneficiary should have

a) Basic Savings Bank Account b) Savings Bank account with Cheque Book c) Basic Savings Bank Deposit Account linked with Aadhaar number d) KYC complaint Account e) None 31. A cheque is received by the branch for payment issued by one of the customers. Meanwhile a request is received by a public prosecutor informing that the person issued the cheque is imprisoned for criminal activity and directs the branch not to make payment of the said cheque. What is expected by the branch? a) Branch should not make the payment b) Branch should ask for court order regarding imprisonment of the customer c) Branch should insist written request from the public prosecutor d) Branch can make the payment.

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32. With regard to 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 of the bank with regard to collection of foreign cheques, bank shall pay compensation @ …….. to the customer if the delay is beyond 45 days. a) SB Interest b) Term Deposit Rate c) Base Rate d) SB Interest + 0.75% e) None 35. Official Language Implementation Committee meetings are to be held 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 up to Rs……… a) `10000 b) `50000 c) `100000 d) `25000 e) None 37. The minimum capital required to start a new private sector bank is…

a) `100 crore b) `200 crore c) `300 crore d) `400 crore e) `500 crore 38. CDR mechanism, which of the following is not correct. a) Multiple Bank Accounts b) `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 d) None 40. X depositor approached the branch with term deposit receipt of `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. What are the interest rates that are still regulated by RBI? a) SB Deposits b) Commercial Loans c) DRI Loans d) b & c e) all

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42. Which of the following scheme is launched to provide pension to the members of unorganized sectors in India? a) Swabhiman b) Swavalamban c) Jeevan Dhara d) Jeevan Kalyan e) Asha 43. To be eligible for classification under priority sector, the ceiling prescribed for dealers in irrigation equipment is. a) `10 lakhs b) `20 lakhs c) `30 lakhs d) `40 lakhs e) `100 lakhs 44. Right of Set-off refers to a) Marking of lien in deposit account of the borrower b) Transfer of term deposit balance, which is due for maturity in the next year to borrower account for adjustment of overdues c) Transfer of Savings Bank balances to borrower account for adjustment of overdues in loan account of the depositor d) b & c e) None 45. A term deposit of `500000/- in the name of individual 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 Gold Loans by Scheduled Commercial Banks, the LTV ratio should not be more than a) 50% b) 60% c) 70% d) 75% e) 80% 47. The Banking Laws (Amendment) 2012 has facilitated the Public Sector Banks in increase of voting rights from…….to…….. a) 10% to 26% b) 5% to 26% c) 1% to 5% d) 1% to 10% e) None 48. Maximum Project cost under USEP of SJSRY for individual borrower a) 1 lakh b) 2 lakh c) 5 lakh d) 10 lakh e) 50000 49. A bank can prefer appeal on the award passed by Banking Ombudsman within 30 days from the date on which the bank receives a) Passing Award b) letter of acceptance of Award by complainant c) the copy of the Award d) None of the above 50. Current Account is treated Inoperative/Dormant where there are no transactions in the account for the last a) 6 months b) 12 months c) 18 months d) 24 months e) 36 months 51. Which of the following is treated as indirect finance to agriculture?

a) Purchase and distribution of inputs for the allied activities such as cattle feed, poultry feed etc., with loan amount up to `100 lakh per borrower b) Loans for setting up of Agriclinics and Agri business centres c) Loans for construction and running of storage facilities d) a & b e) all

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52. What is the standard provision on the assets other than SME, Agriculture and Commercial loans? a) 0.40% b) 0.25% c) 0.50% d) 1.00% e) Nil 53. A customer's cheque realized for `2 lakh is credited to his account by mistake as `2000. Subsequently cheque presented for `20000 returned unpaid by the bank. What is the responsibility of the banker? a) Bank to pay damages to the customer 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 Two lakh & above remittances only b) Remittance should be through account transfer only c) Maximum charges should not be more than `50 per remittance d) Charges to be collected from the Beneficiary only 55. Power of Attorney was granted by a customer for a period of 12 months to X. The customer wants to revoke it after 6 months. What are the options available to the Branch? a) It should be revoked only after 12 months b) Yes he can revoke at any time c) Revoked with the consent of the power of attorney holder d) Yes he can revoke with the consent of the Banker e) None 56. Which of the following is not “Money Market Instrument”?. a) Treasury Bills b) Commercial Paper (CP) c) Certificate of Deposits (CD) d) Fixed Deposit e) Equity Shares 57. As per recent RBI guidelines, the Bank’s are advised to bring down Bulk/Certificate of Deposits to below …… of total deposits during the current year. a) 5% b) 10% c) 15% d) 20% e) 25% 58. Revised guidelines on Priority Sector have come into force based on the recommendations of …………Committee. a) Sri Y H Malegam b) Dr K S Krishna Swamy c) Dr C Rangarajan d) Dr K C Chakraborty e) Sri M V Nair 59. The minimum deposit required to open “No Frill / Basic Saving Account” a) No minimum b) `5 c) `100 d) `500 e) `1000 60. With regard to nomination to Illiterate account, which of the following 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 61. SARFAESI – sale notice to debtor by creditor within how many days?

a) 30 Days b) 60 Days c) 45 Days d) 90 Days e) None

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62. The company has its registered office in Mumbai and its factory is at Kolkatta. The Company has availed credit facilities from banks branch in Hyderabad. The equitable mortgage of company's immovable property is to be created at a) Mumbai b) Kolkata c) Hyderabad d) Any notified place in India e) None 63. A cheque signed by the director as authorized signatory of a company is presented for payment but at the same time branch received information about the death of the director. Branch to a) Pay the cheque as he signed in fiduciary capacity b) Stop payment c) Pay the cheque on receipt of confirmation from the company d) None 64. PMEGP cost of project for loans under manufacturing …… and for Business/Service sectors…….

a) `15 lakhs & 10 lakhs b) `20 lakhs & 15 lakhs c) `25 lakhs & 15 lakhs d) `25 lakhs & 10 lakhs e) None

65. Under Cheque Truncation System, the instrument deposited by the customer for collection remain with……..

a) Collecting Branch b) Service Branch of Collecting Branch c) Paying Branch d) Service Branch of Paying Branch e) Clearing House

66. In case where the instrument is obtained by unlawful means, the holder of the instrument will not get any title as per …….. a) Section 58 of NI Act b) Section 48 of NI Act c) Section 89 of NI Act d) Section 128 of NI Act e) None

67. Banks are required to pay DICGC fee on a) Monthly basis b) Quarterly basis c) Half-yearly d) Yearly e) None

68. Exposure to single/group borrower up to 5% is to be provided after-

a) Borrower consent to disclose the same in notes to account in Bank’s annual report b)Approval of Board c) Charging additional interest @2% d) a & b e) a, b & c 69. Composite loan limit of ….. can be sanctioned by banks to enable the MSME enterprises to avail of their working capital limit requirements through single window a) `25 lakhs b) `50 lakhs c) `100 lakhs d) `150 lakhs e) None

70. Amount allowed to be transferred abroad by any resident without RBI permission for purchase of fixed assets in a financial year. a) One million US Dollors b) Two million US Dollors c) Three Million US Dollors d) Two lakh US Dollors e) None

71. Family Income criteria (per annum) for DRI loans in Rural & Urban areas. a) `18000/- & `24000/- b) `15000/- & `24000/- c) `18000/- & `36000/- d) `24000/- & `36000/- e) None

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72. What is the floor limit (Min & Max) in case of CRR?

a) 3% & 10% b) 3% & 15% c) 5% & 10% d) No limit e) None 73. Fiscal Policy refers to

a) Balance of Payments b)Govt. taxes, expenditure and borrowings c) Govt. borrowings from Equity Market d) Sale and purchase of securities by RBI e) None

74. Subordinated debt instruments are to be limited to ….. of Tier I together with other components of Tier II should not exceeds …. of Tier I capital a) 100% & 50% b) 50% & 50% c) 50% & 100% d) No limit e) None 75. DICGC covers

a) Credit balance in cash credit account b) Overdue term deposit c) Deposits of central / state govts. d) a & b e) a, b & c 76. Photographs / signatures can be converted into electronic form through

a) Printer b) Pen Drive c) CPU d) Scanner e) Web Camera 77. Bank stakeholders include

a) Shareholders b) Customers c) Employees d) a & b only e) all

78. Crossed cheque, presented over the counter through the authorized agent of collecting banker for his valued customer for cash payment. Will you pay? a) Bank can pay b) Payment can’t be made since it is a crossed cheque c) Payment can be made on cancellation of crossing duly signed by the drawer d) None

79. Proprietor of a firm executed Power of Attorney to B. Cheque signed by Power of Attorney Holder for payment after the death of the proprietor. Will you pay? a) Yes b) No c) Will be paid with the consent of legal heirs of the deceased d) None

80. Banks are required to submit return “Unclaimed Deposit” every year in the month of ……. within days from the close of the reporting month.

a) March & 30 days b) December & 30 days c) December & 15 days d) March & 15 days e) None

81. Banks to maintain SLR as per

a) Section 24 of BR Act b) Section 42 of BR Act c) Section 42(1) of RBI Act d) Section 24 of RBI Act e) None 82. Competent authority to write-off loans given to Directors is

a) Board b) Management Committee c) Chairman & Managing Director d) Reserve Bank of India e) None

83. Under Financial Inclusion Plan of the bank, the agents appointed by the bank to collect money and make payments to the depositors are called as

a) Branch Managers b) Business Correspondents c) Business Facilitators d) b & c e) None

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84. Floating Provisions can be added to Tier-II capital up to __% of RWA

a) 1% b) 1.25% c) 1.50% d) 1.75% e) None

85. What is the maximum loan amount to EWS & LIG under ISHUP scheme?

a) 1 lakh & 1.60 lakh b) 0.50 lakh & 1 lakh c) 1 lakh & 2 lakh d) No limits e) None 86. In case where counterfeit note is found at the branch, FIR is to be filed by a) Remitter b) Cashier c) Beneficiary whose account the amount is to be credited d) Bank Branch where no. of notes exceeds 4 in a single transaction e) None 87. Relationship between Customer & Banker in case of Safe custody of articles

a) Lessor&Lessee b) Prinicpal&Agent c) Bailor&Bailee d) Assignor&Assingee e) None 88. Which of the following is not an Operational Risk?

a) People Risk b) Technology Risk c) System Risk d) Liquidity risk e) None

89. Truncated Cheque means

a) Shared Clearing b) Cheques presented will be processed by the depositing branch itself c) Physical movement of instruments from branch to clearing house d) Movement of electronic image instead of physical movement of instruments e) None

90. Provision on Standard Advances to be shown under which head of Balance sheet of the bank

a) Advances & Other Assets b) Provisions & Other Assets c) Liabilities d) Provisions & Other Liabilities e) None

91. As per RBI guidelines, if Bill discounted became NPA, the income already booked but not realized is to be

a) Reversed b) Need not be reversed but 50% provision is to be made c) Need not be reversed but 100% provision is to be provided d) None

92. What is the maximum loan amount that can be given under Small Manufacturing Units under MSME?

a) 100 lakh b) 200 lakh c) 300 lakh d) 500 lakh e) No limit

93. Banks are focusing attention on Retail Banking since it facilitates a) Improved NIM b) Stable Business growth c) Diversified Risk d) a & b e) All 94. What is the age criterion for individuals to open New Pension System (NPS)? a) No age limit b) 10 to 60 years c) 18 to 60 years d) above 60 years e) None 95. Innovative Perpetual Debt Instrument should not exceed …. of Tier-I Capital and the investments by FIIs should not exceed …. a) 10% & 49% b) 15% & 55% c) 15% & 49% d) 20% & 49% e) None

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96. The settlement formula under Comprehensive Corporate Compromise Policy (CCCP) for accounts other than suit-filed accounts is……..

a) Real Account + BMPLR + 2% b) Real Account + BMPLR + 4% c) Real Account only d) Real Account + BMPLR or contracted rate 97. Your customer approached with Fixed Deposit of other Bank with a value of `5.50 lakh (including accrued interest) and due for payment in next 24 months and requested for a loan against the deposit. As Branch Manager how you deal with it? a) Loan can be allowed up to 75% value of the deposit b) Loan can be allowed up to 80% value of the deposit c) Loan can be allowed only on receipt of confirmation from other Bank having noted the lien d) No loan can be allowed against other bank deposits e) None 98. As per AML norms, banks are required to preserve records…… a) 3 years from the date of cessation of transaction b) 5 years from the date of cessation of transaction c) 10 years from the date of cessation of transaction d) No time limit 99. Interest subsidy is available to all eligible Educational Loan Borrowers for a period of….. a) First one Year b) First Two Years c) During Study Period d) Till closure of the loan e) None 100. What is the maximum loan and repayment period is allowed for farmers to avail loans against pledge of agricultural produce? a) `5 lakhs & 6 months b) `25 lakhs & 12 months c) `10 lakhs & 6 months d) No limit on amount but should be repaid within 12 months e) None 101. A customer with a bearer cheque came for withdrawing the amount of cheque for `4000/-. The counter clerk expressed that the amount is not sufficient to pass the cheque as the balance is short by `700/-. The bearer of the cheque deposited `700/- and withdrawn the amount. Further account holder objected for revealing the balance in the account. In such a situation what is his liability? a) It is the responsibility of the customer to maintain sufficient balance in the account while issuing cheque and hence bank is not liable b) Anybody can deposit amount in any account and bank has no right to stop such credits c) Bank paid the cheque amount to the bearer since the instrument is in order in all respects d) Bank is not in order in disclosing the account balance to the bearer of the instrument and hence liable for damages e) None 102. LC states ‘about’ in case of amount, what does it indicate? a) 5% b) 10% c) 20% d) 25% e) None 103. Unspent foreign currency should be submitted with in how many days after returning to India? a) Retain any amount of foreign currency b) Returned to AD within 90 days c) Allowed to retain $5000 US Dollars d) Need to return unspent foreign currency within 180 days, if the amount exceeds $2000 US Dollars e) None of the above

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104. The minimum education qualification stipulated for borrower availing credit limit of `15 lakhs under PMEGP. a) Intermediate (10+2) b) 10th Standard c) 8th Class d) None 105. The risk involved in Business Correspondent Model is a) Credit Risk b) Operational Risk c) Reputation Risk d) Default Risk e) No Risk is involved 106. As per RBI guidelines, the exposure norms for Single and Group borrowers including infrastructure projects are stipulated at …… & …… of Bank’s Capital Funds respectively a) 10% & 20% b) 15% & 40% c) 20% and 50% d) 20% & 40% e) None 107. Under Basic Indicator Approach, Banks are required to provide provision towards operational risk a) 10% of Gross Income b) 15% of Gross Income of the last 2 years c) 15% of Gross Income (average of last 3 years) d) 15% of Net profit e) None 108. As per AML/KYC norms, review of accounts, customer identification of data is to be updated once in ….. years & ….. years for Low and Risk and High Risk Category accounts. a) 2 yr & 1 yr b) Once in two years c) 5 yr & 2 yr d) 2 yr & 5 yr e) None 109. Joint account operated either or survivor, the number of nominees can be a) Joint depositors are allowed to nominate one each b) Only one nominee is allowed c) No nomination facility is available for Joint Accounts d) None 110. Premium payable on pre-shipment and post shipment whole turnover post shipment packing credit. a) 5 & 10 ps per month b) 5.50 & 6.00 ps per month c) 6.00 ps per month d) 6.00 & 5.50 ps per month e) None 111. Short term crop loan treated as NPA if it remains unrecovered for a) One Crop Season b) Two Crop Seasons c) One Crop Season + 90 days d) Existing NPA norms that are applicable for Term Loans e) None 112. For appealing to DRT, the borrower need to deposit a) 25% of suit amount b) 10% of suit amount c) 15% of suit amount d) No deposit required e) None 113. Women granted a loan of `80 lakhs under CGTMSE, what is the amount of claim in case of default? a) `40 lakhs b) `52.50 lakhs c) `60 lakhs d) `64 lakhs e) None 114. Banks can extend Education loans to the students to pursue studies in India and Abroad with a maximum amount of a) `5 & `10 lakhs b) `10 & `20 lakhs c) There is no cap on maximum amount d) 80% of education cost without any cap on maximum loan e) None

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115. As per RBI guidelines, Branch to issue to SB account holders a) Pass Book b) Account Statement c) a & b d) None 116. Post dated cheque presented in clearing paid by the bank and at the same time another cheque presented was returned as there is no sufficient balance in the account. Customer claimed for damages. What is the liability of the bank? a) Bank can make payment of post dated cheque, if the instrument is otherwise in order b) Bank is not in order in making payment of post dated cheque c) It is the responsibility of the depositor to mention correct date while issuing cheque and hence banker is not liable d) Issuing cheque without adequate balance is the responsibility of the customer and hence banker is not liable e) None 117. At present, Banks are required to maintain SLR at a) 20% b) 23% c) 24.50% d) 25% e) None 118. The minimum CRR should be …… maintained on daily basis. a) 50% of eligible CRR b) 70% of eligible CRR c) 80% of eligible CRR d) 100% of eligible CRR e) None 119. Nominee obtains payment in the capacity of a) Owner b) Beneficiary c) Agent d) Trustee e) None 120. Staff should present in the branch 15 minutes before commencement of business hours, this is applicable to a) All Branches b) Rural Branches only c) Urban & Metro Branches d) No such stipulation e) None 121. Once the guarantor repays the loan and he attains the status of a) Debtor b) Creditor c) Agent d) Right of subrogation e) None 122. The present rate of service tax including cess is a) 12.36% b) 12% c) 10.30% d) 10% e) None of the above 123. 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 124. 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 125. 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

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126. Banks to submit Wilful Defaulters list to a) RBI with all accounts irrespective of liability b) CIBIL c) RBI where the liability is `25 lacs & above d) Banking Division, New Delhi e) None of the above 127. Banks are required to submit CTR (Cash Transaction Report) to ------- within ----- of succeeding month. a) FIU, 30 days b) FIU, 15 days c) FIU, 7 days d) RBI, 7 days e) RBI, 15 days 128. Premium payable on deposit insurance on every `100 per annum is a) 10 paise b) 5 paise c) 25 paise d) 50 paise e) None of the above 129. “Floating charge” is a charge created on a) Immovable Assets b) Movable Assets c) Assignment d) Deposits e) Assets created out of Bank finance 130. 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 131. Banks can create assignment on a) Book Debts b) Stocks c) Land & building d) Deposits e) Immovable 132. 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 133. Deposits which are exempted from Tax Deduction at Source (TDS) are a) Fixed b) Savings c) NRE/FCNR d) Recurring e) b, c & d 134. Which statement is not correct with regard to advances against shares? a) Maximum loan allowed is `10 lacs against physical shares b) Maximum loan allowed is `20 lacs against demat shares c) Margin requirement is 50% for physical shares & demat shares d) None of the above

135. 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 136. As per RBI guidelines, banks need to register the charge over the property with CERSAI within ……. days from the date of creation of charge. a) 15 days b) 30 days c) 60 days d) 90 days e) None 137. The method of interest booking on agriculture advances is a) Monthly b) Quarterly c) Half-yearly d) Yearly e) None

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138. RBI injects liquidity through a) Increase Bank Rate b) Reduction of Repo Rate c) Reduction of Reverse Repo d) Increase CRR e) Increase SLR 139. Provisioning norms are not applicable to loans sanctioned to a) Agriculture b) Exports c) DRI d) Govt. Sponsored Schemes e) Against Deposits 140. As per Basel-III, the banks are required to maintain minimum capital adequacy at ….. a) 12% b) 11.5% c) 11% d) 10% e) 9% 141. 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 142. What is the maximum amount that can be allowed to Software Development under priority sector? a) `10 lacs b) `20 lacs c) `100 lacs d) Not eligible to cover under priority 143. Exporter 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 144. 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 145. Clayton’s rule applies to a) Deposit Accounts b) Demand Loans c) Term Loans d) Overdrafts / Cash credits e) None of the above 146. 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 147. What is the maximum amount Branch can extend instant credit to the customers against outstation cheques? a) `15000 at all Branches b) `25000 in Urban/Metro Branches c) `10000 at all Branches d) Discretion of the Branch Manager e) None 148. 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 `5 lakhs d) No collateral security or third party guarantee is required for loans up to `25 lakhs in case of Tiny Sector e) None of the above

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149. UCPD guidelines are issued by a) FEDAI b) RBI c) Ministry of Finance d) IBA e) ICC Paris 150. Your customer requested to include his wife and daughter as nominees after one year of opening of the account. Will it be accepted? a) It can be accepted since the nominees are the family members of the depositor b) Cannot 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’t be considered e) None of the above 151. 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 152. 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 153. Which of the following can’t be a nominee? a) Illiterate Person b) Minor c) NRI d) HUF e) None of the above 154. 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 155. 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 156. 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 157. National Payment Corporation of India (NCPI) has setup payment network to enable the member banks to issue Domestic Payment Cards with a brand………… a) Visa Card b) Master Card c) Prepaid Card d) Rupay e) Travel Card 158. Permanent Account Number (PAN) is mandatory for a) Bank transactions (cash) of `50000/- & above b) Purchase and sale of shares / debentures / bonds of `50000/- & above c) Purchase and sale of immovable property where the value of the property is `5 lakh & above d) a & c e) All 159. 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

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160. X Company approached the Bank for sanction of working capital limit of `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. 161. 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 e) None of the above 162. Which of the following statement is not correct with regard to Tax Saver Scheme of Banks? 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 `10000/- in a financial year d) Maximum amount of deposit allowed is `5 lakhs e) c & d 163. 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 164. Financial statements includes a) Balance Sheet b) P & L c) Cash & Funds Flow d) a & b e) a, b & c 165. 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 12 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 166. 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 167. Which of the following statement is not true with regard to Temporary Overdrafts? 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

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168. The eligible criteria for sanction of Tractor Loan to farmer 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 169. The applicable net interest rate 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 170. 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 `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 171. Unsecured exposure is one where realizable value of tangible security is not more than ……. of the outstanding exposure. a) 5% b) 10% c) 25% d) 40% e) None 172. 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 173. As per RBI guidelines, the banks’ can levy charges to the Current accounts for not maintenance of minimum balances provided………. a) Charges should not exceed `100 in a year b) Charges should not exceed `500 in a year c) Bank has discretion to levy any amount of charges d) No charges should be levied as Bank is not paying any interest to the customer on Current Account deposit e) Banks are allowed to levy reasonable charges but should be known to the customers through proper communication 174. Scheme of payment of ex-gratia in lieu of appointment of dependents on compassionate grounds for officers (Public Sector Banks) is a) Minimum `5 lakh b) Maximum `8 lakh c) Maximum `7 lakh d) Maximum `6 lakh 175. Statements which is not true with regard to Locker operations? a) The rent for “A” type locker is `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 `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 176. Under the liberalized norms, a NRI can remit abroad money from his NRO account, up to …………… a) One Million US Dollar Per Year b) US Dollar of Two Million Per Year c) US Dollar of 5000 per year without any declaration or certificate d) US Dollar of One Million per year on the basis of undertaking and certificate e) None of these

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177. Branch sanctioned OCC limit of `10 lakhs against hypothecation of stocks worth `15 lakhs with 30% margin. What would be the notional drawing power when the present value of stocks is `20 lakhs? a) `10 lakhs b) `14 lakhs c) `20 lakhs d) `10.50 lakhs e) None 178. Which of the following documents do not attract stamp duty? a) Promissory Note b) Mandate c) Power of Attorney d) Form-A e) None 179. 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 180. What would be the applicable interest rate payable to the legal heirs of the deceased on overdue period of matured Term deposit, if not renewed? 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 181. Stamped receipt is to be obtained for all cash transactions of above a) `100/- b) `500/- c) `1000/- d) `2000/- e) `5000/- 182. 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 183. 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 184. What is the net interest rate (Interest Rate minus Interest Subvention) applicable for short term agriculture production loans (Crop Loans) up to `3 lacs? a) Base Rate b) Base Rate – 1% c) 10% d) 8% e) 7% 185. Base Rate 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 186. 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

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187. 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 188. Banks can issue draft against accepting cash up to a) `50000/- b) `20000/- c) `100000/- d) `49999/- e) Any amount 189. How long the counterfeit notes can be kept with the bank after having reported to police. a) 30 days b) 1 Year c) 2 Years d) 3 Years e) None 190. RBI advised banks that a Business Correspondent Agent has to be made available within a radial distance of …… and a branch within a radial distance of ….. a) 2 KM & 5 KM b) 5 KM & 2 KM c) 3 KM & 5 KM d) 5 KM & 10 KM e) No limit 191. What is the insurance coverage available to the borrowers for natural death and death due to accident under SGSY scheme? a) `6000 & `12000 b) `5000 & `10000 c) `6000/- only d) `10000/- e) None 192. Having furnished PAN, NRO Term deposit attracts TDS on interest income at a) 10% b) 20% c) 30% d) 10.30% e) 30.90% 193. Which of the following component is not required to be taken in to consideration while arriving Base Rate? a) Cost of deposits/funds b) Negative carry cost of CRR/SLR c) Unallocated overheads d) Average return on Networth e) Base Rate of Peer Banks 194. Branches should keep the PMEGP backend received in ……… and should be adjusted to the loan account only after completion of ……… months. a) Fixed Deposit & 36 months b) Savings Deposit & 36 months c) Savings Deposit & 24 months d) Fixed Deposit & 24 months e) None 195. Garnishee order is by _____ and the customer and bank relation_____to it. a) Income Tax Authorities & Debtor and Creditor b) Police & Debtor and Creditor c) Court & Judgment Debtor and Judgment Creditor d) Court & Judgment Creditor and Judgment Debtor e) None 196. Which agency is enabling the transfer of subsides directly to beneficiary accounts through Aadhaar Enabled Payment Bridge (AEPB)? a) RBI b) SEBI c) IDRBT d) NPCI e) SBI 197. Call Money Market interest are linked to a) Bank Rate b) Repo Rate c) Reverse Repo Rate d) Market forces e) None

197


198. Interest rate charged by the banks to exporters should not fall below…. after taking applicable interest subvention. a) Base Rate b) Base Rate – 1% c) Base Rate – 2% c) 7% d) 10% e) None 199. Firm X and Y are having accounts with Bank and the both the firms are represented by A, B and C as partners. Firm X showing a debit balance of 2.20 lakh and there is a credit balance of 3 lakh in Firm Y. Bank adjusted the debit balance of X account with available balance in Y account. a) Branch can exercise right of set-off b) Right of set-off can’t be exercised as the accounts are different c) Right of set-off can be exercised by issuing a notice d) None 200. Transaction Password relates to a) Core Banking b) ATM operations c) Internet Banking d) Tele banking e) None 201. Nomination in respect of the following is to be witnessed by two persons. a) All deposit accounts b) Deposit accounts where the nominee is a minor c) Physically challenged accounts d) Thumb impression accounts (illiterate) e) None 202. “Actionable Claims” deals with a) Debt b) Receivables c) Subsidy or Duty Draw Back d) a & b e) all 203. When the contents of the Negotiable Instrument are modified by the drawer, it is treated as a) Forgery b) Fraud c) Material alteration d) suppression of facts e) None 204. Loans to repairs to dwelling units up to ……. Lakh is treated as priority sector. a) 1 lakh for Rural/Semi urban & 2 lakh for Urban/Metro centres b) 2 lakh for Rural/Semi urban & 5 lakh for Urban/Metro centres Housing Loans c) 2 lakh at all places d) Not more than 10% cost of the dwelling unit e) None 205. Housing Loan of `80 lakh where the LTV is below 75%, it attracts Risk weight @ a) 75% b) 100% c) 125% d) 150% e) 175% 206. A cheque was issued for `8000/- leaving blank space both at figures and words column, and the bearer of cheque made it `80000/- and withdrew amount. Customer made a claim for `72000/- against the bank.

a) Bank to reimburse the amount since the cheque was issued for `8000/-only b) Customer is liable since he is negligent having left blank space at figures and words column c) Bank and Customer equally responsible d) Bank to file case against the bearer for making alternations of cheque e) None 207. The least discussed aspect by a financial analyst while appraising proposal a) Ratio Analysis b) Economic conditions c) Technical aspects d) Managerial aspects e) Marketing aspects

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208. Which of the following is part of Tier-I capital? a) Cumulative Perpetual Preferential Shares (CPPS) b) Subordinate Debt c) a & b d) Perpetual Non-cumulative Preferential Shares (PNCPS) e) Revaluation Reserves 209. Exercise of nomination by the depositor a) Optional to the depositor b) Mandatory in case of single named accounts c) Mandatory in case of joint accounts d) Mandatory for locker accounts e) None 210. Which of the following is exempted from NPA provisioning? a) Loans against Deposits b) Loans guaranteed by State Govt. c) Loans guaranteed by Central Govt. d) Loans against NSCs e) Loans against Govt. Securities 211. In case of deceased borrower, what is the extent of liability of the legal heirs? a) Limited to the extent of property inherited b) Not liable at all c) Unlimited and unconditional d) 50% of liability e) None 212. X introduced for opening the account of Y. What is the responsibility of X in case of fraud committed by Y? a) To be reimbursed fully b) No responsibility c) 50% of loss d) Assist the bank in identifying the account holder e) None 213. 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 214. The maximum loan can be sanctioned under DRI (including Housing) a) `12500/- b) `25000/- c) `15000/- d) `20000/- for SC/ST e) c & d 215. Preservation time for applications of closed accounts a) 3 years b) 5 years c) 10 years d) Permanent e) None 216. Foreign tourist who visits India can hold US dollars (currency) maximum of a) $1000 b) $2000 c) $3000 d) $5000 e) None 217. Why Banks prefer to reverse the contra entry immediately on expiry of Bank Guarantees? a) To avert claim from beneficiary b) To avert maintenance of CRAR c) To avert provisioning d) To improve profit e) None

218. Prepayment charges are exempted for

a) Housing Loans b) Education Loans c) Agr. Loans d) Corporate Loans e) a, b & c

219. IFSC code consists of …….. digits.

a) 9 b) 10 c) 11 d) 15 e) None

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220. Loans sanctioned to………, are exempted from exposure ceilings.

a) Priority Sector b) Export c) State/Central Government d) Real Estate e) None 221. Right of General Lien can be exercised on

a) Securities outstanding in the name of the borrower b) Existing and Future liabilities c) Future liabilities only d) a & b e) None

222. Delay in collection of cheque > 90 days, bank to pay Interest at applicable

a) SB Interest b) Term Deposit Interest c) Term Deposit Interest + 2% d) BMPLR e) No interest 223. Payment of FD beyond `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

224. On receipt of possession notice (SARFASEI) issued by the Bank, if the borrower raises objection, the same should be replied within…… a) 7 days b) 10 days c) 15 days d) 30 days e) None

225. Can a Private Limited company join as a partner in a partnership firm? a) Yes b) No c) Yes with limited liability d) None 226. 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 227. 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

228. 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 e) None

229. Cheque signed by the drawer as “R N Das” instead full signature and paid in due course. Drawer demands for return the amount as 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

200


230. 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 231. One Bank account per family is mandatory to avail a) Credit facility from bank b) Direct Benefit Transfer benefit (subsidy) c) Interest subvention – Housing Loan d) None 232. To avert fraudulent encashment of cheques presented for collection, branches are required to a) Present in clearing immediately b) Introduce Drop Box c) Affix the Special Crossing Stamp immediately on receipt of instrument d) None 233. Loans for Commercial Real Estate include………………. a) Plantations b) Housing c) Special Economic Zones d) Construction of Malls e) Hotels & Restaurants 234. 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 & `100 per day b) 60 days & `100 per day c) 30 days & `250 per day maximum of `25000/- d) 60 days & `250 per day e) None

235. Received request from your borrower for a loan of `300 lakhs for purchase of equipment @ 12% interest repayable in 60 months. The estimated Net Profit and depreciation is `100 and `20 lakhs respectively. What is the DSCR?

a) 1.20 b) 1.30 c) 1.50 d) 1.62 e) 1.75 236. The recent changes in issuance of Commercial Paper (CP) are a) Dilution of credit rating norms for the Issuers b) Allowing the Issuers to buyback CPs before maturity c) Relaxation in minimum amount d) a & b e) All 237. The primary business of Asset Reconstruction Companies is to a) Buy stressed assets from banks b) Buy stressed assets from banks and sell it to others for profit c) Buy the stressed assets from banks at discount and share the recoveries with the banks d) Act as Recovery Agent for the Banks e) None 238. Loans to food and agro-based processing units with investments in plant and machinery up to ------ is treated as priority sector advance. a) 1 crore b) 5 crore c) 10 crore d) 50 crore e) None 239. The documents to be insisted from a NRI for opening an account is a) Copies of Passport and VISA b) Local and Overseas addresses c) Compliance of KYC norms d) Latest Passport size photographs e) All of the above

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240. 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 241. Interest Subsidy on Housing Loans (1%) for the first year is available provided the loan amount does not exceed ------ and the cost of house should be within ------ a) 10 lakhs & 15 lakhs b) 10 lakhs & 20 lakhs c) 15 lakhs & 25 lakhs d) 10 lakhs & No cap e) None 242. Commission on receipts (physical) relating to Govt. Business a) 25 per transaction b) 30 per transaction c) 50 per transaction d) 60 per transaction e) 0.50% of the transaction or 45 whichever is higher 243. 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 244. Customer not kept Cheque book under lock and key and one cheque leaf was stolen. Bank made payment of the said cheque which was forged. 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 on forged signature d) None 245. Loans not exempted from Base Rate Purview? a) Consortium Advance b) Deposit Loans c) Export Credit d) Loans to staff members e) None 246. 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 247. Margin on loan against FCNR (B) --- if the maturity period is less than one year and ---- 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 248. Visually challenged persons are allowed to avail the following banking facilities? a) Cheque Book b) Debit Card c) ATM Card d) Locker e) All 249. Customer Service Standing Committee Meeting does not cover a) Customer Grievances b) Staff matters c) Credit d) New Products e) B,C & D 250. 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

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251. 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 252. Why ‘A/c Payee’ cheques are to be credited the payee’s account only. a) To get protection under section 131 of NI Act b) To comply KYC guidelines c) To comply RBI guidelines d) To avert fraudulent conversions e) C & D 253. Cap on Rate of Interest on FCNR deposits a) LIBOR+1.25% b) LIBOR+1% c) LIBOR+2% d) LIBOR – 0.50% e) LIBOR – 0.75% 254. In case of “Paripasu” what charge the subsequent creditor enjoys? a) Equal charge b) First charge c) No charge d) Second charge e) None 255. Current Assets 48 lakh, Networking Capital 12 lakh. What is the Current Ratio? a) 1.20 b) 1.10 c) 1.33 d) 1.45 e) None 256. Mr Sandeep left India on 1st August 2003 for taking up employment in a software company in USA. In this context, which of the following statement is true? a) He would be treated as NRI from 1st August 2003 onwards b) However, till that date, he would be treated as a Resident c) His existing account will continue as a resident account d) All the above e) (a) and (b) are correct 257. X & Y opened SB account operated by “Either or Survivor” and exercised nomination in favor of “Z”. Who is empowered to modify or cancel the nomination? a) X b) Y c) Z d) Jointly with the consent of Z e) None 258. What is the Annual Guarantee Fee (CGTMSE) payable for accounts with credit limits of above `5 lakh to women for the units located in North Eastern region? a) 0.75% b) 0.85% c) 1.25% d) 1.50% e) 1.00% 259. Break Even Point means a) Sales equal to Fixed Costs b) Sale proceeds matches to Variable Costs c) The sale proceeds will take care of fixed as well as variable costs d) Sales equal to Fixed costs + Variable costs + Minimum profit e) None 260. Housing Loan up to ……… is treated as Priority Sector. a) `10 lakh b) `15 lakh c) `25 lakh in Metro with population above 10 lakh & `15 lakh in other centres d) `25 lakh at all places e) None 261. Nominee can exercise his right a) During the tenure of deposit b) On maturity of deposit c) Any time since he will be treated as joint depositor d) He has no right on deposit since it is in the name of the depositor e) On the death of the depositor

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262. As RBI guidelines, bank notes (500 & 1000 denomination) issued prior to 2005 are… a) accepted for monetary transactions up to 31st March 2014 b) exchanged at bank branches on an ongoing basis c) not accepted for exchange after 31st March 2014 d) a & b e) None 263. Provision to be maintained on substandard assets which are fully secured. a) 15% b) 20% c) 30% d) 5% e) 10% 264. Loans to Bank staff backed by terminal benefits attracts Risk Weights @ a) 0% b) 5% c) 10% d) 20% e) 50% 265. Balances under Cash Reserve Ratio (CRR) earn interest @.... a) 3% p.a. b) Applicable SB Interest Rate c) 5% p.a. d) No interest e) None 266. Under Rajiv Gandhi Equity Savings Scheme, the investor is entitled to claim tax relief under section 80 CCG of IT Act up to …… of investments with maximum of ….. a) 100% & one lakh b) 20% & One lakh c) 50% & `50000/- d) 50% & One lakh e) 50% of investments without any cap 267. In the recent years, India’s GDP growth rate shows signs of a) Upward growth b) Downward growth c) Stable growth d) Stagnant e) None 268. The entities willing to start new banks should be under a) Partnership b) Company c) Trust d) Non-Operative Financial Holding Company (NOFHC) e) None 269. Banks are allowed to accept deposits under Capital Gains Scheme in …. a) Savings b) Fixed c) Current d) a & b e) Any scheme 270. X, a pensioner is maintaining joint account (Either or Survivor) with his wife. Branch received the request from wife of the pensioner to furnish the same account for family pension as the main account holder expired. Branch may a) advise the customer to close the existing account b) open another account exclusively for pension purpose c) a & b d) allow the existing account for family pension payments e) None 271. Loans extended to Medium Manufacturing Enterprises shall be classified as Priority Sector provided the loan amount should be within a) 2 crore b) 5 crore c) 10 crore d) Not eligible e) Entire amount 272. Which of the following is an example of Financial Assets? a) National Saving Certificate b) Infrastructure Bonds c) Indira Vikas Patra d) Krishi Vikas Patra e) All

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Question Bank - Key

No No No No No No No 1. c 41. c 81. a 121. d 161. c 201. d 241. c 2. c 42. b 82. d 122. a 162. d 202. e 242. c 3. d 43. e 83. b 123. d 163. a 203. c 243. c 4. d 44. c 84. b 124. e 164. e 204. b 244. c 5. e 45. e 85. a 125. b 165. e 205. c 245. a 6. b 46. d 86. d 126. c 166. e 206. b 246. a 7. c 47. d 87. c 127. b 167. c 207. b 247. a 8. c 48. b 88. d 128. a 168. d 208. d 248. e 9. e 49. b 89. d 129. e 169. a 209. a 249. a 10. d 50. d 90. b 130. e 170. d 210. a 250. e 11. d 51. e 91. a 131. a 171. b 211. a 251. c 12. b 52. a 92. e 132. a 172. e 212. d 252. a 13. d 53. a 93. e 133. e 173. e 213. b 253. b 14. d 54. d 94. c 134. c 174. b 214. e 254. a 15. d 55. b 95. c 135. d 175. a 215. c 255. c 16. c 56. d 96. e 136. b 176. d 216. d 256. d 17. d 57. c 97. d 137. a 177. a 217. b 257. e 18. e 58. e 98. c 138. b 178. b 218. e 258. b 19. d 59. a 99. c 139. e 179. a 219. c 259. c 20. a 60. d 100. b 140. b 180. a 220. c 260. c 21. d 61. a 101. d 141. b 181. e 221. a 261. e 22. d 62. c 102. a 142. d 182. c 222. c 262. d 23. e 63. a 103. d 143. a 183. d 223. c 263. a 24. b 64. d 104. c 144. b 184. e 224. c 264. d 25. b 65. a 105. b 145. d 185. d 225. c 265. d 26. d 66. a 106. c 146. c 186. c 226. b 266. c 27. c 67. c 107. c 147. a 187. d 227. b 267. b 28. e 68. b 108. c 148. e 188. d 228. b 268. d 29. b 69. c 109. b 149. e 189. d 229. b 269. d 30. a 70. d 110. c 150. d 190. a 230. a 270. d 31. d 71. a 111. b 151. d 191. a 231. b 271. e 32. a 72. d 112. a 152. d 192. e 232. c 272. e 33. c 73. b 113. a 153. d 193. e 233. d 34. d 74. c 114. c 154. b 194. a 234. a 35. b 75. a 115. c 155. a 195. d 235. c 36. c 76. d 116. b 156. c 196. d 236. d 37. e 77. e 117. b 157. d 197. d 237. c 38. e 78. a 118. b 158. e 198. c 238. c 39. a 79. b 119. d 159. b 199. b 239. e 40. d 80. b 120. a 160. d 200. c 240. c

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COMPUTER AWARENESS Computer is an electronic device. Computer is a data processing tool. It takes Data and commands as input. Computer processes the data according to the commands and provides the resulting information as an output. A computer is a machine, which calculates and solves problems at very fast speed and has memory to store instructions and information’s. Computer can also calculate the figures. It has the storage place called memory to store the information’s. This memory is in the form of small boxes called chips. Basically any computer is supposed to carry out four functions viz., accepting the data as input, storing the data and instructions in its memory and recalling the same as and when required (Retrieving), processing the data as per instructions to convert it into useful information and communicating the information as output. Computers can be used for many other interesting works like drawing different shapes/pictures, listen music, play games, quiz, puzzles, preparation of greeting cards etc. Computers are used in Education, Hospitals, Business, Science and Engineering, Entertainment, Communication and Telecommunication, Desk Top Publishing, Libraries, Railways, Airports, Offices, Defence, Private and public sectors etc. The other thing which computer can do is to control functioning of very complicated intelligent machines like robots satellites etc. Evolution of Computers The first calculating device developed and used for calculations is known to be the Abacus. An abacus made calculations using beads and rods. Moving beads up and down does addition and subtraction of numbers. The Abacus is a simple and an effective manual calculating device. Blaise Pascal, a young Frenchman, invented an Adding Machine in 1642.This was a mechanical calculating device made from gears, wheels and dials. It was used for adding numbers quickly. Adding machine based on this principle is still in use.

Joseph Jacquard, a French weaver, invented an Automated Loom in 1804. This Loom used punch cards to produce patterns and designs on cloth. The weaving action of this machine depended on the absence or presence of holes in the card.

Charles Babbage, an English man born in 1833, is known as the father of computers. He designed and built a machine called “Difference Engine". This machine could take in the information and sort it out in the form of tables. Difference Engine was used to calculate the logarithm tables accurately. Lady Ada Lovelace, an associate of Charles Babbage, developed procedures for solving problems on the Difference Engine. She is known to be the first lady programmer of the world. Charles Babbage also gave the complete design of a more advanced calculating machine called the “Analytical Engine". Computers have mainly four categories viz., Digital, Analog, Hybrid and Optical. I. Digital Computers operate by numerical counting (adding) of discrete data, using the method of controlled arithmetic operations. Digital computer represents the data into digits and then all operations are done on these digits at extremely fast rates. Digital computer basically knows how to count the digits. Digital computers employ many interchangeable arithmetic devices in usually sequential operation. Hence, cost is relatively high and programming is complex. Digital computers have been grouped into four viz., Micro Computers, Mini Computers, Mainframe Computers, Super Computers

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(a) Micro computers: A microcomputer is a computer who’s CPU is a microprocessor. A microprocessor is a processor all of whose components are on a single integrated-circuit chip. Home computers, personal office computers are examples of microcomputers, which have proliferated, bringing computing power and literacy to more and more people. In terms of number of units, microcomputers are those of all other types of computers combined. Microcomputers can be sub-divided into two types: (i) Home Computer: Home computers are meant for hobbyists rather than professionals. These consist of a keyboard integrated with CPU in one box type thing and interfaced with ordinary television and audiocassettes. They are meant for entertainment, and training. Vendors supply cassette tapes containing programs for computer games and for entertainment. (ii) Personal Computers: Personal computers are called so because they are designed for personal use of individual or individual small business. They are meant for professionals, small business units and office automation systems. PC can be used for a variety of applications like: Computer literacy, BASIC Programming, Fun and Games, Home and School applications, Business and Professional applications, Electronic spread sheets, Telecommunications, Data Base Management, Accounting, Word Processing. (b) Minicomputers: By early 1960, economic and technical factors combined to make small, inexpensive computers attractive for many applications. Many computing tasks could be accomplished with less power than was then available on the contemporary mainframe computers. Speed of execution, memory size, and other characteristics of minicomputers increased with advances in technology. The availability of low cost memory allowed a dramatic increase on the size of main memory attached to the minicomputers. (c) Main Frame Computers: Although there has been some blurring of the boundaries between minicomputers and mainframe computers, the mainframe remain a distinct class of computers. There are some key differences between the mainframe class computers and the mini class computers. One of the most dramatic differences is in the speed of the two classes. Another dramatic difference is in price. The primary function of mainframes today is to support large databases. Large business and government organizations need a central repository of data that can be managed and controlled centrally. Only the mainframe has the processing power to handle large database systems. Moreover mainframes have more that kept up with other classes of computer in terms of price and performance. (d) Supercomputers: There is a need for computers to solve multi various mathematical problems of real physical processes, such as problems that occur in aerodynamics, seismology, metrology, and atomic, nuclear and plasma physics. The Super computer has limited use because of its price tag, a limited market. Only these machines are used, mostly at research centers and some government agencies with scientific or engineering functions. As with other areas of computer technology, there is a content demand to increase the performance of the supercomputer. In some current applications in aero dynamics and nuclear physics, as many as arithmetic operations, requiring more than two days of computing time on a contemporary supercomputer, are needed for a single problem. II. Analogue Computer - Mostly used in engineering and scientific calculations. Analogue computers employee relatively few distinct, single-purpose devices in parallel-channel operation. Hence, cost is relatively low and programming is easy. The accuracy of analogue computers is limited as compared to the accuracy of digital computers, which is essentially unlimited. Analogue computers are best suited for simulating the response of physical systems, while digital computers are best suited for handling numerical problems, statistical data, and discrete random process.

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Digital computers can be set up, however, to serve as mathematical models of physical systems. III. Hybrid Computers: There is another category of computers, which should be mentioned in passing. These are the hybrid computers, which make use of both analogue and digital components and techniques. They employ analogue-to-digital and digital-to-analogue converters for transforming the data into suitable form for either type of computation. IV. Optical computer: Optical computers will be super high speed computer yet to be developed which shall work on quadra system logic. Components of computer Input devices, Output devices, processing unit [CPU], Memory. A device whose purpose is to allow the user to provide input or information to a computer system is called an Input device. Input devices are those devices that we use to send information into the computer. Input devices are - Keyboard, Mouse, Scanner, Joy stick, Bar Code Reader, Micro phone, Digital camera. Output devices are those devices that a computer uses to give information to us. The device used to get information from the computer. Output devices are Monitor [Visual Display unit], Speaker, Printer, Plotter etc.

CPU is responsible for receiving the instructions, processing them and supplying the results to the output units. Central Processing Unit (CPU) of a computer resides in the system box. Physically, there are processor chips, which are plugged on a circuit board called the motherboard. The most important processor chip is the microprocessor chip. Processing includes mathematical operations like addition, subtraction, multiplication and division. Processing also include logical functions like comparison and sorting. The components of CPU are: i) Arithmetic and Logic Unit [ALU] consists of high-speed memory locations directly built into the CPU. It is responsible for the arithmetic [+, -, *, /] and logical operators [<, >, <=, >=, <>] on the data entered. ii) Control Unit [CU] does not process or store data but maintains the flow of data between the ALU, Memory and the Input/Output devices. Sometimes, it just transfers the data from the memory to the output devices or to the storage devices. But if it finds the instructions for the arithmetic or logical operations, it transfers them to ALU for further processing. iii) Memory Unit or the primary storage stores the data before processing, and the final results obtained after processing, in different storage sections. The programs or instructions given to the processor are also stored here.

The functions of CPU are - (a) To access and store relevant data and instructions during processing (b) To control the sequence of operations (c) To give commands to, and coordinate the actions of all parts of the computer system (d) To carry out-processing. How is the data input classified? The data input may be in form of - (a) Numerical with different symbols (b) Alphabetic. (c) Alphanumeric (Combination with letters, numbers and symbols) Examples: a1, b2, d/, 1* etc. Then this is coded into data acceptable to computer in its language. It may be audible, visual or audiovisual analogic data. In this case, an inter-facing device is required to convert it into signals, which are acceptable to computers.

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Types of memories i) Primary memory devices are in the form of a computer chip and they are plugged on the motherboard. In a PC, there are four types of primary memory chips viz., Random Access Memory (RAM) b) Read Only Memory (ROM), Cache Memory [store or to reserve] and Registers. The Hard Disk is basically a mass storage device, which is used for storing data permanently in the computer. Its storage capacity is many times more than that of a floppy and pen drive. ii) Secondary memory consists of different storage devices in which you can store the work done on the computer. The popular storage devices are floppy disks, Pen drives, external hard disks and CD ROMs. Although all of these are storage devices, they differ from each other in many ways. Data can be written on floppy disk. Its capacity is however less but it has the advantage of being portable. It is very easy to write and rewrite data on the hard disks and floppy disks. CD-ROM stands for Compact Disk Read Only Memory. It is an input device that has been exclusively designed to perform read operations. It reads data with the help of laser beam, which is directed with the help of lenses, prism and mirrors. CD-RW: In a CD-RW, it is possible to write many times on the disk, overwriting the previously recorded data. DVD: A DVD or Digital Versatile/video Disc is a high-density medium, capable of storing a full-length movie on a single disc. RAM & ROM RAM is the main memory of the computer. This is the working memory. Any program or data first gets transferred to this memory and then only user can use it. Anything that is typed on the keyboard goes on to the RAM. Similarly, the output displayed on the screen comes from the RAM. It is called volatile memory (temporary). RAM becomes blank as and when the system is switched-off. The ROM is built into the system box. It contains the basic instructions to start the computer and display the system configuration. We can read from this chip and cannot write or change anything on it. The name of this memory suggests that you can only read from this chip and cannot write or change anything on it. It is similar to a printed book that you buy from the market. You only read from the book and do not write anything on it yourself. This chip contains important information and instruction to enable a computer to startup and identify various components within the computer. ROM is non-volatile memory (permanent). That is, even in the absence of electricity, content of this memory is not lost.

Cache is a component that transparently stores data so that future requests for that data can be served faster. The data that is stored within a cache might be values that have been computed earlier or duplicates of original values that are stored elsewhere. If requested data is contained in the cache, this request can be served by simply reading the cache, which is comparatively faster. Otherwise, the data has to be recomputed or fetched from its original storage location, which is comparatively slower. Hardware implements cache as a block of memory for temporary storage of data likely to be used again. CPUs and hard drives frequently use a cache, as do web browsers and web servers.

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Units of Memory This is a system consisting of two digits. The computer converts all the information including numbers and letters into binary system. In the electronic chip the transmission of electricity represents the digit 1 and no transmission of electricity represents the digit 0. 1 or 0 is known as a binary digit or bit. Bit is a binary digit. In computer all the characters including letters, punctuation marks, numbers and special characters are stored in bytes. One byte consists of 8 bits and stores one character. 4 Bits are called Nibble. The units of memory are as under: 8 Bits 1 Byte 1024 Bytes 1 Kilobyte [KB] 1024 Kilobytes 1 Megabyte [MB] (One Million) 1024 Megabytes 1 Gigabyte [GB] (One Billion) 1024 Gigabytes 1 Terabyte [TB] (One Trillion) Computer languages 1. Machine Language: Machine language is considered to be the first generation language. All instructions/data that are fed to the computer are converted into a sequence of bits [0 and 1] as a computer understands only the binary numbers, which consists of only 2 digits [0 and 1]. As clear from the name, machine language is directly accepted and executed by the computer. Note: Machine language is the elementary language of a computer, which consists of binary digits [0 and 1] only. It is directly executable by the computer and no further translation is required and the execution of the program is very fast. However, portability is an issue as the internal designs of computers are different which warrants conversion of program. You need to rewrite the program. 2. Assembly Language: In assembly language, binary operation codes were replaced by the Mnemonics i.e. like two or three letter abbreviations. For example, in machine language, if the operation code for “add,” is “0010”; its equivalent in assembly language is ‘ADD’. An assembler is used to further translate it into the machine code so that it can be executed by the computer. Since mnemonics are abbreviations or symbols, they need to be translated into machine language to get executed. Assembly language is considered to be second-generation language. Machine and assembly languages are also called low level language as they are linked with the hardware. Since assembly language differs from the machine language in the way of mnemonics mainly, most of the shortcomings of machine language like machine dependence, difficulty in writing and debugging the programs etc., are applicable to the assembly language. 3. High Level Languages: Machine language and assembly language were used because initially computers came with very small memory and limited resources. Thus program efficiency could be achieved only by using hardware-oriented languages. As speed, power and capacity of computer increased, a need was felt to develop the programs which can make use of this wonderful machine in many other fields and can be developed by people who are not experts in computer architecture and hardware. So high level languages came into existence. High-level languages (HLL) are the languages with simple English like syntax, which is easy to understand Basic, Fortran, Pascal, Cobol, C, and C++ are a few such languages. We need compilers or interpreters to change the HLL code to machine code so that it could be understood and executed by the computer. High-level languages are considered to be third generation languages.

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(1) BASIC stands for Beginner's All-purpose Symbolic Instruction Code. It is a comparatively easy language for beginners in the sense that it uses phraseology similar to conventional ENGLISH. BASIC is the most commonly used language on microcomputers. lt was designed by two American professors JG Kemeny and Thomas Curtz of Dartmouth College USA in 1964. Most microcomputers use a BASIC devised by a company called Microsoft. Because of its simplicity, BASIC was used in the first PC to gain commercial success. (2) FORTRAN stands for FORMULA TRANSLATION. It was the first computer language developed by IBM in 1957. It has been modified since then many times and these versions were given the names like FORTRAN II. FORTRAN-IV is the most popular version, which was developed in 1966. Latest addition to this is FORTRAN 77, on which even file handling and word processing is possible. FORTRAN'S syntax is very rigid. It is used in engineering and scientific applications. (3) PASCAL is sometimes used on small computers and is better structured than BASIC. PASCAL was designed and developed by Nicolaus Work for teaching computer science. (4) COBOL: It stands for Common Business Oriented Language and is the most popular business language today for data processing. It was designed around 1959-60 with a purpose to provide a common language for business applications. (5) C: Its mid level general-purpose language more versatile than BASIC or FORTRAN. It is used both with Unix and DOS operating systems. The C language was developed at Bell Laboratories in the early 1970s. It was subsequently used to write the UNIX operating system. AT&T (Bell Labs' parent) markets a C compiler and UNIX operating system tools as a single software package. There are many other versions of C that run on pc's and larger machines. (6) LOGO: It allows even children to program a microcomputer quickly for drawing pictures etc. (7) Fourth Generation Languages: These languages are under stage of development. Efforts are being made to see that no elaborate programming is required and languages become user friendly. One such language SQL was developed by IBM around 1976. SQL is an acronym for "Structured query language". Commercial relational DBMS packages such as Oracle 7, Ingress 6.4, and Sybase use SQL. Remember when the input program (called as Source Code) is processed by a language translator, output is the machine language program called as Object program. High-level languages have lots of advantages over Machine language and Assembly language. These programs developed on one type of computer can run or get executed on other type of computer with no change or little change. Hence lot of effort was saved. It is really easy to write a program in a high level language. The programmer is more concerned about logic and program development without worrying about the hardware aspect. Computer language is a medium to communicate with each other. Similarly a computer language, which is needed to interact with computer, has its own set up rules and syntaxes. While making programs it is essential to follow these syntax, otherwise computer will not be able to understand anything. Computer languages can be classified in to three categories based on complexity of the language viz., Machine Language Assembly Language / High Level Language. Software means a set of instructions/programs given to the computer system, which enables the hardware to function. Computer software is the intelligence of the computer and can be broadly classified into:

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i) System software: A software program coordinates the operations of the various hardware components of the computer. The system software or operating system program helps the user to actually operate the computer system. Without the operating system, we cannot use the applications software. The operating system controls computer system resources and coordinates the flow of data to and from the microprocessor and to and from input devices and output devices such as the keyboard and the monitor. It helps the computer to supervise and manage its resources. The most popular operating systems are DOS, UNIX, LINUX, Windows 98, Windows 2000, Windows XP and the Windows 8. ii) Application software makes the computer useful for the people and can be used for different purposes. These help the user to work more efficiently, faster and more productively. There are general purpose application software’s such as Word processing software, Spread sheets, Database management software, Desk Top Publishing software etc. Software developed to suit the specific requests of the customers is called Customized software. Example - Accounting, Library management, Fees collection, Hotel management etc. In computer networking, topology refers to the layout of connected devices. Broadly they are categorized as under: Bus Topology: Bus networks use a common backbone to connect all devices i.e. Single cable. A device wanting to communicate with another device on the network sends a broadcast message onto the wire that all other devices see, but only the intended recipient actually accepts and processes the message. Bus networks work best with a limited number of devices. In case where the number of computers are more, performance problems will likely result. If the backbone cable fails, the entire network effectively becomes unusable. Ring Topology: In a ring network, every device has exactly two neighbors for communication purposes. All messages travel through a ring in the same direction (either "clockwise" or "counterclockwise"). A failure in any cable or device breaks the loop and can take down the entire network. To implement a ring network, one typically uses FDDI, SONET, or Token Ring technology. Star Topology: A star network features a central connection point called a "hub node" that may be a network hub, switch or router. Devices typically connect to the hub with Unshielded Twisted Pair (UTP) Ethernet. Compared to the bus topology, a star network generally requires more cable, but a failure in any star network cable will only take down one computer's network access and not the entire LAN. Tree Topology: Tree topologies integrate multiple star topologies together onto a bus. In its simplest form, only hub devices connect directly to the tree bus, and each hub functions as the root of a tree of devices. This bus/star hybrid approach supports future expandability of the network much better than a bus (limited in the number of devices due to the broadcast traffic it generates) or a star (limited by the number of hub connection points) alone. Mesh Topology: Mesh topologies involve the concept of routes. Unlike each of the previous topologies, messages sent on a mesh network can take any of several possible paths from source to destination. (Recall that even in a ring, although two cable paths exist, messages can only travel in one direction.) Some WANs, most notably the Internet, employ mesh routing. A mesh network in which every device connects to every other is called a full mesh. Partial mesh networks also exist in which some devices connect only indirectly to others.

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Topologies remain an important part of network design theory. You can probably build a home or small business computer network without understanding the difference between a bus design and a star design, but becoming familiar with the standard topologies gives you a better understanding of important networking concepts like hubs, broadcasts, and routes. Computer Networks A computer network is a group of computers that are connected to each other for the purpose of communication. Networks may be classified according to a wide variety of characteristics. A computer network allows computers to communicate with many other computers and to share resources and information. The Advanced Research Projects Agency (ARPA) funded the design of the "Advanced Research Projects Agency Network" (ARPANET) for the United States Department of Defense. It was the first operational computer network in the world. LAN stands for local area network and WAN stands for wide area network. There are obvious differences between the two network types. LANs are smaller networks, usually within an office base. Connections between the workstations are physical, with cables, and all the office resources are shared and distributed between the network workstations. The most common type of LAN is that of Ethernet. This is a family of frame-based computer networking technologies for LANs. WANs are broader geographic networks, like one city to another. They are more of a collection of interconnected LAN networks. Other WANs, provided by service providers, connect local networks to the Internet. In actual fact the Internet is more a specific Internetwork, not a straight WAN. While LANs are smaller, collectively they can be linked to create the WAN. This really is done using a series of routers, and bridges, which are basically network hardware devices which enable interconnectivity between separate LANs with the option of expanding into small-scale WANs. LANs are faster with 10 GB data transfer rates encompass a smaller geographical area. WANs also rely on common carriers, while LANs do not. Aside from these differences users of a LAN will more likely need password validation as it will have specific user rights. While smaller WANs might also have this, it is less likely. LAN networks will generally be more private than WAN networks, and will have some sort of networking software and probably a network administrator. Hardware resources are shared on a LAN, while with a WAN the focus is more on communications. The network topology of LANs is often peer-to-peer. That is to say, each client shares is resources with other workstations in the network. WAN networks will operate on a more client-to-server basis with interconnected LANs. Really, all this means is that the resources are requested from a central server. A single LAN network will be cheaper to set up than that of a larger WAN, with more workstations and more hardware connection requirements with the need for a leased line. So, the differences between Lan’s and Wan’s are indeed greater than just that of size. There are differences in network topology, hardware requirements, software requirements as well as technical specifications and cost. Windows & Desktop Windows is a commercial, multi user, multi tasking operating system with a graphical user interface (GUI). It presents the information to the user in rectangular boxes called windows. In windows every user can have personal settings and a user can open any number of applications depending upon the system resources.

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Windows will get started when you switch on the CPU. After loading Windows the first screen that appears is called Desktop. All the further activities that you start in Windows would then start from the Desktop. It is comprised of many components like Icons, Start menu and Task bar. Icons: Several small pictures along with their name remain present on the desktop. These pictures are called icons. Icons are basically, small graphical symbols, which represent a program. Each icon represents a different program and its name is written below the icon. Example - My computer, Recycle Bin, My Documents etc. When you double click on any icon the program will be opened. It is a multi user and multi tasking operating system and user friendly. However, it requires more memory. There are three types of icons viz., Program icons, Shortcut icons and Tool bar icons. Example - My Documents, My Computer and Recycle bin. To shut down the windows, Click on START, in the menu that appears click on Shutdown / Turn Off Computer, then in the dialogue box that appears with options like STANDBY / SHUTDOWN / RESTART etc. There are three main reasons for working in the Windows environment viz., to reduce memory load and make working easier, to run multiple applications at the same time, and share information between them and to use standardized applications. i) Program Window: A computer program is a set of instructions that perform a specific task, such as word processing or data management. Each time you open a program, Window opens a program through which we can enter commands for the program. The more programs you start, the more windows you open. As a result, you may have several program windows open on your Desktop at the same time. A program window might contain several document windows. ii) Document Window: A document is any information you create with a program, such as a letter, spreadsheet, or database file. When you open or create a document in a program, you open a document window. Each document window contains a single document and always appears in the program window's work area. This type of window is sometimes referred to as a child window. The elements of window are - Title bar, Left side of the title bar there is control menu bar, Below the title bar there is menu bar, Scroll bar, Edit field and Status bar. A dialog box is a window that appears temporarily on the top of your application window, which would require information from you to complete the task. It usually contain an option called “OK”/”Apply”/”Cancel”. OK executes the task, Apply provides an opportunity to make changes before closing and Cancel closes the dialog box ignoring all the changes you may have made. A message box is a simple box that displays a message or a warning to you. Generally they require you to acknowledge the window and click on OK to continue working. In the case of dialog boxes and Message boxes, you cannot continue working until you have closed this box. A list box contains a list of options. Usually, you can only select one option in a list box. It contains a V at the right corner of the field and when you click on the V, various selectable options are displayed. Then click on an appropriate option and select it. The list box closes now.

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Combo boxes are a combination of an edit box and a list box. A combo box is a rectangular box with one option along with a downward facing arrow next to the rectangular box. However, when you press the Down Arrow key a list of additional options descends from the box. You can only select one option from the list. Once you come to the entry of your choice, press the tab key to move to the next field. Since it is a combo box one can also type directly into it and use it like edit field. Menu: Menu means containing list of different options. Each option itself will have special feature, which is used for the purpose of the document. a. Windows Menu: By clicking on the START button, we can activate windows menu. Using the mouse, we can select different Windows Menu options and activate them. Alternately we can press the Windows Key to Activate the Windows Menu and use up or down arrow keys to select a particular menu. b. Other application menus: The application Menu options are available below the title bar of the window. (File, Edit, View, Insert, Format, Tools…etc). By clicking on the required menu option, the sub menu options available under the selected menu option are displayed. By clicking on the appropriate sub menu option, the desired operation can be performed. Menu’s are very important, because without menus we can not complete the task for any application window. By using menus only we can complete the task with the help of dialogue box. So the menu options are very useful for making the work easy. Key Board Escape key - It means to remove any type of dialogue boxes and message boxes from desk top or from any application windows etc. It also cancels the menu from different application windows. TAB Key - Pressing Tab one time, gives 5 spaces. Press TAB to go to next option in a dialogue box. TAB combines with SHIFT key. Then press SHIFT and TAB to go to previous option. TAB combines with INSERT key. Then press INSERT and TAB to read same option repeatedly in any dialogue box. TAB combines with CONTROL key. Then press Control and Tab to move between the pages in some dialogue boxes. TAB combines with ALT key. Then press Alt and TAB to move between opened application windows. At the time of working in columns and rows, press TAB one time to go to next cell and press Shift Tab to go to previous cell. Shift Key - Shift is used to change the small letters into the capital letters. Pressing the shift key we can edit different symbols placed on number keys and other symbol keys. Shift is used for selecting the text with arrow keys. Shift also combines with Control key, Home key, End key, Page up key and Page down key for selecting the text. Control Key: Control key is used to combine with other keys as commands while working with different applications. Examples: Control A, Control Z etc. ALT Key - Alt is used to activate or to deactivate the menu bar. Alt is used to combine with other keys as commands. ALT combines with TAB key, to move between opened application windows. Application Key: When we activate application button, some menu options will take place. Insert Key: Insert is one of the combination key.

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Enter Key - Activates the menu which allows change the line, open the files/folders and give extra space between the lines. Arrow Keys: To go to previous character, press left arrow. To go to next character, press right arrow. To go to previous line, press up arrow. To go to next line, press down arrow. Delete Key: It is used delete the text in a document. It is used to delete blank lines. It is used to delete forward characters. Delete key combines with some keys, as keyboard commands. Examples: Control and delete, Alt and delete, Insert and delete. Home Key: It brings the cursor to the starting of the same line. Home key combines with other keys as keyboard commands. Examples: Control and Home, Shift and Home etc. End Key: It takes the cursor to the last character of the same line. End key combines with some keys, as keyboard commands. Examples: Control and End, Shift and End etc. Page Up Key: It scrolls the screen towards upward direction. It combines with Control key, to go to previous page. Page Down Key: It scrolls the screen towards downward direction. It combines with Control key, to go to next page. Spacebar Key: Spacebar is used to give spaces between the words. Press Spacebar one time selects the list views where files are placed in folders and different drives in my computer. Spacebar is the combination to some keys, as keyboard commands. Examples: Alt Spacebar and X, Alt Spacebar and R, Alt Spacebar and N, Alt Spacebar and C, Control Spacebar etc. Back Space: Back Space is used to delete the characters backward direction. Back Space is also used to move between the drives and to my documents. To come out from the folders or from sub folders we use back space key. Character User Interface Graphical User Interface The commands are typed in a series of characters

The commands are given by clicking icons Does not support pictures Supports pictures Mostly single user operating systems Multi user operating systems Does not support multi tasking Supports multi tasking User must learn all commands in order to use a Character User Interface

People with no/little computer knowledge can operate

Requires less memory Requires more memory Popular during the beginning days of computers

Popular with the evolution of the computer technology

Character User Interface’s are useful for giving complex commands

Not useful for giving complex commands. It contain command shell for giving complex commands

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Microsoft Word

MS Word is a word processing programme involves the information of written text into a form that gives it a formatted systematic looks that facilities easy reading. It allows add/change fonts, characters, Headers and Footers. It also generates personalized letters through Mail Merge, allow you to share resource available to all office programme, such as clipart, drawing tools etc. This module can be used to create and maintain documents, like letters, reports, circulars etc. The documents are stored in .doc or docx format. MS Word is a word processor through which we can format our text in the required format. The Word has nine menus viz., File, Edit, View, Insert, Format, Table, Tools, Windows and Help. FILE MENU – (Keyboard shortcut: ALT + F) 1. New: This is used to create a new document. The shortcut key is Ctrl N. If already there is a open document 1, then document 2 is created. If document 2 is also already open, then document 3 is created. 2. Open: This is used to open an existing document. The shortcut key is Ctrl O. This will ask for file name. Type the file name and press enter. 3. Close: This is used to close the current document. The shortcut key is Ctrl W. This will not close the word. 4. Save: This is used to make the changes permanent. The shortcut key is Ctrl S. This will ask for file name for the first time. After that it will make the changes permanent. 5. Save as: This is used to make a copy of that file. The shortcut key is F12. This will ask for file every time. 6. Page setup: This is used to set the paper properties such as margins, size etc. 7. Print: This is used to print the current document. The shortcut key is Ctrl P. This will ask for printer name, number of pages, number of copies. 8. Send to: This is used to save the file in floppy or to send the file to E-mail. 9. Exit: This is used to quit the Ms word. Shortcut key is Alt F4. EDIT MENU - ALT E Edit menu has the following commands: 1. Undo: This is used to cancel the last operation performed, like delete or typing etc. the shortcut key is Ctrl Z. 2. Redo: This is used to perform the cancelled operation by undo. The shortcut key is Ctrl Y. 3. Cut: this is used to remove the selected text from the document, a copy is placed in the clipboard. The shortcut key is Ctrl X. 4. Copy: this is used to copy the selected text in the clipboard. The shortcut key is Ctrl C. 5. Paste: This is used to place the text from clipboard to the cursor position. The

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shortcut key is ctrl V. 6. Clear: This is used to remove selected text from the document. Shortcut key is delete key. 7. Select all: This is used to select the whole document. Shortcut key is Ctrl A. 8. Line up: This is used to move the cursor to previous line. The shortcut key is up arrow. 9. Find: This is used to find the required text. The shortcut key is Ctrl F. It will ask for find what: type the required text and press enter. Use arrow keys to read the text. 10. Find and Replace: This is used to replace the required text. The shortcut key Ctrl H. It will ask for find what, type the required text to be found. Then press tab. It will ask for replace with: type the word to be replaced. Click on Replace to replace the text at the current occurrence, Click on Replace All to replace the text at all the occurances. A dialogue will say about the total no of replacements. Press escape and use arrow keys to read the text. 11. GO TO: This is used to move the cursor to required position. Shortcut key is Ctrl G. INSERT MENU - ALT I Insert menu has the following commands: 1. Break: this is used to create section, page breaks. The shortcut key for page break is Ctrl enter. The shortcut key for Column break is Ctrl Shift enter. 2. Page Number: Page number dialogue will appear The position for page number should be selected by using up/down arrows. Use tabs and select the alignment using arrow keys then press enter page numbers will automatically displayed. 3. Date and Time: This is used to insert the current date or time. The dialogue will ask for the required format, use arrow keys to select the appropriate format and press enter. 4. Auto Text: the auto text can be used to insert the frequently occurring text. Type the required text. Select the typed text. Use alt F3 to open the auto text dialogue. It will ask for auto text name. Type the name and press enter. To insert auto text: Select the required position to insert the auto text. Select auto text from insert menu. Type the auto text name and press enter. 5. Symbol: The keyboard does not have special symbols like alpha beta etc. In order to type these symbols, symbol command can be used. 6. Picture: This is a submenu which consists of the following: Clipart: Clipart is the preloaded picture which can be used by inserting in the document. FromFile: This is used to insert required picture file. Auto Shapes: This is used to insert shapes like oval, rectangle etc. 7. File: This command can be used to insert another file into the current document. This will ask for file name, type the file name and press enter.

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8. Bookmark: To insert bookmark, first select the required word by using the Ctrl and arrow keys. Then select the command, it will ask for bookmark name, type a name without special characters. Press enter, the bookmark will be created. FORMAT MENU - ALT O 1. Font: Shortcut key for dialogue is Ctrl D. the font dialogue consists of the following: Font name: this is used to give different styles for text. Attributes: This is used to give the attributes like bold, italics, regular. Size: This is used to increase or decrease font size. Colour: This is used to change font colour. There are some other attributes like strike out, superscript, subscript, shadow, outline etc. 2. Paragraphs: The paragraph dialogue have the following: Indentation: This is used for setting the paragraph intendation. Spacing: the spacing is used for specifying the line spacing. There are single, double, 1.5, multiple line spacings. The shortcut key for single line spacing is Ctrl 1, the shortcut key for double line spacing is Ctrl 2, the shortcut key for 1.5 line spacing is Ctrl 5. Bullets and Numberings: this is used for generating automatic numbers, bullets. The dialogue has separates tabs for bullets and numberings. Using arrow keys the required formats can be created. Alt B is used to select the bullets tab. Alt N is used to select the numbers tab. 3. Borders and Shadings: The borders and shadings have the paragraph borders, page borders and shading tabs. The shortcut key for page border is alt P. the shortcut key for paragraph border is alt B. The shortcut key for shadings is alt S. Using tab key appropriate format can be selected. 4. Columns: the column is the format which is used for preparing news format. The column dialogue have 2,3,4,left, right check boxes. These boxes can be selected for required number of columns. There is one more check box for a separator line . there are options for specifying the columns width. 5. Tabs: The tabs can be used to create statements, invoices etc. The tab dialogue will ask for tab stop positions. Type the required tab position, use alt S to set the tab. The tab stops can be divided among the 6 inches. This tab stops can be cleared by using alt A. Before setting the tab, select the required position by using Shift and arrow keys. 6. Drop cap: Normally the newspapers have paragraph starting with a big capital letters. To use such kind of characters in the document we can use this. There are two options: in margin and dropped. 7. Text Direction: The text in the document is normally from left to right. This direction can be changed to top to bottom by using this command. 8. Change Case: The letters typed in lower case can be changed to upper case or vice versa. For this typed text should be selected, Shift F3 can be used to change the case. The available options are lower, upper, sentence case. TABLES - ALT A 1. Insert: Insert have the following submenus: Table: This will ask for number of rows and columns. Select auto contents check box and press enter to create a table. Columns: this command can be used to insert columns in the table. The available options are columns to right and columns to left. Rows: This command is used to insert rows in the table. Available options are rows above and rows below. Cells:

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This command is used to insert cells in the table. The available options are left, right, above, below. 2. Delete: the delete can be used to remove the cells from the table. This have the following options: Table: This is used to delete the current table. Columns: this is used to delete the current column. Rows: This is used to delete the current row. Cells: This is used to delete the selected cells. 3. Select: This command can be used to select the rows, columns, cells in the table. 4. Merge Cells: This command is used to merge more than one cells. This is done by selecting the required cells by using shift and arrow keys. 5. Split Cells: this command is used to split the cells. This dialogue will ask for number of columns and rows. By giving required number of columns and rows, the cells can be splitted. 6. Split Table: This is used to divide the table. Before using this command, select the table. 7. Table auto format: This command is used to format the table in the available format. This is done by selecting the table and giving appropriate format. 8. Auto Fit: the table should be auto fit to contents. In other case the alignment would be improper. To set the auto fit to contents table can be selected and this command can be applied. 9. Heading Row Repeat: tables can be sometimes big so that it cannot be fit into single page. In that case in order to repeat heading of the table this command can be used. 10. Sort: This is used to arrange the tables in ascending/descending order. For this, first select the required column and apply this command. 11. Formula: This command can be used to apply formula in the table. This formula can be used to sum the columns above or sum the rows towards left. 12. Show Grid Lines: This is used to show the lines between the cells. TOOLS MENU - ALT T 1. Spelling and Grammar: Shortcut key is F7. Move the cursor to start of the document. Press F7 to open the spelling and grammar dialogue. If we feel that the word is wrong, we can use alt C to change the word. In other cases alt I can be used to ignore the choice. Alt G can be used to ignore all such spelled words. 2. Language: Set language: this is used to change the language from USA to British format etc. Thesaurus: This is used to find an appropriate synonym for a selected word. To find thesaurus, first select the required word and use shift F7. the thesaurus dialogue will be opened. Use tab and arrow keys to select the appropriate synonym. Use alt R to replace the word with the synonym. 3. Word Count: This is used to find out the following in the current document. Pages, words, characters (without space) characters (with space), paragraphs, lines. 4. Auto Summarise: This command can be used to give the summary about current document.

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5. Auto Correct: Typing errors can be corrected by using the auto correct. This dialogue will ask for replace with colon edit. Type the abbreviation or the required word, use tab key it will ask for with colon edit. Type the words to be replaced. Press enter to add this to dictionary. In case of removing already existing word, type the word and press alt D. It ask for confirmation of deleting press enter. 6. Protect Document: This is used to protect the document from accidental use of the document. This is done by giving password. The protect document dialogue will ask for password. Type the password and press enter, it will ask for confirmation, repeat the password and press enter. Unprotect document: the protected document cannot be modified. In order to modify, unprotect the document. This is done by selecting the unprotect document from Tools Menu. It will ask for the password - type it and enter. The table of contents is a very useful feature of MS-Word. This not only provides an overview of the contents of the full documents but also allows jumping to the section indicated by an entry in the table of contents. Before creating table of contents in the document, we should put heading styles for main headings, side headings and sub-headings. Format List Box: There are several formats of displaying Table of Contents entries "From Template" option is almost similar to what we see in the books. Select the desired format from this list. Show page numbers and right align page numbers: Both of these are check boxes. Show Levels: It is an edit spin box. Specify the number of levels, which you wish to include in the Table of Contents. Tab Leader: It is a combo box. Select the character, which would fill up the blank space in the line between the heading and page number of the Table of Contents entry. Press enter on the OK button. This would create the Table of Contents at the location of the insertion pointer. If the Table of Contents needed to be created at the beginning of the document make sure to go to the beginning of the document before activating the Index and Table command. Mail merge: In case of sending a same letter to more than person the mail merge can be used. It requires three files to be created. 1. To hold the format of the letter. 2. To hold the address of receivers. 3. A document where the merged letter is saved.

Microsoft Excel Excel is a spreadsheet program, and is used present financial data such as budget or sales report. Excel allows to enter and Edit data in a Worksheet. To use Functions and Formulas to calculate and analyze data. To create colorful Charts and Grafics. To save time by combining a series of commands into a single command by using MACROS. To change and analyze a large amount of data in to a list. Adding, subtraction, multiplication, division, square root, average, future value (fv), EMI (pmt), current date and time (now), maximum (max), minimum (min), insert date (control & semi colon), insert time (control shift semi colon), text length (len) Wizard - Highlight the cell where you want your new formula to appear. Start the Function Wizard. Follow the Function Wizard through its two dialog boxes. Pivot table creates an interactive summary from many records. For example, you may have hundreds of invoice entries in a list on your worksheet. A pivot table can total the invoices by customer, product or date. You create the pivot table by using a wizard. You can quickly rearrange the information in the pivot table by dragging the

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buttons to a new position. Organize data in a table that Excel can understand. The first row must have headings. Use a different heading for each column. Keep all the data together -- don't include any blank rows or columns in the table. Leave at least one blank row and one blank column between the data table and any other information on the worksheet.

PowerPoint Power Point is a program that helps you to plan, organize and design professional presentations. The computer screen can be used for 35mm slides or overhead projectors to deliver a presentation. Power Point allows you to edit and organize text in a Presentation. To add objects to the slides in a presentation (Shapes, Pictures, Clip Arts and Charts. To change the color schemes in presentation.*To Animate the presentation.To add slide Transition. Presentation Graphics are application software available to design charts. The package allows the user to, Design charts, Arrange the matter in a readable format, Add pictures in the chart to make them more meaningful and attractive, Change the appearance of the alphabets on the charts and Print these charts. Another way of doing presentation is, the computer can be attached to a device called a LCD(Liquid crystal display). This device is attached in place of monitor. Instead of displaying the contents on the monitor, using LCD you can display directly on the screen to a large group of audience without printing them, straight from the computer. Presentation Graphics add an interesting aspect to your thoughts and ideas. They make your ideas look nice on the transparencies. The combination of your voice and the visual appeal created via the graphics, help in capturing and sustaining the audience’s attention. Procedure to create power point presentation: Ctrl+N will also help to open a new presentation. A blank slide is opened automatically with the name as presentation1. Now you can enter the data in the slide. Types of slide layouts - Title Slide: It contains two parts, one for title and one for subtitle. You can only enter the title and sub titles in this slide. Title only: In this type of slide you have only one section for adding titles ie you can add only title to this slide. Title and text: In this slide you can enter both title and text ie you can type a heading and describe about that topic in detail. Title and 2-column text: In this slide you can give both title and text but its layout is little different from the earlier one. Text can be typed in column format. But it will provide you only 2 columns. Title, text and clipart: This slide allows you to enter title, text and also allow you to insert picture from clipart. Clipart is a tool which contains varieties of pictures arranged in different categories. You must have used clipart in ms-word also, it functions same way in PowerPoint. In this slide you will have title at the top, text at the left side and clipart at the right side. Title, clipart and text: This functions same way as the previous slide the only difference is that the text will be at the right side and clipart will be at the left side.

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Title, text and chart: This slide contains title part, text part and chart also. Chart is the graph which you can insert in your slide. It is the graphical representation of data. Here text is placed at the left side and chart at the right side. Title, chart and text: This chart functions same as the previous one, the only difference is that text will be placed at right side and chart at the left side. Title and Table: This slide provides two options one for title and another for table. You can enter data in the form of table. You can also specify the no of rows and columns. For more details refer to session 18. Title and chart: It provides two options one for giving title and another for inserting chart. You can’t enter text in this slide. Title and Organization chart: It has two objects one for giving titles and other for inserting organization chart. Organization chart is used to represent hierarchical relationships. Layout of PowerPoint is divided into different sections. These include: 1. Task panes: - Task panes are the window within an office application that provides commonly used commands. Task panes are located on the right hand side of the screen. To access it you have to press F6 from the keyboard. 2. Slide: The slide which you have inserted from the blank presentation option will be placed at the centre of the screen. Layout of the slide: The screen of the slide is divided into different placeholders. The placeholders can contain text, title, picture, or a chart. Placeholders are nothing but the different objects like title, clipart, chart etc inside the screen. 3. Thumbnails: Thumbnails are located at the left side of the screen. It contains two tabs, outline and slide. Slide tab displays the full view of the slide. From here you can change the slide design, layout, insert new slide, delete a slide, change the slide transition, you can cut, copy & paste the slides and you can hide any slide. Outline tab displays the contents (text) of the slide. From here you can format the text, insert hyperlink, cut copy & paste the text. 4. Speaker notes: It is located at the bottom of your slide. The person making the presentation may have made notes while developing the presentation to make sure that the points are not forgotten or missed. PowerPoint provides a space called notes page at the bottom of your slide to type such notes. It can be viewed while running your presentation. Pressing the function key F6 moves us between each of these sections. In Microsoft PowerPoint, a hyperlink is a connection from a slide to another slide, a custom show, a Web page, or a file. The hyperlink itself can be text or an object such as a picture, graph, shape, or WordArt. An action button is a ready-made button that you can insert into your presentation and define hyperlinks for. If the link is to another slide, the destination slide is displayed in the PowerPoint presentation. If the link is to a Web page, network location, or different type of file, the destination page or file is displayed in the appropriate application or in a Web browser. In PowerPoint, hyperlinks become active when you run your presentation, not when you are creating it. Use action buttons when you want to include buttons with commonly understood symbols for going to the next, previous, first, and last slides. PowerPoint also has action buttons for playing movies or sounds.

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INTERNET & E-MAIL

WORLD WIDE WEB (WWW): An Internet client-server hypertext distributed information retrieval system." The Web is not a network. The Web is not the Internet itself. The Web is not a proprietary system like AOL. Instead the Web is a system of clients (Web browsers) and servers that uses the Internet for its data exchange. The Web allows rich and diverse communication by enabling you to access and interact with text, graphics, animation, photos, audio and video. Web browser is the software program you use to access the World Wide Web, the graphical portion of the Internet. The first browser, called NCSA Mosaic, was developed at the National Center for Supercomputing Applications in the early 1990s. The easy-to-use point-and-click interface helped popularize the Web, although few could then imagine the explosive growth that would soon occur. Email is now an essential communication tools in business. It is also excellent for keeping in touch with family and friends. The advantages to email are that it is free (no charge per use) when compared to telephone, fax and postal services. Information: There is a huge amount of information available on the internet for just about every subject known to man, ranging from government law and services, trade fairs and conferences, market information, new ideas and technical support. Services: Many services are now provided on the Internet such as online banking, job seeking and applications, and hotel reservations. Often these services are not available off-line or cost more. Buy or sell products: The Internet is a very effective way to buy and sell products all over the world. Communities - Communities of all types have sprung up on the Internet. It’s a great way to meet up. With people of similar interest and discuss common issues. The Toolbar - The row of buttons at the top of your browser, known as the toolbar, helps you travel through the web of possibilities, keeping track of where you've been. Since the toolbars for Navigator and Internet Explorer differ slightly. Bookmarks or Favorites lets you can record the addresses of websites you want to revisit. Once you add a URL to your list, you can return to that web page simply by clicking on the link in your list, instead of retyping the entire address. The Address Bar - Just under the toolbar, you will see a box labeled "Location," "Go To," or "Address." This is where you type the address or URL of a website you want to visit. After you enter it, press the Return or Enter key to access the site or click on the "Go" button to the right of the address box. By clicking the small triangle to the right of the Location box, you will get a drop-down list of the most recent websites you've visited. To revisit a site, just click on the address. The Menu Bar - Located along the top of the browser window, the menu bar offers a selection of things you can do with a web page, such as saving it to your hard drive or increasing the size of the text on a page. Many of the choices are the same, as the buttons on the toolbar below, so don't try to learn everything now. Click once on a word to access the drop-down menu, and then click on the selection you want to make.

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Electronic mail or e-mail, allows computer users locally and worldwide to exchange messages. Each user of e-mail has a mailbox address to which messages are sent. Messages sent through e-mail can arrive within a matter of seconds. A powerful aspect of e-mail is the option to send electronic files to a person's e-mail address. Non-ASCII files, known as binary files, may be attached to e-mail messages. These files are referred to as MIME attachments. MIME stands for Multimedia. Internet Mail Extension, and was developed to help e-mail software handle a variety of file types. For example, a document created in Microsoft Word can be attached to an e-mail message and retrieved by the recipient with the appropriate e-mail program. Many e-mail programs, including Eudora, Netscape Messenger, and Microsoft Outlook, offer the ability to read files written in HTML, which is a MIME type. There are Web servers, FTP servers, telnet servers and e-mail servers running on millions of machines on the Internet right now. These applications run all the time on the server machine and they listen to specific ports, waiting for people or programs to attach to the port. FTP stands for File Transfer Protocol, and is a way of copying files between networked computers. . Anonymous FTP is an option that allows users to transfer files from thousands of host computers on the Internet to their personal computer account. FTP sites contain books, articles, software, games, images, sounds, multimedia, course work, data sets, and more. FTP transfers can be performed on the World Wide Web without the need for special software. In this case, the Web browser will suffice. Telnet is a program that allows you to log into computers on the Internet and use online databases, library catalogs, chat services, and more. There are no graphics in Telnet sessions, just text. To Telnet to a computer, you must know its address. This can consist of words (locis.loc.gov) or numbers (140.147.254.3). Some services require you to connect to a specific port on the remote computer. In this case, type the port number after the Internet address. Example: telnet nri.reston.va.us 185. Telnet is available on the World Wide Web. A link to a Telnet resource may look like any other link, but it will launch a Telnet session to make the connection. A Telnet program must be installed on your local computer and configured to your Web browser in order to work. With the increasing popularity of the Web, Telnet has become less frequently used as a means of access to information on the Internet. NETFIND is an Internet user directory tool. It provides a simple Internet white pages directory facility. Given the name of a person on the Internet and a rough description of where the person works, Netfind attempts to locate telephone / electronic mailbox information about the person. It does so using a seed database of domains and hosts in the network. Netfind finds information about people through the Internet protocols IRC (Internet Relay Chat) is a multi-user, multi-channel chatting system. Imagine sitting in front of your computer and "talking" through typed messages with either one person or many other people from all over the Internet, all in real time! MUD (Multiple User Dimension, Multiple User Dungeon, or Multiple User Dialogue) is a computer program which users can log into and explore. Each user takes control of a computerized persona/avatar/incarnation/character. You can walk around, chat with other characters, explore dangerous monster-infested areas, solve puzzles, and even create your very own rooms, descriptions and items.

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Net lag - The Internet (the network which connects your computer to mine) is made up of thousands of interconnected networks. Between your computer and the computer which houses the MUD, there may be up to 30 gateways and links connecting them over serial lines, high-speed modems, leased lines, satellite uplinks, etc. If one of these gateways or lines crashes, is suddenly overloaded, or gets routing confused, you may notice a long time of lag time between your input and the MUD's reception of that input. Computers which are nearer to the computer running the MUD are less susceptible to netlag. Another source of lag is if the computer which hosts the MUD is overloaded. When netlag happens, it is best to just patiently wait for it to pass. Spamming, derived from a famous Monty Python sketch, is the flooding of appropriate media with information (such as repeated very long say commands). Unintentional spamming, such as what happens when you walk away from your computer screen for a few minutes, then return to find several screenfuls of text waiting to scroll by, is just a source of irritation. Intentional spamming, such as when you repeat very long say commands many times, or quote /usr/dict/words at someone, is usually frowned on, and can get you in trouble with the MUD administration. Client program - A client program is simply another program you use instead of telnet to connect to a mud. Clients also provide useful things such as macros and the ability to gag or highlight certain mud output. Clients are available for anonymous ftp from several sites.

Internet Intranet The Internet is available to the public (everyone).

Intranet is a private network only available to select users. E.g. a school may use an intranet so that its pupils can work from home.

It has slow access speeds It has higher access speeds when compare to Internet.

The information in internet is less secured when compared with that of Intranet

In Intranet the information is more secured with that of Internet.

Different types of web browsers are used to view the website in Internet. e.g. Netscape, IE, Opera

Standardized type of browser is used to view the website in Intranet.

Different types of operating systems are used to view the website (e.g. Windows, Mac)

Standardized type of operating systems are used to view the website in intranet.

It accessible to Global audience (e.g. multilingual, different cultures)

It is Primarily accessible to local audience.

Phishing is an e-mail fraud method in which the perpetrator sends out legitimate-looking email in an attempt to gather personal and financial information from recipients. Typically, the messages appear to come from well known and trustworthy Web sites. A phishing expedition, like the fishing expedition it’s named for, is a speculative venture – the phisher puts the lure hoping to fool at least a few of the prey that encounter the bait. Phisher use a number of different social engineering and e-mail spoofing ploys to try to trick their victims. The perpetrator’s e-mail used AOL logos and contained legitimate links. If recipients clicked on the link, they were taken to a spoofed Web page that asks for personal information, including credit card numbers, personal identification numbers (PINs), social security numbers, banking numbers, and passwords. This information was used for identity theft.

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Vishing is an activity where fraudsters trick unsuspecting customers into providing their personal and financial details over the phone. Usually fraudsters pose as representatives of large companies, banks or public authorities like Reserve Bank of India. The details are used to carry out fraudulent transactions in the customer’s account. Objective Questions 1. Window is a ___________ user interface. a) Character b) Graphical c) Both a and b d) None 2. Expand DOS a) Disk Operating System b) Disk Open System c) Dynamic Operating System d) None 3. Directory can be deleted by using ______ DOS command. a) CD b) MD c) RMDIR d) Del 4. Which of the following is the DOS external command? a) Format b) CLS c) SYS d) DISKCOPY d) a & b 5. Operating system is a type of software _________. a) Application software b) System software c) Both a and b d) None 6. LAN stands for __________. a) Local Area Network b) Local and Network c) None 7. New Directory is created by using _____DOS command. a) MKDIR b) MD c) Both a and b d) None 8. Which of the following is not an operating system? a) DOS b) UNIX c) LINUX d) Windows e) None 9. Which of the following is an input device? a) MS- DOS b) CPU c) Input data d) Keyboard 10. The _______ shortcut key is redo the last undone action. a) Ctrl and Y b) Ctrl and Z c) Ctrl and U d) Ctrl and V 11. The _______ shortcut key is cut the selected text or word. a) Alt and E, T b) Ctrl and X c) Both a and b d) None 12. The ______ shortcut key does the central alignment. a) Ctrl and L b) Ctrl and R c) Ctrl and E d) Ctrl and J 13. To open a document, which of the following commands are True? a) Ctrl and O b) Select file on menu bar and open c) Alt and O d) Alt and F 14. The Repeat on Edit menu repeats which of the following actions? a) The last action b) The second last action c) All previous change d) None 15. What is the keyboard shortcut to display the symbol dialogue box? a) Alt + I + S b) Alt + S + I c) Ctrl + I + S d) Ctrl + S + I 16. The _______ shortcut key is zooming a page. a) Alt + F + V b) Alt + V + Z c) Alt + F4 d) Alt + F + C

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17. The ______ shortcut key is to select the entire document. a) Ctrl + Z b) Ctrl + C c) Ctrl + V d) Ctrl + A 18. Excel is a ________ program. a) Spread sheet b) Application c) Software d) Hardware 19. Which of the following is an Excel Component? a) Title bar b) Caption button c) Menu bar d) All of the above 20. A ___ is an electronic ledger having a set of cells arranged in rows and columns. a) Workbook b) Cell c) Worksheet d) All of the above 21. The worksheet option is available on the _______ menu. a) Insert b) Format c) View d) Edit 22. Which one is an Excel function name? a) MAX b) MIN c) SUM d) All of the above 23. The ______ Excel function returns a positive square root of a number. a) PRODUCT b) FACT c) MOD d) SQRT 24. The ______ Chart component represents a data series. a) Legends b) Axes c) Category d) Labels 25. The Picture option is available on the ______ Menu. a) Insert b) Edit c) Format d) Data 26. Keyboard shortcut for opening the format cells dialog box. a) Ctrl + I b) Alt + 1 c) Ctrl + 1 d) Shift + 1 27. Excel chart is used __________. a) Analyze values b) Analyze numerical value c) Both a and b d) None 28. What is the valid font size in power point? a) 10 b) 12 c) 14 d) 8 29. If the ruler is hidden choose the ruler from the _____ menu. a) File b) Edit c) View d) Tools Question Bank 1. I/O in respect of computers stands for a) Intake/ Output b) Import/ non-import c) Input/Output d) All. 2. A peripheral device a) May be used for input b) May be used for output c) May be used for storage d) All. 3. UNIX is a a) Multi-user operating system b) Single user operating system c) Language d) None. 4. A new directory is created using the command: a) CHDIR b) RMDIR c) MKDIR d) MAKE 5. Use the _______ command to change the name of a file: a) REN b) COPY c) RENUM d) None.

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6. The symbol that shows you where the mouse is on the screen is: a) icon b) mouse pointer c) arrow d) director e) Cursor 7. The FIND option in the start menu in Windows is for: a) search files only b) search folders only c) both a and b d) none 8. Selection of text can be of: a) single word b) single line c) paragraph d) all 9. Which of the following menus has the spelling and grammar tool? a) Insert menu b) Format menu c) Tools menu d) Edit menu 10. Address of the first cell in the worksheet. a) 1 b) A c) A1 d) 1A 11. Which of the following is an Internet Service Provider. a) VSNL b) Satyam Online c) Both a and b d) None 12. Which one is the presentation software? a) MS Word b) MS Power point c) MS Excel d) MS Access 13. Advantage of Email is a) Low speed b) High cost c) High speed d) None 14. Which one of the following is used to convert digital signals to analog signals and vice-versa? a) Modem b) Phone c) Printer d) none 15. What is the intersection of a column and a row on a worksheet called? a) Column b) Value c) Cell d) Address 16. Which of the following is a peripheral device? a) Dot matrix printer b) MS- DOS c) Control unit of CPU d) Input data 17. Which of the following is the DOS external command? a) Format b) SYS c) DISKCOPY d) All 18. An operating system is which type of software? a) Application software b) System software c) Both a and b d) None 19. ‘Save as’ on file menu is used for which of the following? a) Save changes b) Save to file first time c) Copies the file into another d) None 20. A table is a grid of rows and columns containing boxes of: a) Text or graphics b) Only text c) Only graphics d) None 21. What is the default width of the cell in the worksheet? a) 8.45 b) 8.43 c) 8.4 d) 8.44 22. How many default worksheets are available in a work book? a) 4 b) 5 c) 2 d) 3 23. Default order in excel when you select the sort option from the menu? a) Descending b) Ascending c) both a and b d) None

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24. What is the name of the last column in the worksheet? a) V b) VI c) IV d) VII e) Depends on system resource 25. What is the valid font size in power point? a) X b) 12 c) IX d) XI 26. Symbol option is available in which menu in word? a) View b) Edit c) Insert d) Tools 27. View slide option is available in which menu? a) Edit b) Format c) Tools d) Slide show 28. How many steps are available in auto content wizard? a) 3 b) 5 c) 4 d) 2 29. What is the default font in word? a) Arial b) Times New Roman c) Verdana d) None 30. What is the default representation (transfer type) for FTP? a) Binary b) ASCII c) Both a and b d) None 31. Which chart component is to represent a data series? Answer: labels. 32. What is the key board short cut for opening format cells dialogue box? Answer: Control and 1 33. Excel chart is used for Analyses values and numerical values. 34. To plot profit and loss over a seven years period which chart is best suited? Line 35. If the ruler is hidden, chooses the ruler combined from the view menu. 36. The shortcut key to redo the last undone action is Control + Y 37. =sum(a2:a10) is an example of a a) Function b) Formula c) Cell address d) Value 38. All the following terms are associated with spreadsheet software except a) Worksheet b) Cell c) Formula d) Virus detection 39. Name which is not a removable media a) ROM b) Diskette c) DVD d) Pen Drive e) None of the above 40. when a file contains instructions that can be carried out by the computer, it is often called …… a) Data b) Information c) Application d) Executable e) Assembly 41. Which is not a computer programming language? a) C++ b) Java c) Visual Basic d) Machine language e) None Question Bank 1. The fastest computer is called Super Computer 2. Scanner is an Input device. 3. Magnetic tape is an example of Secondary memory.

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4. A memory which cannot be altered is called ROM 5. All mathematical, logical operations are done by ALU 6. Which is not a feature of UNIX GUI 7. The commands readily available on disk are Bootstrap 8. The page in windows that comes after full loading is Desk top 9. The bottom portion of desktop on active window shown is called Taskbar 10.To close an existing window the shortcut key is Alt F4 11. Ctrl+ Alt+ Del results in restart 12. Spell check is present in Tools 13. A ready-made example is called Wizard 14. The default saving folder in word is My documents 15. Ctrl + C is a short cut for Copy 16. To select all the short cut is Control + A 17. To switch between open windows we can use Alt + Tab 18. The feature with big size first letter is called Drop cap 19. To send a document of the same content, to different we can use mail merge 20. A group of commands to act as a single command is Macro 21. The files with .dot extension are called Template 22. Excel files have default extension of XLS 23. To find sum of values from b4 to b10 the symbol is colon 24. Formulas in excel begin with which symbol Equals (=) 25. Function to obtain the absolute value of a numeric is ABS 26. To select desired data we can use Filter 27. The extension of power point file is PPT 28. The shortcut to insert a new slide is Control + M 29. Order and timing of parts of a slide can be done in Preview 30. The protocol to operate the internet is FTP 31. Internet explorer is an example of Browser

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32. Google is an example of Search engine 33. The incoming mails are stored in Inbox 34. Password is always appearing as Special characters 35. Yahoo is an example of Client server 36. To connect a computer telephone line we need Modem 37. The global monitoring body for internet is WWW 38. Every system on the net is identified with unique IP address 39. The message part of an E-mail is called Compose 40. _____ computer is the fastest computer. Super 41. Windows NT is an _________ Operating system 42. To delete all files in a directory the ______ command can be used. Del 43. GUI ……….. Graphical User Interface 44. Mail merge involves merging of the ____with a data source. Document 45. The worksheets contain _____ columns. 256 46. Give one slide layout name that you know in power point ___ Table 47. Name one web browser software. Internet Explorer 48. WAN stands for _____________ Wide Area Network 49. ------is used to login remote computer. Internet explorer 50. The Web is a series of interconnected documents stored on a computer somewhere called a _____. Server 51. MUD stands for ____________. Multi User Domain State whether True or False from the following statements. 1. MS- DOS is a multi user operating system. True 2. To quit MS-Word click on the file menu and then click on the exit option. True 3. Scrolling means moving the text view. True 4. The ruler can be used to set indents, tabs, column widths and margins. True 5. BACKSPACE to insert a character to the left of the insertion point. False 6. Format-> row-> hide is selected to hide the selected row. True 7. Protocol is a set of rules and procedures that enables computers to communicate over a network. True 8. URL stands for Uniform Resource Language. False 9. A mailbox is a location on an email server where incoming messages are stored for a user. True 10. Network is a collection of networks. True 11. Hard Disk is a storage device. True 12. MS- DOS is a GUI operating system. False

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13. FORMAT is a Dos Internal command. False 14. Double click mouse on a word in MS word, it selects that word. True 15. To display the current time, the TIME function can be used in MS- Excel. True 16. .Com is the extension of the power point file. Answer: False 17. The internet and www are two names for the same thing. False 18. The talk program allows you to connect your computer to someone else’s computer and the type a message back and forth. True 19. USENET is a large collection of discussion groups. True 20. IRC stands for Internet Relay Communication. True I. Fill in the blanks: 1. Expand ROM__ Read only memory 2. Directory can be deleted by using ____dos command. RD <name> 3. Name any two dos internal commands. Copy, Ren, Type and Cls 4. What does MS DOS stand for? Micro Soft Disk Operating System 5. Shortcut key to close an application in windows______ Alt F4 6. LAN stands for__ Local Area Network 7. Short cut key to copy files or data __ Control + C 8. How to find the address of the cell ___ Insert + C 9. How to find the maximum value of numbers entered from c20 to c50____ =max (c20:c50) and press enter 10.______is a collection of computers or computer like devices that can communicate across a common transmission media. Internet 11. Expand HTTP_____ Hyper Text Transfer Protocol 12. Modem is used to convert digital signals into analog signals and vice versa. 13. Power point is a ___programme Presentation 14. Main purpose of slide sorter view is ___ To view all slides at one time 15. Headers and footers are edited in ____________ view Print preview

Question Answer CLS DOS command Windows 98 Multi task operating system ppt Extension of power point file Mail merge Send same letter to different addresses Primary key Record can be identified uniquely Email Sending and receiving electronic composed letters Internet Network of networks Keyboard Input device Floppy Storage device Internet Explorer Web browser FTP Protocol Cell Basic unit on the worksheet. Hard disk Storage device Windows 95 Operating system. Net scape navigator Web browser Plotter Output device Computer network Collection of computers TREE Directory structure Windows help F1 Key Compiler System software Header Displayed in top margin Auto filter Creates a series Slide Each individual page in presentation URL Uniform Resource Locator

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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 furnished here under: 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 `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 @ `30/- per employee per month at Hyderabad and `25/- 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) 2000 3 Graduation / Post Graduation 3000

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.193 Ref 03/36 dated 07.08.13)

4) Merit Awards to the Children of Employees: 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.

Rank VII Class SSC/SSLC/HSC Intermediate 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) 5) Mentally retarded children – Financial Relief: An amount of `10000/- per annum will be paid to the staff whose children are mentally retarded till the child attain the age of 25 years. (Cir.no.413 Ref 20/72 dated 29.02.2008)

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6) 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 / Part Time Sweeper (Full wages) 100000 4 Part Time Sweeper (3/4 wages) 75000 5 Part Time Sweeper (1/2 wages) 50000 6 Part Time Sweeper (1/3 wages) 33000

7) 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 14 centers viz., Bangalore, Bhubaneshwar, Chennai, Goa, Haridwar, Ooty, Manali, Mysore, New Delhi, Shirdi, Tirupathi, Tirumala, Varanasi and Gagtok. At present the tariff for the room is `10/- per day in case of Officer Staff and `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 centres like Bangalore, Chennai, Mysore, Shirdi and Varanasi. 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. Cancellation should be intimated to Staff Welfare Department at least 2 days prior to the date for which the reservation is booked, otherwise bank imposes a penalty of `200/- per day. (Cir.no.16 Ref 03/1 dated 11.04.12)

8) 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 `2500/- in Metros and `2000/- at other places. However, additional reimbursement of expenses for Mammography test subject to maximum of `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) 9) 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 `1000/-. This is a onetime reimbursement in the entire service. (Cir.no.555 Ref 20/100 dated 29.03.2006)

10) 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 `100000/- under Staff Welfare Schemes. However, the difference in sanctioned amount and the amount claimed by the employee should be above `25000/-. All staff members and their dependants are covered under this scheme. (Cir.no.191 Ref 3/29 dated 23.09.09) 11) Furniture – Maintenance Charges: Officers who have availed the residential furniture facility are eligible to claim reimbursement of maintenance charges incurred on declaration basis after 3 years of purchase @ 5% of the original cost of the items

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every year. However, items like mattresses and pillows are not covered under the scheme. (Cir no.20 Ref 3/06 dated 21.04.2010) 12) Physically Challenged Employees / Children: All staff members who submit disability certificate are eligible to avail this facility. Under this scheme bank reimburse an amount not exceeding `10000/- and `15000/- for purchase of Wheel chair/Crutches and Artificial Limb/Hearing Aid respectively. Bank reimburses the amount once in 5 years in case of Wheel Chair/Crutches and once in 2 years in case of Artificial Limb / Hearing Aid. 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) 13) 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 (` 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 (including PTS/Security guards) 0.50

14) Group Savings Linked Insurance Scheme (GSLI): All permanent Employees who are in service including PTS are eligible to join the scheme. It is optional to the existing employees where as for the new entrants it is mandatory. No employee after giving consent/joining the scheme shall be allowed to withdraw from the scheme. Bank collects monthly contributions and remits to LIC of India. The monthly premium payable and risk coverage of various categories is furnished here under:

No Category Monthly Premium (Savings plus Risk) Sum assured

1 Scale IV & above 531.25 500000 2 JM-I to MM-III 425.00 400000 3 Clerks 212.50 200000 4 Sub-staff (including PTS) 106.25 100000

The monthly contribution includes two components viz., Savings & Risk premium in the ratio of 65:35. 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. In case of expiry of an employee due to accident, double the sum assured will be paid by LIC of India. (Circular no.103 Ref 3/21 dated 18.06.2013)

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 `2000/- and the same is to be presented in a staff meeting at branch/office.

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16) 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 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 Housing Loans

Liability as on 31st March every year subject to maximum of `20 lakhs (inclusive of addl.HL).

`4.70 per thousand per annum or maximum of `9400/-

Vehicle Loans

Liability as on 31st March every year subject to maximum of `4.50 lakhs & `0.60 lakh for four & two wheeler loans respectively.

`3.86 per thousand per annum or maximum `1351/- for 4 wheeler & `232/- for 2 wheeler

(Cir.no.426 Ref 3/77 dated 19.03.2011) Facilities to Retired (Superannuation) 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 `12500/- on the eve of retirement from service. (Cir.no.177 Ref 03/31 dated 19.08.2011)

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. The scheme is also available to officers who voluntarily retire from Bank’s service / resign after completion of 28 years service. (Cir.no.45 Ref 3/4 dated 02.05.2012)

Age of the furniture Amount to be recovered Below 5 Years

Book Value if original cost is above `5000/-. For items with Book Value with less than 5000/-, 50% of original cost

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 `10/- per day in case of Officer Staff and `5/- per day in case of Award Staff. The maximum stay allowed is 4 days only. However, the maximum stay is restricted to 2 days at important locations. 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 superannuation: Bank is reimbursing medical expenditure incurred on surgery of major ailments (including Cataract surgery, Prostrate surgery, Hysterectomy operation) to the tune of `2.5

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lakhs for self and `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 `100000/- per year. (Cir.no.413 Ref 20/72 dated 29.02.2008 & Cir no. 16 Ref 3/1 dated 11.04.2012). It is desirable that the medical claim is to be routed through the pension paying branch for operational convenience. 6. Additional Interest Rate: All retired/resigned employees are eligible for 1% additional interest on the deposits made by them under Savings/Term Deposits. Further, they are also eligible for Senior Citizen interest rate (0.50% extra) besides staff interest rate. (Cir.no.04 Ref 3/1 dated 05.04.2011)

Guide to Bereaved Families

Taking care of family members is the sacred responsibility of the family head and he is expected to take all possible care so that the spouse/children should not to face financial problems even in his absence i.e. untimely demise. 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 `1.50 lakh towards exgratia to the families (Nominees/Legal heirs) of the employee who die in harness. Advance amount of `25000/- will be paid immediately to meet the funeral related expenses and the same will be adjusted from the exgratia amount. (Cir.no.413 Ref 20/72 dt.29.02.08) 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 `10/-, `6/- and `4/- for officers, clerks and sub-staff respectively for each death. The average amount payable under the scheme is around `100000/-. (Cir.no.560 Ref 20/112 dated 09.03.2004 & Cir.no. 143 Ref 3/28 dated 23.07.2010)

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8) Educational Grant to the children: The children of the deceased are entitled to claim reimbursement of `2000/- for X class, `2000/- for Intermediate and `3000/- 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. (Cir. no.193 Ref 3/36 dated 07.08.2013) 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): All permanent Employees who are in service including PTS are eligible to join the scheme. It is optional to the existing employees where as for the new entrants it is mandatory. No employee after giving consent/joining the scheme shall be allowed to withdraw from the scheme. Bank collects monthly contributions and remits to LIC of India. The monthly premium payable and risk coverage of various categories is furnished here under:

No Category Monthly Premium (Savings plus Risk) Sum assured

1 Scale IV & above 531.25 500000 2 JM-I to MM-III 425.00 400000 3 Clerks 212.50 200000 4 Sub-staff (including PTS) 106.25 100000

The monthly contribution includes two components viz., Savings & Risk premium in the ratio of 65:35. 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. In case of expiry of an employee due to accident, double the sum assured will be paid by LIC of India. (Circular no.103 Ref 3/21 dated 18.06.2013)

13) Compensation & Reward for resisting crime against Bank: To protect the interest of the family members of the employee who dies on account of resisting crime against bank, the following amounts will be paid to the bereaved family. No Facility Remarks 1 Compensation Officers - ` 20 lakh; Clerical/Sub-staff - ` 10 lakh 2 Pay &

Allowances Bank continues to pay last pay drawn by the deceased officer, till one of the children attains age of 21 years or normal retirement age of the deceased whichever is earlier.

3 Education Exp. Up to Degree for children. 4 Employment This is applicable only to those deceased employees who

have completed 5 years of service or before reaching the

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age of 30 years, whichever is later. The appointment shall be made only in the clerical and sub-staff cadre. (cir no. 227 Ref 3/18 dated 27.09.2007)

In case of survival – Cash reward of ` 2 lakh will be paid besides eligible for out of turn promotion or advance increment. (Cir no. 223 Ref 3/50 dated 27.08.12) 14) 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 `20 lakhs and `4.50 lakhs respectively. However, in case of two wheeler the maximum coverage available is `60000/- only. (Cir.no.438 Ref 3/67 dated 15.03.09) 15) Other reimbursements: 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. 16) 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

17) 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 (`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

18) 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 (Officers - `8 lakhs, Clerks - `7 lakhs and Sub-staff - `6 lakhs), provided the monthly income of the family from all sources is less than 60% of last drawn salary (net of the taxes) of the employee. 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.227 Ref 3/18 dated 27.09.2007)

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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. In case where there are no outstanding dues by the member, a sum of `20000/- will be paid to the nominee or dependants.

2) Funeral Expenses: In case where the deceased is a member of Andhra Bank Employees Co-operative Bank, `2500/- will be paid by the bank to the family members of the deceased towards funeral expenses. 2) Andhra Bank Officers` Federation is extending exgratia of `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)

3) 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 Gold 100000 Accidental Death 5 AB Jeevan Abhaya 100000 Natural / Accidental Death 6 Abhaya Savings Plus 50000 Accidental Death 7 Abhaya 25000 Accidental Death

Note: Claims will be settled by the respective insurance companies as per the eligibility and Bank acts as facilitator only. Important Points: � 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.

� 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.

� 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.

� 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.

� 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.

� Any expenditure under staff welfare has to be claimed before the expiry of the following financial year failing which the same stands lapsed.

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