Session 1

Commercial Banking
Banking Regulation Act 1949

Section 5(c) :

“A banking company is a company which transacts the business of banking in

India”

Section 5 (b) :

Banking means “accepting , for the purpose of lending or investment , of

deposits of money from the public, repayable on demand or otherwise , and
withdrawable, by cheque, draft,order or otherwise”
1. Maintaining deposit accounts

2. Issue & Pay Cheques

3. Collect cheques for the banks customers

Payments Financial Financial
Intermediation Services
• Take deposits • Forex
• Traditional
Options (Cheques, • Lend • Wealth Mgmt
DD) • Address safety and • Insurance
• Modern ( Wire liquidity, growth • Investment
transfers, ECS) needs Banking
 First known banks : Ancient Temples

Safe Places : Gold, agricultural tools & implements

Various Factors : Historical crusades shaped the methods &practices

Greeks: Used credit notes Egyptians : Used Grains Romans : Coins

Years : 1100-1300

Large trade volumes in agricultural commodities, cloth, leather .Trade combines

became powerful since specialization brought with it need for more investment
 • General Bank of India
1786 • Estb in Kolkatta

• 3 Presidency Banks established

1809-
1843 • Banks of : Bengal, Bombay, Madras

• 3 Presidency Banks amalgamated

1921 • Imperial Bank of India – European control.
 • Allahabad Bank
1865 • Estb purely by Indians

• Punjab National Bank

1894 • Estb in Lahore

• BOI, CBI, BOB, Can Bank, Indian Bank

1906- established
1913
 • RBI established
1935

• Banking Companies Act : changed to Banking Reg

1949 Act

• SBI formed
1955- • SBI Act passed enabling SBI takeover 8
1959 subsidiaries
 • 14 banks nationalized
1969

• 6 more banks nationalized

• Objective: Social & rural impetus better control
1980

• Narasimhan Committee Reforms

1990’s • Entry of new Pvt sector, Foreign banks
 Financial
System

Capital Markets Insurance and

Central Banking
Regulatory Pension
Authority
Authority Regulators

RBI SEBI IRDA

 RBI

Small
National
IDBI Industries Dev NABARD Exim Bank
Housing Bank
Bank of India
 RBI

Co-Operative
Commercial
Banks Banks
Schld Non State

Foreign
Public Private RRB’s District
Sector Banks
Sector
Primary Credit
Soc
Nationalized SBI &
Other PSU Old Age New Age
Banks Assoc

Scheduled Banks : Those listed in 2nd Schedule of RBI Act 1934.Banks need to fulfill Sec 42 (6)(a) to be incld in schedule
 PSU Banks:

 GOI is the majority stakeholder

 27 PSU banks (19 + SBI & 6 subsidiaries)
 Have taken a lead role in branch expansion – rural areas
 SBI : “Banker to every Indian”
 Regional Rural Banks(RRB’s):

 Established 1976-1987: Develop rural economy.

 Jointly owned by Central Govt + State Govt +sponsor PSU
 Target customers : Farmers, artisans etc
 Decline in numbers : 196 in March 2005 81 as on date.
 Examples: Maharashra Gramin Bank, Saptagiri Grameena
Bank
 Private Sector Banks

 Majority share capital is held by corporates/pvt parties

 Banks not nationalized 1969/1980 : “Old age-Pvt sector”
 Post 1992-93 reforms (Narasimhan Committee) entry
permitted
 7 “New age” banks & 15 “Old age” banks : March 2009
 Examples: Yes Bank, Jammu &Kashmir Bank
 Foreign Banks:

 HO: outside India but operate through branches or rep

offices
 As on June 30 2009: 28 foreign banks operating in India.
 Target customers : Corporates, HNI’s, urban middle class
 Examples : Standard Chartered,HSBC
 Co-operative Banks:

 Governed by Co-operative Society’s Act & Banking

Regulation Act.
 Eg: Abhudaya Co-Operative Bank, Saraswat Co-Op Bank
 Co-Operative Banks:

 Comprise of UCB’s: operations lmtd across one state or stretch across states

 Rural Co-Operative Banks

 State Co-Operatives
 District Co-Operatives
 SCARDB’s: State Co-Op Agricultural & Rural Development Banks
 PCARDB’s : Primary Co-Operative Agricultural & Rural Development Banks

 Large Network:
 53 scheduled UCB’s as per RBI website
 30 State Co-Operative Banks

 Target customers : Farmers, self employed businessmen/traders

 Examples : UCB’s –Rupee Co-Operative Bank, Cosmos Co-Operative Bank
SCB’s: Sikkim State Co-Operative Bank
 • Approx Rs 4000 Crores
involved
Harshad Mehta Scam • Banking System misused
• Small Investors wiped
out

Liberalization of the • Rajiv Gandhi Govt

“Banana Republic” • Propogates liberalization

Narasimhan • Banking Sector Reforms

Committee • Stage set for major
Recommendations overhaul
 •Borrowing Bank gives securities to the lending bank
Ready Forward in return for funds

Txns •Typically was used for short term loans (15 days)
and against govnt securities

•Supposed to be used issued against Govt securities

and given by the borrowing bank to the lending
bank
Bank Receipts •Harshad Mehta :Broker/Fee
•Misused the system and involved Bank of Karad
&Metropolitan
•Fake BR’s usedCo-Op Bank:funds
to borrow Fake BR’s
and purchase
shares and drive up prices

Banks •BR’s repaid by sale proceeds

•Once the scam broke banks left with worthless BR’s
manipulated •Small savings wiped out(Approx Rs 4000 crores
involved)
1st Wave: Post nationalization -1969

 19th July 1969 Govt nationalized 14 banks

 Saraiya Commission appointed to examine the banking system
 Recommend ways to make it work with Govt’s plan of
economic development
 Sec 19 of BR Act ammended to allow formation of
subsidiaries.
2nd Wave: Narasimhan Committee Report #1

 Commissioned on August 14, 1991

 Set-Up to address the need for the fortification of system
 Report #1 submitted on 16th November 1991
 Masterprint : “First Phase” of banking reforms 1992-93
 Theme : Operational Flexibility & Functional Autonomy
 Country reeling under the aftermath of the Harshad Mehta
scam
Main Recommendations: Glimpse

 SLR to be to 25% over a period of 5 years

 CRR component to be reduced progressively
 No bar to open banks in the private/foreign category
 Bifurcation of Banks Investment Portfolio.
 Categorization& Provisioning of loan assets
 Standard Assets (0.25%)
 Sub-Standard (10% of total outstanding)
 Doubtful(100%+ 20/30/50%depending upon age
 Loss Assets : 100% outstanding
 Gradual Approach: RBI-Committees

 Banks have expanded their product offerings: Insurance/Wealth Mgmt etc

 Lead to a healthy competition: Transformation of some PSU banks (Eg

BOB,SBI)

 Encouragement to do something novel:

 Refinance of MFI loans
 Factoring/Forfaiting

 Modern Banking Products : Internet Banking/Mobile Banking

 Infusion of Capital into Banks : Capital Adequacy

Type of Bank 1969 2004 2009 Rural Branches Rural Branches
on June 30, 2009 as % age of all
branches on
June 30,2009
SBI & Assoc 2462 13621 16294 5619 34.4

Nationalize 4553 33359 39703 13425 33.8

d Banks
RRB - 14486 15199 11644 76.6

Tot PSU 7015 61466 71196 30688 43.1

Banks
Oth Schld 900 5807 8979 1126 12.5
Comm
Banks
Foreign 130 218 295 4 1.4
Banks
Non Schld 217 32 44 11 25
Comm
Banks
Grand 8262 67523 80514 31829 39.5
Total
Source:
Economic
 Commenced operations on April 1 1935 in Kolkatta.

 Constituted to take over activities being performed by the Imperial Bank &
Comptroller of Currency.
 Regulate the issue of bank notes
 Maintain reserves to secure monetary stability
 To operate the credit and currency system efficiently

 Served country’s agenda : Rural development I nstitutional

development Bank Supervision &Regulation Financial
Markets
 Acts as the currency authority
 Controls money supply
 Manages foreign exchange
 Banker to the Government
 Banker to banks
 Supervises banks
 Holds part of the cash reserves of banks
 Provides them with centralized clearing
 Safe and economic remittance facilities
 Controls licensing, branch expansion, amalgamation etc
 Inspection: Seeks information through returns, inspections
/meetings
Intermediaries that compete /complement banks

 NBFC’s
 Mutual Funds
 Insurance Companies
 Term Lending Institutions
 NBFC’s:

 Compete aggressively for business with banks

 Cannot
 Accept demand deposits
 Issue cheques - not part of the payment system
 No deposit insurance cover

 Main activities include loans, leasing, hire purchase

 NBFC’s:

 Need to be registered with the RBI.

 Set-up : Companies Act 1956

 NBFC’s registered with other regulators exempted:

 Merchant Banking Co’s-SEBI

 Insurance Company-IRDA
 Housing Finance Co’s-NHB
 NBFC’s:

 Classified under 3 categories by the RBI

 Asset Finance Companies (AFC) : Birla Global Asset Finance

 Investment Company (IC) :
 Loan Company (LC)

 Only NBFC’s holding a valid Certificate of Registration –

Accept deposits
 NBFC’s:
 Min / Max tenure for Dep Acceptance:12 months / 60 months

 Cannot offer > 12.5% p.a – current celing.

 NBFC’s (except certain AFC’s- CRAR of 15% +) – minimum investment grade rating.
 FA- from CRISIL, MA- from ICRA , CARE BBB, FITCH tA-)

 NRE/FCNR funds out of bounds (April 2004).Only NRO funds

 Default : Law, Company Law Board

 Prepayment of Deposits :
 Not encouraged
 Minimum 3 month lock-in
 Possible :Death of Depositor
 NBFC’s:

Examples :

Deposit Taking :
 Mahindra &Mahindra Financial Services-Mumbai
 Bajaj Auto Finance – Pune

NON Deposit Taking

 Citicorp Finance (India)Ltd-Mumbai
 IDBI Gilts-Mumbai
 SKS Microfinance Ltd-Hyderabad
 Insures deposits in all
◦ Commercial banks
◦ Foreign banks functioning in India,
◦ Regional Rural Banks
◦ Cooperative Banks

 Maximum of Rs.1,00,000 (Rupees One Lakh) across all

branches
 Deposits across different branches of the same bank are
aggregated
 Deposits across banks are covered individually.
 Deposits have to be held in same capacity.

 Sole Proprietorship clubbed with individual account .

 Deposit Insurance coverage compulsory

 Term Lending Institutions:

 Provide loans : Medium to Long Term maturities

 Customers : Companies operating in industry, service&
infrastructure sectors
 State Level:
 SFC’s: State Finance Corp
 SIDC’s: State Industrial Development Corporation
 NEDFI : North Eastern Development Financial Institution Ltd
 Term Lending Institutions:

 All India Level:

 EXIM Bank
 SIDBI
 PFC
 IFCI

 Typically specialize-catering to specific sectors (Refer

handout)
 Central
Board of
Directors

Governor
( Mr D
Subbarao)

Deputy Governor Deputy Governor

Deputy Governor Deputy Governor
(K.C (Shyamala
(Ms Usha Thorat) (Mr S Gokarn) Gopinath)
Chakrabarty)
 National Housing Bank (NHB)

 National Bank for Agriculture & Development (NABARD)

 Deposit Insurance & Credit Guarantee Corp (DICGC)

 Bharatiya Reserve Bank Note Mudran Pvt Ltd (BRBNMPL)

 RBI

Umbrella Acts
*RBI Act:1934
*Banking Reg Act :
1949

Specific Functions Banking Operations

*Indian Coinage Act *Companies Act 1956
*FEMA *Banking Co (Acq & Transfer
of Undert)
*Public Debt Act
*Bankers Book Evidence
*Securities Contract Act
1956 *NI Act 1881
 Dept of Currency Mgmt

 Urban Banks Dept

 Rural Planning &Credit Dept

 Foreign Exchange Dept

 Financial Supervision

 Dept of Banking Supervision

 Dept of Non Banking Supervision

 Dept of Banking Operations & Development

 Dept of IT

 Legal Dept

 Monetary Policy Dept

 Internal Debt Mgmt Dept

 Dept of External Investments & Operations

 Dept of Govt & Bank Accounts

 Dept of Economic Analysis & Policy

 Dept of Statistical Analysis & Computer Services

 Dept of Payment & Settlement Systems

 Funds Bank
Allocation
mobilization (Financial
(Lending)
(Deposits) Intermediation)
 • FD’s
Time
• CD’s

• Savings A/C’s
Demand
• Current A/C’s
Demand Deposits:
 Payable on demand : Cheque /Cash

 No fixed term/lock-ins

 Eg: Current/Savings Account

Time Deposits:
 Fixed term : Eg –Term Deposits
Functions of Various Business Units
Example – Raising & Deployment of Funds

Inform BSMG abt Decides about deployment -

the receipt of funds tenure, currency and rate for
fresh lending and asks business
group abt the availability of funds

Bank Branch BSMG

Decides about
funding strategy Sales Team gets in touch with
its clients to deploy the funds

Cust. 1 Cust. 2 Cust 3

Cust. 1 Cust. 2
Customer approaches bank to Cust 3
deposit funds in the form of
CA/SA/Term deposits
 Bank Group 2003 2008 2009
PSU Banks 79.6 73.9 76.6
•Nationalized 50.8 48.4 49.1
•SBI Group 28.8 23.8 24.8
•Others - 2.2 2.8
Private Sector 15.3 20.3 18.1
•Old Pvt Sector 6.7 5.0 4.9
•New Pvt Sector 8.5 15.3 13.2
Foreign Banks 5.1 5.8 5.3
Total SCB’s 100 100 100

Note : Data as at March

31 2010 (in percent)
  RBI License required

Conditions to be satisfied:

◦ Ability to financially service clients

◦ Management
◦ Company Conduct
◦ Capital Structure and Earning Prospects
◦ Impact and justification vis a vis alternates
◦ Public Interest (Foreign Banks)
◦ Compliance with BR Act ( Foreign Banks)
◦ Non discrimination ( Foreign Banks)
KYC:

 Involves checking identity :PAN

 Sources of income
 Location
 Rural inclusion : some relaxation
KYC:

Essence is to know the true profile and the genuineness

of the users of the banking channel.
KYC:

Method:
• Screening and verifying customers identity

• Accepting only genuine customers

• Avoid introduction of unaccounted money at all

costs into the banking system
Relaxation in KYC norms

• At bank officials discretion

• Subject to satisfactory introduction by existing account

holder ( > 6 months old)

• Bal in all accounts not to exceed Rs 50K

• Total credits in all accounts not to exceed Rs 100000

KYC:

Method:
• Screening and verifying customers identity

• Accepting only genuine customers

• Avoid introduction of unaccounted money at all

costs into the banking system
• Designation of a senior officer to monitor risk
compliance

• Employee Orientation and training of employees

Avoid ……
• Records to be maintained for cash transactions of Rs 10
Lacs or more in INR or equivalent in foreign currency

•Series of cash txns connected to each other of below Rs

10 Lacs or its equivalent in fx within a month and where
the aggregate value exceeds10 Lacs

•Cash transactions in forged or counterfeit notes and

suspicious transactions
• Property derived from money laundering can be
confiscated(Eg : Satyam )

•Records pertaining to money laundering need to be

preserved for a period of 10 years

•FIU ( Financial Intelligence Unit) set up to track and

curb such offences

•Banks/FI’s/Brokers :Report non cash trxs over Rs 1

Crore and cash txns of Rs 10 lacs
• Property derived from money laundering can be
confiscated

•Records pertaining to money laundering need to be

preserved for a period of 10 years

•FIU ( Financial Intelligence Unit) set up to track and

curb such offences

•Banks/FI’s/Brokers :Report non cash trxs over Rs 1

Crore and cash txns of Rs 10 lacs
Eligibility

 Current A/C’s :
◦ Individuals
◦ Firms
◦ HUF’s
◦ Societies
◦ Public/Pvt Ltd Companies
Minimum Balance:

 Requirements vary from bank to bank

 Charges levied for not meeting criteria
 “No-frills Account”: special S/B Account
Account Operation

 Mode of Operation
 POA
 Nomination
Minor’s Accounts:

 Opened under guardianship of parents/legal guardian

 Minor : Decide upon attaining majority
 Contract with minor : Void “ab initio”
 Under NIA-can bind others except self
 Can be admitted to benefits of partnership-can repudiate his
liability within 6 months.
Savings Accounts (3.5% p.a)

 Till March 31 2010-calculation on minimum balance between

10th to last date(30/31st)of the month

 Effective April 1 interest will be calculated on daily balance

 Credited twice a year :31st March / 30th Sepetmber

 Dhanalaxmi- HDFC-
15%
24%

Axis- Fed
22% SBI-27% Bank-
20%

Cup of Cheer!

Percentage of total customer liabilities

 Date Deposit Withdrawal Balance
10th July 50,000 Nil 50,000
18th July Nil 48,000 2,000 Used in the “Old” Method”
25th July 25,000 Nil 27,000
31st July Nil 2,000 25,000

Calculation in the Old Method: Calculation in the New Method

2000*3.5%*1/12=Rs 5.83 a) 50,000*3.5%*1/365=Rs 4.79

b) 2,000*3.5%*1/365= Rs 0.19
c) 27,000*3.5%*1/365= Rs 2.58
d) 25,000*3.5%*1/365= Rs 2.39

Total accrued –July Rs = 9.95.

Will be applied = Sept 30
Incremental Gain = Rs 4.1
 Minimum tenor: 7 days

 Banks free to decide interest rates

 Discrimination on rates : Not possible on dep< Rs 15

lacs

 Above Rs 15 Lacs : Differential rates ok

Savings Accounts (3.5% p.a)

 Till March 31 2010-calculation on minimum balance between

10th to last date(30/31st)of the month

 Effective April 1 interest will be calculated on daily balance

 Credited twice a year :31st March / 30th Sepetmber

 Tool for deposit mobilization
 Minimum amount Rs 1 Lac and multiples
 Can be issued by scheduled commercial banks except RRB’s
and Local Area Banks (LAB’s)
 Issued only in Demat form : Negotiable instrument
 No loan possible against CD’s
 Premature withdrawal : Not allowed
 Interest Rate : At bank discretion
 Due Diligence Process:
◦ Compliance with KYC guidelines
◦ Involves the bank having adequate knowledge about a
customers :
 Identity
 occupation
 sources of income
 address / location
◦ KYC norms have been “relaxed” to promote financial
inclusion in rural /BPL areas
 Minimum Balance :
◦ Usually stipulated as part of terms & conditions of opening
a bank account
◦ “No Frills” accounts are special savings bank accounts
where no minimum balance reqd
◦ Banks may place restriction on number of withdrawals,
transactions during a period
 Satisfactory Conduct :Customer &Bank

◦ Customer should ensure that the account is conducted as per

the banks specifications
◦ Bank should safeguard the customers interest and any
information used for cross selling etc must be with express
consent
◦ Operation of the accounts must be as per mandate specified
Types :

 Non-resident Ordinary account (NRO)

 Non-resident External account (NRE)
 FCNR-B
As per FEMA 1999 an NRI means :

 Non-Resident Indian National (i.e Non-resident

holding Indian passport.

Eg: 1) Mr X working in the USA on a Green card.

2) Ms Y deputed to Infosys USA from the Indian office.

Working on a work/business visa.
 Persons of Indian Origin ( Non-residents holding
foreign passports)

Eg: 1) Mr X is born in the USA. His parents moved to the USA

from Haryana twenty years ago.

2) Mr Y moved to the USA after his B.Tech. After living there

for nearly 10 years, he applied for and is a naturalized US
citizen .
  The definition includes

a) Indians going abroad for business/work /vocation indicating

an indefinite period of stay.

b) Indian citizens working abroad on assignment with Foreign

Governments, Govt. agencies or in UNO and its affiliates
IMF,IBRD etc.

c) Govt. officials (both central and state) and other officials of

PSU's deputed abroad on assignments or posted abroad
including Diplomatic Missions
 PIO (Person of Indian Origin)is defined as a citizen of any
country except Bangladesh or Pakistan if :

a) He/she has, at any time held an Indian passport. OR

b) He /she or either of his parents or any of his grand parents was a

citizen of India OR

c) The person is a spouse of an Indian citizen or a person referred to

in a) or b)
NRE Accounts : ( held in INR)

 Need to be opened with funds remitted from abroad

 Fully repatriable : P+I
 Minimum Tenor: 7 Days
 Transfer to another NRE Act/FCNR
 Local payments can be made
 Local credits not permissible (eg: rental income)
 Interest rates on NRE accounts(Savings+Term Dep) : RBI
controlled
 Exchange Risk
FCNR(B) Accounts : ( held in FX)

 USD,GBP,CAD,AUD,EURO,JPY
 Fully repatriable : P+I
 Transfer to another NRE Act/FCNR and vice-versa.
 Opened only as term deposits
 No Exchange Risk since deposits held/repaid in Fx.
 Tenor: 1 -3 years
NRO Accounts : ( held in INR)

 When a resident becomes a non resident-account

converted into NRO account.
 Legitimate Credits accrued in India-Rent, Income from
investments
 Can be opened as Savings, Current,Term Deposit
 Principal non repatriable. Interest earned is repatriable
 Upto US$ 1 million per financial year can be repatriated.
 Permissible Credits/Debits:

 Credits:

• Proceeds of inwards remittance into India through normal

banking channels

• Legitimate income in India : Rent, pension, interest etc

• Sale proceeds of assets (including immovable

property)acquired out of rupee/foreign currency funds or
any inheritance.
 Credits:

• Any foreign currency which is freely convertible tendered by the

account holder during his/her temporary visit to India

• Foreign currency exceeding USD 5000 or its equivalent in cash should

be supported by a CDF (Currency Declaration Form)

• Rupee funds should be supported by an encashment certificate , if they

represent funds brought from outside.
 Debits:

 All local payments in rupees including payments for investments in India

(s.t compliance with RBI)

 Remittance outside India of current income like rent, dividend, pension ,

interest in India of the account holder

 Remittance upto USD 1 million per financial year (April-March)for all

bonafide purposes s.t approval by the AD.
 Remittance of Assets

 By NRI/PIO:

• Can remit an amount not exceeding USD 1 million per financial year out
of balances held in NRO account/sale proceeds of assets/assets in
India acquired by way of inheritance

• Document Required : Paperwork supporting the acquisition or any

inheritance along with an undertaking by the remitter duly certified by a
C.A in the format prescribed by CBDT(Central Board of Direct Taxes)
 Remittance of Assets

 By NRI/PIO:

• Can remit an amount not exceeding USD 1 million per financial year
from the sale proceeds of immovable property purchased as a resident or
as an NR/PIO without any lock-in period

• This facility not available to citizens of Pakistan,

Bangladesh,SriLanka,China,Afghanistan,Iran,Nepal and Bhutan
 Foreign nationals on a visit to India (non-Indian origin)

• NRO ( Current/Savings) account can be opened

• Funds to open the account can be remitted from outside India through
banking channels or sale of foreign exchange brought to India.

• The funds in such accounts can be converted back into foreign currency
at the time of departure of the foreign national ( provided account less
than 6 months old) and no local funds have been credited

• If account tenure > 6 months –RBI approval required

 Resident to Non-Resident:
• When a individual leaves the country(except Nepal/Bhutan) for an
overseas job business etc indicating intention to stay outside – account to
be converted to NRO.

• If the destination is Nepal/Bhutan : The account will continue as

resident

• When such a person working abroad, carrying on business etc comes to

India:

 temporarily – account remains NRO

 For good : Re-designate account to resident
 Resident to Non-Resident :

• Loans Given: While resident but becomes non resident.

 Bank discretion and judgement to continue the arrangement

 Can allow payment of interest and loan either through local

sources or through inward remittance
 Non resident nominee : Credit NRO Account of nominee

 Resident nominee: Credit resident account of nominee

 POA holder can be a resident.

 POA holder can make following payments:

• All local payments including payments for eligible investments

• Remit outside India the current income of the NR after taxes

• POA can remit only to account holder and cannot repatriate funds to any
other account
• POA holder cannot gift any funds from NR account to a
resident on behalf of the NR.

• Cannot transfer funds to another NRO account.

 Can be issued to NRI/PIO without RBI approval

 Payments can be settled by inward remittance or out of

balances in NRE/NRO/FCNR accounts
 Domestic/NRO Accounts:
• Minimum tenor is 7 days

 NRE/FCNR(B) Term Deposits:

• Minimum tenure is 1 year
• Maximum tenure is 3 years
• Banks can accept NRE deposits of tenure greater than 3
years but the rate of interest will be capped at the rate for 3
years
 NRE term deposit into FCNR (B) and vice versa before
maturity subject to penalty

 NRSR/NRNR into NRO deposit before maturity subject to

penalty
 If NRE term deposit withdrawn prematurely for conversion
into RFC Account – NO PENALTY.

 If such a deposit has remained with the bank for a period less
than 1 year , interest can be paid at savings bank rate provided
such a request is made by the NRE account holder
immediately on return to India.
 Since NRNR / NRSR schemes have been discontinued
effective April 1 2002,maturity proceeds of NRNR deposits
can be credited to NRE Accounts on maturity but not
FCNR(B) accounts

 Maturity proceeds of NRSR deposits to be credited to NRO

accounts only.

 Premature withdrawals of NRNR / NRSR deposits to be

credited to NRO accounts only
 Satisfied : Growth of the Bank

 Dissatisfied : Look for a resolution

 Internal : Complaint to the Bank

 External : RBI
Banking Ombudsman
•Came into effect on Jan 1 2006

•The aggrieved customer or his representative

can file a complaint

• Written or via E mail

• A complaint was made to the bank and no response
received within a month

• Non satisfactory response received

•Complaint should not pertain to the a matter pending or

dealt by the Ombudsman or which proceedings are pending
before a court

•Complaint is within the limitation period under the Indian

Limitation Act 1963
Process

• Aggrieved customer contacts ombudsman

• Ombudsman sends the complaint to the bank for redressing

• If not settled within a month of receipt, ombudsman awards /

rejects

• Customer can appeal to the Appellate (Dy Governor) if

dissatisfied

• Banks can appeal after taking consent from CMD