Visit to a Bank and Record of the Working of the Bank

Introduction:

Banks in India play a vital role in managing the country's financial systems by offering services
such as deposits, loans, and transactions. To better understand how a bank operates, I visited a
local branch and observed its internal functioning, customer interactions, and how accounts are
opened. This section provides an overview of the bank's working and details the step-by-step
process of opening a new account.

Working of a Bank:

When I visited the bank, I saw that the bank operates through several key departments, each
handling specific tasks. Here’s how a typical bank operates on a day-to-day basis:

1. Customer Service Counter:

 Primary Functions:
o This is the first point of contact for customers entering the bank. Here, customers
can inquire about various banking services, report issues, apply for loans, open
accounts, request cheques, and make account updates (such as changing addresses
or phone numbers).
o The customer service counter also guides customers through the process of
getting their KYC (Know Your Customer) details updated or submitting required
documents.

2. Cash Counter:

 Primary Functions:
o At the cash counter, customers can deposit and withdraw money. Bank staff
manage the cash flow efficiently, ensuring customers can quickly perform these
transactions.
o Additionally, the cash counter handles tasks like issuing demand drafts and
processing cheques for clearance.

3. Loan Department:

 Primary Functions:
o The loan department handles loan applications, including personal loans, home
loans, and business loans. Customers submit documents such as proof of income,
identification, and collateral (if applicable).
o The bank then evaluates the creditworthiness of the customer based on their credit
score and other factors before granting the loan.
 o There is also a follow-up team to manage ongoing loan repayments and ensure
compliance with loan terms.

4. Account Management:

 Primary Functions:
o The bank maintains records of all customer accounts, including savings, current,
fixed deposits, and recurring deposits. This department ensures that transactions,
including deposits, withdrawals, and interest payments, are processed smoothly.
o Account statements and passbooks are issued and updated here, providing
customers with a record of their financial transactions.

5. Back Office Operations:

 Primary Functions:
o This department handles the clearing of cheques, fund transfers, and other
administrative tasks. The bank ensures compliance with the Reserve Bank of
India (RBI) guidelines for financial and security protocols.

6. Digital Banking and IT Services:

 Primary Functions:
o Banks today place a high priority on digital banking. Internet banking, mobile
banking, and Unified Payments Interface (UPI) services are managed by the IT
services team.
o Customers can use digital platforms for activities like online fund transfers
(NEFT, RTGS, IMPS), bill payments, mobile recharges, and viewing account
balances, thus reducing the need for physical bank visits.

Process of Opening a New Account in a Bank:

Opening a bank account is one of the most common services a bank offers. The process in Indian
banks is regulated by the Reserve Bank of India (RBI) to ensure transparency and security. The
steps involved in opening a new bank account are as follows:

1. Choosing the Type of Account:

 Before opening an account, the customer must choose the type of account they want to
open based on their needs. The most common types are:
o Savings Account: Ideal for individuals who wish to save money while earning
interest.
o Current Account: Suitable for businesses or professionals who need frequent
transactions.
 o Fixed Deposit Account: Where a lump sum is deposited for a fixed period,
earning a higher interest rate.
o Recurring Deposit Account: Where a fixed amount is deposited monthly,
accumulating interest over a set period.

2. Account Opening Form:

 After deciding the type of account, the customer must fill out an account opening form.
This form is available at the bank or can be downloaded online. It requires personal
details such as:
o Name
o Date of birth
o Address
o Contact information
o Employment details
o Nominee details (optional but recommended in case of the account holder’s
death)

3. KYC (Know Your Customer) Documentation:

 In compliance with RBI regulations, all banks require KYC documents to verify the
identity and address of the customer. The following documents are typically needed:
o Proof of Identity: PAN card, Aadhaar card, passport, voter ID card, or driving
license.
o Proof of Address: Aadhaar card, electricity bill, telephone bill, or rental
agreement.
o Photographs: Passport-size photos of the customer.

Banks might request a self-attested copy of these documents and retain them for their records.
For some accounts like the Jan Dhan account (under the Pradhan Mantri Jan Dhan Yojana), the
KYC requirements are relaxed to encourage financial inclusion.

4. Initial Deposit:

 Some types of accounts, particularly savings accounts, require an initial deposit to be

made to activate the account. The minimum balance for opening a savings account may
vary from bank to bank.
o Zero Balance Accounts: Banks may offer zero-balance accounts where no initial
deposit is required. These are usually provided under government schemes like
the PMJDY.

5. Account Activation and Welcome Kit:

 Once the documents are verified and the initial deposit is made (if applicable), the bank
processes the account and issues a welcome kit. This usually includes:
o Passbook: A record of all transactions made by the customer.
 o ATM/Debit Card: To withdraw money from ATMs and make cashless
payments.
o Cheque Book (Optional): If requested, the bank issues a cheque book for
savings or current accounts.
o Internet Banking Credentials: Some banks offer internet banking services
immediately, with credentials provided in the welcome kit.

6. Customer's Role After Account Opening:

 KYC Updates: Customers must periodically update their KYC details, especially when
there is a change in address or other personal information.
 Regular Transactions: Customers are free to deposit or withdraw money, transfer funds,
and use other banking services as soon as the account is activated.
 Maintain Minimum Balance: In case the account has a minimum balance requirement,
the customer should maintain that balance to avoid penalties.

Different Types of Accounts in Indian Banks

Indian banks offer various types of accounts to cater to the diverse financial needs of individuals
and businesses. Each account type serves a specific purpose, ranging from savings and
transactions to long-term investments. Below is a detailed description of the most common types
of accounts:

1. Savings Account

Overview:

A Savings Account is the most common and popular type of bank account in India, designed
primarily for individuals to park their savings while earning interest on the balance. It is ideal for
salaried individuals, students, pensioners, and anyone looking to save money securely while
having easy access to funds.

Key Features:

 Interest on Balance: The account earns interest on the deposited amount. Interest rates
vary from bank to bank, typically ranging from 3% to 4% per annum. Some banks may
offer higher interest rates for larger balances.
 Low Minimum Balance Requirement: Many savings accounts require maintaining a
minimum balance, which varies by bank. However, zero-balance savings accounts (such
as Jan Dhan accounts) are available under certain schemes.
  Easy Access to Funds: Customers can withdraw money from ATMs, bank branches, or
through online banking without restrictions, though some banks may limit free ATM
withdrawals.
 Passbook and ATM/Debit Card: Customers are provided with a passbook for
transaction records and a debit card for ATM withdrawals and cashless payments.
 Digital Banking: Most banks offer online and mobile banking services, allowing
customers to check balances, transfer funds, pay bills, and manage their accounts from
anywhere.

Types of Savings Accounts:

 Regular Savings Account: Offers basic features such as passbook, ATM card, and
interest on deposits.
 Zero-Balance Savings Account: Allows customers to maintain an account without any
minimum balance requirement, often provided under government schemes like the
Pradhan Mantri Jan Dhan Yojana (PMJDY).
 Senior Citizen Savings Account: Special accounts designed for senior citizens, offering
higher interest rates and additional benefits like discounts on locker facilities and health
insurance.
 Children’s Savings Account: Accounts specifically tailored for minors, allowing parents
to open an account on their behalf with lower minimum balance requirements and easy
transaction options.

2. Current Account

Overview:

A Current Account is primarily designed for businesses, entrepreneurs, and professionals who
need to carry out a large number of daily transactions. Unlike savings accounts, current accounts
do not offer interest on the deposited amount but provide facilities for frequent transactions.

Key Features:

 No Interest on Deposits: The primary purpose of a current account is for transaction

handling, not savings, so it does not earn interest.
 Unlimited Transactions: There are no restrictions on the number of transactions,
making it ideal for businesses with high daily turnover or frequent withdrawals and
deposits.
 Overdraft Facility: Most current accounts come with an overdraft facility, allowing
account holders to withdraw more money than their balance, up to a certain limit, which
helps businesses manage cash flow.
 Higher Minimum Balance Requirements: Current accounts typically require
maintaining a higher minimum balance compared to savings accounts. Failure to do so
may result in penalties.
  Cheque Book Facility: Current accounts come with cheque book facilities, which are
essential for businesses and professionals for making payments to vendors and clients.

Types of Current Accounts:

 Standard Current Account: Used by businesses and professionals for day-to-day

operations with basic features.
 Premium Current Account: Offers additional benefits such as higher overdraft limits,
free demand drafts, and multi-city cheque facilities.
 Packaged Current Account: Tailored for specific industries, providing features like
invoicing software, payroll services, and merchant services.

3. Fixed Deposit (FD) Account

Overview:

A Fixed Deposit (FD) Account is an investment account where a lump sum is deposited for a
fixed tenure, earning a higher interest rate than a savings account. It is ideal for individuals
looking for a secure investment option with a guaranteed return.

Key Features:

 Higher Interest Rates: FD accounts offer higher interest rates than savings accounts,
usually ranging from 5% to 7% per annum, depending on the bank and the deposit tenure.
 Fixed Tenure: The tenure of the deposit can range from a few months to several years
(typically 7 days to 10 years). The interest rate is locked for the entire tenure, providing
stability in returns.
 Premature Withdrawal: While FDs are designed to remain locked until maturity, banks
do allow premature withdrawal with a penalty, usually resulting in a lower interest rate.
 No Monthly Transactions: FDs are not transaction accounts, and money cannot be
added or withdrawn regularly. They are strictly for long-term savings.
 Tax Saver FD: Certain FDs come with tax benefits under Section 80C of the Income
Tax Act. These FDs have a lock-in period of 5 years.

Types of Fixed Deposits:

 Standard FD: A fixed deposit where a lump sum is deposited for a specific period,
earning interest over the tenure.
 Cumulative FD: In this FD, the interest is compounded and paid out at maturity, along
with the principal amount.
 Non-Cumulative FD: Here, the interest is paid out at regular intervals (monthly,
quarterly, or annually), providing regular income to the depositor.
4. Recurring Deposit (RD) Account

Overview:

A Recurring Deposit (RD) Account allows customers to deposit a fixed amount of money
every month for a pre-determined period. It is suitable for individuals with regular income who
want to save systematically and earn interest on their savings.

Key Features:

 Regular Monthly Deposits: Customers choose an amount they want to deposit monthly,
which can be as low as ₹100. This helps inculcate a habit of saving.
 Fixed Interest Rate: Like fixed deposits, recurring deposits offer a fixed interest rate for
the tenure, typically ranging between 5% and 7% per annum.
 Tenure Flexibility: The tenure for RDs usually ranges from 6 months to 10 years,
allowing customers to choose a period that suits their savings goals.
 Interest Compounded Quarterly: Interest is typically compounded quarterly, and the
accumulated amount is paid out at maturity.
 Premature Closure: Customers can close the RD before maturity, but they may incur a
penalty or receive a lower interest rate.

5. Jan Dhan Account

Overview:

The Jan Dhan Account is a zero-balance savings account introduced under the Pradhan
Mantri Jan Dhan Yojana (PMJDY), a financial inclusion initiative by the Indian government.
It aims to provide every household in India with access to banking services, especially for those
without access to formal financial institutions.

Key Features:

 Zero Balance Requirement: No minimum balance is required to maintain a Jan Dhan

account, making it accessible to low-income individuals.
 Government Benefits: The account is linked to various government schemes, allowing
direct benefit transfers (DBT) such as subsidies and pensions.
 RuPay Debit Card: Account holders are issued a RuPay debit card for cash withdrawals
and online payments.
 Overdraft Facility: After six months of satisfactory operations, the account holder is
eligible for an overdraft facility of up to ₹10,000.
 Accidental Insurance: Jan Dhan account holders receive free accidental insurance cover
of up to ₹1 lakh (₹2 lakhs if the account was opened after 28 August 2018).
Types of Loans Offered by Banks in India

Banks in India provide a wide variety of loans to cater to the diverse financial requirements of
their customers. The loans are classified mainly into two categories: secured loans and
unsecured loans. Let’s explore these loan types in detail:

1. Personal Loan

Overview:

A Personal Loan is an unsecured loan, meaning it does not require collateral. It is usually taken
for personal financial needs such as medical emergencies, weddings, travel, home renovations, or
debt consolidation. Personal loans can be availed by salaried employees, professionals, and self-
employed individuals.

Key Features:

 No Collateral Required: Since it is an unsecured loan, there is no need to pledge assets

like property or gold.
 Flexible End-Use: The loan amount can be used for any personal purpose without
restrictions.
 Loan Amount: The loan amount varies depending on the borrower’s credit score,
income, and repayment capacity.
 Interest Rates: Personal loans typically have higher interest rates compared to secured
loans. The rates range between 10% and 24% per annum, depending on the bank and the
borrower’s profile.
 Repayment Tenure: The repayment period is usually between 1 to 5 years.
 Eligibility: Banks assess the borrower’s credit score, employment status, and monthly
income to determine loan eligibility.

Examples of Uses:

 Medical emergencies
 Home renovations
 Travel expenses
 Wedding costs

2. Home Loan

Overview:
A Home Loan is a secured loan provided to individuals for purchasing a house, constructing a
new home, or renovating an existing property. The property being purchased or constructed
serves as collateral.

Key Features:

 Purpose-Specific Loan: Can be used only for purchasing or constructing a home, buying
a plot, or home renovation.
 Collateral: The property being purchased or constructed is mortgaged to the bank as
security.
 Loan Tenure: Home loans typically come with a long repayment tenure, usually ranging
from 10 to 30 years.
 Interest Rates: Home loan interest rates are relatively lower than personal loans, ranging
between 6.5% and 9% per annum. Banks offer both fixed and floating interest rates.
 Loan Amount: The loan amount is determined based on the property’s value and the
borrower’s repayment capacity. Banks generally finance 75% to 90% of the property’s
value.
 Tax Benefits: Home loan borrowers can claim tax deductions under Section 80C and
Section 24(b) of the Income Tax Act on both principal repayment and interest payments.

Types of Home Loans:

 Loan for Purchasing a New Home: For buying a ready-to-move-in or under-

construction property.
 Home Construction Loan: For constructing a house on a plot of land.
 Home Improvement Loan: For renovating or repairing an existing property.
 Balance Transfer Loan: Allows borrowers to transfer their existing home loan to
another bank offering lower interest rates.

3. Car Loan (Auto Loan)

Overview:

A Car Loan or Auto Loan is a secured loan provided for purchasing new or used vehicles. The
vehicle itself serves as collateral, meaning the bank has the right to repossess the vehicle in case
of default.

Key Features:

 Loan for New or Used Vehicles: Banks provide loans for purchasing new as well as
second-hand cars.
 Collateral: The car serves as collateral until the loan is fully repaid.
 Loan Tenure: The repayment tenure typically ranges from 1 to 7 years.
 Loan Amount: Banks usually finance 80% to 90% of the vehicle’s on-road price.
  Interest Rates: The interest rates for car loans typically range between 7.5% and 13%
per annum.
 Eligibility: Car loans are available to salaried employees, self-employed professionals,
and businesses with a steady income.

Example of Uses:

 Purchase of a new car

 Purchase of a second-hand car

4. Education Loan

Overview:

An Education Loan is a loan provided to students to finance their higher education in India or
abroad. The loan covers tuition fees, accommodation, books, and other related expenses.

Key Features:

 Specific Purpose Loan: The loan amount must be used exclusively for education-related
expenses.
 Collateral: Loans up to ₹4 lakh typically do not require collateral, but for higher
amounts (especially for studies abroad), banks may ask for collateral.
 Loan Tenure: Repayment usually begins after the completion of the course, with a grace
period of 6 months to 1 year, depending on the borrower’s employment status. The loan
tenure can be up to 15 years.
 Interest Rates: Education loan interest rates range between 7% and 13% per annum.
 Loan Amount: The loan amount varies depending on the course and institution. Banks
provide up to ₹10 lakh for studies in India and up to ₹20 lakh for studies abroad.
 Tax Benefits: Under Section 80E of the Income Tax Act, interest payments on education
loans are eligible for tax deductions.

Coverage:

 Tuition fees
 Exam fees
 Accommodation expenses
 Books and equipment

5. Gold Loan

Overview:
A Gold Loan is a secured loan where the borrower pledges their gold jewelry or ornaments to
avail of a loan. The loan amount depends on the value of the gold provided as collateral.

Key Features:

 Quick Processing: Gold loans are processed quickly, usually within a few hours, making
them an excellent option for emergencies.
 Collateral: The gold jewelry or ornaments are pledged as collateral.
 Loan Tenure: Typically ranges from 6 months to 2 years.
 Interest Rates: Interest rates for gold loans are relatively low, usually ranging between
7% and 15% per annum, depending on the bank.
 Loan Amount: The loan amount depends on the market value of the gold, and banks
typically provide up to 75% of the gold’s value.
 No Credit Score Required: Since it’s a secured loan, banks do not heavily rely on the
borrower’s credit score.

Example of Uses:

 Funding personal expenses

 Handling emergencies

6. Business Loan

Overview:

A Business Loan is a loan given to entrepreneurs, companies, and businesses for starting a new
venture, expanding an existing business, or meeting working capital requirements. Business
loans can be secured or unsecured.

Key Features:

 Loan Amount: The loan amount depends on the business’s needs and financial health. It
can range from a few lakhs to crores.
 Collateral: Secured business loans require collateral such as property, equipment, or
inventory. Unsecured business loans may be granted based on the business’s financial
strength.
 Loan Tenure: The loan tenure for business loans typically ranges from 1 to 5 years.
 Interest Rates: Interest rates vary based on the type of loan and collateral, typically
ranging from 8% to 18% per annum.
 Working Capital Loan: Short-term loan used for managing day-to-day business
operations such as inventory purchases, payroll, etc.
 Eligibility: Eligibility is determined by the business’s financial statements, credit score,
profitability, and repayment capacity.
Types of Business Loans:

 Term Loans: Provided for a specific purpose, such as purchasing equipment or

expanding operations.
 Working Capital Loans: Short-term loans to meet day-to-day operational needs.
 Overdraft Facility: Allows businesses to withdraw more than their account balance up
to an approved limit.

7. Loan Against Property (LAP)

Overview:

A Loan Against Property (LAP) is a secured loan where the borrower pledges their residential
or commercial property as collateral to avail of a loan. The loan amount can be used for personal
or business purposes.

Key Features:

 Collateral: The loan is secured against a residential or commercial property.

 Loan Tenure: The tenure can range from 5 to 15 years, depending on the bank and the
loan amount.
 Interest Rates: LAP interest rates are lower than personal loans, typically ranging from
8% to 12% per annum.
 Loan Amount: Banks usually provide up to 60% to 70% of the property’s market value.
 Eligibility: Borrowers need to have clear property ownership and a stable income to
qualify for this loan.

Example of Uses:

 Debt consolidation
 Business expansion
 Large personal expenses

8. Agriculture Loan

Overview:

Agriculture Loans are provided to farmers for agricultural activities such as purchasing seeds,
fertilizers, farm equipment, or even land. These loans support the agricultural sector and are
often offered at subsidized interest rates by the government.

Key Features:
  Purpose-Specific Loan: The loan can only be used for agricultural purposes such as crop
production, buying livestock, or irrigation projects.
 Interest Rates: Subsidized interest rates are provided by the government, usually around
4% to 7%.
 Loan Tenure: Short-term loans are provided for crop production, while long-term loans
are available for equipment or land purchase.
 Types of Agriculture Loans: Kisan Credit Card (KCC), crop loans, equipment loans,
and loans for land development.

E-Banking (Electronic Banking)

E-banking, also known as electronic banking or online banking, refers to the use of digital
platforms and technology to enable customers to conduct financial transactions and access
banking services over the internet. E-banking allows users to perform various banking tasks such
as checking account balances, transferring funds, paying bills, applying for loans, and making
investments without needing to visit a physical branch.

Key Features of E-Banking:

 24/7 Access: Customers can access their accounts and carry out transactions anytime,
anywhere.
 Convenience: E-banking saves time as users can manage their finances from home or on
the go.
 Services Offered:
o Fund transfers (NEFT, RTGS, IMPS)
o Bill payments (electricity, water, mobile recharges)
o Checking account balances and mini-statements
o Applying for loans, fixed deposits, or credit cards
o Online shopping via net banking
 Security: Banks use encryption, two-factor authentication, and secure login systems to
protect transactions.

How E-Banking Helped During the Covid-19 Pandemic

During the Covid-19 pandemic, e-banking played a crucial role in maintaining access to
essential banking services while minimizing physical contact, in line with social distancing
guidelines. The lockdowns and restrictions imposed to control the spread of the virus meant that
many bank branches were either closed or operating with limited capacity, making e-banking a
critical alternative.

Benefits of E-Banking During the Pandemic:

1. Contactless Banking:
 o E-banking allowed customers to perform transactions without visiting branches,
thus reducing the risk of exposure to the virus. Customers could check balances,
transfer funds, and pay bills from the safety of their homes.
2. Digital Payments:
o With the rise in digital payments, e-banking enabled people to make contactless
payments for goods and services. The use of UPI (Unified Payments Interface),
net banking, and digital wallets surged during the pandemic, helping to avoid
physical cash handling, which could potentially spread the virus.
3. Government Subsidies and Aid:
o Many governments, including India’s, distributed financial aid to affected citizens
during the pandemic. E-banking platforms made it easier for people to receive
direct benefit transfers (DBT) into their accounts and access the funds remotely.
4. Seamless Fund Transfers:
o With limited movement allowed during the lockdown, people relied heavily on e-
banking for IMPS, NEFT, and RTGS transfers to send money to family, friends,
or vendors. This helped in facilitating financial support, both locally and globally,
during tough times.
5. Business Continuity:
o E-banking enabled businesses, especially small and medium-sized enterprises
(SMEs), to continue functioning during lockdowns. Businesses could manage
payroll, pay vendors, and receive payments through online platforms, ensuring
continuity in operations.
6. Financial Inclusion:
o E-banking services were instrumental in providing banking access to people in
remote or rural areas, especially during the pandemic. Digital banking apps
allowed people who were unbanked or underbanked to open accounts, receive
subsidies, and conduct transactions without needing to travel.
7. Loan Moratoriums and Reliefs:
o Banks provided relief measures such as loan moratoriums during the pandemic,
allowing borrowers to defer payments without affecting their credit score. E-
banking made it easy for customers to apply for such reliefs or check their
eligibility online.
8. Online Customer Support:
o With limited access to physical bank branches, customer support services
transitioned to online and phone-based platforms. E-banking apps provided
chatbots, email support, and toll-free numbers to resolve customer queries,
ensuring uninterrupted service.
9. Secure Transactions:
o The pandemic saw a rise in fraudulent activities and cyber threats. However, e-
banking platforms invested in robust security systems like encryption, multi-
factor authentication, and real-time fraud detection to ensure safe and secure
transactions.
How Banks Operated for Customers During the Pandemic

The Covid-19 pandemic posed unprecedented challenges for the banking sector, as physical
branches faced restrictions due to lockdowns and social distancing measures. However, banks
adapted quickly to ensure that essential services remained available to customers. Here’s how
banks operated during the pandemic:

1. Limited Branch Operations:

 During the lockdown, banks operated with reduced staff and limited working hours.
Branches often functioned on a rotational basis, with only a few branches open on
specific days to cater to urgent customer needs.
 Social distancing protocols were strictly enforced in branches, with limits on the
number of customers allowed inside at a time, thermal screening, and the mandatory use
of masks and sanitizers.
 Priority was given to essential services, such as cash withdrawals, deposits, cheque
clearing, and fund transfers.

2. Enhanced Digital Banking Services:

 With restricted access to physical branches, banks encouraged customers to use e-

banking platforms for most services. The use of mobile banking apps, net banking,
ATMs, and digital payment systems like UPI (Unified Payments Interface) saw
significant growth.
 Banks ramped up the capacity and functionality of their digital infrastructure to handle
the surge in online transactions, ensuring smooth service delivery without interruptions.
 Many banks launched chatbots and AI-powered support systems to help customers
navigate online banking platforms and resolve common queries.

3. ATM Services:

 Banks ensured that ATMs were operational across the country to allow customers easy
access to cash. ATMs were regularly sanitized, and banks increased the frequency of cash
refills to meet demand.
 Contactless ATMs were introduced in some areas, enabling customers to withdraw cash
using QR codes and UPI without touching the machine.

4. Dedicated Customer Support:

 Banks extended their customer care services by offering phone-based support, live
chat, and email assistance. They also set up helplines specifically to address issues
related to the pandemic, such as financial distress, moratorium requests, and
documentation delays.
  Many banks introduced video banking services, allowing customers to engage with bank
representatives for advice, issue resolution, or even product applications without visiting
the branch.

5. Financial Inclusion and Aid Distribution:

 Banks played a key role in distributing government relief packages and subsidies
directly into customer accounts. This was especially critical for the economically
vulnerable who depended on financial aid during the pandemic.
 Through digital platforms, banks ensured that customers, including those in rural areas,
could receive government benefits like Direct Benefit Transfers (DBT) without having
to visit branches.

Relaxations Given by Banks During the Pandemic

To help alleviate the financial burden faced by individuals and businesses during the pandemic,
the Indian government and the Reserve Bank of India (RBI) implemented several relief
measures. Banks complied with these directives and introduced additional relaxations to support
customers.

1. Loan Moratorium:

 The RBI announced a moratorium on loan repayments for a period of six months
(March 2020 to August 2020). This meant that borrowers could defer their EMI
(Equated Monthly Installment) payments on loans such as personal loans, home loans,
car loans, and credit cards without being classified as defaulters.
 The moratorium was a deferment, not a waiver, meaning that the unpaid EMIs were
added to the loan’s tenure, and interest continued to accrue during the moratorium period.

2. Restructuring of Loans:

 After the moratorium ended, the RBI allowed banks to offer a loan restructuring
scheme for borrowers who continued to face financial distress due to the pandemic. This
allowed borrowers to renegotiate their loan terms, such as reducing EMI amounts,
extending repayment periods, or adjusting interest rates, based on their ability to repay.
 Business loans, particularly for small and medium enterprises (SMEs), were also
restructured to help businesses manage cash flow disruptions caused by the pandemic.

3. Reduced Interest Rates and EMI Relief:

 Many banks offered reduced interest rates on new loans to encourage borrowing for
both individuals and businesses.
  Customers facing financial difficulties could apply for EMI deferment or interest
waivers in certain cases, such as education loans or agricultural loans, to ease their
financial burden.

4. Waivers on Service Charges and Fees:

 Banks waived certain service charges and penalties during the pandemic, such as
charges for late payments, overdrafts, or account maintenance fees.
 ATM withdrawal charges were temporarily waived to allow customers to make
multiple cash withdrawals without additional fees.
 Some banks offered free digital banking services, such as free NEFT/RTGS transfers or
fee waivers for digital transactions, to encourage online banking usage.

5. Increase in Digital Transaction Limits:

 To promote contactless payments and reduce the need for physical cash handling, banks
increased the limits for digital transactions such as UPI transfers, IMPS, and card
payments.
 Daily transaction limits for UPI payments were raised to facilitate higher value
transactions, making it easier for customers to pay for essentials and services.

6. Extension of Banking Deadlines:

 The RBI extended deadlines for various compliance-related activities, such as KYC
(Know Your Customer) updates and submission of documents. Customers were given
additional time to complete these formalities without facing penalties or account
restrictions.
 Banks also extended the due dates for income tax filing, loan repayments, and other
financial obligations.

7. Support for Small Businesses and MSMEs:

 To support Micro, Small, and Medium Enterprises (MSMEs), banks offered

specialized credit schemes and working capital loans at subsidized interest rates. The
government also introduced the Emergency Credit Line Guarantee Scheme (ECLGS),
which provided additional credit to MSMEs with government guarantees.
 Collateral-free loans and subsidized interest rates were made available to help small
businesses weather the economic downturn.

8. Enhanced Insurance Coverage:

 Many banks partnered with insurance companies to offer Covid-specific insurance

policies to customers, covering medical expenses, hospitalization, and income loss due to
the virus.
 Banks also ensured that existing insurance policies were serviced promptly, with claim
settlements expedited to assist policyholders during the pandemic.