1.

Introduction

2. Banking Products
2.1. Demand Deposit
2.1.1. Saving
2.1.2. Current Account
2.2. Term Deposit
2.3. NRE and NRO (Non- Resident)
2.4. Loans
2.4.1. Secured Loans
2.4.2. Unsecured Loans

3. CIBIL: Need and its Functions and working.

4. Banking Services
4.1. Safe deposit
4.2. Remittances of funds through- Cheques, Bankers’ cheques, Demand drafts, Mail and Telegraphic transfers, electronic
modes of transfer, Tele\mobile and net banking
4.3. ATM
4.4. Services as paying and collecting banker – the process of clearing a cheque.
4.5. Currency exchange
4.6. Bank Guarantee and Letter of Credit

5. RBI guidelines
5.1. Institutional framework
5.2. Financial inclusion
5.3. Safe Deposit Locker
5.4. Nomination Facility
5.5. Collection of instruments
5.6. Dishonour of cheques
5.7. Opening and operation of deposit accounts
5.8. Complaints and its redressal

6. Summary
7. Key words
8. Self-Assessment
9. References

1. Introduction
Banks are like money hubs that can take your deposits and give out loans. There are different types, like retail,
commercial, and investment banks. The government or central bank keeps an eye on them to make sure everything's
in order. Originally, there were three presidency banks, merged in 1921 to form the Imperial Bank of India, later
becoming SBI in 1955.In India, we have scheduled and non-scheduled banks. Scheduled banks include nationalized
banks, SBI and its friends, Regional Rural Banks (RRBs), foreign banks, and other private Indian banks. The
Reserve Bank of India or (Central Bank), born from the Reserve Bank of India Act in 1934, has been overseeing the
banks since 1935.

2.1 Demand Deposit

A demand deposit is money deposited into a bank account with funds that can be withdrawn on-demand at any time

2.1.1. Saving Account - A "Savings Deposit" refers to a type of demand deposit that constitutes a deposit account,
commonly identified as a "Savings Account," "Saving Bank Account," or "Saving Deposit Account," among other
names. This account is subject to certain restrictions regarding both the frequency and the amount of withdrawals
permitted by the bank during any specified period. Typically, banks impose limitations on the number and sum of
withdrawals from a Savings Deposit to encourage customers to maintain and accumulate funds over time. Banks
should pay interest on Saving account.

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 2.1.2. Current Account- A "Current Account" is a type of demand deposit that allows unlimited withdrawals,
depending on the account balance or up to a pre-agreed amount. It also encompasses other deposit accounts that do
not fall under the categories of Savings Deposit or Term Deposit. Urban co-operative banks can choose to pay
interest on current accounts, but the rate should not exceed 0.5% per year. However, it's recommended that banks
avoid paying interest on current accounts due to potential increased costs. If interest is paid, it should be calculated
daily and paid on a quarterly or longer basis.

2.2. Term Deposit

A "Term Deposit" refers to a deposit accepted by the bank for a specific duration, and withdrawal is allowed only
after the completion of the agreed-upon fixed period.
2.2.1. Fixed Deposit: It is type of investment in which an individual invests a lump sum amount for a specific period
of time with a bank. The amount deposited in the FD earns interest at a fixed rate which is set at the time of the account opening.
FD holders can choose to receive the interest earned either monthly, quarterly, half-yearly or annually as per their preference.
Fixed Deposits are popular as they are one of the safest investment options available in the market. The returns are guaranteed and
there is no real risk of a capital loss. Moreover, they offer a better rate of interest when compared to Savings Accounts

2.2.2. Recurring Deposit: A Recurring Deposit, commonly known as RD, is a unique term-deposit that is offered by
Indian Banks. It is an investment tool which allows people to make regular deposits and earn decent returns on the
investment. Due to the regular deposit factor and an interest component, it often provides flexibility and ease of
investments to users/individuals.

However, it is essential to know that RDs are different from Fixed Deposits/FDs. RDs are flexible in most aspects.
An RD account holder can choose to invest a fixed amount each month while earning decent interest on the amount.
RDs are an ideal saving-cum-investment instrument.

2.3.1. Non-Resident external (NRE) and Non- Resident Ordinary Account: NRE full form is Non-Resident (External)
Account, which allows only foreign credits from outside India into the account. On the other hand, NRO stands for
Non-Resident (Ordinary) Account. Such accounts allow both foreign currency credits from outside India as well as
rupee credits from within India.

Comparison

Criteria NRE NRO

Acceptance of Rupee Does not accept rupee transactions from Accepts rupee transactions and foreign
Credits India currency
Repatriability of Allows free repatriation without limits Principal balance repatriation has
Account Balance specified limits, interest income is
freely repatriable
Joint Operations  Joint NRE Account with another Joint NRO Account with Resident or
NRI allowed Non-Resident
 Joint NRE Account with Resident
relative
 Resident relative can operate
under 'former or survivor' basis
with Power of Attorney

Note: Repatriation refers to the process of converting funds or assets back into the country of origin.

2.4. Loans
2.4.1. Secured Loan
Loans that are given in exchange for collateral are known as secured loans. To obtain secured loans, borrowers must
provide security. Lenders are less likely to experience borrower default when dealing with secured loans. The lender
may sell the asset to recoup its costs if the borrower is unable to repay the loan. The interest rate for secured loans is
comparatively lower than that of unsecured loans for this primary reason.

Types of Secured Loan:

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i) Home loan: Home loans are secured loans for buying or building a home. The property serves as the
primary security, and additional collateral may be needed based on the borrower's profile. Loan tenure
ranges from 10 to 25 years, with interest rates starting at 7-7.5% per annum. These long-term, high-ticket
loans, often in lakhs, require Equated Monthly Instalment (EMI) repayments. The Loan-to-Value (LTV)
ratio is typically 80%, allowing borrowers to access up to 80% of the property value.

ii) Gold loans are secured by pledging gold to the lender, who holds possession until repayment. Interest rates
start at 7.50% per annum, often requiring monthly interest payments. Borrowers can repay the principal at
any time and reclaim their gold. The Loan-to-Value (LTV) ratio on gold loans can go up to 90%.

iii) Vehicle loans are for buying various vehicles, including two-wheelers, four-wheelers, and heavy vehicles.
The vehicle serves as primary security, and if there's non-repayment, the lender can seize it. Interest rates
range from 7-7.5% per annum, and the Loan-to-Value (LTV) varies based on the vehicle type. Some lenders
may offer up to 100% of the vehicle's value for specific loans.

iv) Loan against Property: A loan against property is a type of mortgage loan in which the borrower pledges
their personal or business property as security. Home loans have lower administration costs. You may spend
the money for personal or professional endeavors. The interest rate starts at 8% annually, and the loan-to-
value (LTV) ratio is between 65 and 70 percent.

v) Loans against Securities - Investors can borrow against bonds, mutual funds, stocks, and debentures
through loan against securities. With a 50% Loan-to-Value (LTV) ratio, the lender is protected from
fluctuations in the market. Interest rates vary depending on the type of security and start at 7.50% annually.

vi) Title Loans - With title loans, the borrower's vehicle serves as collateral for the loan from the lender. By
giving the lenders their cars as collateral security, the borrowers can borrow between 25% and 50% of the
vehicle's worth in this case. The borrower still owns the car, but the lender has the right to take it back if
they don't make payments. These loans can be taken out for as little as 30 days and are typically extremely
short-term loans. The extremely high interest rate associated with title loans is one of their main
disadvantages. Typically, the interest rate is set at 25% monthly.

vii) Loan against Fixed Deposits (FD): Banks offer loans against FDs, using the deposit as primary security.
Borrowers can avail of up to 60-75% of the FD value. Interest rates vary, with some charging a flat rate and
others 1%-2% higher than the FD rate, currently ranging from 5% to 7.5% per annum.

viii) Loan against Insurance: Life insurance policies can serve as collateral for loans, requiring a surrender
value. The Loan-to-Value (LTV) is 85-90%, with interest rates starting at 10%-12% per annum.

ix) Working Capital Loans: These loans, also known as Cash Credit, help businesses with working capital
needs. The loan amount depends on creditors, debtors, and stock. Interest rates start at 12% per annum, and
while stock and debtors act as security, collateral may also be required.

2.4.2. Unsecured Loans

These are totally different from secured loans. Unsecured loans are given based on the borrower's income or
potential for income-earning. Borrowers are not obliged to provide any collateral for unsecured loans. Based
on the documentation submitted by the borrower, their potential for income, and their credit report history,
lenders offer unsecured loans. Because there is no collateral available with the lender to recoup its
obligations in the event of borrower default, unsecured loans put the lender at greater risk. Lending
organizations offer higher interest rates for unsecured loans because of this.
Unsecured Loans:

i) Personal Loans: Popular loans without collateral, based on the borrower's income and CIBIL
score. Amounts range from medical emergencies to travel, with interest rates between 8% to 10%
per annum.
ii) Short-term Business Loans: Designed to help businesses facing financial uncertainties. Simple
eligibility criteria with interest rates between 12% to 18% per annum, reflecting the higher risk for
lenders.
iii) Education Loans: Monetary aid for rising education costs, with interest rates starting at 8.85% per
annum. Repayment typically begins 12 months after completing education.
iv) Credit Cards: Unsecured spending tools with high-interest rates, ranging from 18% to 36% per
annum. The outstanding balance can be converted to an unsecured loan, impacting the CIBIL
score.

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 3.1. What is CIBIL
The first credit information company in India was established in August 2000 and is known as Credit Information
Bureau (India) Limited CIBIL. Its area of expertise is gathering and managing financial documents pertaining to
credit card transactions, loans, and borrowings for both people and companies. To collect and handle this data, CIBIL
works with its banking and credit institution partners.
The Reserve Bank of India (RBI) has authorized CIBIL, sometimes referred to as the Credit Bureau, which functions
in compliance with the Credit Information Companies Regulation Act of 2005. In order to maintain a thorough and
accurate compilation of financial data, CIBIL depends on the assistance of its associated partners, which include
member banks and credit institutions. These partners provide monthly updates.
Your credit record is represented by your three-digit CIBIL credit score. It is clear from the information in your
credit report. This score is between 300 to 900 overall.

3.2. Importance CIBIL score

 Obtaining a loan is significantly influenced by CIBIL. The majority of banks won't consider someone
eligible for a loan if their CIBIL score isn't good.
 The bank examines each applicant's credit score and credit history before approving a loan.
 If someone has a low credit score, the bank will consider that they have a poor credit history and will reject
their loan application.
 On the other hand, the bank will approve an individual's loan with ease if their credit score is high.
 The likelihood that a loan will be approved for an individual increases with score.
Your eligibility for loans is determined on your CIBIL score. People who have a high CIBIL score find it
easier to get approved for a loan.
 Clients can begin negotiating the loan interest rate for the benefit if their CIBIL score is high.
 The loan will be approved quickly and simply. Banks and lenders will provide people with a credit card or
preapproved loan without charging annual fees.

4. Banking Services

4.1. Safe deposit locker:

Safe deposit lockers are specially designed storage units typically located in secure strong rooms within bank branches in
India. These lockers, available in various sizes, such as small, medium, large, and extra-large, are procured from reputable
manufacturers to cater to the diverse needs of customers.
The safe-deposit box refers to a bank locker that is rented out to the depositors of a bank. The bank maintains it for periodic
rent, usually collected annually. It is used to keep valuables, important documents, and keepsakes locked under security.
Operating a safe deposit locker involves signing in a register with the date and time at the bank to gain access. The officer in
charge guides the locker hirer to the locker room, where, using both the bank's master key and the hirer's key, the locker slot
is opened.

4.2. Remittance of funds

Cheques:
A check is a formal request in writing for a financial organization, usually a bank, to transfer funds between accounts in a
specified amount. The drawer, who writes the check, gives the bank instructions to transfer a specific amount of money to the
payee, who is the recipient of the funds. The bank will take the designated amount out of the drawer's account and deposit it
into the payee's account when the payee deposits the check.
Bank checks are seen as a practical, safe, and secure method of transacting business between two parties. Cheques are easily
traceable and authenticated since they are linked to the user's bank account, unlike cash transactions.

Banker cheques:
These cheques are issued by a bank. The bank issues these cheques on behalf of an account holder to transfer funds to another
person in the same city. The stated amount is debited from the customer's account, and then the bank issues the cheque.
Banker's cheques are known as non-negotiable instruments since banks cannot dishonour them. They are valid for three
months. They can be revalidated if certain conditions are met.

Demand Draft:
A demand draft is a type of payment method often used in banking. It's like a check, but instead of being drawn from an
individual's account, it's drawn from the bank itself. When you get a demand draft, you pay the bank the amount you want to

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send, plus a fee. Then the bank creates a draft for you, which you can give to the person or organization you're paying. They
can then take the draft to their bank and exchange it for the specified amount of money. It's a secure way to make payments,
especially for large amounts or when you don't want to use cash.

Telegraphic transfer
A telegraphic transfer (TT) is an electronic method of transmitting funds that is mostly utilized in international wire
transactions. A telegraphic transfer typically takes two to four business days to complete, depending on its origin and
destination. Telegraphic transfers are often called telex transfers (TT), wire transfers, or electronic financial transfers.
Because of the speed of the transfer, TTs are typically expensive, with numerous fees charged at times.

Net banking and mobile Banking

Net banking, or internet banking, offers online access to a wide range of banking services without visiting a branch. It allows
tasks like money transfers and account management.
Mobile banking, accessible via a banking app on smartphones, provides convenient banking services such as fund transfers,
balance checks, bill payments, and ticket bookings.
Difference between Net banking and mobile banking
Parameters Mobile Banking Net Banking
Device used Smartphones, tablets Laptop, Desktop, mobile, tablets
Limited – fewer compared to Net
Services offered Banking All banking services available – Most available
Customers must download banking Customers only need User ID and password for
How to access app online access
User-friendly, convenient for on- Comparatively more complex for banking
Ease the-go operations
Push Notifications for banking offers,
notifications deals, etc. Not available
Other services Accessible through SMS Requires stable internet connection and device

Electronic transfer
IMPS (Immediate Payment Service): Enables urgent fund transfers 24/7 via mobile, ATM, or net banking, requiring
beneficiary details and MMID or IFSC code.

RTGS (Real Time Gross Settlement): RTGS enables real-time fund transfers for larger amounts, typically starting from a
minimum of Rs. 2 lakhs, within a specific timeframe, sender and receiver bank branches to be RTGS-enabled. Details
required for an RTGS transaction include the sender's name and account details, beneficiary's name and account details, IFSC
code, and the transfer amount.

NEFT (National Electronic Fund Transfer): Widely used during banking hours, with nominal transaction fees, requiring
beneficiary details and IFSC code for transfers, unrestricted by transfer amount. NEFT facility can be availed of only during
the working hours of the banks and remains closed during bank holidays or weekends when the banks are not functional

UPI (Unified Payments Interface): The Unified Payments Interface (UPI) is a mobile app designed by the National
Payments Corporation of India (NPCI) for seamless money transfers between bank accounts. It streamlines transactions by
eliminating the need for entering sensitive bank details, offering instant transfers up to Rs. 1 lakh through smartphone apps.
UPI's user-friendly interface has revolutionized payment processes, promoting economic activity within the country.

ATM (Automated Teller Machine)

ATM stands for Automated Teller Machine, which is a self-service banking facility. ATMs allow you to withdraw money,
check your balance, and even transfer funds. Different banks provide ATM services by deploying cash machines throughout
the country. You can withdraw money from any of these machines, regardless of whether you have an account with the same
bank.

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 ATM transactions are either free or charge a modest fee, depending on the bank. Banks normally don't charge for the first 3-5
ATM transactions per month. When you reach the limit of free transactions, you may have to pay a little fee. In addition,
some banks charge fees for withdrawing money from another bank's ATM.

4.4. Services as paying and collecting banker – the process of clearing a cheque.

i) Paying Banker: This refers to the bank upon which a cheque is drawn, and it is responsible for honoring the
cheques issued by its customers. When a cheque is presented for payment, the paying banker verifies its authenticity,
ensures that there are sufficient funds in the drawer's account, and then cancels the cheque by various methods such
as initialling across the drawer's signature, stamping "Paid" with the date, or perforating the payment date onto the
cheque. Once the cheque is paid, its active life ends.

Obligations of the Paying Banker:

Honor the customer's cheque if it is legal and presented in its original form within a reasonable time.
Ensure that there are sufficient funds in the customer's account to cover the amount of the cheque.
Act on the cheque before receiving any instruction to stop payment or notice of the customer's death.
Verify that the sum of money is at the customer's disposal.

ii) Collecting Banker: This refers to the bank that collects the proceeds of cheques drawn on other banks or branches.
When customers deposit cheques drawn on other banks into their accounts at this bank, the collecting banker ensures
that the cheques are valid and then proceeds to collect the funds from the other bank.

iii) Clearing process-

Starting from September 30, 2012, banks were directed to issue only CTS 2010 standard compliant cheques. Before, there
were separate clearing sessions for non-CTS cheques, but these ceased operations by December 31, 2018. At present, non-
CTS cheques cannot be processed within the CTS system. Banks have been instructed to retrieve non-CTS cheques from their
customers, although these cheques remain legally valid as negotiable instruments.
The "Cheque Truncation System" (CTS) is an electronic clearing system where cheque images and Magnetic Ink Character
Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically, eliminating the need for
physical movement of the cheques.

 In CTS (Cheque Truncation System), banks capture cheque data and images using their internal Capture Systems,
ensuring they meet CTS standards. To secure this process, Public Key Infrastructure (PKI) is used for digital signing
and encryption.

 Presenting banks digitally sign and encrypt data and images before sending them to the Clearing House. They use
either Clearing House Interface (CHI) or Data Exchange Module (DEM) to securely transmit to the Centralised
Clearing House (CCH).

 The Clearing House processes data, settles transactions, and forwards images to paying banks for further processing,
known as presentation clearing. Paying banks use CHI/DEM to receive images and data from the CCH.

 Paying banks also generate return files for unpaid cheques. The Clearing House processes these return files during
return clearing, providing data to presenting banks for processing.

 Once presentation clearing and return clearing sessions are completed successfully, the clearing cycle is considered
complete. CTS technology relies on using cheque images instead of physical cheques for payment processing.

Bank guarantee

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 Bank guarantee is an agreement where a bank assures the recipient that it will fulfil the client's payment obligations in case of
default. The bank acts as a guarantor, ensuring payment within a specified timeframe if the client fails to fulfil their
obligations. Bank guarantees mitigate risks associated with business contracts, with banks receiving commissions based on
the guaranteed amount. There are two main types: performance guarantees and financial guarantees.

letter of credit
A letter of credit (L/C) is a financial document issued by a bank on behalf of a buyer to a seller, guaranteeing payment for
goods once specified conditions are met. The seller must adhere to the buyer's terms outlined in the L/C and provide proof of
compliance. Once conditions are satisfied, the bank releases funds to the seller, providing security for both parties involved.

5. RBI Guidelines
5.1. Institutional Framework
Board's Oversight: The Board should actively engage in deliberations concerning customer service to ensure effective
implementation of instructions and commitment to hassle-free service.
Emphasizing hassle-free service for all customers, especially the common person, should be a key responsibility of the Board.
Customer Service Committee of the Board: Banks must establish a Customer Service Committee comprising board
members and customer representatives to formulate policies and assess compliance, enhancing corporate governance.The
committee's roles include formulating deposit policies, addressing issues like account operations in case of depositor's death,
product approvals, conducting customer satisfaction surveys, and periodic audits.
Monitoring Banking Ombudsman Scheme: The committee should actively monitor and ensure the implementation of
awards from the Banking Ombudsman Scheme, addressing systemic deficiencies highlighted in complaints. Unimplemented
awards should be reviewed, and delays without valid reasons should be reported to the Board for necessary action.
Board Meetings for Customer Service Review: Banks should conduct comprehensive reviews of customer service aspects
every six months, submitting detailed reports to the Board and initiating corrective actions where necessary.
Standing Committee on Customer Service: Ad hoc committees should be converted into a permanent Standing Committee
chaired by the CMD or ED, with non-official members providing independent feedback.
The committee should ensure timely compliance with RBI instructions on customer service, review bank practices, and
submit performance reports to the Customer Service Committee of the Board.
Branch-Level Customer Service Committees: Branches should establish Customer Service Committees with customer
participation, including senior citizens, to address complaints, suggestions, and improve service.
These committees should meet regularly, provide quarterly reports to the Standing Committee, and contribute to policy and
procedural improvements.
Nodal Department for Customer Service: Banks should designate a nodal department or official at the Head Office and
controlling offices to handle customer grievances and liaise with regulatory bodies like the Banking Ombudsman and RBI.
5.2. Financial Inclusion

Basic Savings Bank Deposit Account (BSBDA):

Banks are mandated to offer a 'Basic Savings Bank Deposit Account' to provide essential banking services to all customers.
This account does not require a minimum balance and offers services such as cash deposit/withdrawal at branches and ATMs,
electronic fund transfers, and cheque deposits.

Customers can make unlimited deposits but are allowed a maximum of four withdrawals per month, including ATM
transactions. The account comes with an ATM card or ATM-cum-Debit Card and does not incur any charges for basic
services or non-operation.

Banks can offer additional value-added services beyond the basic minimum on reasonable terms and conditions.
KYC/AML norms apply, and holders are ineligible for opening another savings account.
Existing 'no-frills' accounts are to be converted to 'Basic Savings Bank Deposit Account'.
IT-enabled Financial Inclusion:

While BSBDA aims at financial inclusion, banks need to extend banking services to remote areas with affordable
infrastructure and technology.
Banks are encouraged to scale up financial inclusion efforts using secure and auditable technology following open standards.
Trilingual Printed Material:

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Banks must provide printed material, including forms and passbooks, in trilingual form—English, Hindi, and the regional
language—to ensure accessibility to a wider population.

Rights of Transgender Persons:

In line with the Supreme Court's ruling recognizing transgender persons as 'third gender', banks must include this option in all
forms and applications requiring gender classification.

5.3. Safe deposit Locker Guidelines

Banks are obligated to ensure the security and protection of lockers provided to customers, requiring ongoing review and
necessary precautions. Properly documented security procedures must be in place, and staff should receive thorough training.
Internal auditors should verify strict adherence to these procedures.

In light of recent incidents, banks must be vigilant about the risks associated with safe deposit lockers. To mitigate these risks,
banks should:

 Conduct customer due diligence for both new and existing customers, meeting at least medium-risk classification
standards. Higher-risk customers should undergo due diligence as per applicable KYC norms.

 Promptly contact locker-holders if lockers remain unoperated for more than three years for medium-risk customers
or one year for higher-risk ones. Even if rent is regularly paid, banks should request reasons in writing from locker-
holders for non-use. Genuine reasons, such as NRIs or individuals with transferable jobs, may be considered.

 If no response or operation occurs, banks should consider opening lockers after due notice. Locker agreements
should include a clause allowing banks to cancel allotment and open lockers if unoperated for more than one year,
despite regular rent payment.

 Establish clear procedures, developed in consultation with legal advisors, for breaking open lockers and conducting
inventory checks.

5.4. Nominations Rules

The Banking Companies (Nomination) Rules, 1985, in consultation with the Reserve
Bank of India, outline procedures for nominating individuals for safe deposit lockers and
other banking facilities.
 Nomination forms for deposit accounts, safe custody articles, and safety lockers,
including provisions for cancellation and variation of nominations.
 Measures to address unoperated lockers and safe custody articles, including
contacting customers and incorporating clauses for cancellation if inactive.
 Regarding single deposit accounts, banks are encouraged to promote nomination
facilities, even insisting on nominations unless explicitly declined by the customer.
Acknowledgment of nomination forms is mandated, and proper registration in bank
records is required.
 For customer convenience, banks should indicate nomination status on passbooks
and deposit receipts. Nomination facilities are available for both individual and
joint deposit accounts, aiming to expedite claims settlement and minimize
hardships for families.
 Banks should educate customers on the benefits of nomination and survivorship
clauses, ensuring wide publicity and incorporating nomination options into account

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 opening forms. Periodic drives and promotional materials should emphasize the
availability and importance of nomination facilities

5.5. Collection for cheques

 Banks are required to develop their own policies for cheque collection,
encompassing immediate credit, timeframes, and compensation for
delays.
 Policies should be transparent, integrated with deposit policies, and
approved by the bank's Board.
 Immediate credit is provided for local/outstation cheques, with
adherence to specified timeframes for collection.
 Compensation for delays in cheque realization is provided as per the
Cheque Collection Policy (CCP).
 Banks are prohibited from crediting "account payee" cheques to accounts
other than the payee named.
 Clear instructions are provided to credit proceeds only to the payee's
account.
 Payments are not made beyond three months from the date of the
instrument.
 Banks are responsible for lost cheques in transit or in the clearing
process.
 Reimbursement for related expenses and delays to account holders.
 Lodger's bank pays interest for delays in bill collection, with provisions
for recovery from the drawee's bank if applicable.
 Forwarded directly to the realizing office by the forwarding office.
 Cheque return charges are levied only when the customer is at fault.
 Immediate re-presentation for technical return cheques.

5.6. Returning Dishonored Cheques:

 Banks must promptly return dishonored cheques to customers within 24 hours,

following the recommendations of the Goiporia Committee and guidelines from
clearing houses.

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  Dishonored cheques presented through clearing houses must be returned according
to clearing house regulations.
 Directly presented cheques for settlement must also be returned immediately to
payees or holders.
 Paying banks should clearly indicate return reason codes on memos/objection slips.
 Data for dishonored cheques exceeding ₹1 crore should be included in banks' MIS
reports.
 Separate reporting is required for cheques drawn in favor of stock exchanges.

 For cheques over ₹1 crore, banks may withhold new cheque book issuance after
four dishonors in a financial year. Cautionary advice is issued after the third
dishonor, informing customers of potential account closure.
 For cheques under ₹1 crore, banks develop board-approved policies to address
frequent dishonors and ECS mandates.

Evidence and Compliance:

 Banks extend full cooperation to customers requiring

proof of dishonored cheques for legal proceedings.
 Quarterly consolidated data on dishonored cheques is
presented to Audit/Management Committees.
 Internal Procedures and Preventive Measures
 Banks establish internal guidelines approved by their
respective boards to prevent delays or collusion in
communicating dishonor to payees.
 Staff are trained to strictly adhere to these guidelines to
ensure effective handling of dishonored cheques.

5.7. Opening and operation of deposit accounts

i) Current and Savings Accounts:

 Banks must adhere to RBI's KYC guidelines and

AML regulations for opening and operating current
and savings accounts.
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 Customers need to provide valid identification and
address proof documents as per RBI's guidelines
during the account opening process.
 Passbooks or monthly statements must be provided
to savings account holders for transparent record-
keeping of transactions.
 Minimum balance requirements and associated
charges should be transparently disclosed for savings
and current accounts.
 Cheque books should be available in Hindi and
English for current and savings accounts, with
customers allowed to write cheques in either
language.
 Banks should ensure efficient handling of
transactions, including deposits, withdrawals, and
fund transfers, with convenient access to funds
through ATMs, online banking, and branch services.
 Accurate and up-to-date records of all transactions
and account balances should be maintained by
banks.
 Charges and fees for various services should be
transparently communicated to customers.
 In case of joint accounts, operations such as
withdrawals and transfers should adhere to the

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 specified mandate (e.g., "Either or Survivor" or
"Former or Survivor").

ii) Term Deposit Accounts:

 Banks must accurately record all term deposit transactions, including
issuance, renewal, and premature withdrawal, following RBI's KYC
guidelines and AML regulations.
 Interest rates and maturity dates should be clearly communicated to
depositors at the time of opening the account.
 Premature withdrawals should be allowed with penal interest rates, and
interest should be calculated proportionately based on the period the
deposit remained.
 Renewal procedures should be carried out seamlessly, with clear
communication to depositors regarding renewal options and applicable
interest rates.
 Any changes in interest rates or terms of the deposit should be promptly
communicated to depositors.

5.8. Complaints and redressal

 Provide a box at each bank office for complaints and

suggestions.
 Display a notice inviting customers to meet the branch
manager for unresolved grievances.
 Introduce a complaint book with perforated copies for
instant acknowledgment and notification to the controlling
office.
 Follow the format provided by Indian Banks' Association
for uniformity.
 Offer a complaint form on the homepage with the Nodal
Officer's name for complaint redressal, indicating
escalation to Banking Ombudsman if unresolved.
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  Analyze complaints to identify service areas, sources, and
deficiencies, disclosing them along with financial results.
 Establish a mechanism for receiving and addressing
complaints, acknowledging them promptly.
 Set timeframes for complaint resolution and include rural
and priority sector grievances.
 Display contact details of officials for complaint redressal
at branches and on websites.
 Appoint a senior-level Principal Nodal Officer and

prominently display their contact details on the bank's

portal.
 Continuously examine the effectiveness of the grievance redressal machinery, considering special squads
and staff reassignments. Appoint Public Relations Officers/Liaison Officers at branches with a high number
of complaints.
 Select banks to appoint a Chief Customer Service Officer (CCSO) as an internal ombudsman for grievance
redressal before escalation to Banking Ombudsman.
6. Summary
The banking sector offers a range of products and services to meet diverse financial needs. From demand deposits
like savings and checking accounts for immediate access to funds, to term deposits offering fixed savings with
interest, banks cater to various preferences. NRE and NRO accounts serve Indian nationals abroad, while loans
provide borrowed funds with repayment terms and collateral. CIBIL determines loan eligibility based on credit
scores. Banks facilitate remittances, ATM services, check processing, and currency exchange, adhering to central
bank guidelines. They promote financial inclusion, offer safe deposit facilities, manage service charges, handle
complaints, and provide secure storage and nomination facilities.
7. Keywords
 Demand Deposit: Savings and checking accounts for immediate money access.
 Term Deposit: Fixed savings with interest, requiring a time commitment.
 NRE and NRO: Foreign accounts for Indian nationals.
 Loans: Borrowed funds with repayments and collateral.
 CIBIL: Credit score determining loan eligibility.
 Safe deposit: Secure storage for valuables.
 Remittances: Transferring money via cheques and electronic means.
 ATM: Provides cash access and withdrawals.
 Paying and collecting banker: Manages check processing.
 Currency exchange: Converting foreign currencies.
 Bank Guarantee and Letter of Credit: Providing trade assurances.
 Institutional framework: Central bank regulations.
 Financial inclusion: Ensuring access to financial services for all.
 Opening and operation of deposit accounts: Setting up and managing accounts.
 Service charges: Fees for banking transactions.
 Collection of instruments: Processing checks and other financial documents.
 Dishonour of cheques: Rejected check payments.
 Complaints and its redressal: Resolving customer issues.
 Safe Deposit Locker: Secure storage for belongings.
 Nomination facility: Designating beneficiaries for accounts.

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8. Self Assesment

A) Long questions
1. What is secured loans? Example of secured loans?
2. Explain the various type of fund transfer method
3. Function of CIBIL
4. Overview of the regulatory framework established by the Reserve Bank of India (RBI).

B) Multiple choice questions

i) Which of the following accounts typically earns interest and is designed for long-term savings?
a) Current Account
b) NRE Account
c) Term Deposit
d) NRO Account

ii) What is the primary purpose of a Current Account?

a) Long-term savings
b) Earn interest on deposits
c) Business transactions
d) international remittances

iii) CIBIL is primarily involved in:

a) Issuing loans to customers
b) Providing investment advice
c) Reporting credit information
d) Managing ATM networks

iv) Which banking service provides a secure facility for storing valuable items?

a) Remittances of Funds
b) Safe Deposit
c) ATM
d) Bank Guarantee

v) What is the primary function of an ATM?

a) Currency exchange
b) Fund remittances
c) Cash withdrawals and balance inquiries
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 d) Providing loans

vi) The process of clearing a cheque involves:

a) Confirming the authenticity of the signature
b) Transferring funds from the payer's account to the payee's account
c) Issuing a demand draft
d) Exchanging currencies

vii) Which banking instrument is commonly used in international trade to ensure payment security for
exporters and importers?
a) Bank Guarantee
b) Letter of Credit
c) Term Deposit
d) Unsecured Loan

viii) RBI guidelines primarily focus on:

a) Setting interest rates for loans
b) Regulating the banking sector
c) Providing financial advice to customers
d) Managing government expenditures

C) Fill in the Blanks

i) Banks must adhere to __________ guidelines when opening accounts.
ii) KYC stands for __________.
iii) Customers can transfer their accounts to another branch within the same bank with a __________ declaration.
iv) Passbooks must be offered to all __________ bank account holders.
v) Cheque books can be issued with a larger number of leaves upon __________ request.
vi) Premature withdrawal of term deposits may incur a __________ interest rate.
vii) Banks should provide timely __________ certificates to customers.
viii) Customers should be transparently informed about maintaining a minimum balance and associated

Answer keys

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