ACCOUNTING
1) Error book is maintained at the branches
To avoid the recurrence of errors. It could be useful in rectifying the
error. To identify areas of operation where usually errors are limited
and to initiate safeguards to avoid recurrence.
2) Adjusting account is opened/operated in GL at the time of Annual Closing
Our P&L is on accrual basis. Accrued Income, Income earned in advance
and expenses due but not paid and pre-paid expenses for the accounting
year are adjusted through this account.
3) Daily vouchers should be scrutinized with care and intelligence.
To ensure that the vouchers pertain to the day's transactions; they are
in order; passed in accordance with the powers delegated to the
respective officials and are free from errors. This also enables the
Branch Manager to know the flow of funds.
4) Branch Documents Register is revised.
To provide for methodical record and easy retrieval of branch documents.
Verification by inspecting officials is facilitated.
5) LOCUP has been introduced.
Standardized accounting procedures relating to inter-bank and
inter-branch clearing of instruments. To remove the disparities
generally observed in realization times of such instruments.
6) Bank crossing stamp should be branded on all instruments.
Unscrupulous persons may surreptitiously remove the instruments and
deposit it in other bank. To avail of statutory protection under N.I Act
as collecting banker which is available for instruments that are
specially crossed.
7) Double Signature System has been introduced.
An effective counter-check over high value items. It is a safeguard
against frauds. As per RBI guidelines.
8) The credit balance of P&T Charges Recovered A/c. should be transferred to Charges A/c. at the
close of each Friday.
To avoid artificial inflation of DTL and needless maintenance of
statutory reserves on these accounts.
11) When cheques are returned to the constituents, the Bank's crossing stamp and register number,
if any, must be canceled.
This enables the customer to collect the cheque through another bank as
cheques crossed specially to 2 banks are not paid unless one is acting
as agent for collection of the other.
12) Our deposit accounts have a survivorship clause in case of joint accounts.
ADVANCES - GENERAL
19) We do not open the letters sent to borrowers that are returned undelivered.
To preserve an evidence of the fact that such communication has been
sent to the borrower.
20) Trade advances up to Rs 10.00 lacs are classified under SBF
To encourage banks to grant more finance under priority sector thereby
increasing and creating employment opportunities. The earlier ceiling
has become low due to inflationary trend.
21) "Rate of Interest" on Loans is always linked to PLR
It obviates the necessity of sending a notice to the borrower and
obtaining his consent every time the interest rate changes. A
notification in regard to changes in PLR serves the purpose of "Notice”
to the borrowers.
22) Banks adopt "Service Area Approach"
To ensure balanced regional development; avoid multiple and scattered
finance by the Banks; make individual banks responsible for development
of allocated areas and facilitate follow-up.
23) Balance confirmation is obtained in all loan accounts.
It is an acknowledgment of debt due by the borrower that also helps in
extending the period of limitation.
24) Bank’s name plates should be displayed prominently on all goods pledged or hypothecated to
the bank
To give adequate notice to the world at large of our paramount charge
over the goods pledged or hypothecated to the bank. Also, to prevent
32) Units covered under Selective Credit Control directives cannot be financed under Equity Fund
Scheme.
One of the directives of Selective Credit Control deals with specific
margins that should be compulsorily maintained. Equity Fund Scheme is
meant to finance borrower's margin, the directives of SCC would be
violated.
33) Bank's own shares cannot be accepted as security.
Prohibited under Sec. 20(1)(A) of Banking Regulations Act and Sec. 34(1)
(h) of SBI Act. It amounts to reduction in the share capital of the Bank.
34) Advances to women can be granted only against the security of her own property in her own
right.
We cannot bind her husband unless it can be proved that the advance is
for her necessities. The recovery of advance is doubtful.
35) While granting advances to married woman, it is advisable to obtain guarantee of her husband.
So as to bind the husband also for the debt. Marriage alone does not
create a responsibility on the husband for payment of wife's debts.
Also, women cannot be arrested for non-payment of a judgment debt.
36) Before selling goods pledged, the Bank has to give due notice to the pledger.
AGRICULTURAL ADVANCES
52) Agricultural loans are not disbursed at one instance but in stages
Agriculture requires funds at different stages. Ensures end use of funds
and avoids diversion of funds. Also, reduce interest burden on borrowers.
53) Interest on Agricultural loans is applied in May and Nov.
The proceeds of kharif crops are received in November, and those of Rabi
crops in March /April and as such the interest is applied at the time of
harvesting season so that the installment will be recovered with
interest.
54) Interest on agriculture loans are applied only at the time of repayment
As per RBI directives interest on regular agricultural loan is not to be
compounded. An agriculturist is in receipt of funds only after harvest
and marketing. Repayment of loan and application of interest takes place
at that time.
55) Tractor finance need not be restricted to the allocated villages only.
To enable farmers from allocated villages of other bank’s to avail of
finance in case the bank to which the area is allocated is unable to
extend financial assistance. Such loans do not require much follow up
and also helps to increase our business.
56) Comprehensive crop insurance scheme introduced by Government
It provides financial support to farmers in case of crop failure due to
vagaries of nature; restores credit eligibility of the farmer; and
supports and stimulates production of cereals, pulses and oil seeds
57) Loan for cultivation of horticulture and plantation crops are given as ATL
Crop loans are sanctioned for a maximum of 18 months. Horticulture and
plantation crops have long gestation period; the cost of cultivation is
very high. As income accrues over a period of time sanctioned as ATL.
58) Scale of finance per acre is not uniform through out the country.
Due to differences in soil fertility, irrigation facilities, usage of
fertilizers, cropping patterns, methods of cultivation adopted; the cost
of production is different.
59) We encourage financing dug wells in an intensive manner.
The availability of assured irrigation facilities afford safety to the
crops and consequently the crop loans sanctioned. Dug wells reduce
dependence on monsoon.
73) A farmer being financed for diesel / electric pump set should be persuaded to avail of crop loan
facility also.
To ensure adequacy of working capital funds to farmer so that sufficient
surplus or incremental income is generated from cultivating the land for
repayment of term loan installments.
74) Repayment periods and start-up periods stipulated by NABARD should be strictly adhered to.
So that a substantial portion of the incremental income is left with the
small farmer to meet his sustenance needs in addition to the loan
installments and interest.
75) Dairy loans should be sanctioned for purchase of at least two milch animals.
The second animal is purchased when the first is about to enter its dry
period; this ensures continuity of lactation. An uninterrupted flow of
income ensures that the farmer is able to properly feed the animals and
repay the loan.
76) Demand-Collection-Balance Register should be updated regularly.
As recovery percentage of agricultural advances is the basis for
claiming refinance from NABARD. An accurate picture of the recovery
position will help in planning of suitable recovery strategies.
77) Spacing norms for wells are stipulated by NABARD.
Wells constructed too close are likely to interfere with each other,
resulting in lowering of discharge.
78) Inspection of agricultural advances should be more "farmer-oriented" than "farm-oriented".
Considering the similarity in local conditions and cropping pattern,
farm-oriented inspection only will not be purposeful. It is more useful
to be in touch with individual farmers in order to understand their
problems, credit requirement, repayment capacity, etc.
79) Repayment schedule for agricultural advance varies according to the nature of the crops grown.
Agricultural loans are to be repaid out of surplus available to
borrowers after harvesting and marketing of crops. Since, the
harvesting period vary according to the nature of crops grown, repayment
schedule also vary accordingly.
80) Kisan Credit Cards has been introduced.
With a view to ensure adequate and timely flow of rural credit as also
to meet the composite production credit and consumption needs of
farmers.
81) Farm mechanization is given priority in agricultural finance.
The objective is to increase the output by timely and speedy
agricultural operations, and to minimize the cost of agricultural
operations and to maximize the efficiency of other agricultural inputs.
82) "Self Help Group" are promoted and financed by banks.
Self-Help Group is a voluntary group of poor people in a village formed
to save their earnings and lend the same to the group members. This
approach liberates rural poor from the clutches of moneylenders, develop
financial discipline and makes them eligible for bank finance.
BALANCING
86) Progressive Balance Book is maintained.
Helps to locate difference to a particular ledger and thus facilitates
balancing of individual ledgers.
87) Periodical balancing is a must.
In order to locate and rectify errors at the earliest. For rendering
better and effective customer service.
BANKER’S CHEQUES
88) Simple unstamped letter of indemnity is obtained for issue of duplicate Bankers Cheques.
As Bankers’ Cheques are non-transferable and payable at the issuing end
only the chances of frauds/forgeries and misappropriations or double
payment are rather remote.
BANK GUARANTEES
89) Bankers are prohibited to give guarantee on behalf of non- banking companies to assure their
depositors of refund of deposit when called upon to do so.
It may tantamount to diversion of funds from banking system to
non-banking system.
90) Payment of Bank Guarantee invoked should be made immediately
Our liability is immediate, absolute and unconditional. Any delay in
settling the claim will damage the reputation of the bank and trust
reposed in the bank will be lost
91) Limitation Clause is incorporated in Bank Guarantees.
To notify the beneficiary that the Bank will not be liable and will be
discharged from liability unless a demand/claim is made within the date
specifically mentioned in the guarantee.
92) Accounting System for Bank Guarantees has been revised.
93) In some cases Deferred Payment Guarantees are issued though the Bank can grant loans.
As it is a contingent facility extended for acquisition of fixed assets
without immediate outflow of funds. Minimizes interest burden on the
borrowing unit. Bank's resources do not get blocked in issuing DPG.
94) The Bank does not issue Performance Guarantees.
In view of the complexity involved in appraising the technical
capabilities of the contractor in regard to his performance of any
non-financial obligation, performance guarantees are not normally
issued. Moreover, they require clearance from RBI.
95) Revised procedure for Bank Guarantees has been introduced.
In the wake of significant growth of guarantees business coupled with
incidence of frauds, a suitable and strict control of this business was
considered necessary. The revised system takes care of the contingent
liabilities on an on-going basis. In order to conform to the statutory
format of the balance sheet.
96) Bank Guarantee Extension form modified by the Bank.
To make the Extension Format more clear by addition of certain essential
information such as amount of Bank Guarantee, and name of beneficiary
etc.
97) Revised "Limitation Clause” is incorporated in Bank Guarantee form.
Govt. has amended Section 28 of Indian Contract Act, which has changed
the Standard Limitation Clause to be adopted by banks on issue of B.G.
BILLS
98) Bill of exchange or DP Note cannot be crossed
Because in case of B.E. and DPN; drawer, drawee or the acceptor need not
necessarily be a bank and crossing is a direction to the drawee bank to
pay the money to a bank.
99) Local Bills discounted must be accepted by the drawee before they are discounted.
Sec. 34(3) of SBI Act stipulates that local bills discounted must bear
two signatures of the parties at the time of discounting, each good for
the amount involved. To enable the Bank to have a recourse to the drawee
in case of necessity.
100) Bills and accompanying documents must not be left blank endorsed while sending for
collection.
To obviate the possibility of any bearer of these instruments taking
delivery of goods detrimental to the interests of the parties entitled
thereto.
101) Party-wise accounts are maintained in the Demand Liability Register.
In order to have effective control, follow-up, regulates the drawings in
the account within the sanctioned limits, and readily ascertains the
liability of each party at any point of time. To avoid the possibilities
of kite flying.
102) Collecting Offices should invariably notify the Railways while collecting documentary
bills purchased by the Bank.
103) Usance Bills are to be presented for acceptance without loss of time.
As per the provisions of Negotiable Instruments Act to protect the
interest of the Bank as well as the drawer. Financial position of Drawee
might alter on lapse of time, the goods might incur demurrage,
deteriorate, get damaged, drawee may refuse acceptance if not presented
within a reasonable time.
104) It is necessary to send notice of dishonour in case of non-payment of a bill.
Required as per provisions of N.I. Act 1881. In the absence of a
contract to the contrary, failure to give notice of dishonour to all the
parties entitled to receive it will discharge all such parties from
their liability including the maker of the bill.
105) When a BBR is unpaid, the discounting branch is credited and debited with the bill
amount.
At the discounting branch, IBIT is debited and IB account credited on
due date of the bill. Debits to IBIT can be reversed only through a
branch clearing entry. In case bill is unpaid the credit from collecting
branch reverses the IBIT entry and the debit reverses the credit at
collecting branch.
106) While returning the bills to the remitting bank or the drawer, all re-endorsements in
their favour should be followed with the words 'Sans-Recourse'.
To absolve the Bank from incurring any liability as an endorser of the
bill.
107) We normally do not collect bills for non-constituents.
As banker’s we deal only in documents. However, we may get entangled in
litigation on account of quantity, quality of the goods involved.
108) Pro-forma entries are passed when bills are purchased or accepted for collection.
To provide for control on the outstanding bills and reflect the
constituent’s liabilities on the bills.
109) Requests for extension of time received from drawee to pay the Usance bill received
from other Bank are entertained only after reference is made to remitting bank.
A party to a past bill may not as a rule be granted time for payment of
the amount due without the written consent of every party to the bill,
lest the other parties should be released from their liability.
110) Bill/cheque drawn on centres/places where the Bank is not established should be
discouraged for negotiation and should be accepted only on collection basis.
It is because greater risk is involved in realizing the proceeds and
will require more time for which we would be out of funds, the exchange
earnings in this case, may not be commensurate with the loss of interest
to the Bank.
111) When a lorry receipt is accepted while discounting/purchasing a bill, it must be ensured
that the carrier is on the approved list of IBA.
The scheme of Approved Road Transport Operators of IBA, acts as a
deterrent to transport operators who will not release goods without the
consignor’s copy and thus protects Bank's interest.
BUDGET
113) We have a Budget Exercise
Budget is a plan of Action, a pre-determined schedule of activity of the
Bank in given period of time. It is a system of review and analysis for
the purpose of remedial action and better future planning.
114) Performance Report is submitted every month.
The objective of “P” report is to review the actual performance of a
branch on the background of planned performance. This enables controller
to review the performance of branch and carry out corrections if any.
115) Budget is a two-way communication.
Budgeting is an effective two way communication process because it
enables the business and other goals to be conveyed clearly to every
level and ensure feed back from all levels to the next higher level
right up to the corporate management.
116) AGM and BM do budget exercise by discussion
To make the budget operationally realistic. Ensure and facilitate
involvement with a sense of commitment. Integrates branch budget with
Bank's overall business goal. Eliminate feeling of imposition
117) While preparing branch budgets profitability angle must be kept in mind.
Profitability of operation is needed for assured growth. Mere increase
in business level is not sufficient. Proper mix of business and
efficiency of operations have to be achieved.
118) Branch Dossier is maintained.
To have a proper record of environmental data (pertaining to area of
operation), competition, strengths and weaknesses of our Branch. As an
aid to realistic fixation of budgets and business targets.
119) Inter-bank deposits are not included in the aggregate deposits in the Performance
Report.
No effort is required on the part of the branch in getting such deposits.
CURRENT ACCOUNTS
120) Branches should not open accounts in the name of outstation banks.
As such banks may be tempted to issue cheques on such accounts to
provide remittance facilities to their constituents.
121) A declaration regarding credit facility enjoyed by the applicant is obtained while
opening current accounts
This obviates the possibility of lodging cheques in favour of the
customer by his debtors in the account. This unhealthy practice makes
the outstanding in the lending bank unsecured. RBI directives.
CURRENCY CHEST
122) No entries are passed through the Bank's books of accounts for a remittance between
two currency chests.
As it is nothing but transfer of RBI's money from one of its agent to
another and the necessary adjustments are made in the Currency Chest
CASH CREDIT
123) Bank generally grants advances against goods by way of Cash Credits only.
To avoid under or over financing. To ensure that market value of
security is sufficient to cover our outstanding. To avoid obtention of
fresh documents whenever drawing power changes. To check diversion of
funds.
124) Overdrawing in excess of Cash Credit limit sanctioned is restricted
This inculcates financial discipline among borrowers. If overdrawing is
recurring in nature either assessment is to be reviewed or diversion of
funds to be checked.
125) On the death of partner Cash Credit of partnership firm should be closed and new
opened
The death of the partner dissolves the partnership firm unless contrary
is provided. Old account is closed to crystallize the liability of the
deceased partner. A new account is opened to prevent the operation of
the rule in Clayton’s case.
126) Advances for working capital are renewed every year.
Pursuant to Sec.33 of the SBI Act, advances to working capital can be
granted for a period not exceeding 12 months. Working capital is
sanctioned on the basis of projections for the next year. At the end of
the year fresh projections are sought and limit renewed as per
requirement.
127) No interest is paid on credit balance in cash credit accounts.
It is in the form of a demand deposit or a current account.
128) Interest rates chargeable on Cash Credits are higher than that on Demand Loans.
Unlike demand loan accounts, the borrowers in Cash Credit Accounts enjoy
the advantage of drawing according to their needs and deposit back the
surplus. Frequent and unrestricted transactions are allowed in Cash
Credit accounts.
CASH DEPARTMENT
129) Strong Room has to be certified by a qualified engineer every year.
It is necessary in terms of RBI requirements and keeping in view the
safety of the strong room.
130) Shortage of cash detected is debited to Protested Bills Account even though it may be
recoverable fully.
Recalled Debts are meant only for advances, which have been called up.
This is not in the nature of an advance.
131) Notes bearing political slogan are not accepted
Such notes cease to be legal tender under Legal Tender Act 1964.
132) Branding of “Cash Paid Date Stamp” on debit vouchers and cancellation of signature is
a must.
CHEQUES
141) Dishonored cheques do not require noting and protesting
The returning memo is sufficient for the purpose. It is constructive evidence and drawer can be sued in the
court of Law on the strength of return memo. Noting and protesting is required only in case of dishonored
bills.
142) Cheque book is generally issued only on production of printed requisition slip
The requisition slip is an added proof that the customer has signed it; as he is required to keep the cheque
book in his custody. To avoid any possibility of unauthorized person acquiring the cheque book fraudulently.
143) Cheque forms issued for drawings on Public Fund Account must be 'To Order' only.
Public Fund Accounts are in the nature of trust accounts. In order to observe precautions in paying such
cheques, which cannot be observed in case of bearer cheques.
CLEARING
149) Proceeds of a clearing cheque are not credited to Government Account unless the
stipulated return clearing hours is over.
As Government Accounts cannot be debited directly in the event of the cheques being dishonored and a claim
for recovery of the amount from the Government Department has to be taken up separately.
COLLECTIONS
150) Interest is paid on delayed collections
Recommendations of customer service committee; helps to secure customer's loyalty and acts as a
disincentive for delayed collection by the bank.
151) Documents for collection should not be shown to the drawee before payment.
Presentation to the drawee is not a pre-condition for the payment of such bills. To avoid chances of drawee
refusing to honour the bills for one reason or the other. To avoid frauds by tempering of bills. To safeguard
the interests of the Bank and the drawers.
152) Interest to be paid on delayed collections to be debited to Charges Account.
The interest thus payable would be in the form of compensation to the Bank's clients; hence, charged to P&L
Account.
COMPANIES
153) Charge of hypothecation is preferable in case of advance to companies.
As per sec. 125 of companies Act a floating charge on assets should be
registered with Registrar of companies this serves as a notice to the
world and ensures bank is ranked as secured creditors against official
liquidator or other creditors.
154) Periodical search is done with Registrar of company’s office
To ensure that the charge created on the borrowers’ assets to secure the
debt is maintained intact in its nature, priority and scope on an
ongoing basis and safeguarded against any charge created or to be
created to secure his other assets.
155) Hypothecation by a company of its movable properties has to be registered.
As per Sec.125 of Indian Companies Act 1956, such charges must be
registered within 30 days of their creation. To protect the Bank's
CUSTOMER SERVICE
DD PURCHASE
161) DD Purchase limit is treated as secured advance while Cash Credit (Outward Bills) limit
is treated as unsecured.
In the former case, the position of the banker is that of holder for
value and in the latter case, the banker is only an agent for collection.
162) We cannot grant DD Purchase limit or Cash Credit limit to constituents who have
special hypothecation limits.
Special Hypothecation limit includes book-debts also (all bills); this
will amount to advancing twice on the same security (double finance).
163) Negotiating branches must send their remittance schedules to the drawee offices
promptly.
DD purchased represent fund outlay by the Bank; minimize the loss of
interest by recovering funds expeditiously; obviate possibilities of
kite flying and facilitate easy and quick reconciliation.
164) DDP (Bills) Account in General Ledger has been introduced.
Advances get reflected in negotiating branch books. Facilitates
effective control and follow-up by the negotiating branch.
DECEASED CONSTITUENTS
165) Standard Register for recording the details of settlement of deceased constituents’ a/c
has been introduced
Standard Register is maintained for ascertaining the completion of
formalities in this regard; more over such register is part of branch
168) We prefer disposal of deceased constituent assets on affidavit cum indemnity basis
without production of legal representation.
Directives of RBI and Govt. of India; recommendations of Working Group
on Customer Service. Not to cause inconvenience to family members of the
deceased; eliminate expenditure in obtaining legal representation.
169) In case of death of one of the succession certificate holders, we will not pay the balance in
the account of a deceased depositor to the remaining succession certificate holders.
There is no question of survivorship in regard to succession certificate
holders and as such the remaining holders cannot exercise any power
contained in the Succession Certificate.
170) Production of legal representation is not required for disposal of money left with the
Bank in case of deceased army and air force personnel.
The property is governed by the provisions of the Army and Air Force
(Disposal of Private Properties) Act 1950 as serving members of armed
forces can make oral wills.
DOCUMENTATION
171) Copy of the "Arrangement Letter" is kept along with documents
Arrangement letter forms part and parcel of documents as it enumerates
the terms and conditions on which the borrowers have agreed to avail the
loan.
172) Arrangement letter is not stamped
In case it becomes necessary to prove some point on the basis of
arrangement letter, by paying stamp duty and penalty we can get it
stamped. Avoids burden of stamp duty on borrower.
173) Bank obtains confirmation letter in case of equitable mortgage
It evidences voluntary deposit of the title deeds for creation of
equitable mortgage for securing the advance obtained by the borrower
Otherwise at later date he may claim that the has left the document
inadvertently or he was compelled to do so.
174) Bank takes general letter of Lien and set off
According to sect. 176 of Indian Contract Act 1872 surplus proceeds of
sale after liquidating advance have to be refunded to the borrower.
This letter authorizes bank to apply the sales proceeds of securities
towards satisfaction of any other indebtedness of the customer.
175) We should be careful while obtaining documents
Documents once executed, cannot be rectified or altered without the
consent of the borrower. Fresh stamp duty is also to be paid. The
borrower may refuse to sign when account has gone bad.
179) While Hypothecation Agreements executed by DIR borrowers are exempted from
Stamp Duty, the DP Notes have to be stamped.
D.P Notes are stamped as per Indian Stamp Act; no exemption has been
given under this Act. Exemption is under Bombay Stamp Act.
{All questions relating to stamp duty … for Maharashtra only}
180) Where DP Note becomes time-barred in the absence of Revival Letter, the existing
account may be allowed to continue against execution of fresh DP Note.
In terms of Sec. 25(3) of the Indian Contract Act, an agreement to pay a
time-barred debt is a valid contract and the limitation starts afresh
from the date of such agreement.
181) Two undated transfer forms are taken from the transport operator at the time of
disbursing the term loan.
In case of default, these forms facilitate easy sale of the vehicle if
possession is taken and the borrower refuses to cooperate in the sale
later.
182) Loans under DRI Scheme up to Rs. 500/- should be granted against DP Note only.
As per Government directives. To minimize burden of stamp duty on the
poor borrowers. To expedite disposal of the loan applications.
183) Hypothecation Agreement is signed only by the borrower(s) whereas Form 'C' General
is signed by both the bank and the borrower(s).
The covenants of Form 'C' General are in the nature of an agreement
between the Bank and the borrower(s) whereas those in Hypothecation
Agreement are in the nature of an undertaking by borrower alone.
184) On the DP Note, we take two signatures of the borrowers -one over the Revenue Stamp
and the other by the side of it.
To prove execution of the DP Note by the borrower in the event of loss
of Revenue Stamp.
185) Borrower's signature is obtained below the schedule in Cash Credit Form 'C' General.
In order to obtain confirmation from him as to the quality and quantity
of goods pledged so that he cannot deny at a later date that he was not
aware of the same.
186) DP Note must be delivered to the Bank along with the DP Note Take Delivery Letter.
In order to prove the constructive delivery of DP Note with the
intention of creating a security against the debt.
187) Bank should obtain documents from partners in their capacity as partner of the firm as
well as in their individual capacity.
192) Vernacular signature on Cash Credit Form 'C' / letter of indemnity are not verified.
Verification changes the nature of the agreement to a bond that attracts
advalorem stamp duty.
193) While obtaining security documents from illiterate borrowers, a separate witness letter
signed by two independent witnesses is taken.
Proof that the contents of the documents have been explained to the
borrower and he has understood the implications of the loan
transactions. If taken on the loan document, it might be construed to be
a bond and require higher stamping.
194) Fresh AB-1 need not be obtained at the time of renewal and only revival letters are to be
obtained once in 3 years.
The personal liability clause in AB-1 attracts the provisions of the
Indian Limitation Act, revival letters on form AB-4 will have to be
taken from the borrowers once in 3 years.
Unstamped indemnities should not be obtained
Obtention of unstamped agreements will be treated as mischief under sec 43 and 62 of Stamp Act and
punishable.
DORMANT
195) The first debit to a Dormant Account should be referred to the Branch Manager.
To enable him to establish the bonafide of the depositor beyond doubt.
Such accounts are fraud prone and more than ordinary care is taken.
DRAFT
196) Bank cannot issue a Demand Draft payable to bearer.
Sec.31 of RBI Act 1934 prohibits issuance of a Bill of Exchange payable
to bearer on demand as this amounts to a currency note.
197) The payment of draft cannot be stopped.
200) For issuance of duplicate Government draft, stamped indemnity is not insisted.
Government drafts are not negotiable. The applicant being Govt.
Department is exempted from stamp duty.
201) We issue DD even though the person is not maintaining an account with us.
As there is no risk or liability involved in issue. To promote and
popularize remittances. Bank gets benefited with sizable float-funds.
Bank gets income by way of exchange and commission.
202) Loss of draft is required to be reported to the paying branch immediately by telegram.
To enable the paying branch to exercise sufficient caution and in case
of presentation of the draft. and obtain non-payment confirmation for
issuance of duplicate, where necessary.
Number under MICR draft system should not be scored out when used for issue of duplicate draft.
Reader-sorter machine rejects the draft if number is scored out or
tampered.
When a Bank draft is canceled, a receipt on Revenue Stamp is taken from the applicant.
When canceled draft ceases to be a negotiable instrument and the payment
is made in full and final settlement of the purchaser's claim in the
form of receipt.
203) The validity period of a draft is restricted to 6 months.
Avoids circulation for an indefinite period and facilitates easy and
quick reconciliation.
204) After payment of a lost original draft, if the duplicate is presented, it cannot be paid.
After lawful payment of the original draft, no obligatory commitment
remains with the Bank to pay the duplicate.
FOREIGN EXCHANGE
205) Forward contracts are fixed
To avoid risk of exchange rate fluctuations at a future date which would
affect profit margins of importers/exporters. To enable the customer to
determine the exact amount payable or receivable at a future date.
206) Figures of large value purchases of foreign currencies are advised to FD, Calcutta on the same
day.
To enable them to make cover operations and to square up the position so
that the currency is neither over-bought nor over-sold.
211) Income on Forex during February and March is not booked by debit to Adjusting
Account
This is done by FD Calcutta
212) FCNB deposits not included as a part of deposits by branches
These deposits are reported by FD Kolkatta and taken in Bank’s
consolidated position.
GENERAL
213) Performance Appraisal System has been introduced.
To enable officials to identify their inner strengths and to set and
achieve better goals. Review of performance helps in placement,
promotions and training decisions.
214) Vouchers cannot be canceled with a pen but with an indelible pencil.
As per Banks’ Books Evidence Act, the voucher loses its character to be
proved as evidence in the Court of Law, if canceled in pen.
215) Personal Banking Branches are opened.
To cater to the needs of high net worth individuals and meet competition
from foreign and private sector banks.
216) Profitability has become concern of the Bank
In the wake of deregulation, interest spreads are shrinking. Although
profits are increasing profitability is declining.
217) SBI Capital Market Ltd established
It undertakes issue of share capital, project counseling, loan
syndication, new issue, floating of companies, which is required for
development of healthy capital market.
218) The Depositors of SBI are called unsecured creditors
No depositor holds any security or has physical, symbolic or
constructive charge over the assets of the bank.
219) Job Rotation should be undertaken at periodical intervals
Part of HRD concept, to avoid monotonous nature of work, for prevention
of frauds, to enrich job knowledge, increase productivity, better
customer service to avoid dependency on a particular employee for
particular work
220) Non Banking Working Day is observed at SAB
GOVERNMENT
241) Difference between Govt. Receipts and Payments over Rs. 1 lac should be advised by
telegram.
For quick settlement of funds with Government to avoid loss of interest
to Bank or levy of penal interest by RBI.
242) We cannot pay an ITRO in the absence of the relative advice.
247) RBI Encashment documents of Rs 1 crore and above should be sent by courier to reach
GAD, Mumbai before 10.00 a.m. on the following day.
Substantial amounts are locked up in these Encashment. If these are not
immediately settled and recovered from RBI, loss of income will be very
significant affecting the Bank's profitability.
GOLD LOANS
248) Advance are not granted against the security of gold ornament bearing the initials /
name of a third party other than the borrower
It prima-facie evidences that the ornaments do not belong to the
applicant. The bank's interest will be jeopardized in case the title
proves to be defective at a later stage.
249) Before selling gold ornaments pledged to the Bank notice is given to borrower
It is obligatory on the part of the pledgee to give reasonable notice to
the pledger vide section 176 of Indian Contract Act.
250) Advances against gold ornaments are not looked upon with favour by the Bank.
As they are not of a self-liquidating nature. Risk is involved as to the
genuineness and ownership of the gold ornaments. Security is subject to
market rate fluctuations. They are often availed of for consumption
purposes.
251) When gold loans are partly paid, the Bank insists on borrowers taking proportionate
part delivery of the ornaments.
Otherwise this will amount to keeping the superfluous ornaments in the
Bank's custody without payment of any charge.
252) Borrower's name should not be mentioned in the gold auction notice.
To ensure against the borrower filing defamation suit against the Bank.
253) Gold ornaments pledged to the bank are not delivered to the legal heirs on the basis of
Succession certificates.
INSURANCE
261) Comprehensive insurance in respect of a vehicle financed by the Bank is obtained in the
name of the borrower only.
In order that the Bank may not be directly involved in claims arising
out of any accident to third parties caused by the vehicle.
262) Full insurance irrespective of amount of loan
The bank gets pro-rata amount of claim amount and not full amount in
case the average clause in the insurance policy operates which is
detrimental to the Bank's interest.
263) Bank does not obtain insurance cover for theft in case of advances against goods.
As per the Letter of Pledge or Hypothecation, the borrower is
responsible for all such losses. Premia payable for theft coverage is
high
264) Due dates of the insurance policies should be properly diarised.
It is not obligatory on the part of the insurance company to send
renewal notices. To effect timely renewal of policies,
265) Insurance Policies must contain the Bank's agreed mortgage clause.
Insertion of this clause makes it obligatory on the part of the
insurance company to pay claim even if the increased risk is not covered
by the payment of additional premia.
INCOME TAX
271) Bank's own payments exceeding Rs. 20, 000/- should be made by crossed BC only.
To claim deduction of such expenses in the Bank's IT assessment;
otherwise, such expenses cannot be allowed as admissible expenses.
272) Request for blanket inspections from tax authorities should not be entertained with
circumspection.
The Income Tax Authorities have powers to seek information; however, we
have also to ensure adequate secrecy regarding the accounts and affairs
of our customers.
JOINT ACCOUNTS
276) Joint a/c cannot be opened for a pensioners
Pension is regarded as an ex-gratia payment by Govt to its retired
employees paid for his sustenance in case of joint accounts, govt. will
not get valid discharge through bank and Govt. does not want this
benefit to go to others
LIC POLICIES
294) Advances against LIC policies under Married Woman’s Property Act” are not granted
These policies constitute a trust for the benefit of wife of the policy-
holder and the policy holder can not assign the trust property for his
benefit
295) When LIC Policy is reassigned after the advance has been repaid, the policy holder
should be advised to re-nominate.
As the nomination made by the policy-holder in favour of Bank while
taking advance cancels the nominations already made by him.
296) Assignment of LIC Policy should be registered with the Corporation.
To notify Bank's interest in the policy as a creditor; as the
Corporation is not bound by a mere assignment on the LIC Policy itself.
297) Payment of premia on LIC Policies to be arranged by obtaining standing instructions
when advancing against it.
Non-payment of premium will render the policy lapsed rendering the
advance unsecured; to keep the policy alive and in full force.
298) Notice should be sent to the LIC while advancing against policies.
To ensure that the policy is alive and in full force, ascertain that
there exists no prior charge over the security offered, to notify the
Bank's interest in the policy as a creditor and to get our charge
registered with the Corporation.
299) Age of the life insured should be admitted by the LIC in a policy against which overdraft
is to be granted.
The premia is based on age. In case age is not admitted, the LIC may pay
a reduced claim.
300) The assignment of LIC policy is preferably to be typed on the policy itself.
If the assignment is done on a separate paper, it attracts stamp duty.
301) A loan on the security of LIC policy is granted only by way of an overdraft.
As the security is not a “specified security” as per SBI Act.
302) While granting loans against LIC policies it should be ensured that future premiums are
regularly paid.
If this is not done the policy will lapse. The outstanding in the
account increases due to application of interest but surrender value
will not increase.
LETTER OF CREDIT
MARGINS
307) Margins are maintained for advances.
Margins ensure the borrowers involvement in the project. A cushion to
take care of the fluctuations in the value, deterioration in quality
shrinkage of the securities and loss arising due to a forced sale.
308) Borrower's contribution as margin for affording credit facilities is insisted.
Margin acts as a buffer against price variations, escalation in project
costs or any unforeseen contingencies and as borrower's stake to
inculcate a sense of responsibility and ownership in the enterprise to
the borrower.
309) Lesser margins are stipulated for imported materials compared to local materials.
Imported materials, generally command a premium in the market on account
of better quality; they are easily salable.
310) Margin on Raw Material is less than on Stocks in Process or Finished Goods.
The price of raw material is readily ascertainable and it commands a
better market than finished goods or semi-fininshed goods.
MARKETING
311) The Bank is now paying great deal of attention for marketing of its services
In the days of reducing spread available services are identified as
important source of income and in view of large network of our Bank,
services are paid greater attention.
MINORS
312) Minor admitted to a partnership, should be asked to sign the existing and fresh
partnership letters when he/she attains majority.
To obtain his ratification for transactions put through during his
minority and bind him jointly and severally for the future transactions
of the newly constituted partnership firm.
NON-PERFORMING ASSETS
315) Branches have to pay interest @ 4% p.a. on NPA to CO
It is a dis-incentive to the branch. This ensures that branches strive
to keep NPA levels down.
316) Bank should take advantage of Lok Adalats
For settlement of suits by persuasion and social pressures instead of
coercion; avoid litigation that consumes time, energy and money and thus
reduce the NPA
317) An advance is still classified as NPA even after rescheduling is done.
Rescheduling does not automatically upgrade the quality of advance.
318) Income Recognition is introduced.
Income is to be booked only when actually received and not on accrual
basis as per international practices.
319) Asset Classification is made.
To provide a basis for determining provisions for loan assets, taking
into account credit weaknesses and the extent of dependence on
collateral security for realization of dues.
320) In the case of consortium advances members follow asset classification adopted by
leader. To bring about uniformity in classification by all the
participating banks.
321) NPA are a drain on profitability.
No interest income can be booked on NPA, operational charges are high,
added to this are legal charges and insurance premium and finally value
of security deteriorates.
322) Bank has revised the system of accounting of write-off entries.
Entries on account of write-off have gone up and necessary control
mechanism set up to ensure against loss in transit of the debit items
and also to guard against spurious entries entering the system by way of
write-off.
323) Advances Under Collection account is opened.
In order to continue the liability of the borrower once the loan amount
has been written off.
NOMINATION
324) Name of the 'Nominee' should not be mentioned in the ledger accounts.
To maintain secrecy, lest the nominee resort to unfair /criminal acts to
derive the benefit out of nomination; protect the depositor from undue
influence by third parties.
325) Nomination facility is now available for individual deposit accounts, safe deposits, safe
custody and Safe Deposit Lockers.
As per recommendation of Working Group on Customer Service for
expeditious settlement of claims and to minimize hardships to the family
members.
NRE ACCOUNTS
327) FCNR Deposits are not accepted for more than three years.
The interest rates on these deposits are linked to interest rates in the
international money markets, which are subject to frequent fluctuations.
To minimize the risk taken regard to such deposits for these volatile
deposits.
OPINIONS
328) Opinion reports given to other banks are to be on COS 26
The form contains clause to the effect that neither the Bank nor the
official signing it are responsible/liable for any particulars furnished
by the Bank in respect of the constituents.
329) No opinion is compiled on a limited company.
The Balance-sheet of a company is a public document that discloses the
position of assets and liabilities.
OVERDRAFTS
330) Separate agreement on COS 57 signed by all the account holders should be obtained
when Overdraft is granted on an account payable to 'E' or 'S'.
With a view to establish joint and several liability of all the parties;
otherwise only the person who signs the cheques will be liable for the
overdraft and the Bank will have no recourse to other parties.
331) No documents are obtained for an Overdraft Account..
An overdraft is an informal credit facility which does not require any
documentation yet recoverable under law by production of records as per
Banks' Books Evidence Act 1891
PARTNERSHIP
333) Partnership letters COS 37 is obtained duly signed by all partners
REFINANCE
341) We must obtain refinance wherever possible
Augment resources position at less cost. No pre-emption by way of
SLR/CRR. Our schemes get second look by outside experts ensuring better
appraisal. Benefit of lower interest rates can be extended to borrower.
REORGANISATION
342) A new position of "Sales Planner" is introduced at controlling offices.
As per recommendation of McKinsey and Co planning has been integrated
with operation. He will act as friend, philosopher and guide between AGM
and BM and will have direct contact with market.
RTC
345) Stop list in respect of lost RTC are not circulated to Branches
Considering our network the cost of circulation is very high. Calculated
risk is taken by the Bank, counter signature is required at the time of
encashment.
346) RTC are not issued in joint names
It is inconvenient for both the purchasers to come personally for issue
and encashment. Moreover the death, insolvency, insanity of any one of
them may land the Bank in legal complications
347) Revised RTC procedure has been introduced.
The earlier system proved to be inadequate to cope up with the increased
volume of business; to ensure easy, efficient and up-to-date maintenance
of related work at all levels.
348) We charge commission on issue of RTC.
It is a service and not a form of remittance. The float available was
not sufficient to meet handling charges, overheads, cost of stationery
and printing.
349) “This document is valid and negotiable in India only” stamp is affixed on the reverse of
RTC.
To avoid the possibility of it being encashed in bilateral group of
countries which are under Rupee Payment Arrangement with India.
350) Whenever RTC are issued for use outside India, each cheque should invariably be
endorsed indicating the names of the countries where it can be encashed.
Since sale of such RTC constitutes a remittance of funds abroad, the
exchange control regulations have to be complied with meticulously;
otherwise, the Bank will be held liable for violating the regulations.
351) Pictorial scene of the Parliament has been dropped from the RTC.
To comply with the statutory provisions as pictorial presentation of any
monuments, buildings, signs, etc., of Government of India is prohibited
under the Names and Emblems Act 1950.
352) RTC can be paid even after business hours.
RTC are issued for the convenience of the Traveling Public and in almost
all cases the purchasers themselves present the cheques for encashment.
SAFE CUSTODY
353) Bank is liable for any damage caused to articles kept in Safe Custody.
As per Sec. 151 of the Indian Contract Act, the Bank will be held liable
for any damage caused to articles kept in safe custody due to its
negligence, as the relationship is that of bailor and bailee.
SAFE DEPOSIT
357) Articles received for safe deposit are not sealed with the Bank's own seal.
To obviate the possibility of the depositor contending that the Bank has
tampered with the contents and resealed.
358) An article in safe deposit is not delivered against a Succession Certificate.
Succession Certificate covers debts and securities only, these articles
do not constitute a debt or security.
SAFE DEPOSIT LOCKERS
359) Visualisers have been introduced.
To simplify the accounting system, record more number of accounts at one
place and improve customer service.
360) We interchange the lock of surrendered SDL with that of another locker before letting it
out to another hirer.
To ensure that at no time the prior hirer has any access to the
surrendered locker by using a duplicate key prepared by him.
361) Persons who intend to hire safe deposit lockers are required to open either a Current
Account or an introduced Savings Bank account.
This establishes the person's respectability and SI on the account can
be taken for recovery of hire charges as and when due.
SECURITIES
362) Securities for sale should be from well known constituents only.
To protect the Bank's interest, as the Bank incurs liability as an
endorsee while selling securities endorsed for the purpose of sale. Bank
will become liable to the true owner, in case of defective title.
363) All GP Notes tendered as security for advance must invariably be sent to Public Debt
Office.
To ensure that - all the endorsements are in order; they are not
confiscated; none is duplicate; and no alterations have been made in the
principal amounts.
SHARES - ADVANCES AGAINST
364) Advances are not granted against partly paid shares of Joint Stock Companies
Partly paid shares carry an element of contingent liability the Bank may
be compelled to pay for the unpaid calls otherwise the shares will be
fortified
365) Undated transfer deed is taken in case of advance against shares .
SPECIMEN SIGNATURES
377) While returning the cheque with reason of "Signature differs" drawer is advised
separately
To put the customer on guard in case of forgery, to obtain fresh
signature if it has been changed and avoid recurrence of such incident
378) Specimen Signature sheets must be kept under lock and key.
To preclude the chances of any signature thereon being tampered with and
prevent unauthorized signatures being placed on record.
379) Specimen signature should be individually attested.
In order to avoid insertion of forged signatures.
380) SS no of attesting official should be written.
So that the attesting officials signature could be verified in case of
need.
381) Specimen signatures pertaining to Inoperative accounts should be held in personal
custody of Manager of Division or Branch Manager.
Inoperative accounts are a fraud prone area. This is an added measure of
precaution to prevent access to the specimen signatures.
SSI
382) High priority is given to rehabilitation of sick units.
To help such units to generate internal surplus and ultimately to
increase the national productivity. To better the chances of recovery.
383) A carpenter carrying on his profession in a city can be financed as a village industry.
As per the definition of village industries by Tambe Committee, an
artisan can be financed as a village industry irrespective of the
location of the unit.
384) New small industrial undertakings with inadequate equity are provided with interest
free loans under Equity Fund Scheme.
To strengthen their equity base, reduce the cost of borrowings. As
inadequacy of equity has been found to be a major cause of SSI sickness.
385) Repayment period of advances under Village Industries Scheme is 7 to 10 years or even
more with an initial moratorium period of 12 to 18 months.
This has become necessary because of the small amount of income
generated and keeping in view the continuous essential subsistence needs
of the borrower.
STOCK STATEMENTS
386) Submission of Stock Statements up to Rs. 25,000/- is waived.
There are no regular transactions in the account; borrowers are unable
to submit stock statements.
SUNDRY/SUSPENSE
387) Close follow-up of outstanding entries in Sundry Deposits Account is necessary.
424) Teller services should not be withdrawn even in case of acute shortage of staff.
As teller system is an important facility available to the 'P' segment
clientele for instant service. As Bank's image will be affected if the
teller counter is kept closed for want of staff.
425) Tellers/Relief Tellers should sign a stamped letter of undertaking at the time of initial
appointment as such.
In order to make them responsible towards their duties and functions and
to make them unconditionally liable for any losses which may be
sustained by the Bank because of negligence, omission or default on
their part.
TERM LOANS
TELEGRAPHIC TRANSFERS
429) Overdue interest on TT purchases is now recovered and accounted for in the books of
the realizing offices only.
For exercising effective control on recovery and plug income leakage
centralized at realizing branches. This eliminates avoidable
correspondence between discounting and realizing offices regarding
charging of interest.
430) Application for a telegraphic transfer should be obtained on the prescribed form COS.
165.
The indemnity clause embodied in this form affords protection to the
Bank against any loss/injury/damage arising or resulting from
omissions/delays/errors in transmission/delivery or non-delivery of
telegraphic message or deciphering the message.
431) When a T.T. Purchased telegram is received from a branch, the relative amount is
debited to DDRR a/c and credited to IBIT A/c.
This entry is passed with a view to have a control over the receivable
on account of TT purchased by the Bank.