Promotion Study Material For Bank

STUDY MATERIAL
PROMOTIONS - 2013
CLERICAL TO
OFFICER
All India Andhra Bank Award Employees Union

(Affiliated to AIBEA)
506, Vth Floor, Taramandal Complex, Saifabad, Hyderabad - 500 004.
All India Andhra Bank Award Employees Union

(Affiliated to AIBEA)
506, Vth Floor, Taramandal Complex, Saifabad, Hyderabad - 500 004.
Phone : 23243377 Fax : 040-23298239 E-mail : aiabaeu@gmail.com
Website : www.aiabaeu.com
Date: 25.03.2013
Dear Comrades,
We are happy that for the year 2013-2014, Union made the Management to notify 500
JMGS-I Officer vacancies to be filled on promotion from Clerical Cadre. The Online Written Test is
scheduled on 5th May 2013 (Sunday) for the applicants under Merit Quota.
From the year April 2014 onwards, the vacancies in JMGS-I Officer cadre shall be filled 50%
from within i.e. by way of promotions from clerical cadre and 50% by Direct Recruitment
(Probationary Officers)
You are aware that the Union has signed a Settlement on 13-12-2010 and modified the
minimum service stipulation from five years to two years for the benefit of newly joined clerks.
We are providing study material both on Banking and English. We thank
Sri N. S. N. Reddy, Chief Manager, Andhra Bank, CMD Secretariat, Head Office for
preparing updated material on General Banking and also M/s. Sagar Job Pro Academy,
Hyderabad for providing Objective Questions on General English.
We hope that the material will not only useful for promotion aspirants but also for all staff in
general.
Wishing you all success.
Yours Comradely,
(T. Ravindranath)
General Secretary
BANKER`S
DIGEST
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Bankers Digest 2013
In todays environment, hoarding knowledge ultimately erodes

your power. If you know something very important, the way to
get power is by actually sharing it
Joseph Badaracco
Employees play vital role in service organizations and they need

to be transformed into Knowledge Assets to remain competitive
in the dynamic environment and it is more so with Banks as they
are very service sensitive. Thus it is imperative for the bank staff
to serve the clientele with updated information of banks
products & services to accomplish corporate objectives.
In this endeavor, I have been compiling and releasing the
Bankers Digest every year for the benefit of Andhra Bank
staff since 2007. Seventh edition of Bankers Digest is released
duly covering the important guidelines issued by RBI and Bank
from time to time.
For the benefit of the readers, the present edition is divided into
two parts viz., Banking & Current Trends and Andhra Bank Products & Services. The first part is designed exclusively to
suit the requirements of the staff aspiring for promotions. The
second part covers various products and services that are being
offered by Andhra Bank. Brief details of staff welfare schemes
are also incorporated for the benefit of serving as well as retired
staff.
All possible care is taken to provide error free information,
however, readers may note that the information given herein is
merely for guidance/reference and they need to refer the
relevant circulars for full details.
I express my sincere thanks to friends/colleagues for their
support in encouraging the idea and contributing the required
resources for release of Bankers Digest on time. I solicit your
views on the content and quality of the topics for further
improvement.
Email - nsn6507@yahoo.com / Mobile 09490213002
Wish you all the Success
Date: 01.03.2013
N S N Reddy
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Bankers Digest 2013
Bankers Digest - Index

No
I
Topic
Banking & Current Trends
Deposits - Guidelines
Know Your Customer (KYC)
Alternate Delivery Channels & E-Products
Retail Banking
NRIs Products & Services
Financial Inclusion
Priority Sector & Govt. Sponsored Schemes
Micro Credit / SHG
Micro, Small and Medium Enterprises
4-10
11-14
15-20
21
22-27
28-33
34-41
42-43
44-46
10
11
12
13
14
15
16
17
18
19
20
21
Model Education Loan Policy

Housing Loans
Interest Subvention Schemes
Ratio Analysis & Working Capital Assessment
Non Fund Business (BG/LC)
Charges (Hypothecation/Pledge/Mortgage)
Consortium Banking & Multiple Banking
Takeover of Accounts - Guidelines
Credit Management
Prudential Norms
Restructure of Advances & CDR
Risk Management (Basel-I, II & III)
47-48
49-50
51-52
53-55
56-60
61-62
63-65
65
66
67-69
70-71
72-75
22
23
24
25
26
SARFAESI Act
Clean Note Policy & Cash Management
Customer Service & BCSBI
Compensation Policy
Current Topics - Banking & Finance
76
77-79
80-82
83
1
2
3
4
5
6
7
8
9
i) Union Budget 2013, New Private Banks - RBI

Guidelines, Banking Laws (Amend.) Act 2012, CTS
ii) CIBIL, CERSAI, Kisan Credit Card, Base Rate,
Floating Rate Deposits
iii) Other important concepts
Page
84-86
87-88
89-101
27
II
1
2
3
4
Question Bank & Key

Andhra Bank Products & Services
Andhra Bank Mile Stones
Logo, Vision, Mission & Corporate Slogan
Performance Highlights March 2012
Deposits & E-Products
128
129
130
131-140
5
6
7
8
9
10
Credit Cards & Fee Based Products

Loan Policy Guidelines
Agriculture & Allied Activities - Products
Retail Loans
Impaired Asset Study & OTS Guidelines
AB Products - Service Charges
141-149
150-159
160-165
166-175
176-179
180-184
11
Staff Welfare Schemes
185-192
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Bankers Digest 2013
102-127
Deposits General Guidelines

One of the important functions of the Banks is to accept deposits from the public for
the purpose of lending. In fact, depositors are the major stakeholders of the Banking
System. The depositors and their interests form the key area of the regulatory
framework for banking in India and Reserve Bank of India has been issuing broad
guidelines to the banks from time to time. Various deposit products offered by the
Bank are assigned different names. The deposit products are categorized broadly
into the following types.
a) Demand Deposits means a deposit received by the Bank, which is withdrawable
on demand;
b) Current Deposit means a form of demand deposit wherefrom withdrawals are
allowed any number of times depending upon the balance in the account or up to a
particular agreed amount. These accounts are meant purely to meet the business
needs of customers. Hence, no interest is paid on balances in Current accounts. RBI
prohibits banks from paying interest in Current accounts.
c) Savings Deposits means a form of demand deposit which is subject to
restrictions as to the number of withdrawals as also the amounts of withdrawals
permitted by the Bank during any specified period. Banks have discretion to
introduce special schemes with insurance coverage and other benefits to the
specified group of customers with or without additional charges depending on the
scheme terms and conditions.
d) Term Deposit means a deposit received by the Bank for a fixed period
withdrawable only after expiry of the fixed period and includes deposits such as
Recurring / Cumulative / Annuity / Reinvestment deposits / Cash Certificates, etc.
The minimum period of Term Deposit is 15 days. However, branches can accept term
deposit for 7 days also provided the amount of deposit should be `1 lakh & above.
The maximum period should not exceed 10 years except in case court/minor
deposits as special case.
e) Notice Deposit means term deposit for specific period but withdrawable on
giving at least one complete banking days notice;
Bank may, from time to time design/come out with new deposit products, with
certain additional benefits with or without payment of certain charges to cater to
needs of specified categories of depositors and the same may not be made available
to other customers.
Joint Accounts - Deposit accounts can be opened by an individual in his own name
or by more than one individual known as Joint Account. These accounts can be
operated by single individual or by more than one individual jointly as per the
mandate. The mandate for operations can be viz., Individual; or Jointly; or Either or
Survivor; or Former or Survivor; or Any one or Survivor. If the account is held by
two individuals - Either or Survivor, the final balance with interest, if applicable, will
be paid to survivor on death of anyone of the account holders. If the account is held
on former or survivor basis, the final balance along with interest, if applicable, will be
paid to survivor on the death of Former. The bank may at the request of all the joint
account holders allow addition or deletion of name/s of joint account holder/s if the
circumstances so warrant or allow an individual depositor to add the name of another
person as a joint account holder. However the name of the first joint account holder
cannot be replaced.
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Bankers Digest 2013
Accounts of Firms / Companies / Trusts / Associations, etc - The above

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

Obtain Government order or notification authorizing the concerned officer to

open and operate the account
Verify the identity of the officer authorized to operate the account
Obtain photographs of the persons authorized to operate the account
Address letter to next higher authority after opening of the account
Not to make payment of maturity proceeds of term deposits in cash
Obtain balance confirmation letter for operative and term deposits every
quarter from the said accounts
Minors Accounts - Savings Bank/Recurring Deposit Account can also be opened by

a minor jointly with natural guardian or with mother as the guardian. Minors above
the age of 10 will also be allowed to open and operate saving bank account
independently. However, no overdrafts will be granted to these minors. On
attaining majority, the erstwhile minor should confirm the balance in his / her
account and if the account is operated by the natural guardian / guardian, fresh
specimen signature of erstwhile minor duly verified by the natural guardian would be
obtained and kept on record for all operational purposes.
Illiterate Accounts - The Bank may at its discretion open deposit accounts in the
name of illiterate individuals. However, opening of Current Deposit Account requires
prior permission from higher authorities. While opening of the account, the depositor
needs to call on the Bank personally along with a witness who is known to both the
depositor and the Bank. The Bank official shall explain the terms and conditions
governing the account including safe keeping of Passbook, Cheque Book, Debit Card
etc., to the illiterate person. At the time of withdrawal/repayment of deposit amount
and/or interest, the account holder should affix thumb impression in the presence of
the authorized officer who should verify the identity of the person.
Visually Impaired Persons - Visually Impaired Persons may be allowed to open all
types of deposit accounts, except current accounts, either singly or jointly with other
persons. Opening of Current Accounts for visually impaired persons at the branch
level requires prior permission from higher authorities. The terms and conditions
governing the accounts including special conditions, if any, should be read and
explained to the visually impaired person by the bank official in the presence of a
witness in view of his physical infirmity. Branch should obtain witness signature
(known to the bank) on Personal Data Form and the Account Opening Form along
with specimen signature of the depositor at the time of opening of the account.
No Frills Accounts - Bank offers basic banking facility - 'No-frills' account for lowincome individuals, with either zero or low minimum balances and charges. The
nature and number of transactions in such accounts would be limited, the details of
which would be made known to customers from time to time. These accounts also
will be subjected to compliance with limited KYC norms.
Pension Accounts are opened on receipt of advice from pension disbursing
authorities with all the relevant documents sent to the Bank at identified places /
branches. Payment of pension will be made as directed by the pension disbursing
authority. The terms and conditions for opening of accounts in the name of
pensioners are available at these selected branches of the Bank. The other terms
and conditions will be informed by the Bank from time to time.
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Bankers Digest 2013
Senior Citizens: Senior citizens who have completed 60 years of age and residing
in India are given certain privileges such as 0.50% additional interest rate over and
above the card rate. The depositor is required to furnish Proof of age to the bank.
Joint accounts with another senior citizen or with person who is not a senior citizen
is permitted. In the latter case, only if the senior citizen is the first named depositor,
the privileges are applicable.
Staff Accounts Banks can offer additional interest of 1% on the deposits placed
by the staff members either working or retired subject to conditions laid down by the
respective banks. The spouse of the deceased also can also avail this facility. In case
of Joint accounts, the first name in the deposit should be the staff or ex-staff or
spouse of the staff. However, staff rate of interest is not applicable for
NRE/NRO/FCNR deposits.
Mandate - At the request of the depositor, the Bank register mandate/power of
attorney authorizing another person to operate the account on his behalf.
Deregulation of SB Interest Rates: As per RBI guidelines banks are free to
determine their savings bank deposit interest rate with effective from 25.10.2011
subject to the following two conditions viz., First, each bank will have to offer a
uniform interest rate on savings bank deposits up to `1 lakh, irrespective of the
amount in the account within this limit. Second, for savings bank deposits over 1
lakh, a bank may provide differential rates of interest, if it so chooses. However,
there should not be any discrimination from customer to customer on interest rates
for similar amount of deposit. Further, banks are free to determine their interest
rates on NRE/NRO deposits w.e.f. 16.12.11. However, interest rates offered by banks
on the said deposits should not be higher than those offered by them on comparable
domestic rupee deposits. Banks are paying interest on SB accounts on Daily
Products on half-yearly basis viz., September & March of every year. Though, the
deregulation of interest is in vogue, at present all most all Public Sector Banks are
paying 4% interest where as few Private Sector Banks are extending interest beyond
4% p.a. The interest calculated will be credited to the respective accounts by 5th of
succeeding month i.e. October & April.
Interest on Term Deposits - The interest shall be calculated at quarterly rests on
term deposits. In case the term deposits are of monthly interest payment nature, the
interest shall be calculated for the quarter and paid monthly at discounted value.
The manner of calculation of interest is in accordance with the formulae and
conventions as advised by Indian Banks Association/RBI from time to time. For the
purpose of calculation of interest on domestic term deposits repayable in less than
three months or where the terminal quarter is incomplete, interest should be paid
proportionately for the actual number of days reckoning at 366 days in a leap year
and 365 days in other years. Whenever interest rates are revised, the revised rates
are applicable to fresh deposits as well as renewed deposits only. The interest rates
offered are non-discretionary and non-discriminatory and are applicable uniformly to
all depositors at all branches of the Bank. The rate of interest on deposits should be
prominently displayed in the branch premises and Bank's website. Changes, if any,
with regard to the deposit schemes and other related services shall also be
communicated upfront and shall be prominently displayed in Bank's website.
Premature Renewal of Term Deposit - In case the depositor desires to renew the
deposit by seeking premature closure of an existing term deposit account, the bank
will permit the renewal at the applicable rate on the date of renewal, provided the
deposit is renewed for a period longer than the balance period of the original deposit.
While prematurely closing a deposit for the purpose of renewal, interest on the
deposit for the period it has remained with the bank will be paid at the rate
applicable to the period for which the deposit remained with the bank reckoning from
the date of deposit and not at the contracted rate.
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Bankers Digest 2013
Premature withdrawal of Term Deposit - The Bank on request from the

depositor, at its discretion may allow withdrawal of term deposit before completion of
the period of the deposit agreed upon at the time of placing the deposit. The Bank
shall declare its policy on penalty which will be levied by way of interest reduction for
premature withdrawal of term deposit. The Bank shall make depositors aware of the
applicable rate along with the deposit rate. Normally, the premature cancellation of
term deposit attracts a penalty of 1%. However, at present, deposits of Individuals
up to `5 lakh contracted for any maturity period and deposits of Govt / Corporates /
firms / institutions / associations etc up to `100 lakh contracted up to 90 days are
exempted from levying penalty.
Renewal of Overdue Term Deposits - When a term deposit is renewed on
maturity, on renewed deposit, interest rate for the period specified by the depositor
as applicable on the date of maturity / date of renewal would be applied. If request
for renewal is received after the date of maturity, such overdue deposits will be
renewed with effect from the date of maturity at interest rate applicable as on the
due date, provided such request is received within 14 days from the date of
maturity. In respect of overdue deposits renewed after 14 days from the date of
maturity, interest for the overdue period will be paid at the rates decided by the
Bank from time to time.
Tax Deduction at Source (TDS) - The Bank has statutory obligation to deduct tax
at source (at present 10%) if the total interest paid/payable on all term deposits
held by Resident person exceeds the amount specified, presently `10000 in a
financial year under the Income Tax Act. However, TDS is exempted to the individual
depositors who submits 15G (whose age is below 65 years) and 15H (whose age is
above 65 years) stating that their total income from all sources including the interest
on bank deposits is well within the taxable income limit. Branch should obtain
15G/15H in triplicate and return one copy to the customer as acknowledgement and
it should bear round seal of the branch. As per extant Income Tax guidelines, all
depositors invariably submit PAN failing which the interest income on such term
deposits attracts TDS @20% with effective from 01.04.2010. It is the responsibility
of the branches to download Form 16A from TIN website and also generate single
interest certificate for a customer. Branches should ensure that TDS certificate
(Form 16A) as well as Interest certificate should be sent to the depositor without
waiting for or seeking any written request from the depositor. The Bank will issue a
tax deduction certificate for the amount of tax deducted. Further, if any depositor
requests for TDS certificate, the same should be issued again even though the TDS
certificate was already issued. Interest received on NRE/FCNR/Recurring deposits,
irrespective of amount is exempted from TDS.
Inoperative / Dormant Accounts: Savings as well as Current account should be
treated as Inoperative / Dormant if there are no transactions in the account for over
a period of two years. For the purpose of classifying as above, both the type of
transactions (Debit/Credit) induced at the instance of customers as well as third
party should be considered. However, charges levied or interest credited should not
be treated as transaction for the said purpose. Operations in such accounts may be
allowed after due diligence i.e. ensuring genuineness of the transaction, identify
verification and signature verification. Before converting the account in to
Inoperative, notice is to be issued to the depositor. The conversion may be
postponed to another one year, in case depositor requests in writing that he
undertakes to route the transactions in to the account.
Unclaimed Deposits: Accounts (CA/SB) where there are no customer transactions
for the last 10 years are treated as unclaimed deposits. With regard to term
deposits, which remained unpaid even after 10 years of maturity are treated as
unclaimed deposits. As per Banking Regulation Act 1969, Branches to submit details
of unclaimed deposits to Head Office on 31st Dec of every year for onward
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Bankers Digest 2013
submission to RBI. In case of deceased accounts, the claim shall be settled in favour
of the nominee where the nomination is available and where there is no nomination,
claim settlement shall be as per applicable norms. Banks are required to disclose the
list of unclaimed and inoperative deposit account holders, in a bid to help the
claimants trace their deposits and the names of the depositors shall be displayed on
the Website. The list of unclaimed deposits shall be updated on a monthly basis.
Frozen Accounts With regard to the savings bank accounts frozen by the
enforcement authorities, Bank will continue to credit the interest to the account on a
regular basis. However, withdrawal/debits can be allowed only when the accounts
are released by the Enforcement Authorities. In the case of Term Deposit Accounts of
Customers frozen by the orders of the enforcement authorities, Banks are required
to obtain a request letter from the customer for renewal for a term equal to the
original term, on maturity. No new receipt will be issued. However, suitable note will
be made regarding renewal in the deposit ledger. Renewal of deposit shall be advised
by registered letter / speed post / courier service to the concerned Govt. department
under advice to the depositor. In the advice to the depositor, the rate of interest at
which the deposit is renewed will also be mentioned. If overdue period does not
exceed 14 days on the date of receipt of the request letter, renewal shall be done
from the date of maturity. If it exceeds 14 days, interest for the overdue period shall
be paid as per Banks extant guidelines that are referred in this policy.
Nomination facility: As per section 45 ZA to 45 ZF of the Banking Regulation Act,
1949, account holder can nominate any individual of his choice as nominee to
receive money from the bank in case of death of the depositor. Nomination facility is
available to all types of deposit accounts (including joint accounts E or S), safe
deposit lockers and safe custody articles, which are in the name of individuals. The
nominee can be any individual including illiterates, minors. However, nominations
cannot be made in favour of joint names / Bodies (institutions / trusts etc). The only
exception is safe deposit lockers hired jointly; there can be more than one person as
nominee. In case of illiterate account holders, branch to obtain two witnesses while
accepting nomination. Consent of nominee is not mandatory. Nomination made in
respect of a term deposit will continue to be in force even on renewal of such deposit
unless the nomination is specifically cancelled or changed. The customer has option
to change nomination any number of times during the currency of the deposit. The
rights of nominee arise only after the death of the depositor. As per the recent
guidelines, the name of the nominee is to be printed on the Passbook / Term Deposit
Receipt at the specific request of the depositor. Branch should take witness of
Magistrate / Judicial Officer or an Officer of Central Govt. or State Government or an
Officer of a Bank or two persons acceptable to the Bank for settlement of claims
under nomination.
Passbook/Account Statement - The Bank will provide either a statement of
account or a Pass Book to Savings Bank as well as Current Deposit Account Holders
periodically as per terms and conditions of opening of the account. However, in case
a customer holds a pass book and still requests for a statement of account and vice
versa, the same will not be denied and will be provided on payment of charges as
specified by the Bank from time to time.
Transfer of Accounts - The deposit accounts may be transferred to any other
branch of the Bank at the request of the depositor subject to fulfillment of KYC
norms at transferee branch. However, if any deposit scheme is devised with a
precondition that it cannot be transferred to other places/ branches, the account will
continue to be maintained at the branch where it is opened.
Standing Instructions - Standing instructions can be given to the Bank for
transfer/remittance of funds from one account to other account(s) maintained in the
same branch, or any other branch of the bank or any other bank or any other third
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Bankers Digest 2013
party. Applicable charges will be levied by the bank for rendering the said services.
Revision in service charges, if any, will be communicated one month in advance to
the customers before effecting the revision, through Bank's website.
Deposits maturing on a holiday - In respect of a term deposit maturing for
payment on a Sunday or a holiday or a non-business working day, bank would pay
interest at the originally contracted rate on the deposit amount for the Sunday /
holiday / non-business working day also, intervening between the date of the expiry
of the specified term of the deposit and the date of payment of the proceeds of the
deposit on the succeeding working day.
Payment of Term deposits by cash - Section 269 of Income Tax Act, 1961
prohibits payment of term deposits or notice deposits in cash if the amount involved,
principal plus interest is `20,000/- or more. Hence, the payment of such deposits is
to be made by way of credit to the account of the party (or) by way of A/c Payee
crossed demand draft or pay order only.
Advances against Deposits - The Bank may consider request of the depositor/s for
loan / overdraft facility against term deposits duly discharged by the depositor/s on
execution of necessary security documents. Whenever loan is granted, a lien on the
deposit is marked and bank shall have the right to appropriate the deposit proceeds
to the loan account on the date of maturity, in case the loan remains unpaid. The
interest rates applicable, margins to be maintained etc. will be made known to the
customers at the time of availing the Deposit Loan and also will be placed in Bank's
website from time to time.
Insurance Cover for Deposits - All bank deposits are covered under the insurance
scheme offered by Deposit Insurance and Credit Guarantee Corporation of India
(DICGC) subject to certain limits and conditions. The insurance premium is being
paid by the Bank at present. The details of the insurance cover in force will be made
available to the depositor.
Rounding-off transactions: All transactions including payment of interest on
deposits will be rounded off to the nearest rupee; i.e., fractions of fifty paise and
above shall be rounded off to the next higher rupee and fraction of less than fifty
paise shall be ignored.
Settlement of Deceased Deposit account In case where the depositor
exercised nomination, the balance outstanding in the account of the deceased
depositor will be transferred to the account of/paid to the nominee after the Bank is
satisfied about the identity of the nominee. In a joint deposit account, when one of
the joint account holders dies, the Bank is required to make payment jointly to the
legal heirs of the deceased person and the surviving depositor(s). However, if the
joint account holders had given mandate for disposal of the balance in the account in
the forms such as either or survivor, former / latter or survivor, anyone of survivors
or survivor, etc., the payment will be made as per the mandate to avoid delays in
production of legal papers by the legal heirs of the deceased. In the absence of
nomination and when there are no disputes among the claimants, the Bank will pay
the amount outstanding in the account of deceased person against joint application
and indemnity by all legal heirs or the person mandated by the legal heirs to receive
the payment on their behalf without insisting on legal documents up to the limit
approved by the banks board. This is to ensure that the depositors are not put to
hardship on account of delays in completing legal formalities.
Interest payable on term deposit in deceased account - In the event of death
of the depositor before the date of maturity of deposit and amount of the deposit is
claimed after the date of maturity, the Bank shall pay interest at the contracted rate
till the date of maturity. Again from the date of maturity to the date of payment, the
9
Bankers Digest 2013
Bank shall pay simple interest at the applicable rate prevailing on the date of
maturity, for the period for which the deposit remained with the Bank beyond the
date of maturity, as per the Banks policy in this regard. However, in the case of
death of the depositor after the date of maturity of the deposit, the bank shall pay
interest at savings bank rate operative on the date of maturity (at present 4.00%
p.a.) from the date of maturity till the date of payment. In the case of balances lying
in current account standing in the name of a deceased individual depositor/sole
proprietorship concern, interest shall be paid only from 1st May, 1983, or from the
date of death of the depositor, whichever is later, till the date of repayment to the
claimant/s at the rate of interest applicable to savings deposit as on the date of
payment.
Service Charges - The terms and conditions for opening a deposit account and the
charges that will be levied on the account will be provided to the customer at the
time of opening of the account. The revised charges, if any, are to be informed to the
customers well in advance either through press releases or advertisement in print
media and or by displaying in Bank's web site.
Customer information & Secrecy - The information collected from the customers
shall not be used for cross selling of services or products by the Bank, their
subsidiaries and affiliates. If the Bank proposes to use such information, it will be
strictly with the consent of the account holder. Bank should prepare a profile for each
customer based on risk categorization. This profile contains the information relating
to customers identity, social/financial status, nature of business activity etc. The
customer profile is a confidential document and details contained therein will not be
divulged for cross selling or for any other purposes. The Bank shall not disclose
details / particulars of the customers account to a third person or party without the
express or implied consent from the customer. However, there are some exceptions,
viz. disclosure of information when the interest of our Nation is at stake and
compulsion of law, where there is a duty to public to disclose and where interest of
the Bank requires disclosure.
Redressal of complaints and grievances - Depositors having any complaint /
grievance with regard to services rendered by the Bank have a right to approach
authorities designated by the Bank for handling customer complaint / grievances.
The details of the internal set up for redressal of complaints / grievances will be
displayed in the branch premises. The branch officials shall provide all required
information regarding procedure for lodging the complaint. In case the depositor
does not get response from the Bank within one month from the date of complaint or
he is not satisfied with the response received from the Bank, he has a right to
approach Banking Ombudsman appointed by the Reserve Bank of India.
***
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Bankers Digest 2013
Know Your Customer (KYC)

As per RBI guidelines, it is mandatory for the banks to ensure KYC norms for all the
customers duly collecting full information of the account holder, type of transactions
to be conducted, sources of funds and other relevant matters at the entry level itself.
The policy guidelines are to be adhered not only to new accounts but also to the
existing accounts. The guidelines are applicable to all types of deposit and advance
accounts as well as new technology products such as Credit, Debit, Smart, Add-on
cards. The objective of KYC is to insulate banking from unscrupulous participants and
to avert misuse/undue advantage of system. The key elements of the policy are
i) Customer Acceptance Policy (CAP): Bank should obtain prescribed application
from the applicant along with the documents/information that is required as per
constitution, risk perception, banking practices, legal requirements and RBI
guidelines. Banks should not open accounts in the name of Anonymous or
fictitious/benami names and Terrorist organizations notified under POTA.
ii) Customer Identification Procedure (CIP): It means collecting information
relating to identity, activity, location of the person desiring to open an account in
single name or in joint names and verifying the information collected using reliable,
independent source documents, data or information. Banks are advised to accept
any of the document mentioned in the list can take as valid identification. In case of
a married woman, her identity proof with maiden name, if supported with marriage
certificate could be considered a valid ID proof. With regard to opening of
Partnership, Company, Trust, Club, Association, or any other legal body accounts,
branch should obtain required information/documents to verify the legal status of the
applicant. In case of proprietary concerns, copy of registration/licensed document
issued by government agencies shall be accepted as valid identification document.
Address proof: Banks are advised to obtain any one of the documents mentioned in
the list can be accepted as valid address proof.
Documents - Identity Proof
1 Passport or PAN Card or Voters
Identity Card or Driving license
2 Job card issued by NREGA duly signed
by
an
officer
of
the
State
Government(For Small Accounts)
3 The letter issued by UIDAI containing
details of name, address and Aadhaar
number
4 Identity card (subject to the banks
satisfaction)
5 Letter from a recognized public
authority or public servant verifying
the identity and residence of the
customer to the satisfaction of bank.
6 Government/Defence ID card
7 ID cards of reputed Public Sector
employers
8 Pension Payment Orders issued to the
retired employees by Central/State
Government
Departments,
Public
Sector Undertakings
Documents Residence Proof

Ration Card or Electricity Bill or
Telephone Bill
2 Bank account statement
3 Letter from employer (to the
satisfaction of the Bank)
4 Letter from any recognized public
authority (to the satisfaction of the
Bank)
5 Credit Card Statement- not more than
3 months old
6 Income/Wealth Tax Assessment Order
7 Letter from Public Sector employer
8 Letter from any recognized public
authority having proper and verifiable
record of issuance of such certificates.
9 Voter ID Card (only if it contains the
current address)
10 Pension Payment Orders issued to
retired employees by Government
Departments/Public
Sector
Undertakings, if they contain current
address.
1
11
Bankers Digest 2013
Documents - Identity Proof
Documents Residence Proof
9 Photo ID cards issued by Post

Offices
10 Photo identity cards issued to
bonafide students by a University,
approved by the University Grants
Commission (UGC) and/or an
Institute approved by All India
Council for Technical Education
(AICTE).
11 Photo identity issued by any public
authority having proper record of
issuance of identity proof which is
verifiable from records
12 Ex-Servicemen
Card
with
photograph
13 Bar Council/Medical Association /
ICAI
/ICWAI/ICSI
Card
with
photograph
14 Student Identity Card with photo
issued by reputed colleges with
validity during the course period.
15 Defense Dependents
Card with
photograph
16 Married woman identity proof with
maiden name, if supported with a
verified true copy of marriage
certificate
17 Credit card with photo together
with statement of such card, not
more than three months old.
18 Registered Property document with
photo identity
19 Arms License issued by State /
Central Government of India.
20 Freedom fighters pass issued by
Ministry
of
Home
Affairs,
Government
of
India
with
photograph of applicant.
21 Employee State Insurance Card
(ESIC) with photograph supported
by latest months pay slip.
22 Talati/Patwari (a local govt. official)
attestation by way of putting
rubber stamp and signature. Gram
Sarpanch / Mukhiya attestation by
way of putting rubber stamp and
signature (For Small Accounts)
11 Copies of Registered Leave & License

agreement /Sale Deed / Lease Agreement.
12 Certificate and also proof of residence,
incorporating local address as well as
permanent address, issued by the Hostel
Warden of the University / Institute, where
the student resides, duly countersigned by
the Registrar / Principal / Dean of Student
Welfare. Such accounts shall however, be
required to be closed on completion of
education/leaving the University / Institute
provided the constituent does not give any
other acceptable proof of residence to the
Bank.
13 For students residing with relatives,
address proof of relatives, along with their
identity proof, can also be accepted
provided declaration is given by the relative
that the student is related to him/her and is
staying with him/her.
14 In respect of officials of Central/State
Governments
and
Public
Sector
undertakings, who are low risk customers
for Bank, Branch Heads may verify the
photo/identity and confirm residential
address of such officials from independently
verifiable sources, to their satisfaction, and
permit opening of accounts. This facility is
extended only to the Gazetted officers of
Central / State Government and Senior
Management and above functionaries of
Public Sector Undertakings.
15 Latest telephone bills from any telephone
service providers and mobile service
providers not more than 2 month old,
postpaid.
16 Consumer gas connection card / book /
Pipe gas bill
17 Certificate from ward/equivalent rank
officer, maintaining election roll certifying
address of the applicant
18 Post Office Savings Pass Book
19 Domicile Certificate with communication
address and photograph
20 Certificate by Village Extension Officer
(VEO) / Village Head or equal or higher
rank officer. Branch to confirm the
authenticity of the certificate and that it has
been issued by the person who is holding
the said office.
21 Court divorce order Marriage annulment
order issued by Court
Note: If passport having current

address is given as proof of identity,
there is no need to give separate proof
for address.
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Bankers Digest 2013
With regard to opening of accounts in the name of proprietary concern, they are
required to submit complete income tax return of the sole proprietor where the firms
income is reflected along with copy of any of the utility bills such as electricity,
water, telephone bills in the name proprietary concern.
Foreign Students: Banks are permitted to open resident accounts in the name
foreign students studying in India with ATM card facility by obtaining documents viz.,
Pass Port, Valid Visa with photograph, Proof of Admission Letter from
University/College, Address Proof A letter from College/Hostel or certificate from
embassy or any certification of registration issued by Foreigner Registration Regional
Office (FRRO).
Common man is facing hardships while opening Bank account on account of
adherence of stringent KYC norms. To address the associate issues, RBI advised
banks to accept utility bill (Telephone/Electricity Bill) or any other document
acceptable to establish address proof. However, banks to obtain declaration from the
person (Father/Mother/Spouse/Son/Daughter) with whom the prospective customer
is staying. In case of small value accounts branches are allowed to open accounts
without insisting for proof of identification/address on proper introduction of another
bank customer. With regard to the migratory workers, branches to open accounts by
obtaining photo and permanent residential address with introduction.
Banks are advised to accept Aadhaar number issued by the Unique Identification
authority of India (UIDAI) as a proof of identity but not of address for opening of
accounts. According to the new guidelines, if the address on the document submitted
for identity proof by the prospective customer is the same as that declared in the
account opening form, the document may be accepted as a valid proof for identity
and address.
KYC once done by one branch of the bank should be valid for transfer of the account
within the bank provided the customer submits his address proof at new place. This
is causing inconvenience to many customers. To address the issue, RBI permitted
the banks to obtain self declaration from the account holder about his/her current
address, however, the address proof is to be submitted within 6 months.
iii) Due Diligence: All the forms and documents submitted by the applicant while
opening of the account are to be verified by the officer with the originals to ensure
that the identification and address of the applicant is correct. Further, the officer
should satisfy with the identity and legal existence of the applicant and note the
same in the interview cum due diligence form. Further, the guidelines also stipulate
sending a letter to the customer in the prescribed format on the same day of opening
of the account.
iv) Risk Categorization: RBI advised the banks to classify the accounts into Low,
Medium and High Risk categories based on the risk perception while opening of
accounts and further reviewed once in 6 months. As per the existing guidelines,
customer identification data (including photos) is to be updated once in 5 years in
case of Low Risk Category Customers and once in 2 years in case of Medium and
High Risk category customers. RBI directed the banks to complete the process of risk
categorization and compiling/updating profiles of all existing customers on or before
31st March 2013.
Monitoring of transactions: Banks are expected to fix threshold limit and monitor
the transactions closely and ongoing basis. It covers monitoring of high risk
accounts, NRE accounts, accounts with high turnover, large amount of cash
transactions and Periodical review and reporting of the transactions to appropriate
law enforcing authority.
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Bankers Digest 2013
Non face to face customers: With the introduction of telephone and electronic
banking, increasingly accounts are being opened by banks for customers without the
need for the customer to visit the bank branch. In such cases, apart from applying
the usual customer identification procedures, there must be specific and adequate
procedures to mitigate the higher risk involved. Certification of all the documents
presented may be insisted upon and, if necessary, additional documents may be
called for. In such cases, banks may also require the first payment to be effected
through the customer's account with another bank which, in turn, adheres to similar
KYC standards. In the case of cross-border customers, the bank may have to rely on
third party certification/introduction.
Money Laundering: It is the process of transferring illegitimate money into
legitimate money. In other words, the source of illegally obtained funds is obscured
through a succession of transfers and deals in order that those same funds can
eventually be made to reappear as legitimate income. It normally follows from such
activities as human trafficking, sale of narcotic drugs, illegal dealings in arms and
ammunition etc. It is a threat to the national security and economic activity as it
often associates with the financing of terrorism and also evasion of taxes.
Government of India introduced Prevention of Money Laundering Act, 2002 and the
objectives are - To prevent, combat and control money laundering; To confiscate and
seize the property obtained from the laundered money and to deal with any other
issue connected with money laundering in India. Banks are required to report the
following type of transactions to the Financial Intelligence Unit (FIU), New Delhi.
Report
Cash
Transaction
Reports (CTR)
Suspicious
Transaction
Report (STR)
Counterfeit
Currency
Report (CCR)
Nature of Transactions
i) All cash transactions of the value of more than `10 lakhs.
ii) Series of cash transactions integrally connected to each other,
which have been valued below `10 lakhs where such series of
transactions have taken place within a month and aggregating
`10 lakhs.
iii) All cash transactions where forged or counterfeit notes or
bank notes have been used as genuine and where any forgery of
a valuable security has taken place.
i) Large cash transactions
ii) Multiple accounts under same name
iii) Frequent conversion of currency from small to large
denomination notes
iv) Placing funds in FD and using them as security for more loans
v) Large deposits immediately followed by wire transfers
As and when counterfeit currency is found at branch/currency
chest, the same is to be informed to FIU and Reserve Bank of
India immediately.
Preservation of Records: As per Prevention of Money Laundering (Amendment)

Act 2009, branches are required to preserve all the transactions for at least 10 years
from the date of transaction between the Bank and the client along with the
necessary records. Similarly, they need to preserve all the KYC documents obtained
at the time of opening and during the course of business relationship for a period of
10 years after the business relationship ended.
Reserve Bank of India directed all banks to implement KYC guidelines for new
accounts in 2002 and subsequently made it mandatory for all accounts including
retail investors with effective from 1st January 2011. It is used by financial
institutions and other regulated companies to identify clients and acquire relevant
information in order to prevent identity theft, identity fraud, money laundering,
terrorist financing, etc. Thus KYC has quickly become an important global due
diligence list.
14
Bankers Digest 2013
Alternate Delivery Channels & E-products

Hitherto, Branches were only the strategic outfits (Delivery Channels) and invariably
the customers are required to visit the branches at the specified timings to complete
their transactions. Extending service to the customers round the clock without
presence of physical branch is called as Alternate Delivery Channels. Adoption of
new delivery channels (ATM, Mobile and Internet Banking) has become order of the
day for banks to survive in the competitive environment to meet the emergent
expectations of the customers besides achieving the optimum utilization of scarce
resources. At present, banks are issuing ATM/Debit cards to the customers on
opening of the account itself. The convenience coupled with cost effectiveness has
enabled the cardholders to use the card extensively for all their retail payments.
ATM/Debit Card will be issued to Account holder based on his request. ATM Card is
used for withdrawal of cash from Automated Teller Machines. Debit Card is a
payment card used to with draw cash from ATM, purchase of goods and payment for
services automatically debiting to the card holder's bank account instantly, to the
extent the credit balance exists. In ATM / Debit card the customer can draw cash
from ATM up to the balance available in his account subject to daily caps prescribed
by Bank from time to time. While providing ATM / Debit card, a customer is provided
a PIN number to facilitate withdrawal of amount. Debits to the account using ATM /
Debit Card through PIN Number are treated as mandate for withdrawal of the cash
by the customer from the account.
ATM is an electronic device, which acts as an independent banker without any
human intervention. ATM provides round the clock service throughout the year
(24X7X365) to the customers. ATMs extend services such as Cash Withdrawal,
Balance Enquiry, Cash/Cheque Deposit, Funds Transfer, Bill Payments, Payment of
Direct Taxes, Mobile Recharge, Mobile Banking Registration etc. Cardholder needs to
enter password for each financial transaction on ATM.
In order to facilitate the cardholders RBI has issued guidelines to all banks not to
levy service charges on ATM transactions of Savings Bank Cardholders. However,
Other Bank Cardholders are allowed to withdraw cash on our ATMs up to `10000/per transaction and the maximum number of transactions allowed are 5 per month
at free of charge. The number of free transactions shall be inclusive of all types of
transactions, financial or non-financial. With this, the customer of a Bank has
become customer of all Banks, which has paved the way for Any Bank Banking.
White Label ATMs: The RBI has decided to allow white-label ATMs, permitting
third-party service providers to set up more ATMs in off-premises areas, which
include residential complexes, hospitals, tourist destinations, bus stops and railway
stations. These ATMs would not belong to any bank in particular but will be owned as
well as maintained by independent service providers. This initiative will enable the
excluded segments to avail ATM services as at present majority ATMs are confined to
Urban/Metro areas only. However, service provider levy charges which are to be
either bear by the Bank or the customer.
Complaint Resolution: The revised guidelines has led to increased volume on ATM
Network leading to deficiency in service on account of technology issues and the
resolution is taking undue long time, which is causing concern to the customers and
regulators. In the above backdrop, RBI issued the following directives to all banks:

ATM failed transactions are to be resolved within a maximum period of 7

working days from the date of receipt of the customer complaint.
In case of delay in resolution of the complaint within 7 working days, the
bank shall pay compensation of `100/- per day, to the aggrieved customer
15
Bankers Digest 2013
and shall be credited to the customers account automatically on the same

day when the bank affords the credit for the failed ATM transaction.
However, the cardholder (customer) is entitled to receive such compensation
for delay, only if a claim is lodged with the issuing bank within 30 days of
the date of the transaction.
As per recent guidelines, Banks are advised to issue debit cards with photographs
with a view to reducing the instances of misuse of lost / stolen cards. Further, banks
are asked to ensure full security of the cards and any loss incurred by the cardholder
on account of breach of security or the failure of the security mechanism would be
borne by the banks.
Through ATMs, Bank can penetrate into new areas without opening physical bank
branches and provide value added service to its customers. It is most cost effective
since the investment and operational cost are low when compared to traditional
Branch Banking.
Internet Banking is leveraging the potential of Internet to facilitate customer
access to his account from any place at any time. Apart from viewing the
transactions in his account for any period, the customer is able to effect transfer of
funds and request for various services. Internet is one of the cost effective channel
for delivery of banking services.
Internet Banking is provided to Individual/Joint/Sole proprietary concerns, Corporate
etc. at their request. The terms and conditions governing Internet banking are
displayed on the Bank's website. Any change in the terms and conditions of "Internet
Banking" will be displayed on the website only and not by any means of
communication directly to the user of internet banking. The opening and
maintenance of the account is subject to rules and regulations introduced or
amended from time to time by Reserve Bank of India. Bank can, at its sole
discretion, withdraw any of the services / facilities given for the account either wholly
or partially at any time without giving any notice. The services available through
Internet banking are:

View account balances and download statements

Transfer of funds within Bank and across the Banks
Request for Cheque Book / Fixed Deposit
Payment of Utility bills viz., Electricity, Telephone, Income Tax etc.
Booking of Train/Bus/Airline tickets
Recharge of Moble / Online shopping
Online Equity Trading - Primary and Secondary market
Internet Banking system interfaces between the customer computer and the Banks
Core Banking system (CBS). Customer access is controlled through Customer ID
and Password. However, the customer is not allowed to access the CBS directly to
ensure safety. It is protected with firewalls to prevent unauthorized access,
hacking and virus infection. Advanced encryption technology is used to ensure that
messages from/to the customers are not intercepted and misused by others. With
regard to financial transactions, banks are providing another layer of security i.e.
Online Transaction Password (OTP) to the customers on their mobile or through email. Though it is convenient and cost effective delivery channel for customers and
banks, there is an imperative need on the part of the banks to educate the
customers with the importance of Password to protect them from hacking/fishing.
Mobile Banking: The mobile-phone revolution that is transforming the world could
also turn into a banking revolution. Banks have been exploring the feasibility of using
mobile phones as an alternative channel of delivery of banking services. The swift
16
Bankers Digest 2013
growth in number of Mobile users and wider coverage of mobile phone networks has
made this channel an important platform for extending banking services to
customers. Today, the number of Mobiles in India crossed 1000 million of which
1/3rd mobiles are in Rural India alone. At present, Mobile Banking is providing the Bill
payment and Funds Transfer facility besides information services to the customers.
The Inter Bank Mobile Payment Service (IMPS) has enabled the bank customers to
transfer funds across banks instantaneously using Mobile. The recent guidelines
issued by RBI on Mobile Banking are as under:

RBI approval is required to extend mobile banking services.

All the transactions/services should be in Indian currency only. Cross-border
transfers through mobile banking are strictly prohibited and the operating
banks have to be based, licensed and supervised in India.
Registered customers can only avail this facility from banks. For financial
services one time registration should be done through a signed document.
Hitherto, RBI stipulated a transaction limit `50000/- per customer per day
(which includes purchase of goods and services). However, RBI has removed
the cap and now banks may place per transaction limits based on their own
risk perception with the approval of its Board.
Banks may put in place end-to-end encryption of the mobile PIN number
(mPIN) for better security.
Banks should file Suspected Transaction Report (STR) to Financial Intelligence
Unit-India (FID-IND) for mobile banking transactions, similar to normal
banking transactions.
Mobile banking is very advantageous compared to other delivery channels as it is

easy to use and affordable to customers besides providing real time information to
customers. Mobile Banking gives the banks an opportunity to expand their customer
base without incurring additional infrastructure costs. It would also help in financial
inclusion as it would provide a large number of un-banked people access to banking
services. Banks could save a huge amount of money on card issuance and merchant
acquiring with zero point of sale cost. Mobile Banking is the hottest area of
development in the banking sector and is expected to replace the credit/debit card
system in future. The increased phase of mobile usage is going to place our country
on the top in the Asia Pacific region in the ensuing years.
Transfer of Funds - E-Products: RBI has been playing an important role in the
area of national payment system, which is the backbone of economic activity and has
taken several initiatives for a safe, secure, sound and efficient payment system in
India. Last one decade witnessed spurt in electronic payments due to increased
adoption of technology and regulatory guidelines. The evolution of e-payment
systems in India are:
i) Speed Clearing: Banks as part of their normal banking operations undertake
collection of cheques/drafts deposited by their customers drawn on local banks as
well as on banks located at other centers. The cheques drawn on local banks will be
presented in clearing and the outstation cheques will be sent to other centers for
collection. Though, the time for collection with regard to outstation cheques has
come down, still the collection process is taking 7 to 14 days since cheques need to
move physically from presentation centre to drawee centre. In order to reduce
the collection time, RBI has introduced Speed Clearing where in cheques/drafts
drawn on outstation are treated on par with local cheques and presented in the local
clearing provided the presentment location is MICR/ECCS centre and the destination
bank branch is under CBS platform. However, Government cheques are not eligible
for collection under Speed Clearing. Drawee bank debits the account online without
movement of cheque and sends the proceeds to the collecting bank. Under Speed
Clearing, it would be realised on T+1 or 2 basis i.e. within 48 hours. No charges
should be levied for cheques up to `1 lakh. However, collecting branch can levy
17
Bankers Digest 2013
`1.50/- per thousand for cheques/drafts of above one lakh with a maximum of
`2000/-. However, the facility of immediate credit would not be applicable to
cheques collected under speed clearing arrangements.
ii) Electronic Clearing System (ECS): The introduction of ECS - Credit i.e. Single
Debit - Multiple credits, helped large corporate bodies to pay their dividend, interest
and refunds electronically on the due date, which is very cost effective to corporates
and its customers. Similarly, the utility bodies are now in a position to collect their
bills through ECS Debit (Multiple Debits Single Credit) right on the due date. The
entire process including passing the credits to the beneficiaries accounts take only
one day, which is convenient and cost effective to both banks and customers.
iii) Any Branch Banking (ABB): Under CBS, Branch customer has become Bank
customer and they are allowed to approach any branch across the country for
deposit of cheque or cash and withdrawal of cash or transfer of money. No cash
payment will be made to third party (bearer). However, payment to third party up to
`20000/- is allowed to NRE / NRO accounts and branch should ensure identity of the
bearer while making payments. With regard to deposit of cash / transfer of funds
among the bank branches is allowed at par for any amount.
iv) Real Time Gross settlement (RTGS): RBI launched RTGS for instant transfer
of funds across the banks (`200000/- & above) across the banks within India. It
offers a powerful mechanism for limiting settlement and systemic risks in the interbank settlement process. It enables in expediting the settlement, control and
governance mechanism in the banking system. Funds will be transferred
electronically and credited to the beneficiary accounts instantaneously. It saves lot
of time and paper work and cost effective (Not exceeding `55/-). The timings for
customer payments are 9 AM to 4.30 PM on Monday to Friday; and 9 AM to 1.30 PM
on Saturday. Similarly, for interbank payments; the timings are 9 AM to 6 PM on
Monday to Friday and 9 AM to 3 PM on Saturday. Transfer of funds below
`200000/- are not allowed under RTGS.
v) National Electronic Funds Transfer (NEFT): For the benefit of retail
customers, RBI introduced NEFT scheme. Under this, funds can be transferred across
the banks instantaneously. There is no cap on minimum and maximum amount for
NEFT. Majority of the banks are extending NEFT services at free of cost irrespective
of amount. The timings of NEFT are 9 AM to 7 PM from Monday to Friday and it is 9
AM to 1 PM on Saturday. Customer is required to furnish IFSC Code number of the
Bank Branch and correct account number of the beneficiary for smooth transfer of
funds under RTGS/NEFT.
vi) Applications Supported by Blocked Amount (ASBA): ASBA is an alternative
payment method (optional) for IPO application where the IPO bidding amount
remains in investors account, but blocked by the bank until allotment is done.
Technically there is no refund process for this kind of payment option as only the
required money for allocated shares is withdrawn from the investors account. As
companies cannot list their shares before completing the refund process, ASBA
enables the listing process faster. It is made mandatory for non-retail investors also
to apply only through ASBA. The investors have option to bid IPO either through
designated branches or Internet Banking. Revision and cancellation of bids are
permitted till the issue closure date and time. The investor continues to earn interest
on the application money. Registrar transfers the allocated shares to investors
Demat Accounts. No charges will be levied to the investors for this service. It is an
opportunity to branches to improve low cost deposits and non-interest income since
bank earns commission on each application received under ASBA.
18
Bankers Digest 2013
vii) Credit cards: The concept of credit card was used in 1950 with the launch of
charge cards in USA by Diners Club and American Express. Credit card became more
popular with use of magnetic strip in 1970. The first Credit Card was issued in 1981
and Gold Card in 1986 by VISA. Credit cardholder need not carry cash and purchase
goods and services at any approved Merchant Establishments/Point of sale Terminals
by tendering the card duly signing the charge slip. Further, cardholders can make
online purchases through internet using the card and PIN. Added to this, cardholder
can withdraw cash at any ATM across the globe. However, cash advance attracts
charge i.e. transaction fee as well as service fee/interest charge.
viii) Debit cards known as check cards. It operates like cash or a personal check.
Debit cards are different from credit cards. Credit card is a way to "Pay Later"
whereas debit card is a way to "Pay Now." In case of debit card, bank account of
the customer will be debited immediately on completion of transaction. Debit cards
are accepted at many locations, including retail stores, petrol pumps, and
restaurants. The liberalized norms coupled with ease of usage have led to increase
debit card base over the years. Of late, banks are consciously driving the customers
to alternate delivery channels by issuing debit cards on the day of opening of the
account itself to reduce the work load and to enable them to pay focused attention
on core banking activities.
ix) Charge Card: Charge card is like any Credit or Debit Card. These cards neither
offer revolving credit like the Credit Card nor debit the account instantaneously like
Debit Card. However, the cardholder is required to settle the bill in full by the due
date each month. Charge cards make a good option to develop financial discipline
which likely to enable the cardholders to improve their credit history. Further, charge
card offers a dynamic limit, while rewarding good payment behaviour.
x) Prepaid Card: A prepaid card looks like a credit card and works like a debit card.
These cards resemble credit and debit cards in appearance and allow users to load
any amount up to `50000/- and can be used at any ATM/Point of Sale Terminal. On
use of card, funds are directly debited from the card. Cardholders preload the cards
with funds via a cash deposit or wire transfer. There are no finance fees or interest
payments as charges are deducted from the prepaid balance. It is an opportunity for
people who have had little or no access to the mainstream financial system by
loading funds onto a prepaid card. It is a secure and convenient alternative to cash.
Various types of Prepaid Cards are - Re-loadable Cards (value is replenished once
it is used), Disposable Cards (discarded once the value is used), Closed Cards can
be used for a specific purpose (Phone Cards) and Open Cards (multi-purpose). Reloadable cards are most popular among under-banked individuals, or those who
tend not to possess conventional bank accounts.
The existing identification modes used in new delivery channels has a major
drawback as it recognize the PIN but not the person. Sometimes, it leads to
impersonation and may cause financial loss. To overcome the problem, biometric
technologies such as Fingerprint Recognition, Face Recognition, Voice Authentication,
Hand Geometry, Retinal Scanning, Iris Scanning and Signature Verification have
come in to force. Whenever the user access to delivery channel, it verifies with the
server and deliver the service if found correct.
19
Bankers Digest 2013
Electronic Payments Recent developments: Of late, more thrust is being paid

on banks by Government/RBI to promote payments through electronic mode so as to
increase efficiency and reduce costs by realizing the potential of technology and
rationalization of charges-structure of the various products of the payment systems.
Government of India urged the banks to take appropriate effective measures for
promotion of transactions through electronic mode, such as:
Popularizing NEFT/RTGS platforms for transfer of funds among public and at

par NEFT for transactions upto `1 lac.
Issuance of Debit cards to all eligible accounts.
Any Branch Banking is allowed without any charges.
Encouraging institutions and organizations to pay wages and salaries of their

employees through banking channels preferably e-mode.
It is directed that all payments handled by banks to their customers, vendors,

suppliers will be done electronically from 1st July 2012 onwards.
The validity period of cheques/demand drafts is reduced from 6 months to 3

months with effect from 1st April 2012 to discourage discounting of negotiable
instruments.
NPCI initiated steps to popularize RuPay where Debit/Credit card payments

are being routed through Indian e-service intermediaries which bring down
the costs and improve their acceptability.
Merchant Discount Rate (MDR) is the fee that merchant establishment pays to
the terminal deploying bank (Acquiring Bank), which play vital role in Point of
Sale (POS) transactions. Recently, RBI advised banks to cap MDR at 0.75
percent for transactions up to `2000/- and 1 percent for transactions above
`2000/- to popularize POS transactions using Debit Cards.
Banks are advised to promote Credit/Debit cards to pave the way for cashless
economy. Further, card based transactions leave adequate audit trails and
hence disincentives black money generation.
It is proposed to stop the practice of taking Post-dated Cheques (PDCs) from the
borrowers and ensure that repayments should be only through electronic payments.
Existing PDCs should be converted to electronic payment mandates within a
prescribed timeline. With electronic transfer facilities being available to trade, one
can foresee this as one of the major thrusts towards strengthening accountability
and discouraging unaccounted activities.
***
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Bankers Digest 2013
Retail Banking
Retail Banking is basically a mass banking with focus on Individual customer rather
than on large Corporate Houses/Groups, both on liabilities and assets side of the
balance sheet. While Savings, Current and Fixed deposits, with certain flavors,
remain the prominent products on the liability side; the assets side includes products
like Housing, Education, Vehicle, Clean and Personal loans. Besides the above, banks
are also extending ancillary services such as Credit/Debit cards, Depository services,
Bank assurance products, Mutual funds etc. It is appropriate to call Retail Banking as
a Life Cycle Product package for individuals to meet all their banking needs right
from childhood to silver-line age.
While considerable growth rate is seen under PSBs deposits, the share of low cost
deposits has come down from 39.95% to 33.45% during the last five years i.e. 2006
to 2012. Similarly, Yield on advances is under strain on account of offering
competitive interest rates to corporate clientele besides rise of Non Performing
Assets over the years. Today, the survival and the success of the banks crucially
depend on sustainability of Net Interest Margin (NIM), which is possible only through
judicious deposit mix (CASA) besides augmenting Interest Income through
expansion of credit portfolio with quality. In the above backdrop, banks have been
focusing attention on Retail banking.
The Retail Banking segment is of heterogeneous nature as it comprises of various
sets of people like Professionals, Employees, Entrepreneurs, Labour, Farmers, and
Students etc. While the basic banking requirement i.e. Bank Account, remain the
same for all the segments, they need specific services depending on their
demographic, economic and social background. To reach the target customers the
market can be segregated based on the geographic, demographic, psychographic
and behavioral aspects. In order to penetrate in to the untapped market, there is an
imminent need to map the banking requirements of the existing/prospective
customers to the available products and channels on a priority.
The sustained GDP growth has given a fillip to a consumer boom. The rise of the
Indian middle class coupled with more liberal attitude towards spending and personal
debt is one of the major reasons for increased retail lending in India. Further, the
increased proportion of young population (70%) provides greater demand for retail
banking services. Retail lending enables the banks to improve interest spread as the
lending rates are normally higher than other segments and the credit risk tends to be
well diversified. This segment generally loyal and tend not to shift accounts very
often and facilitates cross selling.
There are seven Ps viz., Product, Price, Promotion, Place, People, Process and
Physical evidence, play a vital role for the banks in developing and designing of retail
bank products. The appropriate mix will deliver the desired results. However,
Product and People are to be very much cared in marketing strategies of retail
products by the frontline staff. Today there are many players in the market to extend
retail banking services on one hand and increased discerning demands of the
customers on the other hand, which is making the banks to walk on the tight rope
with utmost care and caution. Providing uninterrupted cost effective value added
services to the customers is another major challenge for the banks.
India is experiencing a surge in retail banking and the market has decisively got
transformed from a Sellers market to a Buyers market in the light of evolving
macro-economic environment, increased profile of Gen-Y and rapid advancement in
information technology. Retail Banking is going to play significant role in Indian
Banking landscape and banks now need to use retail banking as a growth trigger.
21
Bankers Digest 2013
Non Resident Indians - Products

Non-Resident Accounts can be opened and maintained by Person Resident outside
India, Non-Resident Indians (NRI) and Persons of Indian Origin (PIO). Person
Resident outside India means a person who is not resident in India. It also defined as
a person who has gone out of India, or who stays outside India for the purpose of
employment, carrying on business or vocation or for any other purpose under the
circumstances indicating an uncertain period of stay. Person includes Individual,
HUF, Firm, Company and Association.
Non-Resident Indian means a person resident outside India, who is a citizen of
India or is a person of Indian Origin. Persons who visit India for temporary visit are
treated as Non-Resident Indian. Students going abroad for studies are treated as
Non-Resident Indians.
Person of Indian Origin: A Foreign Citizen (Other than citizen of Pakistan or
Bangladesh) is deemed to be a person of Indian Origin if,

He/She at any time held an Indian Passport or

He/She or either of their Parents or Grand Parents was citizen of India by
virtue of the constitution of India or Indian Citizen Act 1955 or
He/She is a spouse of Indian Citizen or a person referred as above.
N R O Non Resident Ordinary Account
Who Can Open
Nomination
Repatriation
Type of account
Period of Deposits
Rate of Interest
Deposit Loans
Foreign Currency Loans
Margin
Interest on Dep. Loans
Applicability of Local
Taxes
Transfer of funds
Premature Cancellation
of Deposits
Any NRI can open NRO account Singly or Jointly with

Residents. However, individuals / entities of Bangladesh and
Pakistan nationals require prior approval of RBI.
Nominee can be a Resident or a Non Resident.
Claim Settlement Resident Nominees In INR, NRI
Nominee Repatriable to that Country as per RBI Norms.
Remittances of Balances held in NRO accounts can be allowed
up to USD one million per financial year, for all bona fide
purposes to the satisfaction of Authorized Dealer(AD)
Foreign Tourists visiting India the balance amount in the
account (other than local credits) can be repatriated at the
time of departure from India provided the account has been
maintained for a period not exceeding six months.
Current, Savings, Recurring, Term Deposits.
As applicable to Domestic Deposits.
Not Permitted.
Dep. Rate + 2 %.
TDS on Int. earned @ 30% + Edn. Cess + Service Tax.,
including Interest on SB Deposits, irrespective of the amount
of Interest. Wealth Tax, as applicable.
Permitted to NRE account within the overall ceiling of USD one
million per financial year
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Bankers Digest 2013
N R E Non Resident External Rupee account
Who Can Open
Nomination
Repatriation
Type of account
Period of Deposits
Rate of Interest
Deposit Loans
Margin
Interest on Loans
Applicability of Local
Taxes
Transfer of amount
to other types
Premature
Cancellation
NRI can open NRE account Singly or Jointly with their resident
close relatives. However, individuals / entities of Bangladesh
and Pakistan nationals require prior approval of RBI.
Nominee can be a resident or a Non Resident.
Claim Settlement Resident Nominees In Indian Rupee
Non Resident Nominee Repatriable as per RBI Norms.
Balances in the account are Fully Repatriable.
Current, Savings, Recurring, Term Deposits.
Term Deposits Minimum one year and Maximum 10 years.
Saving Deposits Deregulated At present 4.0 %
Term Deposit Deregulated - One Year 9.40%, > 1 Year and
up to 2 Years & above 2 years is 9.25% and 9% respectively.
Rupee loans to be allowed to depositor / third party without
any ceiling.
15%
Dep. Rate + 2 %.
No TDS on Int. earned.
No Wealth Tax. Free from all Taxes
To NRO permitted
To FCNR permitted
Penalty 1% on premature cancellation is applicable. No Interest
is payable, in case of cancellation before 1 year. Conversion
from NRE to FCNR or vice versa, before maturity is subject to
Penalty. No penalty in case the amount is placed in RFC.
Foreign Currency Non Resident account F C N R (B)

Any Non Resident Indian (Individuals of Bangladesh /
Who Can Open
Pakistan Nationality require approval from RBI) Singly or
jointly with another Non Resident only.
Nomination
Claim Settlement Resident Nominees In Indian rupees
Designated Currency
Account can be opened in any freely convertible currency.
Repatriation
Fully Repatriable without any limits.
Foreign Currency
No Exchange Risk to the customer, in case of repatriation,
Exchanger Risk
as account is maintained in Foreign Currency only.
Type of account
Term Deposits only (FDR / Reinvestment)
Period of Deposits
Minimum one year and Maximum 5 years
Linked to LIBOR. Not exceeding LIBOR + 125 basis points.
360 days is taken for a year for the purpose of interest
Rate of Interest
calculation. Simple interest is paid for one year deposit.
However, compound interest (half-yearly, 180 days) is paid
for deposits beyond one year.
Foreign Currency loans to be allowed to depositor / third
Deposit Loans
party without any ceiling.
Applicability of Taxes
No TDS on Interest earned and No Wealth Tax.
Amount Transfer
Permitted to NRO and NRE accounts
A/c can be opened at
Designated branches. (C Category Branches)
No interest payable and no SWAP cost to be recovered for
the deposits up to USD 10000 or equivalent, where the
deposit is cancelled before the expiry of one year. However,
Premature Cancellation SWAP cost to be recovered in case of deposits above USD
10000 or its equivalent. Cancellation of the deposit for the
purpose of renewal in the same currency, same type of
deposit/RFC, no SWAP cost is to be recovered. If the
23
Bankers Digest 2013
deposit is cancelled after one year, applicable rate is to be

paid without Penalty. If the withdrawal for any other reason
applicable interest with 1% penalty is to be levied.
Note: All branches are authorized to accept FCNR (B) deposits. Since the exchange
risk is borne by the bank, branches are required to report all FCNR transactions
(openings, closures, interest payments, transfers etc.,) to Investment & International
Banking Division (IIB), Mumbai on the same day.
R F C - Resident Foreign Currency Accounts
Who Can Open
Sources of funds
Joint Accounts
Types of accounts
Period of Term Dep.
Currency
Nomination
Non Resident Indians (NRI) returning to India who have

been NRIs for a continuous period of not less than one year.
NRIs returning to India for permanent stay in India.
Foreign Exchange received as pension / superannuation /
other benefits from employers abroad. Realization of assets
held abroad. Foreign Exchange acquired as gift or inheritance
from person who was a NRI. Foreign Exchange acquired or
received or any income arising or accruing there on which is
held outside India by any person in terms of general or
specific permission granted by RBI.
Allowed with another eligible person/s or with resident close
relative (Former or Survivor)
Savings, Current, Term Deposits.
As applicable to FCNR B Accounts. Min 1 year Max 5 years
Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian
Dollar
Claim Settlement Resident Nominees In Indian rupees
RFC Domestic Account
Who Can Open
Sources of funds
Joint Accounts
Types of accounts
Period of Term Dep.
Currency
Interest
Loan & Over drafts
Any person resident in India

Foreign Exchange acquired in the form of currency
notes, bank notes, cheques, drafts, and travellers
cheques.
Payment / honorarium / gift for services rendered in
India / abroad.
Unspent amount of foreign exchange acquired by him
from an authorized person for travel abroad.
Gift from close relatives as defined in sec. 6 of the
company act 1956.
Proceeds of Insurance policy claims / maturity /
surrender values settled in foreign currencies.
Not permitted
Current Account / Savings Bank
Term Deposits are not permitted to be opened
Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian
Dollar
No Interest on Current Account. Banks have discretion to fix their
own interest rates on Savings Deposits
Not permitted.
24
Bankers Digest 2013
Exchange Earners Foreign Currency Accounts (EEFC)
Who Can Open
Purpose
Currency
Credit facility
Type of
account
Interest
Nomination
Limit up to
which foreign
currency may
be credited
All Categories of Foreign Exchange Earners such as Individuals,

Companies etc., who are resident in India, may open EEFC account
with 100% of their Forex earnings. Resident Individuals are permitted
to include his close relative as a joint holder, however, the joint holder
is not allowed to operate the account during the life time of
Authorized Dealers (AD) are allowed to open, hold and maintain
foreign currency denominated accounts for the purpose of transacting
foreign exchange business and other matters of the account holder.
The accounts can be maintained with one or more ADs.
The account may be maintained in the currency of the remittance or
any other permitted currency at the option of the depositor.
No credit facility, either fund based or non-fund based should be
permitted against the security of the balances held in the EEFC
accounts.
EEFC accounts should be in the form of non-interest bearing current
accounts only. Cheque book facility is permitted.
No Interest is payable
Nomination facility is permitted like any domestic account. Nominee
can be Resident Indian only
A person resident in India may credit to the EEFC account 100% from
out of the foreign exchange earnings
Inward remittance through normal banking channels, other than the
remittance received pursuant to any undertaking given to the Reserve
Bank or which represents foreign currency loan raised or investment
received from outside India, or those received for meeting specific
obligations by the account holder.
Payment received in foreign exchange by a unit in Domestic Tariff
Area (DTA) for supplying goods to a unit in Special Economic Zone out
of its foreign currency account.
Payment received by an exporter from an account maintained with AD
for the purpose of counter trade, in accordance with the approval
granted in terms of regulation 14 of FEMA (Export of goods &
Services) Regulations 2000.
Permissible
credits to
EEFC accounts
Advance remittances received by an exporter towards export of goods

/ services.
Payments received towards export of goods/ services from India, out
of funds representing repayment of state credit in USD held in the
account of Bank for foreign economic affairs, Moscow with an AD in
India.
Professional Earnings including Director's fees, consultancy fees,
lecture fees, honorarium and similar other earnings received by a
professional by rendering services in his individual capacity.
Interest earned on the funds in the account.
Re credit of unutilized foreign currency earlier withdrawn from the
account. However, the amount withdrawn in rupees shall not be
eligible for conversion into foreign currency and for re-credit to the
account.
Amount representing repayment of loans/ advances granted to the
account holder's importer customer.
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Bankers Digest 2013
Representing the disinvestments proceeds received by the resident

account holder on conversion of shares held by him to ADRs / GDRs
under the sponsored ADR / GDR scheme approved by the Foreign
Investment Promotion Board of Govt. of India.
Payment outside India towards any current account transactions in
terms of FEMA Current Account Transaction Rules 2000 and towards a
capital account transaction Permissible under FEMA (Permissible
Capital Account Transactions) Regulations 2000.
Payment in foreign exchange towards cost of goods purchased from
100% EOU or a Unit in EPZ / STP / Electronic Hardware Technology
Park.
Payment of Customs Duty in accordance within the provisions of
Export Import Policy of Central Government for the time being in
force.
Permissible
debits to EEFC
account
Trade related loans/ advances, by an exporter holding such account to

his importer customer outside India subject to compliance with FEMA
(Borrowing & Lending in Foreign Exchange) Regulations 2000.
Payment in foreign exchange to a person resident in India for supply
of goods / services including payment for airfare and hotel
expenditure.
Branches may permit their export constituents to extend trade related
loans / advances to overseas importers out of their EEFC balance
without any ceiling subject to compliance of provisions of Notification
no. FEMA 3 / 2000 as amended from time to time.
Branches may permit exporters to repay packing credit advances
whether availed in rupee or in foreign currency from balances in their
EEFC accounts and / or rupee resources to the extent exports have
actually taken place.
The balances in EEFC accounts may be allowed to be credited to NRE /
FCNR B account at the option / request of the account holders
consequent upon change of their residential status to Non Resident.
Conversion
into Rupee
Funds
There is no restriction on withdrawal in rupees of funds held in EEFC

account.
Branches should send the request to Investment &
International Banking (IIB), Mumbai by e-mail / fax, for conversion of
rupee funds and can take the conversion rate along with reference no.
Loans to NRIs Against Deposits: Advances against FCNR/NRE deposit to the

depositor himself should be granted only under his specific request and after
verifying the authenticity of the signature of the depositor. Loans can be granted for
any purpose, (except for the purpose of relending or carrying on
agriculture/plantation activities or for investment in real estate business) including
direct investment by way of capital contribution to Indian firm/companies and for
acquisition of residential flats/houses on non-repatriable basis. In case of loans to
third parties against NRI deposits, normally the relative documentation should be
done at the branch from where the loan is being sought by the NRI depositor. The
loan should be granted only when the depositor himself executes the loan documents
in the presence of the bank officials and witness acceptable to the bank. Advances to
third parties against such deposits should not be granted on the basis of Power of
Attorney. The maximum loans/advances that can be sanctioned / renewed either to
the depositors or to third parties is restricted to `100 lakhs against NRI deposits.
The loan amount is to be credited only to NRO account of the depositor but not to
any other account. Advances granted can be repaid by foreign inward remittances, or
26
Bankers Digest 2013
transfer from NRE/FCNR accounts, or maturity proceeds of the deposit, or local rupee
sources held in NRO account. The interest rates to be levied on such loans are as
under:
No
1
2
3
4
Category
Loan to depositor and repayment through
inward remittance or adjustment of deposit or
transfer of funds from NRE/FCNR deposits
Loans to depositor Repayment by rupee
funds in NRO accounts
Loans to third parties Repayment by rupee
funds (less than one year)
Loans to third parties Repayment by rupee
funds (one year & above and up to 3 years)
Interest Rate
Deposit Rate + 2%
Deposit Rate + 3%
Base Rate + 5%
Base Rate + 5.75%
In case the rate of interest payable on NRE/FCNR deposit held as security is Nil due
to premature closure before the expiry of minimum period i.e. one year, the rate of
interest on the loans against such deposit is Base Rate + 7%.
Diamond Dollar Account Scheme in terms of which firms and companies dealing
in purchase/sale of rough or cut and polished diamonds/precious metal jewellery
plain, minakari and/or studded with/without diamond and/or other stones, with a
track record of at least 2 years in import/export of diamonds/coloured gemstones/
diamond and coloured gemstones studded jewellery/plain gold jewellery, and having
an average annual turnover of `3 crore & above during preceding three licensing
years, are allowed to open Diamond Dollar Accounts (DDA). RBI issue DDA on a
case-to-case basis, subject to the following terms and conditions:

Opened in the name of the exporter and maintained in US Dollars only.

It should be in the form of current account and no interest should be paid on the
balance held in the account.
No intra-account transfer should be allowed between the DDAs.
Not permitted to open and maintain more than 5 DDAs.
The balances held in the accounts shall be subject to CRR SLR requirements.
Exporter firms and companies maintaining foreign currency accounts (excluding
EEFC accounts) are not eligible to open Diamond Dollar Accounts.
The permissible credits in the accounts are amount of pre-shipment and postshipment finance availed in US Dollars; Realisation of export proceeds from
shipments of rough, cut, polished diamonds and diamond studded jewellery; and
Realisation in US Dollars from local sale of rough, cut and polished diamonds. The
permissible debits in the accounts are Payment for import/purchase of rough
diamonds from overseas/local sources; Payment for purchase of cut and polished
diamonds, coloured gemstones and plain gold jewellery from local sources; Payment
for import/purchase of gold from overseas / nominated agencies and repayment of
USD loans availed from the bank. Transfer to rupee account of the exporter.
Investment opportunities to NRIs: The permitted investment opportunities to
NRIs in India are Government Securities, Company Deposits, Units of Mutual Funds,
Company Shares/Debentures, Immovable property and Loans to residents. The
investment can be under repatriation or non-repatriation basis. However, NRIs are
prohibited from making investments in any entity, which is engaged in the activities
such as Chit funds, Nidhis, Agricultural or Plantation activities, Real Estate business,
Construction of Farm Houses without RBI`s permission. Whenever the investments
are allowed with repatriation benefits, the funds for the purpose should be received
by inward remittances from abroad or from investors NRE/FCNR accounts. While
funds in NRO accounts could be used in respect of investments on non-repatriation
basis.
27
Bankers Digest 2013
Financial Inclusion
Financial Inclusion is the delivery of banking services at an affordable cost to the
vast sections of disadvantaged and low income group. As banking services are in the
nature of public good, it is essential that availability of banking and payment services
to the entire population without discrimination is the prime objective of the public
policy. It means not only to extending banking facilities to rural people but also to
provide at their convenient time and location. Availability of banking services means
to provide Basic Savings Bank Deposit Account (formerly known as No-Frills account)
with Overdraft facility; Remittance product for Electronic Benefit Transfer (EBT) and
other remittances; Variable Recurring Deposit and General Credit Card or Kisan
Credit Card etc.
Evolution of Financial Inclusion
Social Banking is an instrument for Financial Inclusion. Though, social banking
initiatives were introduced in India long back through measures such as co-operative
banking movement, nationalization of banks (in 1969 & 1980), creation of Regional
Rural Banks etc., their success was largely constrained by the size and population of
the country (1.21 billion) and non-availability of banking services. In the above
backdrop financial inclusion has received a big boost and greater efforts have been
laid on inclusive banking. The following are the steps initiated for enhancing financial
inclusion in India.

Introduction of Basic Saving Bank Deposit account for all individuals with
simplified KYC norms.
Information and Communication Technology (ICT) based Business
Correspondent model for delivery of low cost door step banking services in
remote villages is being implemented.
Roadmap to cover villages with population above 2000 by March 2012 was
prepared and implemented successfully. Process of covering the remaining
villages with population below 2000 is underway.
Opening of 25% of new branches by banks in unbanked rural centers is made
as on obligation.
Other players such as mobile and network companies have been allowed to
partner with banks in offering services collaboratively.
Government has encouraged a multi-channel approach including mobiles,
handheld devices, smart cards, micro ATMs, kiosks etc., for providing financial
services to the target group.
A village is considered to be covered by banking service if either a Brick &
Mortar Branch or Ultra Small Branch or Business Correspondent.
Basic Savings Bank Deposit Account: With a view to achieving greater financial
inclusion, RBI directed the banks to make available basic banking services to the
needy people with Nil balance account without any service charges. However, the
restrictions on transactions and amount are to be made known to the depositors
transparently. In order to ensure that persons belonging to low income group both in
urban and rural areas do not face difficulty in opening the bank accounts due to the
procedural hassles, the 'KYC' procedure for opening accounts for those persons who
intend to keep balances not exceeding `50000/- in all their accounts taken together
and the total credit in all the accounts taken together is not expected to exceed
`100000/- in a year has been simplified to enable those belonging to low income
groups without documents of identity and proof of residence to open banks accounts.
However, these accounts need to be introduced by the existing KYC compliant
customer who had satisfactory dealings with the bank for at least six months.
Photograph of the customer who proposes to open the account and his address need
to be certified by the introducer.
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Bankers Digest 2013
Opening a Basic Savings Bank Deposit account is only the first step in building the
relationship which would require sustained efforts on the part of Banks as well as
Customers to achieve the objective of Financial Inclusion. However, in rural areas
customers cannot be expected to come to branches in view of opportunity cost
and Time and hence banks will have to reach out through a variety of technology
driven delivery channels such as ATMs, Bio-metric ATMs, Mobile ATMs, Smart Cards
and use of Post offices.
i) Low Cost ATMs: The presence of ATMs mostly found in Metro/Urban centers and
banks are not keen to install at Rural/Semi Urban centers in view of high investment
and low transaction volume. Deployment of low cost ATMs at Rural/SU centers with
basic features (cash withdrawal, balance enquiry etc.,) enables the customers to
have access to cost effective convenient banking.
ii) Biometric ATMs: The penetration of ATMs into Rural / Semi-urban areas may
not serve the purpose unless it is put to use by both Literate and Illiterates. The
existing ATMs are not being used optimally by rural folk on account of PIN and
Password related issues. Introduction of Biometric ATMs enables the illiterate and
semi-literate customers to avail ATM facilities on par with literate customers. Under
this, Thumb impression of the cardholder will be scanned and transfer the same to
central server as one time measure. While swapping the card customer is required to
keep thumb on the slot, system verifies the finger print and allows access to his
account/s.
iii) Mobile ATMs are designed for providing ATM facility to the rural folk as well as
other customers. The Van would move at the pre-determined places and also
accessible to Biometric card holders. It can also be used for opening of accounts
during the visits to the rural areas.
All the above initiatives warrant the banks to invest substantial amount on
infrastructure besides recurring expenditure. There is an urgent need to bank on
alternatives to overcome the said constraints and to extend branch less banking to
achieve desired goal.
Business Correspondent (BC): The BC model allows the bank to use third parties
(Individuals/associations/institutions/corporates) to extend the basic banking
services. Normally the operations of BC should be within 30 KMs of base branch
located in Rural/Semi-Urban/Urban areas and it is 5 KMs in case of Metro areas.
However, the distance criteria may be relaxed with prior approval from DCC/SLBC.
BCs are provided with laptop with connectivity to have seamless operations with the
respective banks central server. BCs use biometric smart cards, in which customer
data including finger prints are stored and works on PoS machines with key
management.
Business Facilitators (BF) Model envisages the use of intermediaries by the
banks to provide Non Financial Services to the public such as creating awareness
about banks products/services, identification of borrowers/processing of
applications, post sanction monitoring and follow-up etc.
Ultra Small Branches: Recently, the Government has directed banks to set up
Ultra Small branches in all villages under financial inclusion scheme by March 2012,
typically in a premises spread 100 to 200 sft. It aims to provide a wide range of
banking services, including credit transactions, in villages where only cash
transactions are being provided by BCs. A designated officer will visit the village on a
prefixed date and time every week with laptop and will be connected to Banks
central server (CBS).
29
Bankers Digest 2013
Common Service Centers: Under the National e-Governance Plan (NeGP), the
Common Services Centers (CSCs) have been established with front end service
delivery points at the village level, for delivery of Government, Social and Private
Sector services in the areas of agriculture, health, education, entertainment, FMCG
products, banking and financial services, utility payments, etc. At the last mile, the
CSCs set up in the villages are managed by Village Level Entrepreneurs (VLE) and
engaged as CSPs/BCAs. The infrastructure at the CSC includes a fixed place of
business say 100 to 150 sq. ft, specified working hours, a Personal Computer/Lap
top with internet connectivity web-cam, printer, power backup, biometric scanner.
CSC acts as BC and providing ICT based banking services in unbanked villages
through the CSC network for the purpose of Financial Inclusion. The CSCs will use
on-line biometric based web-base solution as provided by the respective bank. At the
front end the BC will ensure the availability of a PC/lap top, approved biometric
device, printer, web-camera with connectivity. The BC will comply with standard
operating procedures of the respective bank. The cash in hand and its movement
arising out of banking transactions at CSC locations will be responsibility of BC at
their cost, risk and responsibility. As per the DFS mandates, a BCA must be
operational in each of the FI village and the BCA must cater to the entire area of
Gram Panchayat. The Service Provider would be required to appoint from among the
following as the Business Correspondent/BCA. This list would be revised from time to
time based on Reserve Bank of India directives.

NGOs/MFIs set up under Societies/Trust Acts

Cooperative Societies registered under Mutually Aided Cooperative Societies
Acts or the Cooperative Acts of States/Multi State Cooperative Societies Act.
Retired Bank employees / Teachers / Post Masters
Ex-Service men/Retired Govt Employees.
Individual owners of kirana / medical / fair price shop owners / Public Call
Office Operators / Petrol pumps / Rural Multipurpose Kiosks / Village
Knowledge Centers
Agents of small savings schemes and Insurance Companies
Self Help Groups (SHGs) linked to banks / Farmers Clubs
Owners who manage Agri Clinics/Agri Business Centers/Auto dealers
Post Offices / Insurance / Postal agents
Companies registered under the Indian Companies Act 1956 with large and
wide spread retail outlets, excluding Non-Banking Financial Companies
Any other individual considered suitable by the banks
However, the Identified Business Correspondents and BCAs should not have been
defaulters to any financial institution and should not have been blacklisted by any
bank in the last two years for deficiency of service. While appointing Business
Correspondent Agents (BCAs), following general guidelines should be followed by BC:

Existing entrepreneur may be appointed to improve the viability of BCA.

BCA should operate either from his house or Gram Sabha building where
sufficient space is available to accommodate bank officers visit
The selection of BCA must be done with the consent of the concerned Branch
Manager in whose service area the CSP is located.
The device should be interoperable and must have biometric facility plus card
or password plus card. The BCA must have on-line connectivity.
The BCA must be responsible to receive and pay money, to transfer money
from one to another. BCAs may also be used for deposit mobilization and
recovery of loans.
The BCA will also be acting as an extension staff for micro insurance, animal
insurance, crop insurance and micro pension.
Bank officials will be visiting the CSP at regular intervals to collect application
for opening account, loans of all types, recovery follow-up and any other
30
Bankers Digest 2013
banking issues. This will install greater confidence among the customers and
facilitate increased banking transactions through BCAs.
The BCA must be responsible for routing all transactions of all villages in the
assigned villages so that effective marketing and follow up, can take place.
Indicative charges to be paid to the Service Provider
Activity
Remuneration
Savings Bank Account opening
`20/- per account
Recurring Deposit account opening
`5/- per account
Fixed Deposit
`5/- per account
Overdraft/Retail Loans/KCC/GCC
0.5% of loan amount sanctioned subject

to a minimum of `25/- and maximum of
`5,000/-; 50% of the amount payable
shall be paid after the first disbursement
of the loan and the rest 50% shall be
paid one year thereafter if the account
continues to be standard asset till then.
3rd Party financial products like Life

& non-life Insurance, Pension etc.
with prior approval of the concerned
Bank
25% of the commission bank earns
SHG & JLG: For formation and

promotion including credit linkage
Not exceeding `1000/- per SHG/ JLG

formed and credit linked with the Bank in
stages as under.
Stationary and overhead expenses

after saving linkage of SHG
`300/-
4 months after saving linkage
`300/-
After credit linkage of SHG
`400/-
Non cash transactions

Remittance/Fund transfer
`10/- per transaction
Balance Enquiry
Nil
In addition to these charges, the Service Provider will be paid fixed charges @ 2,500
per month for each outlet for a period of six months from the date of activation of
each outlet, at least 80% or more of which must be passed on by the BC to BCA. The
date of activation would be the date of first transaction. The fixed charges will be
paid subject to the condition that the BCA records at least 25 transactions
(enrolment of new accounts or transactions in existing accounts) during each month.
31
Bankers Digest 2013
Direct Benefit Transfer: The Central and State Governments have been
earmarking substantial budgetary allocations towards social security and welfare
schemes through various subsidies with an aim to improve the standard of living of
vast majority of people who require social assistance. The fundamental challenge for
any subsidy framework is to ensure effective targeting of beneficiaries which is a
complex task and fraught with two types of errors viz., errors of Inclusion and errors
of Exclusion. The former involves the wrongful inclusion of beneficiaries ineligible for
subsidy, while the later concerns the exclusion of eligible beneficiaries. In the
process, the lion share of subsidies has not been reaching the target group defeating
the very purpose of the schemes.
In order to ensure electronic transfer of subsidies directly into the accounts of the
beneficiaries under the various schemes of the Central/State Governments, it is
important that the beneficiaries have an account in the service area bank.
Accordingly, banks have been advised that the service area bank in rural areas and
banks assigned the responsibility in specific wards in urban area ensure that every
household has at least one bank account.
To address the above issues effectively, Government initiated steps to introduce
Direct Benefit Transfer in select districts from 1st January 2013 on pilot basis and it is
proposed to cover the remaining districts by 31st December 2013. In this direction,
the Government has taken the following initiatives:
All Banks are advised to provide basic banking services at all villages having
population of above 2000 either opening a bank branch or appointing a
Business Correspondent Agent. A BCA must be operational in each of the FI
village.
All banks must complete the mapping of their respective service area to
ensure that one BCA is available in each Gram Panchayat. The collection of
account opening data including Aadhar number is to be done by BCA on
priority.
Banks are advised to establish a regular Brick and Mortar or Ultra Small
Branch in all habitations with population of 5000 and above in under-banked
districts and 10000 and above in other districts.
RBI has issued guidelines to SLBC convenor banks mandating them to

prepare a roadmap covering all un-banked villages of population of less than
2000 and allot these villages to banks for providing banking services, in a
time bound manner.
Banks are advised to provide Branch, ATM and BCA access points to all the
beneficiaries across the country. Further, it is stipulated that a BCA has to be
made available within a radial distance of 2 KM and a branch within a radial
distance of 5 KM. Banks should issue Debit Cards to all eligible account
holders.
In a bid to incentivize banks for facilitating Direct Benefit Transfers to Aadhaar

enabled accounts, which may not bring any business to the banks, the
government is considering paying them a transaction fee about 3.14% of the
amount of the transaction with a cap of `20 per transaction. A business model is
being worked out to help banks to recoup their transaction costs.
Direct Benefit Transfer Scheme is a Game Changer for Banks as it would help
bring a large number of retail customers into the banking fold. This scheme has
potential to bring about a second revolution in the banking industry in the post
nationalization era.
32
Bankers Digest 2013
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Schemes covered under Direct Benefit Transfer

Post Matric Scholarship for SC Students
Pre-Matric Scholarship for SC Students
Pre-Matric Scholarship for Children of those engaged in unclean occupations
Upgradation of merit of SC Students
National Overseas Scholarship Schemes for SC Students
Post Matric Scholarship for OBCs
National Overseas Scholarship for OBCs
Post Matric Scholarship for economically backward class students
Post Matric Scholarship for students with disabilities
National Overseas Scholarship for persons with disabilities
Scholarship for top class education for students with disabilities
Top Class Education Scheme
Scholarship to Universities/College Students
Fellowship Schemes of UGC.
Fellowship Schemes of AICTE
Subsidy on Fee to Students
National Means cum Merit Scholarship
National Scheme for Incentive for the girl child for secondary education
National Overseas Scholarship for ST students
Post Matric Scholarship Scheme
Upgradation of Merit Scheme
Top Class Education System
Rajiv Gandhi National Fellowship
Matric Scholarship Scheme
Maulana Azad National Fellowship
Merit cum Means Scholarship Scheme
Indira Gandhi Matritva Sahyog Yojana (IGMSY)
Dhanalakshmi Scheme
Janani Suraksha Yojana
Scholarship to the Children of beedi workers
Housing subsidy to beedi workers
Stipend to children in the special schools under the Child Labour Project
Permanent Disability Benefits, Dependent benefits, Sickness State Insurance
Corp. to the insured persons and their families
Pension withdrawal of PF, Premature withdrawal of pension, payment related
to Employees Deposit Linked Insurance
Domestic LPG Subsidy Scheme
PDS Kerosene
Targeted Public Distribution System (in UTs)
33
Bankers Digest 2013
Priority Sector Revised Guidelines

The need for commercial banks to improve Priority Sector advances was emphasized
since 1968 with special focus on Agriculture and Small Scale industries. The
description of the priority sectors was later formalized in 1972 by RBI. Initially there
was no specific target fixed in respect of priority sector lending but in the year 1974
banks were advised to raise the share of these sectors in their aggregate advances
to the level of 33 1/3 percent by March 1979. Subsequently, on the basis of the
recommendations of the Working Group on the Modalities of Implementation of
Priority Sector Lending and the Twenty Point Economic Programme by Banks under
the chairmanship of Dr. K. S. Krishnaswamy, all commercial banks were advised to
achieve the target of priority sector lending at 40 percent of aggregate bank
advances by 1985. Sub-targets were also specified for lending to agriculture and the
weaker sections within the priority sector. Since then, there have been several
changes in the scope of priority sector lending and the targets and sub-targets
applicable to various bank groups.
The Internal Working Group of the RBI headed by Shri C. S. Murthy and the Shri
Y.H.Malegam committee constituted to study issues and concerns in the Micro
Finance institutions (MFI) sector, inter alia, had recommended review of the
guidelines on priority sector lending. Subsequently, RBI has setup a Committee
headed by Shri M V Nair to re-examine the existing classification and suggest
revised guidelines with regard to Priority Sector lending classification and related
issues. Accordingly, revised guidelines on Priority Sector are issued in July 2012.
1. Agriculture
i) Direct Finance to Agriculture: Loans to individual farmers including SHGs/JLGs
engaged in agriculture and allied activities viz., dairy, fishery, animal husbandry and
sericulture are treated as direct lending to agriculture irrespective of the amount.
However, loans to corporates including farmers producer companies of individual
farmers, partnership firms and co-operatives of farmers for the said activities up to
an aggregate limit of `2 crore per borrower is treated as direct lending to agriculture.
The various activities that come under direct lending to agriculture are:

Short-term loans for raising crops, i.e. for crop loans, which include
traditional/non-traditional plantations, horticulture and allied activities.
Medium & long term loans for agriculture and allied activities (purchase of
agricultural implements and machinery, loans for irrigation and other
developmental activities undertaken in the farm, and development loans for
allied activities).
Loans granted for pre-harvest and post-harvest activities such as spraying,
weeding, harvesting, grading, sorting, processing and transporting
undertaken by individuals, SHGs and cooperatives in rural areas.
Loans to farmers up to `25 lakh against pledge/hypothecation of agriculture
produce for a period not exceeding 12 months.
Export credit to farmers for exporting their own farm produce.
If the aggregate loan limit per borrower is more than `2 crore for the above said
purposes, the entire loan should be treated as indirect finance to agriculture.
ii) Indirect finance to agriculture: Lending to the following activities is treated as
indirect finance to agriculture:
Corporates/partnership firms/institutions engaged in Agriculture and Allied

Activities (dairy, fishery, animal husbandry, poultry, sericulture etc.)
34
Bankers Digest 2013

Primary Agricultural Credit Societies (PACS), Farmers Service Societies (FSS)

and Large-sized Adivasi Multi Purpose Societies (LAMPS)
MFIs for on-lending to farmers for agricultural and allied activities
NGOs for on-lending to members of SHGs under SHG-Bank Linkage
Programme for agricultural and allied activities.
RRBs for on-lending to agriculture and allied activities.
Dealers/sellers of fertilizers, pesticides, seeds, cattle feed, poultry feed,
agricultural implements and other inputs up to `100 lakh per borrower.
Setting up of Agri clinics and Agribusiness Centres.
Custom Service Units managed by individuals, institutions or organizations
who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers,
combines, etc., and undertake farm work for farmers on contract basis.
Construction and running of storage facilities.
2. Micro and Small Enterprises: Bank loans to Micro and Small Enterprises (MSE)
engaged in providing or rendering of services will be eligible for classification to MSE
sector under priority sector up to an aggregate limit of `2 crore per borrower/unit,
provided they satisfy the investment criteria for equipment as defined under MSMED
Act, 2006.
3. Medium Enterprises: Units which are engaged in manufacture / production /
preservation of goods and whose investment in plant and machinery should be as
per the guidelines are treated as Medium Enterprises. However, Banks lending to
medium enterprises will not be included for the purpose of reckoning under priority
sector.
i) Manufacturing Enterprises are those engaged in manufacturing or production of
goods. These are defined in terms of investment in Plant & Machinery.
ii) Service Enterprises are the enterprises engaged in providing or rendering of
services. These are defined in terms of investment in Equipment. The modified
definitions of Micro, Small and Medium Enterprises are as under:
No
Category
Investment in Plant & Machinery / Equipment

Manufacturing
Service
Micro Enterprise
Up to `25 lakhs
Up to `10 lakhs
Small Enterprise
`25 to `500 lakhs
`10 to 200 lakhs
Medium Enterprise
`500 to `1000 lakhs
`200 to 500 lakhs
Indirect finance to the small (manufacturing as well as service) enterprises sector

include credit to Persons/co-operatives involved in assisting the decentralized sector
(Artisans, village and cottage industries) in supply of inputs and marketing of output.
All advances granted to units in the Khadi and Village Industries Sector, irrespective
of their size of operations, location and amount of original investment in plant and
machinery. Such advances will be eligible for consideration under the sub-target (60
per cent) of the small enterprises segment within the priority sector.
4. Housing Loans: Loans up to `25 lakh to individuals for purchase/construction of
dwelling unit per family in Metro centers with population above ten lakh and `15
lakh in other centers excluding loans granted by banks to their own employees are
treated as priority sector. Further, loans given to individuals for repairs to the
damaged dwelling units of families up to `2 lakh in rural and semi-urban areas and
up to `5 lakh in urban and metropolitan areas are treated as priority sector. Further,
housing loans to the following are also treated as priority sector:
35
Bankers Digest 2013
Bank loans to any governmental agency for construction of dwelling units or

for slum clearance and rehabilitation of slum dwellers subject to a ceiling of
`10 lakh per dwelling unit.
Loans sanctioned for housing projects exclusively for the purpose of
construction of houses only to economically weaker sections and low income
groups, the total cost of which does not exceed `10 lakh per dwelling unit, will
qualify for priority sector status. However, the family income of the borrower
should not exceed `1.2 lakh per annum irrespective of location.
Loans to Housing Finance Companies (HFC), for on-lending for the purpose of
purchase/construction/reconstruction of individual dwelling units or for slum
clearance and rehabilitation of slum dwellers, subject to an aggregate loan
limit of `10 lakh per borrower, provided the all inclusive interest rate (Interest
rate, processing fee and service charges) charged to the ultimate borrower is
not exceeding lowest lending rate of the lending bank for housing loans plus
2% per annum. However, this segment should not exceed five percent of the
individual banks total priority sector, on an ongoing basis.
5. Education Loans: Education loans include loans and advances granted to only
individuals for educational purposes up to `10 lakh for studies in India and `20 lakh
for studies abroad, and do not include those granted to institutions.
Retail Trade shall include retail traders/private retail traders dealing in essential
commodities (fair price shops), and consumer co-operative stores etc with credit
limits not exceeding `20 lakhs.
Micro Credit: Provision of credit and other financial services and products of very
small amounts not exceeding `50000 per borrower, either directly or indirectly
through a SHG/JLG mechanism or to NBFC/MFI for on-lending up to `50000 per
borrower, will constitute micro credit.
Weaker Sections: Loans to the following categories are treated as weaker sections:
Small and marginal farmers with land holding of 5 acres and less, and
landless labourers, tenant farmers and share croppers.
Artisans, village and cottage industries where individual credit limits do not
exceed `50000/-.
Beneficiaries under SGSY/ SC&ST/ DRI / SJSRY / Liberation and Rehabilitation
of Scavengers (SLRS) / SHG schemes.
Loans granted to persons from minority communities for the said purposes.
Differential Rate of Interest Scheme (DRI): The target stipulated for lending
under DRI scheme is 1% of previous year total advances of the Bank. The existing
loan limit is increased from `6500/- to `15000/- and the housing loan limit is also
increased from `5000/- to `20000/-. The borrowers family income eligibility criteria
is revised to `18000/- & `24000/- p.a. for Rural & Semi-Urban/Urban areas
respectively. At least two third of DRI advances should be granted through
rural/semi-urban branches. 40% of DRI advances should go to SC/ST. 2/3rd of total
DRI lending is to be routed through Rural and Semi Urban branches. Branches can
assist the handicapped/disabled persons for acquiring aids, appliances and
equipment needed especially by students for pursuing studies and vocational training
example Braille Typewriters for blind etc.
Marginal/Small farmer: In order to classify the farmer under Marginal / Small
farmer category, the land holding should not be more than the following:
Category
Marginal
Small
Others
Irrigated Land Holding

1.25 Acres Or
2.50 Acres Or
Above 2.50 Acres Or
36
Bankers Digest 2013
Un-irrigated Land Holding

2.5 Acres
5.0 Acres
Above 5 Acres
Credit flow to SC/ST: RBI has issued the following instructions/directives to the
banks on the credit flow to SC/ST (Circular no.207 Ref 28/08 dated 01.10.08)
Scheme
DRI
SGSY
Reservation / Relaxation
40% of Advances. Land holding criteria is not applicable
50% of the families assisted
SJSRY
Credit to be extended to the extent of their strength in the local

population
22.50% of Advances. Age relaxation 10 Years
PMEGP
Priority Sector - Targets & Sub-targets

Category
Priority
Sector
Domestic commercial banks

40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent
amount of Off-Balance Sheet Exposure, whichever is higher.
18 per cent of ANBC or credit equivalent amount of Off-Balance Sheet
Exposure, whichever is higher.
Agricultural
advances
Small
Enterprise
advances
Of this, indirect lending in excess of 4.5% of ANBC or credit equivalent

amount of Off-Balance Sheet Exposure, whichever is higher, will not be
reckoned for computing performance under 18 per cent target. However,
all agricultural advances under the categories 'direct' & 'indirect' will be
reckoned in computing performance under the overall priority sector
target of 40 per cent of ANBC or credit equivalent amount of Off-Balance
Sheet Exposure, whichever is higher.
Advances to small enterprises sector will be reckoned in computing
performance under the overall priority sector target of 40 per cent of
ANBC or credit equivalent amount of Off-Balance Sheet Exposure,
whichever is higher.
40 per cent of total advances to small enterprises sector should go to

micro (manufacturing) enterprises with investment in plant & machinery
up to `5 lakh and micro (service) enterprises having investment in
Micro
enterprises equipment up to `2 lakh; 20 per cent of total advances to small
within Small enterprises sector should go to micro (manufacturing) enterprises with
Enterprises investment in plant & machinery above `5 lakh and up to `25 lakh, and
sector
micro (service) enterprises with investment in equipment above `2 lakh
and up to `10 lakh. (60% small enterprises advances should go to the
micro enterpr).
Export credit is not a separate category. Export credit to eligible
Export credit activities under agriculture and MSE will be reckoned for priority sector
lending under respective categories.
Weaker
sections
10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet

Exposure, whichever is higher.
Differential
Rate of
Interest
Scheme
1 per cent of total advances outstanding as at the end of the previous

year. It should be ensured that not less than 40 per cent of the total
advances granted under DRI scheme go to SC/ST. At least two third of
DRI advances should be granted through rural and semi-urban branches.
Foreign Banks priority sector advances is stipulated as 32 per cent of ANBC or

credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. In case
of Small Enterprises it is 10 per cent of ANBC or credit equivalent amount of OffBalance Sheet Exposure, whichever is higher. The target for export credit is 12 per
cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever
is higher.
37
Bankers Digest 2013
Government Sponsored Programs

Prime Minister Employment Generation Programme (PMEGP): Prime Ministers
Employment Generation Programme (PMEGP) by merging the two schemes that were
in operation till 31.03.2008 namely Prime Ministers Rojgar Yojana (PMRY) and Rural
Employment Generation Programme (REGP) for generation of employment
opportunities through establishment of micro enterprises in rural as well as urban
areas. The Scheme will be implemented by Khadi and Village Industries Commission
(KVIC) and the details are as under:
Project Cost
Subsidy
Category
Borrower
contribution
General
Special (SC/ ST/OBC/Minorities/Women/ Exservicemen / Physically handicapped/ NER /
Hill and Border areas etc.)
10%
Urban
15%
Rural
25%
05%
25%
35%

The maximum cost of the project/unit admissible under manufacturing sector

is `25 lakh.
The maximum cost of the project/unit admissible under business/service
sector is `10 lakh.
The balance amount (excluding MM/subsidy) of the total project cost will be
provided by Banks as term loan
Eligibility Conditions of Beneficiaries

Any individual, above 18 years of age

There will be no income ceiling for assistance for projects under PMEGP.
For setting up of project costing above `10 lakhs in the manufacturing sector
and above `5 lakhs in the business/service sector, the beneficiaries should
possess at least VIII standard pass educational qualification.
Assistance is available only for new projects under the PMEGP.
Self Help Groups (including those belonging to BPL provided that they have
not availed benefits under any other Scheme) are also eligible for assistance
under PMEGP.
Institutions registered under Societies Registration Act 1860; Production Cooperative Societies, and Charitable Trusts. Existing Units (PMRY / REGP or any
other scheme of Central / State Government) and the units that have already
availed Government Subsidy (including units registered & certified khadi
institutions who have availed subsidy from central/state government) are not
eligible.
To claim Margin Money (Subsidy), the borrower is required to submit

caste/community certificate or relevant document issued by the competent authority.
In case of institutions, a certified copy of the bye-laws is required.
Project cost will include Capital Expenditure and one cycle of Working Capital. Cost of
the land should not be included in the Project cost. Projects costing more than `5
lakh, which do not require working capital, need clearance from controlling office.
PMEGP is applicable to all new viable micro enterprises, including Village Industries
projects except activities indicated in the negative list of Village Industries.
Existing/old units are not eligible. Only one person from one family is eligible for
obtaining financial assistance for setting up of projects under PMEGP. The family
includes self and spouse.
38
Bankers Digest 2013
No collateral security will be insisted upon by Banks in line with the guidelines of RBI
for projects involving loan upto `10 lakhs in respect of the projects cleared by the
Task Force. The borrower is required to undergo EDP training at least 2 weeks
duration. Thereafter, the bank will release first installment of the Bank Finance to the
beneficiary. The margin money (subsidy) is to be kept in Term Deposit for three
years at branch level in the name of the beneficiary/Institution. No interest will be
paid on the TDR and no interest will be charged on loan to the corresponding
amount. Repayment schedule may range between 3 to 7 years after an initial
moratorium as may be prescribed by the concerned bank/financial institution.
Swarnajayanti Gram Swarojgar Yojana (SGSY): It is a Scheme which is a
restructure of the erstwhile schemes like IRDP, TRYSEM, DOWCRA, SITRA, GKY &
MWS etc., with the objective to bring the assisted poor rural families above poverty
line. The scheme aims at establishing a large number of micro enterprises in the
rural area. The identification of the borrowers will be done by Grama Sabha.
Productive and viable activities under Agriculture & ISB are eligible under this
scheme with 50% coverage by SC/ST, 40% coverage by women and 3% to
Physically Handicapped borrowers. The size of the loan under the scheme would
depend on the nature of the project. The loans under the scheme would be
composite loan comprising of Term Loan and Working Capital. Subsidy admissible is
@ 30% or maximum `7500/- (For SC/ST- 50% or maximum `10000) & for groups 50% or maximum `1.25 lac (no ceiling for minor irrigation projects).
For all individual loans exceeding one lakh and group loans exceeding `10 lakh, in
addition to primary security such as hypothecation/mortgage of land or third party
Guarantee as the case may be, suitable margin money/other collateral security in
the form of insurance policy; marketable security/deeds of other property etc. may
be obtained .The upper ceiling of ` 10 lakh is irrespective of the size of the group or
prorate per capita loan to the group while deciding the limit for collateral security,
the total project cost. The repayment period - minimum of 5 years and branches
should ensure that repayment not to exceed 50% of incremental income. In the
event of unfortunate/untimely death of the borrower, LIC make payment of `6000/for natural death and `12000/- for accidental death to the legal heirs of the
borrower. (Cir no. 189 Ref 28/3 dated 2.8.2012)
Self Employment scheme for rehabilitation of Manual Scavengers (SRMS):
The objective of the National Scheme for Liberation and Rehabilitation of Scavengers
and their dependents is to liberate them from their existing hereditary and
obnoxious occupation of manually removing night soil and filth and to provide for
and engage them in alternative and dignified occupations. The Scheme would cover
primarily all scavengers belonging to Scheduled Castes community. Scavengers
belonging to other communities would also be covered. The scheme covers rural
and urban areas and the identification will be done by Ministry of Social Welfare &
National SC/ST financial development corporation. The beneficiaries are eligible for
term loan up to ` 5 lakh and Micro finance up to `25000/- is allowed without any
margin. The loans sanctioned under this scheme are eligible for subsidy @ 50% for
the projects where the unit cost is up to `25000/- and 25% for projects above
`25000/- with minimum of `12500 and maximum of `20000/-. Rate of Interest For
loans up to `25000 @ 4% for women; others 5%. For loans above `25000/-, the
interest rate is @ 6% p.a.
Swarna Jayanti Shahari Rojgar Yojana (SJSRY): The objective of the scheme is
to address Urban poverty alleviation, the scheme seeks to provide gainful selfemployment to the urban poor (living below the urban poverty line) either
unemployed or under employed, through setting up of self-employment ventures or
provision of wage employment. The scheme has components such as Urban self
Employment Programme (USEP), Urban Women Self-help Programme (UWSP), Skill
Training for Employment promotion amongst Urban Poor (STEP-UP), Urban Wage
39
Bankers Digest 2013
Employment programme (UWEP), Urban Community Development Network (UCDN).

The defaulter to any nationalized bank / financial institution / cooperative bank is not
eligible to avail loan under SJSRY. The loans granted under this scheme should be
treated as advances under priority sector. The scheme is meant for Urban Poor who
are under below poverty line and aims to cover 30% Women & 3% physically
handicapped and SC & ST borrowers as per proportion to their population. Urban Self
Employment Programme (USEP) - Operational details in regard to Self-Employment
Individual through setting up of Micro-Enterprises
1
Identification
Eligibility
Nature of
Activities
4
Project Cost
5
Subsidy
6
7
8
9
Margin
Money
Interest
Collateral
Repayment
Survey by ULB
Urban poor (unemployed / under employed) living below the
poverty line, in any city/town. Minimum 18 years at the time
of applying for Bank Loan. Residing in the town for at least
three years. No minimum and maximum educational
qualification.
Town services requiring no special skills / Micromanufacturing units requiring skills. Assistance should also
be made available under agricultural and allied activities /
small scale services/small business activities
The maximum unit project cost for individual cases can be `2
lakh. If two or more eligible persons join together in a
partnership, the project with higher costs would also be
considered provided share of each person in the project cost
is ` 2 lakh or less.
Subsidy would be provided at the rate of 25% of the project
cost subject to a ceiling of `50,000/- per beneficiary. In case
more than one beneficiary join together and set a project
under partnership, subsidy would be calculated for each
partner separately.
Each beneficiary is required to contribute 5% of the project
cost as margin money in cash.
Interest applicable to priority sector.
No collateral is required.
Repayment schedule ranges from 3 to 7 years after initial
moratorium of 6 to 18 months as decided by Bank.
Urban Women Self-Help Programme (UWSP) - Operational details in regard

to self-employment (group) through setting up of Micro-Enterprises
1
Identification
Eligibility
Activity
Subsidy
Margin Money
6
7
Interest
Collateral
Repayment
Survey by ULB
Urban poor women living below the poverty line, in any
city/town with preference performing urban women SHGs.
Minimum number of women in a group is five. 18 years at
the time of the group applying for Bank Loan. No minimum
and maximum educational qualification.
Any group activity/enterprise development for income
generation by the urban poor women
Subsidy would be provided at the rate of 35% of the project
cost subject to a ceiling of `3 lakh or `60,000/- per
beneficiary.
Groups may be encouraged to contribute 5% of the project
cost as margin money in cash.
Interest applicable to priority sector.
No collateral is required.
Repayment schedule ranges from 3 to 7 years after initial
moratorium of 6 to 18 months as decided by Bank.
40
Bankers Digest 2013
STEP-UP, UWEP & UDCN - Inputs under the scheme would be delivered both
through the medium of community structures to be set up along with Urban Local
Bodies (ULBs) like Community Development Society-CDS/ town-Urban Poverty
Alleviation-UPA Cell.
Differential Rate of Interest (DRI): The income criteria to eligible for DRI loan is
`18,000/- pa in Rural areas and `24000/- in Urban areas. With regard to farmers,
the land holding should not exceed one acre wet land or 2.5 acres dry land.
However, it is not applicable to SC/ST borrowers. The unit cost is `15000/- for
general purposes but it is `20000/- for Housing Loans to SC/ST borrowers. The
repayment of the loan ranges from 3 to 5 years. These loans attract interest @ 4%
p.a. The target for the banks is 1% of previous year advances, of which 40% should
go to SC/STs & 2/3rd through Rural/Semi-urban branches.
Rajiv Gruha Kalpa Scheme

EWS house in urban areas.

Income range is minimum `2,000/- per month and maximum `36, 000/- per
annum
Unit Cost of `75,000/- with 10% margin from borrower with Bank loan of
`67,500 per house. 10% increase in unit cost is permitted.
Site will be allotted by Govt. of A.P. at free of cost.
Interest Rate 8% fixed
Valmiki Ambedkar Awas Yojana (VAMBAY): Housing Finance Scheme was

launched in Andhra Pradesh on 01.11.2002 with an objective to provide shelter or
upgrade the existing shelter for people below the poverty line and EWS in urban
slums. The ultimate objective of the Scheme is to have "Slum Less Cities". The
funding pattern is 50% Government, 40% bank Loan and 10% Borrower Margin.
These loans attract interest @ 10% p.a. Tripartite agreement between Beneficiary
Bank & APSHCL.
***
41
Bankers Digest 2013
Micro Credit / SHG

Micro Credit is defined as provision of thrift, credit and other financial services and
products of very small amount to the poor in rural, semi-urban and urban areas for
enabling them to raise their income levels and improve living standards. Banks have
discretion to devise appropriate loan and savings products and the related terms and
conditions including size of the loan, unit cost, unit size, maturity period, grace
period, margins, etc. Such credit covers not only consumption and production loans
for various farm and non-farm activities of the poor but also include their other credit
needs such as housing and shelter improvements. Banks, NBFCs, NGOs and other
institutions/organizations are allowed to undertake activities relating to Micro Credit
in India. The introduction of the Self Help Groups (SHG) format and the nationalized
banks lending system helped accentuate the importance of the same.
SHG is a registered or unregistered group of micro entrepreneurs having
homogenous social and economic background voluntarily, coming together to save
small amounts regularly, to mutually agree to contribute to a common fund and to
meet their emergency needs on mutual help basis. The group members use
collective wisdom and peer pressure to ensure proper end-use of credit and timely
repayment thereof. It is aimed to inculcate saving habit and encourage thrift to
undertake lending among the members. In the process, it boost the confidence to
carry out the activities with ease and paves the way for self-reliance. The
membership of the group could be between 10 to 25 members. If more than 20
members are there, the group should be registered.
Pre-requisites for financing: Groups with 6 months of savings, regular meetings,
regular thrift habit and habituated internal lending and A or B rating as per Critical
Rating Index are eligible for bank finance.
Dose
First
Second
Third &
onwards
Period
Regular loan
Having regular
savings at least for
6 Months
4 times of savings /
corpus or `50000/whichever is higher
Minimum of 12
Months from the
date of availment
of first dose of
finance.
Rural SHGs: 10 times

of savings / corpus or
`100000/- whichever
is higher. In case of
Urban SHGs, the
eligibility is 1.50 lakh.
Minimum of 18
months from the
date of availment
of Second dose of
finance.
Eligibility as per Micro

Credit Plan (MCP)
Debt Swapping
Minimum `25000/- or
50%
regular
loan
limit
whichever
is
higher
subject
to
extent of debt.
Minimum
`50000/for rural SHGs and
`75000/- for urban
SHGs or 50% regular
loan limit whichever
is higher subject to
extent of debt.
40% of MCP or to the
extent
of
debt
whichever is lower
subject to maximum
of `200000/-
Housing
`20000/per
member
subject to
maximum
of
`100000/per group
However, for Rural SHGs - the maximum amount allowed to each SHG Group is
`1.75 lakhs, `2.50 lakhs and `5 lakhs under First, Second and third dose
respectively; and for Urban SHGs, the maximum amount allowed to each SHG Group
is `1.75 lakhs, `3.25 lakhs and `5 lakhs under First, Second and third dose
respectively.
In order to mitigate the hardships faced by SHGs with regard to documentation,
Banks are advised to extend finance (renewals/fresh) by way of Cash Credit facility
only. Further, they advised to convert all outstanding term loan accounts into Cash
Credit immediately.
42
Bankers Digest 2013
Corpus includes Balance amount in SB account, Amount held as cash with

authorized persons, Amount lent internally among members, Amount received as
interest on loans from members, any other contribution received by the group like
Grants, Donations and fund provided by Government
Debt Swapping: Financing to the group members for repayment of loans availed by
them from non-institutional lenders i.e. Private Money lenders. It is only one time
measure.
Interest Rate: The applicable interest rate for SHGs is Base Rate + 4% irrespective
of the amount of finance. State government is providing interest subsidy to SHGs
which are prompt in repayment of loan installments to Banks. It is called Paavala
Vaddi scheme which means 25 paise interest, which amounts to 3% p.a. Amount of
interest charged over and above 3% p.a. will be reimbursed to the group at half
yearly intervals. The reimbursement is to be credited to groups savings bank
account, but not to the SHG loan account. With effect from 01.01.2012, AP State
Govt. reimbursing the full interest for the SHG loans who repay the loans promptly.
Society for Elimination of Rural Poverty (SERP): The introduction of SERP is
aimed at strengthening of SHG Bank Linkage program and to augment credit flow in
orderly manner in the State of Andhra Pradesh. Our Bank entered MOU with SERP to
undertake initiatives such as capacity building, rating of SHGs, preparation of Micro
Credit Plan, activating community based recovery mechanism, imparting training to
improve book keeping etc. (Cir.no.268 Ref 19/15 dated 25.10.2010)
Non Banking Finance Companies Micro Finance Institutions (NBFC-MFI):
RBI has set up a sub-committee under the chairmanship of Sri. Y H Malegam to
study and suggest measures to mitigate the concerns over the functioning of the MFI
registered with RBI as NBFCs. In the above backdrop, RBI allowed set up of NBFCMFI to undertake lending activity provided the minimum net owned funds should be
`200 lakhs for the companies registered in North Eastern Region and `500 lakhs at
other places. These institutes are not allowed to accept deposits. The capital
adequacy ratio shall not be less than 15% of its aggregate risk weighted assets.
Interest on individual loans will not be exceed 26% per annum and calculated on a
reducing balance basis. Processing charges shall not be more than 1% of gross loan
amount. NBFC-MFIs shall ensure code of conduct and systems are in place for
recruitment, training and supervision of staff. Further, the recovery of loans normally
be made at central designated place. Field staff shall be allowed to make recovery at
the place of residence or work of the borrower only if they fail to appear at central
designated place on two or more successive occasions. Bank loans to NBFC-MFIs will
be eligible for priority sector status provided they lend to Qualifying Assets, which
are to satisfy the following conditions.

Loan disbursed by an MFI to a borrower with a rural household annual income

not exceeding `60000/- or urban & semi-urban household income not
exceeding `120000/-.
Loan amount not to exceed `35000/- in the first cycle and `50000/- in
subsequent cycles.
Tenure of the loan not to be less than 24 months for loan amount in excess of
`15000/- without prepayment penalty.
Loan to be extended without collateral.
Loan to be repayable by weekly, fortnightly, monthly installments as per the
choice of the borrower.
Aggregate amount of loan, given for income generation, not to be less than
75% of the total loans given to MFIs.
***
43
Bankers Digest 2013
Micro, Small and Medium Enterprises (MSME)

The Small enterprises contribute nearly 40% of the countrys industrial output and
offer the largest employment after agriculture. Therefore, this sector presents an
opportunity to the country to harness its local competitive advantages for achieving
global dominance. In recognition of these aspects, Government of India enacted the
MSMED Act in the year 2006. In accordance with the provisions of the act, the
activities of MSME are broadly classified into Manufacturing Enterprises and Service
Enterprises.
Manufacturing Enterprises are those which are engaged in manufacturing or
production of goods. These are defined in terms of investment in Plant &
Machinery. Recently, activities such as Seed Processing (for genetic enhancement)
involving collection of germplasm, cleaning, gravity separation, chemical treatment
etc., and Composite unit in Poultry with Chicken (Meat) Processing are treated as
Manufacturing units under MSME.
Service Enterprises are the enterprises engaged in providing or rendering of
services. These are defined in terms of investment in Equipment. Recently activities
such as Medical Transcription Service, Production of TV serials / program, Ripening of
Raw Fruits under controlled conditions and Service Rating Agency are treated as
Service Enterprises under MSME. The modified definitions of Micro, Small and
Medium Enterprises are as under:
No
Category
1
2
3
Micro Enterprise
Small Enterprise
Medium Enterprise
Investment in Plant & Machinery/Equipment (`lakh)

Manufacturing
Service
Up to 25
Up to 10
above 25 & up to 500
Small Enterprises: It includes all loans given to micro and small (manufacturing)
enterprises engaged in manufacture / production / processing / preservation of
goods, and micro and small (service) enterprises engaged in providing or rendering
of services which include small road & water transport operators, small business,
Professional & Self-employed persons and other service enterprises. Indirect finance
to small enterprises shall include finance to any person providing inputs to or
marketing the output of artisans, village and cottage industries, handlooms and cooperatives of producers in this sector.
As per recent RBI guidelines - Loans granted to private retail traders with credit
limits not exceeding `20 lakh and loans to retail traders dealing in essential
commodities (fair price shops) and consumer co-operative stores without any ceiling
in credit limit are eligible for classification under Micro (service) or small (service)
depending on investment in equipment criteria as mentioned above.
Medium Enterprises: Enterprises engaged in manufacture/production/ preservation
of goods and whose investment in plant and machinery should be as per above said
guidelines. Bank`s lending to medium enterprises will not be included for the
purpose of reckoning under priority sector. Interest rates are charged as per rates
prevailing at the time and are subject to change from time to Time. Rate of Interest
is determined as per credit rating system for loans above `10 lakhs as per Internal
Credit Risk Assessment Model. No collateral security or third party guarantee is
insisted for loan up to `5 lakh and for Tiny Sector up to `25 lakh based on the good
track record and financial position of the borrowing unit.
44
Bankers Digest 2013
Banks may fix self set target for growth in advances to SME Sector in order to
achieve a minimum 20% year on year growth in credit to SMEs with the objective to
double the flow of credit to the SME sector within a period of 5 years. Further, banks
should ensure that
40% of the total advances to micro and small enterprises sector should go to
micro (manufacturing) enterprises having investment in plant and machinery
up to `10 Lakh and micro (service) enterprises having investment in
equipment up to `4 Lakh.
20% of the total advances to micro and small enterprises sector should go to
micro (manufacturing) enterprises with investment in plant and machinery
above `10 Lakh & up to `25 lakh, and micro (service) enterprises with
investment in equipment above `4 Lakh & up to `10 Lakh. Thus 60% of MSE
advances should go to the Micro Enterprises.
Further, banks are advised to

Achieve a 20 percent year-on-year growth in credit to Micro and Small

enterprises to ensure enhanced credit flow.
Allocate of 60% of MSE advances to the Micro Enterprises is to be achieved in
stages viz., 50% in the year 2010-11, 55% in the year 2011-12 and 60% in
the year 2012-13.
Achieve minimum 10% growth in number of Micro Enterprise accounts.
Pay focused attention in opening of more MSE branch offices at different MSE
clusters and each lead bank of a district may adopt atleast one MSE cluster.
Banks are mandated not to accept collateral security in case of loans up to `10 lakhs
extended to units in the Micro and Small Enterprises sector and all such loans are to
be covered under Credit Guarantee Scheme. Banks may, on the basis of good track
record and the financial position of the MSE units, increase the limit of dispensation
of collateral requirement for loans up to 25 lakh (with the approval of the appropriate
authority). Women entrepreneurs will be given further interest rebate of 0.50%
irrespective of credit rating and size of the unit. Composite loan (Term Loan and
Working Capital) up to `100 lakhs should be processed under single window concept.
Units undergoing technology up-gradation are eligible for 15% Credit Linked
Capital Subsidy Scheme (CLCSS). Units engaged in food processing are eligible for
subsidy 25% of unit cost with maximum of `50 lakhs and units are located at difficult
areas (J&K, HP, Sikkim, Andaman, NE States and tribal development project areas)
are eligible for 33.33% with maximum of `75 lakhs.
Communication of the bank's decision regarding the credit assistance is done
promptly. As per Ministry of Finance, Government of India, all credit proposals for
additional limit, rescheduling for loan or any other facility should be disposed in 15
days from the date of receipt of application at the branch. With regard to new cases
for sanction, the time norm stipulated is 30 days from the date of receipt of
application at the branch. No loan application is rejected without approval of the next
higher authority.
45
Bankers Digest 2013
Credit Guarantee Fund Scheme for Micro and Small Enterprises

Salient features: It provides guarantee coverage in respect of credit facilities
sanctioned to the accounts up to `100 lakhs to new or existing Micro and Small
enterprises without any collateral security and/or third party guarantees. All Micro
enterprises up to ` 10 lakh (except) Retail Trade are to be covered under this
scheme.
Eligible Accounts: All MSE units classified under Manufacturing, RTO, Business
Enterprises, and Professional & Self Employed are eligible for coverage.
i) Micro Enterprises: Manufacturing units with investment in Plant & machinery up
to `25 lakh and servicing units with investment in equipment up to `10 lakh are
eligible for the coverage.
ii) Small Enterprises: Manufacturing units with investment in Plant & machinery
above `25 lakhs and up to `5 crore and servicing units with investment in equipment
above `10 lakhs and up to `2 crore are covered under this scheme.
The trust shall provide guarantee as under:
Maximum extent of guarantee where credit facility
is to `5
Up
Above `5 & up Above `50 to `100
lakhs
to `50 lakhs
lakhs
85% of
`37.50 lakhs plus 50%
75% of amount
amount
of amount in default
default or
default or
above `50 lakhs subject
subject to
subject to
to overall ceiling of
maximum of maximum of
`62.50 lakhs
`37.50 lakhs
`4.25 lakhs
Category
MSME
Women Entrepreneurs
/ Units located in NE
region (Other than
credit facility up to `5
lakh
to
micro
enterprises)
80% of the amount in default

subject to maximum of `40
lakhs
Others
75% of the amount in default

subject to maximum of `37.50
lakhs
`40 lakhs plus 50% of

amount in default above
`50 lakhs subject to
overall ceiling of `65
lakhs.
`37.50 lakhs plus 50%
of amount in default
above `50 lakhs subject
to overall ceiling of
`62.50 lakhs
The composite all-in Guarantee Fee rates are as under:
Credit Facility
Up to `5 lakh
Above `5 lakh & up to `100 lakh
Annual Guarantee fee (% p.a.)

Women, Micro Enterprises
Others
and units in NE region
0.75%
1.00%
0.85%
1.00%
The lending institution may invoke the guarantee in respect of credit facility within a
maximum period of two years from the date of NPA. The initiation of legal
proceedings as a pre-condition for invoking of guarantees shall be waived for credit
facilities upto `50000/-. The trust shall pay 75% of the guaranteed amount on
preferring of eligible claim within 30 days. The trust shall pay interest at prevailing
Bank Rate to lending institute for the period of delay beyond 30 days.
46
Bankers Digest 2013
Model Educational Loan Scheme (IBA)

Education is central to the human resources development and empowerment in any
country. Knowledge and information would be the driving force for economic growth
in the coming years. The current rate of economic growth of the country demands
technically and professionally trained man power in large numbers. Though
government intends to provide education to all through public funding, it is not
feasible in view budgetary constraints. At the same time the cost of education has
been going up in recent times and it has become financial burden to the parents of
the students. Hence, there is a clear case for institutional funding in this area. As the
focus is on development of human capital, repayment of the loan is expected to
come from future earnings of the student after completion of education. Hence the
assessment of the loan will be based on employability and earning potential of the
student upon completion of the course and not the parental income/family wealth.
Eligibility Criteria: The student should be an Indian National and should have
secured admission to a higher education course in recognized institutions in India or
Abroad through Entrance Test/Merit Based Selection process. However, entrance test
or selection purely based on marks obtained in qualifying examination may not be
the criterion for admission to some of the post graduate courses or research
programs. In such cases, banks will have to adopt appropriate criteria based on
employability and reputation of the institution concerned.
Minimum Age: There is no specific restriction with regard to the age of the student
to be eligible for education loan. However, if the student was a minor while the
parent executed documents for the loan, the bank will obtain a letter of ratification
from him/her upon attaining majority.
Courses Eligible: Approved courses leading to graduate/post graduate degree and
PG diplomas conducted by recognized colleges/universities recognized by UGC/Govt./
AICTE / AIBMS / ICMR etc; Courses like ICWA, CA, CFA etc; Courses conducted by
IIMs, IITs, IISc, XLRI. NIFT, NID etc; Regular Degree/Diploma courses like
Aeronautical, pilot training, shipping etc., approved by Director General of Civil
Aviation/Shipping, if the course is pursued in India. Approved courses offered in
India by reputed foreign universities. However, banks may approve other job
oriented courses leading to technical/professional degrees, post graduate degrees /
diplomas offered by recognized institutions under this scheme. Courses other than
the above offered by reputed institutions may also be considered on the basis of
employability.
Expenses considered for loan: Tuition, Hostel, Library, Laboratory and
Examination fee; Caution deposit, Building fund/refundable deposit; Purchase of
books, uniforms, equipments & instruments including computer/Laptop and study
tour & project work costs etc., are to be considered as cost of education for the
purpose of loan. It is to be noted that reasonable lodging and boarding charges will
be considered in case the student chooses / is required to opt for outside
accommodation. In case of studies abroad, Travel expenses/passage money and
Insurance charges should also be considered as cost of education. However, the
maximum expenses other than Tuition fee may be capped at 20% of the total tuition
fees payable for completion of the course. The scholarship / assistantship, if any, is
to be excluded from the total cost while arriving eligible loan amount.
Quantum of finance: Banks may consider sanction of maximum up to `10 lakh for
studies in India and `20 lakh for studies abroad. It may also be noted that even
loans in excess of `10 lakhs qualify for interest subsidy under Central Sector Interest
Subsidy Scheme for loans up to `10 lakhs.
47
Bankers Digest 2013
Top up loans: Banks may consider top up loans to students pursuing further studies
within the overall eligibility limit, if such further studies are commenced during the
moratorium period of the first loan. The repayment of the loan will commence after
the completion of the second course and further moratorium period, as provided
under the scheme.
Margin: No margin is required to bring in by the borrower for the loans up to 4 lakh
and for loans above 4 lakh, 5% margin is stipulated. In case of studies abroad the
margin stipulated is 15%. Margin may be brought-in on year-to-year basis as and
when disbursements are made on a pro-rata basis.
Security: The loan documents should be executed by the student and the parent /
guardian as joint-borrower.
Loan
Up to `4 lakhs
Security / Co-obligation
Parent as Joint borrower. In case of a married person, joint
borrower can be spouse or the parent(s)/parents-in-law.
Above `4 lakh & up to

`7.5 lakh
Beside the parent as joint borrower, suitable third part

guarantee.
Parent/spouse as joint borrower and suitable tangible
Above `7.5 lakh
collateral security
The security can be in the form of land/ building/ Govt. securities/ Public Sector
Bonds/Units of UTI, NSC, KVP, life policy, gold, and shares/mutual fund
units/debentures, bank deposit in the name of student / parent / guardian / any
other third party or any other tangible security acceptable to the bank with suitable
margin. Wherever the land/ building is already mortgaged, the unencumbered
portion can be
taken as security on second charge basis provided it covers the
required loan amount.
Rate of Interest: Interest to be charged at rates linked to the Base rate as decided
by individual banks. The loan attracts simple interest during the study period.
Servicing of interest during study period and the moratorium period till
commencement of repayment is optional for students. Accrued interest will be added
to the principal amount borrowed while fixing EMI for repayment. 1% interest
concession may be provided by the bank, if interest is serviced during the study
period and
subsequent moratorium period prior to commencement of
repayment. No processing / upfront charges may be levied on loans sanctioned
under the scheme.
Repayment: Repayment of the loan starts after one year from the date of
completion of course or 6 months after getting the job whichever is earlier. The
repayment should be in Equated Monthly Installments (EMI) and maximum
repayment period allowed for loans up to `7.5 lakhs & above `7.5 lakhs 10 & 15
years respectively. If the student is not able to complete the course within the
scheduled time, extension of time for completion of course may be permitted for a
maximum period of 2 years.
Educational loans can be sanctioned either at the Bank branch near to the residents
of the parents or to the educational institution. Existence of an earlier education loan
to the brother(s) and/or sister(s) will not affect the eligibility of another meritorious
student from the same family obtaining education loan as per this scheme from the
bank. Loan applications have to be disposed of in the normal course within a period
of 15 days to one month, but not exceeding the time norms stipulated for disposing
of loan applications under priority sector lending. Branches should not reject any
eligible loan proposal for the reason that the applicants residence does not fall under
service area of the Bank/Branch.
48
Bankers Digest 2013
Housing Loans
In pursuance of National Housing Policy of Central Government, Reserve Bank of
India has been facilitating the flow of credit to housing sector. Since housing has
emerged as one of the sectors attracting a large quantum of bank finance, the
current focus of RBI's regulation is to ensure orderly growth of housing loan
portfolios of banks. Banks with their vast branch network throughout the length and
breadth of the country occupy a very strategic position in the financial system and
were required to play an important role in providing credit to the housing sector in
consonance with the National Housing Policy.
Eligibility Criteria: The following are the eligible categories to avail housing loans
under Direct Housing Finance:

Bank finance extended to a person who already owns a house in town/village

where he resides, for buying/constructing a second house in the same or
other town/village for the purpose of self occupation.
Bank finance extended for purchase of a house by a borrower who proposes
to let it out on rental basis on account of his posting outside the headquarters
or because he has been provided accommodation by his employer.
Bank finance extended to a person who proposes to buy an old house where
he is presently residing as a tenant.
Bank finance granted only for purchase of a plot, provided a declaration is
obtained from the borrower that he intends to construct a house on the said
plot, with the help of bank finance or otherwise, within such period as may be
laid down by the banks themselves.
Banks may consider requests for additional finance within the overall ceiling
for carrying out alterations/additions/repairs to the house/flat already
financed by them.
In the case of individuals who might have raised funds for construction/
acquisition of accommodation from other sources and need supplementary
finance, banks may extend such finance after obtaining paripassu or second
mortgage charge over the property mortgaged in favour of other lenders
and/or against such other security, as they may deem appropriate.
Age Criteria The age of the borrower should be between 21 to 65 years at the
time sanction of the loan.
Assessment of Loan The quantum of loan will be arrived based on the gross &
net income of the borrower and other factors like spouse income, assets, liabilities,
stability of income etc. Further, the loan amount also depends on the tenure of the
loan and interest rate of the loan as these variables determine outflow which in turn
depends on disposal income of the borrower/spouse.
Loan To Value (LTV) Ratio - In order to prevent excessive leveraging, the LTV
ratio in respect of housing loans should not exceed 80 per cent. However, for small
value housing loans i.e. housing loans up to Rs.25 lakh (which get categorized as
priority sector advances), the LTV ratio should not exceed 90 per cent. In order to
ensure proper LTV, banks should not include charges such as stamp duty,
registration/document charges in the cost of the asset.
Interest Rate It is the discretion of the banks to levy their own interest rates.
Gestation Period Normally, the gestation period allowed is 12 to 18 months.
However, it can be extended maximum period of 30 months from the date of first
disbursement.
49
Bankers Digest 2013
Repayment The maximum period allowed for repayment of home loan is 30 years
or up to the age of 75 years of the borrower whichever is earlier.
Equated Monthly Installment - Normally, banks fix EMI which covers Principal as
well as Interest. Some banks offer Floating and Fixed Interest Rates and it is up to
the borrower to choose. Under Floating Interest, the interest rate is subject to
changes from time to time by the Bank with reference to Bench Mark rate (Base
Rate) where as Fixed Interest Rate is a rate which continues to be the same
during the entire tenor of the loan. Banks are also offering flexible repayment
options viz., Step-up and Step-down, depending on the future cash flows of the
borrower. Under Step-up option, the lower EMI in the initial years and EMI increases
as years roll by. It is convenient for borrowers who are in the beginning of their
careers. In case of Step-down option, EMI is high initially and decreases in the
subsequent years, which is useful who are close to their retirement.
Other conditions:
i) In cases where the applicant owns a plot/land and approaches the banks/FIs for a
credit facility to construct a house, a copy of the sanctioned plan by competent
authority in the name of a person applying for such credit facility must be obtained
by the Banks/FIs before sanctioning the home loan.
ii) An affidavit-cum-undertaking must be obtained from the person applying for such
credit facility that he shall not violate the sanctioned plan, construction shall be
strictly as per the sanctioned plan and it shall be the sole responsibility of the
executants to obtain completion certificate within 3 months of completion of
construction, failing which the bank shall have the power and the authority to recall
the entire loan with interest, costs and other usual bank charges.
iii) An Architect appointed by the bank must also certify at various stages of
construction of building that the construction of the building is strictly as per
sanctioned plan and shall also certify at a particular point of time that the completion
certificate of the building issued by the competent authority has been obtained.
iv) In cases where the applicant approaches the bank/FIs for a credit facility to
purchase the built up house/flat, it should be mandatory for him to declare by way of
an affidavit-cum-undertaking that the built up property has been constructed as per
the sanctioned plan and/or building bye-laws and as far as possible has a completion
certificate also.
v) An Architect appointed by the bank must also certify before disbursement of the
loan that the built up property is strictly as per sanctioned plan and/or building byelaws.
vi) No loan should be given in respect of those properties which fall in the category
of unauthorized colonies unless and until they have been regularized and
development and other charges paid.
vii) No loan should also be given in respect of properties meant for residential use
but which the applicant intends to use for commercial purposes and declares so while
applying for loan.
***
50
Bankers Digest 2013
Interest Subvention Schemes

1. Short Term Agricultural Credit: In order to provide short term credit (Crop
Loans, PAGCC, Kisan Vikas Cards, Rythu Mitra Groups, Joint Liability Groups,
Agricultural Gold Loans and Working Capital Loans financed to Fisheries) to the
farmers at reasonable interest rate, Government of India announced a scheme of
Interest Subvention in the year 2006. Under this, farmer receives short term credit
at 7% p.a. from the date of disbursement to the end of the respective season with
an upper limit of `3 lakh on the amount. However, Agricultural Medium Term Loans
are not covered under this scheme. Government will provide Interest Subvention to
the banks viz., PSBs, RRBs, and Farmers Service Co-operative Societies, on the
amounts financed to farmers (short term) at the following rates:
Banks lending to short term agricultural credit are eligible to claim 2% Interest
Subvention from Government of India for loans disbursed in year 2011-12. Further,
farmers are eligible for another 3% interest subvention who repays the loan
promptly. This additional subvention is available to Public Sector Banks on the
condition that the effective rate of interest on short term production credit up to `3
lakh for such farmers will be 4% p.a. Branches are required to submit claim halfyearly (September & March) for reimbursement of interest subvention amount from
RBI. For crop loans up to one lakh disbursed during Rabi 2011-12 in AP State
attracts zero interest rate as state government is reimbursing the entire interest to
the banks for prompt payment.
2. Export Credit: Government is providing interest subvention at 2% p.a. to all
Scheduled Commercial Banks in respect of rupee export credit (Pre & Post shipment)
extended to employment oriented export sectors such as Handicrafts, Handlooms,
Carpets, Readymade garments, processed agriculture products, Sports goods, Toys
and Small & Medium Enterprises (SME). However, the interest rate charged by the
banks on export credit should not fall below 7% p.a. after taking the said Interest
Subvention in to account. The above subvention is valid up to 31.03.2013. Branches
should submit the interest claim to Head Office every quarter along with External
Auditor Certificate.
3. Micro & Small Enterprises: Paavala Vaddi Scheme was introduced for the
benefit of Micro & Small Enterprises set up in AP State except in the Muncipal
Corporation limits of Hyderabad, Vijayawada and Visakhapatnam. The scheme is
applicable to the term loans availed on fixed capital investment by the eligible new
Micro and Small Enterprises on or after 01.04.2008. More than 75% of the plant and
machinery should be new and not second hand. Under the scheme, interest charged
over and above 3% p.a. (i.e. 10% - 3% = 7%) will be reimbursed to the group at
half yearly intervals. However, the maximum reimbursement is restricted to 9% p.a.
The benefit is available for a period of 5 years i.e. up to the first half of 6th year or till
the closure of term loan, whichever is earlier. However, this benefit is available to
only those accounts, which in regular in payment of principal and interest. It is
applicable to one-time payment accounts also.
4. Housing Loans: The objective of the scheme is to provide interest subsidy on
housing loan as a measure to generate additional demand for credit and to improve
affordability of housing to eligible borrowers in the middle and lower income groups.
The scheme is expected to provide relief to prospective home owners and improve
home ownership in the specified target segment. Interest subvention of 1% will be
available on housing loans up to `15 lakh to individuals for construction/purchase of
a new house or extension of an existing house, provided the cost of construction /
price of the new house/extension does not exceed `25 lakh. All loans sanctioned and
disbursed on or after 01.10.2009 are eligible for the said interest subsidy. It will
applicable to the first 12 installments of all such loans sanctioned and disbursed
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Bankers Digest 2013
during the currency of the scheme and will be computed for 12 months on the
disbursed amount. The subsidy amount will be adjusted upfront in the principal
outstanding, irrespective whether the loan is on fixed or floating rate basis. The
interest subvention is applicable for the eligible borrowers for one housing unit only.
The scheme will be implemented through Scheduled Commercial Banks. However,
Non Resident Indians for construction of farm houses and staff members of the
banks are not eligible for interest subsidy under this scheme. The scheme will remain
in force up to 31.03.2013.
5. Educational Loans Interest Subsidy: India is one of the few countries having
large pool of young people, which is an opportunity to the country provided these
Human Assets are converted into Knowledge Assets. Providing proper education to
the students is a prerequisite to achieve the desired goal. The poor financial
background of the students is one of the major constraints for the students aspiring
for higher studies. In the recent budget, it is envisaged to ensure
technical/professional education to all the deserving students by providing required
financial support by way of Interest subsidy.
In the above backdrop, Government of India has launched a scheme Central
Scheme to provide Interest Subsidy (CSIS) to provide interest subsidy during the
period of moratorium i.e. course period plus one year or six months after getting job,
whichever is earlier, on loans taken by students belonging to Economically Weaker
Sections (EWS) from scheduled banks under Educational Loan scheme of the
Indian Banks Association, for pursuing any of the approved course of studies in
technical and professional streams, from recognized institution in India.
The benefits of the scheme would be applicable to those students belonging to EWS
with annual gross parental/family income upper limit of `4.5 lakhs per year from all
sources. The interest subsidy shall be available to the eligible students only once,
either for the first graduate degree course or post graduate degree/diplomas in
India. Interest subsidy shall however be admissible for integrated courses
(graduation plus post graduate). The scheme shall be applicable from the academic
year 2009-10 starting 01.04.2009. Any amount disbursed before the academic year
2009-10 would not be considered for Interest Subsidy under the said scheme.
Canara Bank is the Nodal Bank for the scheme for release of interest subsidy to the
banks on yearly/half-yearly basis as decided by the Government of India. In order to
claim the interest subsidy from Nodal agency, bank branches are required to obtain
income proof certificate from appropriate authority as decided by state government
and agreement with borrower/parents.
6. SHG Loans: AP State Government introduced Vaddi Leni Runalu scheme with
effective from 01.01.2012 for all repayments made after that date for the
outstanding SHG Bank loans, including any fresh loans given thereafter. The interest
incentive will be available only to those accounts who repay the loans regularly. The
incentive will be released directly to the credit of SHG account once in Half-year.
***
52
Bankers Digest 2013
Ratio Analysis
Financial statements and their analysis: The statement which provides us the
financial position of a Balance Sheet are called Finance Statements, which includes
- Trading Account (in case of Manufacturing concerns), Profit & Loss Account,
Balance Sheet, Cash Flow Statement and Funds Flow Statement. The analysis of
Balance Sheet is a process of bringing down the difficult matter into a simple and
easily understandable one. To have a clear understanding of the financial position of
the Business concern, at least three years financial statements are to be ascertained.
They provide us treasure of information. Balance Sheet of a business concern shows
the strength of the concern on a given date but not reveal the current state of affairs
of the concerns. Balance Sheet is having certain limitations, because it does not
disclose the critical factors, such as Managerial Efficiency, Technical competence,
Marketing capabilities and Competition in the market.
Ratio means a comparison of two items which are having cause and relationship.
Ratios can be expressed in percentage or in number of times. Depending upon the
nature, the ratios are broadly classified in to four categories viz., Liquidity Ratios,
Leverage Or Solvency Ratios, Activity Ratios and Profitability Ratios.
I. LIQUIDITY RATIOS: These Ratios helps to find out the ability of the business
concern to pay the short term liability of its liquidity. Any adverse position in liquidity
leads to sudden fall of the unit.
i) Current Ratio: Current Ratio denotes the capacity of the business concern to
meet its current obligation out of the realisable value of the Current Assets. Current
Ratio = Current Assets / Current Liabilities. Term Loan installments falling due for
payment in next 12 months are to be taken as Term Liability for the purpose of
calculation of Current Ratio /MPBF. Inter-corporate deposits are to be treated as
Non-Current Assets. Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan
Policy guidelines is 1.33:1 for the limits enjoying above `6.00 crores and 1.15:1 for
the business concerns availing limits of below `6.00 crores. Any deviation below the
required ratio requires ratification of Higher Authority.
ii) Quick Ratio Or Acid Test Ratio: This ratio is a comparision of Quick Assets to
Current Liabilities. Quick Assets mean the assets which have instant liquidity of the
business concern. Though the Inventory and Prepaid expenses are part of Current
Assets, it may be difficult to sell and realize the inventory. Hence, Inventory and
Prepaid expenses are to be excluded for arriving the Quick Asset Ratio.
Current Assets (Inventory+Prepaid Exp)
Quick Ratio or Acid Test Ratio = ---------------------------------------------Current Liabilities
Ideal Quick Ratio is 1:1. Current Ratio is always to be read along with Quick Ratio. A
fall in the Quick Ratio in comparison to the Current Ratio indicates high inventory
holdings.
II. LEVERAGE AND SOLVENCY RATIOS: These Ratios helps to find out the Long
Term Financial stability of the business concern
i) Debt Equity Ratio: Long Term Debt / Equity - Here, Equity refers Tangible Net
worth. The Ideal ratio is 2:1 and the higher may also be considered as safe.
ii) Debt Service Coverage Ratio: It helps to know the capacity of the firm to
repay the Long Term Loan Instalment and Interest. Ideal DSCR is 2:1. The higher
the DSCR, we may fix the lower repayment period. However, banks may also
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Bankers Digest 2013
consider DSCR 1.20:1 where fixed income generation is assured, such as Rent
Receivables etc.
Net Profit After Tax + Depreciation +Int. on TL
DSCR = ------------------------------------------------------------Int. on TL + Instalment on TL
iii) Fixed Assets Coverage Ratio (FACR): This ratio indicates the extent of Fixed
assets met out of long term borrowed funds. Ideal Ratio is 2:1
Net Block
FACR = --------------------------- (Net Block means Total Assets Depreciation)
Long Term Debt
iv) Interest Coverage Ratio:
Interest Coverage Ratio
EBIDT
= --------------Interest
Where EBIDT is Earning Before Interest, Depreciation and Tax. This ratio indicates
the interest servicing capacity of the unit. Higher the ratio has probability of nonservicing of interest and hence avoidance of slippage of asset.
III. ACTIVITY RATIOS:
i) Inventory Turnover Ratio: Inventory constitutes raw material, work in process,
finished goods etc. The ratio is arrived by dividing Inventory by average monthly Net
sales to arrive at inventory levels in number of months. Lower the ratio, the faster
the movement of inventories and Higher the ratio slower the movement of
inventories. It also indicates the time taken to replenish the inventories. Separate
parameters are laid down for fabrication units & seasonal industries (maintaining
peak level inventories as at March) where operating cycle is longer compared to
other businesses and others
Net Sales =
Inventory x (RM+WIP+FG) x 12 (OR ) Cost of Goods Sold

Average Stock ((Opening Stock+Closing stock)/2)
ii) Debtors Velocity Ratio:
Debtors
------------ x period
Credit sales
Lower the collection period indicates efficiency in realization of receivables and viceversa.
iii) Creditors Velocity Ratio:
Trade Creditors
---------------------- x
Credit Purchase
period
Higher velocity denotes that the company is enjoying credit from its suppliers and it
has bearing on Maximum Permissible Bank Finance (MPBF)
iv) Assets Turnover Ratio:
Net Sales
ASSET TURNOVER RATIO=----------------------------Total Operating Assets
Total Operating Assets= Total Assets Intangible Assets. Higher the ratio indicates
favorable situation of optimum utilization of all the fixed assets.
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Bankers Digest 2013
IV. PROFITABILITY RATIOS:

i) Gross Profit Ratio -> Gross Profit/Net Sales*100 - Gross Profit Ratio
indicates the manufacturing efficiency and Pricing policy of the concern. Higher
percentage indicates higher sales volume, better pricing of the product or lesser cost
of production.
ii) Net Profit Ratio:
Net Profit After Tax

----------------------------------- X 100
Net Sales
A decline trend is a pointer to some unhealthy development unless the company had
made usurious profits in the past and has consciously decided to reduce its profits by
lowering the prices of its product.
iii) Return on Equity:
Net Profit After Tax

----------------------------------Tangible Networth
X 100
Working Capital Assessment

i) Turnover Method: (for WC limits up to & inclusive of `6.00 Crore)
A. Accepted Projected Sales Turnover
B. 25% of Sales Turnover
C. Margin @ 5 % of Sales Turnover
D. Actual NWC available as per latest Audited Balance Sheet
E. B-C
F. B-D
G. M.P.B.F = E or F, whichever is less.
ii) Inventory Method - For WC limits up to & inclusive of `6.00 Crore
A.
B.
C.
D.
E.
F.
G.
H.

Total Current Assets

Current Liabilities (other than Bank Borrowings)
Working Capital Gap
=A-B
Margin @ 13% of Projected Current Assets
Actual NWC available as per latest Audited Balance Sheet
C-D
C-E
M.P.B.F = F or G, whichever is less.
Maximum Working Capital credit limit up to which Turn Over method can be
extended is `6 Crores. Where the limits of above `6.00 Crore, the margin is to be
taken as 25% projected current assets. If actual NWC is less than required
margin, the borrower has to bring in the short fall.
The minimum acceptable Current Ratio for working capital credit facility up to `6
crore & above `6 crore is 1.15 & 1.33 respectively.
Maximum acceptable level of Total Debt- Equity Ratio is 6.
Maximum permissible Gearing Ratio while assessing the eligibility for nonfunded limits is 10.
Standard average DSCR specified for all Term Loans is 1.50 to 2.00. However,
in case of assured source of income, it can be taken as 1.20. Lower DSCR can be
accepted for Rural Godowns.
***
55
Bankers Digest 2013
Non Fund Business

Bank Guarantee: As a part of Banking Business, Bank Guarantee (BG) Limits are
sanctioned and guarantees are issued on behalf of our customers for various
purposes. The guarantees comprise both performance guarantees and Financial
Guarantees depending on the purpose i.e. for EMD, Mobilization advance,
Procurement of Material etc. Though, BG facility is a Non-fund Facility, it is a firm
commitment on the part of the Bank to meet the obligation in case of invocation of
BG. Hence, monitoring of Bank Guarantee portfolio has attained utmost importance.
The purpose of the guarantee is to be examined and it is to be spelt out clearly if it is
Performance Guarantee or Financial Guarantee. Due diligence of client shall be done,
regarding their experience in that line of activity, their rating/grading by the
departments, where they are registered. In case of Performance Guarantees, banks
shall exercise due caution to satisfy that the customer has the necessary experience,
capacity and means to perform the obligations under the contract and is not likely to
commit default. The Financial Indicators / Ratios as per Banks Loan Policy guidelines
are to be satisfactory. The position of receivables and delays if any, are to be
examined critically, to understand the payments position of that particular activity.
The financial position of counter party, type of Project, value of Project, likely date of
completion of Project as per agreement are also to be examined. The Maturity
period, Security Position, Margin etc. are also to be as per Policy prescriptions and
are important to take a view on charging BG Commissions.
Branches shall use Model Form of Bank Guarantee Bond, while issuing Bank
Guarantees in favour of Central Govt. Departments/Public Sector Undertakings. Any
deviation is to be approved by Zonal Office. It is essential to have the information
relating to each contract/project, for which BG has been issued, to know the present
stage of work/project and to assess the risk of invocation and to exercise proper
control on the performance of the Borrower. It is to be ensured that the operating
accounts of borrowers enjoying BG facilities route all operations through our Bank
accounts. To safeguard the interest of the bank, Branches need to follow up with the
Borrowers and obtain information and analyse the same to notice the present stage
of work/project, position of Receivables, Litigations/Problems if any leading to
temporary cessation of work etc.
Letter of Credit: A Letter of Credit is an arrangement by means of which a Bank
(Issuing Bank) acting at the request of a customer (Applicant), undertakes to pay to
a third party (Beneficiary) a predetermined amount by a given date according to
agreed stipulations and against presentation of stipulated documents. The
documentary Credit are akin to Bank Guarantees except that normally Bank
Guarantees are issued on behalf of Banks clients to cover situations of their non
performance whereas, documentary credits are issued on behalf of clients to cover
situation of performance. However, there are certain documentary credits like
standby Letter of Credit which are issued to cover the situations of non performance.
All documentary credits have to be issued by Banks subject to rules of Uniform
Customs and Practice for Documentary Credits (UCPDC). It is a set of standard rules
governing LCs and their implications and practical effects on handling credits in
various capacities must be possessed by all bankers. A documentary credit has the
seven parties viz., Applicant (Opener), Issuing Bank (Opening of LC Bank),
Beneficiary, Advising Bank (advises the credit to beneficiary), Confirming Bank Bank which adds guarantee to the credit opened by another Bank thereby
undertaking the responsibility of payment / negotiation / acceptance under the credit
in addition to Issuing Bank), Nominated Bank - Bank which is nominated by Issuing
Bank to pay/to accept draft or to negotiate, Reimbursing Bank - Bank which is
authorized by the Issuing Bank to pay to honour the reimbursement claim in
settlement of negotiation / acceptance / payment lodged with it by the
paying/negotiating or accepting Bank. The various types of LCs are as under:
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Bankers Digest 2013
i) Revocable Letter of Credit is a credit which can be revoked or cancelled or

amended by the Bank issuing the credit, without notice to the beneficiary. If a credit
does not indicate specifically it is a revocable credit the credit will be deemed as
irrevocable in terms of provisions of UCPDC terms.
ii) Irrevocable Letter of credit is a firm undertaking on the part of the Issuing
Bank and cannot be cancelled or amended without the consent of the parties to letter
of credit, particularly the beneficiary.
iii) Payment Credit is a sight credit which will be paid at sight basis against
presentation of requisite documents as per LC terms to the designated paying Bank.
iv) Deferred Payment Credit is a usance credit where payment will be made by
designated Bank on respective due dates determined in accordance with stipulations
of the credit without the drawing of drafts.
v) Acceptance Credit is similar to deferred credit except for the fact that in this
credit drawing of a usance draft is a must.
vi) Negotiation Credit can be a sight or a usance credit. A draft is usually drawn in
negotiation credit. Under this, the negotiation can be restricted to a specific Bank or
it may allow free negotiation whereby any Bank who is willing to negotiate can do so.
However, the responsibility of the issuing Bank is to pay and it cannot say that it is
of the negotiating Bank.
vii) Confirmed Letter of Credit is a letter of credit to which another Bank (Bank
other than Issuing Bank) has added its confirmation or guarantee. Under this, the
beneficiary will have the firm undertaking of not only the Bank issuing the LC, but
also of another Bank. Confirmation can be added only to irrevocable and not
revocable Credits.
viii) Revolving Credit is one where, under the terms and conditions of the credit,
the amount is revived or reinstated without requiring specific amendment to the
credit. The basic principle of a revolving credit is that after a drawing is made, the
credit reverts to its original amount for re-use by beneficiary. There are two types of
revolving credit viz., credit gets reinstated immediately after a drawing is made and
credit reverts to original amount only after it is confirmed by the Issuing Bank.
ix) Installment Credit calls for full value of goods to be shipped but stipulates that
the shipment be made in specific quantities at stated periods or intervals.
x) Transit Credit When the issuing Bank has no correspondent relations in
beneficiary country the services of a Bank in third country would be utilized. This
type of LC may also be opened by small countries where credits may not be readily
acceptable in another country.
xi) Reimbursement Credit - Generally credits opened are denominated in the
currency of the applicant or beneficiary. But when a credit is opened in the currency
of a third country, it is referred to as reimbursement credit.
xii) Transferable Credit Credit which can be transferred by the original
beneficiary in favour of second or several second beneficiaries. The purpose of these
credits is that the first beneficiary who is a middleman can earn his commission and
can hide the name of supplier.
xiii) Back to Back Credit / Countervailing credit - Under this the credit is
opened with security of another credit. Thus, it is basically a credit opened by
middlemen in favour of the actual manufacturer/supplier.
xiv) Red Clause Credit - it contains a clause providing for payment in advance for
purchasing raw materials, etc.
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Bankers Digest 2013
xv) Anticipatory Credit - Under this payment is made to beneficiary at preshipment stage in anticipation of his actual shipment and submission of bills at a
future date. But if no presentation is made the recovery will be made from the
opening Bank.
xvi) Green Clause Credit is an extended version of Red Clause Credit in the sense
that it not only provides for advance towards purchase, processing and packaging
but also for warehousing & insurance charges. Generally money under this credit is
advanced after the goods are put in bonded warehouses etc., up to the period of
shipment.
Other concepts
i) Bill of Lading: It should be in complete set and be clean and should generally be
to order and blank endorsed. It must also specify that the goods have been shipped
on board and whether the freight is prepaid or is payable at destination. The name of
the opening bank and applicant should be indicated in the B/L.
ii) Airway Bill: Airway bills/Air Consignment notes should always be made out to
the order of Issuing Bank duly mentioning the name of the applicant.
iii) Insurance Policy or Certificate: Where the terms of sale are CIF the insurance
is to be arranged by the supplier and they are required to submit insurance policy
along with the documents.
iv) Invoice: Detailed invoices duly signed by the supplier made out in the name of
the applicant should be called for and the invoice should contain full description of
goods, quantity, price, terms of shipment, licence number and LC number and date.
v) Certificate of Origin: Certificate of origin of the goods is to be called for. Method
of payment is determined basing on the country of origin.
vi) Inspection Certificate: Inspection certificate is to be called for from an
independent inspecting agency (name should be stipulated) to ensure quality and
quantity of goods. Inspection certificate from the supplier is not acceptable.
vii) Lloyds Certificate: Shipments should be made only by Conference Vessels,
which are in the approved list of Lloyds Register of Shipping and classified as Lloyds
100 A1 or its equivalent classification. Age of the vessel should not be more than 25
years and it should be seaworthy. Any other documents required by the applicant,
such as weight certificate, packing list, quality certificates should be mentioned in
the application.
LoC/LoU is issued for making payment of Import Bills received either under FLC or
on collection basis for imports made into India in favour of Overseas Bank or
Financial Institution outside India to the extent of US $ 20 million or its equivalent
per transaction. The period of such LoC / LoU / Guarantee has to be co-terminus with
the period of credit, reckoned from the date of shipment. No roll-over/extension will
be permitted beyond the permissible period. The precautions & Conditions for
issuance of LOC/LOU are:
The facility may be considered in cases where there is mismatch between cash
flows to meet the FLC commitment on the due date.
At any point of time the liability under FLC, FIBC and LoC/LoU/Guarantee put
together shall not exceed the sanctioned FLC limit.
The stocks procured under FLC/Letter of Comfort are to be deducted to ensure

Working Capital limits are fully secured by adequate Drawing Power.
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Bankers Digest 2013
Multi currency option is not available to the importer.
In case the import is made on collection basis, branch should ensure strict
compliance of KYC/AML regulations.
Commission to be collected upfront @ 0.50% per quarter or part thereof for the
specified period of liability i.e. actual validity period of LOC / LOU / Guarantee.
Importer is required to pay all-in-cost (with a ceiling over 6 months LIBOR

minus 200 basis points) to the Overseas Bank / FI outside India. All-in-cost
includes arranger fee, upfront fee and management fee.
General Guidelines: LC is to be opened for our own customers known to be

participating in the trade. The importer should have Import Export (IE) code number
allotted by Director General of Foreign Trade. The importer should have adequate
sanctioned limits and/or funds provision for clearance of goods. Exchange control
copy of license to be obtained in case of the item of import falls under negative list.
If the import is freely permissible obtain a declaration from the importer to that
effect. Import LCs is to be advised through our Foreign Correspondents. Date of
dispatch of goods should be after the date of opening of the LC. When the LC is
opened against third party licence, the applicant should hold a proper letter of
authority issued by the import licence holder along with the exchange control copy of
the licence. The description of goods, validity for shipment, country of shipment and
origin are as per the provisions of Policy/Licence etc. Branch is required to obtain
confidential report on the overseas seller at the time of opening of LC in case where
the value of LC is $25000 and above, however, in case of borrowers with credit
rating of A+ the limit is above USD 1 lac. Confidential report is a must in case where
the importer dealings with the branch are less than 1 year irrespective of the value.
LC should be opened only in favour of overseas supplier/manufacturer or shipper of
goods and not in favour of the applicant himself or his nominee. Terms of shipment
such as FOB/C&F/CIF etc are to be clearly mentioned. For C&F and FOB, applicant
should hold insurance cover note/policy in the joint names of the Bank and the
Opener. The policy should cover at least 110% of the CIF value, and is valid for
entire shipment period. Usance period should not exceed 180 days. LC should not be
opened for import of goods from banned countries. LC should be signed by two
officers, where the value of LC is `10000 and above, where it is not issued through
SWIFT. LC should invariably contain a clause that the credit is subject to the
provisions of UCPDC 600 and URR 725.
LC should stipulate a condition that the shipments should be made only by
conference vessels, which are on the approved list of Lloyds or any certificate to
show that the vessel is seaworthy & not more than 25 years old. LC should insist for
an inspection certificate issued by a well known international Inspection Agencies.
Last date of shipment should be within the validity of Licence.
Goods are to be consigned only in the name of LC opening bank and never directly to
the buyer. Similarly Documents of title to goods should be required to be sent only
to the LC opening Bank but not to the importer directly. The origin of the goods is to
be specifically mentioned in the application. No onerous clause is incorporated in the
LC, which is detrimental to the interest of the Bank. Payment to be claimed only
against presentation of full set of documents. Currency in which payment for import
is to be made is in accordance with the permitted methods of payment.
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Bankers Digest 2013
LC Operational Guidelines: LC covering letter should be addressed to the bank

to whom LC is being forwarded and signed by authorized officer of the branch duly
mentioning Full name of the signatory of the letter, His/her Designation, Signature
number/Power of Attorney number allotted by the bank, Authorized Email ID of the
branch and Clearly mentioning that the any information relating to the said Letter of
credit can be obtained by email id as provided in the letter by quoting the LC no and
date. On receipt of LC, advising bank to send e-mail through its authorized mail ID
seeking confirmation from LC opening bank in having issued the said LC. LC opening
bank is required to give confirmation by email on the same email id of the LC
advising bank, through its authorized e-mail ID only. The confirmation should
normally be under the signature of signatories other than those to LCs. Effort may be
made to verify the same through search engines such as google whether the firm
exists, if so its addresses and other information positive or negative against the firm.
Certain information is available on the internet in public domain such as sales tax
defaulter or whether registration with sales tax still valid or not. Information is
available state wise and within the state circle wise. The same may be confirmed by
LC opening and advising banks.
LC discounting/negotiating bank to send confirmation by an email on the authorized
email ID of the LC opening bank informing that the name of the courier, its docket
no and list of documents dispatched. It has been ascertained that all the necessary
details such as name of the beneficiary, date of last shipment, details of goods to be
purchased under LC, name of LC advising bank etc is captured in CBS system while
opening LC. Even all amendments such as amendment in last date of shipment, date
of expiry and even change in usance and the amount of LC are also captured in CBS.
Therefore LC confirmation work can also be centralized within the bank.
Confirmation needs to be sent though the authorized email of the LC opening bank to
the authorized email ID of LC negotiating bank.
The recent development in issuance of Inland Letter of Credit is implementation of
Structured Financial Messaging System (SFMS) with effect from 1st January 2013. It
is aimed at establishing a safe and secure environment in banking industry for
conducting trade finance business and for sending and receiving messages for LC
instruments. This serves as the basic platform for transmitting messages of Inland
Letter of Credits by all banks in India.
Credit Committees: In order to expedite sanction of credit proposals, a committee
approach is introduced for all loans over and above the branch sanctions. The
delegation of lending powers of Branch Heads will continue to exist as per the extant
guidelines. Credit Committees constituted at Zonal level and Head Office level will
consider credit proposals and all credit related matters in respect of proposals falling
under their respective delegated authority in accordance with the respective banks
Loan Policy guidelines. It is expected that this will improve the quality of decision
making also. Committees at Head Office level Credit Approval Committee headed
by CMD, Credit Committee headed by ED/CGM, Credit Committee headed by GM.
Similarly, Zonal level committees are Zonal Level Credit Committee-I headed by
Zonal Manager, Zonal Level Credit Committee-II headed by second level officials at
Zonal Offices. The committees are expected to meet once on a fixed day in a week.
***
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Bankers Digest 2013
Charges
Banks do business with depositors funds. The Banks have to honor their
commitment to return the deposits whenever demanded by the depositors. The
primary source of funds for repayment is the business itself; hence banks take
considerable care to evaluate the profitability and sustainability of the business
financed by them. Despite all care and due diligence some of the businesses could
fail. The cause of failure may be changes in the external environment or
mismanagement. Banks have to ensure that even if the business fails, their funds
are recoverable by invoking the Security offered by the borrowers. Security is an
asset like land, building and machinery, stocks (raw materials / finished goods),
receivables and other securities which are charged to the bank. Charge is the legal
right given by the borrower to the bank to take possession of dispose of the security
in the event of default. The types of charges are:
i) Pledge is a charge where the borrower hands over possession of asset to the
bank. For example loans against gold jewellery, warehouse receipts, key loan etc.
The relationship between borrower and the bank is Pledgor and Pledgee. Under
this, the ownership of the goods remains with the borrower but the possession of the
goods is in the hands of the bank. The bank enjoys Right of Sale in case the loan is
not repaid and the bank can sell the pledged goods after giving adequate notice of
sale to the borrower. It is the responsibility of the bank to take as much care of the
goods pledged as a man of ordinary prudence would under similar circumstances.
When the loan is fully paid, it is the responsibility of the bank to handover the
possession of the goods back to the borrower.
ii) Hypothecation Normally banks lend funds to the borrowers to acquire raw
material / assets to undertake their business activities and these assets continues to
be in the possession of the borrower. It is as if the borrower holds the asset on
behalf of the Bank. Hypothecation gives the Bank right to take possession and sell
the asset, in case of default. However, bank need to initiate action either under
SARFEASI or Court/DRT to take possession of the asset.
Pledge Vs Hypothecation - Thus, while under pledge the ownership remains with
the borrower but the possession passes on to the bank, under hypothecation, both
ownership and possession remains with the borrower. While under pledge the bank
can sell the asset without going to court, under hypothecation it can be done only
through the legal process. Hypothecation creates floating charge on assets created
out of bank funds. Though hypothecation is the most prevalent form of charge for
bank finance, it is inferior to pledge. To protect their assets, banks need to inspect
the hypothecated assets periodically.
Mortgage While movable assets can be pledged or hypothecated, immovable
assets (land and buildings) can only be mortgaged. It is similar to hypothecation
both ownership and possession remain with the borrower (mortgagor) and the bank
(mortgagee) gets the right to take possession and sell the mortgaged property by of
SARFEASI or legal action. During the subsistence of the mortgage, the borrower
cant sell the mortgaged property without the consent of the bank.
i) Simple Mortgage: A simple mortgage does not involve giving the possession of
the mortgagor's property to the mortgagee. It is under mutual agreement that in
case of non-payment by the mortgagee to the mortgagor within the specified time,
the mortgagee can cause the mortgaged property to be sold in accordance with law
and have the sale proceeds adjusted towards the payment of the mortgage money.
ii) Mortgage by Conditional Sale: This type of mortgage entails the apparent sale
of property by the mortgagor to the mortgagee on a conditional basis, that on
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Bankers Digest 2013
default by mortgagor, the sale shall become absolute and complete. If the mortgagor
repays his loan, the sale shall become null and void.
iii) Usufructuary Mortgage: It is
possession to the lender and gives
from that property as repayment
repayment is complete. There is no
a mortgage, by an express or implied term gives

him rights to accrue the rents or income coming
for interest and mortgage money till the time
time limit for payment of the mortgage money.
iv) English Mortgage: The mortgagor transfers the mortgaged property to the
mortgagee in entirety. However there is a condition that on complete repayment of
the repayment money, he will re-transfer the property back to himself.
v) Anomalous Mortgage: A mortgage that does not fall under the purview of any
of the mortgage types is called an anomalous mortgage.
vi) Conditions attached with mortgage: While mortgaging property, only legal
rights are transferred to the mortgagee but not the possession. An instrument of
mortgage deed is mandatory. On sale of a mortgaged property, the mortgage flows
along with the property.
Assignment of Debt While tangible assets are pledged or hypothecated or
mortgaged, actionable claims are charged to a lender by executing a deed of
assignment. Actionable claims cover debts, receivables, subsidy or duty drawback
receivable from Government, amount receivable under Insurance Policy, valid
contract like guarantee or indemnity. The person who assigns the debt is called the
assignor and the person in whose favor the debt is assigned is called assignee. It is
similar to hypothecation of a movable asset. The ownership and possession, in terms
of the right to recover the debt, remain with the borrower. There are two types of
assignments viz., Legal assignment and equitable assignment. Legal assignment is
done by the assignor executing a deed of assignment. For example Granting loan
against LIC policy. Under equitable assignment, the assignor executes an irrevocable
power of attorney in favor of the bank to collect payment. Advances against Supply
Bills falls under this category.
Lien It means the right to hold anothers property till his debt is repaid. Section
171 of the Indian Contract Act 1872 confers the right of general lien on bankers. In
the absence of any specific document or charge, Banks can exercise the right of lien
on any asset of the borrower which has come into their possession. Thus, bankers
line is considered as an implied pledge. Bank can recover the dues by selling the
asset only after giving the notice to the owner.
Negative Lien It is an undertaking by the borrower not to create any charge on
his assets without the consent of the bank. It does not confer any right on the bank.
Banker Customer Relationship
Relationship
Service
Bank
Customer
Deposit
Debtor
Creditor
Loan
Creditor
Debtor
Pledge
Pledgee
Pledgor
Cheque/Bill Collection
Agent
Principal
DD/NEFT/RTGS/ECS
Fiduciary Agent
Principal
Safe Deposit Locker
Lessor
Lessee
Advisory services
Advisor
Recipient
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Bankers Digest 2013
Consortium / Multiple Banking

Large banks do have the capability to meet the credit needs of most of their business
clients. However, when the amount involved is huge, the bank may ask the borrower
to approach other banks for the part of the credit requirements as they may not wish
to take up the risk of lending the entire amount. Multiple banks may finance the
borrower under two arrangements viz., Consortium arrangement and multiple
banking arrangements.
Consortium of Banks Under this the banks come together and collaborate with
each other in assessing the credit requirements of the borrower duly sharing the
credit facilities as well as sharing securities with Pari Pasu charge. Normally, the
bank which has larger exposure act as leader who conduct meetings, assess the
credit requirements of the borrower and share all the information with member
banks from time to time. However, the decisions taken at the consortium meetings
are not binding on the individual banks and the management of each bank has to
approve in its respective boards.
Multiple Banking Under this, the borrower approaches various banks and avails
credit facilities across banks. Each bank undertakes their own assessment of risk,
decide the mix of credit facilities and stipulate their own terms and conditions. Each
of the banks takes the security and gets the charges registered with the ROC in their
favour. Practically there is no co-ordination between the banks and they compete
with each other to protect their business and interests. This is giving scope to the
borrowers to take undue advantage from the banking system i.e. excess borrowings
and interest concessions. In order to ensure financial discipline RBI issued guidelines
on sharing of information between banks and making the lead bank responsible for
ensuring proper assessment of credit requirements of the borrower so that over
financing can be averted.
Joint Lending Arrangement (JLA) - Under the existing system of Credit Delivery,
credit requirements of large borrowers are being met under Consortium or Multiple
Banking arrangement systems. It is observed that high value borrowers have been
availing credit limits through Multiple Banking over the years which has led to
dilution of asset quality as well as control on the borrowers. In order to address the
challenges associated with Multiple Lending, Govt. of India has introduced ground
rules governing Joint Lending Arrangements. The scheme shall be applicable to all
lending arrangements, with a single borrower with aggregate credit limits (both fund
and non-fund based) of `150 crore and above involving more than one Public Sector
Bank. Borrowers having multiple banking arrangements below `150 crore may also
be encouraged to come under joint lending arrangement, so that the wholesome
view of the assessment of credit requirement as well as the entire operations of the
customers can be taken by banks.
New Borrowers - Lending under joint arrangement shall be mandatory for Public
Sector Banks for borrowers seeking credit limits of `150 crore and above by way of
term loan, working capital and non-fund based facilities, from multiple banks. The
Bank from which the borrower has sought the maximum credit will be the designated
Lead Bank for the JLA.
Existing Borrowers - In case of borrowers presently enjoying aggregate limits in
excess of `150 crore under multiple banking arrangement the Bank which has
extended the highest credit, or any other Bank as mutually agreed by Member
Banks, would become the leader of the JLA and take initiative for holding the
meeting of all financing banks. In case of borrowers enjoying aggregate credit limits
below `150 crore from more than one bank, where further enhancement would take
the aggregate limits to `150 crore or more, should be considered jointly by the
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Bankers Digest 2013
financing banks concerned and the bank, which takes up the largest share of the
limits, shall be deemed to be the leader of the formalized JLA.
There will be no ceiling on number of banks in a JLA, whether it is obligatory (credit
limits of `150 crore and above from more than one bank) or voluntary (credit limits
below `150 crore from more than one bank) in nature. To ensure meaningful
participation, ideally share of a bank as a member of the JLA should be a least 10%
of the credit limits or `25 crore, whichever is higher, for exposures of `150 crore and
above. For exposures below `150 crore, the minimum share will be 10% of the
exposure. In the cases of existing JLA, if a member-bank is unable to take up its
enhanced share, such enhanced share in full or in part could be reallocated among
the other existing willing members. In case other existing member-banks are also
unable to take up such enhanced share of an existing member-bank, a new bank
willing to take up the enhanced share may be inducted into the JLA.
An existing member-bank may be permitted to withdraw from the JLA after two
years provided other existing member-banks and/or a new bank is willing to take its
share by joining the JLA. In case, where the other existing member-banks or a new
bank are unwilling to take over the entire outstanding of an existing member
desirous of moving out of the JLA after the expiry of above-mentioned period of two
years, such bank may be permitted to leave the JLA by selling its debt.
It is necessary that lead bank and member bank(s)/institution(s) ensure that formal
joint lending arrangement does not result in delay in credit delivery. The Lead Lender
will make all efforts to tie up the Joint Lending Arrangement within 90 days of taking
a credit decision regarding the proposal. Lead bank will be responsible for
preparation of appraisal note, its circulation, and arrangements for convening
meetings, documentation, etc.
Takeover of accounts from other Banks - Corporates seeking better
facilities/higher credit from Banks often approach different lenders for sanction of
credit facilities. Banks in turn, in search of good business or an opportunity to enter
into a given Business Segment entertain such requests, subject to their Take Over
Norms/Credit Policy. CVC observed that sometimes existing accounts with one bank
already showing signs of sickness are taken over by another bank and such accounts
predictably turn NPA in the bank that had taken over the account within a short time.
In order to arrest unethical and unjustified practice of takeover of accounts,
Department of Financial Services, Govt. of India has issued the following guidelines
to all Banks.
For taking over of any accounts, Banks must put in place, a Board approved
Policy with regard to take over of accounts from another Bank and the same
should be incorporated in the credit policy of the Bank.
Normally, the accounts having ratings above the level approved by the Board
should only be taken over and the concessionary facilities should be extended
only in extremely deserving cases with specific reasons recorded in writing.
In all cases of takeover of accounts, it is necessary to do proper due diligence

including visit to the premises of the customer, if needed, before the account
is considered for takeover by the bank.
The guidelines of joint lending should be strictly applied in all cases where the
borrower seeks to have additional exposure from the bank after taking over
the account.
No cases should be taken over by a Bank from any Bank where any of its ED
or CMD had worked earlier. In case, any such cases need to be taken over,
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Bankers Digest 2013
the proposal will need to be put up to the Board with specific reasons
justifying the need for taking over the accounts.
The operational guidelines with regard to Take over of accounts from other Banks are
as under:
The account should be a Standard Asset with Positive Net Worth & profit
record.
P & C Report is mandatory preferably before sanction, if not, at least before

disbursement.
Obtain credit information in prescribed format, which enables the transferee

bank to be fully aware of irregularities, if any, existing in the borrowers
account with the transferor bank.
Account Statement - The account copies of all the borrowal accounts with
the present bankers/financial institution shall be obtained at least for the last
12 months (revised from the earlier guideline of 6 months) and ensure that
the conduct of the a/c is satisfactory and no adverse features are noticed. In
case of standalone term loans, the copies of the A/c statement of Current
Account or any other operative a/c maintained by the borrower with the
present bankers shall be obtained and studied for the last 12 months and
ensure that the conduct of the account is satisfactory and no adverse features
are noticed.
Existence & Previous profit track record - i) In existence for a minimum

of 3 years with Audited B/S ii) Profit making in preceding 2 years & iii)
Availing Credit facilities with the previous Banker at least for 3 years.
Enhancement on Existing Limits with the present Banker:

i)
Enhancement not beyond 50% ii) No further Enhancement/ Additional Limits
till one year or next ABS, whichever is earlier.
TOL/TNW should not exceed 4:1 in case of takeover accounts.
Group Accounts - In case of having Sister / Associate concerns, Groups

consolidated position has to be examined.
Branches should ensure that

Assessment is to be made independently as per our Loan Policy guidelines.
Administrative clearance is to be obtained from Zonal Office / Head Office.
To take all existing securities and to complete the documentation

expeditiously duly complying with our loan policy guidelines on takeover
norms, compliance, legal audit, permission for release of limit etc.
While other bank is taking over our borrowal account, Branches are advised
to inform adverse features if any, in the conduct of the accounts to the
transferee bank duly obtaining permission from competent authority for
issuing P & C Report.
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Bankers Digest 2013
Credit Management/Delinquency Management

The success of a bank crucially depends how it manages its Asset Portfolio as it is the
major source of income to the Bank. Managing credit risk plays an important role
and its effectiveness lies in an efficient recovery and exit strategy. Timely follow up is
the key to keep the quality of assets intact and enables the banks to recover the
interest/installments in time. To have better control on the assets created out of
borrowings, banks need to watch the functioning of the units by paying frequent
visits and this is to be done to all the units irrespective whether the account is
performing or non-performing one. Thus, Banks should focus attention on:
i) Awareness Calling When the first payment is due, a call is initiated to make
him aware of the date of payment of installments/dues. This can be done either by
the branch or by call centre.
ii) Reminder Call When the demand is not paid, a reminder call may be made
with a request to make payment of the dues and note the response or commitment.
Repeat calls are made if the borrower fails to honor his promises.
iii) Demand Notice In case where there is n response to the calls, a written
communication is issued to the borrower informing him the status of the account and
advising him to pay the dues. Banks can also make use of technology and notice
may be sent through SMS or E-mail.
iv) Field Visits It involves paying visits to borrowers office or residence either by
bank staff or its agents to appraise the position of the dues and need for repayment.
Continuous persuasion definitely yields positive results. These visits also enable the
banks to assess the functioning of the activity and quality of the assets. If they found
that the financial position of the borrower is deteriorated, bank may strike a
compromise deal to recover the dues.
v) Disposal of Assets In the event of failure of the borrower to repay the dues
despite the said initiatives, the bank need to proceed to take possession of the
assets including collateral duly invoking SARFEASI or through approaching Court /
DRT. Repossession and sale of assets can be done by issuing Recall Notice, Prepossession intimation, Letter of peaceful surrender of the asset, Record of inventory
and notarization, Pre-sale notice to borrower and Auction of the asset.
Outsourcing of Banking Services - Of late, banks have been availing the third
party services for recovery of dues. RBI has issued code of conduct to ensure that
the customers are not harassed, their privacy is protected and the banks code of
commitment to customers is not violated. Outsourcing agencies should be appointed
only after proper due diligence with approved Board policy. Banks should publish the
names of outsourcing agencies and the details are to be kept on Banks website for
the benefit of the customers and general public. The agents appointed by the
outsourcing agency are to be provided with authorization letters / identify cards. All
agents should undergo a mandatory 100 hours training conducted by the Indian
Institute of Banking and Finance (IIBF) and get themselves certified before sending
them into field. Customers are to be contacted ordinarily at the place of his choice,
whether office or residence at appropriate time. In appropriate occasions such as
bereavement in the family or such other calamitous occasions are to be avoided for
making calls or visits. Professional and formal language is to be used in all
interactions with customers. Each bank should have a mechanism whereby the
borrowers grievances with regard to the recovery process can be addressed. The
details of the mechanism should also be furnished to the borrower while advising the
details of the recovery agency. The Fair Practices Code for Lenders and the Code of
Commitment to Customers must be adhered to strictly.
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Bankers Digest 2013
Non Performing Assets/Prudential Norms

A strong banking sector is important for flourishing economy. The failure of the
banking sector may have an adverse impact on other sectors. High level of Non
Performing Assets (NPA) suggests low credit quality and warrants high provisioning,
which has direct bearing on profitability and net-worth of banks and value of
shareholders. The increased incidence of NPA is one of the major concerns of Indian
Banks in the recent years. An asset is classified as NPA, if due in the form of
principal and interest are not paid by the borrower for a period of 90 days. If any
advance or credit facility granted by banks to a borrower becomes non-performing,
then the bank will have to treat all the advances/credit facilities granted to that
borrower as non-performing without having any regard to the fact that there may
still exists certain advances / credit facilities having performing status.
Category
Term Loan
Overdraft/
Cash Credit
(OD/CC)
accounts
Agricultural
Loans
Bills
Purchased /
Discounted
Other a/cs
Treated as NPA if:

Interest and/or installment of principal remain overdue for a period
of more than 90 days
1) The account remains out of order i.e., if the liability exceed
limit/DP continuously for 90 days. If liability is within limit/DP, but
there are no credits continuously for 90 days or credits are not
enough to cover interest debited during the same period.
2) Drawings are allowed on DP calculated on stock statement older
than three months continuously for a period of 90 days
3) Regular/adhoc credit limits have not been reviewed/renewed
within 180 days from due date/date of adhoc sanction.
A Loan is granted for short duration crops will be treated as NPA, if
the installment of principal or interest thereon remains overdue for
two crop seasons. A loan granted for long duration crops will be
treated as NPA, if the installment of principal or interest thereon
remains overdue for one crop season. Long duration crops would
be crops with crop season longer than one year and crops which are
not long duration crops would be treated as short duration
crops. The crop season for each crop, which means the period up to
harvesting of the crops raised would be determined by the SLBC in
each state. In respect of agricultural loans which are not linked to
harvesting season, term loans given to non agriculturists,
identifications of NPAs would be done on the same basis as non
agricultural advances i.e. 90 days delinquency norm.
Bill remains overdue for a period of more than 90 days.
Any amount to be received remains overdue > 90 days.
Potential NPA (PNPA): are those accounts showing overdues and irregularities
persist beyond 30 days. These are also known as Border line Performing Assets.
Date of NPA: It is the date on which the overdues or the irregularities cross 90
days or the date on which the account comes under Income Recognition norms.
Overdue: Any amount due to the bank under any credit facility is overdue if it not
paid on the due date fixed by the bank.
Net NPA=Gross NPA (provisions held towards NPAs + Balances in Interest Sundry
Suspense A/c + part payments received in suit filed accounts and kept in Sundry
Suspense.+ claims received from ECGC/CGC and kept in Sundry Suspense a/c).
Income recognition: The policy of income recognition has to be objective and
based on the record of recovery. Income from nonperforming assets (NPA) is not
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Bankers Digest 2013
recognized on accrual basis but is booked as income only when it is actually

received. However, interest on advances against term deposits, NSCs, IVPs, KVPs
and Life policies may be taken to income account on the due date, provided
adequate margin is available in the accounts.
Reversal of Income: If an account becomes NPA for first time during the year the
unrealized interest that was taken to P&L account on accrual basis pertaining to the
current year as well as pertaining to the preceding year, if any, shall also be
reversed. This will apply to Government guaranteed accounts also.
Valuation of Security for provisioning purposes: In cases of NPAs with balance
of Rs.5 crore and above stock audit at annual intervals by external agencies and
collaterals such as immovable properties charged in favour of the bank should be
got valued once in two years by valuers approved by the Board.
Asset classification: Banks are required to classify non-performing assets further
into the following three categories based on the period for which the asset has
remained nonperforming and the reliability of the dues:
i) Substandard Assets: A substandard asset would be one, which has remained
NPA for a period less than or equal to 12 months. It indicates credit weakness and
scope for loss if deficiencies are not corrected.
ii) Doubtful Assets: An asset would be classified as doubtful if it has remained in
the substandard category for a period of 12 months.
iii) Loss Assets: A loss asset is one where loss has been identified by the bank or
internal or external auditors or the RBI inspection but the amount has not been
written off wholly. It is considered as uncollectible and it is not warranted to continue
as bankable asset since there is little scope for salvage or recovery value.
Multiple Limits/Branches: Facilities granted by a bank to a borrower will have to
be treated as NPA (except bills discounted under LC) if any one facility of the
borrower becomes NPA. Uniform lowest classification shall be accorded to all
facilities. In case of credit facilities for a borrower at more than branch, the principal
branch shall decide the NPA status.
Advances under consortium arrangements: Asset classification of accounts
under consortium should be based on the record of recovery of the individual
member banks.
Accounts where there is erosion in the value of security: Where there are
potential threats for recovery on account of erosion in the value of security or nonavailability of security, asset should be straightaway classified as doubtful or loss
asset as appropriate.
Advances against Term Deposits, NSCs, KVPs, IVPs and LIC policies need not
be treated as NPAs. Advances against gold ornaments, government securities and all
other securities are not covered by this exemption.
Loans with moratorium for payment of interest: In the case of bank finance
given for industrial projects or for agricultural plantations etc. where moratorium is
available for payment of interest, payment of interest becomes 'due' only after the
moratorium or gestation period is over.
Agricultural Advances: In cases of conversion or reschedulement short term
production loan as a relief measure, the term loan as well as fresh short-term loan
may be treated as current dues and need not be classified as NPA.
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Bankers Digest 2013
Government guaranteed advances: Advances under this category, though

overdue may be treated as NPA only when the Government repudiates its guarantee
when invoked. However, interest can be recognized only on recovery basis not on
accrual basis. State Government guaranteed advances would attract asset
classification and provisioning norms if interest and/or principal or any other amount
due to the bank remains overdue for more than 90 days.
Availability of security/Net worth of borrower/Guarantor: The availability of
security or net worth of borrower/ guarantor should not be taken into account for the
purpose of treating an advance as NPA or otherwise, as income recognition is based
on record of recovery.
Post-shipment Supplier's Credit: To the extent Export Credit Guaranteed amount
is received from the EXIM Bank, the advance may not be treated as a nonperforming
asset for asset classification and provisioning purposes.
Ever greening: Rescheduling of a loan without assessing the viability of the activity
for the purpose of avoiding an account becoming NPA.
Provisioning Norms
Provision to be made
0.25% on Direct advances to agriculture and SME sectors.
1.00% on Commercial Real Estate
Standard
0.40% on all advances other than stated above
2.75% on recast loans in standard assets for first 2 years.
25% on unsecured exposures (20% in case of infra loans)
Sub-Standard
15% on other loans
Unsecured portion: 100%
Secured portion: if asset remained in doubtful <= 1 year 25%
Doubtful
If asset remained in doubtful - 1 to 3 years 40%
If asset remained in doubtful > 3 year 100%
Loss
At 100% on the outstanding
RBI Panel suggests 5% provision on new restructured accounts starting 1st April
2013 instead of existing 2.75%.
Status
Unsecured Exposure is one where realizable value of tangible security, as assessed

by the bank/approved valuers/RBI inspecting officers, is not more than 10 percent,
abinitio, of the outstanding exposure (funded and non-funded). However, the
following are the exempted categories from provisioning norms:

Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and
life policies.
Advances granted under rehabilitation packages approved by BIFR / Term
lending institutions.
Advances covered by CGTSI guarantee - No provision need be made towards
the guaranteed portion. The outstanding in excess of the guaranteed portion
should be provided.
Advances covered by ECGC /DICGC guarantee - provision should be made
only for the balance in excess of the amount guaranteed by the Corporation.
***
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Bankers Digest 2013
Restructure of Advance Accounts

Restructuring would normally involve modification of terms of the advances /
securities, which would generally include, among others, alteration of repayment
period / repayable amount / the amount of installments / rate of interest (due to
reasons other than competitive reasons). It is applicable to all type of credit facilities
including working capital limits extended to Industrial Units, provided they are fully
covered by Tangible Securities. No account will be taken up for restructuring by
the banks unless the financial viability is established and there is a reasonable
certainty of repayment from the borrower, as per the terms of restructuring package.
The viability should be determined by the banks based on Return on Capital
Employed, Debt Service Coverage Ratio, Gap between the Internal Rate of Return
and Cost of Funds etc., on case-by-case depending merits of the account. Any
restructuring done without looking into cash flows of the borrower and assessing the
viability of the projects/activity financed by banks would be treated as an attempt at
ever greening a weak credit facility and would invite supervisory concerns/action.
The accounts not considered viable should not be restructured and banks should
accelerate the recovery measures in respect of such accounts. Restructuring of
advances could take place either before commencement of commercial
production/operation; or after commencement of commercial production / operation
but before the asset has been classified as Sub-standard or Doubtful.
Upon restructuring, the accounts classified as 'standard assets' should be
immediately re-classified as Sub-standard assets. Accounts which have been
classified as non-performing assets upon restructuring would be eligible for upgradation to the 'standard' category after observation of 'satisfactory performance'
during the 'specified period'. Any additional finance to the account may be treated as
'standard asset', up to a period of one year after the first interest / principal
payment, whichever is earlier, falls due under the approved restructuring package.
However, in the case of accounts where the pre-restructuring facilities were classified
as 'sub-standard' and 'doubtful', interest income on the additional finance should be
recognized only on cash basis. If the restructured asset does not qualify for up
gradation at the end of the above specified one year period, the additional finance
shall be placed in same asset classification category as the restructured debt.
Accounts that are restructured for the second time or more on account of natural
calamities would retain in the same asset classification category on restructuring.
Hence, restructured accounts on account of natural calamities would not be treated
as second restructuring.
Corporate Debt Restructuring (CDR): The objective of the CDR framework is to
preserve viable corporates that are affected by certain internal and external factors
and minimize the losses to the creditors and other stakeholders through an orderly
and coordinated restructuring programme, outside the purview of BIFR/DRT and
other legal proceedings, for the benefit of all concerned. The scheme will not apply to
accounts involving only one financial institution or one bank. The CDR mechanism
will cover only multiple banking accounts/syndication/consortium accounts of
corporate borrowers with outstanding fund-based and non-fund based exposure of
`10 crore and above by banks/financial institutions. However, there is no
requirement of the account/company being sick, NPA or being in default for a specific
period before reference to the CDR system. CDR is a non-statutory mechanism which
is a voluntary system based on Debtor-Creditor Agreement (DCA) and Inter-Creditor
Agreement (ICA). Three-tier structure is in place for CDR system.
i) CDR Standing Forum provide an official platform for both the creditors and
borrowers (by consultation) to amicably and collectively evolve policies and
guidelines for working out debt restructuring plans in the interests of all concerned.
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Bankers Digest 2013
ii) CDR Empowered Group considers the preliminary report of all cases of requests
of restructuring, submitted by the CDR Cell. After the Empowered Group decides that
restructuring of the company is prima-facie feasible and the enterprise is potentially
viable in terms of the policies and guidelines evolved by Standing Forum, the
detailed restructuring package will be worked out by the CDR Cell in conjunction with
the Lead Institution.
iii) CDR Cell undertakes the initial scrutiny of the proposals received from borrowers
/ creditors to decide whether rehabilitation is prima facie feasible. If found feasible,
proceed to prepare detailed Rehabilitation Plan with the help of creditors and, if
necessary, experts to be engaged from outside. If not found prima facie feasible, the
creditors may start action for recovery of their dues.
CDR-1 system is applicable only to accounts classified as 'standard' and 'substandard'. CDR-2 system is applicable to the accounts where the projects have been
found to be viable but classified under doubtful category provided minimum of 75%
of creditors (by value) and 60% creditors (by number) satisfy themselves of the
viability of the account and consent for such restructuring.
Reference to Corporate Debt Restructuring System could be triggered by any one or
more of the creditors who have minimum 20% share in either working capital or
term finance, or by the concerned corporate, if supported by a bank or financial
institution. However, in case of suit filed accounts at least 75% of the creditors (by
value) and 60% of creditors (by number) shall consent for the proposal. Under CDR,
banks extend the repayment period or moratorium on repayment or reduction of
interest rate on loans or combination of any of the above.
The sub-standard/doubtful accounts which have been subjected to restructuring
would be eligible to be upgraded to the standard category only after the specified
period, i.e. one year after the date when first payment of interest or of principal,
whichever is earlier, falls due under the rescheduled terms, subject to satisfactory
performance during the period.
Take-out Finance - The scheme has been designed to enable lenders to address
the concern of the hitting the sectoral limit, asset-liability mismatch and liquidity
issues that may arise by the long-term debt financing to core projects. Under the
scheme, banks and lenders can enter in an arrangement with financial institutions for
transferring the loan outstanding in their books to those of the financial institution
which is taking out long-term debt. The tenor of the take-out finance is up to 15
years. The sectors eligible for Take-out finance are Road and bridges, Railways,
Seaports, Airports, Inland waterways and other transportation projects; Power,
Urban transport, water supply, sewage, solid waste management and other physical
infrastructure in urban areas; Gas pipelines Infrastructure projects in SEZs,
International convention centers and other tourism infrastructure projects. It is one
of the emerging products in the context of funding of long-term infrastructure
projects. Under this arrangement, the Banks financing infrastructure projects will
have an arrangement with other financial institutions for transferring to the latter the
outstanding in respect of such financing in their books on a pre-determined basis.
The norms of asset will have to be followed by the concerned banks in whose books
the account stands as balance sheet item as on the relevant date. The lending
institution should also make provisions against any asset turning into NPA pending
its takeover by the taking over institution. As and when the asset is taken over by
the taking over institution, the corresponding provision could be reversed. At present
IIFCL is providing a Take-out finance window to the banks in India.
***
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Bankers Digest 2013
Risk Management - Basel-I, II & III

The growing sophistication in banking operations, online electronic banking,
improvements in information technology etc, have led to increased diversity and
complexity of risks being encountered by banks. These risks can be broadly grouped
into Credit Risk, Market Risk and Operational Risk. These risks are
interdependent and events that affect one area of risk can have ramifications for a
range of other risk categories.
Basel-I Accord: It was introduced in the year 2002-03, which covered capital
requirements for Credit Risk. The Accord prescribed CRAR of 8%, however, RBI
stipulated 9% CRAR. Subsequently, Banks were advised to maintain capital charge
for Market Risk also.
Basel-II New Capital Accord: Under this, banks have to maintain capital for Credit
Risk, Market Risk and Operational Risk w.e.f 31.03.2007. The New Capital Accord
rests on three pillars viz., Minimum Capital Requirements, Supervisory Review
Process & Market Discipline. The implementation of the capital charge for various risk
categories are Credit Risk, Market Risk and Operational Risk. Analysis of the bank's
CRAR under both Basel-I & Basel-II guidelines should be reported to the Board at
quarterly intervals.
Internal Ratings Based (IRB) Approach: Under this approach, banks must
categorise the exposures into broad classes of assets as Corporate, Sovereign, Bank,
Retail and Equity. The risk components include the measures of the Probability of
Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective
Maturity (M). There are two variants i.e Foundation IRB (FIRB) and Advanced IRB.
Under FIRB, banks have to provide their own estimates of PD and to rely on
supervisory estimates for other risk components (like LGD, EAD) while under
Advanced IRB; banks have to provide their own estimates of all the risk components.
It is based on the measures of Expected Losses (EL) and Unexpected Losses (UL).
Expected Losses are to be taken care of by way of pricing and provisioning while the
risk weight function produces the capital requirements for Unexpected Losses.
Market Risk: It is a risk pertaining to the interest rate related instruments and
equities in the Trading Book i.e AFS (Available For Sale) and HFT (Held for Trading)
positions and Foreign Exchange Risk throughout the bank (both banking & trading
books). There are two approaches for measuring market risk viz., Standardized
Duration Approach & Internal Models Approach.
Operational Risk: Banks have to maintain capital charge for operational risk under
the new framework and the approaches suggested for calculation of the same are
Basic Indicator Approach and The Standardized Approach. Under the first approach,
banks must hold capital equal to 15% of the previous three years average positive
gross annual income as a point of entry for capital calculation. The second approach
suggests dividing the banks business into eight lines and separate weights are
assigned to each segment. The total capital charge is calculated as the three year
average of the simple summation of the regulatory capital charges across each of the
business lines in each year.
Advanced Measurement Approach (AMA): Under this, the regulatory capital
requirement will equal the risk measure generated by the banks internal operational
risk measurement system using certain quantitative and qualitative criteria. Tracking
of internal loss event data is essential for adopting this approach. When a bank first
moves to AMA, a three-year historical loss data window is acceptable.
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Bankers Digest 2013
Pillar 2 Internal Capital Adequacy Assessment Process (ICAAP): Under this,

the regulator is cast with the responsibility of ensuring that banks maintain sufficient
capital to meet all the risks and operate above the minimum regulatory capital
ratios. RBI also has to ensure that the banks maintain adequate capital to withstand
the risks such as Interest Rate Risk in Banking Book, Business Cycles Risk, and
Credit Concentration Risk etc. For Interest Rate Risk in Banking Book, the regulator
may ensure that the banks are holding sufficient capital to withstand a standardized
Interest Rate shock of 2%. Banks whose capital funds would decline by 20% when
the shock is applied are treated as Outlier Banks. The assessment is reviewed at
quarterly intervals.
Pillar 3 Disclosure Requirements: It is aimed to encourage market discipline by
developing a set of disclosure requirements which will allow market participants to
assess the key pieces of information on the capital, risk exposures, risk assessment
processes and hence the capital adequacy of the institution. Banks may make their
annual disclosures both in their Annual Reports as well as their respective websites.
Banks with capital funds of `500 crore or more, and their significant bank
subsidiaries, must disclose their Tier-I Capital, Total Capital, total required capital
and Tier-I ratio and total capital adequacy ratio, on a quarterly basis on their
respective websites. The disclosures are broadly classified into Quantitative
disclosures and Qualitative disclosures and classified into the following areas:
Area
Capital
Risk Exposures &
Assessments
Credit Risk
Credit Risk Mitigation
Securitisation
Market Risk
Operational Risk
Equities
Interest Rate Risk in
the Banking Book
(IRRBB)
Coverage
Capital structure & Capital adequacy
Qualitative disclosures for Credit, Market, Operational,
Banking Book interest rate risk, equity risk etc.
General disclosures for all banks.
Disclosures for Standardised & IRB approaches.
Disclosures for Standardised and IRB approaches.
Disclosures for Standardised and IRB approaches.
Disclosures for the Standardised & Internal Models
Approaches.
The approach followed for capital assessment.
Disclosures for banking book positions
Nature of IRRBB with key assumptions. The increase /
decrease in earnings / economic value for upward /
downward rate shocks.
Time lines for implementation of Advanced Approaches are set as 31st March 2014.
The Basel-II norms are much better than Basel-I since it coveres operational risk.
However, risks such as Reputation Risk, Systemic Risk and Strategic Risk (the risk of
losses or reduced earnings due to failures in implementing strategy) are not covered
and exposing the banks to financial shocks.
As per Basel all corporate loans attracts 8 percent capital allocation where as it is in
the range of 1 to 30 percent in case of individuals depending on the estimated risk.
Further, group loans attract very low internal capital charge and the bank has a
strong incentive to undertake regulatory capital arbitrage to structure the risk
position to lower regulatory risk category. Regulatory capital arbitrage acts as a
safety valve for attenuating the adverse effects of those regulatory capital
requirements that activitys underlying economic risk. Absence of such arbitrage, a
regulatory capital requirement that is inappropriately high for the economic risk of a
particular activity could cause a bank to exit that relatively low-risk business by
preventing the bank from earning an acceptable rate of return on its capital.
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Bankers Digest 2013
Nominally high regulatory capital ratios can be used to mask the true level of
insolvency probability. For example Bank maintains 12% capital as per the norms
risk analysis calls for 15% capital. In a regulatory sense the bank is well capitalized
but it is to be treated as undercapitalized from risk perspective.
Basel-III is a comprehensive set of reform measures developed to strengthen the
regulation, supervision and risk management of the banking sector. The new
standards will considerably strengthen the reserve requirements, both by increasing
the reserve ratios and by tightening the definition of what constitutes capital. They
focus on the risks that banks are vulnerable to, particularly after the crisis in the
banking sector, which was triggered by the problem in the US sub-prime mortgage
market. The new norms will be made effective in a phased manner from 1st April
2013 and implemented fully by 31st March 2018. The broad guidelines are:

Banks to maintain a minimum 5.5% in common equity (as against 3.6%

now) by 31st March 2015.
Banks must create a Capital Conservation Buffer of 2.5% by 31st March
2018.
Banks should maintain a minimum overall capital adequacy of 11.5%
(against the current 9%) by 31st March 2018.
Banks must supplement risk based capital ratios by maintaining a
leverage ratio of 4.5%
The guidelines will ensure that banks are well capitalized to manage all kinds of
risks. The existing norms stipulate that banks should maintain Tier-I Capital and
Tier-II Capital that comprises instruments with debt like features. Basel-III rules
propose to bring in more clarity and eliminate grey areas in the current rules by
clearly defining different kinds of capital.
Tier - I & II capital consists of Paid up Equity Capital + Free Reserves + Balance in
Share Premium Account + Capital Reserves (surplus) arising out of sale proceeds of
assets but not created by revaluation of assets MINUS Accumulated loss + Book
value of Intangible Assets + Equity Investment in Subsidiaries+ Innovative Perpetual
Debt instruments. Tier - II consists of Cumulative perpetual preferential shares &
other Hybrid debt capital instruments + Revaluation reserves + General Provisions +
Loss Reserves (up to maximum 1.25% of weighted risk assets) + Undisclosed
Reserves + Subordinated Debt + Upper Tier-II instruments. Subordinated Debts are
unsecured and subordinated to the claims of all the creditors. To be eligible for TierII capital the instruments should be fully paid, free from restrictive clauses and
should not be redeemable at the instance of holder or without the consent of the
Bank supervisory authorities. Subordinated debts usually carry a fixed maturity.
They will have to be limited to 50% of Tier-I capital.
Economic Capital (EC) is a measure of risk expressed in terms of capital. A bank
may, for instance, wonder what level of capital is needed in order to remain solvent
at a certain level of confidence and time horizon. In other words, EC may be
considered as the amount of risk capital from the banks' perspective; therefore,
it differs from RC requirement measures. It primarily aims to support business
decisions, while RC aims to set minimum capital requirements against all risks in a
bank under a range of regulatory rules and guidance. So far, since economic capital
is rather a bank-specific or internal measure of available capital, there is no common
domestic or global definition of EC. Moreover, there are some elements that many
banks have in common when defining EC. EC estimates can be covered by elements
of Tier 1, Tier 2, Tier 3, or definitions used by rating agencies and/or other types of
capital, such as planned earning, unrealized profit or implicit government guarantee.
EC is highly relevant because it can provide key answers to specific business
decisions or for evaluating the different business units of a bank.
***
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Bankers Digest 2013
Risk Weighted Assets

(Standardized approach under Basel-II)
No
1
2
3
4
5
6
7
8
9
10
11
12
Category
Credit exposure to Central / State Government
Claims on RBI/DICGC/CGTSI
State Govt. guaranteed claims / ECGC
Corporates based on External Rating
a) Long Term
i) AAA rated
ii) AA rated
iii) A rated
iv) BBB rated
v) BB & below rated
vi) Unrated
b) Short Term
i) A1+
ii) A1
iii) A2
iv) A3
v) A4 & below
vi) Unrated
Retail Portfolio
Claims secured by Residential Property
i) Where LTV Ratio up to 75%
a) Loan up to 30 lakh
b) Above 30 lakh & below 75 lakh
ii) Loan up to 75 lakhs & LTV > 75%
iii) Restructured Housing Loans
iv) Loans above 75 lakh
Commercial Real Estate
Consumer Credit (Clean/Personal/Credit cards)
Venture Capital
Capital Market Exposure
Loans and advances to staff fully secured
Non Performing Assets based on % of provisions
a) Unsecured
i) Below 20%
ii) 20% to < 50%
iii) 50% & above
b) Secured by Residential Property
i) Provision is 20% to < 50%
ii) Provision 50% & above
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Bankers Digest 2013
Risk Weight
0%
0%
20%
20%
30%
50%
100%
150%
100%
20%
30%
50%
100%
150%
100%
75%
50%
75%
100%
(+25% RW)
125%
100%
125%
150%
125%
20%
150%
100%
50%
100%
75%
50%
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND

ENFORCEMENT OF SECURITY INTEREST ACT 2002 (SARFAESI)
SARFAESI enables the banks to seize and sell the properties secured to the bank
without the intervention of courts resulting in realization of the amount due in NPA
accounts and reduction of NPAs. As per the act, officers with a rank of Chief Manager
and above are empowered to act as Authorized Officer to initiate proceedings which
includes issue of notices, taking possession of the property and sale of property.
Branches have to identify the NPA account borrowers to whom the notices are to be
issued under Sec.13(2) of the Act. However, the following are the exceptions
provided under Sec.31 of the SARFAESI Act:

Where the outstanding liability in the account does not exceed Rs 1.00 lakhs
Any security interest created in agriculture land
Pledge of movables / Lien on any goods
Amount due is less than 20% of the principal amount and interest
Creation of Security Interest in any Air Craft / Vessel
Any conditional sale, hire purchase or lease or any other contract in which no
security interest is created
Any right of unpaid seller / Any properties not liable for attachment /sale
under section 60 Civil Procedure Code.
The prerequisite should be that notice should be issued one month after identification
of NPA advising the borrower/mortgagor to pay the entire amount due with in 60
days from the date of receipt of the notice. In case, more than one borrower, notice
shall be sent to each one of them. If the borrower avoids notice, the same may be
served by publishing in two leading Newspapers (English and Vernacular language).
On expiry of 60 days notice period and on default of the payment, possession shall
be taken of the property mentioned in Sec.13 (2) notice and the notice of the same
shall be give to the borrower and general public in two newspapers English and
vernacular Language. The Possession of moveable property may be taken by taking
inventory in the presence of two witnesses.
Authorized Officer shall keep the property either in his own custody or in the custody
of any person authorized or appointed by him who shall take as much care of the
property in his custody as an owner of the property. Insurance of secured assets and
their valuations are to be done before sale of seizure of secured assets. Security
agents can be engaged while seizing the secured assets. Authorized Officer may sell
the secured assets of which the possession is taken by obtaining quotations from the
parties; by inviting tenders from the public; by holding public auction; by private
sale. Auction notice is to be kept on the banks website.
If sale is by inviting tenders from the public or public auction the same has to be
published in two news papers viz., English and another in Vernacular language. Sale
can be affected only after issuing 30 days notice to the borrower / mortgagor. If the
property is subject to speedy decay the Authorized Officer may sell it immediately.
The authorized Officer cannot sell the property less than the reserve price. If the
entire liability of the bank is not cleared after affecting the measures under the Act,
the bank is to file a suit or application before the court or DRT for recovery of the
balance amount of loan. In the accounts where the borrower failed to honour his
commitment under the compromise/OTS, then compromise/OTS permitted should be
withdrawn before initiating action under the Ordinance.
In case of resistance from the borrower to hand over the possession of assets, such
resistance should be recorded in the presence of two witnesses and application
should be made under Sec.14 of the act to Chief Metropolitan Magistrate/Dist.
Magistrate seeking their assistance for taking possession of secured assets.
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Bankers Digest 2013
Recent Developments: The Enforcement of Security Interest and Recovery of Debt

Laws (Amendment) Bill, 2011 was passed in the Loksabha which allow banks to
acquire immovable properties from the borrower so that they can sell them at a later
date. Sometimes there are no buyers for a property or there is a cartelization from
bidders, who deliberately quote lower price thus undervaluing it. The amendment will
ensure that banks do not get into the situation of distress sale and get the right
pricing for the assets on sale. The amendment states that banks will be heard in
Debt Recovery Tribunals before granting any stay on recovery of loans from
borrowers. This will ensure that the law is not misused by borrowers to delay the
settlements and payment of dues. Further, the amendment allows Asset
Reconstruction Companies (ARC) to convert a part of the debt into equity. This could
be a win-win situation for the borrower as well as the ARC. The borrower stand to
gain because his outstanding liability decreases to the extent of equity conversion
and the ARC will also become part of the management so as to aid in the turnaround
of the stressed company.
Clean Note Policy: The usage of stapling is causing mutilation of notes and
shortening the life of the currency. RBI prohibited the banks from stapling currency
notes under section 35A BR Act with an objective to provide clean notes to public. As
per policy, Banks should
Issue clean notes to the public and accept small denominations such as `1/,
`2/- & `5/-.
Not issue number cut notes to public. Any deviation in this regard attracts
penalty.
Desist from writing anything whatsoever on the Bank Notes.
Educate the customers and members of the public in this regard.
Ensure sorting all notes by branches and only Clean Notes/issuable notes are
put into circulation amongst general public.
Ensure that branches are not hoarding any Fresh Notes and coins and to be
distributed to the customers.
Counterfeit Notes: In order to combat the menace, RBI has issued guidelines to all
Banks/Financial Institutions on detection and impounding of counterfeit notes. It is
necessary that
Currency notes received are carefully examined and impound counterfeit

notes wherever detected to curb circulation of such notes to public.
Counterfeit Notes detected shall be branded with a stamp (size of 5 cm x 5

cm) Counterfeit Bank Note with branch/office name, date and signature.
Branch/Office is required to issue acknowledgement to the tenderer of

counterfeit note. The acknowledgement is to be signed by the tenderer of
counterfeit notes and counter cashier with details such as serial number,
denomination and number of pieces.
FIR is required to be filed in case where the counterfeit notes found are five
pieces and above in a single transaction and acknowledgement is to be
obtained from the concerned police authorities. However, in other cases, a
consolidated report is to be sent to Police once in a month.
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Bankers Digest 2013
All Counterfeit Notes received back from police authorities are to be preserved
in the safe custody of the branch / office for a period of 3 years. Thereafter,
these notes are to be sent to the concerned issue office of RBI with full
details.
In no case, the Counterfeit Notes should be returned to the tenderer or

destroyed by the bank branches / treasuries.
Banks should put in place adequate safeguards / checks before loading

currency notes in ATMs.
Cash Remittances: Cash movement takes place from one branch to another branch
and branch to currency chest and vice versa on a regular basis. Branches / Offices
are required to be adhered the following guidelines since it is an important and
sensitive one. The guidelines are as under:
Remittance
Staff / Security Personnel to be accompanied
One Clerk / Officer with 1 Sub-staff and 1 Security

Guard (if available at the branch)
> `50 lakh & < `100 lakh
One Officer, 1 Sub-staff and 2 Armed Guards
` 100 lakh & above
One Officer, 1 Sub-staff and Armed Police Escort
Security Escort for cash remittances by Cash Vans
Up to `200 lakh
To be escorted by 2 Bank Guards
> `200 lakh & up to `1000 lakh To be escorted by 3 Bank Guards
Below `50 lakh
General Precaution in Remittances:

Remittance is to be done in Cash Van or Four Wheeler Vehicles. Cash Van
must have Alarm system and Fire Extinguishers.
Avoid Three Wheeler Vehicles. Two Wheeler Vehicles should not be used.
Cash Remittance may be done on foot provided the distance is short (within
the complex) and the remittance must not be over `2 lakhs.
Cash must be carried in Steel Boxes only.
Armed Guard must sit in front.
Remittance is to be done during Day time only.
Probationary Officers are not to be detailed for cash remittance.
In case of non availability staff, a clerk can be substituted for sub-staff and an
offer for a clerk.
Surprise Verification of Cash at Branches: All Branch Heads should carry out
verification of cash of their respective branches every month, at different dates of
the month with total confidentiality. The verification should also be rotated every
month i.e. once before commencement of office hours, another time at the middle of
the day and sometimes at the close of the office hours. Besides the above, branches
are subject to surprise verification of cash by controlling offices once in a quarter.
Surprise verification report shall cover the aspects such as maintenance of Cash
Movement / Key Movement / Cash Discrepancy Registers, maintenance of cash
beyond retention limit, maintenance of Bait Money and shortage/excess of cash, if
any. Wherever cash position is in excess of Cash Retention Limit, the entire cash on
hand should invariably be verified by the Branch Manager and necessary
endorsement should be recorded thereof.
Incentives & Penalties: RBI introduced scheme in the month of September 2008
for providing incentives to banks for extending enhanced services in the area of
mutilated/soiled notes & coin distribution and levying penalties for deficiency in
providing services to members of the public. (Cir no. 158 Ref 55/13 dt.19.07.12)
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Bankers Digest 2013
No
1
Activity
Adjudication of Mutilated Bank Notes
Exchange of Soiled Notes
Distribution of Coins over the counter
Establishment of coin vending

machines
Incentives
`2/- per piece
One rupee per packet in `5/- `10/`20/- and `50/- denomination
`25/- per bag.
Capital
Cost-Urban/Metro
Centers
50% - Rural & SU centers 75%
Operational cost @ `25 per bag.
Incentives received are being passed on to the concerned branches/currency chests.

Scheme on Penalties
Activity
Shortage in soiled note

currency chest balances
remittances
and
Counterfeit notes detected in soiled

remittances and currency chest balances
note
Mutilated notes detected in soiled note

remittances and currency chest balances
Non compliance of operational guidelines such
as non-functioning of CCTV, non utilization of
NSMs and keeping branch cash / documents in
strong room.
Violation of any term of agreement with RBI or
deficiency in service in currency area as
detected by RBI officials viz.,
i) Non issue of coins over the counter to any
member of public, despite having stock.
ii) Refusal to exchange soiled notes all bank
branches / adjudicate mutilated notes (Currency
Chest branches) tendered by any member of
public.
iii) Not conducting surprise verification of chest
balances, at least at bimonthly intervals by
officials unconnected with the custody thereof.
iv) Denial of facilities/services to linked
branches of other banks.
v) Non acceptance of lower denomination notes
(`10/- `20/- and `50/-) tendered by members of
public and linked bank branches.
vi) Detection of mutilated / counterfeit notes in
reissuable packers prepared by the chest.
Penalties
`50/- per piece in addition to the
loss (shortage) in case of notes
in denomination up to `50/-.
However,
for
notes
in
denomination of `100/- and
above, the penalty is equal to
the value of the denomination
per piece in addition to the loss.
Equal to the value of the
counterfeit note in addition to
the loss.
`50/- per piece irrespective of
the denomination.
`5000/- for each irregularity.
Penalty will be enhanced to
`10000/- in case of repetition.
`10,000/- for any violation of

agreement
in
this
regard/deficiency of service
`5.00 lakhs in case there are
more than 5 instances of
violation by the branch. The
same will be placed in public
domain.
RBI during their Incognito visits to Branches may levy penalty with regard to non
adherence of above guidelines and the same will be recovered from the officials
responsible for such lapses. Hence all branches have to follow the laid down norms
scrupulously without any deviation.
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Bankers Digest 2013
Customer Service & BCSBI

The Government and the regulator (RBI) have been emphasizing the importance and
the need to extend speedy, efficient, fair and courteous customer service in banking
industry. In this direction, the following committees were set up:
1975
1990
2004
2006
Talwar Committee
Goiporia Committee
Tarapore Committee
Working group under chairmanship of Sri N Sadasivan
In addition to the guidelines framed based on the recommendations of the

committees, RBI had been giving instructions to banks as and when required. Over
the years, the customer service in banks has improved considerably with the
introduction of technology based products. Further, the Government of India
introduced the concept of Citizens Charter at all bank branches with an objective to
exercise in setting benchmarks for prompt delivery of banking services, including the
pricing thereof. In the year 2010, RBI constituted a committee under the
chairmanship of Sri.M.Damodaran to look into the customer service aspects in
Banks. The recommendations of the committee are as under:
Bank should offer a basic bank account with privileges such as certain number
of transactions, cheque facility, ATM/Debit Card etc., without any prescription
of minimum balance.
The Passbook/Statement of accounts should indicate the account number,

name, address and ID of the customer, MICR Code, IFSC Code, Toll free
customer care number, Ombudsman contract details, instrument number and
payee name on all debit entries and the full details of TDS (Gross Interest
credited and TDS debited).
Before marking the account as inoperative, the banks must intimate the
account holder by SMS. Banks should introduce Uniform Account Opening
forms and Account Number Portability across the banks.
Banks should take Unique Identification Number (issued under Aadhar

project) as KYC compliance for opening of accounts.
The term deposit renewal notices should be sent to customers preferably in

electronic form. A single Form 15G/H linked to a customer ID across the
branches in a bank should be issued.
Service charges should be reasonable. No charges are to be levied on NonHome Branch transactions.
The users of electronic bank platforms for making collections may offer small
discounts to their customers to favour electronic payments.
Cheque Drop Box should provide receipt/acknowledgement along with the

image of the cheque.
Reason for penal interest on loan accounts, rate of interest charged should be
mentioned in Passbook/Statement of Account.
Banks must ensure that loan statements are issued to the borrowers
periodically giving full details including demand, repayments, interest
component and charges.
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Bankers Digest 2013
The title deeds should be returned to the customers within a period of 15

days after the loan closure.
Bank should provide Most Important Terms and Conditions (MITC) of the
product explicitly in Arial font and size 12 for better readability.
All home loans should permit a switchover between fixed to floating or viceversa at least once during the loan tenure at an appropriate and reasonable
fee. Home loans backed by insurance products, the procedure should be
explained upfront to the customers.
Banks should provide prioritized service to the senior citizens/physically

handicapped persons.
Banks should put a system in a place for Automatic updation of the customers
to the senior citizen category based on the date of birth.
Pensioner may be allowed to submit the annual life certificate at any of the
branches of the bank. Bank should make arrangements to disburse pension to
sick and disabled pensioners at their door steps.
SHG members should not be forced to take insurance products.
Banks should ensure that at least one of the staff members in Tribal / NorthEast areas is conversant with local language.
The staff manning positions in Customer Service Departments in banks should

receive specialized training so that customer complaints are professionally
handled.
With regard to one-man branches Banks should place Proper systems for
safety of cash and also continuity of services in case of leave etc.
In case of frauds in the accounts of the customers, bank is required to credit

the amount to their accounts after obtaining due affidavit.
Banks should put in place secure systems like Multi-factor Authentication to

minimize the fraud instances.
Frauds involving cloned cards, unauthorized online transactions, ATM

transactions not done by the customers etc., can not be valid transactions as
they are not authorized by the customers. The onus should be on the bank to
prove that the customer has done the transaction.
Banks to install CCTV at all ATMs. For Debit/Credit cards at POS, PIN based
authorization should be made mandatory.
Free SMs/e-mail alerts should be sent for every transaction in operative

account / credit cards.
Banks should ensure that ECS Mandate Management System is working

effectively to comply with the mandate given by the customer.
For transaction deficiencies, there should be in-built mechanism to pay

compensation to the customers.
Bank should provide for online registration of grievance in its website.
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Bankers Digest 2013
Banking Codes and Standards Board of India (BCSBI)

RBI has set up BCSBI with an objective of evolving standards for bank services to
depositors, borrowers and common persons at affordable and reasonable price and
monitoring the same in effective manner. It covers

Deposit Accounts (Current/Savings/Recurring/Term/PPF)

Collection of cheques, Lockers, Safe custody services
DD/PO/TT/NEFT/RTGS, Government transactions and Pension payments
Demat Accounts, Equity and Government Bonds
Loans and Advances
Foreign Exchange / Money Changing
Card products (Credit / ATM / Debit / Smart / Pre-paid / Travel)
It is an independent and autonomous watchdog to monitor and

services are delivered as promised. Banks are required to register
BCSBI as members and have the code of commitment to customers
respective Boards. BCSBI has revised The Code of Banks
Customers and the important changes are as under:

ensure that the

themselves with
adopted by their
Commitment to
Advise the customer about change in minimum balance to be maintained in

Savings/Current accounts 30 days in advance during which period, no charges
will be levied for non-maintenance of the higher minimum balance prescribed.
Provide an option to customer for giving nomination at the time of account
opening itself with due acknowledgement. On request from the depositor name of
the nominee will also be indicated on the Passbook/Term Deposit Receipt.
Acknowledge receipt of loan applications and convey in writing the reasons for
rejection of loan.
Return all documents/securities title deeds to mortgaged property to the
borrower within 15 days from the full payment of the dues, without waiting for
request from the borrower.
Compensate the customers for delayed collection of cheques without waiting for a
request from customer.
No charges will be levied for activation of a inoperative account.
In case a credit facility/credit card is issued without customers consent and
charges levied for the same would be reversed along with compensation.
Fair Practices code for Lenders liability: Loan application forms should be
comprehensive to include information about rate of interest, interest application
intervals, penal interest, processing charges, up-front fee, prepayment charges etc.
Loan applications are to be processed within reasonable time and communicate the
terms and conditions in writing to the borrowers. Banks should give notice to the
borrower about the subsequent changes in interest rate / charges, if any.
Credit Card - Fair practices: All credit card issuers should provide Most Important
Terms and Conditions (MITC) to customers and prospective customers. MITC should
include information such as admission fee; cash advance charges, default charges,
annualized percentage rate and grace period. Further, card issuers should maintain
Do Not Call Registries and should not provide unsolicited calls/SMS/Cards/Credit
facilities unilaterally. Card issuing banks are responsible for any omission or
commissions of their agents (Sales/Marketing/Recovery agents).
Selling third party financial products/services: Of late, all banks are
undertaking selling of Mutual Funds and Insurance policies of other institutions to
their customers to earn other income. In order to curb mis-selling of financial
products and services and ensure transparency, RBI advised banks to disclose to
their customers details of the commissions and other fees received by them while
selling Mutual Funds and Insurance policies of other Banks/Institutions.
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Bankers Digest 2013
Compensation Policy
Providing better and timely service to the customers is a prerequisite for banks to
remain stay in the market. Despite best efforts, sometimes, omissions and
commissions may creep in which may lead to inconvenience to the customers. In
order to protect the interest of the customers, banks formulated compensation policy
based on the principles of transparency and fairness in the treatment of customers.
The expected action and compensation payable to the customers in the event of
deficiency of service are as under:
Category
Unauthorized /
Erroneous debits
ECS Debits
Execution failure
Stop payment Payment of cheques
Unsolicited Credit
Cards Levy of
charges
Collection of foreign
cheques / currencies Undue delay
Payment of interest on
delayed collection
i) outstation Cheques
ii) Local Cheques

Cheques/instruments
lost in transit / in
clearing or paying
bank branches
RTGS/NEFT/ECS
Delay in settlement of
wrong ATM Debits
Violation of the code
by Banks` Agent
Delay in payment of
Relief / Savings Bonds
Delay in credit of
pension payments
Compensation payable
Bank should reverse the amount immediately and
compensate the customer to the extent of financial loss
incurred such as interest or service charges. In case the
unauthorized debit is on account of third party, customer
should be compensated up to `50000/- or actual debit
amount whichever is less.
Bank should compensate the customer to the extent of
financial loss incurred along with service charges, if any.
Where the cheque is paid despite stop payment instructions,
bank should reverse cheque amount along with charges, if
any, with value date within 2 days of the intimation.
Bank should reverse the charges immediately and also pay a
penalty without demur amounting to twice the value of the
charges reversed.
Delay up to 14 days
SB Interest + 0.25% simple interest
Delay 15 to 45 days
Beyond 45 days
SB interest rate for the delay period (Metro - 7 days, State
Capitals 10 days and other places 14 days). Applicable
term deposit rate where the delay is beyond 45 days. Term
Deposit rate plus 2% interest in case where the delay is
beyond 90 days. Applicable loan interest rate is to be paid
where the outstation cheques are meant for credit of
loan/overdraft accounts. In case the delay is beyond 90
days, applicable interest rate on loans plus 2% to be paid.
SB Interest rate for the corresponding period of delay.
Bank should provide the required assistance to obtain
duplicate instrument from the drawer of the instrument. The
compensation policy that is applicable to Collection of
outstation cheques is equally applicable to this category of
customers.
Applicable Repo Rate plus 2% to be paid for delayed period.
In case where the compliant is not resolved within 12
working days from the date of complaint made by the
cardholder, bank should pay `100/- per day.
Appropriate steps to investigate the complaint and to
compensate the customer for financial loss, if any.
SB Rate
8% p.a.
The above initiatives will definitely paves the way for better service and the instances
of referring the customer grievances to Ombudsman or any other forum will come
down to a greater extent.
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Bankers Digest 2013
Union Budget 2013 Highlights

Budget 2013 is a balanced attempt to revive growth without significant policy
surprises in the light of moderation in industry and agricultural sectors.

GDP growth rate has been 5% in 2012-13 as against the target of 7.6%.
The estimated GDP for the year 2013-14 is likely to be in the range of 6.1%
to 6.7%.
Fiscal deficit recorded at 5.3% for 2012-13 and the target set for 2013-14 at
4.8%.
Current Account Deficit (CAD) continues to be high touching USD 75 billion.
Thrust on Foreign Direct Investment, Foreign Institutional Investors and
External Commercial Borrowings to reduce CAD
The budget focused on Agriculture credit and Financial Inclusion with
significant allocations to Rural Development programs (`80194 crore) and
other welfare schemes.
Womens Bank is to be set up under Public Sector with initial capital outlay of
`1000 crore
Government has assured capital support for the state run banks and a
provision of `14000 is made for the year 2013-14.
All Public Sector Bank branches to have an ATM by 31st March 2014.
Interest subvention scheme for short term crop loans continued (4% per
annum) for farmers making repayments on time.
Current personal income tax rates remain same. Tax credit of upto `2000 is
extended to every person who has a total income upto `5 lakhs. Introduced
surcharge of 10% on individuals whose taxable income exceeds `1 crore.
Allowed additional deduction of interest of `1 lakh to first time home buyers
for loan amount upto `25 lakhs.
TDS @ 1% has been introduced on value of transfer of immovable property
exceeding sales consideration of `50 lakh.
It is proposed to introduce inflation-indexed bonds/national certificates to
encourage and protect savings of the poor and middle class.
Controlling subsidy as well as curbing gold and oil imports will be necessary to keep
Current Account Deficit (CAD) and Fiscal deficit in check. However, there are
concerns that food security bill may push up subsidy bill. Moderation of inflation is
the need of the hour to drive the investments and to take the economy on the
growth path.
New Private Sector Banks - The guidelines for Licensing of New Banks in the
Private Sector have now been released by RBI and the salient features are:
i) Eligible Promoters: Entities/groups in the private sector, entities in public sector
and Non-Banking Financial Companies (NBFCs) shall be eligible to set up a bank
through a wholly-owned Non-Operative Financial Holding Company (NOFHC).
ii) Fit and Proper criteria: Entities/groups should have a past record of sound
credentials and integrity, be financially sound with a successful track record of 10
years. For this purpose, RBI may seek feedback from other regulators and
enforcement and investigative agencies.
iii) Corporate structure of the NOFHC: The NOFHC shall be wholly owned by the
Promoter/Promoter Group. The NOFHC shall hold the bank as well as all the other
financial services entities of the group.
iv) Minimum Voting Equity capital requirements for banks and shareholding
by NOFHC: The initial minimum paid-up voting equity capital for a bank shall be `5
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Bankers Digest 2013
billion. The NOFHC shall initially hold a minimum of 40 per cent of the paid-up voting
equity capital of the bank which shall be locked in for a period of five years and
which shall be brought down to 15 per cent within 12 years. The bank shall get its
shares listed on the stock exchanges within 3 years of the commencement of
business by the bank.
v) Regulatory framework: The bank will be governed by
relevant Acts, relevant Statutes and the Directives, Prudential
Guidelines/Instructions issued by RBI and other regulators.
registered as a non-banking finance company (NBFC) with
governed by a separate set of directions issued by RBI.
the provisions of the

regulations and other
The NOFHC shall be
the RBI and will be
vi) Foreign shareholding in the bank: The aggregate non-resident shareholding

in the new bank shall not exceed 49% for the first 5 years after which it will be as
per the extant policy.
vii) Corporate governance of NOFHC: At least 50% of the Directors of the NOFHC
should be independent directors. The corporate structure should not impede effective
supervision of the bank and the NOFHC on a consolidated basis by RBI.
viii) Prudential norms for the NOFHC: The prudential norms will be applied to
NOFHC both on stand-alone as well as on a consolidated basis and the norms would
be on similar lines as that of the bank.
ix) Exposure norms: The NOFHC and the bank shall not have any exposure to the
Promoter Group. The bank shall not invest in the equity/ debt capital instruments of
any financial entities held by the NOFHC.
x) Business Plan for the bank: The business plan should be realistic and viable
and should address how the bank proposes to achieve financial inclusion.
xi) Other conditions for the bank:
The Board of the bank should have a majority of independent Directors.

The bank shall open at least 25 per cent of its branches in unbanked rural
centres (population up to 9,999 as per the latest census)
The bank shall comply with the priority sector lending targets and sub-targets
as applicable to the existing domestic banks.
Banks promoted by groups having 40 per cent or more assets/income from
non-financial business will require RBIs prior approval for raising paid-up
voting equity capital beyond `10 billion for every block of `5 billion.
Any non-compliance of terms and conditions will attract penal measures
including cancellation of licence of the bank.
xii) Additional conditions for NBFCs promoting/converting into a bank:

Existing NBFCs, if considered eligible, may be permitted to promote a new bank or
convert themselves into banks.
Procedure for RBI decisions: At the first stage, the applications will be screened
by the Reserve Bank. Thereafter, the applications will be referred to a High Level
Advisory Committee, the constitution of which will be announced shortly. The
Committee will submit its recommendations to the Reserve Bank. The decision to
issue an in-principle approval for setting up of a bank will be taken by the Reserve
Bank. The validity of the in-principle approval issued by the Reserve Bank will be one
year. In order to ensure transparency, the names of the applicants will be placed on
the Reserve Bank website after the last date of receipt of applications.
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Bankers Digest 2013
Banking Laws (Amendment) Act 2012 has been passed in the Lok Sabha on 18th
December 2012 and the salient features of the bill are as under:
i) Forward Markets Contract: The passage of the bill was facilitated by the
removal of a controversial Forward Market's Contract clause that would have allowed
banks to enter into future trading of commodities. Very few banks were keen on
trading in commodities and some felt that the clause had been incorporated to
provide banks a level playing field with corporate giants.
ii) Control: The amendments empower RBI to inspect books of conglomerates,
make board and top management appointments in banks and control transfer of
large chunks of shares.
iii) Voting Rights: The bill also allows investors to have voting rights with a higher
cap of to 26% from the existing 10% in case of private sector banks and 10% from
1% at present in case of public sector banks. Existing banks will gain as their
strategic shareholders will be encouraged by the move to increase voting rights.
iv) Issuance of Rights/Bonus shares: The amendment will facilitate issuance of
Rights/Bonus shares making nationalized banks on par with private sector banks in
serving the shareholders.
v) Mergers & Acquisitions (M&A): The increased voting rights to investors,
commensurate with their shareholding in existing banks, would help both private and
public sector banks to get more foreign investors and help in expanding their capital
base. The bill also seeks to exempt certain M&As, such as peer group mergers, from
the purview of the Competition Commission of India (CCI). However, it was clarified
that the banking sector will not be outside the CCI's purview.
Cheque Truncation System (CTS) is a new system of clearing implemented in the
National Capital Region (NCR) New Delhi and Chennai. It is the process in which the
physical movement of cheque within a bank or between banks and the clearing
house is curtailed, being replaced in a whole or part, by electronic records (images)
for further processing and transmission. It improves faster reconciliation of
inter/intra bank accounts besides saving considerable man-hours and enables the
banks to improve operational efficiency. However, domestic instruments, where both
presenting and drawee banks are the same are not allowed in the CTS. All
Government cheques and all instruments which fail in Image Quality Assessment
(IQA) test will have to be physically handed over to the Paying Bank. To facilitate the
transformation to an image based processing scenario, cheque leaves are required to
be image friendly and uniform. CTS-2010 complaint cheques are designed uniformly
in terms of size, paper quality and fields such as the MICR band, signature and date
details. Besides security features such as watermarks, and the banks logo are also
standardized in the new cheque leaves. RBI directed all banks to issue cheques
confronting to CTS-2010 standard with uniform features w.e.f. 1st April 2012 in
northern and southern grids and across the country by 1st April 2013. The
introduction of new cheque standards was warranted on account of several
developments such as growing use of multi-city and payable at par cheques,
increasing popularity of speed clearing and implementation of grid based cheque
truncation system for image based cheque processing etc. Now, CTS is extended to
all the MICR centres in a phased manner with the introduction of Grid Based Cheque
Truncation clearing.
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Bankers Digest 2013
Credit Information Bureau India Limited (CIBIL): It is Indias first credit

information bureau and provides the information to its members in the form of Credit
Information Report (CIR). It is a repository of information, which contains credit
history of commercial and consumer borrowers. The members of CIBIL are banks,
NBFCs and Housing Finance Companies who provide borrower data to CIBIL. At
present the number of members crossed 800 with a database of 135 million
borrowers. CIBIL collects and maintains records of an individuals payments
pertaining to loans and credit cards from banks and other lenders, on a monthly
basis. Members are provided access to CIBIL to generate CIR and CIBIL levy charges
for the same. The CIBIL score is an objective numeric summary of the credit report
generated on an individual. It takes a snapshot of a consumers CIR and with the use
of advanced analytics moulds the information into a 3-digit number representing the
probability that a consumer will default on a credit facility over the next 12 months.
The possible score ranges between 300 to 900. Obtaining CIR from CIBIL is
mandatory before sanctioning credit limits to borrowers. There are four major factors
that affect the scores of an individual.

The payment history has a significant impact on the score. Hence, if one has
missed the payments on any of his existing loans, over the last couple of
years, the score is likely to be negatively affected indicating that the serving
of existing obligations may be difficult.
High utilization of credit limits also play a vital role in arriving credit score of
an individual.
A higher concentration of home loans or secured loans is likely to be more
favourable for the score than a large number of unsecured loans. More the
number of unsecured loans with high utilization, larger are the payments
resulting from its high rate of interest and consequently lower would be the
score despite satisfactory payment track.
Credit Hungry behavior - many applications for loans, indicates that the
debt burden is likely to, or has increased and one is less capable of honoring
any additional debt and is likely to negatively impact the score.
It enables the lending institutions to take informed decisions while according credit
sanctions. In the post implementation of CIBIL, it is observed that the default rate in
credit card receivables have gone down due to issuers exercising stricter due
diligence while sanctioning credit cards. With CIBILs help, banks have caught many
frauds like individuals trying to avail multiple loans on the same house, vehicle etc.
Sharing of information through CIBIL is more or less stabilized and it is the
responsibility of all of us to take it forward by creating awareness among the
individuals across the country.
Central Registry of Securitization Asset Reconstruction and Security
Interest of India (CERSAI): It is a government company licensed under section 25
of the Companies Act 1956, has been incorporated to operate and maintain the
Central Registry under the provisions of SARFAESI Act 2002. The objective of
CERSAI is to prevent frauds in loan cases involving multiple lending from different
banks on the same immovable property. Under this, the lenders should file details of
the charge over any property with CERSAI within 30 days from the date of creation.
The Central Registry is also an important for the development of the home loan
market as lenders can now be sure that the property offered as a security has a clear
title. Unlike CIBIL, where borrower information is accessible only by lenders, the
records maintained by the Central Registry will be available for search by any lender
or any other person. The scheme is operational w.e.f. 31.03.2011 where central
database will contain details of all properties against which loans have been
advanced by Banks/Financial Institutions. The lending institutions are required to
make a payment of `250/- & `500/- for creation and modification of security interest
to CERSAI for the loans up to `5 lakh & above `5 lakh respectively.
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Bankers Digest 2013
Kisan Credit Card (KCC): The objective of the scheme is to provide adequate and
timely credit support to the farmers under single window for their cultivation and
other needs including consumption requirements. All farmers, tenant farmers, share
croppers and SHGs and Joint Liability Groups with the above categories are eligible
to avail credit facilities under KCC. The short term component of KCC limit is in the
nature of revolving cash credit facility and the farmer allowed to draw using cheque
book, ATM/Debit Card, Mobile based transfers, Business Correspondents and Point of
Sale Terminals. The credit limits under this scheme may be fixed for first year - scale
of finance plus 10% of limit towards post harvest and consumption requirements
plus 20% of limit for repairs/maintenance of farm assets, crop insurance etc. The
limit will be fixed for successive years at first year limit plus 10% increase every year
towards cost escalation. Maximum Permissible Limit will be arrived taking into crop
loan needs for the 5th year plus the estimated long term loan. The validity period of
the card is 5 years. However, branches are advised to obtain fresh letter from the
borrower for every 3 years. The repayment period will be one year. The account
need not come to Zero or Credit balance. The account is said to have been repaid if
the credits are equal to original principal amount, interest and other charges during
the season, within a period of one year from the date of first drawal of limit in Kharif
or Rabi. The KCC holders are eligible to avail Interest Subvention/Prompt Repayment
Incentive as per the guidelines in force. Collateral security may be obtained at the
discretion of the Bank for loan limits above `1 lakh in case on non-tie-up and above
`3 lakh in case of tie-up advances. There should be no processing fee up to a card
limit of `3 lakh. Banks are advised to issue Rupay Kisan Card to all the KCC holders
where ATMs are already been installed.
Base Rate: Banks are not allowed to lend below Base Rate w.e.f. 01.07.2010 except
certain categories such as Differential Rate of Interest (DRI) advances, Loans to
banks own employees, Loans to banks depositors against their own deposits, loans
to tribals/physically challenged persons, Interest Subvention Schemes viz., Crop
loans, Export credit and Restructured loans. The final lending rates include the Base
Rate plus variable or product specific operating expenses, credit risk premium and
tenor premium. However, Banks may charge interest at the rates prescribed under
SHG schemes, National Schedule Tribes Finance and Development Corporation
(NSTFDC) and National Handicapped Finance and Development Corporation (NHFDC)
to the extent refinance is available. Banks are required to fix Base Rate duly taking
Cost of Deposits / Funds, Negative carry in respect of CRR and SLR, Unallocated
Overhead Costs and Average Return on Net Worth in to consideration.
Floating Rate Deposits - Bank Term deposits are the most preferred among the
variety of investment options. However, of late the Bank depositors found
unattractive as the real rate of return is low and sometimes negative since they get
interest at contracted rate only while the interest rates are on the rise. Asset Liability
management is the greatest challenge for the Banks as majority of the banks
liabilities are of short term while the repayments of assets spread over relatively
longer tenure i.e. beyond 36 months. Further, the present term deposit interest rate
scenario is acting as disincentive for long term investors since the interest rate on
deposits of beyond 2/3 years is low compared to short term deposits. Normally, the
retail borrowing happens at floating interest rates whereas their deposits with banks
attract fixed rate exposing them to interest rate risk. In the above backdrop, Banks
have been examining the feasibility of introduction of floating rate term deposits,
wherein the rate of interest keeps changing depending on the market rates. The
interest rate is reset with reference to a benchmark/anchor rates which are directly
observable and transparent to the customer. Floating rate term deposit looks ideally
attractive for the retail investors. On the flip side, since the interest rate is floating,
the income from term deposits may be adversely impacted when the rates fall. The
floating deposit rate concept helps banks to manage their assets and liabilities
better. At present, the Floating Interest Rate Deposits are being offered select banks
only and the concept is yet to take momentum in India.
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Bankers Digest 2013
Aadhaar Project: The Unique Identification Authority of India (UIDAI) was

established by Government of India with an objective to implement Multipurpose
National Identity Card (UID Card) in India. It is aimed to eliminate duplicate/fake
identities and to put hassle-free, cost effective verification/authentication system in
place thereby to save considerable resources of various User Departments as well as
beneficiaries at large. Central / State Governments and Public Sector Banks are
acting as Registrars for AADHAAR project. The Registrar or its agents collect details
of Demographic information and Biometric details such as Facial Image (Photo),
Finger Prints (10) and iris scan of the applicant to establish individuals uniqueness.
De-duplication exercise ensures that nobody gets more than one number and in case
a person already enrolled approaches the registrar, his biometric parameters will be
run through the database and if matches his application will be rejected right away.
It is a 12 digit identity code and will remain a permanent identifier. It gives a big
push to the governments financial inclusion agenda and provides strong foundation
to deliver better services and improve the operational efficiency of the system.
Swavalamban Scheme: The New Pension System (NPS) is aimed to inculcate the
saving habit and to provide pension benefit to the citizens through systematic
savings plan. Under this, the government has made a provision to pay an incentive
of `1000 per year (up to 2014) to every NPS account opened subject to the
minimum contribution of `1000 and maximum `12000 per annum. The age of the
subscriber should be between 18 to 60 years. The subscriber is required to invest
minimum 40% accumulated savings to purchase a life annuity from any IRDA
regulated insurance company, in case where he opts for exit at the age of 60. If the
subscriber prefers to exit before 60 years, he is required to invest minimum 80% of
accumulated savings in annuity policy. In an unfortunate event, the nominee
receives 100% of the NPS pension wealth in lump sum. However, the exit would be
subject to the overriding condition that the amount of pension wealth to be
annuitized should be sufficient to yield a minimum amount of `1000 per month. If
not, the percentage of pension wealth to be annuitized would be increased so that
the pension amount becomes `1000 per month, failing which the entire pension
wealth would be subject to annuitisation.
New Pension Scheme is introduced for Bank Employees in the year 2010 under
which Bank employees are eligible for Defined Contributory Pension Scheme (DCPS).
It is mandatory that all employees who have joined the service of the Bank or after
1st April 2010 enroll themselves as members of this scheme which entails obtaining
of Permanent Retirement Account Number (PRAN) from NSDL who are the Central
Record Keeping Agency. Under this scheme, the members shall contribute 10% of
the Basic pay and Dearness Allowance towards the DCPS and the bank shall make a
matching contribution in respect of these employees. The scheme is governed by
Pension Fund Regulatory and Development Authority (PFDRA) and the funds are
managed by approved fund managers from public and private sector with proven
track record. Employees would be free to carry their PRANS to new employments or
continue as individuals after change of employment status.
Rajiv Gandhi Equity Savings Scheme (RGESS) is a tax saving scheme announced
in the Union Budget 2012-13 and the scheme is designed exclusively for the first
time retail individual investors in securities market, whose gross total income for the
year is less than or equal to `10 lakh. The investor would get under Section 80CCG
of the Income Tax Act, a 50% deduction of the amount so invested, up to a
maximum investment of `50000, from his/her taxable income for that year. The
objective of the Scheme is to encourage the flow of savings and to improve the
depth of domestic capital markets. This would help in promoting an equity culture in
India. The Scheme aims at widening the retail investor base in the Indian securities
markets and also furthers the goal of financial stability and financial inclusion.
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Bankers Digest 2013
Corporate Governance is the system by which companies are directed and

controlled by the Management in the best interest of all stakeholders with greater
transparency and better and timely financial reporting. It encompasses commitment
to values / ethical business conduct to maximize shareholder values on a sustainable
basis, while ensuring fairness to all stakeholders including customers, employees,
investors, vendors, Government and society at large. Sound corporate Governance is
therefore critical to enhance and retain investors` trust. Ethical leadership is need of
the hour to conduct the business on sound lines. What is ethical but not legal should
not be done and at the same time what is legal but not ethical should not be
practiced. Corporate Governance in the Public Sector cannot be avoided and for this
reason it must be embraced. Good Corporate Governance, Good Government and
Good Business go hand in hand. Openness, integrity and accountability are the key
elements of Corporate Governance for any corporate entity.
Commercial Paper (CP): It is a short-term instrument to enable non-banking
companies to borrow short-term funds through liquid money market instruments.
CPs is therefore part of the working capital limits as set by the maximum permissible
bank finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to
time stipulating term, eligibility, limits and amount and method of issuance. CP can
be issued for maturities between a minimum of 7 days and a maximum up to one
year from the date of issue. The maturity date of the CP should not go beyond the
date up to which the credit rating of the issuer is valid. CP can be issued in
denominations of `5 lakh and multiples thereof. Amount invested by a single
investor should not be less than `5 lakh (face value). It is mandatory that CPs should
be rated by credit rating agencies. However, recently RBI diluted the minimum rating
norm from A-2 to A-3 to enable more companies to tap this route to meet their short
term funding requirements for their operations. In a bid to make CPs attractive, the
RBI has allowed issuers to buyback these instruments through the secondary market
before maturity. It attracts stamp duty.
Certificates of Deposits (CDs): It is a negotiable money market instrument and
issued in dematerialized form or as a Usance Promissory Note, for funds, deposited
at a bank or other eligible financial institutions to raise short-term resources within
the umbrella limit fixed by RBI. CDs may be issued at a discount on face value. CDs
differ from term deposit as they involve the creation of paper, and hence have the
facility for transfer and multiple ownerships before maturity. Banks use the CDs for
borrowing during a credit pickup, to the extent of shortage in incremental deposits.
Minimum amount of a CD should be one lakh and in multiples thereof. The maturity
period of CDs should be not less than 7 days and not more than one year. However
FIs are allowed to issue CDs not exceeding 3 years from the date of issue. Banks
have to maintain the appropriate reserve requirements (CRR/SLR) on the issue price
of the CDs. It attracts stamp duty. Banks/FIs cannot grant loans against CDs.
Asset and Liability Management RBI Guidelines: Of late, it is observed that
PSBs have been accepting Bulk Deposits/Certificate of Deposits route to increase
balance sheet size at very high interest rates, adversely affecting the profitability
besides exposing the banks to ALM Risk. RBI directed banks not to accept Bulk
Deposits beyond 10% of the total deposits and the total of Bulk Deposits &
Certificates of Deposits should not exceed 15% of total deposits of the bank at any
given point of time. An appropriate time-bound strategy for reduction of such
existing bulk deposits should be put in place to achieve the same by March 2013.
Securitization is an effective tool to reduce the mismatches in the maturities of
assets and liabilities. It is a financing technique that involves pooling and re-packing
of illiquid financial assets in to marketable securities. There are six players viz.,
Borrowers, Lending Banker (who becomes an originator for the Securitization
transaction), Special Purpose Vehicle (SPV), Credit Rating Agency, Investors and
Service Providers. The process of securitization involves identification of financial
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Bankers Digest 2013
assets, rating of these assets by the rating agency, creation of a SPV for handling the
securitization transaction, assignment of future receivables in favour of the SPV,
issuance of marketable securities based on these underlying financial assets and
selling the same to the investors. The service providers recover the amount
periodically and remit to the SPV and who in turn pass the benefit to the investors.
Treasury Management - Banks not only lend money to customers but also invest
in securities such as Bonds and Debentures of Government as well as Corporates.
These instruments are easily tradable in the capital and money market. The
tradability of securities makes investments an attractive option for banks for
deployment of their funds. Further, banks buy securities not only to trade but also to
hold them till maturity to take advantage of the attractive returns with relatively
lower risk. Banks are allowed to invest in shares of companies. However, the
volumes are low due to associated high risk besides regulatory restrictions. The
investment portfolio of the banks broadly divided into three groups viz.,
i) Trading Book Securities purchased with the intention of selling them within 90
days are held in the trading book. Trading opportunities arise in the market on
account of fluctuation in interest rates and arbitrage opportunities.
ii) Available for Sale (AFS) Securities which are bought with the intention of
selling them but not necessarily within 90 days is considered to be AFS securities.
They are also part of the trading portfolio of the bank but only the time frame is
different. Both the trading and AFS securities have to be Marked to Market every
quarter while finalization of quarterly results.
iii) Held to Maturity (HTM) These securities are meant to be held till their date
of maturity and the purpose investing in them is to earn reasonable steady income.
These securities are carried in the books at cost or purchase price till maturity.
Hence, HTM securities need not be Marked to Market as the bank is certain of
receiving the maturity value on the specified date. Banks are not allowed to shift
securities freely from trading and AFS to the HTM book as this may lead to
overstating of profit figures. However, banks can opt for shifting only once in a year
to adjust their overall portfolio.
Reserve Management As a measure to protect the interest of the depositors, RBI
made it mandatory for all banks to maintain certain % of their demand and time
liabilities in Current Account with RBI is called as Cash Reserve Ratio. At present the
stipulated CRR is 4.25%. Regulator uses CRR for dual purpose as liquidity reserve
and as a monetary policy tool. On weekly basis, Banks have to report their daily
deposit position and balances with RBI to enable them to monitor maintenance of
CRR. Similarly, banks are advised to invest in securities issued and guaranteed by
government known as Statutory Liquidity Ratio (SLR). At present SLR requirement is
23% of demand and time liabilities of bank. It is another liquidity cushion. The SLR
securities are part of the investment portfolio of the bank. The HTM book primarily
consists of SLR investments which have to be held permanently.
Repo is a money market instrument, which enables collateralized short term
borrowing through sale operations in debt instruments. It is also called a ready
forward transaction as it is a means of funding by selling a security held on a spot
(ready) basis and repurchasing the same on a forward basis. Generally, repos are
done for a period not exceeding 14 days. Repo rate is the rate at which banks
borrow rupees from RBI and a reduction in Repo rate helps the banks to get funds at
a cheaper rate and increase in Repo rate makes the borrowing more expensive.
Reverse Repo is the mirror image of a repo. Under reverse repo, securities are
acquired with a simultaneous commitment to resell. Hence whether a transaction is a
repo or a reverse repo is determined only in terms of who initiated the first leg of the
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Bankers Digest 2013
transaction. When the reverse repurchase transaction matures, the counter-party

returns the security to the entity concerned and receives its cash along with a profit
spread. Reverse Repo rate is the rate at which RBI borrows money from banks. An
increase in Reverse Repo rate can cause the banks to transfer more funds to RBI and
similarly reduction of rate may dampen the interest of the banks to lend to RBI.
Liquidity Adjustment Facility (LAF): It is a mechanism for liquidity management
through combination of repo operations, export credit refinance facilities and
collateralized lending facilities, supported by open market operations of the RBI at
set interest rates. RBI manages its liquidity in the market through the operation of
LAF as part of its monetary policy and money supply targets. It undertakes reverse
repo transactions to mop up liquidity and repos to supply liquidity in the market. The
LAF transactions are currently being conducted on overnight basis.
Call Money Markets: Call and notice money market refers to the market for short
term funds ranging from overnight funds to funds for a maximum tenor of 14 days.
Under Call money market, funds are transacted on overnight basis where as in case
of notice money market; funds are transacted for the period of 2 days to 14 days.
Coupon Rate: It is a rate at which interest is paid, and is usually represented as a
percentage of the par value of a bond. It refers to the periodic interest payments
that are made by the borrower (who is also the issuer of the bond) to the lender (the
subscriber of the bond) and the coupons are stated upfront either directly specifying
the number (e.g.8%) or indirectly tying with a benchmark rate (e.g. MIBOR+0.5%).
Zero Coupon Bond / Deep Discount Bond: The bond is issued at a discount to its
face value, at which it will be redeemed. When such a bond is issued for a very long
tenor, the issue price is at a steep discount to the redemption value. The effective
interest earned by the buyer is the difference between the face value and the
discounted price at which the bond is bought. The essential feature of this type of
bonds is the absence of intermittent cash flows.
Adjusted Net Bank Credit (ANBC) denotes Net Bank Credit plus investments
made by banks in non-SLR bonds held in HTM category. However, investments made
by banks in the Recapitalization Bonds and Inter-bank exposures will not be taken
into account for the purpose of priority sector lending targets/sub-targets.
Internal Capital Adequacy Assessment Process (ICAAP): This is intended to
ensure that the capital held by the Bank is commensurate with the Bank's overall
risk profile. The ICAAP takes into account effectiveness of Bank's risk management
system in identifying, assessing, measuring, monitoring and managing various risks.
ICAAP comprises all of the Bank's procedures and measures designed to ensure
appropriate definition and measurement of risks and appropriate level of internal
capital in relation to Bank's risk profile.
Forensic Audit is defined as the application of accounting methods to the tracking
and collection of forensic evidence, usually for investigation and prosecution of
criminal acts such as embezzlement or fraud. It involves examination of legalities by
blending the techniques of propriety, regularity and investigative and financial
audits. The objective is to find out whether or not true business value has been
reflected in the financial statements and in the course of examination to find whether
any fraud has taken place. Forensic Auditors has a unique job because the
responsibility involves the integration of accounting, auditing, and investigation
skills. It involves thinking beyond the numbers and out of the box. It essentially
presumes the existence of fake transactions. It requires a more proactive, skeptical
approach in examining the books of accounts.
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Bankers Digest 2013
Branch Authorization Policy: The opening of branches by domestic scheduled

commercial banks (other than RRBs) in Tier-1 centres (population of one lakh &
above as per Census 2001) will continue to require prior permission of the Reserve
Bank. While issuing such authorization, the Reserve Bank will continue to factor in,
among others, whether at least 25 per cent of the total number of branches to be
opened during a year is proposed to be opened in unbanked rural centres. However,
domestic scheduled commercial banks are permitted to open branches at all centres
other than Tier-1 without permission from RBI, subject to reporting. Government
desires to have bank branches at all villages where the population is 10000 & above
and also in the villages having population is 5000 & above and where there is no
bank branch within a radial distance of 5 KMs by September 2012.
Monetary Policy: Refers to the use of official policy instruments, under the control
of the Central Bank to regulate the availability, cost and use of money and credit
with the aim of attaining optimum level of output and employment, price stability,
healthy balance of payment position and any other goals set by the government. In
an expansionary monetary policy, money supply increases causing an expansion in
aggregate demand through lower interest rates. This stimulates interest sensitive
spending on investment for manufacture of goods, housing, export, business etc.
and in turn, acting through multiplier leads to a rise in gross domestic product. The
reverse process takes place when monetary policy is tightened. However, in a fully
employed economy monetary expansion would primarily raise prices and nominal
gross domestic product with little effect on real GDP as the higher stock of money
would be chasing the same amount of output.
Indian Rupee Symbol: After years of missing unique identity, India got a
distinct symbol to distinguish from Pakistan, Nepal, Srilanka and Indonesia countries
whose currencies are designated as Rupee or Rupiah which is similar to our currency
i.e. Rupee. Now Indian rupee joined the select club of currencies such as the US
Dollar, Euro, British Pound and Japanese Yen that have a clear distinguishing identity
and it is considered as a step towards internationalization of Indian Rupee. Though
the symbol is not be printed or embossed on currency notes or coins, it would be
included in the Unicode Standard and major scripts of the world to ensure that it is
easily displayed and printed in the electronic and print media. After incorporation in
the global and Indian codes, the symbol would be used by all individuals and entities
within and outside the country. The new symbol portrays the nation's strength &
stability, both politically and economically and acts as Brand Ambassador.
It is the Indian domestic card payment network set up by National
Payments Corporation of India (NPCI) at the behest of banks in India. Reserve Bank
permitted to issue RuPay cards which are accepted for payment at all ATMs. The
Logo is a coinage which indicates coming together of Rupee and Payment to
announce the launch of a new world-class retail payment system in India. The
orange and green arrows indicate a nation on the move and a service that matches
its pace. The Indian colors connote that its deeply rooted in India. The color blue
stands for tranquility and peace which is precisely the sense that people must get
from the brand RuPay. The bold and unique typeface grants solidity and symbolizes
a stable entity. Currently the merchant fee is significantly high ranging from 1 to
1.50% on account of inbuilt charges of VISA / Master and Banks. The Rupay system
lowers the cost of the transactions for shops and enables them to adopt electronic
mode of payments. In a way it reduces the overall transaction costs for the banks,
merchants and nation as a whole. The other objective of Rupay is to develop
appropriate products to meet the financial inclusion needs and to provide card
payment service option to many banks with simplified norms. In the long run, it
paves the way to migrate from cash transactions to electronic payments system in
the country which will improve the efficiency in the entire eco system.
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Bankers Digest 2013
Whistle Blower Policy: In compliance with listing agreement relating to Corporate

Governance, all banks are required to have a Whistle Blower Policy to enable the
staff to inform the unethical behavior, actual or suspected fraud or violation of law or
improper practice of the staff members of all cadres, direct to the Board of the Bank
without informing their superiors. The employee shall make a written disclosure to
the Audit Committee of the Bank in a closed/secured envelope along with supportive
documents. The identity of the complainant will not be revealed. In case where the
complainant is being victimized for filling a complaint, the complainant can approach
CMD/ED for redressal. It provides protection to the Whistle Blowers from unfair
termination/harassment from the superiors. Audit Committee of the Bank reviews
the Whistle Blower mechanism at regular intervals.
Money Mules: An individual with bank account is recruited to receive cheque
deposits or wire transfers and then transfer these funds to accounts held on behalf of
another person or to other individuals is called Money Mules. The fraudsters adopt
variety of methods including spam e-mails, advertisements on genuine recruitment
web sites, social networking sites, instant messaging and advertisements in
newspapers. Many times the address and contact details of such mules are found to
be fake and making difficult for enforcement agencies to locate the account holder.
RBI advised the banks to strictly adhere to the guidelines on KYC/AML/CFT to protect
our customers from misuse by such fraudsters.
Core Banking Services (CBS): It is an integrated solution where entire data of
branches is stored in a central server and all the transactions of the branches will be
done through this server. All back office activities such as Interest calculations,
Levying Service Charges, Parameter Setting / Updation, Generation of Reports /
Returns, Providing MIS, Start of Day and End of Day operations are undertaken by
the central server. The customers data can be accessed from various outlets at
various geographical centers. It enables the bank to provide triple A services (Any
Branch, Any Time, Any Where) to the customers through Multiple Delivery Channels
viz., Branches, ATMs, Mobile, Lobby, Corporate Terminals, Kiosks and Internet
Banking. It enabled the banks to introduce technology embedded value added
products besides implementing Data Warehousing, Data Mining and Customer
Relationship Management concepts. CBS is an opportunity to banks to improve
customer service as well as operational efficiency of the banks. However, it is an
imperative for banks to have a re-look to the existing systems and procedures to suit
the changed environment.
Liberalized Remittance Scheme: RBI introduced the scheme as a step towards
further simplification and liberalization of the foreign exchange facilities available to
resident individuals. As per the Scheme, resident individuals may remit up to USD
200000 per financial year (April to March) for any permitted capital and current
account transactions. This limit also includes remittances towards gift (USD 5000 per
remitter/donor per annum) and donation (USD 5000 per remitter/donor per annum)
by resident individual. Under the Scheme, resident individuals can acquire and hold
immovable property or shares or debt instruments or any other assets outside India,
without prior approval of the Reserve Bank. Individuals can also open, maintain and
hold foreign currency accounts with banks outside India. In addition, the existing
facility of release of exchange by Authorized Dealer up to USD 10000 or its
equivalent in a financial year for one or more private visits to any country will
continue to be available on a self declaration basis. It is mandatory to have PAN
number to make remittances under the Scheme. Further, Resident individuals are
allowed to acquire equity shares of a foreign entity by way of/under i) qualification
shares ii) professional services rendered and iii) ESOP scheme.
Reverse Mortgage: The genesis of Reverse mortgage can be traced to developed
countries where Silver Line segment (people above 65 years group) constitutes
major chunk of population on account of higher standards of living, better access to
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Bankers Digest 2013
health care and higher life expectancy. The ever-rising cost of living and health care
has prompted Banks/Financial Institutions to introduce the Reverse Mortgage in the
US, UK and Australia. It works like a traditional mortgage loan, but only in reverse
direction. Under this borrower does not make regular payments to a lender; instead
he receives payments from the lender. It supplements the income of the Senior
Citizens, particularly to those whose pension or income is low. Instead of being
dependent on their children/relatives for monetary support, this would be an ideal
option for elderly people to continue with a graceful lifestyle. The borrower need not
repay the loan during their life time and can also continue to live in their house
during their life time. Thereafter, the legal heirs have the option to repay the bank
loan and redeem the property. Otherwise, the bank will sell the property and
liquidate the loan. The scheme is gaining momentum slowly.
International Financial Reporting Standards (IFRS): Convergence to IFRS will
require significant alterations to financial accounting and reporting processes and
systems. The potential benefits of an integrated global capital market regulated by a
single world-wide financial reporting language would be long lasting and it is a big
step towards improving the efficiency of international capital markets. Regulators will
benefit from greater consistency and quality of information. It also enhances the
communication of the Banks financial results and position together with other
performance indicators to analysts, investors, customers as well as other
stakeholders. It also benchmarks the entity against its global peer group gaining a
broader and deeper understanding of its relative strengths by looking beyond the
country and regional bench marks. It is proposed that the Corporates are to be
moved to IFRS in a phased manner.
Banking Ombudsman (BO) Scheme - It cover redressal of grievances against
deficiency in banking services viz., deposits, loans, debit/credit cards, remittances
(DD/PO/ECS/NEFT/RTGS) etc. BO undertakes the cases where the value of dispute
does not exceed `10 lakhs. The complaints can be made in any form including
online (email) and the same will be processed without any fee. The complainant is
required to take up the matter with the concerned branch for redressal of the
grievance and wait for 30 days and if not addressed he can approach the BO. He
should not have filed a complaint before any other forum or court or consumer forum
or arbitrator on the same subject matter and be pending when he approaches the
B.O. On receipt of the complaint, notice will be sent to the bank advising the bank to
settle the grievance within fifteen days from the date of receipt of the notice or else
submit version and also attend a conciliation meeting at the office of the BO. If the
grievance is not settled by conciliation, it will be taken up for passing an award. The
complainant will have to accept award within fifteen days of receipt of the award.
The time limit for implementation of award is 30 days from the date of such receipt
of acceptance letter. However, Bank can approach Reviewing Authority (Deputy
Governor RBI). Compensation for mental agony, reputation loss etc., will not be
considered as per the provisions of the Scheme.
Right to Information Act 2005 - The act has come into effect from October 12,
2005. This Act is meant to give to the citizens of India access to information under
control of public authorities to promote transparency and accountability in these
organizations. However, this mechanism is meant for seeking information only and
not for making complaints. Under this Act, Citizens of India will have the right to
make the request for information in writing, clearly specifying the information
sought. The application should accompany a fee of `10/- either in cash or DD/PO.
The application for request should give the contact details (postal address, telephone
number, fax number, email address) so that the applicants can be contacted for
clarifications or the information. All Public Sector Banks are covered under this act
and they are required to furnish the information sought by the citizens of India.
Branch Managers are designated as Central Assistant Public Information Officers
(CAIPO) and they have to forward the requests received to the Zonal Managers
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Bankers Digest 2013
concerned, who are designated as Central Public Information Officers (CPIO). The
ultimate responsibility lies with CPIO to get the matter expedited within stipulated
time of 30 days. While disposing off the request under RTI Act, CPIO is required to
mention clearly the time limit of 30 days and address of the Appellate Authority to
the complainant. The Appellate Authority is the Senior Central Public Information
Officer, who will be one of the General Managers at Head Office.
Unique Customer Identification Code (UCIC): The increasing complexity and
volume of financial transactions necessitate that customers do not have multiple
identities within a bank, across the banking/financial system. Government of India
has proposed the introduction of UCIC for customers across different banks/financial
institutions for setting up a Centralized KYC Registry. RBI advised the banks to
initiate steps for allotting UCICs for their customers by providing them a relationship
number. This enables the banks to identify customers, track the facilities availed,
monitor the financial transactions in a holistic manner.
The India Inclusive Innovation Fund (IIIF): Traditional innovative models have
often focused more on addressing the wants of the affluent, rather than the needs of
the deprived, a tendency that directs the best human and financial resources away
from solving more basic developmental needs. In the above backdrop, National
Innovation Council has initiated steps to set up Inclusive Innovation Fund, which
provides risk capital funding to enterprises that create and deliver technologies and
solutions aimed at enhancing the quality of life at the Bottom of the Pyramid
without compromising on economic success. It creates a new Indian model of
innovation - one that bridges Growth and Equitability. The fund size is targeted
around `500 to `5000 crore with contributions from Government, Banks, Insurance
companies, Financial institutions, Public/Private sector companies, and High
Networth Individuals.
IIFCL: India Infrastructure Finance Company Limited (IIFCL) was incorporated
under the Companies Act as a wholly-owned Government of India company in 2006
with a vision to provide innovative financial solutions to promote and develop world
class infrastructure in India. The company is providing long term financial assistance
to commercially viable infrastructure projects in designated sectors like Roads and
Highways, Power, Airports, Railways, Gas Pipelines, Port, Urban Infrastructure, Cold
Storage, Warehousing, Fertilizer Manufacturing etc., with overriding priority to PPP
projects. IIFCL provides direct financing to companies as senior as well as
subordinate debt. IIFCL also provides refinance to banks and other eligible
institutions for their loans to infrastructure projects subject to eligibility criteria.
Besides the above, it provides Takeout Finance to Banks to enable them to address
their Asset Liability Mismatch and exposure constraints. This helps the banks to free
up their funds for investing in newer infrastructure projects. Further, IIFCL
undertakes partial credit guarantee to the project bond issues so as to enhance its
rating level thereby enabling the channelization of long term funds from investors
like Insurance companies and Pension funds.
Permanent Account Number (PAN): As per section 139 (4A) of Income Tax Act
1961, all individuals whose income exceeds the tax free limit and in case where the
person carrying a business, the sales turnover or gross receipts exceeds 5 lakh in a
year are required to have PAN and the same is to be quoted in all returns and
correspondence with IT authorities. As per the extant guidelines, it is mandatory to
furnish PAN number for all transactions viz., purchase/sale of immovable property of
`5 lakh and above, purchase/sale of motor vehicles (other than 2 wheeler), security
transactions of above `1 lakh, purchase/sale of shares/debentures/bonds of
`50000/- & more and bank transactions (cash) of `50000/- & above and payment to
hotels exceeding `25000/- at any one time.
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Bankers Digest 2013
Shadow Banking is relatively a new concept and it refers to the Non Banking Financial
Institutions that perform some banking functions. Shadow banking entities operate outside the
regular banking system and yet engage in bank-like activities such as accepting funding with
deposit-like characteristics, performing maturity and/or liquidity transformation and using
direct or indirect financial leverage. These typically include, pension funds, investment banks,
hedge funds, money market funds, finance, leasing and factoring companies, asset
management companies etc. Shadow banking institutions are typically intermediaries
between investors and borrowers. Shadow banking activities are useful part of the
financial system and they channel resources towards specific needs more efficiently on
account of increased specialization. These activities are exposed to similar financial risks as
banks. Some of these risks can be systemic in nature due to the complexity of shadow
banking entities and their cross-jurisdictional reach and their links with the regular banking
system. The regulators across the globe are now working in tandem to look into and
understand the activities of the shadow banking system and bring them too under
regulation so as to possibly prevent another global financial crisis in future. Shadow
banking has become the financial regulatory buzzword of 2011.
Doorstep Banking: Extending Banking services like pick up of cash, instruments
and delivery of cash etc., to Corporate Customers / Government Departments / PSUs
/ Individual Customers at their place through Employees / Agents is called Doorstep
Banking. However, banks are not allowed to extend such services to Individual
Customers. Cash collected from the customer should be acknowledged by issuing a
receipt on behalf of the bank. Cash collected from the customer should be credited to
the customers account on the same day or next working day, depending on the time
of collection. Doorstep services should be offered only to KYC compliant customers
and the charges should be prominently indicated on brochures. It is a win-win
situation for both customers and banks.
Wilful Defaulters: As per RBI guidelines, a Wilful Defaulter would be deemed to
have occurred, where the unit has defaulted in meeting its payment / repayment
obligations to the lender even when it has capacity to honour the said obligations or
where the unit has not utilized the finance for the specific purpose for which finance
was availed of but has diverted the funds for other purposes or disposed of or
removed the movable fixed assets or immovable property offered for the purpose of
securing a term loan without the knowledge of the Bank/Lender. It covers all non
performing borrowal accounts with aggregate outstanding balance (funded facilities
and such non-funded facilities converted into funded facilities) of 25 lakhs & above.
The classification of the borrower as Willful defaulter is vested with Committee at
Head Office. However, the borrower will be given reasonable time (15 days) for
making submission to the committee. Bank is required to submit the details of willful
defaulters to RBI and CIBIL. RBI advised all Banks/Financial Institutions not to
extend any additional credit facilities to the Wilful Defaulters and they are debarred
from floating new ventures for a period of 5 years from the date RBI publication and
also liable for criminal proceedings for breach of trust, cheating and wrong
certification under IPC.
External Commercial Borrowings (ECB): It is the borrowings by the Corporates
and Financial Institutions from International markets. ECBs include Commercial
Bank loans, Buyers Credit, Suppliers Credit, Securitized Instruments such as
Floating Rate Notes, Fixed Rate Bonds etc. ECBs are usually available at interest
rate of 100 to 400 basis points above LIBOR (London Inter Bank Offered Rate).
American Depository Receipt (ADR): It is a negotiable certificate of ownership in
the shares of non-American Company that trades in an American Stock Exchange.
ADRs make it convenient for Americans to invest in foreign companies as ADRs carry
prices and dividends in dollars, and can be traded on the US stock exchanges like the
shares of US based companies.
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Bankers Digest 2013
Special Drawing Rights (SDR): It is the International Monetary Funds own

currency. The value of SDRs is set relative to a basket of major currencies. It is used
only among governments and IMF for balance of payments settlement.
Global Depository Receipt (GDR): These are the instruments through, which the
Indian companies raise their resources from international markets. It is a negotiable
certificate issued by a depositary company (normally an investment bank)
representing the beneficial interest in shares of another company whose shares are
deposited with the depository. It is a Dollar denominated instrument, traded on
Stock Exchange in Europe or USA or both and represents publicly traded specified
number of local currency equity shares of the issuing Company.
Foreign Direct Investment (FDI): An investment which is made directly on the
production facilities (either by buying a company or by establishing new operations
of an existing company) of a country by a foreign source, usually a foreign company.
These investments are more enduring than foreign investment in shares and bonds.
Derivatives: A credit derivative derives its value from the credit quality of the
underlying loan or bond or any other financial obligation of an underlying company.
The underlying asset can be equity, index, foreign exchange (forex), commodity or
any other asset. Derivative products initially emerged as hedging devices against
fluctuations in commodity prices and commodity-linked derivatives remained the sole
form of such products for almost three hundred years. The financial derivatives have
become very popular in the recent years. Credit Derivatives are financial
instruments designed to transfer credit risk from the person / entity exposed to that
risk to a person / entity who is willing to take on that risk.
SWAP refers to exchange of one asset or liability for a comparable asset or liability
for the purpose of lengthening or shortening maturities or raising or lowering coupon
rates to maximize revenue or minimize financing costs. This may entail selling one
securities issue and buying another in foreign currency; it may entail buying a
currency on the spot market and simultaneously selling it forward. There are various
types of SWAPs such as Equity swap, Currency swap, Credit swaps, Commodity
swaps, Interest rate swaps etc. These can be used to create unfunded exposures to
an underlying asset since counterparties can earn the profit or loss from actions in
price without having to post the notional amount in cash or collateral. Swaps can be
used to hedge certain risks such as interest rate risk or to wonder on changes in the
expected direction of underlying prices.
Futures & Options: An agreement to buy or sell a fixed quantity of a particular
commodity, currency or security for delivery on a fixed date in the future at a fixed
price. Unlike an option, a futures contract involves a definite purchase or sale and
not an option to buy or sell. It may entail potential unlimited loss. However, Futures
provide an opportunity to those who must purchase goods regularly to hedge against
changes in prices. An arrangement where the rate is fixed in advance for the
purchase or sale of foreign currency at a future date is called forward contract.
Option is a contract, which gives the holder the right but not the obligation. A call
and put option is a right to buy and sell the underlying product respectively.
Factoring and Forfeiting: Factoring is a method where by the factor undertakes to
collect the debt assigned by exporter where as international forfeiting is a method
whereby the exporter sells the export bills to the forfeiter for cash. Forfeiting is
resorted to for export of capital goods on medium terms and long-term credit,
whereas the factoring is mainly short-term trade finance. In respect of forfeiting,
the guarantee by the importer's banker is normally insisted upon whereas in
factoring such guarantee by the importers banker is usually not stipulated.
Forfeiting is without recourse to the seller (exporter), while factoring is undertaken
both with and without recourse to the seller.
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Hot Money: Money held in one currency that is liable to switch to another currency,
in a flash, in response to better returns or in apprehension of adverse circumstances.
Such a flight of money might cause the currencys exchange rate to plunge.
Reserve Money (M0): Currency in circulation + Bankers deposits with the RBI +
Other deposits with the RBI = Net RBI credit to the Government + RBI credit to the
commercial sector + RBIs claims on banks + RBIs net foreign assets +
Governments currency liabilities to the public RBIs net non-monetary liabilities.
M1 - Currency with the public + Demand deposits with the banking system + Other
deposits with the RBI. M2 - M1 + Savings deposits with Post offices. M3 - M1+ Time
deposits with the banking system = Net bank credit to the Government + Bank
credit to the commercial sector + Net foreign exchange assets of the banking sector
+ Governments currency liabilities to the public Net non-monetary liabilities of the
banking sector. M4 - M3 + Deposits with post office (excluding NSCs).
Inflation: It is termed as the continual rise in the general level of prices. It is
commonly expressed as an annual percentage rate of change on an index number.
Hyper Inflation: An express growth in the rate of inflation whereby, money loses its
value to the extent where other mediums of exchange like barter or foreign currency
come into vogue.
Stagflation: A condition in the economy that is characterized by the twin economic
problems viz., slow economic growth and rising prices.
Deflation: A sustained fall in the general price level of goods and services, usually
accompanied by fall in output and jobs.
Recession: A phase of dismal economic activity, usually accompanied by rising
unemployment. It is defined by two successive quarters of negative GDP growth and
is considered to have a cyclic character. An imminent global recession is likely as
signs of dismal economic performance are being witnessed.
Stagnation: It is a period during which economy does not grow or grows very
slowly. As a result, unemployment increases and consumer spending slows down.
Devaluation: A fall in the fixed official rate at which one currency is exchanged for
another in a fixed exchange rate system. While it is mostly by a deliberate act of
government policy, in recent years, financial speculation has also been identified as a
responsible factor.
Demonetization: Withdrawal of currency from circulation with an aim to strike at
counterfeiting of currency and unaccounted money. In 1978, currency notes of
denomination of `1000/-, `5000/- and `10000/- were demonetized.
Arthakranthi is a suggestion which is being widely debated to address the
important issues such as rampant corruption and fiscal deficit that are being
confronting the country. It suggests abolition of taxes except for Customs and
Import duties and introduction of bank transaction tax on receipts. It also suggests
currency compression by ensuring that the highest currency denomination is `50/-,
which paves the way to adopt banking system extensively and also enables to
phase-out fake currency from the system which is the need of the hour. Though, the
suggestion appears simple and attractive but needs political will and revamping of
entire eco system.
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Bankers Digest 2013
Negotiable Instrument Act Important sections

Section
Relating to
Promissory Note - Definition
Bill of Exchange - Definition
Cheque (Electronic / Truncated cheque) - Definition
Holder - Definition
Holder in due course
10
15 & 16
Payment in due course

Endorsement - Definition
17
Ambiguous instruments
20
Inchoate stamped instruments
26
Capacity to make instruments
31
Bankers obligation to pay for wrongful dishonor
45A
Holders right to obtain a duplicate of lost bill
47
Bearer instrument Negotiation by delivery
48
Order instrument Negotiation by endorsement
58
Instrument obtained by unlawful means No title passes
80
Interest is to be levied @ 18% p.a. where interest rate is blank
85 (1)
Protection to Paying Banker Order cheque
85 (2)
Protection to Paying Banker Bearer cheque
85 (A)
Protection to Paying Banker Bank Drafts
89
Protection to Paying Banker Materially altered instrument
123
General crossing
124
Special crossing
128
Payment in due course Crossed cheques
130
Not Negotiable Crossing
131
Protection to Collecting Banker Crossed Bank Drafts
138
Return of cheques for insufficient funds Drawers liability
As per RBI guidelines, the validity period of Cheque/Draft is limited to 3 months with
effect from 01.04.2012.
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Bankers Digest 2013
No.
1
2
3
4
5
6
7
Banking Statistics at Glance

Major Indicators
Number
No. of Schedule Commercial Banks
80
No. of Bank Branches
99884
No. of ATMs
95686
Aggregate Deposits (Crores)
6112480
Bank Credit (Crores)
4704790
Credit Deposit Ratio (%)
76.97
Forex Reserves (Crores)
1523670
No
1
2
3
4
5
6
Macro Rates
Bank Rate (w.e.f. 29.01.13)
Cash Reserve Ratio (w.e.f. 29.01.13)
Statutory Liquidity Ratio (w.e.f. 31.07.12)
Repo Rate (w.e.f. 29.01.13)
Reverse Repo Rate (w.e.f. 29.01.13)
Marginal Standing facility (w.e.f.29.01.13)
%
8.75
4.00
23.00
7.75
6.75
8.75
No
1
2
3
4
Andhra Bank Interest Rates

Deposit Rate (1 year to 3 years) w.e.f. 23.10.12
Base Rate (w.e.f. 01.03.2013)
BMPLR (w.e.f. 01.03.2013)
Saving Bank Rate (w.e.f.03.05.11)
%
9.00
10.25
14.50
4.00
101
Bankers Digest 2013
As on
31.03.12
31.03.12
31.03.12
31.03.12
31.03.12
31.03.12
31.03.12
Question Bank
1. No Frills account is also known as
a) Savings Bank Account b) Simple Recurring Deposit Account c) Basic Savings Bank
Account d) None
2. The following advances are not covered under WTPCG. Which is not correct?
a) Advances granted for exports made on deferred terms of payment, turnkey
projects, construction works and service contracts b) Advances grated to
Government Companies c) Advances granted against exports against export orders
d) Advances granted by OBUs, SEZ, EPX e) Advances granted to exporters against
their export entitlements like CCS/DDB
3. EEFC Account can be opened by
a) Non Resident Indian (NRI) b) NRI who returned to India permanently c) Any
Resident with local source of income d) Residents who have forex earnings e) None
4. Failure of internal systems, processes and people lead to
a) Credit Risk b) Market Risk c) Liquidity Risk d) Operational Risk e) Technology Risk
5. As per IBA Model Education Loan Scheme, the minimum & maximum age criteria
for the borrower (student) is
a) 10 & 35 years b) 18 & 35 years c) 18 & 45 years d) All majors e) None
6. As per extant guidelines, advance against book debts should not exceed . % of
working capital limits.
a) 10%
b) 50%
c) 25%
d) 100%
e) no such ceiling
7. Government pays agency commission to the banks @ . for Pension payments

a) `50 per credit b) `12 per credit c) `65 per credit d) `60 per credit e) None
8. PCFC advance generally allowed for a maximum period of
a) 360 days b) 270 days
c) 180 days
d) 90 days
e) no such limit
9. TDS deducted by bank, is to be remitted to Income Tax authorities within..

a) 15 days from the date of deduction b) 7 days from the date of deduction c) 15
days in the succeeding month d) 10 days in the succeeding month e) 7 days in the
succeeding month
10. All the systems in Office building are inter-connected is called as
a) Wide area network
d) Local area network
b) Intra departmental network
c) Satellite link
11. Companies look for Commercial Paper since they need

a) Long Term Low Cost funds b) Short Term High Cost funds
Cost funds d) Short Term Low Cost funds e) None
102
Bankers Digest 2013
c) Long Term High
12. Customer of your branch aged above 65 years placed a term deposit and
requests TDS exemption as his total income including interest income falls below the
taxable income, which form he need to submit to the branch?
a) Form G
b) Form H
c) a or b
d) No form is required
e) None
13. Borrowers availing crop loans up to 3 lakh in the current year are eligible for
interest subvention of .. besides incentive of . for prompt repayment.
a) 1% & 3%
b) 2% & 1%
c) 3% & 1%
d) 2% & 3%
e) None
14. Validity period of a cheque is defined as 3 months under .Act

a) Indian Contract Act b) B R Act
e) Not defined in any Act
c) Negotiable Instruments Act d) RBI Act
15. To consider housing loan, the age of building shall not be more than
a) 10 years
b) 5 years
c) 20 years
d) 15 years
e) 25 years
16. Bank is required to submit XOS statement to RBI, in respect of

a) Foreign exchange transactions b) Import transactions c) Overdue export bills
d) Overdue import bills e) FCNR accounts
17. Zero Coupon Bonds refers to
a) Bond issued at face value b) Bond issued with face value & interest c) Bond issued
at discount from its face value with interest d) Bond issued at discount from its face
value without interest e) None
18. A counterfeit note is impounded by the branch at the time of receipt of cash.
The acknowledgement has to be signed by
a) Cashier b) Manager c) Cashier and remitter d) Casher and Manager
if remitter refused to sign the acknowledgement
e) Cashier
19. CDR-1 system is applicable only to accounts which are under

a) Standard
b) Sub-standard
c) Doubtful
d) a & b
e) All
20. As per recent guidelines, 40% of the total advances to micro and small
enterprises sector should go to micro (manufacturing) enterprises having investment
in plant and machinery up to .. Lakh and micro (service) enterprises having
investment in equipment up to .. Lakh.
a) `10 & `4
b) `5 & `2
c) `10 & `5
d) `2 & `5
e) `15 & `10
21. For transfer of funds through NEFT (National Electronic Fund Transfer) and
minimum and maximum amount that can be transferred are
a) `1,000 and maximum `5 lacs b) `1,000 and maximum no limit c) `5,000 and
maximum `1 lacs d) No minimum & maximum amount e) None of the above.
22. A term deposit of NRO can be accepted for a minimum period of
a) 1 year
b) 2 years c) 6 months d) 7 days
e) 3 years
103
Bankers Digest 2013
23. Payment of installments should commence within months from the date of
restructure of loan.
a) one month
b) 3 months
c) 6 months
d) 9 months
e) 12 months
24. It is mandatory for banks to obtain Joint Lending Agreement where the
aggregate credit limits availed by the borrower from multiple banks exceeds.
a) `100 crore b) `150 crore c) `300 crore
d) `500 crore
e) None
25. USB means

a) Urban Savings Bank account b) Ultra Small Branch c) Uniform Savings Bank
account d) Unique Small Bank e) None
26. Whether borrower has any option to go forduring the currency of the loan?
a) Fixed Interest Rate to Floating Interest Rate b) Floating Interest Rate to Fixed
Interest Rate c) a & b d) Continue with sanctioned terms & conditions only e) None
27. What is the first item of sequence to be followed in risk management?
a) Monitoring b) Measurement c) Identification d) Mitigation e) None of the above
28. Bank cant proceed against the borrower under SARFAESI Act where
a) Security is agril land b) Liability is less than `1 lac c) Liability is less than 20%
of the principal d) Pledge of movables
e) All of the above
29. State which one of the following statement not true with regard to Disclosure
norms to be made at the footnote of Balance sheet as per RBI guidelines.
a) Movement of NPAs b) Large exposure Deposit & advances c) Capital structure &
Capital adequacy d) Industry wise exposure e) Market Risk in Trading Book
30. Under Direct Benefit Transfer (Subsidy) scheme every beneficiary should have
a) Basic Savings Bank Account b) Savings Bank account with Cheque Book c) Basic
Savings Bank Deposit Account with Aadhaar number d) KYC complaint Account
e) None
31. A cheque is received by the branch for payment issued by one of the customers.
Meanwhile a request is received by a public prosecutor informing that the person
issued the cheque is imprisoned for criminal activity and directs the branch not to
make payment of the said cheque. What is expected by the branch?
a) Branch should not make the payment b) Branch should ask for court order
regarding imprisonment of the customer c) Branch should insist written request from
the public prosecutor d) Branch can make the payment.
32. With regard to lockers, which of the following guideline is not issued by the RBI?
a) Branches are to link the allotment of lockers to placement of fixed deposits
b) To ensure prompt payment of locker rent, branch are to obtain a Fixed Deposit
which would cover 3 years rent and charges for breaking open the locker
c) Branch Manager can allot the 1/3rd of vacant lockers
d) Wait list of lockers need not be maintained.
104
Bankers Digest 2013
33. Within the bank's aggregate capital market exposure of of its net worth the
bank's direct investment in shares/convertible bonds/debentures, units of equity
oriented mutual funds/Venture Capital funds should not exceed ..of its net worth.
a) 40% & 15%
b) 30% & 15%
c) 40% & 20%
d) 80% & 50% e) No ceiling
34. As per the compensation policy of the bank with regard to collection of foreign
cheques, bank shall pay compensation @ .. to the customer if the delay is beyond
45 days.
a) SB Interest b) Term Deposit Rate c) Base Rate d) SB Interest + 0.75%
e) None
35. Official Language Implementation Committee meetings are to be held once in.
a) Two months
b) Three months
c) Six months
d) Twelve months
e) None
36. In terms of direction of RBI & IBA on simplified procedure for settlement of
claims preferred by the legal heirs of the deceased constituents, bank has to settle
the death claims involving amount up to Rs
a) `10000
b) `50000
c) `100000
d) `25000 e) None
37. The minimum capital required to start a new private sector bank is
a) `100 b) `200 c) `300 d) `400 e) `500
38. CDR mechanism, which of the following is not correct.
a) Multiple Bank Accounts b) `10 crores & above c) Fund & Non-fund based
d) Preserving viable corporates e) Account should be NPA
39. Branches can negotiate bills drawn under LC for non-constituents, if
a) LC is restricted to our bank only, subject to the condition that the Proceeds will be
remitted to the regular banker of the beneficiary b) LC is not restricted and proceeds
will be remitted to the beneficiary c) LC bearing the clause without recourse d) None
40. X depositor approached the branch with term deposit receipt of `2 lakhs which
was due in the year 2008 and not interested for renewal of the matured deposit and
requesting for payment of interest for overdue period. How do you act?
a) No interest will be paid since the deposit is not renewed b) Term Deposit
applicable interest at the time of maturity will be paid for the overdue period
c) Interest rate at the time of maturity or at the time of renewal whichever is lower
will be paid for overdue period d) SB interest will be paid for the overdue period
41. What are the interest rates that are still regulated by RBI?
a) SB Deposits b) Commercial Loans c) DRI Loans d) b & c
e) all
42. RBI imposing penalty on Currency Chests for incorrect reporting of daily cash
position because..
a) It is causing financial loss to RBI b) To inculcate discipline c) Non adherence of
Owners` instructions d) None of the above
105
Bankers Digest 2013
43. To be eligible for classification under priority sector, the ceiling prescribed for
dealers in irrigation equipment is.
a) `10 lakhs b) `20 lakhs c) `30 lakhs d) `40 lakhs e) `100 lakhs
44. Right of Set-off refers to
a) Marking of lien in deposit account of the borrower b) Transfer of term deposit
balance, which is due for maturity in the next year to borrower account for
adjustment of overdues c) Transfer of Savings Bank balances to borrower account
for adjustment of overdues in loan account of the depositor d) b & c e) None
45. A term deposit of `50000/- in the name of individual with one year tenor is
cancelled prematurely. The penalty for premature closure is.
a) 0.50%
b) 1.00%
c) 1.50%
d) 2.00%
e) No charges
46. In case of Gold Loans by Scheduled Commercial Banks, the LTV ratio should not
be more than
a) 50%
b) 60%
c) 70%
d) 75%
e) 80%
47. The Banking Laws (Amendment) 2012 has facilitated the Public Sector Banks in
increase of voting rights from.to..
a) 10% to 26%
b) 5% to 26%
c) 1% to 5%
d) 1% to 10%
e) None
48. Maximum Project cost under USEP of SJSRY for individual borrower
a) 1 lakh
b) 2 lakh
c) 5 lakh
d) 10 lakh
e) 50000
49. A bank can prefer appeal on the award passed by Banking Ombudsman within
30 days from the date on which the bank receives
a) Passing Award b) letter of acceptance of Award by complainant c) the copy of the
Award d) None of the above
50. Current Account is treated Inoperative/Dormant where there are no transactions
in the account for the last
a) 6 months
b) 12 months
c) 18 months
d) 24 months
e) 36 months
51. Which of the following is treated as indirect finance to agriculture?

a) Purchase and distribution of inputs for the allied activities such as cattle feed,
poultry feed etc., with loan amount up to `100 lakh per borrower b) Loans for
setting up of Agriclinics and Agri business centres
c) Loans for construction and
running of storage facilities
d) a & b
e) all
52. What is the standard provision on the assets other than SME/Agriculture?
a) 0.25%
b) 0.40%
c) 0.50%
d) 1.00%
e) Nil
53. A customer's cheque realized for `2 lakh is credited to his account by mistake as
`2000. Subsequently cheque presented for `20000 returned unpaid by the bank.
What is the responsibility of the banker?
a) Bank to pay damages to the customer b) Not responsible
ensure balance before issuing the cheque d) None of the above
106
Bankers Digest 2013
c) Customer to
54. Which of the following statement is not correct with regard to RTGS?
a) Meant for Two lakh & above remittances only b) Remittance should be through
account transfer only c) Maximum charges should not be more than `50 per
remittance d) Charges to be collected from the Beneficiary only
55. Power of Attorney was granted by a customer for a period of 12 months to X.
The customer wants to revoke it after 6 months. What are the options available to
the Branch?
a) It should be revoked only after 12 months b) Yes he can revoke at any time
c) Revoked with the consent of the power of attorney holder
d) Yes he can revoke
with the consent of the Banker e) None
56. Authorized Dealers are allowed to open EEFC account in the name Foreign
Exchange Earners with . of their foreign exchange earnings.
a) 75%
b) 80%
c) 90%
d) 100%
e) None
57. As per recent guidelines, the Banks are advised to bring down Bulk/Certificate of
Deposits to below of total deposits during the current year.
a) 5%
b) 10%
c) 15%
d) 20%
e) 25%
58. Revised guidelines on Priority Sector have come into force based on the
recommendations of Committee.
a) Sri Y H Malegam
d) Dr K C Chakraborty
b) Dr K S Krishna Swamy
e) Sri M V Nair
c) Dr C Rangarajan
59. The minimum deposit required to open No Frill / Basic Saving Account
a) No minimum
b) `5
c) `100
d) `500
e) `1000
60. With regard to nomination to Illiterate account, which of the following statement
is correct?
a) Can extend in favour of literate only b) Nomination facility is not available
c) Consent from Nominee is required d) Witness is a must
e) None
61. SARFAESI sale notice to debtor by creditor within how many days?
a) 30 Days
b) 60 Days
c) 45 Days
d) 90 Days
e) None
62. The company has its registered office in Mumbai and its factory is at Kolkatta.
The Company has availed credit facilities from banks branch in Hyderabad. The
equitable mortgage of company's immovable property is to be created at
a) Mumbai
b) Kolkata
c) Hyderabad
d) Any notified place in India
e) None
63. A cheque signed by the director as authorized signatory of a company is

presented for payment but at the same time branch received information about the
death of the director. Branch to
a) Pay the cheque as he signed in fiduciary capacity b) Stop payment c) Pay the
cheque on receipt of confirmation from the company
d) None
107
Bankers Digest 2013
64. PMEGP cost of project

Business/Service sectors.
a) `15 lakhs & 10 lakhs
d) `25 lakhs & 10 lakhs
for
loans
under
b) `20 lakhs & 15 lakhs

e) None
manufacturing
c) `25 lakhs
and
for
& 15 lakhs
65. Under Cheque Truncation System, the instrument deposited by the customer for
collection remain with..
a) Collecting Branch b) Service Branch of Collecting Branch
d) Service Branch of Paying Branch e) Clearing House
c) Paying Branch
66. In case where the instrument is obtained by unlawful means, the holder of the
instrument will not get any title as per ..
a) Section 58 of NI Act b) Section 48 of NI Act c) Section 89 of NI Act
128 of NI Act e) None
d) Section
67. Banks are required to pay DICGC fee on

a) Monthly basis
b) Quarterly basis
c) Half-yearly
d) Yearly
e) None
68. Exposure to single/group borrower up to 5% is to be provided aftera) Borrower consent to disclose the same in notes to account in Banks annual report
b)Approval of Board c) Charging additional interest @2%
d) a & b e) a, b & c
69. Composite loan limit of .. can be sanctioned by banks to enable the MSME
enterprises to avail of their working capital limit requirements through single window
a) `25 lakhs
b) `50 lakhs
c) `100 lakhs
d) `150 lakhs
e) None
70. Amount allowed to be transferred abroad by any resident without RBI permission
for purchase of fixed assets in a financial year.
a) One million US Dollors b) Two million US Dollors
d) Two lakh US Dollors e) None
c) Three Million US Dollors
71. Family Income criteria (per annum) for DRI loans in Rural & Urban areas.
a) `18000/- & `24000/- b) `15000/- & `24000/- c) `18000/- & `36000/- d) `24000/& `36000/- e) None
72. What is the floor limit (Min & Max) in case of CRR?
a) 3% & 10%
b) 3% & 15%
c) 5% & 10%
d) No limit
e) None
73. Safest money market instrument.

a) Commercial Paper b)Treasury Bill c) Certificate of Deposit d) a & b
e) None
74. Subordinated debt instruments are to be limited to .. of Tier I together with

other components of Tier II should not exceeds . of Tier I capital
a) 100% & 50%
b) 50% & 50%
c) 50% & 100%
108
Bankers Digest 2013
d) No limit
e) None
75. DICGC covers

a) Credit balance in cash credit account b) Overdue term deposit c) Deposits of
central / state govts. d) a & b
e) a, b & c
76. Photographs / signatures can be converted into electronic form through
a) Printer
b) Pen Drive
c) CPU
d) Scanner
e) Web Camera
77. Bank stakeholders include

a) Shareholders
b) Customers
c) Employees d) a & b only
e) all
78. Crossed cheque, presented over the counter through the authorized agent of
collecting banker for his valued customer for cash payment. Will you pay?
a) Bank can pay b) Payment cant be made since it is a crossed cheque c) Payment
can be made on cancellation of crossing duly signed by the drawer d) None
79. Proprietor of a firm executed Power of Attorney to B. Cheque signed by Power of
Attorney Holder for payment after the death of the proprietor. Will you pay?
a) Yes b) No c) Will be paid with the consent of legal heirs of the deceased d) None
80. Banks are required to submit return Unclaimed Deposit every year in the
month of . within days from the close of the reporting month.
a) March & 30 days
days e) None
b) December & 30 days
c) December & 15 days d) March & 15
81. Banks to maintain SLR as per

a) Section 24 of BR Act
b) Section 42 of BR Act
Section 24 of RBI Act e) None
c) Section 42(1) of RBI Act
d)
82. Competent authority to write-off loans given to Directors is

a) Board
b) Management Committee
d) Reserve Bank of India
e) None
c) Chairman & Managing Director
83. Under Financial Inclusion Plan of the bank, the agents appointed by the bank to
collect money and make payments to the depositors are called as
a) Branch Managers b) Business Correspondents c) Business Facilitators d) b & c
e) None
84. Floating Provisions can be added to Tier-II capital up to __% of RWA
a) 1%
b) 1.25%
c) 1.50%
d) 1.75%
e) None
85. What is the maximum loan amount to EWS & LIG under ISHUP scheme?
a) 1 lakh & 1.60 lakh b) 0.50 lakh & 1 lakh c) 1 lakh & 2 lakh d) No limits e) None
86. In case where counterfeit note is found at the branch, FIR is to be filed by
a) Remitter b) Cashier c) Beneficiary whose account the amount is to be credited
d) Bank Branch where no. of notes exceeds 4 in a single transaction e) None
109
Bankers Digest 2013
87. Relationship between Customer & Banker in case of Safe custody of articles
a) Lessor & Lessee b) Prinicpal & Agent c) Bailor & Bailee d) Assignor & Assingee
e) None
88. Which of the following is not an Operational Risk?
a) People Risk
b) Technology Risk c) System Risk d) Liquidity risk e) None
89. Truncated Cheque means

a) Shared Clearing b) Cheques presented will be processed by the depositing branch
itself c) Physical movement of instruments from branch to clearing house d)
Movement of electronic image instead of physical movement of instruments e) None
90. Provision on Standard Advances to be shown under which head of Balance sheet
of the bank
a) Advances & Other Assets b) Provisions & Other Assets c) Liabilities d) Provisions
& Other Liabilities e) None
91. As per RBI guidelines, if Bill discounted became NPA, the income already booked
but not realized is to be
a) Reversed
b) Need not be reversed but 50% provision is to be made c) Need not
be reversed but 100% provision is to be provided d) None
92. What is the maximum loan amount that can be given under Small Manufacturing
Units under MSME?
a) 100 lakh
b) 200 lakh
c) 300 lakh
d) 500 lakh
e) No limit
93. Banks are focusing attention on Retail Banking since it facilitates

a) Improved NIM
b) Stable Business growth c) Diversified Risk d) a & b e) All
94. What is the age criterion for individuals to open New Pension System (NPS)?
a) No age limit
b) 10 to 60 years
c) 18 to 60 years
d) above 60 years e) None
95. Innovative Perpetual Debt Instrument should not exceed . of Tier-I Capital and
the investments by FIIs should not exceed .
a) 10% & 49%
b) 15% & 55%
c) 15% & 49%
d) 20% & 49% e) None
96. The settlement formula under Comprehensive Corporate Compromise Policy

(CCCP) for accounts other than suit-filed accounts is..
a) Real Account + BMPLR + 2% b) Real Account + BMPLR + 4%
only d) Real Account + BMPLR or contracted rate
c) Real Account
97. Your customer approached with Fixed Deposit of other Bank with a value of `5.50
lakh (including accrued interest) and due for payment in next 24 months and
requested for a loan against the deposit. As Branch Manager how you deal with it?
a) Loan can be allowed up to 75% value of the deposit b) Loan can be allowed up
to 80% value of the deposit c) Loan can be allowed only on receipt of confirmation
110
Bankers Digest 2013
from other Bank having noted the lien d) No loan can be allowed against other bank
deposits e) None
98. As per AML norms, banks are required to preserve records
a) 3 years from the date of cessation of transaction b) 5 years from the date of
cessation of transaction c) 10 years from the date of cessation of transaction d) No
time limit
99. Interest subsidy is available to all eligible Educational Loan Borrowers for a
period of
a) First one Year
b) First Two Years
the loan
e) None
c) During Study Period
d) Till closure of
100. What is the maximum loan and repayment period is allowed for farmers to avail
loans against pledge of agricultural produce?
a) `5 lakhs & 6 months b) `25 lakhs & 12 months c) `10 lakhs & 6 months
d) No limit on amount but should be repaid within 12 months e) None
101. A customer with a bearer cheque came for withdrawing the amount of cheque
for `4000/-. The counter clerk expressed that the amount is not sufficient to pass the
cheque as the balance is short by `700/-. The bearer of the cheque deposited `700/and withdrawn the amount. Further account holder objected for revealing the
balance in the account. In such a situation what is his liability?
a) It is the responsibility of the customer to maintain sufficient balance in the
account while issuing cheque and hence bank is not liable b) Any body can deposit
amount in any account and bank has no right to stop such credits c) Bank paid the
cheque amount to the bearer since the instrument is in order in all respects d) Bank
is not in order in disclosing the account balance to the bearer of the instrument and
hence liable for damages e) None
102. LC states about in case of amount, what does it indicate?
a) 5%
b) 10%
c) 20%
d) 25%
e) None
103. Unspent foreign currency should be submitted with in how many days after
returning to India?
a) Retain any amount of foreign currency b) Returned to AD within 90 days
c) Allowed to retain $5000 US Dollars d) Need to return unspent foreign currency
within 180 days, if the amount exceeds $2000 US Dollars e) None of the above
104. The minimum education qualification stipulated for borrower availing credit limit
of `15 lakhs under PMEGP.
a) Intermediate (10+2)
b) 10th Standard
c) 8th Class
d) None
105. The risk involved in Business Correspondent Model is

a) Credit Risk
b) Operational Risk
e) No Risk is involved
c) Reputation Risk
d) Default Risk
106. As per RBI guidelines, the exposure norms for Single and Group borrowers
including infrastructure projects are stipulated at & of Banks Capital Funds
respectively
a) 10% & 20% b) 15% & 40% c) 20% and 50% d) 20% & 40% e) None
111
Bankers Digest 2013
107. Under Basic Indicator Approach, Banks are required to provide provision
towards operational risk
a) 10% of Gross Income b) 15% of Gross Income of the last 2 years c) 15% of
Gross Income (average of last 3 years) d) 15% of Net profit e) None
108. As per AML/KYC norms, review of accounts, customer identification of data is to
be updated once in .. years & .. years for Low and Risk and High Risk Category
accounts.
a) 2 years & 1 year
years e) None
b) Once in two years
c) 5 years & 2 years
d) 2 years & 5
109. Joint account operated either or survivor, the number of nominees can be
a) Joint depositors are allowed to nominate one each b) Only one nominee is allowed
c) No nomination facility is available for Joint Accounts d) None
110. Premium payable on pre-shipment and post shipment whole turnover post
shipment packing credit.
a) 5 & 10 ps per month b) 5.50 & 6.00 ps per month
d) 6.00 & 5.50 ps per month e) None
c) 6.00 ps per month
111. Short term crop loan treated as NPA if it remains unrecovered for
a) One Crop Season
b) Two Crop Seasons c) One Crop Season + 90 days
d) Existing NPA norms that are applicable for Term Loans e) None
112. For appealing to DRT, the borrower need to deposit
a) 25% of suit amount
d) No deposit required
b) 10% of suit amount c) 15% of suit amount

e) None
113. Women granted a loan of `80 lakhs under CGTMSE, what is the amount of claim
in case of default?
a) `40 lakhs
b) `52.50 lakhs
c) `60 lakhs
d) `64 lakhs
e) None
114. Banks can extend Education loans to the students to pursue studies in India
and Abroad with a maximum amount of
a) `5 & `10 lakhs b) `10 & `20 lakhs c) There is no cap on maximum amount
d) 80% of education cost without any cap on maximum loan e) None
115. As per RBI guidelines, Branch to issue to SB account holders
a) Pass Book
b) Account Statement
c) a & b
d) None
116. Post dated cheque presented in clearing paid by the bank and at the same time
another cheque presented was returned as there is no sufficient balance in the
account. Customer claimed for damages. What is the liability of the bank?
a) Bank can make payment of post dated cheque, if the instrument is otherwise in
order b) Bank is not in order in making payment of post dated cheque c) It is the
responsibility of the depositor to mention correct date while issuing cheque and
hence banker is not liable d) Issuing cheque without adequate balance is the
responsibility of the customer and hence banker is not liable e) None
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Bankers Digest 2013
117. At present, Banks are required to maintain SLR at

a) 20%
b) 23%
c) 24.50%
d) 25%
e) None
118. The minimum CRR should be maintained on daily basis.

a) 50% of eligible CRR
d) 100% of eligible CRR
b) 70% of eligible CRR

e) None
c) 80% of eligible CRR
119. Nominee obtains payment in the capacity of

a) Owner
b) Beneficiary
c) Agent
d) Trustee
e) None
120. Staff should present in the branch 15 minutes before commencement of

business hours, this is applicable to
a) All Branches
b) Rural Branches only
d) No such stipulation
e) None
c) Urban & Metro Branches
121. Once the guarantor repays the loan and he attains the status of
a) Debtor
b) Creditor
c) Agent
d) Right of subrogation e) None
122. The present rate of service tax including cess is

a) 12.36%
b) 12%
c) 10.30%
d) 10%
e) None of the above
123. Banks obtain photograph at the time of opening of the account with a view to
a) Avoid benami accounts b) Verify the identity of the customer c) Verify with police
records
d) a & b
e) a to c
124. Service charges levied are to be displayed by the bank in
a) Banks own Website b) RBI Website c) Branch Premises d) IBA Website e) a to c
125. The form SDF is used for exports where
a) Custom office is not computerized b) Custom office is computerized c) Software d)
Sent by Post e) None of the above
126. Banks to submit Wilful Defaulters list to
a) RBI with all accounts irrespective of liability b) CIBIL c) RBI where the liability is
`25 lacs & above d) Banking Division, New Delhi e) None of the above
127. Banks are required to submit CTR (Cash Transaction Report) to ------- within ---- of succeeding month.
a) FIU, 30 days b) FIU, 15 days c) FIU, 7 days d) RBI, 7 days
e) RBI, 15 days
128. Premium payable on deposit insurance on every `100 per annum is

a) 10 paise b) 5 paise c) 25 paise d) 50 paise e) None of the above
129. Floating charge is a charge created on
a) Immovable Assets b) Movable Assets c) Assignment d) Deposits e) Assets created
out of Bank finance
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Bankers Digest 2013
130. Who is not eligible to convert general crossing to special crossing?

a) Holder
b) Drawer
c) Payee
d) a & b
131. Banks can create assignment on

a) Book Debts
b) Stocks
c) Land & building d) Deposits e) Immovable
132. Banks are required to preserve old records as per

a) BR Act
b) RBI Act
c) Indian Contract Act
d) NI Act
e) Evidence Act
133. Deposits which are exempted from Tax Deduction at Source (TDS) are
a) Fixed
b) Savings
c) NRE/FCNR
d) Recurring
e) b, c & d
134. Which statement is not correct with regard to advances against shares?
a) Maximum loan allowed is `10 lacs against physical shares b) Maximum loan
allowed is `20 lacs against demat shares c) Margin requirement is 50% for physical
shares & demat shares d) None of the above
135. Garnishee order is not applicable
a) Credit balance in SB
b) Credit balance in CD c) Credit balance in Cash Credit
account d) Term Deposits in the Joint names e) None of the above
136. As per RBI guidelines, banks need to register the charge over the property with
CERSAI within . days from the date of creation of charge.
a) 15 days
b) 30 days c) 60 days d) 90 days
e) None
137. The method of interest booking on agriculture advances is

a) Monthly
b) Quarterly
c) Half-yearly
d) Yearly
e) None
138. RBI injects liquidity through

a) Increase Bank Rate b) Reduction of Repo Rate
d) Increase CRR e) Increase SLR
c) Reduction of Reverse Repo
139. Provisioning norms are not applicable to loans sanctioned to

a) Agriculture b) Exports
c) DRI d) Govt. Sponsored Schemes e) Against Deposits
140. As per Basel-II norms, banks to move to new approach to assess Operational
Risk with effective from 01.04.2010
a) Standardized Duration b) Standardized
Model
c) Internal Rating Based
d) Internal
141. Fixed Deposit is maturing on Sunday. It shall be deemed to be payable on

a) Monday b) Immediate succeeding working day c) Preceding Day i.e. Saturday
d) a & b
142. What is the maximum amount that can be allowed to Software Development
under priority sector?
a) `10 lacs
b) `20 lacs c) `100 lacs d) Not eligible to cover under priority
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Bankers Digest 2013
143. Exporter may avail pre-shipment credit at the request of the issuing bank on
the basis of
a) Green Clause Credit LC
b) Revocable LC
c) Red Clause LC
d) Back to Back LC
144. A person appointed by the court to look after the properties of the insolvent
person is called
a) Administrator
b) Liquidator
c) Assignee
d) Attorney
145. Claytons rule applies to

a) Deposit Accounts b) Demand Loans
c) Term Loans d) Overdrafts / Cash credits
146. Percentage of DRI advances should go to Rural/Semi Urban Branches.

a) 50%
b) 25%
c) 66.66%
d) 75%
147. What is the maximum amount Branch can extend instant credit to the
customers against outstation cheques?
a) `15000 at all Branches b) `25000 in Urban/Metro Branches c) `10000 at all
Branches d) Discretion of the Branch Manager e) None
148. Which of the following statements are not correct with regard to MSME?
a) Investments in Plant & Machinery is to be taken as criteria for Manufacturing
Enterprises b) Investment in Equipment is to be taken as criteria for Service
Enterprises c) No collateral security or third party guarantee is required for loans up
to `5 lakhs d) No collateral security or third party guarantee is required for loans up
to `25 lakhs in case of Tiny Sector e) None of the above
149. UCPD guidelines are issued by
a) FEDAI
b) RBI
c) Ministry of Finance
d) IBA
e) ICC Paris
150. Your customer requested to include his wife and daughter as nominees after
one year of opening of the account. Will it be accepted?
a) It can be accepted since the nominees are the family members of the depositor b)
Cannot be considered since the request is not received at the time of opening of
account c) Can be considered with 50% share each d) Nomination should be made
only in favour of single name. Hence cant be considered e) None of the above
151. What is the relationship between the Bank and Overdraft Customer where the
account is showing credit balance?
a) Creditor & Debtor
d) Debtor & Creditor
b) Principle & Agent

c) Trustee & Beneficiary
152. What is the maximum period for which FCNR deposit can be opened?
a) One Year
b) Two Years
c) Three Years
d) Five Years
e) Ten Years
153. Which of the following cant be a nominee?

a) Illiterate Person
b) Minor
c) NRI
d) HUF
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Bankers Digest 2013
154. In case of dishonour of cheques on financial grounds, the holder is required to

issue notice to the drawer within days to claim remedy under section 138 of NI Act
a) 7 Days
b) 30 Days
c) One Year
d) Three Years
155. Bank has right to cancel the allotment of locker, if the customer does not
operate or surrender within . despite notice sent to the locker holder.
a) Three Years
b) Five Years
c) Ten Years
d) Banks discretion
e) None
156. Borrowers who are having satisfactory dealings with bank for a minimum period
of . Years are allowed to avail LUCC facility.
a) 5 Years
b) 3 Years
c) 2 Years
d) 1 Year e) None of the above
157. National Payment Corporation of India (NCPI) has setup payment network to
enable the member banks to issue Domestic Payment Cards with a brand
a) Visa Card b) Master Card c) Prepaid Card d) Rupay e) Travel Card
158. Permanent Account Number (PAN) is mandatory for
a) Bank transactions (cash) of `50000/- & above b) Purchase and sale of shares /
debentures / bonds of `50000/- & above c) Purchase and sale of immovable
property where the value of the property is `5 lakh & above d) a & c e) All
159. High Debt Service Coverage Ratio (DSCR) indicates
a) Unable to meet the installment obligations
b) Able to meet payment of
installments comfortably c) Liquidity problem d) a & c e) None of the above
160. X Company approached the Bank for sanction of working capital limit of `800
lakhs and the Current Ratio of the company is 1.15:1. What is the course available to
the branch?
a) Proposal can be considered as the current ratio is acceptable b) Proposal can be
declined since current ratio is below 1.33:1 c) Advise the company to increase capital
to bring the current ratio to 1.33:1 d) Proposal is to be referred to next Higher
Authority for sanction e) None of the above.
161. Which of the following statement is not true with regard to Capital Gains
Deposit Scheme?
a) Income Tax Assesses who are eligible for exemption under section 54 of the IT
Act are alone can open account with Banks b) Accounts can be opened under
Savings, Fixed and Term Deposits c) Cheque book can be issued to eligible accounts.
d) No lien or deposit loan is allowed against such deposits e) None of the above
162. Which of the following statement is not correct with regard to Tax Saver
Scheme of Banks?
a) Tax exemption is available for the deposit amount under section 80C of IT Act b)
Period of deposit is allowed up to 5 Years c) TDS is applicable, if interest payment is
above `10000/- in a financial year d) Maximum amount of deposit allowed is `5 lakhs
e) c & d
163. A fall in Quick Ratio in comparison with Current Ratio indicates
a) High Inventory Holdings
b) Low Inventory Holdings
c) Decrease in Current
Liabilities d) None of the above
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Bankers Digest 2013
164. Financial statements includes

a) Balance Sheet b) P & L c) Cash & Funds Flow d) a & b
e) a, b & c
165. Banks are permitted to take over borrowal accounts from other Banks &
Financial institutions provided
a) Account should be Standard Asset with positive net worth b) Copy of the borrowal
account for preceding 6 months is to be obtained c) P&C report is to be obtained
from other bank before disbursement d) Branch to take approval from next
sanctioning authority e) All above
166. The guidelines on extending Adhoc Limits to the borrowers are
a) Allowed in fund and non-fund based limits b) Can be allowed maximum of 3 times
during the validity of limit and the maximum period allowed is 3 months for each
adhoc limit c) Adhoc Limit can be allowed up to 20% of the sanctioned working
capital limits to all eligible borrowers d) a & b e) b, c & d
167. Which of the following statement is not true with regard to Temporary
Overdrafts?
a) Can be allowed in Savings Bank Account b) Can be allowed in Current Deposit
Account c) Can be allowed only 3 times in a account in a year d) Should not be
allowed in staff accounts e) None of the above
168. The eligible criteria for sanction of Tractor Loan to farmer is
a) 3 Acres of Wet / Double cropped land b) 6 Acres of Dry / Single cropped land
Minimum of 2000 working hours per year on borrower land d) a & b e) b & c
c)
169. The applicable net interest rate on loans sanctioned under Surya Shakthi
Scheme is
a) 2% for individuals
organizations
b) 4% for institutions c) BMPLR for industrial & commercial

d) a & b
170. With regard to lending to farm sector, the guidelines on obtention of No Due /
No Objection certificate are
a) Banks should not insist for the above certificate for loans up to `50000/- b) No
charges are to be levied for issuance of certificate c) Self declaration from the farmer
is to be obtained d) All above e) None of the above
171. Unsecured exposure is one where realizable value of tangible security is not
more than . of the outstanding exposure.
a) 5%
b) 10%
c) 25%
d) 40%
e) None
172. RBI extending incentives to Banks for the following services

a) Adjudication of Mutilated Bank Notes b) Exchange of Soiled Notes c) Distribution
of Coins over the counter d) Establishment of Coin vending Machines e) All above
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Bankers Digest 2013
173. As per RBI guidelines, the banks can levy charges to the Current accounts for
not maintenance of minimum balances provided.
a) Charges should not exceed `100 in a year b) Charges should not exceed `500 in a
year c) Bank has discretion to levy any amount of charges d) No charges should be
levied as Bank is not paying any interest to the customer on Current Account deposit
e) Banks are allowed to levy reasonable charges but should be known to the
customers through proper communication
174. Scheme of payment of ex-gratia in lieu of appointment of dependents on
compassionate grounds for officers (Public Sector Banks) is
a) Minimum `5 lakh
b) Maximum `8 lakh c) Maximum `7 lakh d) Maximum `6 lakh
175. Statements which is not true with regard to Locker operations?

a) The rent for A type locker is `1000/- p.a. at all branches b) Rentals for in-built
lockers shall be 25% more than the approved rents c) Levy additional charge of
`50/- per transaction where the operations are beyond 10 in a quarter d) Staff
/Retired staff hiring the lockers eligible for 20% concession in rent e) None
176. Under the liberalized norms, a NRI can remit abroad money from his NRO
account, up to
a) One Million US Dollar Per Year b) US Dollar of Two Million Per Year c) US Dollar of
5000 per year without any declaration or certificate d) US Dollar of One Million per
year on the basis of undertaking and certificate e) None of these
177. Branch sanctioned OCC limit of `10 lakhs against hypothecation of stocks worth
`15 lakhs with 30% margin. What would be the notional drawing power when the
present value of stocks is `20 lakhs?
a) `10 lakhs
b) `14 lakhs
c) `20 lakhs
d) `10.50 lakhs e) None
178. Which of the following documents do not attract stamp duty?

a) Promissory Note
b) Mandate
c) Power of Attorney
d) Form-A
e) None
179. The funds available under short term sources is greater than short term uses,
which indicates
a) Low Current Ratio
Low Debt Equity Ratio
b) High Debt Equity Ratio

e) None
c) Higher Current Ratio d)
180. What would be the applicable interest rate payable to the legal heirs of the
deceased on overdue period of matured Term deposit, if not renewed?
a) SB Interest Rate
b) Contracted Interest rate of matured deposit c) Simple
interest applicable to FD for the period the deposit remained with bank after maturity
d) Applicable FD interest will be paid if renewed for further period e) No interest
181. Stamped receipt is to be obtained for all cash transactions of above
a) `100/-
b) `500/-
c) `1000/-
d) `2000/-
e) `5000/-
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Bankers Digest 2013
182. The net of Exports & Imports and the services including foreign inward
remittances forms part of
a) Balance of Payments b) Capital Account c) Current Account d) Trade Surplus
e) Invisibles
183. Banks are empowered to take possession of securities (other than rural
properties) under provisions ofAct, when the borrower fails to repay the loan
as per the agreement.
a) Indian Contract Act
Banking Regulation Act
b) Revenue Recovery Act
c) DRT Act
d) SARFAESI Act e)
184. What is the net interest rate (Interest Rate minus Interest Subvention)
applicable for short term agriculture production loans (Crop Loans) up to `3 lacs?
a) Base Rate
b) Base Rate 1%
c) 10%
d) 8%
e) 7%
185. Base Rate of the Banks will be fixed by

a) Indian Banks Association b) Reserve Bank of India c) Planning Department of
the Bank d) Asset Liability Committee (ALCO) e) Discretion of the Bank
186. While renewing the credit limits of the company, you find that the Debt Equity
Ratio is 3 compared to that of 2.5 in the previous year. It indicates
a) Increase of Profit enabled the Company to add to Reserves b) Decrease of Debt
Burden on the Company
c) Adverse Impact on Profit on account of increased
interest burden d) None of the above
187. Banking Codes and Standards Board of India (BCSBI) deals with
a) Inspection & Audit of Banks b) Funds & Investments in Banks c) Sanctioning of
Loans d) Customer Service e) Banking Ombudsman
188. Banks can issue draft against accepting cash up to
a) `50000/-
b) `20000/-
c) `100000/-
d) `49999/- e) Any amount
189. How long the counterfeit notes can be kept with the bank after having reported
to police.
a) 30 days
b) 1 Year
c) 2 Years
d) 3 Years
e) None
190. RBI advised banks that a Business Correspondent Agent has to be made
available within a radial distance of and a branch within a radial distance of ..
a) 2 KM & 5 KM b) 5 KM & 2 KM c) 3 KM & 5 KM d) 5 KM & 10 KM e) No limit
191. What is the insurance coverage available to the borrowers for natural death and
death due to accident under SGSY scheme?
a) `6000 & `12000
b) `5000 & `10000
c) `6000/- only
d) `10000/-
e) None
192. Having furnished PAN, NRO Term deposit attracts TDS on interest income at
a) 10%
b) 20%
c) 30%
d) 10.30%
e) 30.90%
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Bankers Digest 2013
193. Which of the following component is not required to be taken in to consideration

while arriving Base Rate?
a) Cost of deposits/funds b) Negative carry cost of CRR/SLR c) Unallocated
overheads d) Average return on Networth e) Base Rate of Peer Banks
194. Branches should keep the PMEGP backend received in and should be
adjusted to the loan account only after completion of months.
a) Fixed Deposit & 36 months b) Savings Deposit & 36 months c) Savings Deposit
& 24 months d) Fixed Deposit & 24 months e) None
195. Garnishee order is by _____ and the customer and bank relation_____to it.
a) Income Tax Authorities & Debtor and Creditor b) Police & Debtor and Creditor
c) Court & Judgment Debtor and Judgment Creditor d) Court & Judgment Creditor
and Judgment Debtor e) None
196. Which is the first district where 100% coverage is achieved in opening of Bank
accounts for adult population?
a) East Godavari (AP)
(Kerala) e) None
b) Sivagangai (Tamilnadu) c) Panaji (Goa) d) Ernakulam
197. Call Money Market interest are linked to

a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate d) Market forces e) None
198. Interest rate charged by the banks to exporters should not fall below. after
taking applicable interest subvention.
a) Base Rate b) Base Rate 1% c) Base Rate 2%
c) 7% d) 10% e) None
199. Firm X and Y are having accounts with Bank and the both the firms are
represented by A, B and C as partners. Firm X showing a debit balance of 2.20 lakh
and there is a credit balance of 3 lakh in Firm Y. Bank adjusted the debit balance of
X account with available balance in Y account.
a) Branch can exercise right of set-off b) Right of set-off cant be exercised as the
accounts are different c) Right of set-off can be exercised by issuing a notice d)
None
200. Transaction Password relates to
a) Core Banking b) ATM operations
c) Internet Banking d) Tele banking e) None
201. Nomination in respect of the following is to be witnessed by two persons.

a) All deposit accounts
b) Deposit accounts where the nominee is a minor
c) Physically challenged accounts d) Thumb impression accounts (illiterate)
e) None
202. Actionable Claims deals with
a) Debt b) Receivables c) Subsidy or Duty Draw Back d) a & b e) all
203. When the contents of the Negotiable Instrument are modified by the drawer, it
is treated as
a) Forgery
b) Fraud
c) Material alteration
d) suppression of facts
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Bankers Digest 2013
e) None
204. Loans to repairs to dwelling units up to . Lakh is treated as priority sector.

a) 1 lakh for Rural/Semi urban & 2 lakh for Urban/Metro centres b) 2 lakh for
Rural/Semi urban & 5 lakh for Urban/Metro centres Housing Loans c) 2 lakh at all
places d) Not more than 10% cost of the dwelling unit e) None
205. Housing Loan of `80 lakh where the LTV is below 75%, it attracts Risk weight @
a) 75%
b) 100%
c) 125%
d) 150%
e) 175%
206. A cheque was issued for `8000/- leaving blank space both at figures and words
column, and the bearer of cheque made it `80000/- and withdrew amount. Customer
made a claim for `72000/- against the bank.
a) Bank to reimburse the amount since the cheque was issued for `8000/-only
b) Customer is liable since he is negligent having left blank space at figures and
words column c) Bank and Customer equally responsible d) Bank to file case against
the bearer for making alternations of cheque e) None
207. The least discussed aspect by a financial analyst while appraising proposal
a) Ratio Analysis b) Economic conditions
aspects e) Marketing aspects
c) Technical aspects
d) Managerial
208. Which of the following is part of Tier-I capital?

a) Cumulative Perpetual Preferential Shares (CPPS) b) Subordinate Debt c) a & b
d) Perpetual Non-cumulative Preferential Shares (PNCPS) e) Revaluation Reserves
209. Exercise of nomination by the depositor
a) Optional to the depositor b) Mandatory in case of single named accounts
c) Mandatory in case of joint accounts d) Mandatory for locker accounts e) None
210. Which of the following is exempted from NPA provisioning?
a) Loans against Deposits b) Loans guaranteed by State Govt. c) Loans guaranteed
by Central Govt. d) Loans against NSCs e) Loans against Govt. Securities
211. In case of deceased borrower, what is the extent of liability of the legal heirs?
a) Limited to the extent of property inherited
unconditional d) 50% of liability e) None
b) Not liable at all c) Unlimited and
212. X introduced for opening the account of Y. What is the responsibility of X in

case of fraud committed by Y?
a) To be reimbursed fully b) No responsibility
in identifying the account holder e) None
c) 50% of loss
d) Assist the bank
213. Under Whistle Blower the information can be directly submitted to

a) Board b) Audit Committee of the Board c) Management Committee
d) Central vigilance Commission e) Reserve Bank of India
214. The maximum loan can be sanctioned under DRI (including Housing)
a) `12500/- b) `25000/- c) `15000/- d) `20000/- for SC/ST e) c & d
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Bankers Digest 2013
215. Preservation time for applications of closed accounts

a) 3 years
b) 5 years
c) 10 years
d) Permanent
e) None
216. Foreign tourist who visits India can hold US dollars (currency) maximum of
a) $1000
b) $2000
c) $3000
d) $5000
e) None
217. Why Banks prefer to reverse the contra entry immediately on expiry of Bank
Guarantees?
a) To avert claim from beneficiary
provisioning
d) To improve profit
b) To avert maintenance of CRAR

e) None
c) To avert
218. Prepayment charges are exempted for

a) Housing Loans b) Education Loans c) Agr. Loans d) Corporate Loans e) a, b & c
219. The interest rate on NRE deposits is fixed based on
a) LIBOR + 100 basis points
b) LIBOR + 75 basis points
c) LIBOR + 175 basis
points
d) Discretion of the Bank
e) None
220. Loans sanctioned to, are exempted from exposure ceilings.
a) Priority Sector b) Export c) State/Central Government d) Real Estate e) None
221. Right of General Lien can be exercised on
a) Securities outstanding in the name of the borrower b) Existing and Future
liabilities c) Future liabilities only d) a & b e) None
222. Delay in collection of cheque > 90 days, bank to pay Interest at applicable
a) SB Interest
d) BMPLR
b) Term Deposit Interest

e) No interest
c) Term Deposit Interest + 2%
223. Payment of FD beyond `20000/- in cash is violation of IT rules and attracts

a) Penalty & Imprisonment
Not more than deposit amount
b) Penalty Double the amount

d) No penalty
c) Penalty
224. On receipt of possession notice (SARFASEI) issued by the Bank, if the borrower
raises objection, the same should be replied within
a) 7 days
b) 10 days
c) 15 days
d) 30 days
e) None
225. Can a Private Limited company join as a partner in a partnership firm?

a) Yes
b) No
c) Yes with limited liability
d) None
226. What is the limitation period for public to approach Consumer forum for
redressal of their grievances against Bank?
a) No limitation period
cause of action
b) One year from cause of action

d) Ten Years from cause of action
122
Bankers Digest 2013
c) Two years from

e) None
227. When PMEGP subsidy can be adjusted to loan account?

a) At the request of the borrower before closure of the account b) After 3 years
provided if there are no recoveries in the account c) Discretion of the Bank
d) A & B e) None
228. Account opened in the name of A&B jointly and nomination is given in favour of
C . Branch received request from the nominee for payment of deposit as A expired.
What is the course of action?
a) 50% of deposit can be paid to the nominee b) Nominee has no right since other
joint depositor is alive c) Amount will be paid to nominee with the consent of legal
heirs of A d) Nomination facility is not available to Joint accounts e) None
229. Cheque signed by the drawer as R N Das instead full signature and paid in
due course. Drawer demands for return the amount as signature differs.
a) Bank is liable to pay the amount to the customer since the payment made is not
in due course as signature on the cheque differs from specimen signature on record.
b) Bank is not liable on the ground that the amount was paid to the customer and
the contention of the customer is not tenable since it is not a forgery. C) Bank to
share 50% of the amount since there is negligence on the part of the official passed
the cheque. d) None of the above
230. What is the discount for inclusion of Subordinate Debt under Tier-II capital
where the Sub-ordinate Debt maturity is less than18 months?
a) 50%
b) 60%
c) 70%
d) 80%
e) None
231. One Bank account per family is mandatory to avail

a) Credit facility from bank b) Direct Benefit Transfer benefit (subsidy) c) Interest
subvention Housing Loan d) None
232. To avert fraudulent encashment of cheques presented for collection, branches
are required to
a) Present in clearing immediately b) Introduce Drop Box
Crossing Stamp immediately on receipt of instrument d) None
c) Affix the Special
233. Loans for Commercial Real Estate include.

a) Plantations
d) Construction of Malls
b) Housing
c) Special Economic Zones
e) Hotels & Restaurants
234. What is the time limit to furnish the requested information under Right to
Information Act (RTI) and what is the penalty for non-compliance of the said norm?
a) 30 days & `100 per day b) 60 days & `100 per day c) 30 days & `250 per day
maximum of `25000/- d) 60 days & `250 per day e) None
235. Received request from your borrower for a loan of `300 lakhs for purchase of
equipment @ 12% interest repayable in 60 months. The estimated Net Profit and
depreciation is `100 and `20 lakhs respectively. What is the DSCR?
a) 1.20
b) 1.30
c) 1.50
d) 1.62
123
Bankers Digest 2013
e) 1.75
236. The recent changes in issuance of Commercial Paper (CP) are

a) Dilution of credit rating norms for the Issuers b) Allowing the Issuers to buyback
CPs before maturity c) Relaxation in minimum amount d) a & b e) All
237. The primary business of Asset Reconstruction Companies is to
a) Buy stressed assets from banks b) Buy stressed assets from banks and sell it to
others for profit c) Buy the stressed assets from banks at discount and share the
recoveries with the banks d) Act as Recovery Agent for the Banks e) None
238. Loans to food and agro-based processing units with investments in plant and
machinery up to ------ is treated as priority sector advance.
a) 1 crore
b) 5 crore
c) 10 crore
d) 50 crore
e) None
239. The documents to be insisted from a NRI for opening an account is

a) Copies of Passport and VISA b) Local and Overseas addresses c) Compliance of
KYC norms d) Latest Passport size photographs e) All of the above
240. After taking possession of the immovable property, copy of the possession
notice is to be published in two local newspaper not later than ----- days
a) 7 days
b) 15 days
c) 30 days
d) 60 days
e) None
241. Interest Subsidy on Housing Loans (1%) for the first year is available provided
the loan amount does not exceed ------ and the cost of house should be within -----a) 10 lakhs & 15 lakhs b) 10 lakhs & 20 lakhs
d) 10 lakhs & No cap e) None
c) 15 lakhs & 25 lakhs
242. Commission on receipts relating to Govt. Business

a) 25 per transaction
d) 60 per transaction
b) 30 per transaction c) 45 per transaction

e) 0.50% of the transaction or 45 whichever is higher
243. Minimum and Maximum period of Certificate of Deposits

a) 15 days&1 year b) 30 days&1 year c) 7 days&1 year d) 7 days & no limit e) None
244. Customer not kept Cheque book under lock and key and one cheque leaf was
stolen. Bank made payment of the said cheque which was forged.
a) Customer is liable since he is negligent b) Bank is not liable as the cheque was
stolen c) Bank is liable since the payment is made on forged signature d) None
245. Loans not exempted from Base Rate Purview?
a) Consortium Advance
d) Loans to staff members
b) Deposit Loans
e) None
c) Export Credit
246. Under UCP 600, bank can accept/reject documents within maximum of --- days.
a) 5 Banking days
b) 7 days
c) 10 days
d) 15 days
124
Bankers Digest 2013
e) None
247. Margin on loan against FCNR (B) --- if the maturity period is less than one year
and ---- the maturity period is more than one year
a) 15% & 25% b) 10% & 20% c) 5% & 10%
the deposit e) Discretion of the Bank
d) 25% irrespective of tenor of
248. Visually challenged persons are allowed to avail the following banking facilities?
a) Cheque Book
b) Debit Card
c) ATM Card
d) Locker
e) All
249. Customer Service Standing Committee Meeting does not cover

a) Customer Grievances
b) Staff matters
c) Credit
d) New Products e) B,C & D
250. In case of payment of Fake DD, who has to lodge complaint with police, when it
is identified as fake upon presentation as per recent IBA guidelines?
a) Issuing Bank
e) Paying Bank
b) Collecting Bank
c) Purchaser of the Draft
d) Beneficiary
251. When Current Liabilities are more than Current Assets .

a) Interest burden is less b) Company can meet its obligations c) Company may not
meet its obligations d) Increased Networth e) None
252. Why A/c Payee cheques are to be credited the payees account only.
a) To get protection under section 131 of NI Act b) To comply KYC guidelines
c) To comply RBI guidelines d) To avert fraudulent conversions e) C & D
253. Cap on Rate of Interest on FCNR deposits
a) LIBOR+1.25% b) LIBOR+1% c) LIBOR+2% d) LIBOR 0.50% e) LIBOR 0.75%
254. In case of Paripasu what charge the subsequent creditor enjoys?
a) Equal charge
b) First charge
c) No charge
d) Second charge
e) None
255. Current Assets 48 lakh, Networking Capital 12 lakh. What is the Current Ratio?
a) 1.20
b) 1.10
c) 1.33
d) 1.45
e) None
256. Mr Sandeep left India on 1st August 2003 for taking up employment in a
software company in USA. In this context, which of the following statement is true?
a) He would be treated as NRI from 1st August 2003 onwards b) However, till that
date, he would be treated as a Resident c) His existing account will continue as a
resident account d) All the above e) (a) and (b) are correct
257. X & Y opened SB account operated by Either or Survivor and exercised
nomination in favor of Z. Who is empowered to modify or cancel the nomination?
a) X
b) Y
c) Z
d) Jointly with the consent of Z
e) None
258. What is the Annual Guarantee Fee (CGTMSE) payable for accounts with credit
limits of above `5 lakh to women for the units located in North Eastern region?
a) 0.75%
b) 0.85%
c) 1.25%
d) 1.50%
e) 1.00%
125
Bankers Digest 2013
259. Break Even Point means

a) Sales equal to Fixed Costs b) Sale proceeds matches to Variable Costs
c) The sale proceeds will take care of fixed as well as variable costs
d) Sales equal to Fixed costs + Variable costs + Minimum profit e) None
260. Housing Loan up to is treated as Priority Sector.
a) `10 lakh
b) `15 lakh c) `25 lakh in Metro with population above 10 lakh &
`15 lakh in other centres
d) `25 lakh at all places
e) None
261. Nominee can exercise his right
a) During the tenure of deposit
b) On maturity of deposit
c) Any time since he
will be treated as joint depositor d) He has no right on deposit since it is in the
name of the depositor e) On the death of the depositor
262. In case fake currency note is found, branch should not
a) Return the note to the remitter b) Destroy the note c) File FIR d) a & b e) None
263. Provision to be maintained on substandard assets which are fully secured.
a) 15%
b) 20%
c) 30%
d) 5%
e) 10%
264. Loans to Bank staff backed by terminal benefits attracts Risk Weights @
a) 0%
b) 5%
c) 10%
d) 20%
e) 50%
265. Balances under Cash Reserve Ratio (CRR) earn interest @....
a) 3% p.a.
b) Applicable SB Interest Rate
c) 5% p.a.
d) No interest
e) None
266. Under Rajiv Gandhi Equity Savings Scheme, the investor is entitled to claim tax
relief under section 80 CCG of IT Act up to of investments with maximum of ..
a) 100% & one lakh b) 20% & One lakh
e) 50% of investments without any cap
c) 50% & `50000/- d) 50% & One lakh
267. In the recent years, Indias GDP growth rate shows signs of
a) Upward growth
b) Downward growth
c) Stable growth
d) Stagnant
e) None
268. The entities willing to start new banks should be under

a) Partnership b) Company
Company (NOFHC) e) None
c) Trust
d) Non-Operative Financial Holding
269. Banks are allowed to accept deposits under Capital Gains Scheme in .
a) Savings b) Fixed
c) Current
d) a & b
e) Any scheme
270.
126
Bankers Digest 2013
Question Bank - Key

No
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
c
e
d
d
e
b
c
c
e
d
d
b
d
d
e
c
d
e
d
a
d
d
e
b
b
d
c
e
b
a
d
a
c
d
b
c
e
e
a
d
No
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
c
b
e
c
e
e
d
b
b
d
e
a
a
d
b
d
c
e
a
d
a
c
a
d
a
a
c
b
c
d
a
d
b
c
a
d
e
a
b
b
No
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
a
d
b
b
a
d
c
d
d
b
a
e
e
c
c
e
d
c
c
b
d
a
d
c
b
c
c
c
b
c
b
a
e
c
c
b
b
b
d
a
No
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.
144.
145.
146.
147.
148.
149.
150.
151.
152.
153.
154.
155.
156.
157.
158.
159.
160.
d
a
d
e
b
c
b
a
e
e
a
a
e
c
d
b
a
b
e
b
b
d
a
b
d
c
a
e
e
d
d
d
d
b
a
c
d
e
b
d
No
161.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
172.
173.
174.
175.
176.
177.
178.
179.
180.
181.
182.
183.
184.
185.
186.
187.
188.
189.
190.
191.
192.
193.
194.
195.
196.
197.
198.
199.
200.
127
Bankers Digest 2013
c
d
a
e
e
e
c
d
a
d
b
e
e
b
a
d
a
b
a
a
e
c
d
e
d
c
d
d
d
a
a
e
e
a
d
d
d
c
b
c
No
201.
202.
203.
204.
205.
206.
207.
208.
209.
210.
211.
212.
213.
214.
215.
216.
217.
218.
219.
220.
221.
222.
223.
224.
225.
226.
227.
228.
229.
230.
231.
232.
233.
234.
235.
236.
237.
238.
239.
240.
d
e
c
b
c
b
b
d
a
a
a
d
b
e
c
d
b
e
d
c
a
c
c
d
c
b
b
b
b
a
b
c
d
a
c
d
c
c
e
c
No
241.
242.
243.
244.
245.
246.
247.
248.
249.
250.
251.
252.
253.
254.
255.
256.
257.
258.
259.
260.
261.
262.
263.
264.
265.
266.
267.
268.
269.
c
c
c
c
a
a
a
e
a
e
c
a
b
a
c
d
e
b
c
c
e
d
a
d
d
c
b
d
d
Andhra Bank - Milestones

Andhra Bank was founded by ardent freedom fighter and a great intellectual and
multifaceted genius, Dr.Bhogaraju Pattabhi Sitaramayya. Andhra Bank was
registered on 20th November 1923 and commenced business on 28th November
1923. The Milestones of Andhra Bank are as under:
Year
1923
1943
1964
1964
1969
1969
1976
1980
1981
1981
1983
1984
1988
1989
1997
1998
2001
2002
2003
2005
2006
2006
2006
2006
2007
2008
2009
2009
2009
2010
2010
2010
2011
2012
2012
2012
Event
Commenced operations at Machilipatnam
Attained status of Scheduled Bank
Opened 100th Branch and attained the status of A class Bank
Amalgamation of Bharat Laxmi Bank with Andhra Bank
Largest Private Sector Bank in the country
Bank was entrusted with Lead Bank responsibility in five districts
Bank opened its 500th Branch
Nationalization of the Bank
Sponsored the first Regional Rural Bank (Rushikulya Grameena Bank)
First Bank in India to introduce Credit Cards
Diamond Jubilee Celebrations & surpassed Business of ` 1750 crore
Became convenor of State Level Bankers Committee in AP State
Introduced Insurance Linked Savings Deposit Scheme (Abhaya)
Bank opened its 1000th Branch
Surpassed `10000 crore mark in Total Business
First Bank to introduce farmer friendly Kisan Credit Card (AB Pattabhi Card)
Initial Public Offer (IPO)
Introduction of New Delivery Channel - First Networked ATM
Achieved 100% Branch Computerization
Banking Technology Award for use of IT for customer service in Semi-Urban
and Rural areas by IDRBT, Hyderabad
Follow-on Public Offer (FPO)
First Representative Office abroad (Dubai)
Banking Technology Award 2006 for Payment Initiatives from IBA
Conducted BANCON 2006 Inclusive Growth A New Challenge
Ranked 532 among Top 1000 Banks in the world
Opened Representative Office at New Jersy, USA
100% implementation of Core Banking
Crossed ` 1 lakh crore Total Business
Entered Joint Venture with IndiaFirst Life Insurance Company Limited
Crossed ` 1000 crore Net Profit
Best Bank Award for Quality of Assets, CAMEL Rating and Mid-size Bank
Andhra Bank, Bank of Baroda & Indian Overseas Bank has entered into a tie
up for setting up a banking subsidiary in Malaysia India International Bank
(Malaysia) Bhd and is in the process of commencing business
Best Bank and Financial Institution Awards by CNBC TV18 - Editorial Board
Roll of Honour under Mid-sized Banks Category
RSETI Rajahmundry adjudged as Best RSETIs in the country
Special Jury Award for ATM Operations Excellence by NPCI
Crossed Two Lakh Crore Business by 31st December 2012
128
Bankers Digest 2013
LOGO
TOGETHERNESS IS THE THEME

The Symbol of Infinity denotes a Bank that is prepared to do any thing, to go to
any lengths, for the customer.
The Blue pointer on the top represents the philosophy of a Bank that is always
looking for growth and newer directions.
The Key hole represents Safety and Security.
The Chain indicates togetherness.
The colours Red and Blue denote dynamism and solidity
Vision
Statement
To become a significant player, providing full range of banking services
through innovative customer centric products and to maximize stake
holders value
Mission
Statement
To work together towards delivering excellent customer service by
leveraging on technology and human resources to attain world class
performance standards
Corporate Slogan
129
Bankers Digest 2013
Financial Results March & December 2012 Highlights (`

` Crores)
Dec12
Mar12
Business Parameters
Deposits
105851
112448
Advances
84684
90292
Total Business
190535
202740
Composition of Advances
a) Corporate / Mid Cap. / Large Advances
46419
47436
b) Agriculture Advances
12458
14414
c) Retail Credit
11301
12290
d) MSME
13132
14112
e) Other Advances
1373
2040
Non Performing Assets
a) Gross NPA
1798
3302
b) % Gross NPA to Advances
2.12
3.66
c) Net NPA
755
2023
d) % Net NPA to Advances
0.91
2.29
Profit
a) Interest Income
11339
9551
b) Interest Expenses
7579
6748
c) Net Interest Income (a-b)
3760
1803
d) Other Income
890
693
e) Operating expenses
1804
1443
f) Contribution (d-e)
-944
-750
g) Operating Profit (c+f)
2815
2054
h) Provisions
1470
1109
i) Net Profit
1345
945
Dividend paid (%)
55
---
No
1
2
3
4
7
No
1
2
3
4
5
6
7
8
9
10
11
12
13
Key Ratios (%)

CASA Deposits
26.38
CD Ratio
80.07
Cost of Deposits
7.94
Cost of Funds
6.92
Yield on Advances
12.33
Yield on Investments
7.83
Yield on Funds
9.95
Net Interest Margin (NIM)
3.67
Return on Assets (ROA)
1.19
Cost to Income Ratio
42.21
Standard Assets to Gross Advances
97.88
Provision Coverage Ratio
71.13
Capital to Risk weighted Assets Ratio (CRAR)
13.18
i) Tier-I
9.03
ii) Tier-II
4.15
Dec`12 figures denotes 9 months only (April to December)
26.13
80.44
7.84
7.06
12.06
7.95
9.99
3.27
0.99
41.28
96.34
52.44
11.86
8.06
3.80
Important Initiatives:
The total delivery channels stood at 3040 with 1816 Branches, 15 Extension
Counters, 37 Satellite Offices and 1172 ATMs as on 31st December 2012
spread in 25 States and 3 Union Territories.
Our Rajahmundry RSEIT adjudged as Best RSETI in the country. Bank got a
Special Jury Award by NPCI for excellent performance in key parameters in
respect of ATMs and Switch connected to NFS ATM Network.
130
Bankers Digest 2013
Deposits - New Schemes

Banks have been introducing various innovative deposit schemes to provide value
added services to the customers with an objective to retain existing clientele and to
expand the base further. Besides extending existing generic deposit products such as
Current, Savings, Recurring, Fixed and Kalpataruvu deposits, Bank introduced many
new deposit schemes in the recent past and the brief details of the schemes are
furnished here under:
AB-Freedom (Flexi) Deposits:
The scheme provides features of both Savings and Term Deposits to the customers.
When SB account is opened, Fixed and Reinvestment deposit accounts also will get
opened for the customer with the same account number but without any balance. All
individuals (single/joint), Clubs, Associations, Trusts, Hospitals, Schools and colleges
are eligible to open Flexi accounts. However, special minors are not allowed to open
accounts under this scheme. Minimum balance prescribed for AB Freedom SB
account is `5,000/- and the minimum period of deposit is 15 days and maximum
period is 12 months for FDs/RIP Deposits. The customer is required to specify tenor
option while opening the account. In case where the customer does not exercise
option, system takes 15 days for FD and 6 months for RI as default tenor. The rate
of interest is as applicable to domestic term deposits. The depositor can choose
either FDR or Reinvestment deposits. The depositor can change his choice from FDR
to Reinvestment Deposit or vice versa for the future bunches of units to be opened.
Whenever, the balance in the SB account exceeds `5000/-, system transfers the
balance in to Fixed or Re-investment Deposit with a minimum deposit of `5000/- or
multiples thereof. Similarly, whenever the customer presents a cheque in excess of
SB balance, system cancels the term deposits (`1000/- or multiples thereof) to meet
the requirement. No penalty for premature withdrawal of deposit units under this
scheme. After cancellation of units in a bunch of units, the remaining units will
continue to earn interest at the contracted rate. No deposit loan is allowed against
Flexi Deposits. Deposit Receipts will not be issued for the units opened under the
scheme. Statements will be issued for SB as well as Fixed Deposit/ Reinvestment
Deposit transactions. (Circular no. 159 Ref 44/20 dated 27.08.08 & Cir.no.381 Ref
27/55 dated 07.02.11)
AB Premium Current Account:
In order to provide value added services to the Business community, Bank
introduced special deposit scheme in the month of October 2008. The salient
features of the scheme are as under:
a)
b)
c)
d)
e)
f)
g)
It is meant for Current Deposit Accounts.

Minimum Balance `100000/-.
Free Cheque Book Facility (including Multi City Cheques).
No Folio and Transaction Charges.
Any Branch Banking and Instant Funds Transfer.
50% concession in Service Charges for Funds Remittance.
Balance in excess of `200000/- can be converted as Term Deposits (in units
multiple of `10000/-) subject to the guidelines as applicable to AB Freedom
(Flexi) Deposit Scheme.
It helps the branches to improve the CASA Deposits. (Circular no.238 Ref 44/30
dated 16.10.2008)
131
Bankers Digest 2013
AB Super Salary SB Account The existing scheme of AB Privilege Corporate

Salary SB Account is re-launched with the following features:
a) Salaried staff of any company/organization drawing salaries through our Bank.
b) The Average Minimum Balance of `5000/- should be maintained except when the
account is in debit balance.
c) No Ledger Folio / Transaction charges.
d) Free ATM/Debit Card (for first year).
e) Free Credit Card / Demat Account / Internet Banking / Online Trading
(conditions apply).
f) Free Remittance up to `25000/- per month.
g) Free Statement of Account Once in a month.
h) Free issue of Cheque Books (50 leaves in a year).
i) Scheme provides for conversion of balance in excess of `10000/- as Term
Deposits (units multiples of `5000/-) with Sweep and Reverse Sweep facility
as in the case of AB Freedom (Flexi) Deposit Scheme.
j) Similarly, the scheme also provides for Temporary Overdraft facility equivalent
to the latest Net salary drawn by the account holder at Base Rate + 7.50%.
These two options are mutually exclusive. In other words, where the account
holder opts for Overdraft facility, he/she cannot avail the flexi deposit option
facility. (Cir. no.351 Ref 27/21 dated 01.02.10)
AB Recurring Deposit Plus Scheme:
This scheme is meant to built-up corpus fund for individuals / firms / institutions /
companies through regular monthly deposits over a period of time to meet their
future financial requirements. The salient features of the scheme are as under:
a) Depositor has an option to choose a core installment between `100/- to
`100000/- and further he has option to deposit any amount not exceeding 10
times of core installment.
b) Minimum period of deposit is 6 months and maximum period is 60 months.
c) No penalty for late payment of installments.
d) Interest is calculated on daily products i.e. minimum balance available between
10th and last day of the month.
e) No penalty for premature withdrawal. However, in case of RD account closed
within 6 months, penalty @ 0.50% on the balance outstanding subject to a
minimum of `50/- and maximum of `500/-.
f) Depositor can remit monthly installment at any branch of Andhra bank without
any charges.
g) Interest accrued is exempted from Tax Deduction at Source (TDS).
h) Transfer of accounts between the branches is not allowed.
The other guidelines (Nomination, Payment of maturity amount, Claims etc.,) that
are applicable to existing RD Scheme holds good to AB RD Plus scheme also.
(Circular no.081 Ref 44/09 dated 20.06.2009)
AB Grama Kranthi Savings Account:
It is a new scheme with a built-in overdraft facility of `500/-, aimed at to offer basic
banking services to the financially excluded sections of the society using Smart Card
and Biometric authentication technologies through Business Correspondents. No
minimum balance and no service charges are applicable. Simplified KYC norms are
applicable. No cheque book and ATM/Debit cards will be issued. Overdraft facility of
`500/- would be extended immediately on opening the account and the interest rate
is Base Rate+3.5%. (Cir.no.319 dated 06.12.10 & 364 Ref 19/20 dt.14.01.11).
132
Bankers Digest 2013
AB Easy Savings (ABESB): As per RBI directions, Banks are required to adopt
simplified procedure to open SB accounts. Minimum balance stipulated for opening of
SB account is `5/-. All individuals who are eligible to open normal SB accounts can
open No frills accounts subject to introduction from another account holder who
complied KYC norms. The introducer's account with the bank should be at least six
month old and should show satisfactory transactions. Photograph of the customer
who proposes to open the account and also his/her address needs to be certified by
the introducer OR any other evidence as to the identity and address of the customer
to the satisfaction of the bank. These accounts do not attract service charges / penal
charges. No cheque book shall be issued. Drawals from account shall be permitted
only through numbered withdrawal forms accompanied by passbook. Once the
balance in the account exceeds `50000/- or total credits in the account exceeds
`100000/- in a year, no further transactions will be permitted in the account. The
customer has to close the account and open normal saving account fulfilling the
complete KYC procedure. (Circular no.444 Ref 51/31 dated 26.03.2008)
AB Easy Savings for Students SB Easy Social Welfare (ABESW): These
accounts are specially meant for students who are eligible for scholarships (post
metric) as approved by the Government of AP. Students who fulfills the criteria can
open No Frill account with Zero Balance. Simplified account opening procedure is
adopted and the opening forms are to be attested by the respective Principal of the
College. On opening of accounts, Government makes arrangements to transfer the
scholarship / fee reimbursement amounts to the respective accounts. No withdrawals
are allowed at the branch counters. The account holders are provided with ATM card
to withdraw the scholarship amount. No passbook or cheque book will be issued.
AB Tax Saver: It is a term deposit (Fixed/Reinvestment) scheme earns interest as
well as tax benefits under Section 80 C. It is meant for individuals and HUF (only
Income Tax Assesses with PAN). Deposit can be opened in single/joint accounts. In
case of joint accounts, tax benefit is available only to the first holder of the deposit.
Minimum deposit is `100/- and Maximum amount allowed is `100000/-. The
minimum period of deposit is 5 Years. It earns interest as applicable to five year
deposit. Declaration is to be obtained from the first depositor that the total deposits
under this scheme at various bank branches do not exceed `100000/- during the
year. No nomination can be made in respect of a term deposit applied for and held
by or on behalf of a minor. Deposit receipt shall bear the name, address, PAN
and signature of the depositor. No deposit loan or no lien to any other loan. No
premature cancellation. (Circular no.431 Ref 51/30 dated 13.03.08)
Capital Gains Scheme: The scheme is aimed at Income Tax Assesses to extend
relief of tax on long-term capital gains for different assets provided the assesses
purchase another specified assets within a certain time frame. The assesses are
eligible for exemption under section 54, 54B, 54D, 54F or 54G of the IT Act 1961. All
branches except Rural Branches can open SB and Term Deposit (FD/KTD) accounts
of the said category depositors. Accounts should be opened in individual names only
and no joint accounts are allowed. No cheque book is issued to SB accounts.
Depositors are required to submit withdrawal form along with form C to withdraw
amount from the account. Similarly, Term Deposit funds can not be directly paid to
depositor and they should route through respective SB account only. To close
account, depositor has to submit application in form G along with written approval
from the assessing officer having jurisdiction of the depositor. Deposit loans are not
allowed and no lien should be allowed on the said accounts. (Circular no.453 Ref
44/25 dated 16.01.2006)
All staff deposit accounts earns 1% extra interest while they are in service as well as
on retirement/resignation. Further, in case of senior citizens (staff) they continue to
earn applicable senior citizen deposit rate plus 1% extra. (Cir.no.4 Ref 3/1 dated
05.04.2011)
133
Bankers Digest 2013
Tenure
Limit of
Subscription
Public Provident Fund Scheme (PPF)-1968

15 years.
Amount not less than `500/- and not more than `100000/- in a year
in one lump sum or in installments not exceeding twelve in a year.
Extension of a/c
8.80% p.a. Compounded annually or as prescribed in the Official

Gazette published by the GOI from time to time. Interest is paid on
funds deposited before 5th of every month.
Any individual on his behalf or on behalf of a minor of whom he is
Guardian or HUF or an association of persons or body of individuals.
NRI's cannot open accounts under this scheme.
The entire amount deposited in to PPF during the financial year is
treated as deductible Under Sec.80C of ITR Act.
Yes. Can be transferred inter Bank and intra Bank.
Nomination facility is available.
Any time after the expiry of five years starting from the end of the
year in which the initial subscription was made. Only one withdrawal
is permitted in a year.
Permitted with the following limits.
Period
Shall not exceed
After one year
25% of the amount at credit
After four years
50% of the amount at credit
Repayable with in 36 months from the first day of the month
following the month in which the loan is sanctioned.
5 years at the option of the subscriber.
Closure of account
After the expiry of 15 years from the end of the year in which the
initial subscription was made.
Rate of interest
Mode of holding
Tax treatment
Transferability
Nomination
Withdrawal facility
Loan facility &

Repayment
Senior Citizen
Tenure of the scheme
Rate of interest
Frequency of computing interest
Taxability
Whether TDS is applicable
Investment to be in multiples of
Minimum eligible age for
investment
Savings Scheme (SCSS)-2004

5 years which can be extended by 3 more years
9.30% per annum
Quarterly
Interest is fully taxable
Yes, Tax will be deducted at source
`1000/- Maximum investment limit ` 15 lakh
60 years (55 years for VRS optees). However, age
limit is not applicable to Defence Service personnel.
Available after one year of holding but with penalty

Transferability feature Not transferable to others
Nomination
Available
Can be held both in single or joint holding modes.
Modes of holding Accounts
Joint holding is allowed but only with spouse
Non resident Indians, Persons of Indian Origin and
Applicability to NRI, PIO and HUFs Hindu Undivided Family are not eligible to open an
account under the scheme.
Transfer of account from one deposit office to
Transfer of account
another in case of change of residence is permitted
Bank earns a commission @ `45/- per transaction on PPF and SCSS. (Cir.no.244 Ref
51/18 dated 20.10.2011)
Premature withdrawal facility
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Bankers Digest 2013
Insurance Linked Deposit Schemes

Abhaya Savings Bank (ASB) - The scheme is in force since 1988. This scheme is
having features of Savings Bank coupled with insurance coverage (Group Janata
Personal Accidental Insurance Cover). It is meant for all individual depositors,
specially those whose lives are exposed to accidental risks on account of their
profession / employment / occupation. M/s.United India Insurance Company is
undertaking the risk coverage. Individuals and Joint Account holders can open. All
Joint accountholders are compulsorily covered. Age - 5 to 70 years. Accidental
Insurance cover is available to all depositors. `25000/- for death / total disability and
`12500/- for partial disability. Premium `9/-; Insurance year - 1st Sep to 31st Aug.
Nomination holds good for deposit balance and the insurance claim. Joint
accountholders can specify their nominees separately.
Abhaya Savings Plus (ASB+) - The scheme was introduced in our bank in the
year 2006. It is meant for all individual depositors, especially those whose lives are
exposed to accidental risks on account of their profession / employment /
occupation. Individuals and Joint Account holders can open. All Joint accountholders
are compulsorily covered. Age: 5 to 70 years. Cover: Group Janata Personal
Accidental Insurance Cover. `100000/- for death / total disability and `25000/- for
partial disability. Premium `36/-; Insurance year - 1st Nov to 31st October. United
India Insurance Company is undertaking the risk coverage. Nomination holds good
for deposit balance and the insurance claim. Joint accountholders can specify their
nominees separately.
Abhaya Gold Savings (ABG) - This scheme was introduced in the year 1996.
Individuals and joint account holders are eligible. All joint account holders are
compulsorily covered. Age 5 to 70 years. It is a Group Personal accident Insurance
Policy. M/s. United India Insurance Company is undertaking risk coverage. Death /
Total Disability `1.50 lakh. Partial disability `50000/-. Premia `70/-; Insurance
year - 1st November to 31st October. Separate nomination for insurance claim. Joint
accountholders can give separate nominations for the insurance amount.
AB Jeevan Abhaya (ABJ) - This scheme was launched in the year 2002. It is a
Savings Bank account that provides Life and Accidental death cover on payment
of nominal premium and simple health declaration. No medical examination is
required. Individuals in the age group of 18 to 55 years can open this account. SB
opening form can be used. The present premium rates are as under:
Age Group
18 to 35 Years
36 to 50 years
51 to 55 Years
Premium
`235/`407/`805/-
The insurance period is 1st Dec to 30th November. The risk is covered by IndiaFirst
Life Insurance Corporation Limited (IFLIC) and the amount of coverage is `1
lakh in case of normal or accidental death. Joint accountholders can be covered by
opening a joint account and by paying the applicable Premia. All accounts opened
under AB Super Salary (SB account) scheme will be covered under this scheme.
(Circular no. 294 Ref 51/25 dated 16.11.2010)
Insured Current Deposits (ICD) - Individuals, Joint A/cs, HUF, Sole Proprietors,
Partnership Firms, Ltd Cos., having CD/ODCC/Pattabhi Agricard accounts. However,
office bearers of clubs / societies / trusts / associations and account holders of
inoperative accounts are not eligible to join in the scheme. The age of the account
holder should be in the range of 5 to 70 years. ICD covers risk against accident
(death / disability). It also includes snakebite, electrocution, food poisoning, riots
135
Bankers Digest 2013
etc., United India Insurance Company covers the risk upto 1.50 lakh for
death/total disability. Insurance year - 21st February to 20th February. Premia `69/per person per annum to be collected. (Cir no.462 Ref 51/22 dated 19.02.2013)
AB Kiddy Bank Scheme (Kids Khazana) - Bank has re-launched the earlier the
earlier Kiddy Bank scheme under the new brand name AB Kiddy Bank Scheme in
the year 2007. It is meant for minors (even 1 day old minor) represented by
Guardians or by the minors themselves who have completed the age of 10 years. All
existing Kiddy bank accounts can be converted. Minimum balance to be maintained
is `100/-. Kid and parent/guardian (aged up to 70 years) both are covered under
Accidental Insurance. Accidental insurance coverage is available up to one lakh for
the kid and the parent/guardian. Insurance Premia is `54/- per annum (31st of
October). The risk is covered by United India Insurance Company. Free Doll.
Educational Grant of `5000/- (for age up to 10 years) / `10000 (for age of 11-18
years) as per the age of the child in case of accident risk of the parent in addition to
Deposit
ICD
ASB
ASB +
ABG
ABJ
Kids
Khajana
Insurance Schemes at glance ( ` in lakhs)

Age
Comp Accidental
Insurance year
st
coverage
5 to 70
United
1.50
21 Feb to 20th Feb
India
5 to 70
-do0.25
1st Sep to 31st Aug
5 to 70
-do1.00
1st Nov to 31st Oct
5 to 70
-do1.50
1st Nov to 31st Oct
18 to 55
IFLIC
1.00$
1st Dec to 30th Nov
1 day to
1.50
1st Nov to 31st Oct
United
18 years
Premium
`69
`9
`36
`70
`40
`54
$ covers both Life/Accidental death and premia depends on the age of the insured
Insurance premium should be debited to the respective account on the date of
opening of the account itself. Intimation of death of an account holder must be
accepted in writing only. Claim intimation shall be sent to insurance company with
in 90 days from the date of accident / death and claims forms duly filled in with all
the enclosures shall be submitted to the Insurance Company within 180 days (from
the date of accident / death). The settlement of claim is at the sole discretion of the
insurance company. The Bank will act only as a facilitator. Claim forms may be
submitted to the insurance company either directly or through the bank. Documents
to be submitted along with the claim forms are as under:
In case of death
Death Certificate
Postmortem report with inquest report
FIR of police / Final Investigation Report
Nominee's name
Bank' s certificate of remittance of
premium
In case of disability
Photograph of the disability
Disablement certificate issued by doctor
Bank's certificate of remittance of premium
Any other relevant document
Police Report
Any correspondence with Insurance Company/Claimant must be done only through

Registered Post Acknowledgement Due. All new accounts, a lien of 45 days imposed
for claims arising on account of Natural Death from the date of opening of account.
However, Lien clause is not applicable in case of claims due to Accidental Deaths.
Deposit Schemes Discontinued - Branches are not permitted to accept fresh
deposits under AB Excel, AB Super, AB Supreme, AB Jeevan Prakash, AB Jeevan
Prakash Plus, Sulabh, Stock Invest, Samkshema, Home Loan, Mediclaim, AB
Pattabhi, AB 400, AB Pattabhi Plus, AB Power as the schemes were discontinued.
However, the existing deposit accounts under the above schemes will continue till
maturity.
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Bankers Digest 2013
E-Products
Non-Personalized Debit Cards (NPDC): Post CBS environment has enabled the
bank to issue NPDC to the customers on the opening day of the account itself. Bank
has taken this initiative to render faster customer service and to provide Any Time
Banking through ATM network across the country. Branch delivers the card along
with PIN. The card will be activated within 48 hours of the issue. It is a tool to
branches to attract new customers besides retaining the existing clientele for further
business development. The cards can be used on any ATM across the country to avail
the following services with free of charge.

Balance Enquiry / Mini Statement

Cardholders are allowed to withdraw cash up to `25000/- per day. However,
cash withdrawal per transaction is limited to `15000/- as the machine can
deliver maximum of 40 pieces only.
The maximum limit allowed for purchase of goods and services is fixed
`50000/- per day.
Credit Card holders having VISA/Master affiliation can avail cash advance
facility from any of our ATMs across the country.
Funds Transfer from one account to another account of the cardholder.
Cardholders can donate funds to various trust schemes of Tirumala Tirupathi
Devastanam as per their convenience using E-Hundi option.
Cardholder has an option to make payment of Andhra Bank credit cards
bills/dues from any ATM of our Bank.
Our Bank cardholders can avail Mobile Recharge facility.
Rail Ticket / Air Ticket booking.
mPAY registration for our customers.
SMS Alerts: Bank has launched Mobile Banking Services through SMS Push alerts
to the registered customers. A customer has an option to register for Mobile Banking
facility at branch or ATM or Internet. All Savings and Current Account holders who
owns mobile are eligible to avail the following services at free of cost.

Savings Bank transactions of `100 and above

Current and Overdraft transactions of `25000/- & above
ATM / Internet Banking irrespective of the amount
All Credit Card transactions
Cheque Returns / Cheque Book Issue
Term Deposit Due date
Balance for any transaction at end of the day for Current/ODCC accounts.
A mobile registered customer has an option to enquire Balance Enquiry, Last Five
Transactions and Cheque Status Enquiry through SMS Pull alerts. However, the
service provider (Mobile Company) levies applicable charge.
Mobile Banking (mPAY): Bank is providing SMS based mobile alerts to the
registered customers to keep them informed of various transactions that occur in
their accounts. Further, bank is also using the SMS media to send specific or
common messages/information to the customers. In order to meet the customer
expectations, Bank has introduced mPAY which provides the customers a secure and
convenient means of banking from anywhere and at anytime. Under this, customers
can check their account balances, view mini account statement, know cheque status,
note stop payment of cheques, make donations and transfer funds (Mobile to Mobile
and Mobile to Account) on press of button. All Savings Bank and Current account
holders having ATM/Debit card are eligible to avail this facility. Customer has an
option to link any one account (CASA group) connected to the card with the mobile
number. Customer intending to avail mPAY facility should possess mobile handset
Java enabled or Windows Mobile 5.0 & above model or Windows Mobile Professional
137
Bankers Digest 2013
model with activated GPRS (General Packet Radio Service). Customer can register
for mPAY through any of our ATMs across the country. It is hassle-free paperless
process and upon registration, customer receives a registration slip which contains
the default application password and MPIN. The maximum transaction limit is fixed
as `10,000/- per day. At present, Bank is extending the said services free of cost.
(Cir.no.220 Ref 55/18 dated 10.09.10)
Internet Banking: Our bank introduced Internet Banking with AB INFI-net brand
name in the year 2008. Bank is extending the following facilities to the registered
customers (Individuals and Corporate) free of cost:

Account Balance Enquiry / Account Statement view / Printing / Downloading

Request for Cheque Book / Term Deposit
Online TAX payment (e-tax) / Online IPO - ASBA
Credit Card Bill payment
Funds Transfer - Registered customer has an option to transfer balances
between linked operative accounts of the same customer across the branches
and also undertake third party transfers from his/her account to any other
operative account of Andhra Bank.
Transfer of funds across the Banks through NEFT is allowed on Internet. The
default limit set for retail customers is `100000/- per day. However, branches
can recommend for higher limits to Head Office depending on the request of
the customers.
On receipt of Internet Banking application from the retail customers, branch should
enter the details such as account number, mobile number and e-mail of the
customer in the system for registration. Internet Processing Center, Koti, Head Office
directly sends Login Password to the customer and transaction password will be sent
to the branch for onward submission to the customer with due acknowledgement.
However, branches to continue to forward the Internet requests from corporate
customers to Head Office for approval. (Cir 304 Ref 55/19 dated 15.12.09, Cir 263
Ref 55/21 dated 23.10.10 & Cir 119 Ref 55/8 dated 12.07.11)
Dematerialization (Demat) signifies conversion of physical form of securities in to
electronic form and the converted securities will be credited to customer account
with Depository Participant (CDSL/NSDL). This can be used for shares, bonds and
Mutual funds. Now, it is mandatory that the investor should have Demat account to
subscribe IPO/FPO. The benefits associated are - Faster settlement cycle, Elimination
the risk of bad delivery, No stamp duty, Easy for the banks to lend against shares,
Eliminate delays, thefts, interceptions and fake certificates and Online credit of
Bonus/Rights/Split shares. Our Bank is offering value added service with a brand
name AB Demat to facilitate the investors to have hassle-free, fast and accurate
electronic transactions. Submission of application along with photograph, address
proof and Bank account details are the prerequisites to open demat account.
Nomination facility is available. Investor has the option to freeze/defreeze the
securities. The service charges are as under:
No
1
2
3
4
5
6
Service
Agreement charges
Annual Membership charges
Demat charges
Remat Charges
Transaction Fee
Pledge Creation/closure
Charges (Exclusive service tax)

Actuals as per state laws
Individuals `300/- Corporates `750/- No charges
for staff accounts.
`2/- per certificate + mailing charges `20/- in
India and `500/- for foreign address
`15/- for every 100 securities or part thereof.
0.04% of market value or minimum of `20/`50 /- per instruction
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Bankers Digest 2013
Branches are allowed to sanction credit limits against pledge of approved and
unencumbered shares, Debentures, Mutual Fund units, which are in demat form. The
margin required is 50% on the market price or 52 week low whichever is low.
However, the maximum limit that can be allowed is ` 20 lakhs only. (Cir. no. 70 Ref
51/3 dated 10.06.09)
AB e-trade (Online Trading): The scheme is meant for the customers who are
interested to carry stock market operations (Buying/Selling) at his convenience. It
offers the depositor to trade from his residence or office or while on move through
Internet. The salient features of the product are as under:

It is also called as 3-in-1 account since it integrates Bank Account, Demat

Account and Broking Account of the depositor.
Individual or Joint Account, HUF/Trusts, Corporates etc., who are eligible to
open Current / Savings accounts can open AB e-trade account. However, the
style and form of account holders in demat account should be the same as in
bank account.
The existing KYC guidelines are to be followed strictly while opening AB etrade account at the branch.
This facility is being offered in tie-up arrangements with M/s.Religare
Securities Limited (RSL).
Once the account is opened, account holder is required to register with RSL to
undertake online trading duly indicating the scheme viz., R-Ace, R-ACE Lite
and R-Ace Professional.
RSL sends the Login ID and Password to enable the customer to have access
to the website for trading.
In case of purchase of stocks, his account will be debited with the value of the
stocks purchased plus brokerage/service charges and the said stocks will be
transferred to his demat account.
Similarly, in case of sale of stocks, demat account will be debited with the
number of stocks sold and the proceeds will be credited to his bank account
after deducting brokerage/charges.
In order to protect the customers from fraudulent transfers, customers have
an option to mark lien so that no debit operations are allowed in demat
account. It is a unique feature available in our product.
Brokerage charges levied by RSL is ` 0.05% for intra day transactions and
0.50% for other transactions i.e. delivery.
It enables the bank to improve low cost deposits besides earning fee based income
through maintenance charges/transaction charges. (Cir no.70 Ref 51/3 dt.10.06.09)
Personalized Cheque Books: In order to meet the discerning expectations of the
customers, Personalized Cheque Book facility is introduced at all important centers
across the country and the indents will be processed online and delivered to
branches through courier. All cheque leaves bear branch address and name of the
customer, which provides value addition to the customers.
Computer Generated Cash Receipt: The most happening of customer interaction
in the bank branches are at the cash counters and customers/public likely to take
impulse decisions based on the service experience at these touch points. In order to
improve the customer service at cash counters further and to avert avoidable
complaints pertaining to cash related issues, all branches are advised to issue
computer generated receipt for all customer related cash transactions. These
receipts do not require any signature since they are system generated. It is the
responsibility of the respective branches to ensure that the Cash Receipt Printers are
kept in working condition along with required stationery. However, in the event of
absence of cash receipt printers or printers going out of order, for the reasons
beyond the control of the branches, branch may issue manual counter-
139
Bankers Digest 2013
foil/acknowledgement, as an exceptional case. However, such counter-foils are to be

countersigned by another officer apart from the signature of the staff receiving such
cash. Branches are advised to display prominently near the cash cabin stating that
customers are advised to demand system generated cash receipt only and it should
also be mentioned that complaints made on pass book with manual entries and cash
receipts issued manually will not be entertained by the bank. (Cir.no.208 Ref 55/17
dated 06.09.10 & cir.no.209 Ref 55/17 dated 20.09.10)
Tele Banking Call Center: Bank has launched Tele Banking & Call Center to
provide information to the registered customers about their accounts through
Interactive Voice Response (IVR). Further, it enables the customers to have desired
information without visiting the branch personally. IVR is available round the clock
throughout the year including Sundays and Holidays where as Call Center services
are available from 8 am to 8 pm on all days except on Sundays and National
Holidays. Call center is providing the enquiry related services such as Balance
Inquiry, Interest Rates, Product features etc., pertains to deposit and advance
accounts. Caller is required to contact Toll Free Number 1800-425-1515 for the
above information. However, the caller needs to furnish Customer ID and Personal
details to know his account related information. Besides the above, Call Center
disseminate information of various products of our Bank through Customer Service
Executives to the registered customers as well as other customers/general public.
Bank is not levying any charges for the said services.
Upset service: In order to minimize the customer complaints and to match the
customer expectations, bank has launched technology embedded service Upset
proactively wherein customers can send their grievance through SMS direct to HO for
immediate resolution. The salient features of the product are:

The aggrieved customer is required to type the word Upset in his/her mobile and
forward the same through SMS to 9666606060.
On receipt of SMS, the service provider sends acknowledgment to the
complainant and routes all inbound SMS received to Customer Service
Department, HO on daily basis. In turn, Customer Service Department calls back
the customer to elicit the details of the grievance/complaint and forwards the
same to the concerned branch/office through email for doing the needful.
Branch/Office is required to initiate necessary steps to resolve the grievance duly
following the extant guidelines and furnish the information through email to
resolution@andhrabank.co.in on the same day.
The status of complaint/grievance will be informed to the complainant within 48
hours by the Customer Service Department, Head Office.
The newly introduced service Upset is an opportunity to the bank to receive the
expectations of the customers online and enables the bank to initiate necessary
steps for speedy Redressal of the Grievances. (Cir.no.275 Ref 34/03 dated
29.10.2010)
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Bankers Digest 2013
Credit Cards
RBI initiated steps to popularize Credit Cards to encourage alternate payment
system in the country to minimize the risks associated with traditional modes of
payments such as cash/cheque/Demand Draft etc.
Of late, credit card has become one of the means to make payments by majority of
house-holds and it is no longer a status symbol. Buy Now - Pay Later concept is
attracting and popularizing the credit cards in the market. It is easy to carry with a
limit and hassle free payment system. Cardholders undertake purchase of goods and
services without carrying currency and make payment at a later date. In a way,
Banks are extending short term unsecured personal loans by issuing Credit Cards to
their customers. Card business augments other income of the banks through annual
subscription, service charges and interchange fee. The salient features of credit cards
offered by our bank are furnished here under (cir.no.92 Ref 5/1 dated 28.06.11).
Description
Eligibility:
Cards are issued to
Income:
Salaried Class: Gross
Net
Others :
Annual
Subscription:
Annual
Subscription
for subsequent years
is waived in case the
usage in the previous
year
Failure of the above:
For main cards
For add on cards
Validity:
Cash Advance
Charge
Accidental
Insurance
Sanctioning
Authority
VISA Classic
Master Card
VISA Gold
Card
Customers/Non Customers and

Resident
Indians
Master Card Electronic

/VISA Gold & Classic
(Against Deposit)
Non resident Indians also
Minimum Deposit:
Master Card Electronic:
`10000
VISA Gold: `67000
VISA Classic: `33500
No Annual subscription in the First Year
Master Card Electronic /
Classic/Master:`18000/`18000/`23000/Gold: `23000/-
`15000/- p.m
`8000/- p.m
`180000/- p.a
`20000/- p.m
`10000/- p.m
`240000- p.a
Master Card Electronic

`200/`150/(VISA Classic/Gold as
applicable to gen. category)
Globally Valid
3%
2%
`550/`200/-
`1000/`400/-
3%
`2.00 lacs
`5.00 lacs
Not available for Master

Card Electronic
Branch Manager For customers with satisfactory track record
at least for 6 months. AGM/DGM (Second Line executive at
Zonal Office) For non customers and customers with
operations of less than 6 months.
Other conditions:
1. Two recent Passport size colour photographs
2.Residence Proof & Photo Identification Telephone /
Gas / Electricity Bill / passport / Driving License etc
3. Proof of Income: a) Salaried Class: Copies of latest
salary slip and Form 16/IT Returns b) For Others:
Copies of two years IT Returns filed with computation
sheets.
4.Copy of PAN Card 5.Rating Sheet in the
prescribed format with recommendation
141
Bankers Digest 2013
1. Two recent photos

2.Copy of deposit receipt
duly marking lien on the
face of Deposit Receipt
3. System generated print
out of lien marking of
deposit.
AB VISA Platinum Credit Card

Eligibility Criteria
Major, Resident & NRIs
Age Limit in years
21-70
`5.00 lacs per annum
Income Eligibility
Cards Against lien on Deposit with 25%
`1,00,000/- Deposit amount
margin and without insistence of Income
Proof and Scoring model
Minimum Card Limit
`75,000
Add on cards
Up to 2 cards-Spouse, children and Parents
Validity of the card
4 years
Roll over facility
5%
Validity
Global
`10.00 lacs to the Main cardholder and
Accident Insurance coverage
`5.00 lacs to the Add-on Cardholder
Baggage Insurance
`25,000 (Maximum)
Lost card Insurance
`1,50,000 (Maximum)
Cash Advance Limit
50%
Fee & Charges
`1000 & `400 for cards against Deposits
Annual subscription
Annual subscription is waived in the first
`30,000 or 18 Transactions in a year
year and not levied if usage in the previous
year is
`300
Add on cards
Lost card charges
`300
Lost card Replacement charges
`200
Charge slip request charges
`100
Transaction charges at Railways on the
amount of charge slip
2.50%
`2,000
No Surcharge on fuel purchase per day &
Surcharge over & above prescribed limit is
2.50%
Foreign Currency Markup
3.00%
Temporary enhancement Charges per
`200
occasion
`200
Hot listing charges
Cash advance charges
2.00%
Service Charges
If MPD Paid
1.50%
If MPD not Paid
Late Payment Fees
Outstanding upto `5,000
Between `5001 to `15,000
Between `15,001 to `25,000
Above `25,001
Transaction fee:
Cash withdrawals/balance enquiry
Andhra Bank ATMs/Branches
Cash
withdrawals
from
other
ATMs/Branches
2.95%
`200
`300
`400
`600
from
Nil
Bank
`50/- for VISA Cards

`70/- for Master Cards
Balance enquiry at other Bank ATMs

2.5% of the transaction amount subject to
a minimum of `10/- per transaction
2.5% on the charge slip amount
`200/-
Transactions at Petrol Stations

Purchase of Railway Tickets
Lost/Broken/Hot listing charges
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Bankers Digest 2013
Issue of Cards to Borrowers: Visa Gold cards are Issued to the Borrowers who are
enjoying a Limit of `10.00 lacs and above which are secured and Performing; Free
Accidental insurance up to `5 lacs is available. Card details are to be noted in the
documents after sanction. Maximum Card limit is `50,000/-, however, Higher Limits
are considered on submission of Income Proof.
Credit Scoring Model: Card limit is fixed based on the rating arrived using Credit
Scoring Model, which covers six important factors pertaining to the applicant such as
Own House, Employment/Occupation, Proven income, Bank Account, Age and Risk
category (KYC norms). The minimum marks to be scored for eligibility and process
the application are 18 at the branch level. Zonal Manager may improve overall
scoring by not more than 2 points, depending on merits of individual case while
recommending. Where the score ranges 18 to 22 points, the cardholder is eligible for
Base limit. Higher limit may be considered by the sanctioning authority where the
score is above 22.
Corporate Cards: Banks are issuing Corporate Cards to the companies registered
under Companies Act 1956 and whose net worth should be minimum of `25 lakhs.
The cards will be issued to the Executives / Officers / Employees of the company. No
admission fee and the annual subscription fee is `2000/-. The aggregate limits under
various cards issued to a company should not exceed 25% of its net worth subject to
a maximum of `50 lakhs in total and not exceeding `10 lacs per card. Companies
availing credit facilities with Banks/DFIs are only eligible except where 100% liquid
security is offered as guarantee by way of lien on deposits / Govt. Securities for the
Corporate Credit Card limits. In case of non-customers, they are required to produce
status reports from their Financing Banks / Development Finance Institutions etc
while submitting the application for Corporate Cards. Company is required to submit
copies of Memorandum & Articles of the company, Board Resolution, Last two years
audited balance sheet, 2 colour Photographs of the card Applicants and undertaking
letter to the branch for sanction of corporate credit cards. Zonal Managers are
empowered to sanction the Corporate Cards.
Credit Cards - Highlights (Circular no.102 Ref 05/01 dated 08.07.09)

Cards are issued to our Customers generally.

Service charges at 2.50%, which is one of lowest in the Industry.
Global validity on Visa Gold card and Visa Electron Debit card.
Free Accidental Insurance coverage to the Main and Add on cardholder
excluding cards against Deposits.
Free Credit period of 21 to 51 days even under roll over facility.
Cash Advance up to 50% of the Base Limit.
No Annual subscription in the First year and shall be waived in the
subsequent years if card used for stipulated minimum amount.
Highly secured payment for Internet usage through VBV (Verified by VISA)
and Msecure (Verified by MASTER).
Pre Paid Acquisition (PPA) Advance: It is a facility of funding to the Merchant

Establishments against future card receivables to meet their short-term
requirements. The minimum amount of loan shall be `10 lakhs and maximum of `10
crore against 100% collateral for loans up to `100 lakhs and for loans above `100
lakhs and up to `500 lakhs the collateral requirement is 75% and for loans beyond
`500 lakhs requires 50% collateral. However, the advance amount should not exceed
immediate preceding 12 months aggregate business turnover of the Merchant
Establishment on cards. Normally, the loan is repayable within 24 months. The
interest rate to be levied on PPA advances is Base Rate + 5%. The sanctioning
authority for PPA advance is Head Office. (Cir.no.43 Ref 26/7 dated 23.05.2011)
143
Bankers Digest 2013
Prepaid Cards: In order to provide further value added services to the customers /
public, bank has launched two types of prepaid cards viz., Gift Card and International
Travel Card on 30.09.2011 and the salient features of the said products are as under
(Cir.no.218 Ref 5/2 dated 30.09.2011):
Gift Card
Gift cards are available for denominations starting from `250/- to `50,000/-.
All ELBs, VLBs and select Large Branches are allowed to issue Gift cards.
The Card is valid in India and valid for ONE year from the date of purchase
Cards are Non-Relodable and not enabled for cash withdrawals
Branch issue cards with a service charge `25/- for the cards value up to
`1000/- and `50/- for cards beyond `1000/-
Wide acceptance in all Master Card affiliated merchants for transactions at

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

The Travel cards are accepted in all countries except India, Nepal and Bhutan
Travel cards are issued under USD, Euro and GBP currencies
Cards are enabled for transactions at POS Merchants. POS and ATM usage
require PIN for secured transactions
Travel cards are available from USD 200 to the maximum eligibility under
FEMA guidelines
Validity period of the card is 2 years from the date of issue
Cards are re-loadable from any select Branch
The Welcome Kit contains Two cards. Incase the existing card is misplaced /
damaged, the Second card can be Activated after Blocking the Primary card.
Unique feature of Locking/unlocking the card Account through IVR or through

Website self care portal system
An exclusive Internet login provided in the Website for balance enquiry,

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

***
144
Bankers Digest 2013
Fee Based Income - Products

In the present deregulated competitive environment, Banks are facing difficulties in
retaining / improving profits since there is pressure on Net Interest Margin (NIM). In
order to cope up the demand, Banks are focusing their attention on other services to
improve the bottom line. Banks are entering into ancillary services in a big way. To
augment other income, our Bank is undertaking five activities viz., Selling of Mutual
Funds, AB Arogyadaan, Bancassurance schemes, Sale of Gold Coins and Liability
Insurance/Asset Insurance.
I. Mutual Funds are associations or trusts of public members who wish to make
investments in the financial instruments or assets of the business/corporate sector
for the mutual benefit of its members. Mutual Funds are launching various schemes
with different investment objectives from time to time to suit the requirement of the
investors. Mutual Funds are beneficial to their members in reducing risks and
maximizing income by proper selection of financial instruments, which will bring
income flow in the form of dividends as well as in the form of capital appreciation.
Our Bank has entered agreement with Mutual Funds viz., Principal Mutual Fund
(PNB), SBI Mutual Fund, TATA Mutual Fund, UTI Mutual Fund, Kotak Mutual Fund,
Reliance Mutual Fund, Sundaram BNP Paribas Mutual Fund, LIC Mutual Fund, Birla
Sun Life Mutual Fund and Baroda Pioneer Mutual Fund for distribution of their
products. It is a win-win situation to the Banks and customers since banks are
providing value added services to the customers and it is a source of other income to
the Banks.
II. AB Arogyadaan: It is a group Mediclaim Insurance Scheme, which takes care of
the hospitalization expenses, issued as a Floater Policy, in association with M/s.
United India Insurance Company Limited. There are two plans viz., Plan-I covers a
policy of four (1+3) consisting of Policy Holder, Spouse and 2 dependent children
and Plan II covers a family policy of SIX (1+5) consisting of Policy holder,
Spouse, two dependent children and parents (father & mother). Dependent mean
male child - below 26 years and unmarried female child. It is a Floater Policy, any
one member or all the members put together can avail hospitalization benefits
(Room, Boarding, Nursing, Surgeon/Consultant fee, Diagnostic charges etc.) during
the policy period. M/s. Good Health Plan Limited is acting as Third Party
Administrator (TPA) and issue photo identity cards direct to the policy holders in
Metro/Urban/Semi-Urban areas and with regard to other centers the cards will be
sent to the respective branches. Policy holders are eligible to avail cash less
treatment at networked hospitals and incase of non-networked hospitals, they may
pay bills first and then claim reimbursement from TPA. The entry age is up to 60
years for fresh proposals and on renewal coverage is up to 80 years. Risk will be
covered based on sum assured ranging from one lakh to five lakh.
lakh Policy is valid for
one year, however 15 days grace period is allowed for payment of premium. The
annual premium payable by the customer is depending on the Sum Insured. The
premium paid under the Scheme is eligible for IT relief under section 80D. The first
30 days of joining the scheme is treated as waiting period and policy holder is not
entitled for reimbursement of hospitalization charges in the said period. However,
this condition does not apply in case of accidental hospitalization. The maximum
reimbursement will be made to the policy holder is 80% of eligible claim. Bank acts
as facilitator only. Settlement of the claims is the sole responsibility of M/s.United
India Insurance Company (UIIC). The contract is between the insurer (insurance
company) and the insured (individual) and not between the Bank and insured.
Further UIIC has extended another benefit i.e. Janata Personal Accident Policy of
`1.0 lakh at free of cost, to all the policy holders whose age is 45 years & below as
on date of remittance of policy premium. (Cir. No.88 Ref 51/4 dated 28.05.12)
145
Bankers Digest 2013
III. Bancassurance (Life): Andhra Bank is the Corporate Agent for M/s. IndiaFirst
Life General Insurance Company Limited and providing various insurance products to
the customers of the Bank as well as General Public w.e.f. 01.01.2010.
Bancassurance (Non-Life): Bank is undertaking marketing of non-life policies
issued by M/s.United India Insurance Co. Limited to customers as well as general
public through selected branches. The important policies are Standard Fire & Special
Perils Policy, House Holders Insurance Policy, Shop Keepers Policy, UNI Care Policy,
Electronic Equipment Insurance Policy and Contractors All Risk Insurance Policy.
Besides the above, branches can also undertake insurance of loan assets (Primary
and Collateral securities) with M/s. UII, so that branches can protect the loan assets
against risk and earn income through commission. All insurance proposals processed
should bear bank Code 920100 to receive eligible commission.
IV. Sale of Gold Coins: Gold has become a preferred choice of investment for a
large number of investors across the globe in general and India in particular. In
order to provide the desired services to the customers and to improve the noninterest income, our bank has entered the business of selling the famous Swiss
999.9 fine gold in round shaped coins of 2 grams, 4 grams, 5 grams, 8 grams, 10
grams, 20 grams and 50 grams denominations in the first phase. All gold coins are
embossed with the logo of our bank on one side and our name & weight of the coin
on the other side. A pre-requisite for selling of gold coins is to obtain VAT/CST
license. All branches are allowed to sell gold coins. Branch receive price quote every
day from IIB, Mumbai. Branch will get an income of `100/- per gram as commission.
No sale is to be effected against Credit card for purchase of coins. However,
branches can grant loan against Gold Coins under Gold Loan Scheme.
Non-customers - For purchases up to the value of `20000/- no documents are
required except an application form. Identity proof is required for purchases above
`20000/- and up to `49999/-. Cash for `50000/- and above cannot be accepted from
non-customers. For customers - For purchases below `50000/- no documents are
required except an application form and cash can be accepted. For purchases of
`50000/- and above PAN Card copy is required and payment is through a cheque.
(Circular no.341 Ref 51/22 dated 24.12.2008)
V. Liability Insurance: In order to survive in the competitive world, financial
institutions are offering innovative retail loan products to the customers. In this
direction, Banks have made the loan procedures easy, offering competitive interest
rates and building value-additions in their loan products by providing insurance cover
(Accident & Life) to the borrowers. Retail loans (Housing, Vehicle, Education etc)
involve huge sums and remains in existence for longer periods as compared to the
other loans. These loans being one of the essential social needs with emotional and
psychological attachment, the family need to continue the asset even in case of any
unfortunate event to the borrower. Andhra Bank is providing cover to Housing /
Vehicle / Education loan borrowers in association with India First Life Insurance
Corporation (IFLIC) under Group Mortgage Redemption Assurance. The borrowers
can avail this facility at their option and it is not compulsory. The intending
borrowers opting for the risk cover have to submit Consent-cum-Authorization and
Simple Health Declaration Form.
146
Bankers Digest 2013
Covering the borrowers under this policy helps the bank in reduction of default risk in
case of unfortunate event to the borrower. It is also providing a potential avenue for
earning fee-based income to the Bank. The features of the scheme are as under:
Features
Particulars
All new and existing borrowers between 18 to 65 years of age for
Housing Loans / Education Loans Vehicle Loans. Coverage is available
Eligibility
for Joint Borrowers of Housing Loans and Vehicle Loans. In case of
Joint Borrowers, any one of the borrower will be covered provided No
Objection Letter is obtained from the other borrower (s). Age Proof Copy of Date of Birth Certificate / Passport / Voters ID / PAN Card /
School Certificate etc. To arrive the correct age for the purpose of
calculation of premium, Age as on last birthday should be considered.
Up to `50 lakhs & `20 lakhs for Housing and Vehicle loan borrowers
Maximum
respectively. In case of Education Loans in India, the maximum
Cover
coverage available is `10 lakhs and `20 lakhs for abroad studies.
However, the policy is covered with the sanctioned limit or the liability
as on date, whichever is lower.
Amount
Outstanding indebtedness of the borrower to the Bank which means
payable by the amount outstanding in the loan account on the date of entry in to
Insurance
the scheme for the first year and for subsequent years the
company
indebtedness as reduced by the amount deemed to have been repaid
through EMI towards the liquidation of the Principal and Interest on
such loan. The amount shall not include the default in payment, if any.
Recovery of In case the amount of claim settled by the insurance company falls
short
fall short of the liability outstanding in the loan account, the short fall
amount
should be paid by the joint borrowers / co-obligants / guarantors /
legal heirs of the borrower.
One time Single Premium. The premium will be calculated based on
Premium
sanctioned limit / liability, age of the borrower and repayment period
of the loan. However, in case of existing borrowers, outstanding
liability and Residual Repayment Period as on the date of the policy is
to be taken into consideration while calculating premium amount.
Foreclosure On request of the borrower, LIC will refund the Proportionate premium
of the Loan basing on the Residual Repayment Period.
The insurance cover for a borrower is terminated once the borrower
Termination attaining the maximum permissible age (65 years for Housing Loan, 60
of cover
years for Education & Vehicle loans) or on expiry of repayment period
of the loan or on complete repayment of the loan before the due date.
Cir.no.041 Ref 51/05 dated 20.05.2010
147
Bankers Digest 2013
IndiaFirst Life Insurance Company Limited (IFLIC)

Bank has entered into Insurance joint venture with Bank of Baroda and Legal &
General Group plc with 30%, 44% and 26% stake respectively and offering the
following schemes.
No
Salient Features
Target Group
Entry Age
Term
Minimum Invest.
i) Regular Premium
ii) Limited Premium
iii) Single Premium
Maximum Invest.
Payment options
Fund options
Sum Assured
i) Regular & Limited
premium
5
6
7
8
ii) Single Premium

9
Withdrawals
10
Tax Benefit on
11
Death Benefit
IndiaFirst Smart Save
IndiaFirst Young India
It is a simple structured
Unit Linked Plan meant for
long term protection and
savings.
18 to 60 Years
15, 20 and 25 Years.
Single Premium the term
is 15 Years.
Customers
with
children to impart
education to them.
`12000/- p.a.
`15000/- p.a.
`45000/-
young
quality
18 to 55 Years
10, 15, 20 and 25 Years.
`12000/- p.a.
NA
NA
No limit
Half-yearly / Yearly SIP facility is available
Debt, Equity, Balanced, Index and value Fund.
Higher of {105% (premium paying term x annualized
premium) or (10 x annualized premium)}
For age < 45 years 125% of
premium and for age >=45 years
NA
110% of premium
Minimum withdrawal is `5000/Maximum withdrawal 25% of the fund value, only if the
fund is left with a minimum balance equal to 110% of
annual premium after withdrawal. In case of single
premium the fund value after the withdrawal should not
be less than `45000/Premium invested Section 80C and Maturity benefits
received Section 10 (10D)
The fund value or the sum assured whichever is higher is
paid to the family/nominee.
IndiaFirst Secure Save Plan: It is a traditional insurance cum savings plan which
enables the customer to build their savings systematically by paying regular
premium based on income and sum assured chosen. The minimum age at entry of
life insured is 5 years and maximum age is 65 years as on last birthday. However,
the minimum age stipulated for policy holder is 18 years, in case where the policy is
taken for minors. The minimum plan period is 10 years and maximum 30 years. The
investor has choice to choose payment mode Monthly/Half-yearly/Yearly. The plan
offers as maturity benefit, basic sum assured along with simple reversionary bonus
and terminal bonus declared by the company from time to time, will be paid to the
policy holder at the end of the plan term. However, in case of death, the sum
assured will be paid along with simple reversionary bonus accumulated till death, to
the nominee. Premium paid and benefits are eligible for tax benefits under sec 80C
up to ` 1 lakh from taxable income. (Cir.no.412 Ref 51/29 dated 01.03.2011)
Bank has entered MOU for distribution of Life Insurance products of the Joint Venture
Company as their Corporate Agents and bank earns commission on the policies
mobilized/sold. (Circular no. 214 Ref 51/15 dated 08.09.2010)
148
Bankers Digest 2013
IndiaFirst Money Back Health Insurance Plan: IFLIC has launched this product
on 26th May 2011. It provides both a wide, comprehensive health insurance cover to
the family and also an excellent investment opportunity to systematically save, earn
market returns. The salient features of the plan are as under: (Cir.no.106 Ref 51/05
dated 06.07.2011)
No
Salient Features
Target Group
Entry Age &

Maximum age at
maturity
Sum assured
Minimum Invest.
i) Regular Premium
ii) Single Premium
5
6
7
Payment options
Fund options
Withdrawals
Hospital claim
Maturity Benefit /
Death Benefit
10
Tax Benefit on
11
Commission to Bank
12
Third Party
Administrator (TPA)
IndiaFirst Money Back Health Insurance Plan

Policy holder can opt for the scheme for self, self,
spouse, parents and children (maximum 2)
Primary Life Assured 18 to 60 years Max. 70 years
Spouse & Parents 18 to 65 years Max. 75 years
Children 90 days to 24 years Max. 25 years
Individual Minimum 1.50 lakh & Max. 5 lakh
Family Floater Minimum 1.50 lakh & Max. 10 lakh
Age
Minimum
Maximum
Up to 45 years
`10000
`33300
46 years 60 years
`14200
`47600
Up to 45 years
`30000
`100000
46 years 60 years
`37500
`125000
Note In case of spouse, children and parents, the
policy holder need to pay additional premium as under
Type
Minimum
Maximum
Regular premium
`900
`47500
Single premium
`9400
`475500
Yearly
Debt, Equity, Balanced, Index Tracker and value Fund.
No withdrawal is followed before 5 years.
Minimum 24 hours hospitalization required.
30 days waiting period except in case of accidents.
Hospitalization of the insured upto 1% of the annual
sum assured with maximum limit of `5000/- per day.
ICU/ICCU expenses are covered up to 2% of the annual
sum assured or `10000/- per day whichever is less.
More than 3400 network hospitals across 20 states.
The Primary Life Assured will receive the accumulated
fund value. In case of death of Primary Life Assured, the
amount will be paid to nominee and the policy
terminates for all other life assured members. However,
in case of death of other assured member, the plan will
continue to be in force for remaining members.
Premium invested Section 80C and Maturity benefits
received Section 10 (10D)
10% of premium paid in first year and 1% thereafter in
case of Regular Premium accounts and 2% of premium
for Single Premium accounts.
E-Meditek Services Limited.
Abhaya First Wealth Pack: It is a four-in-one product which provides Savings

Bank account with life insurance, recurring deposit facility, ULIP equity option and
group life term plan with life insurance coverage in case of unfortunate death of the
account holder. The first two products are of Andhra Bank and other two products
are of IFLIC. The product is available in three denominations viz., Silver (`25000),
Gold (`50000) and Platinum (`100000/-). Cir no.359 Ref 51/23 dated 12.01.2012.
149
Bankers Digest 2013
Loan Policy Guidelines

The objective of Loan Policy is to ensure balanced growth of credit across various
sectors and to avert credit to undesirable sectors. It is aimed at to improve the credit
off-take with quality with minimum risk and maximize profits. Further, it enables the
bank to continue to maintain thrust to priority sector advances in consonance with
Govt. of India / Reserve Bank of India guidelines. The exposure norms as per the
existing policy of the Bank are as under:
No
Category
Norms
1
Single Borrower
15% Banks capital fund*
2
Single BorrowerInfrastructure
20% Banks capital fund
3
Group
4
Group Infrastructure
5
NBFC
6
NBFC Infrastructure
7
NBFC - Asset Finance Company
8
NBFC - Asset Finance Company - Infrastructure
9
Public Limited companies (widely held)
10
Public Limited companies (widely held) Group
11
Public Limited companies (widely held) - Infra
*Banks Capital Fund = Tier-I & II Capital as per audited balance sheet of the
previous year. Single Borrower threshold limit & Substantial Exposures Limit can be exceeded
by Management Committee/Board. (Circular no.041 Ref 26/11 dated 11.05.2007 &
Cir.no.86 Ref 26/14 dated 17.06.2011)
Maximum Exposure / Prudential limits:
(Crores)
Maximum prudential limit
No
Category
Entity
Group accounts
1
Individual / Proprietary concern
20
30
2
Partnership
30
40
3
Limited Liability Partnerships
5
10
4
HUF
10
5
Trusts / Societies / Associations
20
30
6
Private Limited Companies
80
100
7
Public Limited Companies (closely held)
100
120
8
Film Industry (Per party) Max 6 parties
4
9
Infrastructure Project (Per project)
500
10
Construction Contractors
15 times of Net owned funds
Note: The maximum limit is to be restricted to the said limits or 6 times of net worth
of the concern as per the Latest Audited Balance Sheet, which ever is less. However,
in case of Individual / Proprietary / Partnership / HUF / Trusts / Societies /
Associates the limit can be sanctioned to `60 crores by CMD/ED.
Non Funded Limits - Maximum Exposure / Prudential norms:
No
1
2
3
4
5
Category
BGs (including Letter of Comfort /
Letter of Undertaking)
BGs to Banks / FIIs / Others
Letter of Credit
Bills discounted (IDBI/SIDBI)
Foreign Exchange Commitments
Maximum
3 times of Net Worth of the Bank
10% of Banks capital funds (Tier-I capital)
2 times of Net Worth of the Bank
1% of Net Worth of the Bank
Equal to the Net worth of the Bank
150
Bankers Digest 2013
Substantial Exposure Limits

Single borrower threshold limit will be `750 Crores.
Substantial Exposure Limit The sum total outstanding of all the borrowal
accounts, where the single borrower exposures is in excess of `750 crore,
shall not exceed `20000 crore.
The following internal exposure limits are fixed to specific industries/sectors in

addition to the above exposure limits.
Exposure Ceilings
Fund Based
Non Fund Based
Power
22.00%
10.50%
Transport
11.00%
5.00%
Energy
23.00%
10.50%
Hospitals
3.00%
1.50%
Educational Inst.
2.00%
2.00%
Textiles
9.00%
4.00%
Petroleum products
10.00%
1.00%
NBFC*
10.00%
5.00%
Iron & Steel
10.00%
14.00%
Construction & Contractors
10.00%
50.00%
Housing Loans
15.00%
Rice Mills
6.00%
2.00%
Commercial Real Estate
7.00%
2.00%
Diamond, Gems & Jewellery
5.00%
3.00%
*Sub-ceiling of 3% for NBFCs dealing in financing against gold collateral
Industry / Sector
Administrative clearance from H.O is required for credit facilities to Trust & HUF
borrowal accounts for the first sanction. For subsequent renewals & enhancements it
is not required provided there is no change in the composition / activity of HUF /
Trust. The extent up to which Interest & Non-interest bearing Unsecured Loans (from
promoters, friends and relatives) can be treated as Quasi Capital/Net Worth for
exposure norms is 50% and 100% respectively.
Capital Market Exposure:
Funded & Non-funded facility to Stock Brokers including its associates/inter
connected companies subject to
a) 20% of Net Worth of the Bank as per the last audited balance sheet (on
solo/consolidated basis) after netting exposure to Loans and advances to Individuals,
Loans & advances to corporates for meeting promoters contribution & Loans to
individuals for investment in IPOs/ESOPs.
b) For Individuals `20.00 crore, For Partnership firms `30 crore and for Private and
Public Sector Companies it is `80 crore and `100 crore respectively subject to 6
times of Net worth of the borrower for Individual, Partnership & Private Ltd.
Companies. (Cir.47 Ref 26/9 dated 27.05.11)
Exposure ceilings - Exemptions

Loans & Advances against security of banks own term deposits and LCs / BGs
covered by 100% cash margin.
Food Credit.
151
Bankers Digest 2013

Rehabilitation of Sick / Weak Industrial units: Existing / additional credit facilities

(including funding of interest and irregularities) granted to weak / sick industrial
units under rehabilitation packages.
Govt. of India Guaranteed accounts where principal & interest are fully
guaranteed.
Bills purchased/negotiated/discounted under LC (where the payment to the
beneficiary is not made under reserve.)
Maximum repayment period allowed for the following Term Loans

No
Category
1
2
3
4
5
6
Infrastructure
Infrastructure
RTO Loans
RTO Loans
Other TLs
Other TLs
Credit Rating
CRS/CRAS
CRRM
A+++ / A++ A++
A+ / A&B
A+,A,B++
A+++ / A++ A++
A+ / A&B
A++
A+++ / A++ A++,A+A,B++
C
B+, B
Repayment with in
15 Years including gestation
12 Years including gestation
6 Years including holiday
5 Years including holiday
7 Years excluding holiday
5 Years excluding holiday
Due Diligence Report Conducting due diligence is a prerequisite for all new
borrowal accounts (`100 lac & above) by the branch. It helps the branch to assess
the credit worthiness of the prospective borrower and risks involved in the proposal.
The report covers the details of the prospective borrower / Promoters / Partners /
Directors, details of associate and group concerns and details of market enquiries
about the new borrower and the associate/sister/group concerns. Due diligence is to
be done by Zonal Office in case of accounts of `300 lac and above. However,
branches to obtain Credit Investigation Report for all advance accounts irrespective
of the credit limits sanctioned. However, Agrl, Weaker and Govt. Sponsored accounts
upto a limit of `25 lakh are exempted from the purview of Credit Investigation.
(Cir.no. 6 Ref 26/03 dated 07.04.2010)
Stock Statement/Book Debts:

All borrowers availing working capital limits are required to submit stock
statement as on the last Friday of the month before 10th of succeeding month.
Penal Interest of 1% for the period of default on working capital
outstanding.
The minimum working capital limit to accept Book Debts as security is above
`5 lakh.
Book Debt statement is to be certified by the borrower every month and it
should be certified by a Chartered Accountant every quarter.
MSOD

All accounts with working capital limit of `100 Lakh & above from the Banking
system is required to submit MSOD.
MSOD is to be submitted on or before 15th of next month.
Penal interest of 1% to be charged in case of accounts with fund based
working capital limits of `100 lakhs & above for the period of default.
QIS II is a Quarterly Statement showing the performance during the quarter. Time
stipulation for the submission of QIS II is within six weeks from the close of the
quarter. Cut-off limits for obtention of QIS form II.

Funded working capital limits of above `6.00crore (A & above rated)

C rated accounts, with fund based working capital limits of `1.00 crore
and above
152
Bankers Digest 2013
B(CRS/CRAS)& B++(CRRM) rated accounts, with fund based working

capital limits of `2.00 crore and above
QIS III is a Half-yearly Operating and Funds-Flow statement. Time stipulation for
the submission of QIS III is within two months from the close of the half year. Cutoff limits for obtention of QIS form III.
Funded working capital limits of `3.00 cr and above (A and above rated)
C(B+ & B under CRRM) rated accounts, where fund based working
capital limits of `1.00 crore and above
B(B+ under CRRM) rated accounts, where fund based working capital
limits of `2.00 crore and above
Penal interest @ 1% p.a for one full quarter on the working capital
outstanding will be levied for non submission of QIS II/III. However, maximum over
all penal interest chargeable in an account for any reason should not exceed 2% p.a.
Margins & Securities:
Bank Guarantees - Value of Agricultural Land and/or Rural Buildings should not
exceed 30% of total collateral security requirement in case of new accounts and 50%
in case of existing accounts that too in states where there is no ban on acceptance of
agricultural land as security for non-agricultural purposes.
Loans against NSCs/KVPs - 75% of the purchase value plus accrued interest of
NSCs / KVPs is eligible for bank finance. However, the loans should be extended only
where the date of maturity is less than 3 years from the date of finance except
where the facility of premature cancellation/surrender value is available.
Book Debts: The margin required for financing against book debts is 50% and in
case of MSME it is 30%. However, sanctioning authority can reduce margin to 25%
on book debts of Government departments. While arriving Drawing Power, only Book
Debts 90 days and below are to be taken in to consideration. With regard to MSME
advances the stipulation is 180 days & below.
Security Norms Crop Loans / Agriculture Term Loans: Hypothecation of
Crops/Assets financed is only be treated as security for loans up to `50000/- and for
loans beyond `50000/- and up to one lakh, branches to obtain co-obligation / thirdparty guarantee. However, in case of loans above one lakh, 100% collateral security
in the form mortgage of land / creation of charge is required.
Third party Collateral norms: Borrowers are required to furnish the collateral
securities in the form of immovable or movable properties as per the loan policy
guidelines of the bank. In the cases where the borrowers are not having sufficient /
adequate properties, the properties of third parties who are near relatives, friends
etc. are being accepted as collateral security. However, in view of the risks involved
in accepting the collaterals from third parties, now the branches are advised to
obtain administrative clearance from the next higher sanctioning authority for all
loans except loans against Bank Deposits. Third Party means any person other than
the borrower, borrowers spouse, father, mother, son and daughter, partner of the
firm or Directors of the Company or Trustees of a Trust. While accepting third party
collateral security, a savings account has to be opened in the name of the party
depositing title deeds with due KYC compliance. An attested photo should be kept
along with RF 255. Branch Managers or authorized officer should visit independently,
unaccompanied by the borrowers or their representatives and make their own
enquiries about ownership and valuation from the neighbours/office bearers of the
residents society, if any. The first visit should be along with the borrower and a
153
Bankers Digest 2013
certificate to this effect is to be kept on record along with the loan document.
(Cir.no.231 Ref 26/36 dated 13.10.2011)
Unit Inspections & Audits:
No
1
Cash Credit Limits

Below `50 lakhs
`50 lakhs & above
`100 to `200 lakhs
`200 to `300 lakhs
Above `300 lakhs
Other than Cash Credit
Periodicity
Bi-monthly by branch
Once in a month by Officer & once in a quarter
by Manager / Stock Audit by Concurrent Auditor
Once in a month by Officer & once in a quarter
by Manager / Stock Audit by Concurrent Auditor.
Once in a year by Inspector of Branches.
Once in a month alternatively by Officer/Branch
Manager/Concurrent Auditor; Short Inspection
by Concurrent Auditor/IOB once in a year; Stock
& Receivable Audit once in a year.
Once in a month by ZO officials (Technical
Officer/Senior
Manager-Credit)
or
CM/SM
heading branches.
Once in a quarter by an Officer; Once in half
year by the Manager.
Stock Audit is to be done for all Cash Credit Accounts with limits of `50 Lakh &
above by the Concurrent Auditor.
Short Inspection is applicable to Advances of `100 lakhs & above. Short Inspection
will be conducted by Concurrent Auditors/Inspectors of Branches. In case of Fresh
Advances, Short inspection is to be conducted within 3 months from the date of first
disbursement. In case of Existing Advances, the periodicity is once in a year
preferably six months after the regular inspection of the branch.
Stock & Receivable Audit - Minimum Cash Credit Limit for conducting audit is
`2.00 Crore. Accounts for which conducting Stock & Receivable Audit is applicable:
C Rated Accounts
B Rated Accounts
A Rated Accounts
NPA Accounts
New/Take-over
accounts < 3 years
To all accounts
`2 Cr. & above(with min. of 50% fund based limits)

With balances of `5 Crore & above
Where Working Capital Limits enjoyed are `2 Crore &
above irrespective of Credit Rating.
W.C. Limits of `10 crore & above (fund based and non
fund) irrespective of rating.Cir.311 ref 26/37 dt 16.11.06
Audit is to be done by a firm of practicing Chartered / Cost Accountants once in a

year and review should be done by Zonal Office. (Cir. no.463 ref 26/83 dated
31.3.2009)
Pre-sanction Unit Inspection report is to be done preferably by Manager himself
within in one month of disbursement of loan. However, it is to be done before
sanction of Fresh / Renewal / Enhancement of the limits.
Credit Rating is required for Small Loans of above `2 Lakh and below `5 Lakh
Fund and Non-Funded (SSI, RT, BE, PSE, RTO); Credit Rating System (CRS) for
Fund Based Limits of `5 Lakh & above but less than `50 Lakh; Credit Risk
Assessment System (CRAS) for both Fund Based and Non-Fund based Limits of `50
Lakh & above up to `500 lakh; Credit Rating Model for New units without Audited
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Bankers Digest 2013
Balance Sheet for Limits of `5 Lakh & above and up to `500 lakh; Credit Risk Rating
Model for credit limits of above Rs 500 lakh (fund & non-fund based) is applicable.
Risk Rating Model is to be applied for Stand alone Term Loans of `5 Lakh & above. As
per CRS/CRAS/CRRM (as applicable) at the time of half yearly / annual review basing
on latest Audited Balance Sheet and pricing shall be reset as per the credit rating
so arrived at by the sanctioning authority. CRS/CRAS is applicable for the borrowal
accounts with both working capital and term loan limits under the industry / business
/ trade / agriculture segments including import and export proposals. Rating is
required for non-fund based limits also. However, it is not applicable to Professionals.
CRS is applicable for Rice Mill accounts with limits of above `10 Lakh irrespective of
any upper limit. A+ & above rated Rice Mills have a concession of 50% of the
processing.
Interest Rate as per Credit Rating finalised by the sanctioning authority is
applicable for advances of above `10 Lakh. However, interest rates of import/export
credit shall be fixed as stipulated by RBI/Bank from time to time but not as per
CRS/CRAS/CRRM rating. For agriculture segment Credit rating is required for
firms/corporate borrowers with above `5 lakh limit and `25 lakhs & above for
Individuals and non-corporate borrowers. However, DWCRA / SHGs / IRDP / SGSY /
SCAP / STAP / FSCS / LAMPS / Cold Storages, Rural Godowns Scheme / storages
financed under capital investment subsidy scheme of NABARD are exempted from
the above rating.
Review of Accounts:
Parameter
Periodicity
of Review
Term Loans up to `5 lakh

Housing Loans
Yearly
Education Loan
Deposit Loans
TL/DPG above `5 lakh and
Yearly
below `100 lakh
Large Borrowal A/cs of
Half Yearly
`100 lakh & above
(Cir.no.062 Ref 26/11 dated 04.06.2011)
Time of review
Reviewing
Authority
During III Quarter

of the financial year
Branch
Manager
During III Quarter

of the financial year
Every 6 months
Sanctioning
Authority
Audited Balance Sheet of the latest financial year shall be the basis for arriving at
the various financial parameters at the time of renewal / sanction under CRAS /
CRS/CRRM. In the absence of audited balance sheet of the latest financial year, the
least of ratings arrived based on the latest provisional balance sheet
OR last audited balance sheet shall be awarded. In such cases, the audited balance
sheet for the latest financial year is to be obtained within 6 months to finalise credit
rating and re-fix interest accordingly. If the audited balance sheet of the latest
financial year is not submitted within 6 months from the date of closure of financial
year for arriving at credit rating in case of fund based advances of `100 lakh &
above, additional interest of 1% is to be charged for the non-submission period.
Renewal of C rated accounts (B under CRRM) under the branch/zonal office
powers shall be considered by Zonal Manager & DGM as II level official at ZO. At HO
respective sanctioning authorities can renew the C Rated A/cs. For Enhancement
one level higher to the sanctioning authority upto GM (Credit). ED/CMD is
empowered to sanction enhancements under their delegated powers the limits. For D
rated limits renewal/review powers are with one level higher to the sanctioning
Authority.(Cir.274 ref.26/35 dt.11.11.2008).
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Bankers Digest 2013
Working Capital Term Loans for Traders & small units:

Maximum limit up to which Working Capital Term Loans can be sanctioned
to Traders and Small Units is `10 lakhs.
Permissible repayment period of Working Capital Term Loan to Traders
and Small Units is 60 equal monthly installments.
Periodicity for obtaining Stock-Statements in case of WCTL to Traders and
Small Units is once in a quarter.
Margin on Primary Security in case of WCTL to Traders and Small Units is
10% for limits up to `5 lakhs and for others it is 25%.
The units are to be inspected once in a Quarter.
Collateral Security is to be obtained minimum of 125% of the value of
Limit.
Legal Audit: All new/ renewal borrowal accounts with aggregate credit limits of `25
lakh and above are covered under Legal Audit. From limits of `25 lakhs to `100 lakhs
empanelled Advocate who has not given legal opinion or Law Officer at Zonal Office.
For limits above `100 lakhs law officer at ZO has to conduct the legal audit. It covers
other aspects such as documents relating to Primary & Collateral securities. Legal
Audit is to be completed before release of loan amount. After the completion of Legal
Audit, permission from Zonal Office is required, in respect of the borrowal accounts
with aggregate credit limits of `50 lakh & above (fund based & non fund based inland
and foreign business limits) for release of sanctioned limits.
Loan Delivery System - Borrowal accounts with fund based working capital credit
limits of `10 Crore and above from the banking system. The total disbursement for
WCDL and Cash Credit should not exceed 80% and 20% of the sanctioned limits.
However funds can be released either as Cash Credit or as Demand Loan basing on
the request of the borrower.
Trust Receipt Financing: A Trust Receipt is a bridging loan that provides a buyer
with financing to settle goods imported on sight terms. Under a Trust Receipt, the
applicant pledges the imported goods in favour of the Bank. This means that the
borrower takes possession of the imported goods, but holds them in trust for the
Bank. When the goods are sold, he has to use the proceeds of the sale to repay the
Bank. As security, the goods title will be vested with the Bank, and the borrower will
undertake to hold the documents, the goods and the sale proceeds in trust for the
Bank. Trust Receipt usually comes together with Import Letter of Credit or Import
Collection Bill Service.
Corporate Loans are sanctioned to meet margin requirement for Working Capital,
Margin for Long Term Project Finance, commitment of the Corporate or for any other
purpose related to the financial needs of the company. However, corporate loans
should not be extended to meet the financial commitments of sister concerns.
Maximum repayment period for a Corporate Loan is 60 Months.
Disbursement of Term Loan by way of reimbursement to the borrower: It
shall be permitted by the sanctioning authority, provided:

Such reimbursement is within 12 months from the date of purchase /

acquisition of the assets.
It should be supported by satisfactory proof of investment / source of funds
supported by Invoice/receipt/voucher followed by auditors certificate.
Such funds should have been remitted through a bank account.
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Bankers Digest 2013
Penal interest on overdue limits:

First 3 months from the due date of the credit facility
Beyond 3 months from the due date of the credit facility
till submission of renewal application with full information
Penal interest of 1%
Penal interest of 2%
Adhoc Limits - Branch can allow adhoc limits maximum of 3 times during the
validity period of the Working Capital Limit. The maximum period for which adhoc
limit can be sanctioned is 3 months. Branch Managers (I, II & III) do not have any
powers to allow Adhoc limits for the sanctions made by higher authorities except in
case of A & above rated Micro, Small Enterprises borrowers. Up to 20% of the
Working Capital facility can be allowed as adhoc to the eligible accounts. The Adhoc
limit shall be regularized on or before due date either by adjustment or by
considering the need based regular limits where the Adhoc limit is also reckoned. The
concept of Adhoc Limit is not applicable to Non-funded limits. The details of Adhoc
limits allowed within the discretionary powers are to be reported in ADA - IX along
with monthly sanctions.
Excess Drawals: The general guidelines for allowing Excess Drawals / Adhoc limits
are as under:
The account should be standard performing one and allowed to the borrowers
enjoying regular sanctioned limits.
Both adhoc and excess drawals should not be allowed simultaneously.
Branches are allowed to extend excess drawals up to 20% of regular limit or
beyond the powers of specified for the branch manager as delegated powers
the branch has to obtain prior approval from controlling office.
Excess drawals should be allowed only to meet the urgent business
requirements such as payment of wages or urgent cash purchases, etc.
The maximum period for which Excess Drawals can be sanctioned is for a
period not exceeding 15 days.
Excess Drawals shall be allowed in a Working Capital account not more than 6
times during the validity period of the working capital limit.
Branch should obtain a letter from the constituent requesting for the Excess
Drawal facility specifying the amount; purpose and the time limit.
Excess Drawals/Adhoc limits attract 2% additional interest.
No adhoc limits are allowed in case of SOD against Real Estates. - ADHOC Not
permitted. However, Excess Drawls can be allowed.
Excess drawals are to be reported in ADA - X along with monthly sanctions.
Temporary Over Draft is a facility by which a constituent is permitted to draw
money from his Current Account in excess of his credit balance. TOD facility can be
allowed only six times in a year in an account. TODs can be allowed in SB accounts
with satisfactory transactions up to `1000/- per account subject to a total amount of
`10,000/-.TODs allowed at the Branch as part of specially launched schemes. TODs
should not be allowed in accounts of our staff members. The Current Account holder
should have undoubted reputation, integrity and satisfactory transactions in the
account for a minimum period of six months. Branch should obtain a letter from the
constituent requesting for the TOD facility specifying the amount; purpose and the
period for which the facility is required. Discretionary powers of Branch Managers for
allowing TODs are JM-I 5000, MM-II `10000, MM-III `25000, SM IV `100000 and SM
V `200000. All TODs allowed are to be reported in ADA-XI every month to ZO. When
the TOD is allowed beyond discretionary powers, the compliance is to be prepared
and a copy of it should be enclosed to the letter seeking confirmation.
Instant Credit of Outstation/Local Cheques: The facility of instant credit facility is
extended up to `15000/- to all individual account holders maintaining Savings Bank/
Cash Credit, including all insurance linked accounts provided the account is properly
introduced and maintained satisfactorily for a period not less than 1 year. In case of
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Bankers Digest 2013
outstation cheques, branches are to levy normal collection charges only. With regard
to local cheques, service charge at flat rate of `5/- per cheque should be levied. In the
event of dishonor of the cheque, interest at normal rate should be levied for the period
the bank is out of funds. (cir 431 Ref 34/02 dated 31.12.2003)
Channel Financing is a new approach or system supporting business by a
realignment of existing products, delivery process, procedures and organization
structures so as to provide a comprehensive solution to the working capital
requirements of an entity. It aims at extending working capital finance to authorized
suppliers / dealers, whose small businesses are connected to large companies as
suppliers/dealers in the business of the entity. Channel Finance provides credit
facility to the suppliers of the Corporate for the supplies made is called as Supplier
Finance. Similarly credit facility is provided to the dealers for the goods delivered
by the corporate called as Dealer Finance.
Supplier Finance: Bank pays amount directly to the main operative account of the
supplier as per advise of the corporate by discounting the bills with maximum of 180
days tenor and the same will be recovered from Corporate on respective due dates.
If the supplier is enjoying working capital limits with another banker, the amount
shall be credited to the account maintained with the said bank. An undertaking letter
is to be obtained from the Corporate to pay the amounts on the due dates of bills
discounted by our Bank. Alternatively, wherever feasible, Post dated cheques of the
main operative account are to be obtained from the Corporate to enable the Bank to
realize the dues on the respective due dates of the bills.
Dealer Finance: In case sanction of Bill facility to the Dealer as per referral letter of
Corporate and agreed by the dealer(s), a suitable Bill discounting limit is assessed
and post dated cheques are obtained from the dealer(s). The particulars of deliveries
of the final products to the respective dealers are provided to the Bank with
supporting documents such as invoices, bills of exchange and other documents
evidencing delivery of goods to the dealers. The payment is made by the Bank to the
credit of main operative account of the Corporate and the same will be recovered
from the dealers on the respective due dates of the bills. If the Corporate is enjoying
working capital limits with another banker, the amount shall be credited to the
account maintained with the said bank.
Type
Supplier Finance / Dealer Finance

Sponsoring Corporate can be a Manufacturing unit, Wholesale dealer
of goods, Distributor of Goods or Provider of services, approved by
Eligibility
Head Office with A and above rating under CRS/CRAS and B++
Criteria
under CRRM. In case of external rating it should be minimum A2
rating (CRISIL or equilant). Corporate / Supplier in existence for
minimum 3 years with good track record.
Based on the quantum of supply / sales for the last 12 months and
the period of credit terms between supplier and the Corporate or
Assessment /
20% of total amount of transactions projected between corporate
Loan / Margin
and Supplier, whichever is less. Minimum loan `25 lakh and
maximum `500 lakh with 10% margin.
Tenor
Maximum 180 days
Primary DA Bills drawn by the suppliers duly accepted by the
Security
corporate. Collateral - 25% of the limit in the form of semi urban /
urban property or liquid securities.
Up to 45 days Base Rate + 0.50%
Interest Rate
> 45 & up to 90 days Base Rate + 1.75%
> 90&up to 180 days Base Rate + 2.75%
The finance made would not be included for MPBF calculations
Others
All other loan policy guidelines are applicable
Cir.no.271 Ref 26/45 dated 14.11.2011
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Bankers Digest 2013
Trade Credit refers to credits extended for imports directly by the overseas bank,
and financial institutions for original maturity of less than three years.
Suppliers Credit relates to credit for imports in to India extended by the overseas
supplier.
Buyers credit refers to loans for payment of imports into India arranged by the
importer from a bank or financial institution outside India for maturity of less than
three years. Issue of Letter of Comfort /Letter of Undertaking/ Guarantee is
applicable for Buyers Credit.
Contact Point Verification: In order to help the branches in strengthening the due
diligence process while entertaining retail credit proposals, bank has appointed
outsourcing agencies for contact point verification. These agencies undertake to verify
the authenticity of the address and the documents submitted by the prospective
borrowers. However, highly placed Government officials / institutions / organizations,
longstanding customers with above 5 years satisfactory track record, persons having
salary accounts with our bank for the last 2 years, existing borrowers enjoying credit
facilities with the bank, practicing professionals like Doctors, Chartered Accountants,
Cost Accountants, Company Secretaries; landlords of our Bank Premises etc., are
exempted from Contact Point Verification Process. Nevertheless, branch managers will
have to conduct their usual due diligence while processing loan applications. (Cir no.
424 Ref 53/10 dated 30.03.2010 & Cir no 449 Ref 53/28 dated 31.03.2012)
Collateral security norms: No collateral security/Guarantee is required for
agriculture loans (Hypothecation of crops/assets for crop loans/Agricultural Term
Loans) up to and inclusive `50000/-. In addition to hypothecation of Crops and/or
Assets, Co-obligation and Third party guarantee is to be obtained where the loan
amount is above `50000/- and inclusive of `100000/-. Collateral security is to be
obtained in the form of mortgage of lands where the loan amount exceeds `100000/.
Margin/security should not be insisted for Agriculture loans up to `100000/- as per
the recent RBI guidelines. (Cir.no.107 Ref 19/06 dated 30.06.10). No collateral
security or third party guarantee is insisted for SME loans up to Ten lakhs and for
Tiny Sector up to Twenty five lakhs based on the good track record and financial
position of the borrowing unit.
Valuation of Properties All properties mortgaged to the Bank are to be valued
before disbursement of loans. The frequency of valuation of properties by approved
engineer for fund & non funded working capital limits including Non Performing and
Suit filed accounts is 2 years. However, Branch Manager is allowed to value
Agricultural lands up to `5 lacs, Above `5 lacs should be valued by RDO and
countersigned by Manager. In case of vacant sites up to `25,000 Branch Manager is
empowered to undertake valuation. Properties of 50 crore and above, the valuation
is to be done by minimum two independent valuers (chartered engineers) and the
lower of the two valuations shall be taken into consideration The valuation report
should bear additional details such as longitude and latitude of the property, distress
value of the property along with market value, address of the property with photo,
particulars of electricity bill payments and other taxes paid on property as proof of
ownership, nearest landmark, deviations in construction, if any. Revised format is to
be submitted with effect from 14.12.2011 (Cir 317 Ref 26/52 dated 14.12.2011)
Other miscellaneous:

The Cost/Capacity of proposed second hand machinery shall not exceed 25%
of total Cost/Capacity of machinery of the proposed scheme stipulated margin
on second hand machinery is 50%.
Sensitivity Analysis is made mandatory in respect of all Term Loans of `50
lakh & above.
Financing second hand vehicle under RTO loans is not allowed.
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Bankers Digest 2013
Agricultural Lending Products

i) Pattabhi Agri credit Card (PAGCC): Bank has introduced this product in the
year 1998 to meet the production and consumption credit requirements of the
farmers. Loan amount is arrived for both the seasons Kharif (Financing from 1st April
to 30th September) and Rabi (Financing from 1st October to 31st March) based on
scale of finance approved by District level technical committee. Branches are allowed
to consider additional finance to the extent of 20% over and above the scales of
finance to meet post harvest, consumption and other contingencies of the farmer. It
is a revolving credit and valid for a period of 3 years subject to annual review. The
due date for the loan is 12 months in case of short duration crops and 18 months
with regard to long duration crops. Accidental insurance coverage is available up to
`1.50 lakh to the farmer and the premium payable is 69/- per year per head
(Cir.no.462 Ref 51/22 dated 19.02.2013)
ii) Kisan Credit Card (KCC): Government of India advised all Commercial Banks,
RRBs and cooperative Banks to implement the revised KCC scheme with an aim to
provide adequate and timely credit support to the farmers under single window for
their cultivation and other needs including consumption requirements. The details of
the scheme are available in page no.85.
iii) Kisan Sampathi (Produce Marketing loans) aims at preventing distress sale of
the farmers agricultural produce. The crops that can be financed under this scheme
include Paddy, Ground nut, Bengal gram, Turmeric, Maize, Millets, Yam, Black and
Green gram. Bank sanctions loan amount based on the 75% of procurement prices
or the minimum support prices issued by Govt. from time to time. Bank entered into
an agreement with NCMSL (National Collateral Management Service Ltd) for
extending produce loans up to `10 Lakh without collateral security provided the
produce is stored at Central Ware House/State Ware House/Food Corporation of
India/NCMSL approved ware Houses and branch should obtain personal guarantee of
two persons. In case where produce stored with the cultivator, loan up to `2 lakh can
be sanctioned with out collateral security, however, branch should take personal
guarantee of the borrower. For loans beyond `2 lakh branches should obtain
collateral security with value not less than 100% of bank loan component. These
loans are to be repaid within 12 months. Interest Rate for loans up to `2 lakh Base
Rate and loans above `2 lakh and up to `10 lakh Base Rate + 0.50% (cir.no.379
Ref 19/21 dated 07.02.11 & cir no.7 Ref 19/1 dated 08.04.2011)
iv) Agricultural Gold Loans are meant for meeting crop production expenses
and/or for creation of assets to be used in his farming operation or for allied
agricultural activities like Dairy, Poultry, Fisheries etc. & Agri related activities. Loans
may be granted as a Cash Credit/Overdraft or single transaction-Demand Loan with
one year tenor; linked to harvest. However, Term loans can be considered with
minimum 40% of margin and repayment period to be fixed 3-5 years repayable
annually, coinciding with the harvest and marketing season/generation of income
from the activity. The loan assessment will be based on scale of finance for crop
production and actual credit requirement by farmers for other investment purposes.
This shall be based on the declaration of the farmers in the application for limits up
to `1.00 lakhs. Loan eligibility will be computed at the rate per gram as decided by
bank (or) 80% of market value of Gold as stated by the appraiser whichever is
lower. Rate of Interest is as applicable to agricultural advances. Short term
Production Credit only is eligible for Interest Subvention as per GOI guidelines.
Appraising Charges - Up to `2.00 lakhs: 1% on limit sanctioned. Above `2.00 lakhs:
0.50% on limit sanctioned. In case of Demand Loan repayment should be fixed
based on the income generation coinciding with harvest and the marketing time,
total period not exceeding 12 months. With regard to term loans the repayment
period to be fixed 3-5 years in annual installments coinciding with the harvest and
marketing season/generation of income from the activity. Simple application cum
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Bankers Digest 2013
letter of pledge with provision for declaration of the applicant on the purpose of the
loan, Particulars of Land, survey number, extent of lands, nature of crops etc may be
obtained and recorded in the application. Irrespective of the purposes, for loan
amount up to `1.00 lakh documentary proof need not be insisted as the farmers
avail the facility for emergent purpose only. However, it is the responsibility of the
branches to ensure end use. For loan amount above `1.00 lakh proof of activities/
purposes may be insisted. (Cir no 375 Ref 19/35 dated 10.12.12).
v) Kisan Chakra: Under the scheme, Vehicle loans are given to farmers for
supporting transport facilities. Two-wheeler loans up to `40000 and four-wheeler
loans up to `3 lakh can be sanctioned under this category. Loans to the children of
farmers having 2 acres of wet land or 5 acres of dry land are eligible.85% of onroad
price of vehicle is sanctioned to small and marginal farmers where as 75% is
sanctioned to Other farmer. Loan should be repayable in 5 years either yearly or half
yearly or quarterly as per the cropping pattern and income generation of the farmer.
vi) Kisan Bandhu (Finance to Tractors): Bank entered MOUs with all leading
tractor manufacturers for financing to Tractors. The borrower should have 3 acres of
wet/double cropped land or 6 acres of dry/single cropped land. No collateral security
is to be insisted for loans up to `3.5 lakh. Finance can also be extended for second
hand tractors aged up to 7 years. At present 7 companies viz., Eicher, Mahendra &
Mahendra, Bajaj Tempo, TAFE, New Holland, HMT and International Tractors, and
the dealer will offer one additional free service during the first year. Margin: For
small/Marginal farmers - 15%. For others 25%. Rate of Interest Base Rate +
3.75 + Term Premia. Minimum of 1000 working hrs per year on own farm/customer
land should be ensured. Under this scheme power tillers are also sanctioned to the
farmers having 1 acre of wet land or 2 acres of dry land.Minimum working hours are
600. Collateral security is not required for the loans up to `1 lakh.
vii) Finance to Horticulture: National Horticulture Board (NHB) is providing 20%
of unit cost as subsidy subject to maximum of `25 lakhs. The activities covered
under this program are Grape, Mango, Sweet orange, Lime, Banana, Amla,
Pomegranate and other horticulture activities. The farmer is required to receive
Letter of Intent (LOI) from the NHB and avail loan from Banks within 12 months and
claim subsidy. The subsidy is to be kept as Back End subsidy. The subsidy
component is 20% in case of Medicinal plantations provided by National Aromatics
Board, Hyderabad.
viii) Mandal Mahila Samakhyas consists of maximum 500 SHGs as members
covering 20 to 30 Village Organisations (VOs) operating in a mandal. VOs/SHG
Federation/MMS are to be registered under AP Mutually Aided Cooperative Societies
Act 1995 to avail finance from Banks subject to Minimum two years of existence with
audited balance sheet; A rating by External Agency i.e. Chartered Accountant; The
maximum eligible amount is 10 times of the Networth of VOs (savings contributed by
each SHG to VOs on monthly basis, interest earned on savings and internal lending,
revolving fund if any) or 80% of Micro Credit Plan (MCP) whichever is lower subject
to borrowing clause incorporated in the byelaws.
ix) Rythu Mitra Groups (RMG): Optimum size is 15 farmers. Marginal, Small and
tenant farmers can become members of the group. Objective of RMG is to provide
technology transfer, market information and credit facilities to the farmers. Quantum
of eligible finance is 20 times of corpus of the group. Finance can be provided for
crop production. The maximum finance is `7.5 lakhs subject to scale of finance as
per land holdings of each member of the group and not exceeding `50000/- per
member. No collateral security up to `5 lakhs. Govt. of AP provides subsidy for term
lending taking by RMGs who undertake Dairy, Input Dealers/fertilizers and Compost
Pit/Vermi Compost activities. However, the maximum unit cost is `1 lakh and the
maximum subsidy available is `25000/-.
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Bankers Digest 2013
x) Joint Liability Groups (JLG): Tenant farmers with minimum 4 5 people

(members of existing RMGs or freshers) can form as group under JLG. The members
of JLB should be from the same socio economic status living in the same village and
carrying the similar activity (For example cultivation). The acreage of the members
should not be more than 2.5 acres in case of irrigated land and 5 acres in case of dry
land. Banks can extend maximum credit facility for crop production to each member
is `25000/- against group guarantee of the members of the group.
xi) Kisan Vivek - Finance to Agri Clinics/Agri Business Centers (ACABC):
a) Agri Clinics are envisaged to provide expert advice and services to farmers on
various technologies including soil health, cropping practices, plant protection, crop
insurance, post harvest technology and clinical services for animals, feed and fodder
management, prices of various crops in the market etc. which would enhance
productivity of crops/animals and ensure increased income to farmers.
b) Agri Business Centres are commercial units of agri ventures established by
trained agriculture professionals. Such ventures may include maintenance and
custom hiring of farm equipment, sale of inputs and other services in agriculture and
allied areas, including post harvest management and market linkages for income
generation and entrepreneurship development. The above schemes are open to
Graduates / Diploma / Post Graduate Diploma in agriculture and allied subjects;
Graduates / Post Graduation in Biological Sciences; Degree courses recognized by
UGC having more than 60 percent of the course content in Agriculture and allied
subjects; Diploma/Post-graduate Diploma courses with more than 60 percent of
course content in Agriculture and allied subjects, after B.Sc. with Biological Sciences;
Plus two (Inter) Agriculture related courses with at least 55% marks. Project cost
ceilings `20 lakh for individuals; `25 lakh in case of extremely successful candidate
and `100 lakh for a group project (minimum five individuals). No margin is required
for loans up to `5 lakh and 10% margin is required for loans beyond `5 lakh. No
collateral is required for loans up to `5 lakh. The repayment period will be in the
range of 5 to 10 years (inclusive gestation period). The borrowers are eligible for
36% composite subsidy which will be back-ended with 3 years lock-in period.
However, it is 44% for Women/SC/ST and candidates from NE and Hilly States.
NABARD provides 100% refinance. (Cir.no.197 Ref 19/15 dated 10.09.11)
xii) Andhra Bank Rural Credit Card (ABRCC): A scheme to provide hassle free
credit to customers having more than 3 years banking with branches/having sizable
deposits - based on the assessment of income and cash flow of house holds. The
limit should not exceed 20% of eligible production credit and/or 20% of annual
income of the applicant from know sources or `25000 which ever is less. It is
overdraft/cash credit limit for 3 years with no end use stipulation and every year the
account is to be brought into credit. Maximum limit is `25000. Entire credit
outstanding under ABRCC shall be treated as Indirect Finance to agriculture.
xiii) Kisan Samraksha (Rural Godowns): The objective of the scheme is creation
of scientific storage capacity with allied facilities in rural areas to meet the
requirements of the farmers for storing farm produce, processed farm produce and
agricultural inputs. This scheme is meant for construction of Godowns in Rural areas
only (not in municipal areas) with capacity ranging from 100 metric tons to 10,000
metric tons. The project can be undertaken by individuals, farmers, growers,
Partnership / proprietary firms, SHGs, NGOs, Companies, Corporations, Cooperatives and Local Bodies. Govt. of India through Directorate of Marketing and
Inspection (DMI) and NABARD administers Capital Investment Subsidy Scheme.
Government of India provides 25% of unit cost as subsidy subject to maximum of
`46.87 lakhs in case of farmers and with regard to others the eligible subsidy is 15%
of unit cost subject to maximum of `28.12 lakhs. Subsidy of 33.33% in case of
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Bankers Digest 2013
Women, SC, ST, SHG, Co-operative societies and projects located in North Eastern
states with a maximum of `62.50 lakhs. For Godowns up to 1000 tonnes capacity
Project cost as appraised by financing Bank or actual cost or `3500/- per MT of
storage capacity which ever is lower. For Godowns exceeding 1000 MT capacity
Project cost as appraised by bank or actual cost or `3000/- per MT of storage
capacity, whichever is low. For NE region/hilly areas, normative cost will be `4000/per MT or as appraised by Bank/financial institution, which ever is lower irrespective
of Godown capacity. The rate of interest for units up to 10000 MT is Base Rate +
1.25 + TP and in case of other units (> 1000 MT units), the interest rate is Base
Rate + 2.50 + TP. No collateral is required up to 200 MT capacities. In case of above
200 MT capacities, collateral not required if Tie-Up with FCI/SWC/CWC is there. If
there is no tie-up, 100% collateral security besides mortgage of the godown site is
required if there is no tie-up. Normally, the margin stipulated is 25% of the unit cost
and 10% where tie-up with FCI/CWC/SWC is available. The loan is repayable with in
7 years with maximum gestation period of 2 years. NABARD reimbursing 1.50%
interest rebate to the borrowers who repay the loans as per schedule based on the
bank certificate (Circular no.298 Ref 19/25 dated 01.12.2011)
xiv) AB Kisan Rakshak: The objective of the scheme is to provide Bank credit to
the indebted farmers to repay loans taken from non-institutional lenders i.e., private
money lenders. It covers the Existing farmer borrowers of the bank, who have been
regular in repaying loans with interest in the past, except on occasions when they
could not do so on account of factors beyond their control and non-borrower farmers
in the service area of the bank branch also. The eligible finance under this scheme
for the existing crop loan borrowers is 50% of Pattabhi Agri Card sanctioned limit
subject to a maximum `50,000/- (or) to the extent of debt whichever is lower. The
maximum limit allowed to new borrowers is `25000/- (or) to the extent of debt
which ever is lower. The loan amount should be released by way of Cheque/Demand
Draft/Pay Order to the creditors who lent money to the farmer against the discharge
of the financial instrument. The discharged instrument should be kept along with the
documents. The rate of interest is Base Rate + 2.50% + TP. The loan is repayable in
7 years with a gestation period of one year. The yearly installment in Term Loan
should be recovered along with Pattabhi Agri Card Loan i.e., on or before 30th June
of every year or marketing the produce which ever is earlier. No collateral security is
needed for the aggregate limit of `100000/- and if it exceeds, branch to obtain
collateral security with value equivalent to bank loan shall be offered.
xv) Surya Shakthi Scheme: Under this scheme, banks are financing for Solar
Water Heater systems. The rate of interest charged for these loans shall be Base
Rate and interest subsidy is available for these loans. The net interest rate (after
adjustment of interest subsidy) should not exceed 2% for individuals, 3% for
institutions and 5% for industrial/commercial organizations. The interest subsidy is
to be claimed upfront within 180 days from the date of loan. The margin
requirement is 15% and repayment period 5 years.
New Schemes (Cir.no.375 Ref 19/38 dated 10.12.2012)
i) Purchase of Land: The scheme aims at providing term loan to small/marginal
farmers including share croppers/tenant cultivators to purchase agricultural land as
well as fallow and wasteland/ to develop and cultivate it with a view to increase
production/ productivity. The maximum loan that can be sanctioned is `10 lakhs
subject to last 5 years average registration value available with registrar/Sub
registrar of the area (or) cost of land as per sale agreement whichever is less +
stamp duty and registration charges. Borrower has to bring 20% as margin. The
security of the loan should be mortgage of land to be purchased as well as
Hypothecation of existing and future crops. The interest rate should be Base Rate.
The loan is repayable in 7-15 years in half yearly/yearly installments including a
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Bankers Digest 2013
maximum moratorium of 24 months depending on the crops grown and income

generated.
ii) Estate Purchase Loans: To purchase estates growing traditional plantation
crops viz. coffee, tea, rubber and cardamom, cashew, pepper, coconut and other
perennial orchard crops. In addition to the above, purchase of existing poultry units,
Fish tanks and Horticultural plantations can be considered under the scheme. The
purchaser should have yielding estates and should be in a position to rejuvenate the
Estate proposed to be purchased. The intending borrowers should have satisfactory
past dealings with the Bank. The purchaser should be experienced in the activity;
however new entrants who are financially sound and capable of bringing in margin
and service the debt can also be considered. Maximum size of the estate to be
financed should not exceed Ac.15.00. The quantum of loan shall be based on the
lowest of (i) Market value (ii) Guidance value/Circle rate fixed by the State or (iii)
purchase consideration, after retaining the necessary margin. Borrower need to bring
50% margin, however, in deserving cases it can be relaxed up to 25%. Since the
estate to be purchased shall be the primary security, collateral security of minimum
100% of loan amount to be obtained. Rate of interest is as applicable to agriculture
term loans. The loan should normally be repayable within 7 to 9 years. However,
depending on the status of the Estate and rejuvenation period required, it may be
extended up to 20 years.
iii) Kisan All Purpose Term Loan is introduced to create a hassle free single term
loan limit to Individual farmers, Group of farmers, SHGs/JLGs engaged in agriculture
and allied activities for all term loan requirements like Farm Mechanization, Land
Development, Minor Irrigation, Water Conservation, Horticulture etc. It shall be
single transaction Term loan limit Loan repayable within 9 years. The purposes for
which the limit is granted shall not be a part of the Kisan Credit Card limit and it shall
be a separate Single transaction account. However development projects with a long
gestation period more than 3-4 years may not be considered in view of the specific
tenor of this credit product. The quantum of loan shall be subject to 5 times of
Annual income of the farmer including allied activities or 50% of the value of land
mortgaged whichever is lower, with a maximum of `20 Lakhs. The margin required
for Small/Marginal farmers is 15% and for other farmers is 25%. Rate of interest is
as applicable to agriculture term loans. The loan shall be repayable within 9 years.
iv) Kisan Tatkal - An instant credit for farming community to meet the emergency
requirements for Agriculture and Domestic purposes for tiding over temporary
difficulties. Individual farmers/joint borrowers (not exceeding 4 farmers) who are
existing Kisan Credit Card (KCC) holders having satisfactory track record of at least
two years are eligible for the loan. It shall be single transaction Term loan limit Loan
repayable within 3-5 years. The minimum loan is 1000 and maximum loan `50000/subject to ceiling at 50% of KCC limit or 25% of annual income. No additional
securities to be obtained. The loan shall be repayable in 3-5 years in half
yearly/annual installments. Rate of interest is as applicable to Kisan Credit Cards.
v) Financing solar Pump set - Under this scheme loan will be granted for
installation of solar water pumping system. The farmers' land should have adequate
source of water. In case any Public/Government source is being used, water right
certificate from the concerned authority should be produced. In case of wells they
should have sufficient recouping capacity to irrigate area proposed to be brought
under irrigation. The borrower should own an economic land holding with a minimum
of 10 acres. However, in case where the farmer is able to sell surplus water,
relaxation may be given. The loan amount shall be 75% of the cost of the
equipment. These are eligible for subsidy, which may be treated as Margin Money
while disbursing the loans. Hypothecation of equipments and mortgage of land is the
security. The interest rate shall be Base rate + 0.75 + TP. The loan should be repaid
within 5 to 7 years by annual installments.
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Bankers Digest 2013
vi) Solar Water Heaters/Solar Home Lighting - Small and marginal farmers
Share croppers/tenant farmers and agri-Entrepreneurs are eligible to avail loans to
purchase Solar Water heaters up to the cost of 75-85% of the unit. The interest rate
shall be Base rate + 0.75 + TP and repayable in 3 to 5 years by annual instalments.
National Agricultural Insurance Scheme (NAIS): It is operated by Agriculture
Insurance Company of India Limited, New Delhi. In consultation with State Level
Coordination Committee of State Government, identifies notified crops district-wise
and also premium rates. This scheme is operating on Village as unit for insurance
coverage in specified crops like paddy and mandal-wise for other crops. Coverage of
crops under crop insurance is District specific but not uniform for all districts in the
state. However, Mandal is taken as unit in case of Rabi season.
Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) is introduced
by Government of India with an objective to enable the Economic Weaker Sections
(EWS) and Lower Income Group (LIG) segments in the urban areas to construct or
purchase houses by providing an interest subsidy of 5% on loan amount of
maximum `1.00 lakh. EWS and LIG are defined as households having an average
monthly income up to `5,000 and `5,001 to `10,000 respectively. The borrowers
under the scheme must have a plot of land for the construction or have identified a
purchasable house. The preference under the scheme should be given to
SC/ST/Minorities/Women/ persons with disabilities in accordance with their
population in the total population of the area as per 2001 census. The scheme will
provide a subsidized loan for 15-20 years for a maximum amount of `1 lakh for an
EWS individual for a house at least of 25 sq. mts, and `1.60 lakh for a LIG individual
for a house at least 40 sq.mts, will be admissible. However, subsidy will be given for
loan amount up to ` 1 lakh only. (Cir.no.316 Ref 28/09 dated 04.12.2010)
SLBC: The SLBC comprises of representatives of all Commercial Banks and Chairmen
of Regional Rural Banks operating in the state. Representatives of the state
Cooperative banks, Reserve Bank of India, NABARD shall also be invited to attend
the meetings of the committee. The level of participation is the Zonal/Regional heads
of banks stationed at the state headquarters, for expeditious decision-making. The
activities of SLBC are - Take up issues raised by member banks or State Government
authorities. Liaison with the state government authorities in the matters relating to
the implementation of Lead Bank Scheme/Government sponsored schemes; Analyze
the deposits and advances of banks and review the credit deployment position for
improving it wherever, it is unsatisfactory; Consolidate all the District Credit Plans
and prepare State Credit Plan, launch and monitor the progress of its
implementation; Review the progress made under various Government sponsored
programmes of poverty alleviation through Lead Dist. Managers; Maintains liaison
with Government departments on behalf of Banks in the State and represent
problems of the member Banks to the Govt. for solution.
Lead Bank: The main object of the scheme is a planning exercise for providing
credit to develop banking in Rural and semi urban areas and extension of credit to
neglected areas for balance regional development of district as a unit. Our Bank is
having Lead Bank responsibilities in Six Districts in the country, of which four are in
Andhra Pradesh viz. Srikakulam, East Godavari, West Godavari, Guntur and the
other two districts are in Orissa (Ganjam and Gajapathi)
Service Area Approach is applicable only to implement Government sponsored
schemes. Banks are free to lend to any area under other schemes subject to
obtaining No Objection/No Due Certificate from the banks operating in the command
area. Banks should not insist for No Objection Certificate for agricultural loans up to
`50000/- to existing farmers and should obtain the self declaration of not having any
loan from other banks. Banks as per RBI guidelines should also not to charge any
such fee for giving any no objection certificate/no due certificate to farmers.
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Bankers Digest 2013
Retail Loans
Eligibility
Purpose
Age of the Borrower

Building age
Loan Amount
Maximum Loan
Housing Loans
Individual either singly or jointly. Joint application from same
family Spouse/father/brother etc.
Construction or Purchase of House/Flat/Plot. Purchase of open
plot is to be sanctioned in urban and metro areas only that too
approved residential lay-outs. Maximum loan can be allowed
50% cost of the plot or `25 lakh whichever lower.
Construction is to be completed within 12 months from the
date of loan.
Minimum 21 Years & Maximum age limit 65 Years.
Residual life of the asset certified by approved engineer should
be atleast 10 years over and above the repayment tenor.
Salaried - Maximum amount of EMI that can be permitted for
proposed loan is to be taken as 50% of net salary. While
arriving net salary, IT deduction, VPF and any other temporary
deductions may be added back and exclude non-regular
income like bonus, arrears etc.
Non-salaried 65% of monthly average income of preceding
3 years as reflected in IT returns.
Rural - `25 Lakh, Semi Urban - `75 Lakh, Urban - `150 Lakh
and Metro - `250 Lakh
Interest Rate
Limit
LTV 75% or Lower
LTV > 75%
10 lakh to 30 lakh
Base Rate
Base Rate + 0.15
Above 30 lakh
Base Rate + 0.25
Base Rate + 0.40
Period
Up to 25 lakh >25 to 30 lakh > 30 lakh
ii)Unrated accounts
<= 5 Years
B.R + 0.75
B.R + 1.00
B.R + 1.75
& Below `10 lakh
> 5-10 Years
B.R + 1.00
B.R + 1.25
B.R + 2.00
accounts
> 10 Years
B.R + 1.25
B.R + 1.50
B.R + 2.25
Repayment
Maximum 30 Years
Maximum gestation period is 30 months from the date of
Gestation period
release of first installment or immediately after taking
possession.
`2 & `8 lakh for houses aged up to 5 years & above 5 years
Repairs/Renovation
respectively. Interest Rate Base Rate + 1%
Security
Mortgage of House/Flat/Plot
Guaran/Co oblig.
Co-ob/Satisfactory third party guarantee may be stipulated.
0.50% of loan amount subject to maximum of `10000/-.
Processing Charges
Up to 10 Lac `100, Above 10 L& upto15 L- `150/- Above 15
Administrative
Charges
Lacs `250/- Per quarter.
2% flat on pre-paid amount, where the repayment is fixed
Pre-payment
beyond 36 months. However, charges may be waived, in case
charges
the payment is from own savings / windfall gains.
* Borrower is required to get a minimum credit score of 60 out of 100.
Cir.no.261 Ref 53/23 dated 27.09.2012
i)Rated accounts*
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Bankers Digest 2013
Educational Loans (Students in India)

Secured admission through test/selection process
12-30 yrs.
All courses including schooling
Need based genuine expenditure related to the course
`10.00 Lac
(Max.2 Loans)
Up to `4 L
Above `4 Lac
Margin
Nil
5%
Repayment
5-7 Yrs
1 Year after completion of course or 6 Months after getting
Gestation period
job whichever is earlier.
Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5
Lac- Satisfactory third party guarantees.
Security / Guarantee
Above `7.5 Lac - Collateral security of suitable value & Co
obligation of parents.
Up to 4 Lakh Base Rate + 2.75%
4 Lakh to 7.5 lakh Base Rate + 3.75%. However, the
interest rate will be Base Rate + 2.75% where the loan is
backed by collateral security.
Rate of Interest
Above 7.5 lakh Base Rate + 2.75%
Staff Children Base Rate + 2.75% (Irrespective of limit)
Simple interest during course & gestation period
Penal Interest
2% for limit above 2.00 Lakh
Concessions
0.50% in interest rates for Girl students
Exemptions
Processing/Administrative/Upfront fee/Pre-payment Charges
Cir. No. 56 Ref 53/5 dated 09.05.2012
Eligibility
Age Criteria
Course
Loan Amount
Maximum Loan
Eligibility
Age Criteria
Course
Loan Amount
Maximum Loan
Margin
Repayment
Gestation period
Security / Guarantee
Rate of Interest
Penal Interest
Concessions
Exemptions
Educational Loans (Abroad studies)

Secured admission in overseas institution
17-35 yrs
Graduation
and above
Need based genuine expenditure related to the course
`20 Lac
Up to `4 Lac
Above `4 Lac
Nil
15%
5-7 Yrs
1 Year after completion of course or 6 Months after getting
job whichever is earlier.
Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5
Lac- Satisfactory third party guarantees. Above `7.5 Lac Collateral security of suitable value & Co obligation of
parents
Up to 4 Lakh Base Rate + 2.75%
4 Lakh to 7.5 lakh Base Rate + 3.75%. However, the
interest rate will be Base Rate + 2.75% where the loan is
backed by collateral security
Above 7.5 lakh Base Rate + 2.75%
Staff Children Base Rate + 2.75%% (irrespective of limit)
Simple interest during course & gestation period
2% for limit above 2 Lakh
0.50% in interest rates for Girl students
Processing /Administrative/ Upfront fee/ Pre-payment
Charges
Cir. No. 56 Ref 53/5 dated 09.05.2012
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Bankers Digest 2013
Educational Loans to Indian School of Business, Hyderabad and Mohali

Students (Cir no. 417 Ref 53/39 dated 02.01.2013) - Indian School of Business
(I.S.B.) is one of the premier educational institutes with which we have an MOU for
allowing educational loans to its students. Our High Tech City branch and Mohali
branches are the Nodal Branches for handling Educational Loans to students of ISB.
The concessions offered on Educational Loans to students of ISB for the academic
year 2013-14 are as follows:
Eligibility
Amount of Loan
Margin
Rate of Interest
Co-obligation
Collateral Security
Holiday Period
Repayment
Liability Insurance
Exclusive powers of
sanction
Role of Nodal
Branches
Hi-Tech City Br,
Hyderabad and
Mohali Br.
Role of other
Branches
All students admitted for the Post Graduate Programme in

Management Courses offered by ISB, Hyderabad.
Need based subject to maximum of `23.00 lakhs
Minimum 10%
Base Rate Floating. Presently 10.50%. No other incentives of
any sort are admissible, including female student incentive.
Co-obligation of earning parent / spouse
Collateral Security may be obtained but need not be insisted.
Period of study and six months after completion of course
Recovery of Interest component only during the first two
years from commencement of repayment. However it is
optional for the borrower to remit over and above the interest
also at his/her convenience and without any prepayment
charges. Fixing EMI from the third year onwards (after
commencement of repayment) basing on the balance
outstanding and the left over tenor of the loan. The
maximum repayment period is 10 years.
Liability Insurance is mandatory, but it is optional for the
student to purchase the Liability Insurance Policy from any of
the service providers.
The Branch Managers of Hi-Tech City and Mohali Branch or
ZLCC(A) of respective zones are empowered to sanction
Education loans upto maximum of `23.00 lakhs for
admissions of 2013-14.
Nodal branches should ensure strict compliance with KYC
norms for student and parent through our branches nearer to
the place of their domicile and if required, can avail the
services of such branches for execution of loan documents by
student and the parent. Nodal Branches should maintain
close liaison with the Institute to monitor the loan account
regularly and enlist their cooperation in tracking the student,
follow up and recovery and should ensure excellent and
timely service to students with an ultimate objective of
transforming the present relation to a long standing one with
the Bank, beyond loan a/c. Nodal branches should provide
leads on placements of ISB students, to branches nearer to
their place of work to enable them to carry forward the
relation with the Bank. The loan accounts are usually
maintained and monitored at the nodal branch till closure.
However requests for transfer of loan account should be
considered, when any borrower, after completion of study,
prefers the loan account at a branch nearer to his place of
work/domicile.
Should extend support and cooperation to nodal branches in
complying with KYC norms and getting the loan documents
executed. Branches can entertain any reference /proposal for
Educational Loan that comes from ISB student. Branches can
process such applications along with other required
documents and forward the same to the nodal branch
168
Bankers Digest 2013
concerned (Hyderabad/Mohali) with their remarks /

recommendations. Branches other than the two mentioned
above should not sanction/disburse the Educational Loan for
ISB students.
The loan processing and sanctioning is centralized at these
two branches for the convenience of operation, monitoring,
tracking the students and evaluation of repayment
performance in respect of these loans.
Branch Managers are advised to collect information from
Nodal Branches about ISB students who secured placements
nearer to the operational area of the branch to market our
deposit and fee based products.
Education Loans to children of Staff Members - All Educational Loans to staff
children are to be sanctioned by Zonal Offices. Rate of interest as applicable to
general public with a concession of 0.50% (for girl child additional 0.50%
concession). If the students have joined an institution with whom we are having MOU
with a lower rate of interest should be either MOU or non-MOU with concession
whichever is lower. However, the above interest rate shall not be less than Base
Rate. Wherever collateral security norms are applicable to general public depending
on the limit sanctioned, only for those loans, collateral security of suitable value shall
be obtained at the time of retirement of staff members for continuing such loans
beyond the service period. On retirement of an employee, loans outstanding in the
staff children under education loan should be reviewed and there should not be any
overdues in the account. In case of retiring employee is a pensioner, the loan should
be transferred to his pension paying branch. (Cir.no.416 Ref 26/57 dt.01.01.2013)
Vehicle Loan
Any individual having minimum gross Income of `1.0 Lac p.a for 4 W,
Eligibility
`60000/- p.a for 2W & `40000/- p.a for battery operated e-bikes.
Eligible loan amount is to be worked out based repayment capacity. For 4
wheeler the maximum permissible EMI should not be more than 60%
net salary in case of employees and 70% in case of other than salaried
class. In case of second sale, the vehicle should not be more than 3
Loan amount
years old and 60% of garage value or `5 lakh whichever is lower.
For 2 wheelers 85% of Road Price (includes invoice price, Registration,
Life Tax, Insurance & accessories) for salaried class/SME/Corporate
borrowers with credit rating B and 80% for other borrowers. However
the upper ceiling is `1.5 lakh.
Security
Hypothecation of vehicle purchased
Guarantee
Good third party guarantee acceptable to the Bank.
Net Pay
40% after proposed installment
Monthly/Quarterly/Half-yearly/Annual Maximum period is 7 years for
Repayment
new vehicles and 5 years for second hand vehicles.
Interest
4 W- BR+3.25%. For loans repayable beyond 3 Yrs plus TP.
2 W - BR+4.25%. For loans repayable beyond 3 Yrs plus TP.
1% of loan maximum of `1000/-.
Proc. Fee
2 % flat on pre-paid amount, where the repayment is fixed beyond 36
Pre-payment
months. However, charges may be waived, incase the payment is from
charges
own savings / windfall gains.
Bank is extending the following concessions during campaign period i.e.
Special
up to 31st December 2012. Interest Rate - 4 W- BR+1%. For loans
Campaign
repayable beyond 3 Yrs plus TP. 2 W - BR+1%. For loans repayable
beyond 3 Yrs plus TP. Processing fee - 0.50% of sanctioned loan amount.
Cir no. 273 Ref 53/25 dated 04.10.2012
169
Bankers Digest 2013
Eligibility
Loan amount
Security
Co obligation
Net Pay
Repayment
Interest*
Pre-payment
charges
Eligibility
Loan amount
Security
Renewals
Guarantee/
Co obligation
Net Pay
Repayment
Interest
Eligibility
Loan amount
Security
Guarantee
Net Pay
Repayment
Interest
AB Vanitha Vahan
Salaried/ professional & self employed Women having min. gross Income
of `1.0 Lac pa for 4W - `60000 pa for 2W & `40000/- pa for battery
operated e-bikes. 50% of Husband's salary will be taken for computing
eligibility provided he is working and stands as Co-obligant.
4 Wheeler - NEW - Least of Road price minus margin or 3 yrs. gross
income. USED- (Not more than 3 years old) - Least of 60% of garage
value or 3yrs.gross income. Max. of `5.00 Lac. 2 Wheeler - NEW- Road
price minus margin with a Max. of `60000/Road Price- Invoice price, Registration, Life Tax, Insurance & accessories
up to `5000 for 4 W & `1000 for 2 W. Margin: Salaried class with salary
deduction 15%; SME/Corporate with standard assets with B rating &
above 15% and other borrowers 20%
Hypothecation of vehicle purchased
Father /Husband of the applicant or suitable third party guarantee.
4 W- New-12-72 EMI - 4 W- Used-60EMI - 2 W- 12-60EMI
4 W-BR+1.50%; Term Premia (TP) of 0.25% Extra for loans repayable
beyond 3 Yrs. 2 W-Up to 36 months-BR+3.75%; Above 36 monthsBR+4.00+0.25 (0.5% Concession for prompt repayment as back end.)
2 % flat on pre-paid amount, where the repayment is fixed beyond 36
months. However, charges may be waived, incase the payment is from
own savings / windfall gains.
Clean Loan
Any individual having repayment capacity. Age not above 75 years in case
of Pensioners & 55 years in case of LIC Agents.
Salaried Persons: Fresh- 8 Times of gross salary or Maximum `1.00 Lac.
Renewals -10 Times or Maximum `1.50 Lac. ZO sanction 18 times
Non SalariedZO Sanction - 2 Times of average annual proven income
Pensioners - 8 Times of monthly Pension Maximum `1.00 Lac.
LIC Agents - 2 Times of average of last 3 yrs. annual renewal
commission for IT Assesses and 50% of average of 3Yrs. annual renewal
Commission for Non IT Assesses. Maximum `2 Lac
Nil
After payment of 1/3rd regular installments
Two third party guarantors acceptable to the Bank. In case of Clean loan
to Pensioners - Nominee of the pensioner/family pensioner shall join as
Co-obligant / Guarantor. In case of Clean loan to LIC Agents- Spouse or
one of the family members and one LIC Agent.
Maximum 60 EMI & 36 EMI for Pensioners aged > 65 yrs. & LIC Agents
Base Rate+7%. Term Premia (TP) 0.25% for loans repayable > 3 Yrs
Consumer Loan
Any individual having repayment capacity. (Non-Salaried personsMinimum Income `30000/- pa
Equal to 10 Months gross salary- 40 % on annual Income in case of
non-salaried persons or 75% of cost of articles, whichever is lower.
Hypothecation of goods purchased
Good third party guarantee acceptable to the Bank.
Max.60EMI
Base Rate + 7.50% + TP 0.25% for loans repayable beyond 3 years
170
Bankers Digest 2013
Loans against Government securities

Eligibility
Purpose
Loan amount
Margin / Security
Guarantee/co-oblig
Repayment
Interest
Processing & Upfront Fees
Employees/ Pensioners / Professional & Self-employed

holding Govt. securities (except IVPs)
Not specific
Equal to 75% of purchase value of security including
Accrued interest / Surrender value of LIC Policies.
Securities where premature cancellation is not available,
the date of maturity should be less than 3 years from the
date of finance.
25 % margin and pledge of receipts.
Limit above `50000/- Co obligation is required
Max.60EMI
Base Rate+4.0% Term Premia (TP) of 0.25% Extra for
loans repayable beyond 3 Yrs
Nil
Facility
Loan amount
AB Doctor +
Individuals, Partnership firms/ Ltd co. /Trusts. Key promoters
should be practicing qualified Medical practitioner and Doctors.
Minimum practicing experience should be 2 years.
To set up clinic / diagnostic labs (x-ray/pathology/songraphic),
purchase of medical equipments, Vehicles, Ambulance, medical
software, furnishing of nursing homes, working capital
requirement for existing nursing homes.
Term Loan / Overdraft or both
Maximum 20 lakh
Margin
25% for equipments
Eligibility
Purpose
No collateral security or Third Party Guarantee. To be covered

under CGTMSE
Repayment
Term Loan - Maximum 84 months - Gestation- 12 months
Interest
Base Rate + 3.25 floating
Processing& Upfront 0.50%
Cir.no.8 Ref 53/1 dated 05.04.2012
Security
Eligible Borrowers
Eligible Properties
Eligible Tenants
Purpose
Loan amount
Margin
Rent Receivable
Individuals, Sole Proprietorship, Partnership Firms, Public
Limited Companies, Private Limited Companies, Trusts etc.,
owning properties including landlords of our branch premises.
Unencumbered Residential/commercial Properties at Urban /
Metro areas. In case of Semi-urban areas, premises let out to
banks may be considered.
Reputed PSB/Multinational undertakings, Embassies/consulate
offices, Banks, National & International Airlines etc. In case of
Private Sector Organizations, the Net Worth of the organization
should be above 5 crore.
Closure of the loan availed for development/construction of the
property. In case where the property is constructed with own
sources, limits can be considered for the expansion /
development of existing business.
Minimum loan ` 25 lakhs and the maximum loan is ` 5 & ` 10
crore for individual and other borrowers respectively. In case of
proposals from land lords of our bank premises, the stipulation
for minimum loan amount is relaxed to `5 lakhs. However,
limits beyond ` 10 crores falls under MC powers.
15% of rent receivable towards maintenance and 25% of
margin in collateral security of NSCs, Deposits etc.
171
Bankers Digest 2013
Equitable mortgage of the property of the value not less than

150% of the loan. However, in case of deficit, liquid securities
Security
such as NSCs, Bank Deposits etc., can be accepted with 25%
margin.
Guarantee/
One Co-obligation / Guarantor. However, no Co-obligation /
Co obligation
Guarantor for our Bank premises.
84 Months (120 months in case of leased premises of our
branches) or unexpired certain lease period whichever is less
Repayment
after making adjustments for TDS, Property Tax and 15% rent
towards maintenance.
Interest
Base Rate + 5% + 0.25% (TP)
Pre-payment
0.50% on outstanding liability for the unexpired period
Proc & Upfront Fees 1% of the limit sanctioned plus service tax.
Cir.no.44 Ref 26/08 dated 23.05.2011
Eligibility
Loan amount
Mortgage Loan
Any individuals holding house/flat in their/spouse/Major children's
names. Age 21-65 yrs. Above 60 yrs, jointly with spouse or major
children.
The maximum eligible loan amount is calculated based on the
proportion of EMI to net income. For salaried class 50% of net
salary; For non-salaried class 65% of monthly average income of
preceding 3 years as reflected by IT returns.
However, the
maximum quantum of loan is restricted to `100 lakhs.
Mortgage of House/Flat Margin 50%
Security/Margin
Guarantee/
Third party acceptable to Bank.
Co obligation
Repayment
Maximum of 60 EMI
Interest
Up to 36 months B.Rate + 5% > 36 months B.Rate+5%+TP
Processing fee
1% of the loan amount. Administrative charges as applicable
Cir.no.274 Ref 53/26 dated 04.10.2012
Eligibility
Purpose
Loan amount
Margin
Security
Guarat/co-obligant
Repayment
Interest
AB Anand Jeevan
Single or Jointly with spouse; Age - First borrower -Above 60
Years, Spouse- Above 55 Yrs.
To meet any genuine needs.
90% of realizable value of House/Flat i.e. 70% of Market value.
Min. `5 Lac. Maximum `100 Lac. Loan installment payable to
the borrower in Monthly, Quarterly, and Lump sum @ `198/-,
588/- & 8335/-respectively per lac for loan tenor of 15 years
(max). Lumpsum maximum `15 lac only
Not Applicable.
Equitable Mortgage of House/Flat, against which loan is
sanctioned. (To be registered with Sub- Registrar)
Borrower has to execute a Will
Payable in Lump sum after the last surviving Borrower dies or
opt to sell the home or permanently moves out the home.
10.75% Fixed (ROI will be reset at the end of every 3 years})
Pre-payment
Allowed without any charges.
Processing& Upfront No
Cir 334 Ref 26/56 dated 28.12.11
AB Equipment Finance: Bank introduced a scheme to purchase New equipment
like JCBs, Excavators, Concrete Batch Mixing Plants, Lifts, Steel scaffolding Material
etc., to meet the needs of Service Industry including Civil Contractors/Builders. The
nature of facility is Term Loan. All the existing borrowers with 2 years satisfactory
172
Bankers Digest 2013
dealings and in case of others, minimum 3 years experience in the respective field
with profit track record are eligible for the above facility. Maximum amount of loan to
be disbursed is 90% of the cost of the machinery/equipment. Interest rate for
existing borrowers is Base Rate + 3.75% and for new borrowers it is Base Rate +
4.50%. Repayment should be within 24 to 60 months. Wherever the repayment is
beyond 36 months, the loan attracts additional interest of 0.25% towards Term
premia. Collateral security need not be insisted for both existing and new borrowers.
However, suitable co-obligation / guarantee shall be obtained. Processing charges
are to be collected @ 0.25% of loan amount. Zonal Managers are authorized to
sanction loans under the scheme even for the borrowers enjoying limits under HO
powers. (Cir.no.92 Ref 26/21 dated 01.07.09)
AB Priority Gold Loans (Cir.no.275 Ref 53/27 dated 04.10.2012) - A new loan
product as a third variant captioned as AB Priority Gold Loan is introduced covering
various Micro / Small industries / Service enterprises, Retail Trade, industrial /
commercial purposes in addition to the existing Agricultural and Personal needs.
Nature of Facility
Tenure of Loan
Maximum Loan
Purpose
Repayment
Rate of Interest
Minimum purity of Gold
Rate Per Gram
Assessment of loan
Delegation of Powers
Documents to be
obtained
Features of Product
Demand loan or Overdraft
1 to 2 years
`50 Lakh for advances wholly secured with Gold at the
field level for Micro and Small Enterprises- Manufacturing,
Services. `15 lakh for small business and retail trade.
Any genuine credit needs of activities falling under
Micro/Small industries or enterprises, Small Business/
Retail Trade
Bullet Payment in case of Demand Loans along with
interest
The interest rates are same as applicable to NonAgricultural Gold Loans or SME whichever is lower.
20 ct & above are only to be accepted
As applicable to agricultural gold loans
Basing on turnover method restricted to 80% of the
appraised value of the Gold or as per Lending Rate per
Gram prescribed by the Bank from time to
time
whichever is lower
Branch Managers JM-I `5 lakh; MM-II `10 lakh;
MM-III `15 lakhs; SM-IV & above `50 lakh
a) Copy of any document which evidences existence of
the unit like Municipal/Panchayath tax receipt, registration
certificate,
Membership
certificate
of
respective
Trade/Industry Association, Copy of C Book of vehicle for
road transport activity.
b) Declaration on Turnover and purpose of the loan
c) Declaration on proper end use of loan proceeds.
d) Application for Gold Loan suitably amended. An
additional clause to be incorporated enabling bank to
demand accelerated repayment/additional security in case
the market price of the gold falls down.
173
Bankers Digest 2013
Rate per gram

I. Hallmarking Gold
`2100/- per gram or 80% of the market value of
22 Carat
21 Carat
II. Without Hallmarking Gold
22 Carat
21 Carat
20 Carat
III. Gold Coins (Specially minted for and marketed by SCBs)
999.9purity `2150/- per gram or 80% of the market value of
916 purity
gold whichever is less

Other guidelines - Gold loans should not be extended for speculative purposes. The
maximum finance is restricted at the field level is `15 lakh for individual borrowers.
Ornaments subjected to domestic wear and tear only should be accepted. New
ornaments should not be accepted unless branch is satisfied with the trustworthiness
of the customer. Ornaments with large percentage of stones or other extraneous
material should be avoided. As a rule, ornaments like Kante, Addiga, Nagaram,
Ragidi should not be accepted. Very small ornaments also should not be accepted.
Right relinquishing letter is to be obtained from owner of the ornaments if any names
are there on the ornaments. Gold coins of our Bank with tamper proof Assay
certificate intact need not be appraised. Re-appraisal of gold pledged with limits of `5
lakh & above is to be done once in every six months. Further, all gold loans
outstanding beyond 18 months from the date of loan (including renewals) should be
re-appraised. Gold jewels pledged with the branches should be kept in transparent
and tamper proof seal packets and the cover should bear the signatures of the joint
custodians.
Liberalized Trade Finance: All existing traders (Individual, Proprietary, Partnership
and limited companies) in operational area of the branch/Trade Finance Centers
Preferably with Sales Tax Registration Certificate whether maintaining account with
the branch or not are eligible for working capital credit under Liberalized Trade
Finance scheme. Branches can sanction loans as per the eligibility of the borrower
subject to a maximum of `100 lakhs. In case of WCTL, the maximum loan is `10
lakhs only. Loans up to 50 lakhs & 100 lakhs attract a spread of 4% & 5%
respectively. Audited balance sheet need not be insisted for limits below `10 lakhs.
However, it is mandatory for the borrower whose turnover exceeds `40 lakhs per
annum. The collateral security norms for the limits up to `10 lakhs are as under:
Age of the business
Less than 5 years
5 to 10 years
Above 10 years
Collateral Security
100%
75%
NIL
Remarks
However, in case where the limits
are beyond `10 lakhs, branch to
obtain 125% of limit as collateral
Note: All term loans where the repayment is fixed beyond 36 months attract
prepayment charges @ 2% on the advanced payments made. Similarly, all term
loans are to be levied with the following Processing and administrative charges
Loan Amount
Up to 0.25 lakhs
> 0.25 2.00 lakhs
> 2.00 lakhs
Processing Charges (One time)
Quarterly Admn. charges
`150
`300
`300 per lac or part thereof
`50
`75
`100
174
Bankers Digest 2013
AB Professional Loan: In order to provide simple and hassle free credit facilities to
the professionals, Bank introduced a new scheme i.e. AB Professional on 30.01.2012
and the salient features of the scheme are as under:
Features of Product
All Practicing Chartered Accountants, Architects, Engineers, Valuers,
Management/Financial Consultants, Company Secretaries, Cost
Accountants etc., are eligible under this scheme. Individuals, Firms,
Limited Liability Firms, Companies or Societies engaged in rendering
professional services should be an assessee under income tax at least
for the last two years and be a registered member with their respective
professional Association/Board/Body.
Purpose
To establish/renovate the office premises, Furnishing of office
premises, purchase of Tools, Equipments & Books, Expenses relating to
travel for professional purposes, Working Capital for carrying out day
to day operations. Branches can sanction Term Loan, Overdraft or
combination of both depending on the purpose of the loan. The
maximum amount allowed under this scheme is `10 lakhs.
Assessment
Term Loan - 75% of the cost of asset proposed to be purchased.
Working Capital Limit - 75% of the revenue expenditure of the
previous year as per Profit and Loss account. Total exposure should not
exceed 2 times of average annual income of preceding two years.
Security
Hypothecation of existing movable assets and asset/s purchased out of
loan and also obtain post dated cheques for initial 18 months. The
loans are to be covered under CGTMSE compulsorily. However,
CGTMSE premium to be borne by the borrower.
Interest Rate Base Rate + 3.25. Loan attracts 0.50% processing / upfront charges.
Repayment
Not exceeding 60 monthly installments with a maximum repayment
holiday of 1 year for principal & interest for term loans and one year
for working capital limits.
Cir 377 Ref 53/18 dated 30.01.2012
Eligibility
Credit Rating for Personal Banking Schemes: In order to have better credit risk
management system, Bank introduced credit rating for Clean / Personal Loans,
Vehicle Loans, Housing Loans and Mortgage Loans. For all new loans the rating is
based on important parameters such as Age, Qualifications, Residence, Stay,
Transferability, Employment/Profession, Gross Income, Spouse employment, No. of
dependants, dealings with the bank, Net Take Home Pay, Loan recovery mechanism,
Repayment History, Margin contribution and Networth. The prospective borrower is
expected to score minimum of 40 marks out of 100 marks to entertain the credit
proposal. All existing personal banking schemes of the branches are subjected for
annual review during the month of December every year. (Cir.no.163 Ref 26/34
dated 06.08.2010)
Recovery Agents: All NPA accounts (including technical written-off accounts) with
Real Account outstanding of `5 lakh and above and which are more than 2 years old
will be entrusted to the Recovery Agents. However, in exceptional cases the
mandatory period of 2 years can be waived. The agency should be either Partnership
or Corporate entity with required expertise to handle NPA accounts. The agents
appointed under this scheme are required to be complied BCSBI code and Banks
Model Code of conduct for collection of dues and repossession of secured assets.
However, the agency shall not have any right to sub-delegate or appoint any subagent. The engagement of agent is account specific and for a specified period only.
Bank also engaging the services of Investigation Agents for the purpose of locating the
whereabouts of borrowers/guarantors or details of assets other than charged /
mortgaged to the bank to expedite the process of recovery of suit filed accounts. (Cir.
no.343 Ref 45/09 dated 27.01.10 & Cir.no.244 Ref 45/11 dated 01.10.10)
175
Bankers Digest 2013
Impaired Asset Study

Lending is an integral part of bank business. Borrower is expected to use the funds
for the purpose for which availed and pay interest and installments regularly. Some
times, default may arise due to business cycles, changed environment,
mismanagement and other external factors. Whenever a borrowal account slips to
Non-Performing Category, the account needs to be examined closely for analyzing
the systematic deficiencies if any, which has resulted in the failure of account. The
Objective of IAS will be to identify the causative factors for failure of the account and
to take appropriate corrective action for minimizing, if not eliminating systemic or
human failures. The exercise of Impaired Asset Study (IAS) would be primarily to
look into reasons for the failure of an advance account and to look into Staff
accountability aspects to know the acts of Commission and Omission of the staff that
might have contributed to such failure.
Branch Managers (other than the Branch Manager who sanctioned the loan) will
conduct IAS study for all NPA accounts of the branch with Real Account balance up to
`2 lakh. The IAS study should be initiated after 90 days from the close of the
respective quarter and completed within 6 months from the date of NPA. However,
for above `25 lakh & up to `100 lakh, the study should be completed within 120 days
and with regard to above `100 lakh loans it should be completed within 90 days. In
all the cases where accountability is ascribed shall be referred to Vigilance
Department, HO to examine vigilance angle. (Cir no. 51 Ref 26/9 dated 04.05.2012)
NPA Real Account
Competent Authority
I. Sanctioned by Scale-IV & below

Upto `2 lakh
> `2 lakh and up to `25 lakh
II. Sanctions by AGM
> `25 lakh and up to `100 lakh
> `100 lakh
Zonal Committee consisting of ZM, second

line official & vigilance official.
GM(CMRD) at Head Office

GMs committee at HO consisting of GM
(CMRD), GM (Inspection), GM (RMD) & GM
(Oper). Minimum quorum shall be three.
Cir.no.095 Ref 26/15 dated 29.06.11

Comprehensive Corporate Compromise Policy (CCCP) - Prompt recovery of
loans and advances not only increases liquidity and profitability but also keeps funds
cycle moving by continuous lending for the development of the economy.
Compromise Policy is a step in this direction. The compromise should be a negotiated
settlement under which it should be ensured to recover its dues to the maximum
extent possible with a minimum sacrifice. The important aspect in connection with
settlement proposals is the concept of opportunity cost of funds. The opportunity
cost of funds in hand vis--vis that of funds, which could come in hand at a later
period should be calculated to establish a comparative advantage of 'now or later'.
The guiding factors for a compromise settlement are:

Balance outstanding in the account (real account) as on date of NPA.

Provision held in the account.
Market value of the securities and time taken for realizing it.
Reasons for failure i.e. factors beyond borrower's control like natural
calamities.
Present status of the account and the amount that can be recoverable.
176
Bankers Digest 2013
Our Bank introduced a Comprehensive Corporate Compromise Policy (CCCP) and the
salient features of the policy are furnished here under:

These guidelines are applicable to NPAs and Technically Written-off

accounts including Credit Card dues.
The account should have been classified as Substandard asset as at the end
of previous quarter for settlement. All the limits enjoyed by the borrower
either with the same branch or with different branches are also settled
simultaneously.
It also covers dues of employees/officers who cease to be in service on
account
of
retirement/death/resignation/dismissal/discharge/compulsory
retirement may be treated on par with general public.
Compromise settlement may be entered with willful defaulters/fraudulent
borrowers without prejudice to the criminal case against the borrower and
those cases of compromise settlement should be vetted by Management
Committee/Board of the Bank.
Bank may also entertain compromise proposal from the borrowers (in
justifiable cases) on whom SARFAESI notices are served for taking possession
of securities, provided the borrower comes forward for a compromise
proposal.
Committee approach is to be adopted while according compromise approvals.
The committee should give justifying reasons for consideration of the
compromise while referring the proposal to the competent authority for
consideration. An official who has sanctioned a particular loan, which has
become NPA shall not participate in the compromise committee meeting
where the proposal relating to that loan is under consideration for settlement.
To impart further transparency especially with regard to high value
compromise accounts, the proposals need to be vetted by Settlement
Advisory Committee constituted by three independent members viz., Retired
Judge, Retired ED/CMD of a Bank and Retired General Manager of a Bank.
Administrative clearance is required from Head Office, where the write-off
exceeds 25% of real account balance in case of Sub-standard NPA accounts.
However, this is not applicable with regard to Doubtful / Loss category
accounts.
Formula to rework out Shadow Account

Calculation
Real account balance + Interest at prevailing BMPLR or
Non Suit-filed
contracted rate whichever is lower on simple basis from the date
Accounts
of cessation of interest / NPA date whichever is earlier, until the
preceding month + any other charges.
Suit-filed
accounts not
decreed
of cessation of interest / NPA date whichever is earlier, until the
preceding month + Suit expenses + any other charges.
Suit-filed
accounts decreed of cessation of interest / NPA date whichever is earlier, until the
preceding month + Law charges incurred after date of suit +
any other charges.
Note: As and when BMPLR is phased out, from the date of such phase out, notional
interest shall be calculated at prevailing Base Rate + 4%.
Category
177
Bankers Digest 2013
The Net Present Value (NPV) of the compromise amount as well as realizable value of
securities may be arrived as under:
A - Fair Market value of the security
B Less - Costs / Expenses for realization of securities
C - Total value (A-B)
D - Net Present value of (C) discounted at existing Base Rate+4% for 3 Years
E - Total amount of compromise - Payment of compromise amount due on (where
payable in installments)
F - Net Present Value of the compromise amount discounted at existing Base
Rate+4% Simple for the period of payment
It should be ensured that NPV of the compromise amount discounted at existing
Base Rate + 4% simple i.e. F should generally be not less than the NPV of the
realizable value of securities i.e. D.
Mode of Payment: As far as possible, before entertaining the proposal, it should be
ensured that the borrower makes upfront payment of at least 10% of compromise
amount. Payment of compromise amount within 30 days is desirable. If not a
reasonable 90 days time may be given to the borrower for full payment in 2 to 3
installments. Depending on the case, borrower request for making payment within
12 months may be considered on the condition that 25% of compromise amount
(including upfront amount) and the balance amount along with interest @ Base Rate
+ 4% (simple) from the date communication of compromise till the date of final
payment. However, in any case the repayment period of compromise amount should
not exceed 18 months. In case of delay in payment of compromise amount, interest
is to be collected at current Base Rate + 4% + 2% spread on reducing balances from
the date of sanction communication until the closure of the account. Branches are
required to communicate in writing to the borrower the terms and conditions of the
compromise approved and the date on which the compromise gets lapsed in case of
failure of the borrower to pay the compromise amount in full. Proportionate release
of securities could be considered on case-to-case basis. Branch should obtain
commitment letter from the borrower that the sale proceeds are to be credited to the
compromise account. (Circular No.351 Ref 45/07 dated 26.11.2012).
OTS for Small Loans: All NPA accounts including suit filed accounts but not decreed
with real account balance of `2.00 Lakh & below and classified as Doubtful/Loss
Assets as on 31.03.2012 are eligible under the scheme. Accounts technically writtenoff on or before 31.03.2008 are also eligible under the scheme. Further, the scheme
shall not cover cases of fraud and decreed accounts. It shall also not cover accounts
backed by liquid securities or salary undertaking letters. The scheme is now made nondiscretionary and non-discriminatory. Settlement amount is linked to the date of NPA
as under:
Settlement amount formula
Real a/c balance of
Real a/c balance of `1 lakh
below `1 lakh
& above and up to `2 lakh
01.04.10 to 31.03.11
75% amount in default
01.04.08 to 31.03.10
01.04.06 to 31.03.08
On or before 31.03.06 60% amount in default
Technical w/off a/cs
Amount in default = Real account balance as on date of NPA + CGTMSE/ECGC
claim received and appropriated Minus recoveries after date of NPA
Age of NPA
Cash Discount of 10% on the settlement amount is available where the borrower pays
the amount in full at a time. Sanctioning authority of OTS proposal is Branch Manager
and reviewing authority is Zonal Manager. The settlement amount arrived at as above,
178
Bankers Digest 2013
should be paid in one lump sum amount without interest within 30 days of sanction or
in installments within 60 days, by collecting at least 25% of the settlement amount as
down payment on case to case basis. This scheme is operative up to 30.09.2012.
(Cir.no.02 Ref 45/02 dated 02.04.2012)
OTS for MSME Loans: The important features of the modified scheme are furnished
hereunder (Cir. No. 1 Ref 45/1 dated 02.04.2012):

Sub-Standard Accounts are not eligible under the present scheme

NPA accounts, including Suit Filed accounts but not decreed, under
Micro, Small & Medium Enterprises, with real balance of above `2 lakh
and up to `10 crore as on 31.03.2012 and classified as Doubtful and
Loss Assets, are eligible under the Scheme
Accounts Technically Written Off on or before 31.03.2008 are eligible
under the Scheme
Small loans up to `2 lakh under MSME shall be considered under Small
Loans OTS scheme
The Settlement formula, based on the date of NPA, is as under:

Real account balance> `2 lakh and < `10 lakh
Date of NPA
Settlement amount
01.04.10 to 31.03.11
90% of Amt. in default
01.04.08 to 31.03.10
01.04.06 to 31.03.08
On or before 31.03.06
Tech. Written off on or before 31.03.08
Real account Balance

=> `10 lakh and < `1
crore
Real account Balance

=> `1 crore & up to
`10 crore
01.04.09 to 31.03.11
Amt. in default
01.04.07 to 31.03.09
On or before 31.03.07
Tech. Written off on or

before 31.03.08
Date of NPA
Amt. in default = Real account balance as on date of NPA + CGTMSE/ECGC

claim received and appropriated Minus recoveries after date of NPA
In case of loan accounts with real liability of `10 lakh and above as on the date of
NPA, the settlement formula will be as above or Net Present Value (NPV) of available
securities Primary as well as Collateral and Securities Attached by the court Before
Judgement (ABJ), whichever is higher. NPV will be calculated with 3 years realization
period at prevailing Base Rate + 4%. Cash Discount of 10% on the settlement
amount is available where the borrower pays the amount in full at a time.
***
179
Bankers Digest 2013
AB Products Service Charges

Bank is levying the following service charges w.e.f. 01.10.2009 (Cir.no.79 Ref 27/09
dated 15.06.2011 & Cir.no.293 Ref 27/28 dated 17.10.2012)
No
1
NonIndividuals
Category / Type
Cheque Issue / Return
Cheque Book SB
Cheque Book - CD
Cheque Stop payment Per leaf
`2.50 per leaf (25 leaves free in a year)

`3/- per leaf (No free cheque leaves)
`60/`55/`50/Max.`250/Max.`225/Max.`200/-
Cheque Return - Inward

CD cheque Up to `20000/SB cheque Up to `20000/CD cheque Above `20000/SB Cheque Above `20000/Cheque Return - Outward
2
3
4
5
6
Service Charges
Individuals
Pensioners/
Sen.Citi./Indiv.
in Rural Areas
`100/`75/`75/`60/`200/`150/`100/`80/`100/- plus other bank charges,

pocket expenses.
`115/per `110/per
item
item
`50/`40/`100/`60/if any plus out of
Balance Enquiry for an item more

`100/- per item
than 12 months old Per item
Account closure
SB (closed within 12 months)
`200/`150/`100/SB (closed after 12 months)
`100/`80/`60/CD (closed within 12 months)
`500/`350/`250/CD (closed after 12 months)
`300/`200/`150/No account closure charges for AB Easy accounts (No frills account)
Signature verification (per attestn)
`125/`110/`100/No Due Certificate (No charges for `150/`125/`100/weaker section loans)
Passbook / Statement charges
Issue of Balance Certificate
`100/- per certificate
Duplicate Passbook / Statement `15/- per Passbook/Statement
with latest balance only
Duplicate Passbook / Statement Passbook - `75/- plus additional `50/- per bunch
with previous entries only
of every 40 entries.
Statement `25/- for each 40 entries.
Collection of local cheques
(Other than clearing cheques)
SB Group Accounts
`50/`35/`30/CD Group Accounts
`100/`80/`60/Collection of Cheques - Others
No out of pocket expenses should be levied
Up to `5000/SB accounts `25/- - Other accounts `50/ `5001 to 10000/`50/- for all accounts.
`10001 to `100000/`100/- for all accounts.
Above `100000/Maximum of `200/Safe Custody Charges
Scrips
`100/- per scrip per annum
Sealed cover
`500/- per sealed cover per annum
Sealed Boxes
20x20x20 c.m.
`500/- per annum
30x30x30 c.m.
`600/- per annum
180
Bankers Digest 2013
No
Category / Type
10
Inward/Outward Bills
Up to 1000/Above 1000/- up to 5000/Above 5000/- up to 10000/Above 10000/- up to 1.0 lakh
Above 1.0 lakh up to 10 lakh
Above 10 lakh
Issuance of DD/TT/PO
Up to 1000/>1000/- to < 5000/>5000/- to < 10000/>10000/- to < 1 lakh
11
`60/- plus out of pocket expenses

`9/- per thousand plus out of pocket expenses
`30/`2.50 per
thousand
`2.25 per
thousand
`2 per
thousand
`20000/`100/- per
`100/- per
`100/- per
>1 lakh to < 10 lakhs

>10 lakhs and above
12
13
14
No
15
16
17
18
Service Charges
Individuals
Pensioners/
Sen.Citi./Indiv.
in Rural Areas
NonIndividuals
Maximum commission
Cancellation of DD/TT/PO
Duplicate DD/TT/PO
DD/PO Revalidation
Standing instructions (SI)
Noting charges
Transfer between accounts
Other standing instructions
Nonexecution of SIInsufficient bal.
Folio charges CD & ODCC
accounts (Quarterly)
Free entries are allowed per
quarter for the accounts where the
average credit balance in the
account is above
`20/`25/`30/`2.25 per
thousand
`2.00 per
thousand
`1.50 per
thousand
`18000/instrument
instrument
instrument.
`15/`20/`25/`1.75/- per
thousand
`1.50/- per
thousand
`1.25 per
thousand
`15000/-
`25/No charges
Remittance charges plus out of pocket expenses
`100/`80/- for every 40 entries after availing free
entries referred as below
Balance up to `25000/Nil
>`25000/- up to `50000/60
>`50000/- up to `1 lakh
100
>`1 lakh up to `2 lakhs
400
Above `2 lakhs
No charges
Note: No free entries to C & IFD accounts.
Inoperative Accounts Service Charges (Yearly)
`50/- per quarter in Rural areas and `100/- per
SB Group Accounts
quarter at all other places.
`200/- per quarter
Current Accounts
Cir.no.79 Ref 27/09 dated 15.06.2011
Service Charges
Individuals
Pensioners/
Category / Type
Sen.Citi./Indiv.
in Rural Areas
Cash handling charges
Cash receipts under CD and ODCC accounts
Up to one bundle
No charge
More than one bundle
`100/- per bundle maximum of `10000/Note: OD a/cs of existing/retired staff are exempted from cash handling charges
Addition/Deletion of names
`100/Change in Operation instructions
`100/Record copy of cheque/DD/PO
`100/- per item
Non-Individuals
181
Bankers Digest 2013
Minimum Balance violation charges: The minimum balances stipulated for

deposit accounts (Current and SB group accounts) are as under:
(`)
No
Category
Rural
SU
Urban
Metro
1
CD & ICD
1000
2000
3000
5000
2
SB with Cheque Book
250
250
500
500
3
SB without Cheque Book
100
250
250
500
4
ASB with Cheque Book
300
500
500
500
5
ASB without Cheque Book
150
250
250
300
6
Abhaya Gold / Abhaya Jeevan
1000
7
ASB plus- Cheque book
400
500
500
500
8
ASB plus - without cheque book
200
300
300
300
9
Kids Khazana
100
10 Personalised Cheque facility CD
10000
11 Personalised Cheque facility CD
2000
The mode of calculation of minimum balance is based on Quarterly Average
Balance (QAB) in the account. Non maintenance of QAB attracts the following penal
charges as per circular no.169 Ref 44/19 dated 09.09.2009.
Category
Current Accounts
AB Premium Current Account
Charges
`200/- per quarter
`400/- per quarter
`100/- quarter - Metro/Urban/SU areas
`50/- per quarter - Rural areas
`150/- per quarter
Savings Bank Accounts

AB Privilege SB Accounts
Safe Deposit Lockers: The rents on lockers have been revised as under w.e.f
01.10.2009 (Cir.no.170 Ref 44/20 dated 09.09.2009)
Locker Type
A & A1
B
C
D
E & H1
F
G
H
L
Metro
1000
1100
1150
1250
2000
2200
2500
5000
6000
Urban
900
950
1000
1100
1500
1800
2000
4000
5000
S.Urban / Rural
750
800
900
1000
1300
1600
1800
3000
4000
Other conditions: Rentals for built-in lockers shall be 25% more than the rents
noted above. The locker operations are restricted to 10 in a quarter. Any operation
beyond 10 in a quarter attracts a charge of `50/- per transaction. A concession of
20% in rent is allowed to our existing and retired staff members.
Note: All the above service charges attract tax @ 12.36% with effective from
01.04.2012.
i) Purchase of Local cheques against clearing:

At par for salaries cheques of employees of Central/State government and

Public Sector Units maintaining SB accounts with our Bank.
Cheques presented by Rice Millers Applicable cash credit interest rate to the
respective Rice Mill accounts.
With regard to others Interest @ 15.50% p.a.
182
Bankers Digest 2013
ii) Purchase of cheques other than local cheques: The charges are 40 paise for
every `100/- besides applicable collection charges. If the cheque is returned unpaid,
Base Rate + Spread @6.50% is to be collected. (Cir.no.109 Ref 26/27 dt. 30.06.10)
E-Products Service charges
No
1
Category
RTGS Outward
RTGS Transaction Time
Service charges
`2 lakh to
lakh
`25
`26
`30
`5
Above `5 lakh
9 AM to 12 Noon
`50
Above 12 Noon to 2.30 PM
`51
After 2.30 PM
`55
2
NEFT (AB Xpress)
Up to `1 lakh
At Par
Above `1 lakh & up to `2 lakhs
Above `2 lakhs
3
Electronic Clearing Services (ECS)
Registration of ECS
`100/Cheque Return charges (ECS Debits)
`100/- per debit
4
Speed Clearing (Cir 293 Ref 27/28 dated 17.10.2012)
Up to & inclusive of `1.00 lakh
No charge
Above `1.00 lakh
Maximum of `150/Up to `10000/` 50/Up to `10000/- to `1.0 lakh
`100/Speed clearing return charges
Above `1 lakh
`150/5
Any Branch Banking (ABB)
Cash withdrawals by self
No charges for cash transactions up
to `50000/Cash deposits by self
Cash remittances by others
i) Up to `1000/`10/ii) `1001/- to `50000/`2/- per thousand
Non cash transactions
i) Up to `1.00 lakh
No charges
ii) Above `1.00 lakh
SB Accounts No charge
Deposit of clearing instruments at nonCD Accounts No charge up to `1.00
home branch drawn on non-CBS
6
lakh and `50/- per instrument for
branch / other banks
`1.00 lakh & above.
7
Multi City Cheques (MCC)
`5/- per leaf.
8
ATM / Debit Card
Annual maintenance charges
`75/- per annum at the start of
second year
Transactions on our ATMs
No charges
`20/- per transaction. However, no
charge
will
be
levied
for
5
Transactions on other Bank ATMs
transactions in a month for SB
accounts.
`200/- w.e.f. 01.07.11
Re-issuance (lost/misplaced/damaged)
9
SMS
Push Alerts / Pull Alerts
Push Free. Pull `3/- per request*
10 Internet Banking
No charges
* Service provider levy charges
183
Bankers Digest 2013
Processing Charges: The processing charges are as follows:

I. Working Capital Limits (Fund & Non-Fund Based)
Up to `25000/`150/> `25000/- & up to `2 lac
`300/Above `2 lac
`300 per lac or part thereof with a
maximum of `30 lac.
However, Rice Mills with credit rating of A+ are exempted from processing charges
II. Loans against Shares & Securities `300/- per lac
III. Mortgage Loans
1% of the loan amount
IV. Rent Receivables
Minimum `5000/- or 1% of the loan
whichever is higher.
Branches have to collect 25% of the normal processing/upfront fee in advance for
new accounts involving fund/non fund based credit limits of more than `2 lacs. If the
loan is sanctioned, this amount will be adjusted against processing charges/upfront
fee to be collected at the time of disbursement of limits. However, no charges will be
collected upfront before sanction of loan to Micro & Small Enterprises for the loans
up to `5 lakh. However, in the cases where borrowers come into our fold through
Loan Syndicate or on taking a share under consortium arrangement, processing
charges/upfront fee shall be collected on the share allocated to our Bank at the time
of documentation or at the time of disbursement of limits in line with other member
banks. (Cir no.163 Ref 26/26 dated 20.07.2012)
Upfront Fees: 1% of the term loan amount is to be collected for all categories of
borrowers and no ceiling is prescribed for collection of upfront fee on term loans.
Powers are delegated for permitting concession/waiver up to 50% of processing
charges/upfront fee to ED. Powers for permitting concession/waiver up to 100% of
processing charges/upfront fees are vested with CMD for all accounts including MC
sanctions. (Cir.no.5 Ref 26/02 dated 07.04.2010)
Commitment charges are to be levied for term loans of above `5 crores at 1% p.a.
for delay in draw down schedule beyond one month. Similarly, working capital limits
of `1 crore and above to all corporate borrowers shall be levied @ 0.50% p.a.
commitment charges (exclusive of overall ceiling of 2% penal/additional interest) on
the unavailed portion of fund based working capital limits subject to a tolerance level
of 20% i.e. the utilization of the limit shall not be less than 80% of the sanctioned
limit. However, limits sanctioned to Sick/weak units, export credit, banks, public
sector undertakings and seasonal industries are exempted from commitment
charges. (Cir. no.143 Ref 26/29 dated 25.07.2007)
Pre-closure charges are to be levied on Term Loans (repayable beyond 36
months) @ 2% flat on the pre-paid loan amount. However, Education, Housing, SHG,
Govt. sponsored scheme loans are exempted from levy of the said charges (Circular
no.5 Ref 26/3 dated 08.04.2008).
Agency Commission payable on Government transactions: Government is
paying the following charges to the banks 01.07.2012.
No
1
2
3
4
Type of transaction
Receipts Physical Mode
Receipts e-mode
Pension Payments
Payments other than Pension
Unit
Per transaction
Per transaction
Per transaction
Per `100 turnover
184
Bankers Digest 2013
Rate
`50
`12
`65
`5.5 paise
Guide to Staff Welfare/Other Schemes

Bank has been extending various facilities/financial assistance under different
schemes from time to time for the benefit of staff members and the gist of such
schemes is furnished here under:
1) Reimbursement of Expenses incurred towards Food and Beverages: All
employees on the rolls of the Bank including Part Time Sweepers on graded scale
wages are covered under the scheme. Bank reimburses `300/- per month to
employees, who attends office for more than 10 days in a month, towards Food and
Beverages expenses. The amount is to be claimed before the end of succeeding
month to which it relates and no arrears will be paid. (Cir.no.555 Ref 20/100 dated
29.03.08)
2) Subsidized Canteen: Bank is providing subsidized canteen facility to the
employees where the staff strength exceeds 50. The subsidy is being paid to the
canteen contractor @ `30/- per employee per month at Hyderabad and `25/- per
employee per month at other centers.
3) Incentives for Excellence in Education to the Children of Employees: Bank
is providing cash incentive every year to the children of employees (maximum of
two) to encourage them for further studies. It covers all children who are studying
First Standard to Post Graduation. However, this scheme is applicable to only those
children who are wholly dependent and whose age is below 25 years. The quantum
of incentive per annum per child is as under:
No
1
2
3
Standard
First Standard to SSC (X or equivalent)
Intermediate (XI & XII classes)
Graduation to Post Graduation
Incentive amount
2000
2500
4000
To claim the incentive, eligible employees are required to submit application (April to
December) along with proof of pass and continuation of studies to the branch/office
for onward submission to controlling office for sanction. Courses pursued under
Distant Education mode or in a Foreign Country are not covered under the
scheme. (Cir.no.118 Ref 03/24 dated 12.07.10)
4) Merit Awards to the Children of Employees: To encourage meritorious
students among the children of staff, Bank introduced Zone-wise Merit Award
Scheme. Head office is also considered as a separate zone for this purpose. Merit
Awards will be given for Boys and Girls separately for four categories viz., Officers,
Clerks, Sub-staff and PTS. Zonal office will call applications every year. Students who
have passed the examinations conducted during March to August are eligible to apply
for awards. The toppers of each group will be given the following cash incentives.
(Amount in `)
Intermediate
Rank
VII Class
SSC/SSLC/HSC
MPC/BZC
Comm./Arts
First
800
900
1000
1000
Second
700
800
900
900
Third
600
700
800
800
Fourth
500
600
700
700
(Cir.no.555 Ref 20/100 dated 29.03.08)
5) Mentally retarded children Financial Relief: An amount of `10000/- per
annum will be paid to the staff whose children are mentally retarded till the child
attain the age of 25 years. (Cir.no.413 Ref 20/72 dated 29.02.2008)
185
Bankers Digest 2013
6) Andhra Bank Employees Group Insurance Scheme Payment of

Premium: Bank entered agreement with LIC of India to cover the life risk of all the
employees and the relevant premium is being born by the Bank. The premium
calculated for all employees who are on rolls as on the last working day of February
every year and paid to LIC. The amount of coverage is as under:
No
1
2
3
4
5
6
Cadre
JM-I to General Manager
Clerks
Sub-staff / Part Time Sweeper (Full wages)
Part Time Sweeper (3/4 wages)
Risk coverage
375000
200000
100000
75000
50000
33000
7) Holiday Homes: All employees (including retired employees) of the bank, who
are proceeding on holiday or leave, can avail Holiday Home facility with nominal rate
at 14 centers viz., Bangalore, Bhubaneshwar, Chennai, Goa, Haridwar, Ooty, Manali,
Mysore, New Delhi, Shirdi, Tirupathi, Tirumala, Varanasi and Gagtok. At present the
tariff for the room is `10/- per day in case of Officer Staff and `5/- per day in case
of Award Staff. The maximum stay allowed is 4 days only. However, it is restricted to
maximum of 3 days with regard to stay at centres like Bangalore, Chennai, Mysore,
Shirdi and Varanasi. Employees desirous of availing the facility are required to send
an application through Branch/Office to Staff Welfare Department, Head Office for
allotment of room. Cancellation should be intimated to Staff Welfare Department at
least 2 days prior to the date for which the reservation is booked. In case the
employee who booked and availed or not intimated the cancellation in time, bank
imposes a penalty of `200/- per day. (Cir.no.16 Ref 03/1 dated 11.04.12)
8) General Health Check-up: All staff members/spouse who are on the rolls of the
Bank and who have completed 40 years of age are eligible to claim for
reimbursement of expenses for general health check-up subject to maximum of
`2500/- in Metros and `2000/- at other places. However, additional reimbursement
of expenses for Mammography test subject to maximum of `600/- is available to all
eligible women employees / spouse of employees (who have completed 40 years)
w.e.f. 24.03.2006. The reimbursement of expenses is subject to production of
relevant receipts/bills of approved Hospitals/Diagnostic centers. This scheme is
applicable to spouse of the staff members also. This facility can be availed by the
eligible staff once in 2 years. (Cir.no.346 Ref 3/45 dated 26.12.2008)
9) Eye Check-up & Spectacles: All staff members who are on the rolls of the Bank
are eligible to claim reimbursement of expenses for Eye Check-up and purchase of
spectacles subject to maximum of `1000/-. This is a one time reimbursement in
the entire service. (Cir.no.555 Ref 20/100 dated 29.03.2006)
10) Hospitalization Expenses Major ailments: Reimbursement of
hospitalization expenses for major ailments (By-pass surgery, Angio-plasty, Kidney
transplantation, Cancer, Gastro enterology, Brain Surgery and Orthopedic surgery
and other rare and costly ailments approved by HO) over and above IBA package will
be reimbursed subject to maximum of `100000/- under Staff Welfare Schemes.
However, the difference in sanctioned amount and the amount claimed by the
employee should be above `25000/-. All staff members and their dependants are
covered under this scheme. (Cir.no.191 Ref 3/29 dated 23.09.09)
11) Furniture Maintenance Charges: Officers who have availed the residential
furniture facility are eligible to claim reimbursement of maintenance charges incurred
on declaration basis after 3 years of purchase @ 5% of the original cost of the items
every year. However, items like mattresses and pillows are not covered under the
scheme. (Cir no.20 Ref 3/06 dated 21.04.2010)
186
Bankers Digest 2013
12) Physically Challenged Employees / Children: All staff members who submit
disability certificate are eligible to avail this facility. Under this scheme bank
reimburse an amount not exceeding `10000/- and `15000/- for purchase of Wheel
chair/Crutches and Artificial Limb/Hearing Aid respectively. Bank reimburses the
amount once in 5 years in case of Wheel Chair/Crutches and once in 2 years in case
of Artificial Limb / Hearing Aid. The above reimbursement is also available to the
spouse / children of staff who are physically challenged. (Cir.no.413 Ref 20/72 dated
29.02.08 & Cir.no.191 Ref 3/29 dated 23.09.09)
13) Group Personal Accident Insurance (GPA): Bank has taken Group Accident
policy from M/s.United India Insurance Company Limited to cover the employees
against risks round the clock. It covers death, permanent disablement and partial
disablement. The risk coverage of various categories is as follows:
No
1
2
3
4
5
6
7
8
9
10
11
Category
CMD
Executive Director
General Managers
Deputy General Managers
Asst. General Managers
Chief Managers
Senior Managers
Deputy Managers
Asst. Managers
Clerks / Pilots / Drivers
Sub-staff (including PTS/Security guards)
Coverage (`
` in lakhs)
10.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.50
1.00
0.50
14) Group Savings Linked Insurance Scheme (GSLI): Employees (except

sweepers on consolidated wages/contract employees) in the age group of 18 to 60
are entitled to become members of the scheme. Bank collects monthly contributions
and remits to LIC of India. The monthly contribution includes two components viz.,
Savings & Insurance Premia in the ratio of 70:30. The saving component earns
interest @ 8% p.a. and will be paid to the employee/legal heirs when the scheme
comes to an end due to retirement/resignation/demise of the employee. The monthly
premium payable and risk coverage of various categories is furnished here under:
No
1
2
3
4
Category
Scale IV & above
JM-I to MM-III
Clerks
Sub-staff (including PTS)
Monthly Premium
(Savings plus Risk)
127.50
95.63
63.75
31.88
Sum assured
120000
90000
60000
30000
In case of expiry of an employee due to accident, double the sum assured will be
paid by LIC of India. (Circular no.113 Ref 20/23 dated 09.07.2008)
15) Silver Jubilee Awards: Employees who have completed 25 years of service are
honoured by presentation of an award with a cost not exceeding to `2000/- and the
same is to be presented in a staff meeting at branch/office.
16) Liability Insurance: It covers the lives of the employees to the extent of
liabilities outstanding in Housing / Vehicle Loan as on 31st March every year and also
on fresh disbursal by IFLIC of India. Premium is payable by the employee to the
debit of respective loan accounts and the details of the coverage is as under:
187
Bankers Digest 2013
Category
Coverage
Liability as on 31st March every
Housing
year subject to maximum of `20
Loans
lakhs (inclusive of addl.HL).
Liability as on 31st March every
year subject to maximum of `4.50
Vehicle
Loans
lakhs & `0.60 lakh for four & two
wheeler loans respectively.
(Cir.no.426 Ref 3/77 dated 19.03.2011)
Insurance Premia
`4.70 per thousand per annum
or maximum of `9400/`3.86 per thousand per annum
or maximum `1351/- for 4
wheeler & `232/- for 2 wheeler
Facilities to Retired (Superannuation) Employees:

Besides terminal benefits (Pension/PF/Gratuity/Leave encashment etc.,) the retired
employees are entitled to avail the following benefits / facilities from the Bank:
1. Memento/Gift on the day of Retirement on superannuation: In recognition
of the service rendered by the employees (including PTS) Bank is presenting a
Memento/Gift worth `12500/- on the eve of retirement from service. (Cir.no.177
Ref 03/31 dated 19.08.2011)
2. Reimbursement of Transport Charges: Employees who retire on
superannuation are eligible to claim reimbursement of transport charges (luggage)
incurred on account of shifting of luggage from the office where he took retirement
to the place of permanent settlement in India by submitting TA Bill. Employee is
eligible to claim all expenses on par with normal transfer TA Bill except DA.
3. Retention of Residential Furniture: Officers who availed residential furniture
can retain the items on retirement by paying the following amounts to the Bank.
(Cir.no.45 Ref 3/4 dated 02.05.2012)
Age of the furniture
Below 5 Years
5 Years & < 7 Years
7 Years & above
Amount to be recovered
Book Value if original cost is above `5000/-.
For items with Book Value with less than 5000/-, 50%
of original cost
40% of original cost or Book Value whichever is higher.
25% of original cost or Book Value whichever is higher.
4. Holiday Homes: Bank is extending Holiday Home facility to the retired

employees also. Retired employees can avail this facility at select centers with
nominal rate. At present the tariff for the room is `10/- per day in case of Officer
Staff and `5/- per day in case of Award Staff. The maximum stay allowed is 4 days
only. However, the maximum stay is restricted to 2 days at important locations. For
allotment of rooms they need to submit application to Staff Welfare Department,
Head Office. (Cir.no.555 Ref 20/100 dated 29.03.08)
5. Hospitalization Scheme for retired employees on super annuation: Bank is
reimbursing medical expenditure incurred on surgery of major ailments (including
Cataract surgery, Prostrate surgery, Hysterectomy operation) to the tune of `2.5
lakhs for self and `1.5 lakhs for spouse with a margin of 10% and 25% for self and
spouse respectively. However, in case of cancer treatment (without surgery) the
reimbursement is allowed up to `100000/- per year. (Cir.no.413 Ref 20/72 dated
29.02.2008 & Cir no. 16 Ref 3/1 dated 11.04.2012)
6. Additional Interest Rate: All retired/resigned employees are eligible for 1%
additional interest on the deposits made by them under Savings/Term Deposits.
Further, they are also eligible for Senior Citizen interest rate (0.50% extra) besides
staff interest rate. (Cir.no.04 Ref 3/1 dated 05.04.2011)
188
Bankers Digest 2013
Guide to Bereaved Families

Taking care of family members is the sacred responsibility of the family head and he
is expected to take all possible care so that the spouse/children should not to face
financial problems even in his absence i.e. untimely demise. Bank has been
extending various facilities/benefits to the bereaved families through different
schemes. Hence, staff and their family members are necessarily to have an idea of
these schemes and the associated benefits thereon. The nominees/legal heirs are
entitled to avail the following financial benefits/facilities from Bank and other
organizations:
1) Family Pension: In case of an employee who opts for pension and expired after
completion of 7 years of service, higher family pension equal to 50% of pay last
drawn by the deceased employee or twice the ordinary rate of family pension
whichever is less is payable.
2) Provident Fund: The actual contribution made by the employee/bank, and
interest thereon, which includes Voluntary Provident Fund. However, PF Loan, if any,
will be adjusted from the above contributions.
3) Gratuity: Employee is eligible for 15 days for every completed 26 working days
and accordingly the eligible amount will be paid subject to the ceiling, if any. This
amount will be paid immediately.
4) Future Service Gratuity Insurance: Bank has taken master policy for the said
purpose. In case of death of any employee, Bank submits the claim to LIC and the
same will be paid to the nominees of the deceased on receipt of claim amount from
LIC. Normally, the settlement of claim takes 3 to 6 months. (Cir.no.360 Ref 20/62
dated 01.01.2008)
5) Leave Encashment: Bank pays the amount for the unavailed Privileged Leave, if
any, subject to maximum of 240 days. The last drawn salary is the basis for
calculation and payment.
6) Exgratia: Bank pays an amount of `1.50 lakh towards exgratia to the families
(Nominees/Legal heirs) of the employee who die in harness. Advance amount of
`25000/- will be paid immediately to meet the funeral related expenses and the
same will be adjusted from the exgratia amount. (Cir.no.413 Ref 20/72 dt.29.02.08)
7) Financial Aid to Bereaved Families of the Employees who die in harness
(FABF): It is a voluntary contributory scheme and the interested employees can
become member of the scheme by submitting option-cum-nomination letter to Head
Office. The members are required to contribute `10/-, `6/- and `4/- for officers,
clerks and sub-staff respectively for each death. The average amount payable under
the scheme is around `50000/-. (Cir.no.560 Ref 20/112 dated 09.03.2004 & Cir.no.
143 Ref 3/28 dated 23.07.2010)
8) Educational Grant to the children: The children of the deceased are entitled to
claim reimbursement of `2000/- for X class, `2500/- for Intermediate and `4000/for Graduation/Post Graduation for each child every year subject to maximum of two
children. However, they are eligible to avail this facility only up to the age of 25
years or superannuation date of the deceased whichever occurs earlier. The
application is to be forwarded through the branch where the deceased employee
worked. (Cir. no.555 Ref 20/100 dated 29.03.2006)
9) Residential Furniture: Family of the deceased is allowed to retain the furniture
provided by the bank under Officers Residential Furniture Scheme without payment
of any amount/charges to the bank. (Cir.no.131 Ref 4/1 dated 20.06.2005)
189
Bankers Digest 2013
10) Leased Accommodation: Family members of the deceased employee are

entitled to retain the quarters till completion of the succeeding month or current
academic year whichever occurs later.
11) Reimbursement of Transport Charges: Family members are eligible to claim
reimbursement of transport charges (luggage) incurred on account of shifting of
luggage from the place of work of the deceased to the place of permanent settlement
in India by submitting TA Bill and they are entitled to claim all expenses and the TA
Bill is treated on par with normal transfer TA Bill except Dearness Allowance.
12) Group Savings Linked Insurance Scheme (GSLI): Bank collects monthly
contributions from the members and remits to LIC of India. The monthly contribution
includes two components viz., Savings & Insurance Premia in the ratio of 70:30. In
case of death on account of accident, LIC pays the double the amount of assured.
Bank submits the claim to LIC as per the eligibility. The monthly premium payable
and risk coverage of various categories is furnished here under:
No
1
2
3
4
Category
Scale IV & above
JM-I to MM-III
Clerks
Sub-staff (including PTS)
Premium (M)
127.50
95.63
63.75
31.88
Sum assured
120000
90000
60000
30000
13) Compensation & Reward for resisting crime against Bank: To protect the
interest of the family members of the employee who dies on account of resisting
crime against bank, the following amounts will be paid to the bereaved family.
No
1
Facility
Compensation
on death
Remarks
Officers
- ` 20 lakh
Clerical/Sub-staff - ` 10 lakh
Bank continues to pay last pay drawn by the deceased
Pay &
officer, till one of the children attains age of 21 years or
2
Allowances
normal retirement age of the deceased whichever is
earlier.
3
Education Exp.
Up to Degree for children.
4
Employment
Family member subject to eligibility.
In case of survival Cash reward of ` 2 lakh will be paid besides eligible for out
of turn promotion or advance increment. (Cir no. 223 Ref 3/50 dated 27.08.12)
14) Liability Insurance: All liabilities of staff members under Housing and Vehicle
loans are insured and bank claims the amount from LIC of India in case of death of
the employee and adjust the same to the respective loan accounts. The maximum
coverage for Housing and Vehicle loans is `20 lakhs and `4.50 lakhs respectively.
However, in case of two wheeler the maximum coverage available is `60000/- only.
(Cir.no.438 Ref 3/67 dated 15.03.09)
15) Other reimbursemens: The family members of the deceased are entitled to
claim the reimbursement of News Paper, Conveyance and Refreshments of the
current month/quarter and arrears if any from the branch.
16) Appointment of dependant of the deceased: Bank may consider the
appointment of one of the dependants of the deceased employee, who expired while
performing official duty as a result of violence, terrorism, robbery or dacoity.
However, this is applicable only to those deceased employees who have completed 5
years of service or before reaching the age of 30 years, whichever is later. The
appointment shall be made only in the clerical and sub-staff cadre.
190
Bankers Digest 2013
17) Group Insurance Scheme (CODST): This is a Group Policy taken by the Bank
with LIC to cover the lives of the employees of the Bank with the following coverage.
No
1
2
3
4
5
6
Category
Officers (JM-I to SM-VII)
Clerks
Sub-staff
PTS wages
PTS wages
PTS 1/3 wages
Coverage
375000
200000
100000
75000
50000
33000
18) Group Personal Accident Insurance (GPA): Bank has taken Group Accident
policy from M/s.United India Insurance Company Limited to cover the employees
against risks round the clock. It covers death, permanent disablement and partial
disablement. The risk coverage of various categories is as follows:
No
1
2
3
4
5
6
7
8
9
10
11
Category
CMD
Executive Director
General Managers
Deputy General Managers
Asst. General Managers
Chief Managers
Senior Managers
Deputy Managers
Asst. Managers
Clerks / Pilots / Drivers
Sub-staff / PTS/Security guards
Coverage (`
`lakhs)
10.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.50
1.00
0.50
19) Scheme of payment of ex-gratia in lieu of appointment of dependants on

compassionate grounds: This scheme is applicable to employees who die in
harness and employees who seek premature retirement due to incapacitation before
reaching the age of 55 years. Bank grants ex-gratia to the family of the eligible
employee (Officers - `8 lakhs, Clerks - `7 lakhs and Sub-staff - `6 lakhs), provided
the monthly income of the family from all sources is less than 60% of last drawn
salary (net of the taxes) of the employee. The dependents should make an
application within 6 months from the date of the death of the employee. The exgratia amount in eligible cases will be paid within 3 months of receipt of application,
if the same is complete in all respects. (Cir.no.517 Ref 3/31 dated 06.03.2006)
Other Institutions / Organizations
1) Surety Loan: In case where the deceased employee availed loan from Andhra
Bank Employees Co-operative Bank Limited, the balance under Thrift and MMBF
contributions are adjusted to surety loan and the remaining balance will be writtenoff through insurance cover. The family members need not to pay liability under
surety loan of Andhra Bank Employees Co-operative Bank. In case where there are
no outstanding dues by the member, a sum of `20000/- will be paid to the nominee
or dependants.
2) Funeral Expenses: In case where the deceased is a member of Andhra Bank
Employees Co-operative Bank, `2500/- will be paid by the bank to the family
members of the deceased towards funeral expenses.
191
Bankers Digest 2013
2) Andhra Bank Officers` Federation is extending exgratia of `50000/- to the

family members of the deceased officer. However, this scheme is meant for those
officers who are members of the federation only. (Federation cir.no.4/SW/2007
dated 17.01.2007)
3) Insurance Claims: The family members of the deceased are entitled for the sum
assured
mentioned
below
provided
the
deceased
maintains/avails
the
accounts/facilities.
No
1
2
3
4
5
6
7
Account / Product
AB Visa Platinum
AB Gold Card
AB Classic Card
Abhaya Gold
AB Jeevan Abhaya
Abhaya Savings Plus
Abhaya
Coverage
1000000
500000
200000
100000
100000
50000
25000
Remarks
Accidental Death
Accidental Death
Accidental Death
Accidental Death
Natural / Accidental Death
Accidental Death
Accidental Death
Note: Claims will be settled by the respective insurance companies as per the
eligibility and Bank acts as facilitator only.
Important Points:
All staff members should ensure that nomination is submitted for Pension,
PF, Gratuity, FABF, GSLI, Credit card, Andhra Bank Employees Co-operative
Bank, Insurance Linked Accounts etc., to avoid delay in settlement of claims.
Branch/Office to communicate the demise of the employee to Welfare

Department, Head Office, Andhra Bank Employees Co-operative Bank, Credit
Card Department etc., immediately.
Branch/Office to submit the death certificate of the deceased to Head Office

to settle terminal benefits (Pension, PF, Gratuity etc.,) immediately. In case of
accidental death, branch to should send death certificate along with copy of
FIR/Post Mortem Report.
Wherever the deceased staff member has not submitted nomination, the
branch/office has to obtain claim forms from the legal heirs as per the
procedure laid down for payment of amounts by Bank. However, in such
cases, the claims will be settled only at HO.
With regard to Abhaya, Abhaya Plus, Abhaya Gold and Abhaya Jeevan, the
claim is to be submitted at the respective branches where the deceased
maintained said accounts.
Any expenditure under staff welfare has to be claimed before the expiry of
the following financial year failing which the same stands lapsed.
***
192
Bankers Digest 2013
SAGAR JOBPROTM ACADEMY

(Training Division of Right Logix Pvt. Ltd)
Exercise-1
Directions for questions 1 to 25: Choose the correct answer.
1. May I come in? This is
1) a greeting
2) an enquiry
3) a request
4) a statement
2. Please help me! This is
1) a request
2) an interrogation
3) an imperative sentence
4) an exclamation
3. Is he a clever boy? This is
1) a question
2) an assertion
3) a request
4) an order
4. The rose is a lovely flower. The speaker is
1) making a suggestion
2) expressing doubt
3) making a statement
4) making a request
5. What a clever boy! This is
1) an interrogation
2) a request
3) an exclamation
4) a command
6. Tomorrow is the day of decision. This is
1) a suggestion
2) a request
3) an assertion
4) an order
7. So tender, yet so firm! This is
1) an expression
2) an exclamation
3) a request
4) a command
8. Help me, please! This is
1) a command
2) a request
3) an expression of doubt
4) a statement
Sagar JobProTM Academy(Training Division of Right Logix Pvt. Ltd)

SR NAGAR|MEHDIPATNAM|BASHEERBAGH
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ONLINE TESTS at www.sagarjobpro.com
For PROMOTION TESTS,INTERVIEWS, J/CAIIB,PO,Clerks(Discount to children of Bank Employees)

9. Do not make so much noise. This is
1) a request
2) an exclamation
3) a suggestion
4) a command
10. Alas! He died young. This is
1) an assertion
2) an interrogation
3) an expression of sorrow
4) a question
11. Who is that girl? This is
1) a question
2) an invitation
3) a greeting
4) a statement
12. Whom do you want to see? This is
1) an optative sentence
2) an interrogative sentence
3) an assertive sentence
4) an exclamatory sentence
13. This is Johns bicycle. This is
1) an enquiry
2) a demonstration
3) a question
4) an exclamation
14. Ramesh helped me, but who helped you? The speaker is
1) asking for help
2) asking a question
3) making a statement
4) expressing a sudden feeling
15. That is a rose. The speaker is
1) demonstrating
2) commanding
3) requesting
4) greeting
16. So delicate, yet so strong! This is
1) an enquiry
2) a suggestion
3) a statement
4) an exclamation
17. Catch the dog! This is
1) an exclamation
2) an assertion

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4) an invitation
18. Oh! What a surprise! This is
1) a command
2) a request
3) an exclamation
4) an enquiry
19. How very cold the night is! This is
1) an exclamation
2) an interrogation
3) an assertion
20. The boy on the bicycle is my class-mate. This is
1) an enquiry
2) a question
3) a declaration
4) an exclamation
21. Leave the room at once. The speaker is
1) requesting
2) expressing doubt
3) commanding
4) making a suggestion
22. Is it your final answer? This is
1) a sudden emotion
2) a command
3) a suggestion
4) a question
23. I cant agree to your proposal. This is
1) a question
2) a doubt expressed
3) a statement
4) an exclamation
24. May you never have a similar misfortune! The speaker is
1) giving a piece of advice
2) making a request
3) expressing a wish
4) giving an order
25. All the staff and students are requested to attend the function without fail. This is
1) a request
2) an invitation
3) an order
4) a question

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Exercise-2
Directions for questions 1 to 25: Choose the appropriate answer.
1. A: What is our programme tomorrow?
B: Come here at 9.00 a.m. sharp, unless I call you on phone.
1. B wants A to come
2. A should not come at that time if B calls him up
3. B will call A on phone and confirm the time
4. B does not want A to come till he calls A on phone
2. X: Would you like to go skiing tomorrow?
Y: I dont mind today
1) Y wants to go skiing the next day
2) Y does not want to go skiing today
3) Y prefers to go skiing today
4) Y does not ski at all
3. A: I promise never to smoke again
B: IF were you, I would not have started at all.
a) B wants to be in As place
b) B has already tried smoking
c) B will never smoke at all
d) B says that A should never have started smoking
4. A: What do you prefer coffee or tea?
B: B does not want to have either coffee or tea.
1) B does not want to have either coffee or tea
2) B wants to have tea only
3) B prefers coffee to tea
4) B wants to have both
5. X: How are you?
Y: Fine, thank you
1) Y says he is fine
2) Y is thankful that X has asked about him
3) Both are engaged greeting each other in a formal way
4) Y is a friend of X
6. A: May I borrow your car for today?
B: Not unless you promise to drive carefully
1) B does not want A to drive carefully
2) B does not want A to take his car
3) B permits A to use his car
4) B does not want to lend the car till A promises to drive carefully
7. A: Its surprising how your outlook towards life has become pessimistic!
B: Hasnt it?
1) B agrees with As opinion
2) B does not agree with A
3) B is surprised at As observation
4) B strongly rejects As statement

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8. X: How is your business doing?
Y: If only I had accepted your offer!
1) Y is happy with his business
2) Y says that he would have been better
3) Y wants to accept Xs offer
4) Y does not want to reveal the position of his business
9. A: How was your evening yesterday?
B: Sultry as it was, we went out
1) B has gone out inspite of the sultry weather
2) As it is sultry, B has not gone out
3) Though the weather is not sultry, B has not gone out
4) B has not enjoyed his evening at all
10. A: Good bye forever!
B: Who knows? We might meet again
1) B does not want to bid goodbye to A
2) B is optimistic that they would meet again
3) B feels that one can never say goodbye to another
4) B likes A too much to say goodbye forever
11. X: Did you make it to the school basket ball team?
Y: If only I were as tall as you are!
1) Y wants to be as tall as X
2) Y is shorter than X
3) Y has made it to the team in spite of his short stature
4) Y is disappointed that he has not made it to the school team on account of his short stature
12. A: Has the postman come?
B: Not yet
1) B says that the postman will not come
2) B tells A that the postman will come
3) B says that there is some more time for the postman to come
4) B says that the postman is yet to come
13. X: How was the movie?
Y: Dont ask me!
1) Y does not want to talk to X
2) Y has not enjoyed the movie
3) Y does not have any opinion about the movie
4) Y likes to reserve his opinion
14. A: Is Mr. Thapar going to be the new director?
B: Quite unlikely
1) B does not want to know whether Mr. Thapar will become the new director
2) B feels that Mr. Thapar probably may not be the new director
3) B says that Mr. Thapar may become the new director
4) B says that Mr. Thapar will definitely not be the new director
15. X: You should have answered that job advertisement
Y: If only I knew that you are with that company

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1)
2)
3)
4)
Y has applied for the job

Y is happy that he has not applied
Y is unhappy that he has not applied for the job
Y does not know that X is with that company but still he applied for the job
16. A: Mrs. Rani is not here

B: Could you ask her to call me back?
1) B requests A to pass on the message to Rani
2) B wants Mrs. Rani to call back A
3) B demands that A should convey the message
4) B is upset that Mrs. Rani is not there
17. A: My throat still hurts.
B: Will you be able to participate in the programme?
1) B expresses concern about As health
2) B wants A to participate in the programme
3) B discourages A from participating in the programme
4) B encourages A to participate in the programme in spite of his ill health
18. A: Are you happy with your marriage?
B: I could not be happier!
1) B is not at all happy
2) B is very happy
3) B does not want to be happy
4) B feels that he can be happier
19. A: have you ever seen anything like that before?
B: You bet!
1) B wants to find out if A has seen anything like that
2) B has seen something like that before
3) B has not seen anything like that before
4) B does not want to see anything
20. A: At what time does the bus come?
B: How should I know?
1) B does not know the time at which the bus will come
2) B does not want to know the time of arrival of the bus
3) B doesnt want to tell A the time of arrival of the bus
4) B will tell A the time of arrival of the bus
21. X: You need to give me some more money
Y: Havent I given enough?
1) Y feels he has given enough money to X.
2) Y does not want to give any more money
3) Y will give some more money
4) Y has to think about giving more money to X.
22. A: I hear that Malathi is very unhappy with her job
B: Dont you think so?
1) B does not agree with As opinion
2) B feels that Malathi is very unhappy with her job
3) B feels that Malathi is happy with her job

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4) B things unlike A
23. A: The PM announced that there would be tough new restrictions on visas for citizens of certain countries
like India, Pakistan, etc.
B: Then, the PMs statements could be a dampener to tourist industry
1) Bs statement supports As statement
2) B disagrees with A
3) B is pointing out a possible fall out if what A says is true
4) B says that the tourist flow will be regulated
24. A: How are your classes going?
B: Alas! Anything but regular
1) B enjoys his classes
2) B does not like his classes
3) B internationally misses them
4) B is unhappy that his classes are not going on regularly
25. A: Has your son been promoted to next class?
B: If only he had done well in Civics!
1) B is not happy with his sons performance in Civics
2) Bs son has done well in Civics
3) Bs son has been promoted to next class since he has done well in Civics
4) Bs son has been promoted to next class in spite of his bad performance in Civics

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Exercise-3: Appropriate verbs

Directions for questions 1 to 25: Fill in the blanks with appropriate verbs.
1. I _____ him to come to the market with me.
1) warned
2) wished
3) requested
4) liked
2. As the floor was dirty she _____ the room quickly
1) rode
2) dusted
3) shoved
4) swept
3. He is going to start _____ around for a new job
1) making
2) going
3) looking
4) talking
4. She _____ the tray down on a table next to the
1) slowed
2) kept
3) set
4) shock
5. We have _____ some good times together, she and I
1) looked
2) laughed
3) smiled
4) seen
6. That girl really _____ after her mother
1) takes
2) talks
3) goes
4) backs
7. The UN has called on the warring factions to _____ aside their differences
1) keep
2) put
3) talk
4) give
8. The pastry was so fluffy that it _____ in my mouth
1) broke
2) melted
3) disappeared
4) filled

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9. I got a number of dresses _____ for the festival season
1) bought
2) brought
3) stitched
4) borrowed
10. It was a bitter pill to _____
1) swallow
2) take
3) eat
4) make
11. We _____ the station in time but the train was an hour late
1) came
2) went
3) reached
4) returned
12. There was a sale going on; I _____ some clothes at throw away prices
1) bought on
2) picked up
3) stitched
4) caught
13. They always _____ fault with me
1) show
2) tell
3) say
4) find
14. The principal _____ to speak to you
1) wanting
2) is wanting
3) wants
4) want
15. When I get home, my pet _____ at the door waiting for me
1) sits
2) has been sitting
3) will sit
4) will be sitting
16. I _____ a new car last month
1) had bought
2) have bought
3) bought
4) would have bought
17. If he _____ your plans, he will be surprised
1) hears for
2) would hear
3) hears of

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4) will hear
18. She _____ unconscious since four 0 clock
1) is
2) has been
3) was
4) had been
19. He had some work, so he _____ out five minutes ago
1) has gone
2) had gone
3) went
4) was going
20. We were _____ the radio all evening for news
1) listening
2) listening to
3) hearing
4) hearing to
21. Grandma was very, very _____ because the little boy broke the vase.
1) pleased
2) cross
3) hurt
4) hated
22. The bus was so _____ that there was no place even to stand
1) applied
2) needed
3) used
4) crowded
23. The Indian team won the toss and _____ to bat first
1) left
2) fought
3) thought
4) opted
24. I _____ my fingers to the one on that particular project
1) burnt
2) spent
3) worked
4) tired
25. She _____ my watch when I was not looking
1) protested
2) stole
3) knocked
4) gave

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Exercise-4: Appropriate adjectives

Directions for questions 1 to 25: Fill in the blanks with appropriate adjectives.
1. Marijuna has few with drawl effects and this has given rise to the _____ belief that it is not an addictive.
1) mistake
2) mistaken
3) misunderstood
4) mitigating
2. The _____ diet has too little fibre in it.
1) modernistic
2) modal
3) modern-day
4) mock
3. An _____ crowd assembled at the gate on Monday.
1) ordinary
2) ornery
3) ornate
4) orderly
4. I have a _____ hunting knife
1) raw
2) rationalistic
3) raven
4) razor-sharp
5. Have a sandwich; you must be _____.
1) thirsty
2) realistic
3) accomplished
4) unguarded
6. Although he is bind he is an _____ singer.
1) accident prone
2) accessible
3) accomplished
4) unguarded
7. The disappearance of the letter made the situation all the more _____.
1) piquant
2) pious
3) pioneering
4) pitiful
8. The Afghani refugees are living in _____ conditions.
1) pitch-black
2) pivotal
3) pitiable
4) funny

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9. America is conducting _____ raids on Afghanistan
1) reticent
2) metro-active
3) revealing
4) retaliatory
10. He is an _____ athlete who also paints very well.
1) all-rounder
2) all time
3) all-round
4) all-star
11. She writes equally well with both hands; she is _____.
1) ambivalent
2) ambiguous
3) ambidextrous
4) articulate
12. Mandelas release was a/an _____ event in South Africas history
1) pithy
2) pivotal
3) funny
4) interesting
13. This is a _____ disease
1) water-born
2) born and bread
3) water-borne
4) born-again
14. I am sure they will be _____ to rational argument
1) ambivalent
2) ambitious
3) amenable
4) ambient
15. They put up a/an I am sure they will be _____ to rational argument performance of King Lear
1) ambient
2) altruistic
3) amicable
4) sensible
16. She was tall, blonde and I am sure they will be _____ to rational argument looking.
1) interesting
2) beautiful
3) athletic
4) atavistic
17. Most refugees live in _____ conditions
1) worst
2) worse
3) dirty
4) atrocious

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18. His paintings are _____
1) amateurish
2) anaerobic
3) analgesic
4) antistatic
19. I think he requires a _____ diet.
1) great
2) large
3) hot
4) nutritious
20. The _____ friends that I have are very helpful.
1) little
2) many
3) few
4) most
21. I pretended not to notice but I saw that he had given me a _____ look.
1) balding
2) baleful
3) balmy
4) bald
22. She came In wet and _____.
1) bedraggled
2) becoming
3) cheerful
4) bereft
23. I am fed up with being _____ all the time.
1) hungry
2) thirsty
3) broke
4) broken-hearted
24. He waged a _____ fight against crime but was unsuccessful
1) ceaseless
2) central
3) censorious
4) certain
25. I wrote a _____ note on his success
1) communicable
2) congratulatory
3) commiseratory
4) committed

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Exercise-5: Adverbs
Directions for questions 1 to 25: Fill in the blanks with suitable adverbs.
1. The guests were welcomed _________ by the host
1) cordially
2) casually
3) keenly
4) voluntarily
2. The sky, which thundered _________, indicated a terrible storm.
1) radiantly
2) menacingly
3) vigorously
4) alluringly
3. The Minister _________ stated that stringent action would be taken against the erring officials.
1) ambiguously
2) impudently
3) sarcastically
4) categorically
4. The waiter was tipped _________ by the rich man.
1) beautifully
2) handsomely
3) gently
4) prompously
5. The man was so _________ dressed that he almost looked like a clown.
1) garishly
2) modestly
3) decently
4) suavely
6. The brave warrior _________ fought against the enemies.
1) haltingly
2) valiantly
3) indiscriminately
4) distinctly
7. He _________ imposed strict discipline
1) rigorously
2) caustically
3) casually
4) abundantly
8. The sluggard did nothing constructive, except rambling on the strets _________.
1) aimlessly
2) religiously
3) perversely
4) spuriously

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9. A country can be termed truly secular when people of all religions lived _________.
1) surreptiously
2) comfortable
3) decently
4) harmoniously
5)
10. The wealthy old man _________ bequealthed a huge portion of his property to the orphanage.
1) magnanimously
2) courteously
3) graciously
4) covetously
11. He glanced _________ at the document, which was supposed to be kept confidential.
1) Stealthily
2) threateningly
3) dejectedly
4) benevolently
12. As the matter is _________ clear there is no reason for ambiguity.
1) pragmatically
2) practically
3) explicitly
4) conveniently
13. As she was thoroughly satisfied with her preparation, she entered the examination hall _________.
1) competently
2) adeptly
3) skillfully
4) confidently
14. Although I am averse to watching movies, I _________ visit the theatre to watch plays.
1) rarely
2) occasionally
3) fervently
4) specifically
15. The rose is _________ the queen of flowers.
1) controversially
2) authentically
3) indisputably
4) speciously
16. The boys _________ flung stones at the limping dog.
1) dangerously
2) casually
3) mercilessly
4) fearlessly
17. I drove the car _________ while negotiating the curves on the ghat road.
1) cautiously
2) conveniently

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3) fearfully
4) precariously
18. Many people wept _________ at the loss of their beloved leader.
1) exclusively
2) inconsolably
3) intensely
4) excruciatingly
19. The workers _________ demanded better wages.
1) industriously
2) resolutely
3) persistently
4) decisively
20. The polyglot spoke many foreign languages quite _________.
1) proficiently
2) fluently
3) enthusiastically
4) incredibly
21. The thieves entered the house _________.
1) Timidly
2) docilely
3) furtively
4) discursively
22. As the Minister did not want to divulge the information, he replied _________ to the journalists queries.
1) mockingly
2) sarcastically
3) secretly
4) evasively
23. One cannot form an opinion about a person by _________ looking at his face.
1) trivially
2) merely
3) peculiarly
4) intently
24. The event was so _________ planned that there was no cause for complaint.
1) minutely
2) meticulously
3) intricately
4) nimbly
25. Although I was initially nervous to address a gathering, _________ I overcame my nervousness.
1) eventually
2) generally
3) casually
4) evidently

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Exercise-6: Prepositions
Directions for questions 1 to 25: Fill in the blanks with appropriate prepositions.
1. The carpet ____ the table is threadbare.
1) on
2) in
3) through
4) under
2. He stands ____ the school gate everyday six 0 clock.
1) about
2) up
3) on
4) near
3. Alcohol is injurious ____ health.
1) for
2) to
3) of
4) with
4. Since she is my neighbour, I am acquainted ____ her.
1) of
2) with
3) by
4) at
5. Although he is not rich, he is contended ____ his lot.
1) about
2) around
3) with
4) of
6. I congratulate you ____ your success.
1) at
2) on
3) for
4) before
7. The food was shared ____ ten girls.
1) between
2) besides
3) beside
4) among
8. The beggar walked ____ his dog.
1) besides
2) between
3) beside
4) near

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9. The deer was killed ____ a hunter in the forest.
1) with
2) by
3) for
4) from
10. He was accused ____ forgery by his boss.
1) about
2) after
3) of
4) to
11. The dog ran ____ the road.
1) about
2) in
3) across
4) upon
12. Sheena and her friends quarreled ____ themselves without rhyme of reason.
1) between
2) among
3) about
4) around
13. She was ____ deaths door, when the man entered her life.
1) in
2) on
3) for
4) at
14. I sent the parcel to my friend ____ courier
1) through
2) with
3) by
4) into
15. I never use a credit card; I always settle bills ____ cash.
1) by
2) with
3) in
4) to
16. He has not yet recovered ____ is illness.
1) with
2) from
3) over
4) about
17. Mahatma Gandhi worked very hard ____ the welfare of the country
1) by
2) with
3) for
4) towards

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18. ____ his fathers death, lyotiraditya Sandia was crowned king.
1) Before
2) Within
3) Behind
4) After
19. He hanged himself ____ a piece of cloth.
1) by
2) to
3) with
4) around
20. We must reach our destination ____ sunset.
1) besides
2) by
3) at
4) on
21. ____ his children, his nephews and nieces were present.
1) Beside
2) About
3) Around
4) Besides
22. I have eaten nothing ____ morning
1) from
2) for
3) since
4) till
23. He is bright boy; he is always ____ the top of his class
1) in
2) at
3) on
4) over
24. The ICICI charges interest ____ twelve percent.
1) on
2) for
3) with
4) at
25. ____ what I know of him, I hesitate to trust him.
1) Of
2) About
3) From
4) Since

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Exercise-7: Prepositions
Directions for questions 1 to 25: Fill in the blanks with appropriate prepositions.
1. This work is ___ my capacity.
1) after
2) beyond
3) beside
4) after
2. ___ this, I wash my hands off you.
1) Before
2) Beyond
3) After
4) For
3. The goods were sold ___ the auction.
1) in
2) behind
3) around
4) at
4. The programme lasted ___ the night.
1) through
2) around
3) about
4) into
5. As he was walking on the road, he was stunned ___ a blow on the head.
1) with
2) by
3) on
4) from
6. She said something ___ leaving town.
1) around
2) with
3) about
4) of
7. Do you think this shirt is too tight ___ the shoulders?
1) around
2) on
3) across
4) throughout
8. The party went on until ___ midnight.
1) by
2) through
3) beyond
4) about

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9. it is ___ my principles to borrow money.
1) around
2) about
3) against
4) beyond
10. The child stood ___ the curtain with only his shoes peeping out.
1) beyond
2) besides
3) behind
4) beside
5)
11. There was a ladder behind my house propped up ___ the wall.
1) around
2) through
3) at
4) against
12. My brother was working for Telco ___ 1995, when he got a job at Siemens Nixdorf.
1) with
2) at
3) until
4) from
13. We spent the whole after noon walking ___ the town.
1) about
2) within
3) beyond
4) in
14. The fool has parked his scooter right ___ the entrance to the driveway
1) beyond
2) across
3) within
4) on
15. ___ the span of a year, three of the towns biggest factories have closed down.
1) Within
2) In
3) Behind
4) Beyond
16. He beamed ___ pleasure when he heard the news.
1) in
2) with
3) from
4) on
17. ___ all his faults, I still like him.
1) In
2) At
3) Until
4) With

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18. I could see something glittering ___ the water.
1) below
2) beneath
3) under
4) beyond
19. They were suddenly plunged into darkness as the train went ___ the tunnel.
1) into
2) through
3) in
4) between
20. She has been ___ a lot of pressure at work
1) by
2) in
3) under
4) beneath
21. Wait until the lights change ___ green
1) into
2) to
3) from
4) for
22. He was standing with his back ___ me
1) at
2) behind
3) towards
4) to
23. These families are living ___ the official poverty line.
1) below
2) under
3) beneath
4) beyond
24. Theves is a large international organization with offices ___ the world.
1) through
2) in
3) across
4) throughout
25. ___ the mist she could just make out his silhouette
1) Over
2) Beyond
3) Through
4) Across

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Exercise-8: Conjunctions
Directions for questions 1 to 25: Fill in the blanks with appropriate conjunctions.
1. Elizabeth works hard, ____ Jane is lazy.
1) and
2) or
3) because
4) but
2. ____ he is poor, he is contented.
1) Unless
2) Until
3) Though
4) Yet
3. I trust her ____ she always speaks the truth.
1) hence
2) thus
3) because
4) but
4. Wait for me ____ I return.
1) if
2) so
3) till
4) as
5. I range the bell ____ no one answered
1) but
2) but
3) so
4) if
6. He failed in the examination ____ he did not work hard.
1) but
2) although
3) because
4) therefore
7. You must not tell lies ____ your mother will punish you.
1) or
2) but
3) and
4) unless
8. Dont go there ____ you are called
1) since
2) therefore
3) unless
4) because

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9. Is Rita your sister ____ your cousin?
1) and
2) but
3) or
4) because
10. I am going to Kolkata ____ my brother is going to Chennai.
1) whereas
2) even
3) because
4) since
11. ____ he was an industrious worker, I encouraged him.
1) Unless
2) Though
3) Before
4) As
12. You will get late ____ you hurry to the meeting
1) because
2) unless
3) if
4) though
13. You must be tired ____ you have walked such a long distance.
1) though
2) than
3) but
4) since
14. Not ____ I loved Caesar less, but that I loved Rome more.
1) than
2) if
3) that
4) though
15. I am in the right ____ you are in the wrong
1) because
2) since
3) for
4) but
16. We judge ourselves by what we feel capable of doing ____ others judge us by what we have already done.
1) than
2) and
3) but
4) except
17. ____ I have no money to spend, you have no one to spend it on.
1) When
2) While
3) And
4) But

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18. He does well, ____ that he is nervous at the beginning
1) simply
2) only
3) and
4) so
19. ____ she had given up smoking, she kept her lighter with her.
1) If
2) That
3) Although
4) Except
20. ____ we approached the house, We heard the sound of music.
1) where
2) that
3) if
4) when
21. I know you better ____ he does!
1) that
2) than
3) while
4) when
22. He bled so profusely ____ he died
1) that
2) than
3) while
4) when
23. She has already packed all her belongings ____ I just have to take them to her new flat.
1) but
2) that
3) except
4) and
24. My shoes were full of water ____ I took them off
1) and
2) because
3) so
4) that
25. It was difficult to understand people for a long time ____ eventually I got used to them.
1) and
2) but
3) except
4) because

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Exercise-9: Direct to indirect speech

Directions for questions 1 to 25: Change the following sentences from direct to indirect speech.
1. The minister said, I am an honourable man.
1) The minister exclaimed that he is an honourable man.
2) The minister said that he was an honourable man.
3) The minister yelled that he is an honourable man.
4) The minister advised people to believe him.
2. The president said, I will come back to India.
1) The president said that he would come back to India.
2) The president told that the will come back to India.
3) The president said that he was to come back to India.
4) The president reiterated that he could come back to India.
3. The social servant said. I have devoted all my life to the welfare of the people.
1) The social servant enlightened people that he had devoted all his life to the welfare of the people.
2) The social servant revealed that he had devoted all his life to the welfare of the people.
3) The social servant stated that he had devoted all his life to the welfare of the people.
4) The social servant said that he is devoted all his life to the welfare of the people.
4. She said to the servant, Bring all the bags upstairs.
1) She ordered the servant to bring all the bags upstairs.
2) She requested the servant to carry all the bags upstairs.
3) She told the servant that he may bring the bags upstairs
4) She told to the servant to bring all the bags upstairs.
5. Ravi said to Deepak, Please shut the door.
1) Ravi requested Deepak to shut the door.
2) Ravi ordered Deepak to shut the door.
3) Ravi told Deepak that he should shut the door.
4) Ravi said to Deepak that he may shut the door.
6. He told her, You may borrow my car for a day.
1) He requested her to use his car only for a day.
2) He permitted her to borrow his car for a day.
3) He told her that she might borrow his car for a day.
4) He said to her that she may borrow his car for a day.
7. The president said, The government has totally neglected the handloom sector.
1) The president abused saying that the government has totally neglected the handloom sector.
2) The president said that the government totally neglected the handloom sector.
3) The president told that the government has been totally neglecting the handloom sector.
4) The president said that the government had totally neglected the handloom sector.
8. She said, I was surprised and pleased to see him.
1) She told that she was surprised and pleased to see him.
2) She said that she had been surprised and pleased to see him.
3) She told that she was surprised and pleased on seeing him.
4) She revealed that she was surprised and pleased to see him.

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9. He said, My tie is lime green in colour with figures of frogs painted on it.
1) He informed that his tie was painted with frogs and was lime-green in colour.
2) He said that his tie is of lime green and with figures of frogs painted on it.
3) He told his tie was of lime green in colour, with frogs painted on it.
4) He said that his tie was lime in green colour, with figures of frogs painted on it.
10. The traveler said, But on this visit, I notice a sea change!
1) The traveler exclaimed that on that visit, he noticed a sea change.
2) The traveler informed that on that visit, he notices a sea change.
3) The traveler perceived that on that visit, he had noticed a sea change.
4) The traveler said that but on this visit, he noticed a sea change.
11. She said to her brother, Am I doing the right thing?
1) She asked her brother whether she was doing the right thing.
2) She wondered if she is doing the right thing
3) She asked her brother whether she did the right thing.
4) She questioned her brother if he was doing the right thing.
12. The Policeman said to the politician, How are there elections rigged?
1) The Policeman questioned the politician if he had rigged these election results
2) The Policeman asked the politician how were those elections rigged.
3) The Policeman asked the politician how those elections ere rigged
4) The Policeman accused the politician that those elections were rigged.
13. He said, It is true!
1) He explained that it was never true.
2) He said what is not true.
3) He reported that it is not true.
4) He said that it was not true.
14. The legal advisor said to the director, Amend the existing laws and plug all the loop holes.
1) The legal advisor told to amend the existing laws and plug all the loop holes.
2) The legal advisor warned the director to amend the existing laws and plug all the loopholes.
3) The legal advisor advised the director to amend the existing laws and plug all the loop holes.
4) The legal advisor tells the director that he shall amend the existing laws and plug all the loopholes.
15. The President said, My party is hopeful of reaching an accord with our political ally!
1) The President hoped to reach an accord with their political ally.
2) The President says that he was hopeful of reaching an accord with their political ally.
3) The President expressed that his party is hopeful of reaching an accord with his political ally.
4) The president said that his party was hopeful of reaching an accord with their political ally.
16. He said, What a pleasant day it is!
1) He said, What a pleasant day it is!
2) He said what a pleasant day it was
3) He shouted that it was a pleasant day
4) He happily said that it is a pleasant day
17. The girl told the bully, Let me go!
1) The girl exclaimed to the bully that he should let her go.
2) The girl shouted at the bully to let her go.
3) The girl requested the bully to let her go.
4) The girl pleaded with the bully that he should let her go.

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18. Are you coming home with me now? the brother asked his sister.
1) The brother asked his sister if she was going home with him then.
2) The brother questioned his sister if she was coming home with him then.
3) The brother enquired if his sister was going home with him then.
4) The brother called his sister if she was going home with him now.
19. The girl said, I do not wish to talk to any of you.
1) The girl told that she did not wish to talk to any of you.
2) The girl said that she doesnt wish to talk to any of them.
3) The girls revealed she wished not to talk
4) The girl said that she did not wish to talk to any of them.
20. The vexed shopkeeper told the fussy customer, You either buy it or walk out of may shop!
1) The vexed shopkeeper shouted at the fussy customer that she should buy it or walk out of the shop.
2) The vexed shopkeeper told the fussy customer that she should either buy it or walk out of his shop.
3) Te vexed shopkeeper told the fussy customer to leave his shop
4) The vexed shopkeeper told the fussy customer to buy it or to leave his shop.
21. He said, How beautiful she is!
1) He wondered that she was beautiful.
2) He thought that she is beautiful.
3) He exclaimed that she was very beautiful.
4) He says that she was very beautiful
22. She asked Rajesh, Is your brother taller than I?
1) She questioned Rajesh if his brother is taller than me.
2) She asked Rajesh whether his brother was taller than she.
3) She asked Rajesh whether his brother was taller than her.
4) She said to Rajesh if his brother is taller than her.
23. Ramani said, I have heard this already
1) Ramani cried that she had heard this already
2) Ramani told that she had heard that before.
3) Ramani said that she had heard that already
4) Ramani says that she had heard that.
24. Rasi told the servant, Clean the glasses thoroughly!
1) Rasi ordered the servant to clean the glasses thoroughly
2) Rasi demanded the servant to clean the glasses thoroughly.
3) Rasi requested the servant to properly clean the glasses.
4) Rasi told her servant that she would clean the glasses thoroughly.
25. Give me the change, the passenger asked the conductor.
1) The passenger demanded the conductor give him the change.
2) The passenger asked the conductor to give him the change
3) The passenger shouted at the conductor give to the change
4) The passenger wanted the conductor to give the change

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Exercise-10: Indirect to direct speech

Directions for questions 1 to 25: Change the following sentences from indirect to direct speech.
1. Mani asked Megha whether she had read the letter.
1) Mani asked Megha, Have you read the letter?
2) Mani questioned Megha, Do you read the letter?
3) Mani told Megha, Will you read the letter?
4) Mani asked Megha, Are you going to read the letter?
2. He sadly exclaimed that his team had lost the match
1) He exclaimed, My team has lost the match!
2) He said Oh God! My team lost the match!
3) Alas, he exclaimed, My team will lose the match.
4) He said Alas! My team lost the match!
3. The student requested his teacher to help him out.
1) The student said, Will you help me out, teacher?
2) The student said, Teacher, please help me out
3) The student told his teacher, Help me out
4) The student asked his teacher, Will you be able to help me out?
4. The old man advised his sons that united they stand but divided they fall.
1) The old man told his sons, United you stand but divided you fall.
2) The old man advised his sons, You stand united but when divided you fall.
3) The old man said to his sons, Stand united and fall divided.
4) The old man told his sons, Stand united but fall when divided.
5. She told Ramu that she was pleased to meet him.
1) She said to Ramu, I am pleased to meet him.
2) She told Ramu, I am pleased to meet you.
3) She informed Ramu. I was pleased to meet you.
4) She told Ramu, I am pleased to have met you.
6. The Princess asked the mirror who the most beautiful lady on the earth was.
1) The Princes asked, Oh mirror! Who the most beautiful lady on the earth was?
2) The Princess asked the mirror, Who is the most beautiful lady on the earth?
3) The Princess questioned the mirror, Whom do you think is the most beautiful on the earth?
4) The Princess inquired from the mirror, Who will be the most beautiful lady on the earth?
7. She said that she might join the party.
1) She said, I can join the party.
2) She told, I may join the party.
3) She tells, I will join the party.
4) She said, I may join the party.
8. She exclaimed that it was a pleasant surprise.
1) She shouted, It was pleasant surprise
2) She exclaimed, What a pleasant surprise it is!
3) She stated The surprise was pleasant.
4) She said I am pleasantly surprised.

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9. Kamala asked Ravi who had taught him such tricks as those.
1) Kamala asked Ravi, Who has taught you such tricks as these?
2) Kamala questioned Ravi, By who were you taught tricks as these?
3) Kamala enquired from Ravi, who teaches you such tricks as these?
4) Kamala asked Ravi, Who taught you such tricks?
10. The Policeman asked me if I could park my car closer to the kerb.
1) The Policeman asked me, Can you park your car closer to the kerb?
2) The Policeman questioned, Will you park your car closer to the kerb?
3) The Policeman asked, Could you park your car close to the kerb?
4) The Policeman advised me, If you could park my car closer to the kerb?
11. The researchers say that beauty is in the eye of the beholder.
1) The researchers say, Beauty is in the eye of the beholder.
2) The researchers say, Beauty was in the eye of the beholder.
3) The researchers said, Beauty is in the eye of the beholder.
4) The researchers inform, The beauty is in the eye of the beholder.
12. The auction-in-charge said that the auction had gone very well and they were very pleased.
1) The auction-charge informed, The auction had gone very well and we are very pleased.
2) The auction-in=charge said, The auction has gone very well and we are very pleased.
3) The auction-in-charge stated, The auction has gone very well and they are very pleased.
4) The auction-in-charge said, The auction will go very well and will be very pleasing to us.
13. She exclaimed that Anju danced very well.
1) She said, How well Anju dances!
2) She said, Anju dances very well.
3) She commented, How Anju dances well!
4) She stated, How well Anju danced?
14. The President said that a lot of things had been done to accommodate them.
1) The President said, A lot of things are done to accommodate them.
2) The President said, A lot of things have been done to accommodate them.
3) The President said, A lot of things are done and accommodated them.
4) The President said, A lot of things are being done to accommodate them.
15. Walker said that he could not believe Jones had done anything that brutal.
1) I cannot believe that Jones has done anything this brutal, Walker said.
2) I cannot believe that Jones has done anything brutal, Walker said.
3) I cannot believe that Jones did that. Walker exclaimed.
4) I cannot believe that Jone can do anything that brutal, Walker shouted.
16. The members said that they would give a positive response.
1) The members said, We give a positive response.
2) The members told, We would give a positive response.
3) The members said, We will give a positive response.
4) The members informed, We can give a positive response.
17. The director said that they would have to adopt a cautious approach.
1) The director said, We will have to adopt a cautious approach.
2) The director said, We may have to adopt a cautious approach.
3) The director said, A cautious approach would have to be adopted.

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4) The director reminded, They will have to adopt a cautious approach.
18. The Indian Captain said that the pitch was more suitable for batsmen.
1) The Indian Captain said, The pitch was more suitable for batsmen.
2) The Indian Captain wished, The pitch is ore suitable for batsmen.
3) The Indian Captain remarked, The pitch is more suitable for batsmen.
4) The Indian Captain said, The pitch suits batsmen no more.
19. Mr. Mayo said that if they use celebrities, they give them an advantage.
1) Mr. Mayo argued, If we use celebrities, they given us an advantage.
2) Mr. Mayo said, If we use celebrities, they give us an advantage.
3) Mr. Mayo revealed, If they use celebrities, they would given them and advantage.
4) Mr. Mayo said, If they use celebrities, advantage is given to them.
20. She commented that the weather had been much better the previous day.
1) She said, The weather had been much better the previous day.
2) She said, The weather was much better yesterday.
3) She said, The weather has been much better yesterday.
4) She said, The weather was much better the previous day.
21. The teacher said that the sun rises in the east.
1) The teacher teaches, The sun rises in the east.
2) The teacher said, The sun rises in the east.
3) The teacher tells, The sun rose in the east.
4) The teacher explains, The sun has risen in the east.
22. The Minister said that he welcomed anyone interested in assisting him in his fight against communalism.
1) The Minister said, I welcome anyone against communalism.
2) The Minister said, I welcome everyone interested in assisting him in my fight against communalism.
3) The Minister said, I will welcome anyone against communalism.
4) The Minister says, I could welcome anyone interested in assisting me in fight against communalism.
23. The Professor remarked that the two sides could resume talks if they wanted to.
1) The Professor says, The two sides can resume talks if they wanted to.
2) The Professor remarked, The two sides can resume talks if they want to.
3) The Professor observed, The two sides could have resumed talks, if they wanted to.
4) The Professor said, the two sides will resume talks, if they want to.
24. The leader commented that people with empty stomachs did not indulge in corruption.
1) The leader said, People on empty stomachs do not indulge in corruption.
2) The leader said, People with empty stomachs will not indulge in corruption.
3) The leader said, People with empty stomach do not indulge I corruption.
4) The leader said, People with empty stomachs do not indulge in corruption.
25. Ramesh exclaimed that the music was very sweet.
1) Ramesh says, The music was very sweet.
2) Ramesh said, How sweet is the music!
3) Ramesh exclaimed, The music is very sweet.
4) Ramesh noticed, How the music is sweet!

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Exercise-11: Active to passive voice

Directions for questions 1 to 25: Change the following sentences from active to passive voice.
1. The teacher uses audio-visual aids to teach the children.
1) Audio-visual aids are being used by the teacher to teach the children.
2) Audio-visual aids are used by the teacher to teach the children.
3) Audio-visual aids were used to teach the children by the teacher.
4) To teach the children, audio-visual aids are being used by the teacher.
2. A storm often uproots huts.
1) Huts are often uprooted by a storm
2) Huts were often uprooted through a storm.
3) Huts were often uprooted through a storm
4) Huts will often be uprooted by a storm
3. They laughed at her proposals and ridiculed her suggestions.
1) Her proposals were laughed at and suggestions ridiculed.
2) Her proposals were being laughed at and ridiculed.
3) Her proposals were being laughed at and suggestions were being ridiculed.
4) Her proposals are laughed at and suggestions are ridiculed by them.
4. She rendered the song beautifully.
1) The song is rendered beautifully by her.
2) The song was rendered her beautifully
3) The song was rendered beautifully by her
4) The song, she rendered beautifully.
5. He handed her a letter.
1) She was handed to a letter.
2) She was handed a letter by he.
3) A letter was handed to her.
4) She was handed a letter by him.
6. The centre invites all groups for talks.
1) All groups are being invited by the centre for talks.
2) All groups are invited by the centre for talks.
3) All groups will be invited for talks, by the centre.
4) For talks, all groups are being invited by the centre
7. Forensic computing studies the anatomy of a computer crime.
1) The anatomy of a computer crime is studied by forensic computing.
2) The anatomy f a computer crime studies forensic computing.
3) The anatomy of a computer crime is being studied by forensic computing.
4) By forensic computing, the anatomy of a computer crime will be studied.
8. Her husband will take her to the doctor.
1) She would be taken to the doctor by her husband.
2) She is taken by her husband to the doctor.
3) She will be taken to the doctor by her husband.
4) She is being taken to the doctor by her husband.

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9. Somebody has put out the fire.
1) The fire was put out by somebody.
2) The fire has been put out.
3) The fire is put out by somebody.
4) The fire had been put out.
10. We elected Rani, our representative.
1) Rani was elected as our representative by us.
2) Our representative, Rani was elected by us.
3) Rani was elected our representative.
4) Rani is elected as our representative by us.
11. Who has written this letter?
1) This letter was written by whom?
2) This letter has been written by whom?
3) By whom has been this letter written?
4) By whom has this letter been written?
12. The children are enjoying the ice-cream.
1) The ice-cream are being enjoyed by the children.
2) The ice-cream has been enjoyed by the children.
3) The ice-cream has been enjoyed by the children.
4) The ice-cream is enjoyed by the children.
13. I am observing you very carefully.
1) You are being observed very carefully by me.
2) You are observed very carefully by me.
3) You have been observed very carefully by me.
4) You were being observed very carefully.
14. The jury found him guilty of molestation.
1) He is found guilty of molestation by the jury.
2) He is being found guilty of molestation.
3) He was found guilty of molestation by the jury.
4) He had been found guilty of molestation by the jury.
15. Who gave you this gift?
1) By whom were you given this gift?
2) Who are you given this gift by?
3) This gift was given to you by whom?
4) By whom has been this gift given to you?
16. The players celebrated their victory.
1) The victory was celebrated.
2) Their victory was celebrated by the players.
3) The victory is celebrated by the players.
4) Their victory is celebrated with the players.
17. Ramu will buy a scooter shortly.
1) A scooter is being bought shortly by Ramu.
2) A scooter was being bought shortly by Ramu.

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3) A scooter is bought shortly by Ramu.
4) A scooter will be bought shortly by Ramu.
18. The chief minister is inaugurating the workshop.
1) The workshop is being inaugurated y the chief minister.
2) The workshop is inaugurated by the chief minister.
3) The workshop was inaugurated by the chief minister.
4) The workshop will be inaugurated by the chief minister.
19. Why did you do this?
1) Why were this done?
2) Why was this done?
3) Why is this done by you?
4) Whey are these done by you?
20. Somebody has stolen my purse.
1) My purse had been stolen by somebody.
2) My purse was stolen by somebody.
3) My purse was stolen.
4) My purse has been stolen.
21. The flood water spoiled the furniture.
1) The furniture is spoiled by the flood water.
2) The furniture were spoiled by the flood water.
3) The furniture was spoiled by the flood water.
4) The furniture is being spoilt by the flood water
22. Flood waters inundated the fields.
1) The fields are being inundated by flood waters.
2) The fields were being inundated by flood waters.
3) The fields have been inundated by flood waters.
4) The fields were inundated by flood waters.
23. I have made up my mind to step down.
1) My mind has been made up by e to step down.
2) My mind has been made up to step down.
3) My mind will have to be made up to step down.
4) To step down, my mind has to be made up.
24. The government is ignoring the pattern of resolving conflict.
1) The pattern of resolving conflict is ignored by the government.
2) The pattern of resolving conflict was ignored by the government.
3) The pattern of re solving conflict is being ignored by the government.
4) The pattern of resolving conflict has been ignored by the government.
25. How did you solve this problem?
1) How has been this problem solved?
2) How was this problem solved?
3) How could this problem be solved?
4) How would this problem be solved by you?

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Exercise-12: Passive to active voice

Directions for questions 1 to 25: Change the following sentences from passive to active voice.
1. He was abused by his parents.
1) His parents had abused him.
2) His parents are abusing him.
3) His parents abused him.
4) His parents abuse him.
2. Her last wish is fulfilled by her children.
1) Her children are fulfilling her last wish.
2) Her children fulfilled her last wish.
3) Her children fulfill her last wish.
4) Her last wish, her children are fulfilling it.
3. The teachers command was promptly obeyed.
1) The students had promptly obeyed the teachers command.
2) The students have promptly obeyed the teachers command.
3) The children promptly obey the teachers command.
4) The students promptly obeyed the teachers command.
4. Her voice is like by all.
1) All liked her voice.
2) All like her voice.
3) Everybody liked her voice
4) Everyone had liked her voice
5. Sarees are being sold her.
1) The shop-keeper is selling sarees here
2) The shop-keeper sells sarees here
3) Here, the shop-keeper sells sarees
4) The shopkeeper has sold sarees here
6. This book was written by him last year.
1) Last year, he wrote this book
2) He wrote this book last year
3) He has written this books last year
4) He would have written this book last year
7. The babys sleep was disturbed by a loud sound
1) A loud sound has disturbed the babys sleep.
2) A loud sound would have disturbed the babys sleep.
3) A loud sound disturbed the bays sleep
4) A loud sound disturbs the babys sleep
8. The shops are being renovated by the workers.
1) The workers are renovating the shops
2) The workers renovate the shops
3) The workers have been renovated the shops
4) The workers will renovate the shops

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9. You will be taken there tomorrow
1) I will take you there tomorrow
2) I would be taking you there tomorrow
3) I will have taken you there tomorrow
4) I would have taken you there tomorrow
10. The sheep have been sheared
1) The shepherds sheared the sheep
2) The shepherds shear the sheep
3) The shepherds have sheared the sheep
4) The shepherds have sheared the sheep
11. The ship was sunk by the arsonists.
1) The arsonists have sunk the ship
2) The arsonists sinked the ship
3) The arsonists sank the ship
4) The arsonists had sunk the ship
12. Ms. Zenia is chosen to be their leader.
1) They choose Ms. Zenia to be their leader
2) They have chosen Ms. Zenia to be their leader.
3) They chose Ms. Zenia to be their leader
4) They had chosen Ms. Zenia to be their leader
13. I am struck by the generosity of my boss.
1) The generosity of my boss strikes me.
2) The generosity of my boss struck me.
3) The generosity of my boss has stricken me
4) The generosity of my boss had stricken me.
14. He is being influenced by a few greedy people
1) A few greedy people are influencing him
2) A few greedy people will influence him
3) A few greedy people influence him
4) A few greedy people have influenced him
15. I was never given a chance to speak.
1) They had not given me a chance to speak
2) They never gave me a chance to speak
3) They did not give me a chance to speak
4) They do not give me a chance to speak
16. The ship has been pushed to the shore by the wind
1) The wind pushed the ship to the shore
2) The wind had pushed the ship to the shore
3) The wind pushes the ship to the shore
4) The wind has pushed the ship to the shore
17. Many people are killed by an earthquake
1) An earthquake killed many people
2) An earthquake will kill many people
3) An earthquake kills many people
4) An earthquake has killed many people

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18. The house was broken into by the gangsters
1) The gangsters broke into the house
2) The gangsters break into the house
3) The gangsters had broken into the house
4) The gangsters have broken into the house
19. I was annoyed by her rude behaviour
1) Her rude behaviour annoys me.
2) Her rude behaviour annoyed me.
3) Her rude behaviour had annoyed me
4) Her rude behviour has annoyed me
20. She will have been brought here by him tomorrow
1) He will have brought her here tomorrow
2) He would have brought her here tomorrow
3) He should have brought her here tomorrow
4) He will bring her here tomorrow
21. As he was industrious, he was encouraged by his teacher
1) As he was industrious, his teacher encourages him
2) As he was industrious, his teacher had encouraged him
3) As he was industrious, his teacher encouraged him
4) His teacher encouraged him, s he is industrious
22. A necklace was found by the police yesterday
1) The police had found a necklace yesterday
2) The police would have found a necklace yesterday
3) The police could have found a necklace yesterday
4) The police found a necklace yesterday
23. No diseases were known to man then
1) Man knew no diseases then
2) Man knows no diseases then
3) Man had known no diseases then
4) will have known no diseases then
24. The key to his success has been found
1) I found the key to his success
2) I had found the key to his success
3) I find the key to his success
4) I have found the key to his success
25. I am being penalized for no fault of mine.
1) They are penalizing me for no fault of mine.
2) They penalize me for not fault of mine
3) They penalized me for no fault of mine
4) For no fault of mine, they were penalizing me.

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Exercise-13: Error Identification

Directions for questions 1 to 25: Identify the underlined part that has an error (of grammar usage, word choice
or idiom) and write the number of that underlined part as your answer in the appropriate box in the answer sheet.
1. Cows are amongst the gentlest of breathing creatures; none shows more passionate tenderness to their
A
B
C
D
young.
2. Many a man have succumbed to this temptation, inviting his own downfall and destruction.
A
B
C
D
3. Neither the chairman nor the directors is present at the crucial meeting between the workers and the
A
B
C
D
officers.
4. If it was possible to get near when one of the volcanic eruptions takes place we should see a grand sight.
A
B
C
D
5. Euclid proved that the sum of the three angles of a triangle are equal to the two right angles.
A
B
C
D
6. No sooner did the ship touch the shore then a solider of the tenth legion leaped into the water.
A
B
C
D
7. We have helped them not only with money and also with a body of workers, all well trained and
A
B
C
D
experienced.
8. The doctor compelled the lady to drink such vile medicine that he all but killed she.
A
B
C
D
9. His practice is disgraceful yet his precept is equally beautiful.
A
B
C
D
10. Loosing the favour of his master, Ramesh was dismissed from his high office.
A
B
C
D
11. Were an angle to tell me such a thing of you, I will not believe it.
A
B
C
D
12. I will forgive you on one condition that you do not repeat the offence again
A
B
C
D
13. Our professor recommended that we are present at the meeting this afternoon in order to meet the
A
B
C
representatives from other colleges.
D
14. Eventhough Miss India lost the beauty contest, she was still more prettier than the other girls in the pageant.
A
B
C
D
15. It is essential that the pressure is not elevated to a point where the substance formed may become
A
B
C
D
unstable.

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16. Before the advent of television, the common man seldom never had an opportunity to see as well as listen
A
B
C
to his favourite singers live performances.
D
17. In order for one to achieve the desired results in this examination, it is necessary that he works as hardly as
A
B
C
D
possible.
18. The purpose of the United Nations is to maintain peace and security and encouraging respect for human
A
B
C
D
rights.
19. If the biennials like Chrysanthemums were planted this year, they will be likely to bloom next year and
every
A
B
C
two years thereafter.
D
20. I heartily congratulated him at his good fortune that favoured him after a long time.
A
B
C
D
21. The introduction of tea and coffee and such other beverages have not been without some effect.
A
B
C
D
22. The results of the recognition of this fact is seen in the gradual improvement of the diet of the poor.
A
B
C
D
23. Theres Mr. Dutt, whom, they say, is the best portrait-painter in the entire country
A
B
C
D
24. Each of the scholars have done well in the seminar
A
B
C
D
25. He asked if either of the brothers were at home.
A
B
C
D

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Directions for questions 1 to 25: Identify the underlined part that has an error (of grammar usage, word choice
or idiom) and write the number of that underlined part as your answer in the appropriate box in the answer sheet.
1. Anyone who wish to participate in our slogan competition may do so by filling the coupon supplied
A
B
along with every bottle of our beverage purchased.
C
D
2. The high protein content of various strains of soyabean plants, along with characteristically long root
A
B
system, that enables them to survive long drought, make them particularly valuable in dry countries.
C
D
3. Laxmi, accompanied by her brother on the piano were given a standing ovation at the talent search contest.
A
B
C
D
4. Professor Sarcar told his class that the best way to achieve distinction in biochemistry is to practice the
A
B
C
D
structures of the compounds.
5. The Supreme Court verdict of 14th January setting aside the Delhi high court judgement of 31st August last
A
B
C
year, partially vindicate the Union Railway Minister.
D
6. In an ambitious plan drawn out by the council for leather exports, total exports of leather goods from India
is
A
B
C
expected to touch billion dollars (U.S) by the year 2000 A.D.
D
7. The houses and all the contents were as a whole consumed by the fire.
A
B
C
D
8. Dairying is concerned not only with the production of milk, but also with the finer aspects of the technology
A
B
that is being used to preserve the quality of milk as well as other milk products.
C
D
9. An organ is a group of tissues capable to perform some special function, as for example, the pancreas or
A
B
C
D
the lungs.
10. Mohan Bagan, once the only contender for the national championship, is now being challenged by either
A
B
C
Mohammedan Sporting and other clubs from other states.
D

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11. asked him many questions to illicit what had really happened during the night after the party.
A
B
C
D
12. Though my father won a Maruti car in the lottery, but he remained humble.
A
B
C
D
13. You cannot quench your thirst, as there is a little water in the tumbler.
A
B
C
D
14. Yesterday Samir had a bad fall as one of the tables legs on which he was sitting broke under his weight.
A
B
C
D
15. Either one of the three top rankers in the class is eligible for a scholarship only after going through
A
B
C
an elimination process.
D
16. Now-a-days Ravi is studying hardly, burning midnight oil, as his final examinations are fast approaching.
A
B
C
D
17. Chand will probably buy some more computer software when he will get paid his annual dues.
A
B
C
D
18. Every student needs an identification number so he can get a university library card made to gain access to
A
B
C
D
valuable literature.
19. Inspite of our best efforts, she hasnt finished the assignment yet, and neither I have.
A
B
C
D
20. During the annual literary competitions, Rama could have made herself understood if she spoke not louder
A
B
C
but only more slowly
D
21. The exterior most wall of the house is made of stone; the interior walls are of wood.
A
B
C
D
22. The Marwaries are not least enterprising than any other business community in India.
A
B
C
D
23. This is the question, the solution of whom has baffled philosophers of all ages
A
B
C
D
24. She is a wonder and an example of what a human being in spite of infirm health is capable.
A
B
C
D
25. It would not suit the rules of art, in spite of my own feelings to write in that style.
A
B
C
D

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DIRECTIONS : the following questions consists of a sentence in which four words or phrases are marked. The
four part of the sentences are marked A, B, C or D. you are to identify the one part that would not be accepted in
standard written English.
1. It is necessary to put a return address that included
A
B
C
your name, street number, city, state and pin code on all
D
correspondence. No error
E
2. The race driver accelerated to 190 miles per hour and qualifies
A
B
for the Indianapolis 500, Americas
most celebrated auto racing competition. No error
C
D
E
3. Since banks usually give gifts to customers who deposited
A
B
large amounts to saving account, it is a good idea to ask the bank officials whether you are entitled to
C
D
receive one. No error
E
4. The professor told us that in order to remember details, it is
the
A
B
lecture. No error.
E
important to take notes while listening to

C
5. The fruit and vegetables at the corner store are always very fresh because they
A
B
were shipped in every day form the local farm markets No error
C
D
E
6. The maid does not finish cleaning the rooms in the dormitory yesterday because she had to help scrub
A
B
C
D
the floors in the kitchen and the cafeteria. No error
E
7. When the manager of the hotel suspicioned
A
them. No error
D
E
8. The condition of mankind has
A
B
that their identification was not valid, he refused to serve

B
C
been improved recent technological advances No error

C
D
E
9. Although you must get off while the plane is cleaned you may leave your suitcases and other
A
B
C
belongings laying on your seats. No error
D

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10. The flag over the White House is risen at dawn every day by a guard from the United States armed forces.
A
B
C
D
No error
E
11. The carefulness with which she prepared the report was evident to the committee No error
A
B
C
D
E
12. After trying without success to talk with them, Ms. Johnson lost her patience and gave them their papers
A
B
C
D
No error
E
13. Since everyone would like to find an apartment nearer to the University, there are
A
B
C
very few vacancies In the area No error
D
E
14. The suggested increase in the rate was neither a fair request and not a practical one. No error
A
B
C
D
E
15. They solved the problem by using a computer rather than to do it all by hand No error
A
B C
D
E
16. To read literature and being introduced to a different culture are two excellent reasons for studying a
A
B
C
D
foreign language. No error
E
17. The six main parts of a formal letter are
A
B
C
the address, the inside address, the selection, the body, the closing and signing your name No error
D
E
18. The program used to include not only employees but their families. No error
A
B
C
D
E
19. Dr. Brown, the first elected president of the University, was int elligent, and awareness
A
B
C
of the problem yet to be solved No error
D
E
20. Those of us who go during the semester should have their addresses changed at the registrars office.
A
B
C
D
No error
E
21. The officials of the Election Commission asked each voter to preset their
A
B
registration card and a valid drivers license before receiving a ballot. No error
C
D
E

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22. Hong-Kong is one of the world cities that are noted for its busy harbour. No error
A
B
C
D
E
23. If one had considered the consequences carefully, you would not have agreed to sign a four - year lease
A
B
C
D
No error
E
24. Inspite of his being a professor of chemical engineering, Dr. Bell also knows
A
B
C
the most about theoretical mathematics No error
D
E
25. Neither of the two alternatives that had been outlined at the last meeting were acceptable to the executive
A
B
C
D
committee. No error
E

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Exercise-16: Sentence Completion

Directions for questions 1 to 25: Select the correct alternative word/words from the numbered choices that
complete the given sentence and write its number in the appropriate box of the answer sheet. Please note that
more than one choice may fit in to make a syntactically correct sentence but select the choice that is logical in
the context of the sentence.
1. The collapse of the Bronze Age civilizations of Greece came in the face of internal ____ and ____ of the
peloponnese and the southern islands.
1) dissentinvasion
2) disagreementconclusion
3) collusioncoercion
4) cohesionadhesion
2. An uncomplicated love for their own natural ___ emerges in the work of a succession of ___ painters.
1) featuresthick
2) landscapelife-size
3) scenerylandscape
4) selfconscious
3. The population in the ___ regions like Arctic circle is generally ___ although in a few favoured places it is
dense.
1) hostilethick
2) inhospitablesparse
3) favourablescantly
4) polarpopulous
4. Although the country is dominated by ____ winds, it is extremely ___ except for the southern slopes of the
Himalayas, which have moderate rainfall.
1) dryrain-bearing
2) gustydry
3) coolhot
4) rain-bearingwet
5. Pakistan is in general linguistically ____, and no single ____ can be said to be common to the whole
population.
1) mixedreligion
2) complexfaith
3) simpleliterature
4) heterogenouslanguage
6. ____ considerations strongly limit the dosage level of ____ employed for various experiments on human
beings.
1) Ethicaldrugs
2) Ethnicmedicines
3) Moraltablets
4) Spiritualcapsules
7. In public places, one must be careful of ___ of petty thieves in order to not to lose ones ____.
1) abilitybags
2) alacritypurses
3) legerdemainmoney purses
4) capacitychildren

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8. The police stopped the ___ and arrested the ____.
1) disputemob
2) fracasbelligerents
3) arsoncrowd
4) brawlformidable
9. The ___ caused by the Gulf war in the lives of ____ continues even to this day.
1) masspeople
2) confusionvictims
3) hurtcitizens
4) imbroglioimmigrants
10. My friend, who wanted to settle abroad, was denied ____ visa, as the embassy people had found some ____
in the information he provided.
1) emergencydisturbances
2) emigrantdiscrepancies
3) urgentdisbursements
4) immediateanonymity
11. Having been ____ once by a fast talking salesman, he was extremely ____ when he went to buy a used car.
1) fooleddangerous
2) helpedskeptical
3) hoodwinkedcautious
4) cheatedhumorous
12. Although he was ____ and blunt with most people, he was always _____ with children
1) adamantyielding
2) gruffgentle
3) garrulousjovial
4) guilelessgenial
13. This restaurant is famous because the proprietor is both ____ and ____, trying to make all the customers
happy.
1) gentlycurt
2) generousbrusque
3) bluntsarcastic
4) genialamiable
14. The _____ bronze statue reflected the lamplight after the _____ around the exposed corners of the statue
was removed.
1) burnedrust
2) shiningdirt
3) burnishedpatina
4) polishedfilm
15. His ____ demeanour during the meeting made us not to adopt _____ attitude towards the topics of
discussion.
1) strictstern
2) austerefrivolous
3) jovialboring
4) sincerebanal

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16. The _____ legs of the Kangaroo are ____ for leaping.
1) stumpyhelpful
2) longadopted
3) curvedadept
4) sartorialsuitable
17. After the accident, ___ made her forget her identity and give _____ and unclear answers to the queries of
the police.
1) injuryproper
2) amnesiaambiguous
3) illnesssuitable
4) sicknesscorrect
18. Though the Oxford English Dictionary is undoubtedly the greatest dictionary ever ____, it is designed for
scholars and research workers rather than for the ____ dictionary user.
1) assembledassodipis
2) demonstratedamateur
3) compiled casual
4) published professional
19. The company continues to be ____ with problems of all kinds, but ____ managing director says that it is on
the road to recovery.
1) bedeviledan optimistic
2) hitan ideal
3) improvinga pessimistic
4) progressinga retrospective
20. Communal riots in Bombay have shaken _____ confidence in the countrys _____ capital.
1) peopleswholesale
2) carnalswholesale
3) exportersimportant
4) businesscommercial
21. _____ in this political party is _____ especially after several hopefuls were left out of the new cabinet and
some more dropped.
1) Suggestion increasing
2) Dissension snowballing
3) Agreement improving
4) Assertion down
22. Though she had made a visibly _____ statement, the _____ in it caused a misunderstanding among her
friends.
1) innocuous innuendo
2) harmless meaning
3) daring hint
4) bold insinuation

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23. The post-Ayodhya riots exposed the minister as ____, who was unable to ____ the enormity of the
communal divide in the city.
1) a misanthropist measure
2) an administrator understand
3) a ditherer comprehend
4) a philanthropist gauge
24. Inspite of a ____ attached to it, tobacco has become ____ agri-export of India.
1) flavour a famous
2) name an agreeable
3) blame .. and expensive
4) stigma a leading
25. Indian industry is crying itself hoarse about ____ in demand, but is not ____ prices to attract buyers.
1) a slack reducing
2) a fall altering
3) an increase hiking
4) a dip announcing

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Reading Comprehension
Exercise-1
Human being is a social animal and without society, he shall be either an angle or a beast was rightly remarked
by famous thinker Aristotle. The quality humanity can be achieved only through social living. We take social
living so much for granted that we fail to understand the immense influence society has over us. There is an
interaction between human beings and the society. But between the two, society is usually the dominant partner,
reason being that society existed long before we are born into it, and it exists long after we are gone. Society
gives us content, direction, and meaning to our lives and in turn we, in countless ways, reshape and leave the
same to the next generation. None had been and will be able to survive without society. No infant, could reach
maturity without the care and protection of other people and no adult could remain alive without using the
abundant information transmitted to him by society. Even the most rare individuals who escape from society
carry with them, into isolation, the recognitions, the ideas and the philosophies that they have learnt from others.
1. According to Aristotle, man shall be either an angle or a beast without
1) knowledge
2) wealth
3) education
4) society
2. What can be achieved through social living according to the author?
1) Resources
2) Influence
3) Humanity
4) Happiness
3. Which of the following does society give us?
1) content
2) meaning to our lives
3) direction
4) all the above
4. Between society and human beings, society is the dominant partner because
1) man does not exist without society
2) society existed before we were born and exists after we are gone.
3) Society is more powerful than an individual
4) Society exercises its influence even on future generation
5. How does society exercise its influence?
1) It moulds our way of thinking
2) People are influenced by recognitions, ideas and philosophies learnt from others.
3) It operates in an abstract way
4) Through its interaction with the numbers
Israeli astronomers say that black holes the remnants of a dying star can no longer be considered as
gateways to other universes, as was earlier believed. The research, which was carried out by Tsvi Piran and
Sachar Hod at the Racah Institute of Physics of the Hebrew University in Jerusalem, contradicts the belief held
by many physicists.
Black holes are debris of dying stars with infinite density and huge gravitational pull. They are called black
holes because even light cannot escape from them, making them really invisible. Within every black hole there
is a point-singularity in physicists parlance with infinite density. Anything reaching the points is utterly

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devastated. However, in the late 60s British scientists Stephen Hawking and Roger Penrose showed that in some
black holes could serve as gateways to other universe or to other areas within our universes. Intact, in his bestselling title, A Brief History of Time, Hawaking mentions about this possibility. However, by using super
computer-based calculations, Piran and Hod proved it was not possible to execute safe passage through black
holes as anything attempting to penetrate a black hole would itself become a point of blockage.
6. What was the belief that was proved groundless by the research conducted at the Hebrew University?
1) Blackholes are remnants of a dying star.
2) Blackholes have infinite density and huge gravitational pull.
3) Blackholes are gateways to other universes.
4) Blackholes are really not black.
7. What gives the name black hole to a dying star?
1. They have infinite density
2. They emit light of wavelength similar to black light
3. They are black in colour
4. Light cant escape from them
8. What is referred to as singularity in physicists parlance?
1) A point of no escape with infinite density.
2) A single blackhole, with nothing anywhere near it.
3) A small discrepancy in the stellar fabric of the universe.
4) A huge chunk of matter
9. Who were the two researchers who proposed that lack holes could serve as gateways to other universes?
1) Hawking and Piran
2) Piran and Hod
3) Stephen and Roger Rabbit
4) Hawking and Penrose
10. Why is it currently thought that black holes are impenetrable?
1) They have infinite density.
2) Light cant escape from them.
3) Anything attempting a passage would itself be a blockage
4) Blackholes are no larger gateways
Trees plants which form forests are the life and blood of human civilization. Forests in India cover one fifth of
the land area. They have served mankind in various ways from the days of yore (ancient time). They have fed
numerous mouths and cured diseases since life began on the planet earth. The survival of the human species is
very much dependent on plants. A large portion of the food, medicine and materials we consume I our everyday
life is derived from some wild species of plants which grow in the tropics. Catharanthus rosens is on such
plant which originated in Madagascar and which enabled many children suffering from Leukemia stay alive. Dr.
Richard Evans of Harvard that University rightly pointed out, the drugs of the future grow in the primeval
jungle. Apart from feeding and protecting human lives, plants also protect fragile soil from erosion, regulate
atmosphere, maintain water supplies for agriculture and prevent formation of deserts. Despite the immense value
of plants, man has been destroying them simply due to ignorance and shortsightedness.
11. What are considered as the life and blood of human civilization?
1) Herbs
2) Trees and plants
3) Medicinal plants
4) Food yielding plants

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12. Catharanthus rosens is a plant which enabled the survival of children suffering from
1) asthamaa
2) lung cancer
3) leukemia
4) arcoma
13. How do plants influence the survival of the human species?
1) Drugs for all diseases are obtained from plants.
2) Plants influence the weather
3) A large portion of food, medicines and materials which we consume in everyday life are derived from
plants.
4) Plants protect man from the influence of toxic substances
14. According to Dr. Richard Evans drugs of the future grow in
1) laboratories
2) hospitals
3) research centres
4) primeval jungles
15. Besides feeding and protecting human lives plants protect mankind in which of the following ways:
1) Plants protect fragile sol from erosion
2) Plants regulate atmosphere
3) Plants maintain air water supplies for agriculture
4) all the above
Man is not born as person, Culture converts him from man to person. It is the variety of experiences and social
influences due to which he becomes a person and comes to possess personality. So socialization plays an
important role I the development of personality. The term personality as used in day to today language is
derived from the Latin word persona which means a mask. Two approaches for the study of personality have
been extended. These are (i) psychological and (ii) the sociological. Of course, there is third approach also and
that is bio-physical characteristic of personality. This exhibits physical outlook like height, health, features and
complexion of a person. These characteristics of individual organism is an inadequate representation of his
personality. The psychological approach enables us to understand personality in terms of mental trends,
emotions and sentiments. The sociological approach considers personality in terms of the status of an individual
in a group. The ideas, attitudes and values which a person holds comprise his personality.
16. According to the author, man is converted into a person by
1) etiquette
2) personality
3) culture
4) social grace
17. Which of the following qualities play a major role in the development of mans personality?
1) social status
2) physical appearance
3) socialization
4) none of the above
18. Physical outlook like height, health, feature and complexion of a person makes up the ______ attribute.
1) psychological
2) bio-physical
3) sociological
4) all the above

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19. Sociological approach considers personality in terms of
1) mental trends
2) physical features
3) moral values
4) status of an individual
20. Man can acquire and cultivate personality by
1) amassing wealth
2) participating in group life
3) personal grooming
4) becoming a good public speaker
Ancient manuscripts in different civilizations were written by hand before the introduction of printing. In fact,
the word manuscript comes form the Latin word manus meaning hand. Manuscripts were used not only for
religious purposes (most sacred books of different religious faiths were handwritten) but also to keep records of
important events, laws and accounts. Generally parchment, wood, clay tablets and dried leaves were used for
manuscripts. Quill pens were used to write with.
In India we find manuscripts illustrated with drawing. Some of the religious texts like the Bhagavata Purana or
the epics contain beautiful drawings besides the verses. There are illustrated manuscripts dealing with nonreligious themes also. Such manuscripts are generally housed in museums or Oriental manuscript libraries in
some cities of the country. When it comes to English, the first examples of upper and lower case letters can be
seen in early manuscript writing, like the beautiful Book of Kells written by Irish monks living on the Scottish
island of lona around 800 AD. At the same time,
Alcuin, an English monk, was employed by the French king Charlemagne to teach his officials how to write. He
developed a style which used mainly lower case letters because they were quicker to write. Alcuin also taught
them to put spaces between words and to finish off sentences with full stops, which led to the tradition of having
elaborate, decorative capital letters at the beginning of a page or paragraph, painted in gold, red, green and blue.
21. What kind of a document does the word manuscript refer to?
1) Documents written on parchment
2) Documents made of clay tablets
3) Ancient documents
4) Documents written by hand
22. What were the kind of materials used for manuscript writing?
1) Paper and bark
2) Stone and cave walls
3) Wood and clay tablets
4) Plastic and polythene
23. What was the mode that replaced manuscripts and was used instead to keep a record of things?
1) Museums
2) Libraries
3) Printing
4) Letters

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24. Where does one see the first examples of upper and lower case writing in English?
1) in letters written by Scotsmen
2) Teachings of Charlemagne
3) Early manuscript writing
4) Paintings of Alcuin
25. What innovation led to the tradition of having elaborate, decorative capital letters at the beginning of a page
or paragraph?
1) Charlemagnes teaching aids
2) Alcuins initiative in using spaces and full stops
3) Book of Kells by Irish monks
4) Bhagavata Purana with beautiful drawings

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Exercise-2
According to the State of the Worlds Children report published recently by the UNICEF, nearly a billion people
will enter the 21st century without the ability to either read or sign their names. In India, says the same report,
110 million children are out of school, of which 40 million have never been to school. As long as our politicians
consider such statistics simply as numbers to be quoted in their speeches, the possibility of their being jolted into
some urgent action remains bleak.
Education at the basic level should help people learn how to achieve fundamental and developmental right such
as health, nutrition and safe motherhood by constantly improving the quality of life. Besides, the right kind of
education could help the citizen of a diverse country such as ours to respect pluralism. It is not enough to have
access to basic education but also to be able to achieve meaningful and quality education. There is an urgent
need to ensure that when our children leave school they will have acquired the basic literacy, numeracy and life
skills, enabling them to continue to learn through life.
In India, the denial of education is all the more pronounced in the case of a girl child. Yet, it has been proved
beyond doubt that it is by providing education to the girl child that we can eventually hope to eradicate child
labour and achieve education for all.
Successive governments have reduced their concern for education to the status of a strident rhetoric and made
no sincere efforts in realizing an educational agenda that would lead to an optimum expansion of human
resources and talent. Young minds have only been allowed to be wasted in poverty and despair. Yet, the success
of primary education in China, or even a study of the achievement of a high percentage of literacy in Kerala
would show that it is possible to usher in literacy at the grassroots by a concerted, programme and a strong State
support for basic social service.
1. How does the State of the Worlds Children report concern India?
1) According to the report, 40 million children are out of school.
2) The report provides mere statistics for our politicians.
3) 110 million children are out of school in India, of which 36% have never been to school.
4) A billion Indians will enter the 21st century without the ability to either read or sign their names.
2. What should be the basic goals of education?
1) Provide a bright career for students.
2) Help people read or sign their names.
3) Help people achieve economic liberation.
4) Help people achieve fundamental and developmental rights.
3. Why is it pertinent to educate the girl child?
1) Girls are more backward in all spheres.
2) Governments have been reducing their concern for women.
3) Basic literacy, numeracy and life skills are lower amongst girls.
4) Educating girls would help eradicate child labour.
4. What has been the attitude of the Indian government in the past few decades, with regard to education?
1) Governments have reduced their concern to plain rhetoric.
2) Governments have made rapid strides for realizing an educational agenda.
3) Literacy has been ushered at the grassroots by a concerted programme.
4) Human resources and talent have been utilized.

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5. Which state/country have proved successful in adopting a grassroots policy?
1) Kerala/China
2) India
3) India/China
4) Kerala/India
This September, diplomats will gather in Montreal to mark the tenth anniversary of a landmark in international
environmental diplomacy: the Montreal Protocol on Substances That Deplete the Ozone Layer. The event will
provide a much-needed reminder that some of the daunting environmental problems confronting humanity can
be solved. And it will offer some important lessons about how to cope successfully with those global problems
that still loom.
The Montreal Protocol stands out a the one global environmental accord so far to produce clear results:
production of chlorofluorocarbons (CFCs), the most voluminous ozone-depleting substances, has plunged by
more than three-quarters from its peak in 1988. If all countries meet their commitments under the treaty,
scientists estimate the ozone shield will gradually begin to heal within the next few years, with a full recovery
expected by about 2050. Millions of skin cancer cases will have been prevented as a result, as well as untold
agricultural losses and ecological damage.
Coincidentally, this year the world also passed another important milestone the fifth anniversary of the Rio
Earth Summit. This occasion was marked by much hand wringing about the fact that most global environmental
trends continue to run rapidly in the wrong direction. Yet Earth Summit II produced discouragingly little in
the way of concrete action.
What can we learn from Montreals relative success? One lesson is the importance of the precautionary
principle. The decision to take action in Montreal before there was complete proof of the link between CFCs and
ozone depletion was an act of foresight that must be replicated with the problems of climate change, species
loss, and the proliferation of health-threatening toxic chemicals, among others.
Secondly, the Montreal Protocol demonstrated the pivotal role of industry. As public and scientific concern over
ozone depletion mounted, the business community decided to give up on blocking the accord and instead put its
energies into taking advantage of the new business opportunities opened up by the shift to substitutes for CFCs.
Many business then became advocates for further progress, rather than obstacles to it.
Finally, the experience with ozone depletion proves that North-South environmental partnerships can work.
Industrial countries have largely honoured their promises of financial and technological support to help
developing countries make the transition to ozone-begin technologies. Most developing countries, in turn, have
become strong participants, with many of them ahead of schedule in phasing out CFCs.
At a time when global environmental trends are so daunting, it is reassuring that the international community
has responded cooperatively to the challenge of rescuing the ozone layer. We now need to devote similar energy
to tacking the other pressing environmental challenges that cry out for attention. If this happens, by the tenth
anniversary of the Rio conference there will be some real progress to report.
6. What will be the message of the Montreal Protocol on Substances That Deplete the Ozone Layer?
1) Substances deplete the ozone layer.
2) Some of the daunting environmental problems can be solved.
3) Production of CFCs has to be banned.
4) Skin cancer cases result from pollution.

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7. What is the expected positive outcome of the Montreal Protocol for the future?
1) Cure for skin cancer can be found.
2) Production of CFCs has come down by more than three quarters from its peak in 1988.
3) Ozone shield will heal if countries meet commitments.
4) Agricultural losses will increase
8. In what sense was the Rio Earth Summit a disappointment?
1) Little was produced the form of concrete action
2) A lot of hand writing was observed.
3) It was only the 5the anniversary, hence no maturity in the discussions that followed
4) No cure was found for skin cancer
9. What is the precautionary principle that led to Montreals relative success?
1) Public should take precautions against skin cancer
2) Action was taken before proof of link between CFCs and ozone depletion
3) Species were protected as a precaution against ozone depletion.
4) Business community decided to block the accord as a precaution.
10. How does the experience with ozone depletion prove that North-South partnerships can work?
1) Ozone depletion in northern hemisphere can affect southern hemisphere.
2) Due to warming, ice-cups in the north melt, causing floods in the south.
3) Developed countries supported developing countries in making transitions.
4) CFCs were passed from industrial countries to developing countries.
Capital may be defined as anything made by man and can be used for further production. The prosperity of the
nation depends upon capital and its formation. Diversified capital is needed for faster economic growth and
development. The role of foreign capital is significant in this respect. Capital is broadly of four types viz., fixed
capital, circulating and floating capital, sunk capital and social capital or national capital. Capital formation or
accumulation is regarded as one of the important and principal factors in economic development. Vicious circle
of poverty can be broken through capital formation. The supply of machines, equipment and tools increase the
scale of production. Social and economic overheads are created. It is capital formation that leads to the fuller
utilization of available resources. Capital is also required to construct schools, hospitals, roads, railways etc.,
Investment in capital equipment not only increases production but also employment opportunities. Capital
formation leads to technical progress. A rapid rate of capital formation gradually dispenses with the need for
foreign aid. In fact, capital formation helps in making a country self sufficient and reduces the burden of foreign
debt.
11. According to the author, the prosperity of a nation depends upon
1) people
2) capital and its formation
3) literacy
4) population control
12. Which of the following is needed for faster economic growth and development?
1) Diversified capital
2) Fixed capital
3) Circulating capital
4) National capital

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13. Capital formation helps in eradicating
1) illiteracy
2) poverty
3) terrorism
4) unemployment
14. Capital formation leads to
1) social and economic
2) utilization of available resources
3) technical progress
4) Both (2) and (3)
15. How does capital formation help in making a country self-sufficient?
1) By making used of indigenous products
2) By dispensing with the need of foreign
3) By increasing production
4) By making people more enterprising
Health education has traditionally been a one-way process, working on the assumption that local communities
need to learn from health educators. In developing countries, their messages often have little to do with local
practices which have evolved through centuries of trial and error. A processes
Of imposed education of this nature usually ends in frustration. We have also seen that these high pressure and
unempathetic educational process lead to a gradual erosion of some good local health practices.
For the Voluntary Health Association of India (VHAI), therefore, health education starts with an understanding
of local health traditions, food habits and the habitat. This will ensure that messages conveyed will be
understandable and acceptable to the local communities, and also that goals and milestones are set realistically.
There is always a two-way process of learning from the local community as well as offering them information
which has not hitherto been accessible to them. This process has led us to redicscover unrecorded knowledge
about food habits, effective traditional medicines which have no harmful side-effects, and refreshing patterns of
sustainable ecologically-friendly living. We feel that the holistic health of a community should be based on that
communitys own health traditions, many of which made a great deal of sense within the given context and are
truly sustainable.
We have equally found that current mainstream health education overemphasizes communicating through the
print media, even though in most developing countries a very large proportion of the people suffering from illhealth cannot read. On the other hand, thee communities have vibrant, entertaining and ever-evolving methods
of communication such as local fairs, festivals, puppeteers, jugglers and magicians, and traditional theatre
groups.
After years of according too much importance to the role of print in communication, we are gradually realizing
the incredible potential of all thee other ways of communicating that have never ceased to be popular in the
community. Through our work with existing groups, we have seen how we can spread health and development
messages among the people in a much more effective manner. We have also seen that these alternative media
are much more interactive and closer to peoples hearts.
16. Why does health education end in frustration in the developing countries?
1) It leads to a gradual erosion of some good local health practices.
2) It considers local food habits.
3) Holistic health of a community is not considered.
4) It imposes education from health education from health educators.

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17. what is necessary for health education to set goals and milestones that are realistic and acceptable to the
local communities?
1) Understanding of local health traditions, food habits and the habitat
2) A-2 way process of learning
3) A process to redicscover new methods of growing food
4) Refreshing patterns for eco-friendly living
18. What new discoveries in health education has the two-way process led to?
1) New student-teacher relationships
2) Unrecorded knowledge about food habits and traditional medicines
3) Communicating effectively through print media.
4) New form of local fairs and festivals
19. What is the drawback in the publicity programme of the current mainstream health education, in the context
of the developing countries?
1) It overemphasizes the importance of developing countries.
2) It overemphasizes communication through print media in developing countries
3) It lays stress only on illiterate people.
4) If forgets that a large section of the population is unemployed.
20. What are the alternative media that are much more interactive and closer to peoples hearts?
1) Movies and animation
2) Discotheques and publications
3) Fairs and festivals
4) Health clubs and gyms
Sociological research is very interesting and exciting. It is a form of systematic detective work. It has two sides:
theory and research. Both are essential. Facts without theory are meaningless and theories without facts are
unproved speculations of little use to anybody because there is no way to tell whether they are correct. Theory
and research are thus part of a constant cycle. A theory inspires research that can be used and are to verify, and
the findings of research are used to confirm, reject or modify the theory. Guess work and common sense play an
important role in sociological research. But these two issues do not play an important part in producing reliable
evidence on their own. Reliable evidence can be produced only by using a reliable research methodology.
Methodology refers to a system of rules, principles, and procedures that guide scientific investigation. Research
methodology provides guidelines for collecting evidence about what takes place, for explaining why it takes
place, and for doing so, in such a way that the findings can be checked by other researchers.
21. The author considers sociological research to be
1) monotonous
2) tedious
3) exciting
4) factual
22. The author compares sociological research with
1) Theory based on facts
2) unproved speculations.
3) a system of rules.
4) systematic detective work.

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23. Facts without theories are of little use to anybody because
1) Theory and research are not interlinked.
2) Theory without facts are approved speculation.
3) Facts without theories are meaningless.
4) Facts are not based on scientific investigations.
24. Reliable research methodology is used to produce
1) verifiable facts
2) appropriate research methods
3) research on evidence
4) meaningless theories
25. Guidelines of research methodology helps in
1) explaining facts
2) observable recording conclusions
3) collecting evidence about what takes place and how it takes place.
4) Analyzing statistical data.
Exercise-3
AJET of molten lava arises from the womb of the earth, pierces through the seabed and gives rise to islands
amidst a turbulent ocean. In a rare feat of scientific endeavour, the birth throes of an emerging island in the
ocean were witnessed for the first time by scientists recently. Loihi, the young, undersea volcano 30 km southeast of the main island of Hawaii, has suddenly become one of the worlds most active volcanoes.
Riding a submersible, a team of explorers under Alexander Malahoff of the Hawaii Undersea Research
Laboratory at the University of Hawaii, dived into the dark churning waters of the ocean. The aim was to probe
the cause of thousands of earthquakes that shock the area in the past months. The research ship carrying
Malahoff and his colleagues dove to the recesses of the undersea volcano and discovered that so much debris
had been thrown out by the eruption that they could hardly see more than a metre ahead.
But the most striking discovery was that the turmoil at the volcanos top had collapsed its summit, creating a
crater more than half-a-mile wide and 1,000 feet deep. Petes dome, an area on the southern rim of the volcano
that previously had been considered very stable, had simply vanished. Scientists discovered a riot of landslides,
toppled rock formations and bus-size volcanic boulders strewn around. The collapsed crater had vents spewing a
mixture of superheated water, dissolved minerals and microbes that thrive in the seabeds rocky substrate.
The tumult is part of the volcanos upward growth, say scientists. Lavaflows build it up and avalanches and
cataclysmic explosions knock it down. This widens the crater, creating a larger base for the next stage of
building. The fight is between construction and destruction, says Malahoff. The team estimates that the
collapse of the summit took two to three days and the slow collapse prevented generation of a huge tsunami, or
tidal wave, that could have caused large scale destruction in the adjoining islands.
The process by which islands are formed in this zone due to volcanic upheaval is dynamic. The great heat
engine within the earth stirs a sea of hot plastic rock that melts through the crust in places. A vast majority of
this action takes place in the hidden darkness of the deep sea. In certain places, the interior heat gives rise to jets
or plumes of lava that are stationary in relation to tectonic plates that move slowly overhead. The gigantic plates
that make up the earths crust move at the rate of a few centimeters a year, or about as fast as fingernails grow.
As a result of this slow movement, a single jet can, over the ages, leave a trial of extinct volcanoes in the plate
tens of thousands of years before Loihis fiery summit rises above the waves.

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1. What is the source that contributes to the formation of an island from the ocean bed?
1) Islands are formed when flotsam on a sea coagulates.
2) Earthquakes result in lands breaking up to form islands
3) Lava from volcanoes forms islands
4) Meteors from outer space crash into the sea to form islands.
2. What was the original intention with which the research team set out to investigate the undersea volcano?
1) To find the reason for the turmoil at the volcanos top which collapsed its summit
2) To find out why Landslides occurred
3) To find the reason for the formation of islands
4) To find the cause of thousands of earthquakes that shook the Hawaii region
3. what was the most striking result of the changes in the volcanos stable surface?
1) An island had formed in the sea.
2) The summit of the volcano had collapsed, forming a crater.
3) Many earthquakes shattered the surrounding area.
4) The research ship carrying Malahoff sunk.
4. What is the process, as described by the scientists, through which the volcano grows upward?
1) Volcanoes grow because of intense earthquakes.
2) When islands emerge volcanoes grow upward.
3) Whenever a volcanos top collapses, it grows upward.
4) Lava flowing upward and widening the crater builds a volcano.
5. Where do the movements of the jets or plumes of lava originate?
1) The core of the earth
2) The surface of the sea
3) On islands
4) Only on Hawaii islands
EARTHQUAKES hit an area with a ground shaking intensity. Therefore, a slow earthquake seems a
contradiction of sorts. Yet, US geologists have detected a quake on Californias San Adreas fault that lasted 10
days.
Occurring when rocks slip suddenly, earthquakes trigger sharp vibrations. As the quake advances, the fault
surfaces slip by several metres. The more slowly the fault slips, the less efficiently it generates seismic waves. If
the fault slip is slow enough, no waves are radiated and the earthquake is silent. If all earthquakes were slow
they would not be very hazardous.
Researchers led by Alan Linde of the Carnegie Institution, Washington DC, studied data from strain gauges
placed five km apart in San Juan Bautista, about 20 km inland from Monterey Bay in California. On the north of
this region, the fault remains locked and inactive for years on end. On the south of San Juan Bautista, tiny
quakes are caused due to the smooth movement of the tectonic plates past one another. According to Linde, the
whole pattern makes up a single, slow earthquake. It releases as much energy as a powerful quake of 4.8
magnitude.
Linde and his team were equipped with borehole strain gauges at the time the slow quakes occurred. The fault
slipped by just a few centimeters, which could hardly be detected by the most powerful satellite positioning
systems. He believes that some slow tremors may be precursors to major earthquakes. But until someone
collects systematic data on slow quakes, Linde says, I dont know if there is a real connection.

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6. Why are some earthquakes slow or silent?
1) They dont make much noise.
2) They are not noticed by the meteorological society.
3) They occur when the quake doesnt generate waves efficiently.
4) They occur with a groundshaking intensity.
7. What causes earthquakes.
1) Volcanoes
2) Other earthquakes
3) Lunar tides
4) When rocks slip inside earths surface
8. What were the instruments used by researchers to study the fault in the tectonic plates?
1) Satellites
2) Seismic waves
3) Strain gauges
4) Borchiles
9. What were the two variations of the fault pattern that made a single slow earthquake?
1) On the north, fault remains inactive while tiny quakes are caused in the south.
2) On the north, faults cause volcanoes while the earth slips in the south.
3) On the north, tiny quakes are caused, while the fault remains inactive in the south.
4) Two different seismic waves meet and cause a slow earthquake.
10. What is required to prove the connection between slow tremors and major earthquakes?
1) A tectome plate
2) A 4.8 magnitude earthquake
3) Systematic data on slow earthquake
4) Strain gauges
THREE-DIMENSIONAL (3-D) images rather, the illusion of viewing them-holds a certain fascination for us.
Whether it be special glasses to view stereo vision in cinema halls or the present day virtual reality headgear,
much effort has gone into creating 3-D effects. There are now reports of genuine 3-D images being traced out by
lasers inside a small cube made from special materials. Elizabeth Downing of Stanford University, California,
US, and her colleagues report the demonstration of a three-colour display in a rare earth doped metal fluoride
glass.
The underlying idea is almost a decade old. According to it, if a pair of infrared lasers are crossed in a suitable
transparent material, they could excite a fluorescence. The process is one of the absorption of two infrared
photons from the lasers by an atom and then emission in a single photons of visible light. The materials that
exhibit this properly are rare earth elements like erbium which absorb at two different frequencies and then emit
in the green region of the spectrum. The trick is to scan the crossing point of the lasers through a cube of glass
doped with rare earth and trace an image in three dimensions.
The device consists of a centimeter-sized cube of fluoride glass which is multiply sliced. Each slice has a
different rare earth dopant which fluoresces in red, green and blue. An array of lasers with movable mirrors are
arranged around the cube and these scan the whole volume of the cube.
The whole process hinges crucially on a compact, solid-state laser which produces the exact infrared
wavelengths which can be absorbed and the fluorescent material itself. The transparent substance should not
dissipate the energy absorbed into vibration energy. For the same reason, ordinary glass is not suitable for the

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purpose. The recent development of powerful compact lasers and more importantly, of fluoride-based glass in
the 70s, provided the impetus needed to perform the experiment.
The fact that a simple device operating at room temperature, using commercially-available laser diodes, can
produce these images and can be viewed under ordinary room lighting conditions, is a significant step forward.
11. What are the presently available forms of 3-D images in the market?
1) Holograms in museum
2) Stereo vision in cinema halls
3) Deep sea divers vision equipment
4) Surgery viewing apparatus
12. What is the underlying principle behind genuine 3-D images being traced out inside a cube?
1) If light strikes any surface at a very high angle, it gets reflected back.
2) If a pair of infrared lasers are crossed, they could excite fluorescence.,
3) If protons are bombarded on a material, it emits radiation.
4) IF lasers are crossed in a rare medium, light waves are bent in a denser medium.
13. What does the cube consist of?
1) Lasers of different wavelength
2) Media of different densities
3) Fluoride glass which is multiply sliced
4) Three colours are demonstrated in a rare earth glass
14. What is crucial for the whole process?
1) A solid-state booster and a pridescent material
2) Dissipated energy and vibrational energy
3) 3-D special glases for viewing stereo vision
4) A solid slate laser and fluorescent material
15. Why is this process a significant advance?
1) Simplicity of the apparatus and viewing conditions
2) It can be used for advanced applications
3) It can be used for generating 3-D images
4) It can be produced without transparent material
It is an experience most of us would have had many times. How come mosquitoes and other winged creatures
are partial in their biting habits? They seem to have distinct favourites, whose blood is selectively devourced.
While scientists always suspected that it is something to do with ones skin or, more specifically, its secretions
emitting odour, supportive evidence has been forthcoming only since the past few years.
The first conclusive evidence that people may vary in attractiveness to mosquitoes has been reported from
Tanzania by Burt G J Knols and colleagues from Department of Entomology, Wageningen Agricultural
University, Wageningen, Netherlands. Field trials have shown that men are distinct favourites particularly those
with large body- size; mercifully, children are targeted less frequently as compared to adults.
In the study of Knols, three volunteers slept in separate tents outfitted with a mosquito entrance and two exit
traps. The volunteers slept in the same tent, in the same bed and under the same unimpregnated bed net for some
days. Then over the next nine nights they moved between these three different sites. Analysis of mosquitoes
collected by the trap showed that one of the volunteers is significantly less attractive to two anopheles and one
culex species than were the other two. Knols etal conclude that three of the mosquito species that they collected
during the study period must have selected thei hosts on their specific body odour.

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The effect of expired carbon dioxide, a known mosquito attractant, was effectively discounted since the three
volunteers were of approximately the same weight, size and age. The mosquitoes that were studied included
Anopheles gambae, Anfunestes giles, Culex quinquefasciatus and Mansonia spp in north east Tanzania. While
the anopheles species causes malaria, the culex and mansonia cause Japanese encephalitis.
Other recent experiments which have used wind tunnel bioassay, suggest that the bacteria and other microflora
present in the human skin may be responsible for attracting the mosquitoes. The human body odour secreted by
the two million odd eccrine sweat glands on the skin that release odourless sweat and a sparser number of
apocrine glands which secrete substances which vary from human to human in respect of smell or stink, as the
case may be. In fact, these scent glands produce a milky secretion that reacts with bacteria on the skin.
16. What was the common inference among scientists as to why mosquitoes bite some and not others?
1) Mosquitoes prefer men over women.
2) Mosquitoes attack people with thicker blood.
3) Mosquitoes are partial to a particular skin and its odour.
4) Mosquitoes attack children rather than adults.
17. What was the evidence revealed in initial field trials?
1) Mosquitoes are more active at night.
2) Man are targeted more, and adults are preferred over children.
3) Carbondioxide affects mosquitoes.
4) Blood is selectively removed by mosquitoes.
18. How did the volunteers make sure that each one of them stood a fair chance of being bitten?
1) Equal number of mosquitoes were let into tents.
2) All volunteers were asked to apply mosquito repellents.
3) All volunteers shared similar features and they were moved between tents.
4) Volunteers were sent to eat Tarzarra.
19. Apart from body odour, what is a known mosquito attractant?
1) Blood
2) Adults
3) Carbondioxide
4) Bacteria
20. How is human body odour produced?
1) Due to mosquito belts
2) When blood breaks down into seat
3) When human dont bathe
4) When sweta glands secrete substances
Human genes are not for the asking, thus intoned the international Bar Association (IBA) and abut time too. For,
the field of human genome sequencing, though only five years old, has seen an almost runaway kind of research
explosion.
It was at the instance of the Human Genome Organisation (HUGO), a network of scientists working worldwide
on cracking the human genetic map, that the IBA set about drafting an international convention aimed at
establishing minimum legal standards for the use of human genetic information. The basic gist of the convention
requires that there will be no discrimination on the basis of genetic characteristics and genetic technology will
not be used to prevent births within any group of humans genetically disposed to conditions like sickle-cell
anaemia or Downs syndrome.

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It also recommends rules on what should form the key element of genetics and sets standards for the use of
human genome information in developing new healthcare treatments and therapies. The convention will come
into effect after it is approved at the UN, where it will be presented in June next year. It was recently approved
during IBAs annual conference at Berlin, Germany. IBA will send copies of the convention to its 170bar
associations around the world.
Once governments approve the convention, they will be required to adopt laws which will guarantee that all
human genetic research in their countries will be conducted according to internationally accepted medical,
scientific and bio-ethical standards. Remarked Martine Rothblatt, chairperson of the IBAs bio-ethics
committee, The Human Genome Project is only about five years old and already there are numerous instances
of abuse being reported. The purpose of the treaty is to make sure that al the people in the world have the benefit
of legal protection.
21. Which area of research on human genes has witnessed a research explosion?
1) DNA formation
2) Human genome sequencing
3) Legal standards for use of genetic information
4) New healthcare treatments and therapies
22. What is the aim of drafting an international convention for gene research?
1) Establishing minimum legal standards for use of genetic information
2) For researching formation of genes
3) For understanding human genome sequencing
4) For finding a cure for sickle-cell anaemia or Downs syndrome
23. What is the basic gist of the convention?
1) There will be no discrimination on the basis of genetic characteristics.
2) Human genes are not for the asking
3) Human genes are kind of maps which can be exploited
4) Key elements of genetics should be used for human genome information.
24. What steps are governments expected to take once the convention is approved?
1) They need to further research
2) Adopt laws which guarantee that research will be conducted in accordance with be conducted in
accordance with intentionally acceptable standards.
3) Governments need to bar further research on genetic dissection.
4) Governments need to pass information genetic disorders to people.
25. Why is the Human Genome Project being regularised?
1) So as to share information with members
2) So that standards are maintained
3) To prevent abuses which are being reported
4) To promote further research

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Exercise-4
For modernizing India, education has been considered significant determinant of aspiration, technology,
productivity and mobility. In fact, education has been considered important factor in accepting or rejecting
social change. In case of women, one of the major achievements, during the last hundred years has been the
growing favourable climate in support of womens education. There was a phase in our history, separate them
when it was believed that a girl does not need any education. Whatever she required in terms of housekeeping
could be learnt in the family. In fact there was a strong belief that if a girl is educated, she becomes a widow! In
this atmosphere of total apathy towards opening the doors of knowledge to girls, the social reformers in the
nineteenth century recognized the value of womens education in the stupendous task of reforming Indian
society. Of course, for them womens education meant studying upto middle school level. They had not
envisaged women extending their activities beyond the family. Education was looked upon as emancipating
women from age-old dominance of traditional values. In course of time this attitude changed and education of
woman has been valued not merely in terms of enhancing her familial role but also as a good lever for getting
employment.
1. Education is considered to be an important factor in
1) modernizing India
2) accepting or rejecting social change
3) emancipating women
4) all the above
2. Which of the following is regarded as one of the major achievements over the last hundred years?
1) Liberalizing India
2) Achieving total literacy.
3) Recognising the importance of womens education
4) Making India self-reliant
3. Why were people in olden days, apprehensive of educating women?
1) They believed that if a girl is educated she would become a widow.
2) It was feared that an educated woman would look down upon the traditional values.
3) Womens education would put an end to male dominance
4) People believed that if a girl is educated it would lessen her prospects of marriage
4. The social reformers of the nineteenth century promoted the cause of womens education because
1) they were against the decadent traditions.
2) They wanted to suppress male dominance.
3) They realized the value of womens education in reforming India or society.
4) They wanted women to become self-reliant.
5. The social reformers of the past believed that women should study only upto middle school level because
they
1) believed that an educated woman would decrease of employment for a man.
2) Were egoistic
3) Believed that higher education is not necessary for a woman
4) Had not envisaged women extending their activities beyond the family
Fish have evolved a multitude of deices to ensure their survival. Camouflage makes many species difficult to
detect. Streamlined bodies and smooth, closefitting scales enable others to move more swiftly through the water.
High-speed hunters, such as bonito, marlin and tuna, developed powerful muscles along their backbones to
enable them to whip their tails from side to side and propel themselves swiftly and tirelessly through the water.
The fish they hunted, a rich variety that includes many surface-feeding species, needed to find their own
answers to sudden raids by these marauders. If they couldnt outpace them they had to evade them.

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Flying fish, of which as many as fifty species have been classified, have developed wing like pectoral fins; some
kinds also have broad ventral fins, notable for their striking patterns. When startled, the fish hurl themselves
from the water, spread their wings and glide at an average speed of about 56 km/h (35 mph).
Researchers have logged flights lasting thirteen seconds, during which the fish travel hundreds of metres to
elude their pursuers. The fish usually fly close to the water, but passengers on many ocean liners have been
startled by flying fish landing on decks up to 11 m (36 ft) above the tops of the waves.
For many years, argument continued about whether flying fish actually fly. To qualify as true, birdlike fliers,
these fish would need to vibrate their wings, not keep them rigid for gliding. High-speed photography has ended
the debate: most flying fish rarely flutter their wings, but hold them steady. Some kinds of South American
hatchet fish and an African freshwater species known as the butterfly fish really do fly, vibrating their wings on
leaving the water.
Another trick picked up by the high-speed camera is that sometimes in their flight flying fish change their body
angle so that their tails dip into the water. With a swift flick, they are airborne again, careering on in another,
and possibly life-saving, glide. Leaping in this way from the water may enable flying fish to escape seaborne
predators, but it gives another enemy sea birds better chance of a feast. Most flying fish live in the open
ocean, where there are usually few birds. But those that put on their flying circus closer to shore always risk
being snapped up in flight by the superior performers of the air.
6. Mention two of the survival strategies that fish have evolved.
1) Swimming backwards and sideways
2) Camouflage and streamlined bodies
3) Secreting poisons and enzymes
4) Walking on land and swimming in mud
7. What is the strategy adopted by flying fish to shake off pursuers?
1) They hurl themselves out of water and glide.
2) They attack their pursuer in groups.
3) They take refuge in ocean liners.
4) They camouflage their bodies.
8. What is the mystery about the flight of the flying fish that high-speed camera solved?
1) Whether flying fish are edible
2) Whether flying fish can camouflage
3) Whether flying fish can swim
4) Whether flying fish actually vibrate their wings
9. How does the fishs flight sometimes land it in a devil and deep sea predicament?
1) Escaping from water and burning up in air
2) Jumping onto land and asphyxiating
3) Escaping water pursuers and falling prey to birds
4) Swimming away from pursuers only to end up in fishing nets
10. Who are the superior performers of the air that pose a risk to flying fish?
1) Fishing trawler
2) Stronger swimmers
3) Sharks
4) Sea birds

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Many of our sports and pastimes got their names in unusual ways. None, perhaps, is stranger than that of
snooker, which is said to have come from an insult. In 1875, British army officers at Jabalpur, India, were bored
playing billiards and took up a new game called pyramids, which used a number of red balls, Later, they devised
a variation, adding balls of different colours until there were twenty-two on the table, the current number for
snooker.
In the 1880s, Colonel Sir Neville Chamberlain (not the future British prime minister) intrduced the game at the
Ooty club in Ootacamfund. One evening, when a guest missed an easy shot, Sir Neville called him a snooker,
a term used at the Royal Military Academy in London to describe first-year (and unschooled) cadets. The
colonel, afraid that his guest might take offence, quickly added, We are all snookers when it comes to this
game. The name caused amusement, and caught on.
Badminton, the racket game of hitting a feather shuttlecock over a net, comes from a childrens game known as
battledore and shuttlecock. It is named after Badminton, a country estate in Gloucestershire, England, where the
game was once played by the family and guests of the Duke of Beaufort. Like snooker badminton became
popular with British army officers in India in the 1870s. The modern rules were first drawn up in Karachi in
1877.
Table-tennis was once, and sometimes still is, called ping-pong. An English engineer, James Gibb, helped to
pioneer the sport, which was played in the 1880s with a cork ball. Later, Gibb introduced an American celluloid
ball, called a Gossima, which made the game faster and more popular. In 1901, John Jacques, a British
manufacturer of table-tennis equipment, renamed the game ping-pong, based on the sound of the celluloid ball
striking one side of the table and then the other. Early this century, ping-pong enjoyed great popularity as a
game played on home dining tables. Later, special standard-sized tables were marketed. A Ping-Pong
Association was formed in Britain in 1922, and shortly after was renamed the Table Tennis Association.
11. Where did the name of game snooker originate?
1) At the Royal Military Academy in London
2) At the Ooty Club in Ootacamund
3) At Jabalpur, India
4) At Gloucestershire, England
12. Where did badminton first evolve as a modern game?
1) At Beaufort, England
2) At the Ooty Club, Ootacamund
3) At Gossima, USA
4) At Karachi
13. How did people ski I earlier times?
1) Using a battledore and shuttlecock
2) Using a number of red balls arranged as a pyramid
3) Using splinters as show shoes
4) On dining tables using cork balls
14. Why was table tennis renamed as ping-pong?
1) It used a cork ball.
2) The Chinese excelled at it.
3) The celluloid ball made a sound when it ht the table.
4) The association named it ping-pong.

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15. How did ping-pong become popular?
1) When it started using a celluloid ball which made the game faster
2) As it was played on home dining tables
3) When the ping-pong association was formed
4) When wonder splinters were used for bats
Peering at the stars through a home-made telescope on Christmas night 1980, Roy Panther identified a new
comet, the first to be discovered by a British astronomer for fifteen years. Three weeks later, David Branchett,
viewing the night sky from his bedroom window and using only a pair of ordinary binoculars, saw a bright glare
in the sky. Still unidentified, it is called Branchetts Object.
Remarkably in an age when nations spend enormous sums on technology for exploring space, the worlds
amateur astronomers 15000 of them in Britain, 250000 in the United States continue to make outstanding
contributions to our knowledge of the stars.
Star-gazing is a rewarding pastime that offers a sense of adventure and excitement. A major discovery, such as
that of a comet, can bring immortality. Four comets are named after George Alcock, long acclaimed as one of
the worlds most famous amateur astronomers, who discovered them all through binoculars.
You dont need elaborate or expensive equipment to become a starwatcher. Most likely you already have the
essentials a reclining chair and a pair of binoculars. Star maps, to be found in many books, will help you to
sort order from chaos. Find somewhere away from the glare of street and house lights. Using a weak torch to
avoid dazzle, try to relate your star map to the patterns of the night sky. Several thousand stars are visible to the
naked eye, but binoculars will add clarity to your viewing.
If you have a camera almost any kind will do photographing star patterns will help your understanding, and
give valuable reference for future work. Clamp your camera to something firm, and use a cable release to avoid
camera shake. Experiment with time exposures of different lengths, anything from thirty seconds to ten
minutes, with your lens set on infinity. Work at first with black-and-white film. If you learn to develop your own
film and enlarge your prints, which is not difficult, you will get even more pleasure from your star-watching.
To speed your progress, join an astronomical society, where you will find experienced amateurs keen to give
advice, particularly about equipment. Some groups operate their own observatories for members who dont own
a telescope.
One glance at the sky on a clear and moonless night will demonstrate that it offers an infinite source of
fascinating and useful study, with the incentive that professional astronomers can never keep watch on it all.
16. Where do the outstanding contributions to the existing knowledge of the stars come from?
1) From professional researchers across the world
2) From amateurs using simple equipment
3) From the Hubble telescope in outer space
4) From the Royal Observatory, UK
17. Who is the star amateur astronomer?
1) One who observes stars
2) George Alcock
3) Roy Panther
4) David Branchett

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18. how can you learn to understand the patterns of the night sky?
1) With the aid of a torch
2) Using intuition
3) With the naked eye
4) Binoculars and a star map
19. How can a camera help in star-gazing?
1) The camera should be clamped to something firm to avoid camera shake.
2) The camera should be focused n stars.
3) It helps in photographing star patterns which further ones understanding of the stars.
4) It should have a black and white film.
20. How would joining an astronomical society help?
1) Members get access to costly equipment.
2) Amateurs numbering 15,000 would share photographs
3) Experienced amateurs would share advice
4) Such societies have access to clear skies.
The United Nations is alarmed over the way the western pop music industry is making drug abuse seem
acceptable and even glamorous. The multi-billion dollar western pop music industry is under fire. It is being
blamed by the United Nations for the dramatic rise in drug abuse worldwide.
The most worrisome development is a culture of drug-friendliness that seems to be gaining prominence, said the
UNs 13-member International Narcotics Control Board in a report released in 1998. The 74-page study says
that pop music, as a global industry, is by far the most influential trend-setter for young people of most cultures.
Some lyrics advocate the smoking of marijuana or taking other drugs, and certain pop artistes start making
statements and setting examples as if the use of drugs for non-medicinal purposes were a normal and acceptable
part of a persons lifestyle, the study says.
Surprisingly, says the Board, the effect of drug-friendly pop music seems to survive even the occasional shock
of death by overdose. Such incidents tend to be seen as an occasion to mourn the loss of an idol, and not an
opportunity to confront the lethal effect of recreational drug use, it notes.
Since the 1970s, several internationally renowned singers and move stars including Elvis Presley, Janice
Joplin, John Belushi, Jimi Hendrix, Sid Vicious, River Phoenix, Jonathan Melvin and Andy Gibbs have died
of either drug abuse or drug related illnesses.
The US fashion industry another heavy drug-user in 1997 coined the term heroin chic adding an aura of
sophistication to the growing habit of drug addiction among the jet set. In late 1997, US President Bill Clinton
accused some of the fashion magazines and fashion photographers of glorifying drug use by playing up pictures
of heavily sedated male and female models.
The UN study also blames the media for its portrayal of certain drug issues especially the use of marijuana and
the issues of liberalization and legislation which encouraged, rather than prevented, drug abuse.
The Board says its concern was not so much coverage but the dissemination of knowledge on how to grow
cannabis indoors, or hot to make a range of designer drugs or which common plants contain hallucinogenic
properties. Over the last years, we have witnessed how drug abuse is increasingly regarded as being acceptable
or even glamorous, says Hamid Ghodse, president of the Board. Powerful pressure-groups run political
campaigns aimed at legalizing controlled drugs, he says. Ghodse also points out that all these developments

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have created an environment which is tolerant or even favourable to drug abuse and undermines international
drug prevention efforts currently underway.
The present study, he says, focuses on the issue of demand reduction and prevention within an environment that
has become tolerant of drug abuse. The Board calls on governments to abide by their legal and moral
obligations, and to counteract the prodrug messages of the youth culture to which young people increasingly are
being exposed.
21. Why is the pop music industry being blamed for the rose in drug abuse?
1) Drugs are passed freely during music shows.
2) Drugs help people relax after pop concerts.
3) Pop music is making drug abuse seem glamorous.
4) The United Nations has accused the multibillion dollar industry
22. What is the ways in which pop music supports drug abuse?
1) Some lyrics are vulgar, and contain sexual innuendoes
2) Certain pop artists were jailed for drug abuse.
3) Music and drugs go together quite well.
4) Some lyrics advocate the use of drugs.
23. Why are cases of overdose not taken seriously and almost go ignored?
1) Such incidents are rare.
2) Such incidents are occasions to mourn the loss of an idol.
3) Death by overdose is an accepted fact and doesnt surprise anybody.
4) Such incidents are soon forgotten.
24. Which their industry is also responsible for hogging limelight through drug abuse?
1) Pharmaceutical
2) Entertainment
3) Agriculture
4) US fashion industry
25. What are the issues of focus for the preset study?
1) The reasons for use of drugs
2) How to cure addicts
3) Demand reduction and prevention
4) Economic effect of drug abuse

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Exercise-5
Violence against women can only be curbed if men become conscious of their responsibilities and society as a
whole accords women their due place.
Empowering of women through rights and honoring them both I letter and spirit would go a long way in
tackling this serious and complicated issue, several activists of NGOs, United Nations and government officials
felt after working for the cause of womenfolk for a long time.
Sharing their experiences at a meeting convened by United Nations Development Fund for Women (UNDFW) I
New Delhi, the participants said rights to women were denied at every level starting from the family itself.
Countries around the world time and again ratified laws and rights for women but the society and the syste
lacked the will to implement them.
Gender-based inequities permeate almost every aspect of the growing girls socio-cultural environment. A girl
must be nurtured and groomed in an environment of dignity to become skilled and confident.
Gender violence caused more death and disability among women aged 15 to 44 than cancer, malaria, traffic
accidents or even war. The indirect costs of gender violence to development were extremely high, they felt.
The negative impact of gender violence on reproductive health is just beginning to be understood and
recognized.
The situation of women in terms of their conditions and position needs to be understood in the larger socioeconomic, cultural and political framework of the country.
Three main factors have contributed to the dis-empowerment of women, especially those in poverty. They are
viz patriarchal culture, discriminatory social hierarchy and division of labour.
The impetus for changing practices must begin now, they said and outlined a programme of action for the next
couple of months, including a 15-day campaign starting on November 25. The campaign coincides with
observance of the 50th anniversary of the Universal Declaration of Human Rights.
1. What was seen as the solution to violence against women, by several activists of NGOs, United Nations and
government officials?
1) Empowering men with more responsibilities
2) Empowering women through rights
3) Allowing women to work with NOGs and the UNDFW
4) Strict monitoring and prevention of violence against women by law enforcing agencies
2. Where does the deprivation of rights for women begin?
1) the UNDFW
2) Within the society
3) From the family itself
4) In developing countries
3. Why are the ratified laws and rights for women in most countries ineffective?
1) The laws are not strict.
2) Law enforcing agencies are corrupt
3) Courts dont uphold appeals.
4) Society and system lack will to implement laws.

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4. Why is the socio-cultural environment not conductive for the growth of a girl child?
1) Economic depravement
2) Inadequate academic facilities
3) Gender-based inequalities
4) Religious compulsions
5. What are the factors that lead to the disempowerment of women, coupled with poverty?
1) Religious compulsions
2) Physical limitations
3) Discriminatory social hierarchy and patriarchal culture
4) Corruption at various levels of society
Today, the world over, education is considered to be the best agent for promotion of rational and scientific
values and attitudes. While a total faith in educations modernizing role may be somewhat exaggerated,
nevertheless, State that are in the process of nation-building rely considerably on education to modernize the
outlook and world-view of their population.
Unlike In the past, when education was anchored in pathsals, gurukuls and madrasahs that emphasized religiontraditional learning, modern education mainly provides scientific knowledge and superior technical skills. But,
at the same time, it directly or indirectly, also influences the minds of the learners, especially of those who are in
the younger generation. Since young minds are receptive to new ideas and values, education has its greatest
impact on young people. Also, the young tend to have questioning minds and are critical enough to evaluate
what is taught to them. Hence, faith is placed in them that they will usher in changes in society. In India, our
hopes of building a secular society, therefore, largely rest upon the millions of school and university students,
who are today being exposed to modern science, rationality and humanism.
6. Which of the following factors promote rational and scientific values?

1) Modernism
2) Education
3) Scientific temperament
4) Secular approach
7. How is modern education considered to be different from traditional education?
1) Traditional education emphasized religion traditional learning.
2) Modern education imparts scientific knowledge and superior technical skills.
3) None of the above.
4) Both (1) and (2).
8. Education has a greater impact on young people because
1) their minds are receptive to new ideas
2) they have questioning minds
3) they have are capable of bringing changes in society
4) all the above
9. The hope of building a secular society rests on todays school and university students because they
1) are exposed to modern science, rationality, and humanism.
2) Are more creative.
3) Have a scientific bent of mind.
4) Uphold moral values.

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10. Which of the following statements is true according to the passage?
1) Education is the only means of modernizing the country
2) Only young people are capable of achieving a secular outlook.
3) A total faith in educations modernizing role is somewhat exaggerate.
4) Education system functions in a specific socio cultural milieu
Radio telescopes may be turned to receive radio waves of the desire wavelength in the same way as we tune
radio t receive only the station we want. Radio telescopes not only give a view of the invisible universe, but
can also probe much deeper into space when compared with optical telescopes. Radio waves can propagate
through dust clouds in space, just as radio signals on the Earth can penetrate cloudy or foggy weather. Thus,
they enable radio astronomers to construct images of regions complete hidden from the view of optical
telescopes. However, radio telescopes normally receive radiation within a narrow band of wavelengths.
11. How can we receive radiowaves of the desired wavelength?
1) By using satellites
2) By tuning radio telescopes
3) Through photographic films
4) Through optical telescopes
12. Radio telescopes give a view of the
1) invisible universe
2) micro organisms
3) bacteria
4) electro magnetic radiation
13. Why is a radio telescopes considered to be superior to an optical telescope? The former
1) more powerful.
2) Gives a view of even the smallest objects
3) Probes much deeper into space
4) Is expensive.
14. How do Radio waves help astronomers construct images, which are hidden from the view of optical
telescopes as they
1) can penetrate cloudy or foggy weather.
2) Are of a higher speed when compared to optical telescopes.
3) Emit radiations of all wavelengths.
4) Can penetrate through dust clouds in spare.
15. The radiation received by radio telescopes is
1) of undesired wavelength
2) longer band of wavelength
3) elector magnetic
4) within a narrow band of wavelength
A continent that rose above the Indian Ocean at least three ties over 80 million years, only to disappear beneath
the waves again each time, has been discovered on the seabed about 4,000 kilometres south-west of Australia.
The events that raised the Earths crust above sea level are so unexpected that theories of how continents form
may have to be revised.
Geologists aboard the drilling ship Joides Resolution, which is working on the international Ocean Drilling
Program, have found that two submerged features, the Kerguelen Plateau and Broken Ridge, now about 2,000
metres below the surface, were once joined. Together, they formed a continental shelf of 2 million square
kilometres.

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Only a small part no bigger than Britain actually protruded above the surface. This landmass probably
played a role in the migration of animals after the super continent of Gondawana broke up, which started about
130 million years ago. The new discovery shows that the breakup, which gave rise to Australia, Antarctica and
India, was much more messy than once thought, says Mike Coffin of the University of Texas at Austin, one of
the leaders of the drill team.
Marine geologists have suspected for more than a decade that the Kerguelen Plateau was part of an ancient
continent. Now samples drilled over the past two months have provided the first direct evidence. At Elan Bank,
on the western side of the plateau near Heard Island, the geologists found
Garnet-bearing metamorphic rock, which forms at the high temperatures and pressures found deep in continental
crusts.
At other drill sites, layers of sediment were found containing plant spies, seeds, pollen, wood fragments and
charcoal. If there are continental fragments below the Kerguelen Plateau, then that changes the way you
reconstruct the formation of the continents, says Philip Symonds of the Australian Geological Survey
Organization in Canberra.
Based n the plant remains and fossilized marie plankton, the researchers have identified three periods during
which the crust rose above sea level. The first was about 110 million years ago, when the southern end of the
plateau rose above the surface. Part of the crust broke the surface again about 85 million years ago each tie
farther to the north and involving a smaller amount of land.
The crust would have been pushed up by intense volcanic activity. As the magma plume that a caused this uplift
fooled and contracted, the crust slipped back below the waves once more. But because this part of the seafloor
Antarctic Plate was moving so slowly over the volcanic hot spot in the Earths mantle, this cycle repeated
itself. The volcanism was on a scale far greater than any in recorded history, Say Coffin. it is unknown for an
event of this magnitude to be repeated three times. It means we dont quite understand mantle plumes.
16. Where is the missing continent supposed to have surfaced?
1) 4,000 miles under Australia
2) 2,000 meters to the north of Britain
3) In the Indian Ocean
4) 4,000 km north-east of Australia
17. What did geologists find as its present features?
1) Two submerged features about 2,000 m below the surface were once joined
2) Two islands Kerguelen Plateau and Broken Ridge
3) Plant remains and fossilized plankton
4) Two hot spots in the earths mantle
18. What gave rise to Australia, Antarctica and India?
1) Huge volcano activity
2) Upheavals in the ocean
3) Break-up of Gondwana
4) Disturbances on the sea-bed
19. Why is the garnet-bearing metamorphic rock taken as sure evidence to say that Kerguelen Plateau was part
of an ancient continent?
1) Its age tallies with a continents age.
2) Garnet-bearing rocks are found only on continents.

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3) On what basis have researchers identified three periods during which the crust rose above sea level?
4) None of the above
20. On what basis have researchers identified three periods during which the crust rose above sea level?
1) Martine plankton and volcanoes
2) Plant remains and marine plankton
3) Volcanoes and plant remains
4) Fossils and Volcanoes
Among the novel methods of combating cancer are some drugs that fight the disease by blocking blood supply
to the cancerous cells. These drugs stop angiogenesis the process by which new blood capillaries grow to
augment blood supply to growing tissues like tumours. Two new substances have been identified by Michael
ORely and his team from the Childrens Hospital, Harvard Medical School in Boston, US, that prevent the
endothelial cells, which line the walls of capillaries, from multiplying.
Malignant tumours are like revolting soldiers undisciplined and dangerous, refusing to obey any of the rules of
normal, organized and disciplined cellular growth. Arresting this unregulated growth has been the objective of
all cancer therapies. Anti-cancer drugs prevent such proliferation by stopping the division of cancerous cells, but
in the process they also tend to arrest the growth of normal cells. Not surprisingly, bone marrow, hair follicles
and the gut are seriously affected in people undergoing chemotherapy.
The inhibition of angiogenesis currently considered one of the hottest areas in cancer biology is offering new
hopes of cancer treatment. As many as nine drugs are undergoing clinical trials in various stages of
development. ORellys group is concentrating on angiostatin and endostatin, two very promising drugs. So far,
trials have shown that these drugs can decimate tumours (at least in mice). More importantly, they also seem to
play an important role in keeping at bay the so-called secondary cancers, often considered more lethal than
primary tumours.
Secondary tumours erupt in the body through a process called metastasis, which occurs when the proliferating
cancer cells go beyond simple over breeding. Once metastasis starts in the body of a cancer patient, it is nearly
always fatal. This is because a single tumour can either be excised by surgery or decimated through radiation;
secondary tumours, however, are too numerous and spared out to be dealt with by any of the conventional anticancer therapies.
Surprisingly, some primary cancers actually suppress the formation of secondary cancers in the body through a
process known as dormancy. In such cases, the secondary cancers erupt only when the primary one is removed
from the body. Thus, such primary cancers are known t be more effective in checking the spread of secondary
ones than even the most potent drugs now known.
21. What is the target area of the new drugs?
1) Cardio-vascular arteries
2) Preventing angiogenesis
3) Cure malignant tumours
4) Keeping at bay secondary cancers
22. How do anti-cancer drugs produce other undesirable side-effects?
1) They arrest growth of normal cells.
2) They affect people undergoing surgery.
3) They constrict capillaries.
4) They decimate tumours.

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23. What is the measure of success being achieved by the new drugs?
1) These drugs decimate mice and other pests.
2) They prevent hair follicles from falling.
3) They decimate tumours, and arrest secondary cancers.
4) They obviate the need of surgery.
24. Why are secondary tumours, caused due to metastasis, always nearly fatal?
1) They cant be detected.
2) They are formed inside blood capillaries.
3) They dont respond to radiation
4) They are numerous and spread out.
25. How do primary cancers check the secondary ones?
1) By making surgery necessary
2) By radiating lethal rays
3) By dormancy
4) By invoking early detection

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All India Andhra Bank Award Employees Union

All India Andhra Bank Award Employees Union

In todays environment, hoarding knowledge ultimately erodes

Employees play vital role in service organizations and they need

Bankers Digest - Index

Model Education Loan Policy

i) Union Budget 2013, New Private Banks - RBI

Question Bank & Key

Credit Cards & Fee Based Products

Staff Welfare Schemes

Deposits General Guidelines

Accounts of Firms / Companies / Trusts / Associations, etc - The above

Obtain Government order or notification authorizing the concerned officer to

Minors Accounts - Savings Bank/Recurring Deposit Account can also be opened by

Premature withdrawal of Term Deposit - The Bank on request from the

Know Your Customer (KYC)

Documents Residence Proof

Documents - Identity Proof

Documents Residence Proof

9 Photo ID cards issued by Post

11 Copies of Registered Leave & License

Note: If passport having current

Preservation of Records: As per Prevention of Money Laundering (Amendment)

Alternate Delivery Channels & E-products

ATM failed transactions are to be resolved within a maximum period of 7

and shall be credited to the customers account automatically on the same

View account balances and download statements

RBI approval is required to extend mobile banking services.

Mobile banking is very advantageous compared to other delivery channels as it is

Electronic Payments Recent developments: Of late, more thrust is being paid

Popularizing NEFT/RTGS platforms for transfer of funds among public and at

Issuance of Debit cards to all eligible accounts.

Any Branch Banking is allowed without any charges.

Encouraging institutions and organizations to pay wages and salaries of their

It is directed that all payments handled by banks to their customers, vendors,

The validity period of cheques/demand drafts is reduced from 6 months to 3

NPCI initiated steps to popularize RuPay where Debit/Credit card payments

Non Resident Indians - Products

He/She at any time held an Indian Passport or

N R O Non Resident Ordinary Account

Who Can Open

Any NRI can open NRO account Singly or Jointly with

N R E Non Resident External Rupee account

Who Can Open

Foreign Currency Non Resident account F C N R (B)

deposit is cancelled after one year, applicable rate is to be

Who Can Open

Non Resident Indians (NRI) returning to India who have

Who Can Open

Any person resident in India

Exchange Earners Foreign Currency Accounts (EEFC)

Who Can Open

All Categories of Foreign Exchange Earners such as Individuals,

Advance remittances received by an exporter towards export of goods

Representing the disinvestments proceeds received by the resident

Trade related loans/ advances, by an exporter holding such account to

There is no restriction on withdrawal in rupees of funds held in EEFC

Loans to NRIs Against Deposits: Advances against FCNR/NRE deposit to the

Opened in the name of the exporter and maintained in US Dollars only.

NGOs/MFIs set up under Societies/Trust Acts

Existing entrepreneur may be appointed to improve the viability of BCA.

Savings Bank Account opening