Friday, July 17, 2015

Customer Service


Series of studies have been conducted by various committees such as the Talwar Committee, Goiporia Committee, Tarapore Committee, etc., to bring in improvement in performance and procedure involved in the dispensation of hassle-free customer service.

Depositors' interest forms the focal point of the regulatory framework for banking in India.

Broadly, a customer can be defined as a user or a potential user of bank services. So defined, a ‘Customer’ may include:

     a person or entity that maintains an account and/or has a business relationship with the bank;

     one on whose behalf the account is maintained (i.e. the beneficial owner);

     beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc., as permitted under the law, and

     any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.


Policy for general management of the branches

Banks should have a Board approved policy for general management of the branches which may include the following aspects:-

(a)           providing infrastructure facilities like adequate space, proper furniture, drinking water facilities, with specific emphasis on pensioners, senior citizens, disabled persons, etc.
(b)           providing entirely separate enquiry counters at their large / bigger branches.
(c)           displaying indicator boards and Business posters at all the counters in English, Hindi as well as in the concerned regional language.
(d)           posting roving officials to ensure employees' response to customers and for helping out customers in putting in their transactions.
(e)           Providing customers with booklets consisting of all details of service and facilities available at the bank in Hindi, English and the concerned regional languages.
(f)                  Use of Hindi and regional languages in transacting business by banks with customers, including communications to customers.
(g)           Reviewing and improving upon the existing security system in branches.
(h)           Wearing an identification badge displaying photo and name thereon by the employees.
(i)             Periodic change of desk and entrustment of elementary supervisory jobs.
(j)             Training of staff in line with customer service orientation.
(k)           visit by senior officials from Controlling Offices at periodical intervals for on the spot study of the quality of service rendered by the branches.
(l)             rewarding the best branches from customer service point of view by annual awards/running shield.
(m)          Customer service audit, Customer surveys.
(n)             holding Customer relation programmes and periodical meetings.
(o)           clearly establishing a New Product and Services Approval Process which should require approval by the Board especially on issues which compromise the rights of the Common Person.
(p)           appointing Quality Assurance Officers who will ensure that the intent of policy is translated into the content and its eventual translation into proper procedures.

Customer Service: Institutional Framework

Need for Board's involvement

Matters relating to customer service should be deliberated by the Board to ensure that the instructions are implemented meaningfully.

Customer Service Committee of the Board

Banks are required to constitute a Customer Service Committee of the Board and include experts and representatives of customers as invitees to with a view to strengthening the corporate governance structure in the banking system and also to bring about ongoing improvements in the quality of customer service provided by the banks.

Role of the Customer Service Committee

Customer Service Committee of the Board, illustratively, could address the following:-

       formulation of a Comprehensive Deposit Policy
       issues such as the treatment of death of a depositor for operations of his account
       product approval process with a view to suitability and appropriateness
       annual survey of depositor satisfaction
       tri-enniel audit of such services.

Besides, the Committee could also examine any other issues on the quality of customer service.

Monitoring the implementation of awards under the Banking Ombudsman Scheme

The Committee should observe the complaints / grievances resolved by Banking Ombudsmen of the various States. Banks should ensure that the Awards of the Banking Ombudsmen are implemented expeditiously and with active involvement of Top Management.

Further, with a view to enhancing the effectiveness of the Customer Service Committee, banks should

a)   place all the awards given by the Banking Ombudsman before the Customer Service Committee to enable them to address issues of systemic deficiencies existing in banks, and

b)   Place all the awards remaining unimplemented for more than three months to report to the Board.

Board Meeting to Review and Deliberate on Customer Service

Banks are advised to review customer service / customer care aspects in the bank and submit a detailed memorandum in this regard to the Board of Directors, once every six months and initiate prompt corrective action wherever service quality / skill gaps have been noticed.

Standing Committee on Customer Service

The Committee on Procedures and Performance Audit of Public Services (CPPAPS) therefore recommended that the Ad hoc Committees should be converted into Standing Committees on Customer Service. The constitution and functions of the Standing Committee may be on the lines indicated below:-

i)                      The Standing Committee may be chaired by the CMD or the ED and include non-officials as its members to enable an independent feedback on the quality of customer service rendered by the bank.

ii)                     The Standing Committee may be entrusted not only with the task of ensuring timely and effective compliance of the RBI instructions on customer service, but also that of receiving the necessary feedback to determine that the action taken by various departments of the bank is in tune with the spirit and intent of such instructions.

iii)                    The Standing Committee may review the practice and procedures prevalent in the bank and take necessary corrective action, on an ongoing basis as the intent is translated into action only through procedures and practices.

iv)                    A brief report on the performance of the Standing Committee during its tenure indicating, inter alia, the areas reviewed, procedures / practices identified and simplified / introduced may be submitted periodically to the Customer Service Committee of the Board.

With the conversion of the Ad hoc Committees into Standing Committees on Customer Service, the Standing Committee will act as the bridge between the various departments of the bank and the Board / Customer Service Committees of the Board.

Branch Level Customer Service Committees

Banks were advised to establish Customer Service Committees at branch level. As senior citizens usually form an important constituent in banks, a senior citizen may preferably be included therein. The Branch Level Customer Service Committee may meet at least once a month to study complaints/ suggestions, cases of delay, difficulties faced / reported by customers / members of the Committee and evolve ways and means of improving customer service.

The branch level committees may also submit quarterly reports giving inputs / suggestions to the Standing Committee on Customer Service thus enabling the Standing Committee to examine them and provide relevant feedback to the Customer Service Committee of the Board for necessary policy / procedural action.

Nodal department / official for customer service

Each bank is expected to have a nodal department / official for customer service in the Head Office and each controlling office, with whom customers with grievances can approach in the first instance and with whom the Banking Ombudsman and RBI can liaise.

Board approved policies on Customer Service

Customer service should be projected as a priority objective of banks along with profit, growth and fulfillment of social obligations. Banks should have a Board approved policy for the following:

Comprehensive Deposit Policy
By setting out the rights of the depositors, the policy would be required to cover all aspects of operations of deposit accounts, charges and other related issues. Providing other facilities by "tying-up" with placement of deposits is clearly a restrictive practice.

Cheque Collection Policy
By taking into account their technological capabilities, systems and processes adopted for clearing arrangements and other internal arrangements for collection through correspondents.
The policy should cover the following three aspects:

       Immediate Credit for Local / Outstation cheques
       Time frame for Collection of Local / Outstation Instruments
       Interest payment for delayed collection

Customer Compensation Policy
CAP should be based on IBA’s model policy. Banks policy should, incorporate the following aspects:-

(a)           Erroneous Debits arising on fraudulent or other transactions
(b)           Payment of interest for delays in collection
(c)           Payment of interest for delay in issue of duplicate draft
(d)           Other unauthorised actions of the bank leading to a financial loss to customer

Customer Grievance Redressal Policy
Banks must have a well documented Customer Grievance Redressal Policy duly approved by their Boards.

Giving publicity to the policies

(i)   Banks should ensure that wide publicity is given to the above policies on the web-site and displaying them on the notice board in their branches.

(ii)    The customers should be clearly apprised of the assurances of the bank on the services on these aspects at the time of establishment of the initial relationship.

(iii) Further, they may also take necessary steps to keep the customers duly informed of the changes in the policies formulated by them from time to time.

Financial Inclusion

Basic Savings Bank Deposit Account (BSBDA)

Banks are advised to offer a 'Basic Savings Bank Deposit Account' which will offer following minimum common facilities to all their customers:

i.   The 'Basic Savings Bank Deposit Account' should be considered a normal banking service available to all.
ii.  This account shall not have the requirement of any minimum balance.
iii.   The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt / credit of money through electronic payment channels or by means of deposit / collection of cheques drawn by Central / State Government agencies and departments.
iv.   While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals.
v.  Facility of ATM card or ATM-cum-Debit Card.
vi.    The above facilities will be provided without any charges. Further, no charge will be levied for non-operation / activation of in-operative 'Basic Savings Bank Deposit Account'.
vii.   Banks would be free to evolve other requirements including pricing structure for additional value-added services beyond the stipulated basic minimum services on reasonable and transparent basis and applied in a non-discriminatory manner.
viii.        The 'Basic Savings Bank Deposit Account' would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time. If such account is opened on the basis of simplified KYC norms, the account would additionally be treated as a 'Small Account'
ix.    Holders of 'Basic Savings Bank Deposit Account' will not be eligible for opening any other savings bank deposit account in that bank. If a customer has any other existing savings bank deposit account in that bank, he / she will be required to close it within 30 days from the date of opening a 'Basic Savings Bank Deposit Account'.

x.    The existing basic banking 'no-frills' accounts should be converted to 'Basic Savings Bank Deposit Account' as per the instructions contained above.

BSBDA – Frequently Asked Questions (FAQs)

In view of several queries received in connection with BSBDAs, a list of FAQs was issued. These FAQs are furnished in Annex VII.

IT-enabled Financial Inclusion

A few banks have already initiated certain pilot projects in different remote parts of the country utilizing smart cards/mobile technology to extend banking services similar to those dispensed from branches. Banks are, therefore, urged to scale up their financial inclusion efforts by utilizing appropriate technology. Care may be taken to ensure that the solutions developed are:

  highly secure,
  amenable to audit and
   follow widely accepted open standards to allow inter-operability among the different systems adopted by different banks.

Printed material in trilingual form
All printed material used by retail customers including account opening forms, pay-in-slips, passbooks, etc., in trilingual form i.e., English, Hindi and the concerned Regional Language.

Rights of Transgender Persons – Changes in bank forms/ applications etc.

Banks are, therefore, directed to include ‘third gender’ in all forms/applications etc. prescribed by the Reserve Bank or the banks themselves, wherein any gender classification is envisaged.

Opening / Operation of Deposit Accounts

Customer Identification Procedure for individual accounts

Banks should be generally guided by RBI instructions on KYC / AML for opening of accounts.

Intra-bank Deposit Accounts Portability

Banks are advised that KYC once done by one branch of the bank should be valid for transfer of the account within the bank as long as full KYC has been done for the concerned account. The customer should be allowed to transfer his account from one branch to another branch without insisting on fresh proof of address and on the basis of a self-declaration from the account holder about his / her current address, subject to submitting proof of address within a period of six months. Periodical updation of KYC data would continue to be done by bank as per prescribed periodicity.

Savings Bank Rules

As many banks are now issuing statement of accounts in lieu of pass books, the Savings Bank Rules must be annexed as a tear-off portion to the account opening form so that the account holder can retain the rules.

Photographs of depositors

Banks should obtain and keep on record photographs of all depositors/account holders in respect of accounts opened by them subject to the following clarifications:

(i)   The instructions cover all types of deposits including fixed, recurring, cumulative, etc.

(ii)    They apply to all categories of depositors, whether resident or non-resident. Only banks, Local Authorities and Government Departments (excluding public sector undertakings or quasi-Government bodies) will be exempt from the requirement of photographs.

(iii)   The banks may not insist on photographs in case of accounts of staff members only (Single/Joint).

(iv)     The banks should obtain photographs of all persons authorised to operate the accounts viz., Savings Bank and Current Accounts without exception.

(v)   The banks should also obtain photographs of the ' Pardanishin' women.

(vi)    The banks may obtain two copies of photographs and obtaining photocopies of driving license/passport containing photographs in place of photographs would not suffice.

(vii)    The banks should pay 'self' or 'bearer' cheques in cash by taking usual precautions without insisting on the presence of account holder unless the circumstances so warrant.

(viii)   Photographs cannot be a substitute for specimen signatures.

(ix)    Only one set of photographs need be obtained and separate photographs should not be obtained for each category of deposit. The applications for different types of deposit accounts should be properly referenced.

(x)   Fresh photographs need not be obtained when an additional account is desired to be opened.

(xi)     In the case of operative accounts, viz. Savings Bank and Current accounts, photographs of persons authorised to operate them should be obtained. In case of other deposits, viz., Fixed, Recurring, Cumulative, etc., photographs of all depositors in whose names the deposit receipt stands may be obtained except in the case of deposits in the name of minors where guardians' photographs should be obtained.

Minimum balance in savings bank accounts

At the time of opening the accounts, banks should inform their customers about the requirement of maintaining minimum balance and levying of charges, etc., if the minimum balance is not maintained. Any charge levied subsequently should be transparently made known to all depositors in advance with one month’s notice. With effect from May 6, 2014, banks are not permitted to levy penal charges for non-maintenance of minimum balances in any inoperative account.

Levy of Penal Charges on Non-Maintenance of Minimum balance in savings bank accounts

(i)      In the event of a default in maintenance of minimum balance / average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS / email / letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.
(ii)      In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.
(iii)      The policy on penal charges to be so levied may be decided with the approval of Board of the bank.

(iv)     The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.
(v)     It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.
(vi)    It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.
These guidelines should be brought to the notice of all customers apart from being disclosed on the bank's website.

Purchase of Local Cheques, Drafts, etc., during suspension of Clearing

Whenever clearing is suspended and it is apprehended that the suspension may be prolonged, banks may temporarily accommodate their constituents, by purchasing the local cheques, drafts, etc., deposited in their accounts for collection. While extending this facility, banks would no doubt take into consideration such factors as creditworthiness, integrity, past dealings and occupation of the constituents.

Statement of accounts / Pass Books

Issuance of Passbooks to Savings Bank Account holders (Individuals)
Banks are advised to invariably offer pass book facility to all its savings bank account holders (individuals) and in case the bank offers the facility of sending statement of account and the customer chooses to get statement of account, the banks must issue monthly statement of accounts. The cost of providing such Pass Book or Statements should not be charged to the customer.

Updating passbooks

(i)                     Wherever pass-books are held back for updating, because of large number of entries, paper tokens indicating the date of its receipt and also the date when it is to be collected should be issued.
(ii)                    Whenever a passbook is tendered for posting after a long interval of time or after very large number of transactions, a printed slip requesting the depositor to tender it periodically should be given.

Entries in passbooks / statement of accounts

(i)                     Banks should give constant attention to ensure entry of correct and legible particulars in the pass books and statement of accounts.

(ii)                             Banks should avoid inscrutable entries in passbooks / statement of accounts and ensure that brief, intelligible particulars are invariably entered in passbooks / statement of account.

Maintenance of savings bank pass books: precautions

A few precautions in this regard are given below:
(i)                     Branches should accept the pass books and return them against tokens.
(ii)  Pass books remaining with the branches should be held in the custody of named responsible officials.
(iii) While remaining with the branch, pass books should be held under lock and key overnight.

Providing monthly statement of accounts

(i)     Banks may ensure that they adhere to the monthly periodicity while sending statement of accounts.

(ii) The statements of accounts for current account holders may be sent to the depositors in a staggered manner instead of sending by a target date every month. The customers may be informed about staggering of the preparation of these statements.

(iii)                   Further, banks should advise their Inspecting Officers to carry out sample check at the time of internal inspection of branches to verify whether the statements are being dispatched in time.

Address / Telephone Number of the Branch in Pass Books / Statement of Accounts

Banks are therefore advised to ensure that full address / telephone number of the branch is invariably mentioned in the passbooks / statement of accounts issued to account holders.

Printing of MICR code and IFSC code on passbook / statement of account

Banks are advised to provide MICR code, IFCS code in all passbook / statement of account of their account holders.

Issue of Cheque Books

Issuing large number of cheque books (issued to Public Sector Banks)

Banks may issue cheque books with larger number of (20/25) leaves if a customer demands the same.

Banks should take appropriate care while issuing large number of cheque books. It should be done in consultation with the Controlling Office of the bank.

Writing the cheques in any language

All cheque forms should be printed in Hindi and English. The customer may, however, write cheques in Hindi, English or in the concerned regional language.

Dispatching the cheque book by courier

Banks should refrain from obtaining such undertakings from depositors that a dispatch by the courier is at depositor's risk and ensure that cheque books are delivered over the counters on request to the depositors or his authorized representative.

Acceptance of cheques bearing a date as per National Calendar (Saka Samvat) for payment

An instrument written in Hindi having date as per Saka Samvat calendar is a valid instrument. Banks can ascertain the Gregorian calendar date corresponding to the National Saka calendar in order to avoid payment of stale cheques.

Issue of Multicity / Payable at All Branches Cheques by CBS enabled Banks:

Banks have been advised not to charge their savings bank account customers for issuance of CTS-2010 standard cheques when they are issued for the first time.

Term Deposit Account

Issue of term deposit receipt

Bank should issue term deposit receipt indicating therein full details, such as, date of issue, period of deposit, due date, applicable rate of interest, etc.

Transferability of deposit receipts

Term deposits should be freely transferable from one office of bank to another.

Disposal of deposits

Advance instructions from depositors for disposal of deposits on maturity may be obtained in the application form itself. Wherever such instructions are not obtained, banks should ensure sending of intimation of impending due date of maturity well in advance to their depositors as a rule in order to extend better customer service.

Notifying the change in interest rates

Change in interest rate on deposits should be made known to customers as well as bank branches expeditiously.

Payment of interest on fixed deposit – Method of calculation of interest

IBA, has prescribed that on 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 the year at 365 days. Some banks are adopting the method of reckoning the year at 366 days in a Leap year and 365 days in other years. They should provide information to their depositors about the manner of calculation of interest appropriately while accepting the deposits and display the same at their branches.

Premature withdrawal of term deposit

A bank, on request from the depositor, should allow withdrawal of a term deposit before completion of the period of the deposit.
The bank will have the freedom to determine its own penal interest rate of premature withdrawal.
Interest on the deposit for the period that it has remained with the bank will be paid at the rate applicable to the period for which the deposit remained with the bank and not at the contracted rate.
No interest is payable, where premature withdrawal of deposits takes place before completion of the minimum period prescribed.
With effect from April 1, 2013 banks will have the discretion to disallow premature withdrawal of a term deposit in respect of bulk deposits of 1 crore and above.
Bank should ensure that the depositors are made aware of the applicable penal rates along with the deposit rates. The revised guidelines are made applicable with effect from April 1, 2013.

Repayment of Term/Fixed Deposits in banks:

1.     It is clarified that if fixed/term deposit accounts are opened with operating instructions ‘Either or Survivor’, the signatures of both the depositors need not be obtained for payment of the amount of the deposits on maturity. However, the signatures of both the depositors may have to be obtained, in case the deposit is to be paid before maturity. If the operating instruction is ‘Either or Survivor’ and one of the depositors expires before the maturity, no pre-payment of the fixed/term deposit may be allowed without the concurrence of the legal heirs of the deceased joint holder. This, however, would not stand in the way of making payment to the survivor on maturity.
2.      In case the mandate is ‘Former or Survivor’, the ‘Former’ alone can operate/withdraw the matured amount of the fixed/term deposit, when both the depositors are alive. However, the signature of both the depositors may have to be obtained, in case the deposit is to be paid before maturity. If the former expires before the maturity of the fixed/term deposit, the ‘Survivor’ can withdraw the deposit on maturity. Premature withdrawal would however require the consent of both the parties, when both of them are alive, and that of the surviving depositor and the legal heirs of the deceased in case of death of one of the depositors.

3.   In case of term deposits with "Either or Survivor" or "Former or Survivor" mandate, banks are permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the death of the other, only if, there is a joint mandate from the joint depositors to this effect.

4.   The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term / tenure of the deposit. If such a mandate is obtained, banks can allow premature withdrawal of term / fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder. It is also reiterated that such premature withdrawal would not attract any penal charge.

5.   When a fixed deposit account is opened in the joint names of two depositors on ‘Either or Survivor’ basis and the said joint depositors already have a savings bank account in their names jointly on ‘Either or Survivor’ instructions, on maturity of the fixed deposit, proceeds of the matured fixed deposit can be credited to the joint savings bank account already opened in the bank.

6.   Renewal of Overdue deposits

All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified of the terms and conditions of renewal including interest rates, at the time of acceptance of deposit. The policy should be non-discretionary and non-discriminatory.

Addition or deletion of the name/s of joint account holders

A bank may, at the request of all the joint account holders, allow the 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, in no case should the amount or duration of the original deposit undergo a change in any manner in case the deposit is a term deposit.

A bank may, at its discretion, and at the request of all the joint account holders of a deposit receipt, allow the splitting up of the joint deposit, in the name of each of the joint account holders only, provided that the period and the aggregate amount of the deposit do not undergo any change.

Note: NRE deposits should be held jointly with non-residents only. NRO accounts may be held by non-residents jointly with residents.

Payment of interest on accounts frozen by banks

Banks are advised to follow the procedure detailed below in the case of Term Deposit Accounts frozen by the enforcement authorities:

(i) A request letter may be obtained from the customer on maturity. While obtaining the request letter from the depositor for renewal, banks should also advise him to indicate the term for which the deposit is to be renewed. In case the depositor does not exercise his option of choosing the term for renewal, banks may renew the same for a term equal to the original term.

(ii)    No new receipt is required to be issued. However, suitable note may be made regarding renewal in the deposit ledger.

(iii)     Renewal of deposit may be advised by registered letter / speed post / courier service to the concerned Government department under advice to the depositor. In the advice to the depositor, the rate of interest at which the deposit is renewed should also be mentioned.

(iv)    If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal may be done from the date of maturity. If it exceeds 14 days, banks may pay interest for the overdue period as per the policy adopted by them, and keep it in a separate interest free sub-account which should be released when the original fixed deposit is released.

Further, with regard to the savings bank accounts frozen by the Enforcement authorities, banks may continue to credit the interest to the account on a regular basis.

Acknowledgement by banks at the time of submission of Form 15-G / 15-H

Banks are advised to give an acknowledgment at the time of receipt of Form15-G/15-H.

Timely Issue of TDS Certificate to Customers

Banks are advised to provide TDS Certificate in Form 16A, to their customers in respect of whom they (banks) have deducted tax at source.

Acceptance of cash over the counter

Banks are, therefore, advised to ensure that their branches invariably accept cash over the counters from all their customers who desire to deposit cash at the counters. Further, they are also advised to refrain from incorporating clauses in the terms and conditions which restrict deposit of cash over the counters.

Opening accounts in the name of minors with Mothers as guardians

Banks are advised to instruct their branches to allow minors' accounts (recurring, fixed and savings only) with mothers as guardians to be opened.

Opening of Bank Accounts in the Names of Minors

With a view to promote the objective of financial inclusion and also to bring uniformity among banks in opening and operating minors’ accounts, banks are advised as under:

  1. A savings /fixed / recurring bank deposit account can be opened by a minor of any age through his/her natural or legally appointed guardian.
  2. Minors above the age of 10 years may be allowed to open and operate savings bank accounts independently, if they so desire. Banks may, however, keeping in view their risk management systems, fix limits in terms of age and amount up to which minors may be allowed to operate the deposit accounts independently. They can also decide, in their own discretion, as to what minimum documents are required for opening of accounts by minors.
c.     On attaining majority, the erstwhile minor should confirm the balance in his/her account and if the account is operated by the natural guardian / legal guardian, fresh operating instructions and specimen signature of erstwhile minor should be obtained and kept on record for all operational purposes.

Banks are free to offer additional banking facilities like internet banking, ATM/ debit card, cheque book facility etc., subject to the safeguards that minor accounts are not allowed to be overdrawn and that these always remain in credit.

Opening of Current Accounts – Need for discipline

(i)        Banks should scrupulously ensure that their branches do not open current accounts of entities which enjoy credit facilities (fund based or non-fund based) from the banking system without specifically obtaining a No-Objection Certificate from the lending bank(s). Banks should note that non-adherence to the above discipline could be perceived to be abetting the siphoning of funds and such violations which are either reported to RBI or noticed during our inspection would make the concerned banks liable for penalty under Banking Regulation Act, 1949.

(ii)      Banks may open current accounts of prospective customers in case no response is received from the existing bankers after a minimum waiting period of a fortnight. If a response is received within a fortnight, banks should assess the situation with reference to information provided on the prospective customer by the bank concerned and are not required to solicit a formal no objection, consistent with true freedom to the customer of banks as well as needed due diligence on the customer by the bank.

(iii)      In case of a prospective customer who is a corporate or large borrower enjoying credit facilities from more than one bank, the banks should exercise due diligence and inform the consortium leader, if under consortium, and the concerned banks, if under multiple banking arrangement.

Reconciliation of transactions at ATMs failure - Time limit

  1. Failure to recredit the customer’s account within 7 working days of receipt of the complaint shall entail payment of compensation to the customer @Rs.100/- per day by the issuing bank. This compensation shall be credited to the customer’s account automatically without any claim from the customer, on the same day when the bank affords the credit for the failed ATM transaction.
  2. Any 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.
  3. The number of free transactions permitted per month at other bank ATMs to Savings Bank account holders shall be inclusive of all types of transactions, financial or non-financial.
  4. All disputes regarding ATM failed transactions shall be settled by the issuing bank and the acquiring bank through the ATM System Provider only. No bilateral settlement arrangement outside the dispute resolution mechanism available with the system provider is permissible. This measure is intended to bring down the instances of disputes in payment of compensation between the issuing and acquiring banks.

Non-adherence to the provisions contained in para 5.12 (a) to (d) shall attract penalty as prescribed under the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

Lodging of ATM related Complaints

The following information should be displayed prominently at the ATM locations:-

(i)         ATM ID may be displayed clearly in the premises to make use of it while making a complaint / suggestion
(ii)          Information that complaints should be lodged at the branches where customers maintain accounts to which ATM card is linked
(iii)          Telephone numbers of help desk / contact persons of the ATM owning bank to lodge complaint / seek assistance
(iv)          Uniform Template (as given in Annexure V) for lodging of complaints relating to ATM transactions.

To improve the customer service through enhancement of efficiency in ATM operations, banks are advised to initiate following action:

(i)   Message regarding non-availability of cash in ATMs should be displayed before the transaction is initiated by customer
(ii)    Make available forms for lodging the complaints with name and phone number of the officials with whom they have to be lodged
(iii)     Make available sufficient toll-free phone numbers for lodging complaints / reporting and blocking lost cards and also attend the requests on priority
(iv)   Mobile numbers / e-mail IDs of the customers may be registered to send alerts

In case of complaints pertaining to a failed ATM transaction at other bank ATMs, the customer should lodge a complaint with the card issuing bank even if the transaction was carried out at another bank’s ATM.

Transactions at ATM-Procedural Amendment - Pin Validation for Every Successive Transaction

Each bank may ensure that the process flow is modified to provide for the pin validation for every transaction, including balance enquiry facilitated through ATM. Further, as an additional safety measure, banks are advised that the time-out of sessions should be enabled for all screens / stages of ATM transaction keeping in view the time required for such functions in normal course.

Non-adherence to the above provisions shall attract penalty as prescribed under the Payment and Settlement Systems Act.

Security Issues and Risk mitigation measures- Online alerts to the cardholder for usage of credit/debit cards

Banks were advised to put in place, latest by June 30, 2011, a system of online alerts for all types of transactions irrespective of the amount, involving usage of cards at various channels. Banks should provide easier methods (like SMS) for the customer to block his card and get a confirmation to that effect after blocking the card.

Security Issues and Risk mitigation measures related to Card Not Present (CNP) transactions

Banks have been mandated to necessarily put in place additional factor of authentication/validation based on information not visible on the cards for all on-line
Card not Present (CNP) transactions in a phased manner, starting with online transactions followed by Interactive Voice Response (IVR), Mail Order Telephone Order (MOTO) and Standing Instructions (SI). In the case of MOTO and SI transactions, it has been stated that in case of customer complaint regarding issues, if any, arising out of transactions effected without the additional factor of authentication after the stipulated date, the issuer bank has to reimburse the loss to the customer further without demur.

Securing Electronic Payment Transactions

Some of the additional measures that need to be introduced by the banks could be as follows:

(i)   Customer induced options may be provided for fixing a cap on the value / mode of transactions / beneficiaries. In the event of customer wanting to exceed the cap, an additional authorization may be insisted upon.

(ii)   Limit on the number of beneficiaries that may be added in a day per account could be considered.

(iii)   A system of alert may be introduced when a beneficiary is added.

(iv)   Banks may put in place mechanism for velocity check on the number of transactions effected per day / per beneficiary and any suspicious operations should be subjected to alert within the bank and to the customer.

(v)    Introduction of additional factor of authentication (preferably dynamic in nature) for such payment transactions should be considered.

(vi)        The banks may consider implementation of digital signature for large value payments for all customers, to start with for RTGS transactions.

(vii) Capturing of Internet Protocol (IP) address as an additional validation check should be considered.

Levy of Service Charges

Fixing service charges by banks

Banks should make arrangements for working out charges with prior approval of their Boards of Directors as recommended above and operationalise them in their branches as early as possible.

Ensuring Reasonableness of Bank Charges

In order to ensure fair practices in banking services, Reserve Bank of India had constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges and to incorporate the same in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). Based on the recommendations of the Group, action required to be taken by banks is indicated under the column 'action points for banks' in the Annex I to this circular.

Home Loans-Levy of fore-closure charges/pre-payment penalty

The Committee on Customer Service in Banks (Chairman: M. Damodaran) had observed that foreclosure charges levied by banks on prepayment of home loans are resented upon by home loan borrowers across the board especially since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario. As such, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.

It has been decided that banks will not be permitted to charge foreclosure charges/pre-payment penalties on home loans on floating interest rate basis, with immediate effect.

As per extant guidelines a fixed rate loan is one where the rate is fixed for entire duration of the loan. Hence, the Dual Rate/Special Rate home loans sanctioned by banks cannot be treated as fixed rate loans. In case of Dual Rate/ Special Rate home loans, the provisions of paragraph 6.3.1 above will be applicable from the date the rate of interest on the loan becomes floating.

Levy of Foreclosure Charges / Pre-payment Penalty on Floating Rate Term Loans

Banks will not be permitted to charge foreclosure charges / pre-payment penalties on all floating rate term loans sanctioned to individual borrowers.

RTGS charges for customers

Consequent to the levy of service charges for members under RTGS, banks cannot charge their customers for outward RTGS remittances beyond the amounts stipulated below:
Inward Transactions: Free
Outward transactions: 25 + applicable time varying tariff
 2 lakh to 5 lakh:        subject to a maximum of 30            
Above 5 lakh:           50 + applicable time varying tariff subject to a maximum of 55

Uniformity in Intersol Charges

Banks are advised to follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches. Accordingly, if a particular service is provided free at home branch, the same should be available free at non home branches also. There should be no discrimination as regards intersol charges between similar transactions done by customers at home branch and those done at non-home branches.

Charges for Sending SMS Alerts

Banks are advised to leverage the technology available with them and the telecom service providers to ensure that such charges are levied on all customers on actual usage basis.

Service at the counters

Banking hours / working days of bank branches

Banks should normally function for public transactions at least for 4 hours on week days and 2 hours on Saturdays. Extension counters, Satellite Offices, one man offices or other special class of branches may remain open for such shorter hours as may be considered necessary.

Changes in banking hours

No particular banking hours have been prescribed by law and a bank may fix, after due notice to its customers.

In order to safeguard banks' own interest, a bank closing any of its offices on a day other than a public holiday, will have to give due and sufficient notice to all the parties concerned. What is sufficient or due notice is a question of fact, depending on the circumstances of each case. It is also necessary to avoid any infringement of any other relevant local laws such as Shops and Establishment Act, etc.

Further, the provisions, if any, in regard to the banks' obligations, to the staff under the Industrial Awards / Settlements, should be complied with. Clearing House authority of the place should also be consulted in this regard.

The banks' branches in rural areas can fix the business hours (i.e. number of hours, as well as timings) and the weekly holidays to suit local requirements. This may, however, be done subject to the guidelines given above.

Commencement / Extension of working hours

Commencement of employees’ working hours 15 minutes before commencement of business hours could be made operative by banks at branches in metropolitan and urban centers. The banks should implement the recommendation taking into account the provisions of the local Shops and Establishments Act.

The branch managers and other supervising officials should, however, ensure that the members of the staff are available at their respective counters right from the commencement of banking hours.

Banks should ensure that no counter remains unattended during the business hours and uninterrupted service is rendered to the customers.

All the customers entering the banking hall before the close of business hours should be attended to.

Extended business hours for non-cash banking transactions

Banks should extend business hours for banking transactions other than cash, up till one hour before close of the working hours.

The following non-cash transactions should be undertaken by banks during the extended hours, i.e., up to one hour before the close of working hours:

(a)   Non-voucher generating transactions :

(i)     Issue of pass books/statement of accounts;

(ii)    Issue of cheque books ;

(iii)   Delivery of term deposit receipts/drafts;

 (i)     Acceptance of share application forms;

(ii)    Acceptance of clearing cheques;

(iii)   Acceptance of bills for collection.

(b)   Voucher generating transactions:

(i)      Issue of term deposit receipts;

(ii)     Acceptance of cheques for locker rent due;

(iii)    Issue of travelers cheques;

(iv)    Issue of gift cheques;

(v)     Acceptance of individual cheques for transfer credit.

Such non-cash transactions to be done during the extended business hours should be notified adequately for information of the customers.

Banks can have evening counters at the premises of existing branches in urban/metropolitan centers for providing facilities to the public beyond the normal hours of business so as to bring about improvement in customer service. It is necessary that in such cases the transactions conducted during such extended hours of business are merged with the main accounts of the branch where it is decided to provide the aforesaid facilities.

The concerned banks should give to their constituents due notice about the functions to be undertaken during the extended banking hours through local newspapers, as also by displaying a notice on the notice board at the branch concerned. Further, as and when the hours of business of any of the branches are extended, the concerned clearing house should be informed.

Guidance to customers and Disclosure of Information

Assistance/guidance to customers
All branches, except very small branches should have “Enquiry” or “May I Help You” counters either exclusively or combined with other duties, located near the entry point of the banking hall.

Display of time norms
Time norms for specialised business transactions should be displayed predominantly in the banking hall.

Display of information by banks – Comprehensive Notice Board

The display of information by banks in their branches is one of the modes of imparting financial education.
Keeping in view the need for maintaining a good ambience at the branches as also space constraints, an Internal Working Group in RBI revisited all the existing instructions relating to display boards by commercial banks so as to rationalize them. Based on the recommendations of the Working Group, the following instructions were issued to banks:

Notice Boards

The Group felt that rationalization of the existing instructions could be best achieved if the instructions were clubbed on certain categories such as ‘customer service information', 'service charges', 'grievance redressal' and 'others'. Accordingly, the existing mandatory instructions have been broadly grouped into four categories mentioned above and given in a Comprehensive Notice Board which has been formulated by the above Group. The minimum size of the Board may be 2 feet by 2 feet as Board of such a size would facilitate comfortable viewing from a distance of 3 to 5 meters. Banks are advised to display the information in the Notice Boards of their Branches as per the format given for the Comprehensive Notice Board.

While displaying the information in the notice board, banks may also adhere to the following principles:
(a)               The notice board may be updated on a periodical basis and the board should indicate the date up to which the board was updated (incorporated in the display board)
(b)              Though the pattern, colour and design of the board is left to the discretion of the banks, yet the display must be simple and readable.
(c)               The language requirements (i.e., bilingual in Hindi speaking states and trilingual in other states) may be taken into account.
(d)               The notice board shall specifically indicate wherever recent changes have been done. For instance, if there is a recent change in the SSI loan products offered by the bank, the information on the SSI loan products may be displayed as 'We offer SSI loans/products ( changed on ……….)’.
(e)               The notice board may also indicate a list of items on which detailed information is available in booklet form.

Further, in addition to the above Board, the banks should also display details such as ‘Name of the bank / branch, Working Days, Working Hours and Weekly Off-days' outside the branch premises.


The detailed information as indicated in Para (E) of Annex II may be made available in various booklets / brochures as decided by the bank. These booklets / brochures may be kept in a separate file / folder in the form of ‘replaceable pages’ so as to facilitate copying and updation. In this connection, banks may also adhere to the following broad guidelines:
v    The file / folder may be kept at the customer lobby in the branch or at the ‘May I Help You’ counter or at a place that is frequented by most of the customers.

v    The language requirements (i.e. bilingual in Hindi speaking states and trilingual in other states) may be taken into account.

v    While printing the booklets it may be ensured that the font size is minimum Arial 10 so that the customers are able to easily read the same.

v    Copies of booklets may be made available to the customers on request.


The detailed information as indicated in Para (E) of Annex II may also be made available on the bank’s web-site. Banks should adhere to the broad guidelines relating to dating of material, legibility, etc., while placing the same on their websites. In this context, banks are also advised to ensure that the customers are able to easily access the relevant information from the Home Page of the bank’s web-sites. Further, there are certain information relating to service charges and fee and grievance redressal that are to be posted compulsorily on the websites of the bank. Reserve Bank is providing a link to the websites of banks so that customers can also have access to the information through RBI’s website.

Other modes of display

Banks may also consider displaying all the information that has to be given in the booklet form in the touch screen by placing them in the information kiosks. Scroll Bars, Tag Boards are other options available. The above broad guidelines may be adhered to while displaying information using these modes.

Other issues

Banks are free to decide on their promotional and product information displays. However, the mandatory displays may not be obstructed in anyway. As customer interest and financial education are sought to be achieved by the mandatory display requirements, they should also be given priority over the other display boards. Information relating to Government sponsored schemes as applicable location-wise may be displayed according to their applicability.

Display of information relating to Interest Rates and Service Charges – Rates at a quick glance

A format has been devised by Reserve Bank for display of information relating to interest rates and service charges which would enable the customer to obtain the desired information at a quick glance. The format is given in Annex III. Banks are advised to display the information as per the format given in Annex III on their web-sites. Banks are however free to modify the format to suit their requirements, without impairing the basic structure or curtailing the scope of disclosures.

Banks may also ensure that only latest updated information in the above format is placed on their web-sites and the same is easily accessible from the Home Page of their web-sites.

Display of information by banks

In order to enhance transparency in pricing of credit, based on the recommendations of Working Group on Pricing of Credit, banks are advised to adhere to the following additional instructions with effect from April 1, 2015:

(a)   Website:

i.         Banks should display on their website the interest rate range of contracted loans for the past quarter for different categories of advances granted to individual borrowers along with mean interest rates for such loans.
ii.         The total fees and charges applicable on various types of loans to individual borrower should be disclosed at the time of processing of loan as well as displayed on the website of banks for transparency and comparability and to facilitate informed decision making by customers.
iii.         Banks should publish Annual Percentage Rate (APR) or such similar other arrangement of representing the total cost of credit on a loan to an individual borrower on their websites so as to allow customers to compare the costs associated with borrowing across products and/ or lenders.

(b)   Key Statement/ Fact Sheet:

Banks should provide a clear, concise, one page key fact statement/fact sheet, as per prescribed format in Annex IX, to all individual borrowers at every stage of the loan processing as well as in case of any change in any terms and conditions. The same may also be included as a summary box to be displayed in the credit agreement.

Disclosure of Information by banks in the public domain

Disclosure of information on products and services on websites is found to be an effective channel for reaching out to customers and the public at large. Such disclosures increase transparency in operations and also help to create awareness among customers about the products and services offered by banks. Some of the details, which could be made available for public viewing through websites of the bank, are listed below:-

I.  Policy / Guidelines

(i)       Citizen's Charter

(ii)      Deposit Policy

(iii)     Deceased Depositors Policy along with Nomination Rules

(iv)     Cheque Collection Policy

(v)      Fair Practices Code for Lenders

(vi)     Fair Practices Code for Self- Regulation of Credit Card


(vii)    Code of Conduct for Direct Selling Agents

(viii)   Code for Collection of Dues and Repossession of Security

II.  Complaints

(i)             Grievance Redressal Mechanism

(ii)            Information relating to Banking Ombudsmen

(iii)           Information relating to Customer Service Centres (for Public Sector Banks)

III.   Opening of Accounts

(i)             Account Opening Forms

(ii)            Terms and Conditions

(iii)                Service Charges for various types of services – Should cover typical common services including courier charges – What services are available without any charges.

(iv)          Interest rates on Deposits

(v)           Minimum balances – along with corresponding facilities offered.

IV. Loans and Advances

(i)     Application forms relating to loans and advances

(ii)    Copy of blank agreement to be executed by the borrower

(iii)   Terms and Conditions

(iv)  Processing fee and other charges

(v)   Interest rates on Loans and Advances

V. Branches

(i)     Details of branches along with addresses and telephone numbers (with search engine for queries relating to branch location)

(ii)    Details of ATMs along with addresses

Display of Timelines for Credit Decisions

Banks should clearly delineate the procedure for disposal of loan proposals, with appropriate timelines, and institute a suitable monitoring mechanism for reviewing applications pending beyond the specified period. There should not, however, be any compromise on due diligence requirements. Banks may also make suitable disclosures on the timelines for conveying credit decisions through their websites, notice-boards, product literature, etc.

Operation of Accounts by Old & Incapacitated Persons

Facility to sick/old/incapacitated non-pension account holders

The facilities offered to pension account holders should be extended to the non-pension account holders also who are sick / old / incapacitated and are not willing to open and operate joint accounts.

Types of sick / old / incapacitated account holders

The cases of sick / old / incapacitated account holders fall into following categories:

(a)      An account holder who is too ill to sign a cheque / cannot be physically present in the bank to withdraw money from his bank account but can put his/her thumb impression on the cheque/withdrawal form;

(b)   Account holders who are not only unable to be physically present in the bank but are also not able to put his/her thumb impression on the cheque/withdrawal form due to certain physical incapacity.

Operational Procedure

With a view to enabling the old / sick account holders operate their bank accounts, banks may follow the procedure as under:-

(a)                    Wherever thumb or toe impression of the sick/old/incapacitated account holder is obtained, it should be identified by two independent witnesses known to the bank, one of whom should be a responsible bank official.

(b)                   Where the customer cannot even put his / her thumb impression and also would not be able to be physically present in the bank, a mark can be obtained on the cheque / withdrawal form which should be identified by two independent witnesses, one of whom should be a responsible bank official.

(c)                    The customer may also be asked to indicate to the bank as to who would withdraw the amount from the bank on the basis of cheque / withdrawal form as obtained above and that person should be identified by two independent witnesses. The person who would be actually drawing the money from the bank should be asked to furnish his signature to the bank.

Opinion of IBA in case of a person who cannot sign due to loss of both hands

Opinion obtained by the Indian Banks’ Association from their consultant on the question of opening of a bank account of a person who has lost both his hands and could not sign the cheque / withdrawal form is as under:

The Supreme Court has held in AIR 1950 – Supreme Court, 265 that there must be physical contact between the person who is to sign and the signature can be by means of a mark. This mark can be placed by the person in any manner. It could be the toe impression, as suggested. It can be by means of mark which anybody can put on behalf of the person who has to sign, the mark being put by an instrument which has had a physical contact with the person who has to sign”.

Providing bank facilities to persons with disabilities

Guidelines framed by IBA based on the judgment of Chief Commissioner for Persons with Disabilities

Indian Banks' Association has framed operational guidelines for implementation of its member banks on providing banking facilities to persons with disabilities. Banks should adopt / follow the operational guidelines meticulously.

Need for Bank Branches / ATMs to be made accessible to persons with disabilities

Banks are advised to take necessary steps to provide all existing ATMs / future ATMs with ramps so that wheel chair users / persons with disabilities can easily access them. Care may also be taken to make arrangements in such a way that the height of the ATMs does not create an impediment in their use by wheelchair users. However, in cases where it is impracticable to provide such ramp facilities, whether permanently fixed to earth or otherwise, this requirement may be dispensed with, for reasons recorded and displayed in branches or ATMs concerned.

Banks are also to take appropriate steps, including providing of ramps at the entrance of the bank branches, wherever feasible, so that the persons with disabilities/wheel chair users can enter bank branches and conduct business without difficulty. Banks are advised to report the progress made in this regard periodically to their respective

Customer Service Committee of the Board and ensure compliance.

Providing banking facilities to Visually Impaired Persons

Banks should therefore ensure that all the banking facilities such as cheque book facility including third party cheques, ATM facility, Net banking facility, locker facility, retail loans, credit cards etc., are invariably offered to the visually challenged without any discrimination.

Talking ATMs with Braille keypads to facilitate use by persons with visual impairment

Banks should make all new ATMs installed from July 1, 2014 as talking ATMs with Braille keypads. Banks should lay down a road map for converting all existing ATMs as talking ATMs with Braille keypads and the same may be reviewed from time to time by the Customer Service Committee of the Board.

In addition to the above, magnifying glasses should also be provided in all bank branches for the use of persons with low vision, wherever they require for carrying out banking transactions with ease. The branches should display at a prominent place notice about the availability of magnifying glasses and other facilities available for persons with disabilities.

Guidelines for the purpose of opening/ operating bank accounts of Persons with Autism, Cerebral Palsy, Mental Retardation, Mental Illness and Mental Disabilities

The following guidelines would be applicable for the purpose of opening / operating bank accounts of the above persons:

i.         The Mental Health Act, 1987 provides a law relating to the treatment and care of mentally ill persons and to make better provision with respect to their property and affairs. According to the said Act, “mentally ill person” means a person who is in need of treatment by reason of any mental disorder other than mental retardation. Sections 53 and 54 of this Act provide for the appointment of guardians for mentally ill persons and in certain cases, managers in respect of their property. The prescribed appointing authorities are the district courts and collectors of districts under the Mental Health Act, 1987.
ii.         The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 provides a law relating to certain specified disabilities. Clause (j) of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two or more of such conditions and includes a person suffering from severe multiple disabilities. This Act empowers a Local Level Committee to appoint a guardian, to a person with disabilities, who shall have the care of the person and property of the disabled person.

iii.              Banks are advised to take note of the legal position stated above and may rely on and be guided by the orders/certificates issued by the competent authority, under the respective Acts, appointing guardians/managers for the purposes of opening/operating bank accounts. In case of doubt, care may be taken to obtain proper legal advice.

Banks may also ensure that their branches give proper guidance to their customers so that the guardians/managers of the disabled persons do not face any difficulties in this regard.

Display of information regarding Local Level Committees set up under the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999

In a case which came up before the High Court of Delhi, the Honorable Court had directed that all banks should ensure that their branches display in a conspicuous place
(i) Essential details about the facilities under the enactment (Mental Disabilities Act); (ii) the fact that the parties can approach the Local Level Committees, for the purpose of issuance of the certificate and that the certificate issued under the Mental Disabilities
Act is acceptable; and (iii) the details of the Local Level Committees in that area. The Court had further directed that the information shall be displayed in the local language and English / Hindi (or both). Banks are advised to strictly comply with the above orders of the Court.


Remittance of Funds for Value ` 50,000/- and above

Banks should ensure that any remittance of funds by way of demand drafts/mail transfers / telegraphic transfers or any other mode and issue of travelers cheques for value of ₹ 50,000 /- and above is effected only by debit to the customer’s account or against cheques or other instruments tendered by the purchaser and not against cash payment . These instructions are extended to retail sale of gold/silver/platinum. In the current scenario, where the integrity of the financial system in general and the banking channels in particular is of paramount importance, breach of these guidelines is a matter of serious regulatory concern in view of the wide ranging ramifications. Any violation of these instructions will be viewed seriously.

Demand Drafts

Issue of Demand Drafts

Measures seeking to bring down the incidence of frauds perpetrated through bank drafts should be built into the draft form itself. Necessary changes in system and procedures to speed up issue and payment of drafts should be taken.

Banks should ensure that demand drafts of ` 20,000/- and above are issued invariably with account payee crossing.

All superscriptions about validity of the demand draft should be provided at the top of the draft form. A draft should be uniformly valid for a period of three months and procedure for revalidation after three months should be simplified.

Banks should ensure that drafts of small amounts are issued by their branches against cash to all customers irrespective of the fact whether they are having accounts with the banks or not. Bank's counter staff should not refuse to accept small denomination notes from the customers (or non customers for issuance of the drafts).

Encashment of drafts

The banks should ensure that drafts drawn on their branches are paid immediately.

Payment of draft should not be refused for the only reason that relative advice has not been received.

Issue of Duplicate Demand Draft

Duplicate draft, in lieu of lost draft, up to and including ` 5,000/- may be issued to the purchaser on the basis of adequate indemnity and without insistence on seeking nonpayment advice from drawee office irrespective of the legal position obtaining in this regard.

Banks should issue duplicate Demand Draft to the customer within a fortnight from the receipt of such request. Further, for the delay beyond this stipulated period, banks were advised to pay interest at the rate applicable for fixed deposit of corresponding maturity in order to compensate the customer for such delay. The period of fortnight prescribed would be applicable only in cases where the request for duplicate demand draft is made by the purchaser or the beneficiary and would not be applicable in the case of third party endorsements.

Remittance through electronic mode

In case of remittance through electronic funds transfer, originating banks should provide the option to the customer to choose between RTGS system and NEFT system at the time of initiation of the funds transfer. The option should be made available to all the customers who may originate remittance either at the branch or through internet or any other means. The funds are to be transferred necessarily through the option chosen by the customer. Further, banks should allow the customers to choose NEFT also as one of the electronic modes of making payment towards loan EMIs / repayments, etc.

Providing Positive Confirmation to the Originator

All banks should put in place appropriate mechanism to ensure positive confirmation is sent to the remittance originator confirming the successful credit of funds to the beneficiary’s account when funds are transferred through NEFT. While it is expected that such confirmation messages are sent as soon as the beneficiary account is credited, it should not exceed beyond end-of –the-day under any circumstance.

Payment of penal interest for delayed credit /refunds of NEFT transactions

In case of delay in crediting the beneficiary customer’s account or in returning the uncredited amount to the remitter in case of NEFT, banks should pay penal interest. Under the extant guidelines, banks are required to pay penal interest at the current RBI LAF Repo Rate plus two percent for the period of delay / till the date of refund as the case may be to the affected customers’ suo moto, without waiting for claim from customers.

Under the NEFT Procedural Guidelines, banks are required to establish dedicated Customer Facilitation Centres (CFCs) to handle customer queries/complaints regarding NEFT transactions. The contact details of CFCs are available on websites of banks as well as the website of RBI for easy availability to the customers. Further, banks have to keep the contact details of their CFCs, set up to handle customer queries / complaints regarding NEFT transactions, updated at all times. Changes, if any, should be advised by banks immediately to the National Clearing Cell, Nariman Point, RBI for updating the central directory placed on RBI website. Banks should also ensure that calls made / e-mails sent to CFCs are promptly attended to and sufficient resources are dedicated for the same.

National / Regional Electronic Clearing Service (NECS / RECS) – Extension of service to remaining branches

With a view to extend both NECS and RECS facility to the customers of all bank branches, the participating banks are advised to make efforts in bringing all their branches under NECS/RECS.

National Electronic Funds Transfer (NEFT) – Requirement of Indian Financial System Code (IFSC) in transactions

To facilitate electronic modes of remittance and enhancing customer service at branches for NEFT transactions, the participating banks are advised that staff should provide customers with necessary assistance in filling out the details as required in the NEFT application form, including ensuring that beneficiary account details etc. are duly filled in.

National Electronic Funds Transfer (NEFT) System - Rationalisation of customer charges

Maximum Customer charges that can be levied by the banks for NEFT transactions are as under:

Value Band
Maximum Charges

(exclusive of service tax)
Amounts up to
` 2.50/-

Amounts from `
` 5/-
10,001/- to ` 1 lakh

Amounts above ` 1
` 15/-
lakh up to ` 2 lakh

Amounts above ` 2
` 25/-

NEFT - Customer Service and Charges - Adherence to Procedural Guidelines and Circulars

With a view to minimizing instances of customer complaints, all participant banks (both direct as well as sub-members), are advised to ensure adherence to extant instructions as under:

       NEFT application forms with proper instructions are made available at all branches.

       The charges levied on customers for inter-bank NEFT transactions at both branch locations and Customer Service Point (CSP)/Business Correspondent (BC) /agent locations are at par.

       The extant charges applicable on NEFT transactions should be displayed at all branches / locations of the bank where NEFT transactions can be conducted.

       A printed “charges card” in appropriate vernacular language should invariably be carried by agents / business correspondents of the banks.

       Positive confirmation of credit to beneficiary account is invariably sent for all inward transactions received by the bank.

       Banks originating the NEFT transactions should ensure that the positive confirmation is relayed to all remitting customers, including walk-in customers who provide their mobile number / e-mail id.

       Intimation of failed / returned transactions should also be brought to the notice of the remitting customer and funds credited to the account immediately / returned to the remitter at the earliest.

       In case of delayed credits or delayed returns, the penal interest as applicable is paid suo-moto to the customer. Even in the case of back-dating or value-dating such delayed transactions, banks should pay the penal interest for the delayed period.

Mobile banking transaction limits

The transaction limit of ` 50,000/- per customer per day has been done away with for mobile banking transactions. However, banks may place per transaction limits based on their own risk perception with the approval of its Board.

Domestic Money Transfer – relaxations
 (a) Cash Pay-out scheme which facilitates transfer of funds from the accounts of their customers to beneficiaries not having bank accounts through the use of ATMs, BCs etc. up to Rs. 10,000 per transaction subject to a monthly cap of ` 25,000 with full details of the beneficiary.

(b) Cash Pay-in scheme where a walk-in / non-account holding customer can transfer funds to a bank account of a beneficiary etc. up to ` 5000 per transaction with a monthly cap of ` 25,000 with minimum details of the remitter.

(c) Card-to-Card transfers up to ` 5000 per transaction subject to a monthly cap of 25,000.

Cheque Drop Box Facility

Both the drop box facility and the facility for acknowledgement of the cheques at regular collection counters should be available to the customers and no branch should refuse to give an acknowledgement if the customer tenders the cheques at the counters.

Banks should ensure that customers are not compelled to drop the cheques in the drop-box. Further, in the context of customer awareness in this regard, banks should invariably display on the cheque drop-box itself that "Customers can also tender the cheques at the counter and obtain acknowledgment on the pay-in-slips". The above message is required to be displayed in English, Hindi and the concerned regional language of the State.

Banks are also advised to make absolutely fool proof arrangements accounting for the number of instruments each time the box is opened so that there are no disputes and the customer’s interests are not compromised.

Collection of instruments

Formulating Cheque Collection Policies

Keeping in view the above, earlier instructions issued regarding immediate credit of local /outstation cheques, time frame for collection of local/outstation instruments and interest payment for delayed collection have been withdrawn by Reserve Bank leaving it to the individual banks to formulate policies in this regard.

Broadly, the policy should include instructions on the following:

       Immediate Credit for Local / Outstation cheques

       Time frame for Collection of Local / Outstation Instruments

       Interest payment for delayed collection

Banks have been advised to reframe their Cheque Collection Policies to include compensation payable for the delay in the collection of local cheques as well. In case, no rate is specified in the CCP for delay in realisation of local cheques, compensation at savings bank interest rate should be paid for the corresponding period of delay.

With a view to encouraging faster migration to CTS-2010 standard cheques, banks are advised that non CTS-2010 standard instruments will be cleared at less frequent intervals in the CTS clearing centers. Banks may educate and notify their customers of the likely delay in realisation of non-CTS-2010 standard instruments in view of the arrangement for clearing of such instruments at less frequent intervals. Banks’ Cheque Collection Policies (CCPs) may also be modified suitably to reflect this change. They may also put in place appropriate arrangement for handling customer complaints, if any, arising out of this new arrangement.

Broad Principles

(i)                     Banks should formulate a comprehensive and transparent policy covering all the above three aspects, taking into account their technological capabilities, systems and processes adopted for clearing arrangements and other internal arrangements for collection through correspondents.

(ii)                    Further, they may also review their existing arrangements and capabilities and work out a scheme for reduction in collection period.

(iii)                   Adequate care also may be taken to ensure that the interests of the small depositors are fully protected.

(iv)                  The policy framed in this regard should be integrated with the deposit policy formulated by the bank in line with the IBA's model deposit policy.

(v)                   The policy should clearly lay down the liability of the banks by way of interest payments due to delays for non-compliance with the standards set by the banks themselves.

(vi)                  Compensation by way of interest payment, where necessary, should be made without any claim from the customer.

The policy should be placed before the Board of the Bank along with Reserve Bank's earlier instructions as indicated in paragraph 3.2 and the Board's specific approval should be obtained on the reasonableness of the policy and the compliance with the spirit of our guidelines.

Delays in Cheque Clearing - Case No. 82 of 2006 before National Consumer Disputes Redressal Commission

Banks are advised to comply with the final order on 'timeframe for collection of outstation cheques passed by the National Consumer Disputes Redressal Commission in case no. 82 of 2006. Further, banks are advised as under:

(i)    Banks shall reframe their Cheque Collection Policies (CCPs) covering local and outstation cheque collection as per the timeframe prescribed by the Commission.

(ii)   For local cheques, credit and debit shall be given on the same day or at the most the next day of their presentation in clearing. Ideally, in respect of local clearing, banks shall permit usage of the shadow credit afforded to the customer accounts immediately after closure of relative return clearing and in any case withdrawal shall be allowed on the same day or maximum within an hour of commencement of business on the next working day, subject to usual safeguards.

(iii)      Timeframe for collection of cheques drawn on State Capitals / major cities / other locations to be 7/10/14 days respectively. If there is any delay in collection beyond this period, interest at the rate specified in the CCP of the bank, shall be paid. In case the rate is not specified in the CCP, the applicable rate shall be the interest rate on Fixed Deposits for the corresponding maturity. The timeframe for collection specified by the Commission shall be treated as outer limit and credit shall be afforded if the process gets completed earlier.
(iv)   Banks shall not decline to accept outstation cheques deposited by its customers for collection.

(v)   Banks shall give wide publicity to the CCP by prominently displaying salient features thereof in bold and visible letters on the notice board at their branches.

(vi)   A copy of the complete CCP shall be made available by the branch manager, if the customers require so.

Collection of Account Payee Cheque - Prohibition on Crediting Proceeds to Third Party Account

a) Reserve Bank has considered it necessary to prohibit the banks from crediting 'account payee' cheque to the account of any person other than the payee named therein. Accordingly, banks were directed that they should not collect account payee cheques for any person other than the payee constituent.

Where the drawer / payee instructs the bank to credit the proceeds of collection to any account other than that of the payee, the instruction being contrary to the intended inherent character of the 'account payee' cheque, bank should ask the drawer / payee to have the cheque or the account payee mandate thereon withdrawn by the drawer. This instruction would also apply with respect to the cheque drawn by a bank payable to another bank.

b) In order to facilitate collection of cheques from a payment system angle, account payee cheques deposited with the sub-member for credit to their customers' account can be collected by the member bank (referred to as the sponsor member) of the Clearing House. Under such arrangements, there should be clear undertaking to the effect that the proceeds of the account payee cheque will be credited to the payee's account only, upon realization.

c)             With a view to mitigate the difficulties faced by the members of co-operative credit societies in collection of account payee cheques, it is further clarified that collecting banks may consider collecting account payee cheques drawn for an amount not exceeding ` 50,000/- to the account of their customers who are co-operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies. While collecting the cheques as aforesaid, banks should have a clear representation in writing given by the co-operative credit societies concerned that, upon realization, the proceeds of the cheques will be credited only to the account of the member of the co-operative credit society who is the payee named in the cheque. This shall, however, be subject to the fulfillment of the requirements of the provisions of Negotiable Instruments Act, 1881, including Section 131 thereof.

d)            Banks may note that the above instructions shall also extend to drafts, pay orders and bankers’ cheque.

Payment of Cheques/Drafts/Pay Orders/Banker’s Cheques

With effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument. Banks should ensure strict compliance of these directions and notify the holders of such instruments of the change in practice by printing or stamping on the cheque leaves, drafts, pay orders and banker’s cheques issued on or after April 1, 2012, by issuing suitable instruction for presentment within the period of three months from the date of the instrument.

Cheques / Instruments lost in transit / in clearing process / at paying bank's branch

Banks are advised to follow the following guidelines regarding cheques lost in transit: - In respect of cheques lost in transit or in the clearing process or at the paying bank's branch, the bank should immediately bring the same to the notice of the accountholder so that accountholder can inform the drawer to record stop payment and can also take care that other cheques issued by him are not dishonoured due to non-credit of the amount of the lost cheques / instruments.
(i)                     The onus of such loss lies with the collecting banker and not the accountholder.
(ii)                    The banks should reimburse the accountholder related expenses for obtaining duplicate instruments and also interest for reasonable delays occurred in obtaining the same.
(iii)                            If the cheque / instrument has been lost at the paying bank's branch, the collecting banker should have a right to recover the amount reimbursed to the customer for the loss of the cheque / instrument from the paying banker. Banks are advised to incorporate the above guidelines in their Cheque Collection Policies.

Bills for collection

Bills for collection including bills discounted, required to be collected through another bank at the realising centre, should be forwarded directly by the forwarding office to the realising office.

Payment of interest for Delays in collection of bills

The lodger's bank should pay interest to the lodger for the delayed period in respect of collection of bills at the rate of 2% p.a. above the rate of interest payable on balances of Savings Bank accounts. The delayed period should be reckoned after making allowance for normal transit period based upon a time frame of 2 days each for (i) Dispatch of bills; (ii) Presentation of bills of drawees (iii) Remittance of proceeds to the lodger's bank (iv) Crediting the proceeds to drawer's account.

To the extent the delay is attributing to the drawee's bank, the lodger's bank may recover interest for such delay from that bank. The banks may suitably revise the format of their payment advices to incorporate the above information.

Delay in Re-presentation of Technical Return Cheques and Levy of Charges for such Returns:

Banks have been advised to levy cheque return charges only in cases where the customer is at fault and is responsible for such returns. The illustrative, but not exhaustive, list of returns, where the customers are not at fault are indicated in the Annex VI. In cases where the cheques need to be re-presented without any recourse to the payee, such re-presentation should be made in the immediate next presentation clearing not later than 24 hours(excluding holidays) with due notification to the customers of such representation through SMS alert, email etc.

Dishonour of Cheques – Procedure thereof

Returning dishonoured cheques

(i)   Banks are required to implement the recommendation of the Goiporia Committee that dishonoured instruments are returned / dispatched to the customer promptly without delay, in any case within 24 hours.

(ii)      It is suggested that in addition to the existing instruction in respect of dishonoured instruments for want of funds, banks may follow the additional instructions laid down in paragraph 15.2 below which could cover all cheques dishonoured on account of insufficient funds and not only those relating to settlement transactions of Stock Exchanges.

Procedure for return/ dispatch of dishonoured cheques

(i)    The paying bank should return dishonoured cheques presented through clearing houses strictly as per the return discipline prescribed for respective clearing house in terms of Uniform Regulations and Rules for Bankers' Clearing Houses. The collecting bank on receipt of such dishonoured cheques should dispatch it immediately to the payees / holders.

(ii)     In relation to cheques presented direct to the paying bank for settlement of transaction by way of transfer between two accounts with that bank, it should return such dishonoured cheques to payees/ holders immediately.

(iii)   In case of dishonor / return of cheques, the paying banks should clearly indicate the return reason code on the return memo / objection slip which should also bear the signature / initial of the bank officials as prescribed in Rule 6 of the Uniform Regulations and Rules for Bankers’ Clearing Houses (URRBCH).

Information on dishonoured cheques

Data in respect of each dishonoured cheque for amount of 1 crore and above should be made part of bank's MIS on constituents and concerned branches should report such data to their respective controlling office / Head Office.

Data in respect of cheques drawn in favour of stock exchanges and dishonoured should be consolidated separately by banks irrespective of the value of such cheques as a part of their MIS relating to broker entities, and be reported to their respective Head Offices / Central Offices.

Dealing with incidents of frequent dishonour of cheques of value 1 crore and above

(i) With a view to enforce financial discipline among the customers, banks should introduce a condition for operation of accounts with cheque facility that in the event of dishonour of a cheque valuing rupees one crore and above drawn on a particular account of the drawer on four occasions during the financial year for want of sufficient funds in the account, no fresh cheque book would be issued. Also, the bank may consider closing current account at its discretion. However, in respect of advances accounts such as cash credit account, overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts should be reviewed by appropriate authority higher than the sanctioning authority.

(ii) For the purposes of introduction of the condition mentioned at (i) above in relation to operation of the existing accounts, banks may, at the time of issuing new cheque book, issue a letter advising the constituents of the new condition.

(iii) If a cheque is dishonoured for a third time on a particular account of the drawer during the financial year, banks should issue a cautionary advice to the concerned constituent drawing his attention to aforesaid condition and consequential stoppage of cheque facility in the event of cheque being dishonoured on fourth occasion on the same account during the financial year. Similar cautionary advice may be issued if a bank intends to close the account.
 Dealing with frequent dishonour of cheques of value of less than 1 crore

Banks are therefore advised to have a Board approved policy for dealing with frequent dishonour of cheques of value of less than ` 1 crore. The policy should also deal with matters relating to frequent dishonour of ECS mandates.


(i) For the purpose of adducing evidence to prove the fact of dishonour of cheque on behalf of a complainant in any proceedings, banks should extend full co-operation, and furnish documentary proof of such dishonour.

(ii) Banks should place before their Audit/ Management Committee, every quarter, consolidated data in respect of the matters referred to above.

Framing appropriate procedure for dealing with dishonoured cheques

Banks are also advised to adopt appropriate procedure for dealing with dishonoured cheques to prevent any scope for collusion of staff with the drawer of the cheque for causing delay in communicating the fact of dishonour to the payee/ holder.

Dealing with Complaints and Improving Customer Relations

Complaints/suggestions box

Complaints/suggestions box should be provided at each office of the bank. A notice requesting the customers to meet the branch manager regarding their grievances may also be displayed.

Complaint Book /Register

IBA has prepared a format of the complaint book with adequate number of perforated copies, so that the complainant is given an acknowledgement instantly. A copy of the complaint is required to be forwarded to the concerned Controlling Office of the bank along with the remark of the Branch Manager within a time frame. All bank's branches should maintain such complaints register in the branch either in the physical form or electronically.

The complaints registers should be scrutinised by the Regional Manager during his periodical visit to the branches and his observations/comments recorded in the relative visit reports.

Complaint Form

A complaint form, along with the name of the Nodal Officer, may be provided in the homepage of bank’s website. The form should indicate that the first point for redressal of complaints is the bank itself and that complainants may approach the Banking Ombudsman only if the complaint is not resolved within a month. Similar information may be displayed in the boards put up in the branches to indicate the name and address of the Banking Ombudsman and the Controlling Authority of the bank to whom complaints can be addressed.

Analysis and Disclosure of complaints - Disclosure of complaints / unimplemented awards of Banking Ombudsmen along with Financial Results

The complaints received by the bank should be analyzed
(i)             to identify customer service areas in which the complaints are frequently received;
(ii)                 to identify frequent sources of complaint;
(iii)                to identify systemic deficiencies; and
(iv)               for initiating appropriate action to make the grievance redressal mechanism more effective.

Banks are also advised to disclose the following brief details along with their financial results:

A. Customer Complaints

(a)   No. of complaints pending at the beginning of the year
(b)   No. of complaints received during the year
(c)   No. of complaints redressed during the year
(d)   No. of complaints pending at the end of the year

B. Awards passed by the Banking Ombudsman

(a)   No. of unimplemented Awards at the beginning of the year
(b)   No. of Awards passed by the Banking Ombudsmen during the year
(c)   No. of Awards implemented during the year
(d)   No. of unimplemented Awards at the end of the year

Banks are also advised to place the detailed statement of complaints along with those pertaining to ATMs, and its analysis on their web-site for information of the general public at the end of each financial year.

Grievance Redressal Mechanism

Banks should ensure that a suitable mechanism exists for receiving and addressing complaints from its customers / constituents expeditiously.

Banks are also advised to:

(i)                     Ensure that the complaint registers are kept at prominent place in their branches.
(ii)                    Have a system of acknowledging the complaints.
(iii)                   Fix a time frame for resolving the complaints.
(iv)                  Ensure that redressal of complaints emanating from rural areas and those relating to financial assistance to Priority Sector and Government’s Poverty Alleviation Programmes also form part of the above process.
(v)                             Prominently display at the branches as well as websites, the names and contact details of the officials who can be contacted for redressal of complaints.
(vi)                  Such names should also include the concerned Nodal Officer appointed under the Banking Ombudsman Scheme, 2006.
(vii)                          Further, banks should also display on their web-sites, the names and other details of their CMD / CEO and also Line Functioning Heads for various operations to enable their customers to approach them in case of need, if necessary.
(viii)                         Where the complaints are redressed within the next working day, banks need not include the same in the statement of complaints.

Where the complaints are not redressed within one month, the concerned branch / Controlling Office should forward a copy of the same to the concerned Nodal Officer under the Banking Ombudsman Scheme and keep him updated regarding the status of the complaint. In the final letter sent to the customer regarding redressal of the complaint, banks should indicate that the complainant can also approach the concerned Banking Ombudsman. The details of the concerned Banking Ombudsman should also be included in the letter.

Banks should give wide publicity to the grievance redressal machinery through advertisements and also by placing them on their web sites.

Display of Names of Nodal Officers

With a view to making the Grievance Redressal Mechanism more effective, banks are further advised to:
i)      Ensure that the Principal Nodal Officer appointed under the Banking Ombudsman Scheme is of a sufficiently senior level, not below the rank of a General Manager.

ii)       Contact details of the Principal Nodal Officer needs to be prominently displayed in the portal of the bank preferably on the first page of the web-site.

iii)    Grievance Redressal Mechanism (GRM) should be made simpler even if it is linked to call centre of customer care unit without customers facing hassles of proving identity, account details, etc.

iv)    Adequate and wider publicity are also required to be given by the respective financial services provider.

The name and address of the Principal Nodal Officer may also be forwarded to the Chief General Manager, Customer Education and Protection Department, Reserve Bank of India, Central Office, 1st Floor, Amar Building, Sir P.M.Road, Mumbai-400 001 (email: ).

Review of grievances redressal machinery in Public Sector Banks

Banks should critically examine on an on-going basis as to how Grievances Redressal Machinery is working.

Banks should identify areas in which the number of complaints is large or on the increase and consider constituting special squads to look into complaints on the spot in branches against which there are frequent complaints.

Banks may consider shifting the managers/officers of branches having large number of complaints to other branches/regional offices/departments at Head Offices where contacts with public may be relatively infrequent.

At larger branches and at such of the branches where there are a large number of complaints, the banks may consider appointing Public Relations Officers /Liaison Officers for looking into/mitigating the complaints/grievances of customers expeditiously.

The banks may arrange to include one or two sessions on customer service, public relations etc., in training programmes conducted in their training establishments. In cases where the contention of the complainant has not been accepted, a complete reply should be given to him to the extent possible.

Complaints relating to congestions in the banking premises should be examined on a continuing basis and action taken for augmentation of space, keeping in view the availability of larger accommodation in the same locality at a reasonable rent and other commercial considerations.

Select Banks to appoint Chief Customer Service Officer

All public sector banks, and some private sector and foreign banks have been advised to appoint an internal ombudsman designated as Chief Customer Service Officer (CCSO).These banks have been selected on the basis of their asset size, business mix, etc.

The CCSO should not have worked in the bank in which he/she is appointed as CCSO. The bank’s internal ombudsman will be a forum available to bank customers for grievance redressal before they can even approach the Banking Ombudsman.

Erroneous Debits arising on fraudulent or other transactions

Vigilance by banks

Banks have been advised to adhere to the guidelines and procedures for opening and operating deposit accounts to safeguard against unscrupulous persons opening accounts. Banks should remain vigilant to avoid lapses while opening accounts.

Compensating the customer

(i)             If the branch is convinced that an irregularity / fraud has been committed by its staff, the branch should at once acknowledge its liability and pay the just claim,
(ii)            Where banks are at fault, the banks should compensate customers without demur, and
(iii)                Where neither the bank nor the customer is at fault and the fault lies elsewhere in the system, then also the banks should compensate the customers (up to a limit) as part of a Board approved customer relations policy.

Extension of Safe Deposit Locker / Safe Custody Article Facility

Allotment of Lockers

Linking of Allotment of Lockers to placement of Fixed Deposits

To ensure prompt payment of locker rent, banks may at the time of allotment, obtain a Fixed Deposit which would cover 3 years rent and the charges for breaking open the locker in case of an eventuality. However, banks should not insist on such Fixed Deposit from the existing locker-hirers.

Wait List of Lockers
Branches should maintain a wait list for the purpose of allotment of lockers and ensure transparency in allotment of lockers. All applications should be acknowledged and given the wait list number.

Providing a copy of the agreement

Banks should give a copy of the agreement regarding operation of the locker to the locker-hirer at the time of allotment of the locker.

Security aspects relating to Safe Deposit Lockers

Operations of Safe Deposit Vaults/Lockers

The security procedures should be well-documented and the concerned staff should be properly trained in the procedure. The internal auditors should ensure that the procedures are strictly adhered to.

Customer due diligence for allotment of lockers / Measures relating to lockers which have remained unoperated

(i)             Banks should carry out customer due diligence for both new and existing customers at least to the levels prescribed for customers classified as medium risk. If the customer is classified in a higher risk category, customer due diligence as per KYC norms applicable to such higher risk category should be carried out.

(ii)                 Where the lockers have remained unoperated for more than three years for medium risk category or one year for a higher risk category, banks should immediately contact the locker-hirer and advise him to either operate the locker or surrender it and explain the reason why he / she did not operate the locker. This exercise should be carried out even if the locker hirer is paying the rent regularly. In case the locker-hirer has some genuine reasons, banks may allow the locker hirer to continue with the locker. In case the locker-hirer does not respond nor operate the locker, banks should consider opening the lockers after giving due notice to him. In this context, banks should incorporate a clause in the locker agreement that in case the locker is not operated for more than one year, the bank would have the right to cancel the allotment of the locker and open the locker, even if the rent is paid regularly.

(iii) Banks should have clear procedure drawn up in consultation with their legal advisers for breaking open the lockers and taking stock of inventory.

18.3 Embossing identification code

Banks should ensure that identification Code of the bank / branch is embossed on all the locker keys with a view to facilitate Authorities in identifying the ownership of the locker keys.

Nomination Facility

Legal Provisions

Provisions in the Banking Regulation Act, 1949

The Banking Regulation Act, 1949 was amended by Banking Laws (Amendment) Act, 1983 by introducing new Sections 45ZA to 45ZF, which provide, inter alia, for the following matters:
a.     To enable a banking company to make payment to the nominee of a deceased depositor, the amount standing to the credit of the depositor.
b.    To enable a banking company to return the articles left by a deceased person in its safe custody to his nominee, after making an inventory of the articles in the manner directed by the Reserve Bank.
c.        To enable a banking company to release the contents of a safety locker to the nominee of the hirer of such locker, in the event of the death of the hirer, after making an inventory of the contents of the safety locker in the manner directed by the Reserve Bank.

The Banking Companies (Nomination) Rules, 1985

The Banking Companies (Nomination) Rules, 1985 which are self-explanatory, provide for:-
(i)                     Nomination Forms for deposit accounts, articles kept in safe custody and contents of safety lockers.
(ii)                    Forms for cancellation and variation of the nominations.
(iii)                   Registration of Nominations and cancellation and variation of nominations, and
matters related to the above.

Nomination facilities in respect of safe deposit locker / safe custody articles

Sections 45ZC to 45ZF of the Banking Regulation Act, 1949 provide for nomination and release of contents of safety lockers / safe custody article to the nominee and protection against notice of claims of other persons. Banks should be guided by the provisions of Sections 45 ZC to 45 ZF of the Banking Regulation Act, 1949 and the Banking Companies (Nomination) Rules, 1985 and the relevant provisions of Indian Contract Act and Indian Succession Act.

Reserve Bank of India has specified the formats for the purpose of returning articles left in safe custody to the nominee. In order to ensure that the amount of deposits, articles left in safe custody and contents of lockers are returned to the genuine nominee, as also to verify the proof of death, banks may devise their own claim formats or follow the procedure, if any, suggested by the Indian Banks' Association for the purpose.

Nomination Facility – Sole Proprietary Concern

Banks may extend the nomination facility also in respect of deposits held in the name of a sole proprietary concern.

Nomination Facility in Single Deposit Accounts

Banks should generally insist that the person opening a deposit account makes a nomination. In case the person declines to fill in nomination, the bank should explain the advantages of nomination facility. If the person still does not want to nominate, the bank should ask him to give a specific letter to the effect that he does not want to make a nomination and make a noting in case he refuses to do so.  Banks should not refuse to open an account solely on the ground that the person refused to nominate.

Acknowledgement of Nomination

Banks should devise a proper system of acknowledging the receipt of the duly completed form of nomination, cancellation and / or variation of the nomination. Such acknowledgement should be given to all the customers irrespective of whether the same is demanded by the customers or not.

Registering the nomination

Banks are required to register in its books the nomination, cancellation and / or variation of the nomination made by their depositor(s) / hirers.

Incorporation of the legend “Nomination Registered” in pass book, deposit receipt etc. and indicating the Name of the Nominee in Pass Books / Fixed Deposit Receipts

Banks may introduce the practice of recording on the face of the passbook/ term deposit receipts the position regarding availment of nomination facility with the legend "Nomination Registered". Banks may also indicate the name of the Nominee in the Pass Books / Statement of Accounts / FDRs, in case the customer so desires.

Separate nomination for savings bank account and pension account

Banking Companies (Nomination) Rules, 1985 are distinct from the Arrears of Pension (Nomination) Rules, 1983. Nomination exercised by the pensioner under the latter rules for receipt of arrears in the pension account will not be valid for the other deposit accounts. A separate nomination is necessary in terms of the Banking Companies (Nomination) Rules, 1985 for such other accounts.

Nomination Facility – Certain Clarifications

Nomination facility in respect of deposits

(i)     Nomination facility is intended for individuals including a sole proprietary concern.
(ii)    Nomination shall be made only in favour of individuals.
(iii)   There cannot be more than one nominee in respect of a joint deposit account.
(iv)  Banks may allow variation/cancellation of a subsisting nomination by all the surviving    depositor(s) acting together.
(v)   In the case of a joint deposit account the nominee's right arises only after the death of all the depositors.
(vi)        Witness in Nomination Forms: Attestation by two witnesses is required only in case of Thumb-impression(s). Signatures need not be attested.
(vii)      Nomination in case of Joint Deposit Accounts: Banks are to ensure that their branches offer nomination facility to all deposit accounts including joint accounts opened by the customers.

Nomination in Safe Deposit Lockers / Safe Custody Articles

(i)     Nomination facilities are available only in the case of individual depositors and not in respect of persons jointly depositing articles for safe custody.
(ii)    Banking Regulation Act does not preclude a minor from being a nominee for obtaining delivery of the contents of a locker. However, the responsibility of the banks is to ensure that, the articles were handed over to a person who, in law, was competent to receive the articles on behalf of the minor.
(iii)   As regards lockers hired jointly, on the death of any one of the joint hirers, the contents of the locker are only allowed to be removed jointly by the nominees and the survivor(s) after an inventory was taken in the prescribed manner.

Customer Guidance and Publicity Educating Customers on the Benefits of nomination / survivorship clause

(i)    The banks should endeavor to drive home to their constituents the benefit of nomination facilities and ensure that this facility is popularized among their constituents.

(ii)   Banks should give wide publicity and provide guidance to deposit account holders on the benefits of the nomination facility and the survivorship clause.

(iii)   Account opening form should contain space for nomination so that the customers could be educated about availability of such facilities.

(iv)    Unless the customers prefer not to nominate, nomination should be a rule, to cover all other existing and new accounts.

(v)    To popularise the nomination facility, publicity may be launched, including printing compatible message on cheque books, pass-book and any other literature reaching the customers as well as launching periodical drives.

Settlement of claims in respect of deceased depositors – Simplification of procedure Provisions of the Banking Regulation Act, 1949

Accounts with survivor/nominee clause

In the case of deposit accounts where nomination facility was availed or where the account was opened with the survivorship clause, the payment of the balance in the account, to the survivor or the nominee represents a valid discharge of the bank's liability provided:

(a)           the bank has exercised due care and caution in establishing the identity of the survivor(s) / nominee and the fact of death of the account holder, through appropriate documentary evidence;

(b)           there is no order from the competent court restraining the bank from making the payment from the account of the deceased; and

(c)           It has been made clear to the survivor / nominee that he has received the payment as a trustee and that such payment to him shall not affect the right or claim of any other person.

while making payment to the survivor(s) / nominee of the deceased depositor, the banks should desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.

Accounts without the survivor / nominee clause

Banks are required to adopt a simplified procedure for repayment to legal heirs where the deceased depositor had not made any nomination nor was the account opened with a survivor clause. In this context, banks may fix a minimum threshold limit, up to which claims could be settled without insisting on any documentation other than a letter of indemnity.

Premature Termination of term deposit accounts

In the case of term deposits, banks are required to incorporate a clause in the account opening form itself to the effect that in the event of the death of the depositor, premature termination of term deposits would be allowed. The conditions subject to which such premature withdrawal would be permitted may also be specified in the account opening form. Such premature withdrawal would not attract any penal charge.

Treatment of flows in the name of the deceased depositor

In order to avoid hardship, banks should obtain appropriate authorization from the survivor(s) / nominee with regard to the treatment of pipeline flows in the name of the deceased account holder. In this regard, banks could consider adopting either of the following two approaches:

The bank could be authorized by the survivor(s) / nominee of a deceased account holder to open an account styled as 'Estate of Shri ________________, the Deceased' where all the pipeline flows in the name of the deceased account holder could be allowed to be credited, provided no withdrawals are made.


The bank could be authorized by the survivor(s) / nominee to return the pipeline flows to the remitter with the remark "Account holder deceased" under intimation to them. They could then approach the remitter to effect payment in the name of the appropriate beneficiary.

Interest payable on the deposit account of deceased depositor

In the case of a term deposit standing in the name/s of

(i)             a deceased individual depositor, or

(ii)            two or more joint depositors, where one of the depositors has died,

The criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard.
In the case of balances lying in current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest should 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.

Time limit for settlement of claims

Banks should settle the claims in respect of deceased depositors to the claimants within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank's satisfaction.

Banks should report to the Customer Service Committee of the Board, at appropriate intervals, the details of the number of claims received and those pending beyond the stipulated period, giving reasons thereof.

Claim Forms to be made available

Banks are advised to provide claim forms to any person approaching the bank for it. Claim forms may also be put on the bank’s website so that claimants can access and download the forms without having to visit the concerned bank.

Access to the safe deposit lockers / Return of safe custody articles to Survivor(s) / Nominee(s) / Legal heir(s)

Access to the safe deposit lockers / return of safe custody articles (with survivor/nominee clause)

·         If the sole locker hirer nominates a person, banks should give him access in the event of his death.
·         In case of nomination in a locker hired jointly with the instructions to operate it under joint signatures, the bank should give access of the locker jointly to the survivor(s) and the nominee(s).      
·         In case the locker was hired jointly with survivorship clause, banks should follow the mandate in the event of the death of one or more of the locker-hirers.

However, banks should take the following precautions before handing over the contents:
(a)           Banks should find out if there is any order from a competent court restraining the bank from giving access to the locker of the deceased; and

(b)           Banks should make it clear to the survivor(s) / nominee(s) that access to locker / safe custody articles is given to them only as a trustee of the legal heirs and such access given to him shall not affect the right or claim which any other person.

Similar procedure should be followed for return of articles placed in the safe custody of the bank. Banks should note that the facility of nomination is not available in case of deposit of safe custody articles by more than one person.

While giving access to the claimants, the banks should desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from them.

Access to the safe deposit lockers / return of safe custody articles (without survivor/nominee clause)

Where the deceased locker hirer had not made any nomination or where the joint hirers had not given any mandate by a clear survivorship clause, banks are advised to adopt a customer-friendly procedure drawn up in consultation with their legal advisers for giving access. Similar procedure should be followed for the articles under safe custody of the bank.

Preparing Inventory

Banks should prepare an inventory before returning articles left in safe custody / before permitting removal of the contents of a safe deposit locker. The inventory shall be in the prescribed appropriate Forms.

Banks are not required to open sealed/closed packets left with them for safe custody or found in locker while releasing them to the claimants.

Simplified operational systems / procedures

As per the direction of Reserve Bank, the Indian Banks' Association (IBA) has formulated a Model Operational Procedure (MOP) for settlement of claims of the deceased constituents, under various circumstances, consistent with the instructions contained in this circular, for adoption by the banks.

Customer guidance and publicity

Banks should place on their websites the instructions along with the policies & procedures with respect to deceased claims. Further, a printed copy of the same should also be given to claimants whenever a claim is received from them.

Settlement of claims in respect of missing persons

As per the provisions of Section 108 of the Indian Evidence Act, presumption of death can be raised only after a lapse of seven years from the date of his/her being reported missing. As such, the nominee / legal heirs have to raise an express presumption of death before a competent court. If the court presumes that he/she is dead, then the claim in respect of a missing person can be settled on the basis of the same.

Banks are advised to formulate a policy which would enable them to settle the claims of a missing person. They may fix a threshold limit, up to which claims in respect of missing persons could be settled without insisting on production of any documentation other than (i) FIR and the non-traceable report issued by police authorities and (ii) letter of indemnity.

Settlement of Claims in respect of Missing Persons in Uttarakhand Disaster

In the aftermath of Uttarakhand Natural Disaster during June 14-20, 2013 the Office of the Registrar General of India, Ministry of Home Affairs, has devised a procedure for Registration of Death of Missing persons in Natural Calamities affected areas in Uttarakhand.

In view of the above, banks are advised to settle the claims in respect of such missing persons, without insisting on production of any documentation other than (i) the ‘Death Certificate’ issued by the Designated Officer under MHA Circular and (ii) letter of indemnity.

Release of other assets of the deceased borrowers to their legal heirs

Banks had represented that the principle of not obtaining succession certificates etc., could be extended for settlement of claims in respect of other assets of deceased customers including securities held against advances after adjustment thereof. Banks are advised not to insist upon legal representation for release of other assets of deceased customers irrespective of the amount involved. Banks may, however, call for succession certificates from legal heirs of deceased borrowers in cases where there are disputes and all legal heirs do not join in indemnifying the bank or in certain other exceptional cases where the bank has a reasonable doubt about the genuineness of the claimant/s being the only legal heir/s of the borrower.

Unclaimed Deposits / Inoperative Accounts in banks

Every banking company shall submit a return in the prescribed form to the RBI, on all accounts in India which have not been operated upon for 10 years. The return should be submitted within 30 days after close of each calendar year (i.e., 31st December).

(i)   Banks should make an annual review of accounts in which there are no operations for more than one year. The banks may inform the customers in writing and ascertain the reasons for the same. In case the non- operation in the account is due to shifting of the customers from the locality, they may be asked to provide the details of the new bank accounts to which the balance in the existing account could be transferred.

(iii)   If the letters are returned undelivered, they may immediately be put on enquiry to find out the whereabouts of customers or their legal heirs in case they are deceased through phone calls, e-mail or other known sources. In case the whereabouts of the customers are not traceable, banks should consider contacting the persons who had introduced the account holder or contact the employer if any.

(iv)    A 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.

(v)   In case any reply is given by the account holder giving the reasons for not operating the account, banks should continue classifying the same as an operative account for one more year within which period the account holder may be requested to operate the account. However, in case the account holder still does not operate the same during the extended period, banks should classify the same as inoperative account after the expiry of the extended period.

(vi)     For the purpose of classifying an account as ‘inoperative’ both the type of transactions i.e., debits as well as credit transactions induced at the instance of customers as well as third party should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered.

(vii)    Since the interest on Fixed Deposit account and/or dividend on shares is credited to the Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as such entries are credited to the account. Such account can be treated as inoperative account only after two years from the date of the last credit entry, provided there is no other customer induced transaction.

(viii) Operation in such accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the signature and identity etc. However, it has to be ensured that the customer is not inconvenienced as a result of extra care taken by the bank.

(ix)  There should not be any charge for activation of inoperative account.

(x)     Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are properly audited by the internal auditors / statutory auditors of the bank.

(xi)     Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest.

Banks may also consider launching a special drive for finding the whereabouts of the customers / legal heirs in respect of existing accounts which have already been transferred to the separate ledger of ‘inoperative accounts’.

Display list of Inoperative Accounts: Banks are advised that they should display the list of unclaimed deposits/inoperative accounts which are inactive / inoperative for ten years or more on their respective websites. The list must contain only the names and address of the account holder. However, the account number, its type and the name of the branch shall not be disclosed.

Banks should also give on the same website, the information on the process of claiming the unclaimed deposit/activating the inoperative account and the necessary forms and documents for claiming the same.

Strengthening the Regulatory Framework for Unclaimed Deposits

Banks are advised to put in place a Board approved policy on classification of unclaimed deposits; grievance redressal mechanism; record keeping; and periodic review of such accounts.

Treatment of certain savings bank accounts opened for credit of Scholarship amounts and credit of Direct Benefit Transfer under Government Schemes
The Government has expressed difficulties in crediting benefits into accounts with zero balance which have been classified as inoperative due to non-operation of the account for over two years.

Banks are therefore advised to allot a different “product code” in their CBS to all such accounts so that the stipulation of inoperative/dormant account does not apply while crediting proceeds as mentioned above.

While allowing operations in these accounts, due diligence should be exercised by ensuring the genuineness of transactions, verification of signature and identity, etc. However, it has to be ensured that the customer is not inconvenienced in any manner.

Treatment of accounts opened for credit of Scholarship Amounts under Government Schemes

As directed by the Bombay High Court, banks are advised to ensure that accounts of all student beneficiaries under the various Central/State Government Scholarship Schemes are free from restrictions of ‘minimum balance’ and ‘total credit limit’.

Customer Confidentiality Obligations

The scope of the secrecy law in India has generally followed the common law principles based on implied contract. The bankers' obligation to maintain secrecy arises out of the contractual relationship between the banker and customer, and as such no information should be divulged to third parties except under circumstances which are well defined. The following exceptions to the said rule are normally accepted:

(i)             Where disclosure is under compulsion of law
(ii)            Where there is duty to the public to disclose
(iii)           Where interest of bank requires disclosure and
(iv)          Where the disclosure is made with the express or implied consent of the customer.

Collecting Information from customers for cross-selling purposes

At the time of opening of accounts of the customers, banks collect certain information. While complying with the above requirements, banks also collect a lot of additional personal information. Banks should treat such information collected from the customer as confidential and not divulge any details thereof for cross selling or any other purposes. Banks may, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard.

Wherever banks desire to collect any information other than the purpose of KYC, it may do so on a separate form, purely on a voluntary basis, after explaining the objectives to the customer and taking his express approval for the specific uses to which such information could be put.

Transfer of account from one branch to another

Instructions of a customer for transfer of his account to another office should be carried out immediately on receipt of his instructions. It should be ensured that along with the balance of the account, the relative account opening form, specimen signatures, standing instructions, etc., or the master sheets wherever obtained, are also simultaneously transferred, under advice to the customer.

The account transfer form with the enclosures may be handed over to the customer in a sealed cover if he so desires for delivery at the transferee office / branch. However, the transferee office should also be separately supplied with a copy of the account transfer letter.

When an office receives an enquiry from a customer regarding the receipt of his account on transfer from another office it should take up the matter with the transferor office by electronic means, in case it has not received the balance of the account and/or other related papers even after a reasonable transit time.

Switching banks by customers

Banks should ensure that depositors dissatisfied with customer service have the facility to switch banks and thwarting depositors from such switches would invite serious adverse action.

Co-ordination with officers of Central Board of Direct Taxes

Banks should extend necessary help/co-ordination to tax officials whenever required. Further, banks will have to view with serious concern cases where their staff connive/assist in any manner with offences punishable under the Income Tax Act. In such cases in addition to the normal criminal action, such staff member should also be proceeded against departmentally.

Declaration of Holiday under the Negotiable Instruments Act, 1881

In terms of Section 25 of the Negotiable Instruments Act, 1881, the expression "public holiday" includes Sunday and any other day declared by the Central Government by notification in the Official Gazette to be a public holiday. This power has been delegated by the Central Government to State Governments. However when Central Government itself has notified a day as "public holiday" under Section 25 of the Negotiable Instruments Act, 1881, there is no need for banks to wait for the State Government notification.


Sunday banking

In predominantly residential areas banks may keep their branches open for business on Sundays by suitably adjusting the holidays. Banks should keep rural branches open on weekly market day.

Accepting standing instructions of customers

Standing instructions should be freely accepted on all current and savings bank accounts. The scope of standing instructions service should be enlarged to include payments on account of taxes, rents, bills, school / college fees, licenses, etc.

Clean Overdrafts for small amounts

Clean overdrafts for small amounts may be permitted at the discretion of branch manager to customers whose dealings have been satisfactory. Banks may work out schemes in this regard.

Rounding off of transactions

All transactions, including payment of interest on deposits/charging of interest on advances, should be rounded off to the nearest rupee i.e., fractions of 50 paise and above shall be rounded off to the next higher rupee and fraction of less than 50 paise shall be ignored. Issue prices of cash certificates should also be rounded off in the same manner. However, banks should ensure that cheques/drafts issued by clients containing fractions of a rupee are not rejected or dishonoured by them.

Various Working Groups / Committees on Customer Service in Banks - Implementation of the Recommendations

In order to keep a watch on the progress achieved by the bank in the implementation of the recommendations of various working groups/Committees on customer service, banks may examine the recommendations which have relevance in the present day banking and continue to implement them. Banks may consider submitting periodically to their Customer Service Committee of the Board a progress report on the steps/ measures taken in that regard.

Code of Bank’s Commitment to Customers

Banks should follow various provisions of the Code of Bank’s Commitment to Customers, implementation of which is monitored by the Banking Codes and Standards Board of India (BCSBI).

Based on RBI Master Circular Dated 1/7/15.
Please refer in case of any clarification if needed…………… Poppy