5. income booklet

8/9/2019 5. Income Booklet

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FOREWORD

In the present competitive world, margins are becoming thinner andfocused efforts are required to increase the profits. In such a scenario,each rupee saved is rupee earned and legitimate income not collected ismoney lost. Revenue leakage is a menace, which eats into the profits ofthe Bank like a termite. Reducing income leakage will have direct andpositive impact on our profits. In this context, the role of InspectingOfficers is vital in ensuring that the bank invariably collects all thelegitimate income, which is due to us and does not pay interest morethan what is due from us.

This compendium spells out areas requiring focus by the InspectingOfficers in arresting income leakage.

I am sure that the Inspecting Officers will make the best use of it.

Bangalore A C MahajanDate: 28.07.08 Chairman & Managing Director


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Compendium on Areas of Income Leakage

The Inspecting Officers have to play a positive role in ensuring adherence to thelaid down systems & procedures.

The Inspecting Officers are aptly referred as the Eyes and Ears of theManagement. Apart from this Inspecting Officers have to play a pivotal role indetecting income leakage. Income Leakage affects the profitability of the bank. Inthe present day Banking Business profitability plays a vital role in performanceof the organization.

It is observed that some of the Inspecting Officers confine themselves tochecking of documents alone without paying much attention to those areas whichcauses huge income leakage to the Bank. In this regard attention is drawn to HOCircular 224/2005 dated 20.08.2005, wherein a list of manual errors causingincome leakage is furnished.

System deficiencies and limitations in the computer packages also cause hugeincome leakage. Inspecting Officers (IOs) should be familiar with systemdeficiencies to detect such income leakage.

We are furnishing hereunder some manual errors made by branches which leadto Income leakage and some tips to our IOs to detect income leakage andthereby avoid loss of legitimate income due to the bank.

1. ADVANCES

101. Interest Calculation / application / Checking Register (NB 151) notmaintained/not updated. (BPC-MOI on Interest Collected Clause 12.2Page 68 updated ti ll 30.11.2003 & Cir .No.224/05 dt. 22.08.2005).

102. Rate of Interest not checked by the Branch Officials resulting in leakagenot found out by the branch. (Cir. No.224/05 dt.22.08.2005)

IOs should ask for INTEREST DUMP for the entire review period(12/18/24 as the case may be) immediately on commencing the inspectionof a particular branch and prepare the list of accounts where interest is not

debited. IOs have to verify whether non debit of interest is on account ofloan accounts classified as NPA or on account of mistakes in feeding themaster data. If such accounts are segregated and studied, we will be in aposition to find out non debiting of interest due to incorrect feeding offlags. `Interest on Principal' flag would have been fed as `N' in IBBSbranches. (CBS Guidelines 73/06 dt.16.12.2006)


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103. In IBBS Package, whenever loan accounts are classified as NPA for thefirst time, branch is supposed to change the interest flag as `N'. Whenthey are reclassified as Standard, the flag is to be changed as Y'. Failureto change the flag results in non debiting of interest and the resultantincome leakage. (Page 90, Clause 3.5 of BPC-MOI on Interest

Collected updated t ill 30.11.2003)

104. Revision of Rate of Interest is not updated in the system promptly as andwhen interest is changed. (Cir.No.236/94)

105. In respect of CBS branches, Interest Dump generated from BusinessObject is available and branches are not ensuring correctness of interestcharged and rate of interest applied to the loan account. (CBS guidelines22/08 dated 26.05.2008)

106. Subsequent to migration of branches to CBS environment, all loan

accounts are to be reviewed and ensure correct schedule of Interest i.e.,Fixed or Floating is given to the account as per DIT guidelines. Branchesare not reviewing all the loan accounts. (CBS Guideline 22/08dt.20.05.2008)

107. If wrong migration of Interest schedule is noticed/observed i.e., from Fixedto Floating or vice-versa, branches are not taking steps to set right thediscrepancies. (CBS Guideline 22/08 dt.20.05.2008)

108. In CBS branches, scheme level interest changes are being effected at DITlevel. Branches have to verify whether revised interest rate is correctly

percolated to the account and ensure the correctness. Wherever accountlevel preferential/concessional interest rates are permitted, branches arenot ensuring the correctness of interest rates and differential interest is notbeing collected manually. (CBS guidelines 06/08 dt.18.02.008)

109. Incase of OD/OCC accounts/working capital limits, the interest rates aremaintained at account level at branches. Branches have to effect theinterest changes at account level by opting CHM48. Check the same.(CBS guidelines 06/08 dt.18.02.2008)

110. Incase of ODCC accounts in CBS, most of the products are linked to

BPLR. Check whether branches are selecting Index rate of BPLR (20001)in CHM07 option at the time of limit creation and maintain variance inCHM48 for customer accounts, so that any change in BPLR will geteffected at account level automatically when the rate is changed at DITlevel. (CBS guidelines 06/08 dt.18.02.2008)


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111. In case of PMRY loans, subsidy is to be placed in term deposits carrying0% interest and while fixing slab rate of interest for loan, branches arefeeding the rate of interest as 0% from the first day itself. It should beactually from the date of disbursement of last instalment. (CBS guidelines87/07 dt.19.10.2007)

112. Branches are not maintaining register for interest rate changes as percircular 326/94 and Appendix-1 of manual of instructions on InterestCollected

113. Before proceeding with the scrutiny of loan documents, IOs have to gothrough Interest Scheme Codes created by the branch. By checkingvarious versions for updations, IOs can observe that some of the interestrevisions are not updated by the branch. Whenever interest rate is fed at

ACCOUNT LEVEL, more care needs to be exercised. There is noprovision for generating a list of accounts having ACCOUNT LEVELcodes. Branches are required to maintain a register for these accounts

and updations are to be carried out one by one. Many omissions havebeen noticed in such updations. (CBS guidelines 30/06 dt.08.09.2006)

114. Rate of Interest changed in the system with retrospective effect is nottaken care in the Core Banking System due to limitation of the package.(Cir.No.224/05 dt.20.08.2005 & CBS guidelines 6/08 dt.18.02.2008))

115. Whenever interest rates are revised branches are required to update thesame expeditiously. If there is delay in updating the interest scheme codein IBBS PACKAGE, even if effective date is given, system will notcalculate interest from back date unless updation is done within that

month itself, i.e. Before interest is debited for the month in which revisionis made. (Cir.No.224/05 dt.20.08.2005 & Page 68 Clause 12.2 of BPC-MOI on Interest Col lected updated til l 30.11.2003))

To quote an example, if interest revision of 05.05.2006 was effected in themonth of July 2006, even though effective date was fed as 05.05.2006,system will not recalculate the interest for the months of May and June2006 in IBBS package. However, Bancs 2000 will recalculate from theeffective date and debit the differential interest.

116. In the case of wrong credits made in Current account/OD accounts, while

reversing, branches do not reverse with value date. In such cases,interest for the notional OD/transgressions, is to be calculated manuallyand system will calculate only if value dated reversal is done.


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117. Simple Interest collected on adjusted rates.

118. Branches are in the habit of changing the repayment commencement dateto a future date in the system whenever accounts are going to appear inSpecial Watch accounts. In these cases, the system will calculate

overdues only from such future date and will take into account all therecoveries made so far as prepayments resulting in incorrect calculation ofoverdues. Overdue interest will not be calculated from the date of loan totill the date of commencement of modified repayment date. Party who isat default gets benefited. There is a stipulation that whenever suchrephasements are done, branches are required to change the DCB figureswhich will avoid such mistakes but many branches are not aware of thisstipulation. (Cir.No.224/05 dt.20.08.2005)

119. Compound interest flag should be N for simple interest loans and Y forother loans. However compound interest flags are to be made as `Y in the

case of overdue agricultural loans. IOs attention is drawn to HO Cir131/06 dated 12 05 06.

In the case of Gold Loan accounts, compound interest flag is to bechanged as `Y' at the end of 12 months, which is not being done resultingin income leakage. (Cir.No.131/06 dt.12.05.2006)

120. Broken period interest in respect of loan accounts is not collected bybranch subsequent to migration to CBS i.e., from the date of last chargedin the legacy till the date of migration. Branches have to arrive thedifferential interest and debit manually as given below: (CBS guidelines

11/08 dt.10.03.2008)

a. Holiday period and staff loan accounts where interest is notcharged, broken period of accrual interest can be arrived asfollows:

Accrual interest available in the LNM10 Account Details (minus)uncollected interest in the legacy system (minus) catch up interestaccrual in CBS available in LNM10 Audit Trail.

b. EMI and IPI (Non EMI) accounts where interest is not charged and

accrual is happened in the month end (Ex : February 2008)

Accrual interest available in the LNM10 Account details (minus)interest accrual in CBS available in LNM10 Audit trail


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c. EMI and IPI (Non EMI) accounts where interest is charged andaccrual is happened in the month end (Ex : February 2008)

Interest charged in the loan account in LNM10 (Statement of inquiry) (minus) {interest accrual happened in the month end + catch upinterest accrual till the anniversary date} in the LNM10 - Audit Trail.

121. For OD / VSL against 3rd party deposits, higher rate of Interest asapplicable to category of borrower not collected. (Cir.No.162/08dt.30.06.2008)

122. Whenever deposits pledged to VSL are renewed, corresponding interestrevision for VSL is not updated.

123. OD/VSL against deposits - 100% erosion of margin - clean rate of interestfor the overdrawn liability will not be calculated by the system and to bedone manually. (System deficiency) (Cir.No.162/08)

124. In respect of LPD accounts, the rate of interest prevailing as on the date oftransfer of the liability to LPD with penal interest if any, is to be taken asthe rate of interest applicable till the closure of the LPD account, notwithstanding the changes made at the product level at DIT. Branches arenot taking care of this aspect. (CBS guidelines 27/08)

125. In LPD Suit filed accounts, interest till the date of filing of suit notcalculated and not included in the plaint. (Page 48, Clause 7.5.1 of BPC-MOI on Interest Col lected updated til l 30.11.2003)

126. Transferred loan accounts product adjustment register not maintainedand appropriate interest not collected. (Cir.No.224/05 dt.20.08.2005 &IBBS guidelines 4/01 of CPPD dated 03.04.2001)

Transferred loan accounts - IOs to verify product adjustment register andensure collection of interest. (Cir.No.224/05 dt.20.08.2005)

Income leakage is always observed in the case of employees transferred-in accounts. Branches though feed the accumulated products as furnishedby the transferor branch, fail to take into account the products from thedate of transfer to the date of opening the account in the transferee

branch.

127. In NPA accounts where recoveries are effected, branches are notappropriating the same to interest collected account. (Cir.No.224/05dt.20.08.2005 & Page 90 Clause 3.6, 3.9 of BPC-MOI on InterestCollected updated t ill 30.11.2003)


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128. Rate of interest is to be reset promptly in case of term loans where resetclause has been stipulated. Inspecting Officers have to verify whetherreset has been done as per reset clause and updated in the system.

129. Collection of penal interest in case of non-compliance of bill culture normsand non-completion of EMT / II Charge in terms of HO CircularNo.197/2001 dated 04.10.2001.

130. Adhoc limit wherever granted, 1% additional interest not collected andwhen not regularized before the period specified 2% penal interest notcollected (Page 60, Clause 9.5.8 of BPC-MOI on Interest Collectedupdated till 30.11.2003).

131. Penal Interest on delayed submission/non-submission of stock statementsnot collected. (to be done manually) (Page 60, Clause 9.5.5 of BPC-MOI

on Interest Collected updated til l 30.11.2003)

132. When there is no stock / less stock penal interest not collected. (to bedone manually). (Page 60, Clause 9.5.5 of BPC-MOI on InterestCollected updated t ill 30.11.2003)

133. Penal interest for overdue amount / installment not collected. OverdueMonth End Flag should be fed as `Y' for staff loans only. But some of thebranches feed the same as `Y for all personal loans like Canpension,Canbudget, Canmobile etc. where repayment is linked to salary. Thisresults in wrong calculation of overdues as well as overdue interest. (Page

60, Clause 9.5 of BPC-MOI on Interest Collected updated till30.11.2003)

In the case of EMI loans, branches should feed the EMI flag as `Y asotherwise system appropriates the recovery to principal alone andoverdues are understated and resultant loss of penal interest income.

134. Processing charges as per sanction and for adhoc / extension of limit notcollected. (Cir.No.96/07)

135. TOD outstanding beyond stipulated period (Current Account) Processing

charges not collected. (Cir.No.96/07 dt.29.03.2007)

136. CDB permitted under Emergency Powers- Processing charges notcollected, if not realized with in 15 days of discounting. (Cir.No.96/07dt.29.03.2007)


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137. Upfront fee not collected wherever term loans are granted with repaymentperiod of 36 months and above classified as Term Loan. If the repaymentperiod is less than 36 months but the repayment holiday + repaymentperiod permitted is equal to 36 months or more, upfront fee is to becollected. (Cir.No.96/07 dated 29.03.2007 & & Compendium of

Instruct ions / Guidelines on Services Charges dated 30.09.2001)

138. Ledger Folio charges not collected for OD/OCC/Current/KCCS Accounts.(Cir.No.231/07 dt.28.08.2007)

139. For Project appraisal Certificate are issued on behalf of our customers onetime fee of Rs.10000/- not collected ( HO cir no. 96/2007 dtd. 29/03/2007)

140. Documentation charges are not being collected as per cir. 96/07 dated29.03.2007.

141. Charges if copy of documents is for submission to any statutory authoritynot collected as per cir. 96/07 dtd.29/03/07.

142. Charges for noting cancellation of Banks lien on Govt securities / LICpolicies at the time of grant of loan not collected (HO cir no. 96/2007dtd.29/3/2007)

143. Commitment charges not collected (HO cir. No. 96/2007).

144. Wherever loans are syndicated by us, whether syndication fee isrecovered by the branch as per term sheet is to be verified.

145. Wherever we have taken up Lenders Agency / TRA / Escrow Agency /Lead Bank Assignments (Term Loan), collection of annual fee at agreedrates needs to be verified.

146. Pre Closure charges not collected for retail loans and term loans.(Cir.No.338/06 dt.11.12.2006)

147. Periodical Godown Inspection charges / Unit Inspection charges notcollected. (Cir.No.96/07 dt.29.03.2007)

148. When Export Gold Card Limit is renewed for 3 years, processing chargescollected for one year only. (Page 341, Clause 1.3 of BPC-MOI onWorking Capital Finance updated til l 30.06.2005)

149. Penal interest for liability in excess of drawing power not collected (Cir.No.224/05 dated 20.08.2005 & Page 225, Clause 4.21.2 of BPC-MOI onWorking Capital Finance updated til l 30.06.2005)


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2. BANK GUARANTEES / LCs etc.

201. When bills are handled under LCs opened by other banks, branchescollect interest upto the due date without having reference to the actual

date of receipt of funds in our Bank account.

202. Non collection/Short collection of commission/processing charges on NFBlimits. (Page 70, Clause 12.2.xi of BPC-MOI on Interest Collectedupdated till 30.11.2003)

203. LC amendment charges not collected. (Page 68, Clause 11.6 of BPC-MOI on Bank Guarantees updated ti ll 30.09.2004)

204. Wrong collection of commission on FLC/ILCs: Whenever LCs are openedwith tolerance clause and interest clause, commission needs to be

collected for LC value + Tolerance level + Interest amount. System will nottake care of this aspect. In Bancs 2000 package there is a provision forentering tolerance % and if entered correctly, commission will be collectedfor LC value + tolerance amount. Here again, commission will not becalculated for the interest portion.

205. Commission not collected on disputed Bank Guarantee invoked but notcrystallized due to Court Proceedings. (Page 53, Clause 11.2 of BPC-MOI on Bank Guarantees updated ti ll 30.09.2004)

206. Commission short collected on GTEs due to wrong classifications of the

type of Guarantee. (Page 53 Clause 11.2 of BPC-MOI on BankGuarantees updated till 30.09.2004)

207. Deferred collection of commission on BG on annual basis not followed upand collected. (Page 59, Clause 11.8 of BPC-MOI on Bank Guaranteesupdated till 30.09.2004)

208. Processing Charges not collected on BG permitted on single transactionbasis. (Page 52, Clause 11.1 of BPC-MOI on Bank Guaranteesupdated till 30.09.2004)

209. Minimum 2 quarters commission for BG, upto Rs. 10 lakhs not collected.(Page 53, Clause 11.2 of BPC-MOI on Bank Guarantees updated till30.09.2004)

210. For Solvency Certificate / Capability Certificate appropriate commissionnot collected. (Cir.No.96/07 dt.29.03.2007)


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211. Full guarantee commission not collected at the time of devolvementwherever concessional commission is permitted. (Cir.No.345/05dt.14.12.2005)

212. For availing Buyers Credit facility, Letter of Comfort / Undertaking arebeing issued to our borrowers. Collection of commission as applicable tofinancial bank guarantees for the same and not as applicable to LCs, needto be verified.

3. DEPOSITS

301. Wrong feeding of NRE SB and NRE Term Deposits interest rates,resulting in excess / short payment of interest.

302. In Computer System, change in parameters are not effected wheneverthere is change in Rate of Interest

303. Payment of Interest to ineligible SB Accounts. (Page 68, Clause 12.2 ofBPC-MOI on Interest Collected updated ti ll 30.11.2003)

304. In Bancs 2000 package branches, there is no provision to find out chequeleaves issued beyond 40/60 leaves in a year to SB accounts and chargesare not recovered by the system hence it is to done by manually. (Cir.No.231/07 dt .28.08.2007)

Presently, in Bancs 2000 package there is no provision to find out chequeleaves issued beyond 40/60 leaves in a year to SB accounts and chargesare not recovered by the branches through the system. It is to be donemanually and omissions are noticed. BC officials/IS auditor's help can besought for writing a SQL program to extract a list of accounts wherecheque leaves beyond the prescribed 40/60 leaves are issued.

305. Non collection of service charges for non maintenance of minimumbalance in SB/CA incase of Banc 2000 branches by not running theprogramme and in the other packages (IBBS, CBS) parameters are notedcorrectly. (Cir.No.231/07 dt.28.08.2007)

306. Folio charges/Half yearly Service Charges for in-operative SB/CAaccounts are not collected. (Cir.No.231/07 dt.28.08.2007)

307. Stop payment charges as applicable and Service Charges for closure ofaccounts within one year are not collected. (Cir.No.231/07 dt.28.08.2007)


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308. Service charges not collected for return of cheques in SB, CA, etc. whilebranches are promptly collecting cheque return charges in respect ofreturn of inward clearing cheques, charges are not being collected inrespect of outward clearing cheques returned from other banks. Systemwill not calculate and manual intervention is required. (Cir.No.231/07)

4. GENERAL MATTERS

401. Interest not collected for return of inward clearing cheques received foramount of Rs. 50,000/- and above. (Page 94, Clause 45.7.6 of BPC-MOIon SB / CA)

402. Locker Rent short collected. (Cir.No.224/05 dt.20.08.2005 & Page 4 & 6,Clause 3 of BPC-MOI on Safe Deposit Lockers updated till31.07.2003)

403. Delayed remittance of locker rent @Rs.20/- pm/fraction of a month for aperiod of delay not collected (HO cir 231/2007 dated 28.08.2007).

404. Rs.20/- per operations beyond 24 operations per year not collected (HOcircular No. 231/07 dated 23.08.2007.

405. Excess commission paid to NNND agents. (Box item (NC) to Cir.No.95/08 dt.10.04.08, No.107/08 dt.28.04.08 & No.108/08 dt.29.04.08)

406. Short collection of commission on DDs/TTs/OSC etc.

In the case of OSCs, 50% commission is applicable only for Public SectorBanks and RRBs sponsored by our Bank. Branches extend this 50%concession for private sector banks like ICICI Bank, IDBI Bank, IndusIndBank etc. (Page 65 & 66, Clause 2.2 of BPC-MOI on OSC)

Whenever OSC proceeds are placed in term deposits, branches do notcollect commission. There is no such blanket permission. Powers aredelegated to RO and CO for waiver of commission.

Whenever FOSCs are handled, commission is to be collected at the rateof 0.25% subject to a minimum of Rs.10/. This commission is chargeable

even for OSCs handled for our NRIs. Branches are under the wrongimpression that only P&T need to be collected from NRIs. While it is so forinland instruments, commission at the above rates is to be collected fromNRIs also for FOSC instruments. (Page 60, Clause 3.22.7 of BPC-MOIon Foreign Remittances updated ti ll 31.01.2003)


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407. Turnover commission for Government Transactions claimed wrongly.(Cir.No.142/06 dt.23.05.06)

408. Postal tariff are not collected in all cases wherever applicable, including

where at par facilities are granted, as follows. (HO Circular 231/07)

i) Ordinary Post : Actual minimum Rs.10/- per envelopeii) Registered/Courier : Actual minimum Rs.30/- per envelope

iii) Telegram/fax/Telephone $ : Actual minimum Rs.50/- per message

$ Only at the request of customer.

409. Service Charges for Electronic Clearing Service (Debit Clearing) of Rs.1per transaction are not collected. (HO Circular 23/2006).

410. Electronic Clearing Service (Debit Clearing) Charges for returns not

charges/collected. (HO Circular 110/2008).411. Cash handling Charges for Cash Remittance to CA/OD/OCC accounts are

not collected by branches (H O Circular 13/2008)

412. Service Charges in respect of funds transfer using Canspeed(RTGS)/NEFT are not collected by branches. (HO Circular 27/2008).

413. Charges for overdue GRs not collected. (Cir.No.224/05 dt.20.08.2005 &Page 30, Clause 1.41.6 of BPC-MOI on Export General updated till30.06.2006)

414. Whenever advance payment is received for export a commission ofRs.100 is being deducted at FD. When export bills are tenderedsubsequently at branches by customers, a commission of Rs. 250/Rs. 100as the case may be is to be collected from them by branches and creditedto their Commission account. IOs attention is drawn to Page 270 of ExportManual.

415. In case of Export Bills drawn in Indian Rupees, appropriate commissionnot collected.


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5. SYSTEM RELATED INCOME LEAKAGE AREAS.

A) IBBS Platform:

501. In SB and CA modules SB and CA minimum balance violation chargesand TOD interest rates not fed. (Cir.No.231/07)

502. MICR cheque charges not parameterized correctly. (Cir.No.231/07)

503. Folio charges in CA and ODCC are not fed correctly. (Cir.No.231/07)

504. Stop payment charges are to be collected manually, as the system doesnot provide for the same. (Cir.No.231/07)

505. In ODCC, generally system takes care of collecting folio charges. Butbranch may set a flag in master for collecting folio charges manually.

These accounts are to be verified. (Cir.No.231/07)

506. Effective date for TD is entered wrongly resulting in wrong calculation ofinterest.

507. Payment of interest to NRE term deposits when closed before maturitywithin 12 months. (Page 31, Clause 1.22.1 of BPC-MOI on NRI Depositsupdated till 31.07.2003)

508. Interest is being charged with interest debit mode set wrongly as quarterly/half yearly / yearly instead of monthly.

509. Advances interest failure reports are not reviewed and interest is notdebited manually in these accounts

510. In advances, scheme level interest updation is not done or interest iswrongly updated. Interest is short debited in loan accounts having thisparticular interest code.

511. Even if the branch updates ROI at scheme level, they have not updated inthe loan accounts where interest is defined at account level.

512. In overdue AL loan accounts simple interest is charged and compoundinterest flag is not modified as Y(Cir.No.132/06 dt.12.05.2006)

513. Simple interest is stipulated in some of the retail lending schemes likeTeachers' loan, instead of compound interest (Page No.22, Clause 5.13of BPC-MOI on Interest Col lected updated t ill 30.11.2003)


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514. In loan accounts collection flow id is wrongly set as BOPI instead of BOIP.Flow Id BOPI can be stipulated only for staff housing and LHV loanswhere principal amount is recovered first. Short collection of interest isobserved since the entire credit is adjusted to principal and not to theoutstanding interest. (CBS guideline 11/08 dt.10.03.2008)

515. While feeing master data in computer, the collection flow ID andcompound interest flags are not set correctly which will result in incomeleakage (CBS guideline 11/08 dt.10.03.2008.

ROI Collect ion Flow ID Compound Interest FlagStaff simple BOPI NOthers simple BOIP NEMI BOPI YCompound BOIP Y

516. Non updation of interest rates in Advances / Loans, (CBS UserEducational Series No.8 dt.13.07.2006)

BANCS 2000 Platform - Legacy Data

517. Non recovery of minimum balance charges in current account due to SQLprogram used for recovery is wrongly modified by local TM sectionsofficials. (Cir.No.231/07 dt.28.08.2007)

518. Setting of Numeric codes of interest like D 1050 for 10.50% for VSL loan

accounts instead of creating separate code for each and every VSL loanaccount depending upon the limit.

519. If Term Deposit account is opened on transfer from other branch withinterest amount fed wrongly, system will not verify the correctness ofinterest.

520. For every change in Domestic Deposit Rate, corresponding overdueDomestic Deposit Interest code is to be set up as per DIT guidelines.System may take wrong interest code if Deposit is renewed after 14 days.(Cir.No.118/2001)


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B. Core Banking Solution

521. Checking of Interest Rate for all ODCC & Loans and advances

Fast Path - CH129 - For ODCC accounts

Fast Path - LN632 - For loans and advances(CBS guideline 2A/2006 dt. 26.06.2006)

522. Checking of all loan accounts with details whether Fixed or Not Sampleverification of some loan accounts whether the loan type shown in thereport are actual Fixed Interest accounts or not? (CBS guidelines 7/08dated 26.02.2008)

Report to be generated through Business Objects Loans and advances interest rate for loan accounts List of fixed type loan accounts.

523. Incase of CDB/FCDB in Flexcube Retail module, the Rate of Interestchanges has to be handled procedurally by inputting the interest variancefield in ST070 at the time of purchasing/discounting thecheque/currency/TC. (CBS guidelines 46/07 dt.18.06.2007 & 7/08dt.26.02.2008)

524. Whenever Rate of Interest changes, incase of outstanding CDB/FCDBamounts in Flexcube Retail Module, the differential interest, if any, has tobe debited to the CASA accounts of the customers and credited to interestcollected General Ledger manually.

525. As system will not support for recovery of overdue interest foroverdue/delayed period in the case of realization of Inland Bills like CDB,branches have to collect the differential interest for overdue/delayedperiod manually.

The differential interest can be observed by review of the following reports:

FP 643 List of CDBs/FCDBs - Purchased/DiscountedFP 213 List of CDBs/FCDBs - Realised

526. Incase of renewal of NRE Deposits within 14 days, System will not support

for picking the lower rate of interest between the interest rate on the dateof maturity and the prevailing interest rate on the date of Renewal. HenceIOs should verify such accounts and ensure that higher rate of interest isnot paid. (Page 35, Clause 1.27 of BPC-MOI on NRE Term Depositsupdated till 31.07.2003)


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527. Incase of agricultural loans, for the products 812, 840, 841, 842, 845, 847,876, 895, 896 and 899, the interest rates are fixed at the account level inLNM83. As such, the branches have to take care of interest change at theaccount level only. (CBS guidelines 29/08 dt.30.06.2008)

528. The interest rate change in respect of Farm House loans (Products 783and 885) is to be taken care at the account level, as the change in theproduct level has not taken effect at account level due to mismatch of'interest slabs' between account level (LNM83) and product level (LN060).(CBS guidelines 29/08 dt.30.06.2008)

529. Interest rates for DPN loans to employees are different depending uponthe period of sanction (Prior to introduction of Clean OD 13.75% & forconverted DPN 9%). Since, we cannot assign different rates of interestto the same product, we have assigned the ROI for the product 701 (StaffClean DPN) as 13.75%. Branches may note to give the interest variance,

wherever applicable. The interest variance earlier maintained to bemodified as the interest index selected is BPLR. (CBS guidelines 29/08dt.30.06.2008)

530. In respect of Loans in CBS, the necessary changes in Rate of Interest, ascommunicated in HO Circular from time to time, are effected, at productlevel at DIT. Branches have to verify all the loan accounts and ensure thatthe change in Rate of Interest has been percolated at account levelcorrectly. In case of any discrepancy in rate of interest, branches have torectify the same by giving account level variance in LNM83 (both 1000and 4000 series) and adjust the differential interest to the loan accounts

through BAM57. (CBS guidelines 29/08 dt.30.06.2008)

531. In case of OD/OCC accounts/Working Capital limits, the interest rates aremaintained at account level at Branches. Hence, branches have to effectthe changes in ROI at account level by opting CHM48. In case thebranches have already selected BPLR index code (20001) at the time ofopening of the account, in CHM07, the changes made at DIT level wouldhave percolated to such accounts. IOs should check whether correctinterest is charged to the OD/OCC accounts. (CBS guidelines 29/08dt.30.06.2008)

532. For OD/OCC accounts, it is preferable that Branches select Interest Indexrate of BPLR (20001) in CHM07 option at the time of limit creation andmaintain variance in CHM48 for Customer accounts, so that any change inBPLR would get effected at account level automatically when the rate ischanged at DIT level. (CBS guidelines 29/08 dt.30.06.2008)


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533. In case of Staff OD accounts, normal Interest Index rate codes are only tobe attached at the time of account opening. (CBS guidelines 29/08dt.30.06.2008)

534. Wherever OD is granted against Deposits, branches should maintain thevariance over and above the Deposit Rate, in CHM48 , as the systemarrives the Net Rate basing on the rate noted in CHM07(Deposit Rate) +the interest variance maintained.(2% over and above the deposit rate) inCHM48 (CBS guidelines 29/08 dt.30.06.2008)

535. Rate of Interest for VSL/OD against own deposits:

As per HO guidelines, the ROI for a VSL against own deposits excludingNNND and FCNR upto the value of 90% of the deposit is 2% above theROI offered on deposits, 90% to 100% of value of deposit is 2% above

the ROI stipulated on the loans and advances and more than 100% ofvalue of deposit is clean ROI. But CBS system supports interest only 2%above the ROI on deposits. Hence, branches have to calculate thedifferential ROI manually. (Cir.No.162/08 dt.30.06.2008).

536. In case of VSL/OD against third party deposit and loan/OD against NNNDdeposits, loan against FCNR, RFC, NRE, the ROI changes to be handledmanually. (CBS guidelines 29/08 dt.30.06.2008)

537. Interest variance should not be given by the Branches in LN057 for theaccounts where incremental slabs are applicable. (example staff VSL

accounts) else, the variance will get updated in all the slabs. (CBSguidelines 29/08 dt.30.06.2008)

538. Rate of Interest applicable for loans to individuals (Clean OD/DPN otherthan Teachers loan) is to be handled manually. (CBS guidelines 29/08dt.30.06.2008)

539. Rate of Interest applicable for CANRENT/CANMORTGAGE for theaccounts opened before 17-04-2007 is to be handled manually. (CBSguidelines 29/08 dt.30.06.2008)

540. Resetting the ROI after 3 years in case of fixed ROI in the loan products ofCANMOBILE, CANRENT and CANMORTGAGE are to be handledmanually. (CBS guidelines 29/08 dt.30.06.2008)


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SPACE FOR UPDATIONCIRCULAR

NO.DATE GIST OF GUIDELINES


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SPACE FOR UPDATIONCIRCULAR

NO.DATE GIST OF GUIDELINES

5. income booklet

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