Sunday , 25 June 2017

Banks

BANKS- THEIR WORK, USES AND WHY WE NEED BANK

Is your bank safe?

Banks raise money from depositors and lend or invest it to earn profits. “The bank can lose money if the lending is improper or investments are risky. So, your money is as safe as your bank’s lending or investments.”

So are the bank’s lending and investments safe?

As the FM points out, the banks are well capitalized. What does this mean? It simply means, that the RBI lays down norms for banks to follow and these regulations will ensure that depositor’s money is safe. Here are some of the regulations:

-Banks cannot lend more than a certain amount to unsecured loans, that is, loans that are not backed by a mortgage or lien. Common examples of these are personal loans, credit cards, etc. Even loans against shares are risky because the mortgage in this case would be the shares which are volatile.

1. The RBI’s monetary policy defines the limit to which banks can invest in the stock market. It means that banks can’t invest more than that amount in equity shares, convertible debentures, mutual funds etc.

2. Banks have a limit on the use of foreign funds (either foreign direct investment or foreign borrowing). This ensures that during times of crisis, even if foreign players pull out their money, the bank is not substantially affected.

3. Banks have strict audit and disclosure requirements. This keeps a check on the bank’s lending and borrowing.

4. Banks must maintain a minimum capital as a buffer against any unforeseen risk. Banks also need to keep liquid funds and these are defined by the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).

“For every Rs. 100 a bank collects as deposit, Rs. 25 will have to be kept with the government as bonds. Governments cannot default, so Rs. 25 is anyway safe. Another 8.5 per cent cash should be kept with the RBI, so that is safe again. Lehman Brothers lent 40 times its capital as loans and Goldman Sachs lent 27 times it capital but India is nowhere near that kind of cowboy lending”

In addition to these regulations, “For further security, the government introduced ‘deposit insurance’, which secures your bank deposit up to Rs. 1 lakh.”

All commercial banks including the branches of foreign banks functioning in India, local area banks and regional rural banks are covered under the deposit insurance scheme.

Foreign banks?

Foreign banks that have subsidiaries in India are safe. However, those that are headquartered abroad and only have branches here will be different. “If their operations fail there, then most certainly their operations here will become questionable,” he says.

In such case, the bank’s future would depend on the respective governments. For instance, the British government has gone all out to reassure its banks in a big way.

Inspite of all the guidelines and protection, it would only make sense for you, as depositors, to exercise caution while investing in banks. Here are some dos and don’ts.

Do’s

Do not panic. Restructure your savings. In case your deposits are with ‘unsafe’ banks, move them to a good reputed public or private sector bank.

Smart tip: You cannot gauge the safety of a bank by its name; for this you need to read balance sheets, audit reports and disclosures.

Check the Reserve Bank of India’s (RBI) norms for banks’ borrowings and lending and see if your bank adheres to them. You can access the bank’s website for this information.

Although this calls for some time consuming research, nothing is ever tiring when it comes to your own money.

Don’ts

“Simply stay away from co-operative banks,” since they are very unpredictable. A reminder would be the famous Madhavpura Mercantile Co-operative Bank – Ketan Parekh case.”

Though these banks are also subject to the same regulations and guidelines, their affairs are, sometimes, not professionally handled. “Failing co-operative banks is not a new thing.”

Is your bank customer friendly?

LATELY a lot of thought is being given to and action taken in the area of retail banking regulation.

The latest – The Banking Codes and Standards Board of India has introduced new rules for banks to increase transparency and customer services.

Let’s look at these new rules:

1. Interest rate information: In case if a customer has borrowed against a floating rate of interest, then he/she has to be informed about any change in rate through given means such as letter, email, SMS etc. The Interest rate change information should also be available on the banks’ website.

2. Return of loan document: Bank has to return property and other document within 15 days of closure of loan whether such demand has been made or not by the customer. If a bank fails to return documents in the stipulated time, the customer should be adequately compensated in cash.

3. Information to joint account holders: Banks must inform all joint holders before classifying an account as dormant/ inoperative.

4. Insurance for securities: Bank can’t force customers to take insurance cover (for the securities lodged) from a particular insurance company. The customer is free to select any insurance company.

5. Restriction on pre-sanctioned loan: Banks can’t pre-sanction loans to any customer based on telephonic confirmation. The bank has to get a written consent letter from customer.

6. Account closure time limit: In the event of account closure request, the bank has to close the account within 3 days from receipt of the request.

7. Handling complaints: Banks have to address customer complaints in 30 days, failing which they have to compensate the customer.

8. Recovery agent details on website: Banks must publish details of all recovery agents on their website so a customer can check whether an agent is authorized or not.

All these rules are applicable to member banks of Banking Codes and Standards Board of India. As of now(1st june 2010) 79 banks are members. Click here for the list of member banks.

Withdraw cash from any bank’s ATM for free!

THIS 1st April gives you reason to smile (if you haven’t already, over a fools’ day joke).

A directive from the Reserve Bank of India (RBI), dated March 2008, comes into complete effect this day. According to the directive, banks now, cannot charge you for use of other bank’s ATM for cash withdrawals.

This means that now you can withdraw money from the ATM of any bank without paying a fee.

When the directive was issued last year, it had laid down that with immediate effect (that is March 2008) banks would not charge customers for use of their own ATMs or for balance enquiries at ATMs of other banks. It had also put a cap of Rs. 20 per transaction on withdrawal from other bank’s ATMs.

Starting 1st April 2009, this Rs. 20 will also not be levied.

This final step is in line with the RBIs attempt to regulate the fee structure from the public policy angle.

Now, more interest on your savings account!

IF you are the kind who leaves a lot of money idle in your savings accounts, this news is going to make you happier and richer!

The Reserve Bank of India (RBI) made a key announcement last year that there will be a change in method of calculation of interest on your savings account. This change is effective from 1 April 2010, that is today.

Till yesterday, banks calculated interest on your savings account as follows:

3.5 per cent per annum or 0.29 per cent per month on the minimum balance in your savings account between the 10th of the month and the end of the month.

What was a little unfair here was that interest is paid on the minimum balance in your account between the 10th of the month and the end of the month. But how many of us are left with large bank balances at the end of the month anyway!

While the rate of interest has been maintained at 3.5 per cent per annum, the good news is, that from today, interest will be calculated as follows:

3.5 per cent per annum or 0.0095 per cent per day on the daily balance in your savings account.

If you can’t make sense of these numbers, allow us to explain.

Suppose your bank statement in April reads like this:

Date Deposits (Rs.) Withdrawal (Rs.) Balance (Rs.)
1 April

5,000

2 April

Rs. 30,000

35,000

3 April

4,000

31,000

5 April

4,000

27,000

10 April

12,000

15,000

13 April

Rs. 2,700

17,700

18 April

4,500

13,200

25 April

5,500

7,700

30 April

7,700

 

Before:
Under the old method, you would get an interest of Rs. 22.46 for April, that is 0.29 per cent on Rs. 7,700 (the minimum balance in your account between the 10th and the 30th of April).

Now:
Your interest would be a handsome Rs. 48.82 for April. That is, 0.0095 per cent everyday on your balance of that day.

Easily, your idle money is going to make you far richer!

That doesn’t, however, give you an excuse to leave your money lying idle in the savings account. Read our column ‘ Idle Money, Devil’s Delight ‘, down to find out how you could lose out by leaving too much money in your savings account and what you can do to invest smartly!

Making your savings and FD account flexible
GONE are the days when all a bank offered was a savings account, fixed deposit (FD) and a recurring deposit.

Today, banks are topping up plain vanilla schemes with a variety of features.
Flexible savings and Flexible FDs

There are typically two categories of accounts covered here.

1) A fixed deposit account that allows you to withdraw funds as and when you need them.

2) A sweep account, that is, a savings account where balance exceeding a predetermined limit is automatically transferred to a fixed deposit account.

Let’s understand these two accounts better.

Flexible FD
You will have to open a fixed deposit for a specific term with your bank. The minimum FD amount varies from Rs. 25,000 to Rs. 50,000, depending on the bank you choose. Also, depending on the amount of FD, you will be given the option to maintain a zero balance savings account. Naturally, higher the FD amount, greater are the chances of a zero balance savings account.
Now, as and when you require funds or if you require funds in excess of the balance in your savings account, the bank will allow you to partially break your FD to meet your requirements.

How it works:
IDBI Bank and ABN AMRO will break your FD into units of Rs. 1,000. So if you need to withdraw Rs. 15,200, a sum of Rs. 16,000 will be transferred from your FD to your savings account. In the case of HDFC Bank, the FD is broken down into units of Re 1, so only the amount that you have to withdraw will be transferred to your savings account. The balance in your fixed deposit account will continue to earn interest as per the decided rate.

The amount withdrawn will have earned interest up to the date of withdrawal at the rate applicable for the period the money was with the bank.

Reverse sweep possible?
You cannot do a reverse sweep, that is, you cannot transfer funds from your savings account into your FD. However, you must remember that the FDs will be broken on a FIFO (First In First Out) basis, which is the first FD opened will be broken first

Sweep account or Savings plus account
Here, you can open a savings account and set a minimum limit, the excess over which will be transferred to an FD. So instead of letting your savings account lie idle with funds that you may need at a certain future date, you can opt for this facility and earn a little higher interest on your money.

How it works?
In the case of ICICI Bank, you will have to keep a minimum balance of Rs. 10,000 in your savings account. If you give an instruction for sweep, any amount over and above this will be transferred to an FD in multiples of Rs. 5,000. In the case of SBI, any excess of Rs. 10,000 in the savings account will be transferred to an FD. Each time excess is transferred; a new FD will be created. The minimum ceiling for Canara Bank is Rs. 15,000.

Reverse Sweep possible?
Yes. This means that a sum as required by you will be re-transferred from your FD to your savings account. In the case of Canara Bank, the reverse sweep is done in multiples of rs 1,000. This is done on a FIFO basis, thus, the FD taken first will be broken first and interest on the amount withdrawn will be calculated for the period it was kept as FD at the rate prevailing at the time the FD was broken.

In the case of SBI, an FD will be broken in the order as desired by you. So, if interest rates have been declining, you would prefer to break a relatively older FD. You must remember that in the case of SBI, if an FD of more than Rs. 1 lakh or for a period longer than 3 years is broken, a penalty of 1 per cent will be levied for premature withdrawal. The amount that you withdraw from your FD will earn interest for the period it was actually kept as an FD at the rate prevailing at the time the FD was taken.

For ICICI Bank, the reverse sweep will be made in units of Rs. 1,000. The latest FD will be broken first so that all your old FDs would continue to earn the entire interest. When an FD is broken, interest on the amount withdrawn would be at the rate prevailing at the time the FD was made.

Idle money, devil’s delight

I HAVE a love-hate relationship with my bank accounts. I can’t help but love them because they keep my money safe. But I hate it for all the trouble it involves — keeping track between accounts, managing funds, bounced cheques, keeping passbooks and bank statements etc.

However, it needn’t be like this. Life provides you with enough stress opportunities (your boss for eg!) already. Your bank account needn’t add to it.

You just have to know how to manage your bank account so that it works for you rather than the other way around.

Here are some handy tips:

1) Trim the fat
Multiple accounts are the beginning of stress. Confesses Raj, a reader, “I have four bank accounts in all. One is a salary account, the second one, where I get good interest rates on my deposit. The other two are close to my residence and I use them to make my payouts. But somewhere I feel the way I’m managing my finances is very chaotic.”

Don’t let this happen to you. This leads to bounced cheques and mismanagement of funds. Take a long, hard look at how you are banking currently. Figure out what you really need, and then close the rest of your bank accounts within the next 30 days – no more!

2) How much is enough?
Managing your funds so that expenses are met, minimum balance is maintained and funds don’t remain idle can be a challenge. So what’s the answer? A simple rule of thumb – keep one month’s expenses idle in a savings account. This is how you can do it:

- Take an average of the last 6 months expenses by maintaining a diary or using your passbook.
- Be sure not include any non-recurring income like equity dividends, annual bonus, gift from spouse etc or non- recurring expense like jewellery purchase or vacations.
- Add to this sum, any expenses you expect in the foreseeable future (say the next three months).

3) What about savings and investments?
The answer is simple. You’ve just calculated your monthly expense. Now when you’ve got enough to equal 2-5 months’ expenses then you’re ready to invest. Put aside this money in a liquid or floating rate mutual fund, which can be accessed at virtually no notice (24 hours). A 2-5 month range is advisable because that’s how long it will take you to find a new job should you (god forbid!) lose your existing job.

In doing so you can be sure that your bank account will no longer be a cause of stress in your life. Don’t you wish there was as simple a solution for your boss?

Money Matters Mantras
a) Close extra bank accounts within the next 30 days
b) Calculate your regular monthly expenditure levels
c) Don’t keep more than a month’s expenses in the bank
d) Invest 2-5 months’ expenditure in a liquid/ floating rate fund

What is a Flexi Bank Account?
HAVE you ever tried losing weight? Eating right and working out just to find out at the end of the month that you’ve lost a grand total of 300 grams! It’s a little like putting money in your savings account. You religiously deposit money month on month just to find out that you’ve got practically nothing in terms of interest benefits all these years (In today’s world a paltry 3.5% is actually equal to nothing). Also read: Why idle money is a devil’s delight!

Give your savings a boost. Banks such as ICICI Bank, Union Bank of India, Corporation Bank, Bank of Baroda to name a few, have introduced FLEXI DEPOSITS! These instruments act as savings cum fixed deposits interchangeably, to bring you a lot more in terms of higher interest as well as additional benefits.

Flexi-deposits are similar to savings accounts. The only difference is that on the basis of your regular cash needs, you could set a limit and instruct the bank to transfer the balance of your idle money to the term deposit. This will enable you to earn some extra bucks in the bargain.

For instance, let’s say you have put in Rs. 1,00,000 in a flexi account for a year. Out of this Rs. 70,000 would automatically be transferred to a flexi deposit while Rs. 30,000 would remain in the savings account. The flexi deposit will earn interest at 5% per annum giving you a cool Rs. 3,500 on your idle money, while the savings account balance would earn at 3.5% giving you only Rs. 1,050!

But what if you’ve miscalculated your requirement and you’ve issued a cheque of Rs. 33,000 instead of the Rs. 30,000 currently in your savings balance? The beauty of this account is that the cheque will not bounce. The excess of Rs. 3,000 will be invoked from the flexi deposit. In such emergencies, imagine you having to break your fixed deposit wherein your banker would charge you 1% premature penalty. But with a flexi-deposit, there’s no such charge.

So it helps you both ways. Earning interest as well as providing you liquidity. Every bank offers. different features in this product. While the minimum balance of Corporation bank is Rs. 10,000, HDFC requires Rs. 25,000 where all money in excess of Rs. 5,000 is automatically transferred to the fixed deposit, enabling the customer to earn comparatively higher interest. But the downside is that the overdraft has a limit of 75%. This means depositors. can withdraw only that much and no more and yes, the money should remain in the account for at least six months.

What’s the catch?
So why isn’t the whole world and its uncle rushing for this product instead of a vanilla savings account?
a) First, such deposits are beneficial only for the short term. The maximum period you can deposit in such an account is a year only since the aim of such a deposit is to provide you liquidity as and when required.
b) Unlike your normal savings account under flexi-deposits you need to prescribe the cut-off limit over which, all money will be transferred to the term deposit. For instance, you instruct the bank to transfer any amount over Rs. 5,000 to your term deposit. But if the amount in your account falls below this limit you may be penalized.
c) A customer needs to state in advance the period for which he would like to open the account. If the account is closed before completion of a year, a service charge penalty of Rs. 500 can be levied.
d) Lastly, of course there are concerns of customer mis-use. “While this is good, you cannot park all your funds in such an account. It’s important to have a diversified portfolio.”

But most agree that the advantages far outweigh the disadvantages. So flexi account is the perfect way to give your bank savings a little boost. However the world has yet to find the perfect way to give your slow moving weight loss a boost. That innovation will surely fare even better flexi accounts.

I or e, it’s a Net benefit

THIS could get this writer in trouble, but it has to be said. One of the reasons why women seek the perfect man is so that someone can organise their lives for them, pay the bills and ensure their cell phones are always fully charged!

But maybe there is a simpler solution than looking for the perfect man.

Your bank is now going out of its way to make life simple for you. It offers you online bill payment in addition to online banking, investments and whatever else you need.

Get started!
You need a computer with a modem or a dial-up device, a checking account with a bank that offers online service, and the patience to complete a one-page application form, which can usually be done online.

In return, here are the services you will get.

Bill payment
Each bank has tie-ups with various utility companies, service providers and insurance companies across the country. Which means you can pay your electricity and telephone bills, mobile phone, credit card and insurance premium bills online.
You need to complete a simple one-time registration for each billing entity. You can also set up standing instructions online to pay your recurring bills automatically, so that you don’t miss out due to lack of time.
The best part: it is free!

Funds transfer
You can transfer any amount from one account to another, either in the same bank or another bank. Obviously, this means you can send money anywhere in India.
Once you login to your account, mention the payee’s account number, his bank and branch. The transfer takes place in a day or so. Traditionally, funds transfer takes a minimum of three working days.

Credit card services
Credit card users have more to look forward to. Internet banking lets you pay your credit card bills online and get a loan on your cards. You can also apply for an additional card, request a credit line increase and report a lost card.

Railway pass
This is a great relief to the harried commuter. Indian Railways has tied up with ICICI bank, enabling you to make your railway pass for local trains online.
The pass is delivered to you at your doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat and Pune. The bank charges rs 10 + a service tax at 12.36 per cent.

Investments
Opening a fixed deposit account cannot get easier than this. You can do it through a simple online funds transfer.
If you have an interlinked demat account and bank account, you can trade in the stock market. Rest assured the cash will get debited and shares will get credited automatically.
Most leading banks offer online banking and demat account. If you have a demat account with independent share brokers, you need to sign a special form which will link both your accounts.
Some banks even give you the facility to buy mutual funds, apply for any kind of loan and constantly receive new product information

Mobile recharge
You no longer need to rush to the vendor to recharge your prepaid phone every time your talk time runs out. Just top up your prepaid mobile cards by logging in to Internet banking.
Select your operator’s name, enter your mobile number and the amount for recharge, and your phone is back in action in minutes.

Shop
The expression, shop till you drop, is no longer valid because Internet banking has taken the exhaustion off shopping. Leading banks have tie-ups with various shopping web sites.
With a range of all kind of products, you can shop online and pay through your account.

You can also buy rail and air tickets through Internet banking.
Internet banking also offers other benefits
i)
Stop payment through Internet banking does not cost extra. When done through your bank branch, you might be charged Rs. 50 per cheque plus the service tax.

ii) Tracking your transactions beyond quarterly statements is a long, expensive process in regular banking. The branch may charge you Rs. 25 per page (which includes only 30 transactions), and take eight days to deliver. Internet banking lets you do it any time of the day, as often as you want, free of charge.

iii) Transferring funds outstation where the bank does not have a branch, entails outstation charges. Doing the same online is absolutely free.

In their report, Online Banking 2006, The Internet and Mobile Association of India says, “There are many advantages of online banking. It is convenient, it isn’t bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost.”

Not really a catch, but just some things you should be aware of!
i) You need an account with an Internet Service Provider.
ii) Be careful of security concerns, such as hackers accessing your bank accounts.
iii) The initial setup for bill paying is time-consuming, but will ultimately be a time-saver.
iv) Switching banks can be more cumbersome online than in person.
v) You must have basic computer skills and Internet knowledge.

Be secure!
i) Never share personal information — your Personal Identification Number, passwords, etc — with anyone, including employees of the bank.
ii) Safeguard documents that contain confidential information. Do not store PIN or password mailers Change and memorise your PIN and/or passwords immediately and before destroying the mailers
iii) Don’t provide sensitive account-related information over unsecured e-mails or over the phone. Ensure that the logged in session is signed out properly.

Why should I invest in bank deposits (FD)?
TRADITIONALLY, bank deposits have been the favourite investment avenue for us Indians.
Close to 20 per cent of household savings are invested in bank deposits. And not without reason.

Here’s why:
Low risk
Banks deposits come with very low default risk and offer security of your capital.
The real risk to these products is in the form of inflation. This is because if interest rates are low, the post inflation returns on FDs may be negligible or even negative.

Capital guarantee
Your deposit of up to Rs. 1 lakh in any bank is protected under RBI’s Deposit Guarantee Scheme. This means if you place your deposit in a bank that defaults, you will get up to Rs. 1 lakh of your money in the deposit.

Fixed returns
Interest rate on bank deposits is fixed for the entire tenure of the deposit.
FDs of different tenures carry different interest rates. Generally, higher the tenure, higher is the rate.

Liquidity
You can invest in a FD for as little as a month too. Thus, it provides ample liquidity as you can place your surplus for the short term.
Besides, bank deposits can be prematurely withdrawn. However, you will need to pay a penalty of 1 per cent of the interest rate.

Good returns
With high interest rates at present, FD returns have become attractive. For a longer tenure deposit (two to three years), you can even get a rate of around eight to nine per cent per annum. However, rates vary from bank to bank.

How to invest in FDs?
Its very simple. All you need to do is to hop across to your bank branch and apply for a deposit.
You will have to submit basic proofs such as identity, address and your Permanent Account Number (PAN).
You can even open a fixed deposit account online, through your internet banking facility.

How long will my cheque take to clear?
PICTURE this. It’s the 7th of August, but thanks to some careless partying, you are left with a paltry balance of Rs. 2,000 in your bank account, even before the middle of the month.

Your car EMI of Rs. 8,000 is due on the 10th. You are worried. A bounced cheque means a penalty and interest charges. But will the cheque make it before the EMI?

How long does a cheque take to process?
The timelines for cheque processing (that is, for the amount to get credited into your bank account) depends on whether it is:

Local clearing
Outstation clearing
A same branch transfer
A high value clearing
Let’s look at each of these in detail.

Local clearing : This is when you deposit a cheque that is drawn on a bank branch of the same city. In other words, when you have got a cheque from a bank account located in the same city as yours
Here is a day-wise procedure that banks follow to clear local cheques:
Day 1: You deposit the local cheque in your bank account.
Day 2: Your bank sends it to the ‘clearing house’ at the Reserve Bank of India (RBI). A clearing house is an association of banks that enable cheque clearing between different bank branches within a city.
At the clearing house, banks collect cheques that are drawn on any of their branches.
The head office of these banks sends the cheque to its respective branches for clearing. This is also called ‘inward clearing cheques’.
Day 3:Your account is credited for the amount. If the bank that is paying the amount is unable to debit his customer’s account (for any reason, for example insufficient balance), then the cheque is returned back to the bank that has presented the cheque (that is, the bank with which you hold the account).

Hence, a local cheque that you deposit in your account will get credited in 2-3 days time.

Outstation Clearing : As the name suggests, this is when you deposit a cheque that is drawn on a bank branch of another city. A similar process (as that of local clearing) is followed except that the deposit in your account takes more time. This is because of logistics involved in moving physical cheques from one city to the other.

Normally, outstation clearing takes around 7-10 days depending upon the location of the bank branch and the bank in question.

Same Branch Transfer: This is when you deposit a cheque drawn on the same bank branch where you hold the account. This is the quickest mode of cheque clearing. Normally, for such transactions, you will receive the amount in your account on the same day.

High Value Clearing:

Cheques of Rs. 1 lakh and more are considered high value. In High Value Clearing (HVC), your local cheque gets cleared on the same day and your account is credited by the next morning.

To enable this, you need to deposit the cheque before the cut off time in the morning (as laid down by your bank for HVC). You also need to indicate that the cheque has to be processed under HVC.
Smart tip 1: Look out for the cheque collection policy of your bank. As per the RBI, all banks need to put up this policy. This is for customers to know the exact time it takes for the cheque proceeds to reflect in their account.
Smart tip 2: See the outstation clearing and HVC charges levied by your bank. For the former, banks charge anything between Rs. 15 to Rs. 500, depending upon the cheque amount and location. However, as I write this, the RBI has proposed to bring down these charges drastically, a move that will benefit customers As for HVC, charges vary from Rs. 20 to Rs. 50.
New Cheque Norms In-force from 1st July 2010

THINK ‘payment’ and the first thing that comes to mind is perhaps a cheque book. As advanced methods like credit cards and net banking continue to make inroads into the Indian financial system, payment by cheque remains the most preferred option in India.

No wonder then, that the volume of cheque clearing is as high as 6 million every year in India. And the Reserve Bank of India (RBI) faces a tough challenge of making the process more efficient, faster yet safer.

Keeping this is mind, the RBI has already completed a pilot for a project called ‘Cheque Truncation System (CTS)’ and seeks to implement it by July 1st, 2010. The Cheque Truncation System has the capability to process the cheque based on its image, doing away with the need for an actual cheque at the time of clearance.

To bring this system into effect, the RBI has prescribed certain benchmarks towards achieving standardization of cheques issued by banks across the. In February 2010, RBI issued a circular known as ‘CTS-2010 standard ‘.

One of the most important points is – ‘Prohibiting alterations / corrections on cheque’ ie no changes / corrections should be carried out on the cheques and this comes into effect from 1st July 2010. That means customer would need to issue a fresh cheque for any change in:
• payee’s name
• amount in figures
• amount in words

Circular also asked banks to make changes in the existing cheque. Here are few changes listed in the circular
1. All cheques shall carry a standardized watermark, with the words “CTS-INDIA” which can be seen when held against any light source.
2. Pantograph with hidden word “COPY” or “VOID” feature shall be included in the cheques so it should be clearly visible in photocopies and unspecified scanned color images.
3. Bank’s logo shall be printed in ultra-violet invisible ink.
4. All cheques should be issued with the account number field pre-printed. This is mandatory for current account holders and corporate customers.
All these changes on the cheque leaf will make it more secure and easy to handle. In the age of technology, the RBI has geared up to ensure to unauthorized copy of cheque gets cleared under Cheque Truncation System.

for comments and discussion on new norms do visit New Norms
Strategies that make bank, Richer:

DURING a cash crunch, many companies look for ways to make an extra buck.

Private sector banks, for instance, have introduced a slew of new charges! And like always, the changes are subtle and you will never know about them until you find a debit to your account that you cannot place.

Let’s look at how some of them will make a dent in your pocket.
Standing instructions
The going rate has been upped to Rs. 150 (from Rs. 50, earlier). And there’s more; you’ll pay Rs. 25 if you change the standing instructions already given by you!

Miscellaneous charges
Call your bank home — for address confirmation, signature or photograph attestation — and you will end up shelling out between Rs. 50 and Rs. 100.

ATM transaction
If you are unable to withdraw money due to a lack of funds in your account, the bank will charge you Rs. 25 for trying to make that transaction.

Drop box
A charge of Rs. 100 to Rs. 300 will be levied if you put cash into the drop box! Repeat this and you will be charged up to Rs. 500.

Unblocking debit cards
If you have blocked your debit card, you will shell out Rs. 100 to unblock it.

New password, IPIN number
Re-issuance of user id, password or IPIN number will be charged henceforth. The charge is Rs. 50 per request.

Credit-free days
Several banks have reduced the number of ‘credit-free days’ by five to 10 days. This will affect the payment cycle of the bill.
In addition to this, there are several other charges such as ECS debit return, cheque return, DD issue and cancellation.
So, ignorance is NOT bliss.

What are the various bank charges?

BANKS today offer a slew of services to the customer, which only seem to increase by the day. However, remember this: there’s no such thing as a free lunch. Let’s take stock of what you pay to avail of services for a typical savings bank account.

1. Non-maintenance of minimum balance
You must maintain a stipulated minimum balance in your account (Rs. 1,000 for a nationalised bank, Rs. 5,000 for a private bank). If you fail to maintain this average quarterly minimum balance, you attract a bank charge of Rs. 750 to Rs. 1,500 respectively.

You could also face fines for cash transactions at branches and ATMs.

2. Chequebook
Most nationalised banks provide chequebooks free as per your requirement. Many private ones, on the other hand, charge you Rs. 50 to Rs. 200 per chequebook, if you use up more than two-three per quarter.

3. Account closure
Yes, it takes money even to say goodbye. Some banks charge Rs. 50 to Rs. 200 if the account is closed within six months of opening it.

4. Certificates
Unlike most nationalised banks, private banks charge Rs. 50 to Rs.250 for documents such as balance certificate, interest certificate, address confirmation, signature attestation and photo attestation.

5. Bounced Cheque
Nationalised banks fine you Rs. 50 to Rs. 200 if your cheque bounces due to insufficient funds, signature mismatch or any other reason. Private banks charge you Rs. 100 to Rs. 500.

6. Cash transaction at other branches
Banks claim to have hundreds of branches for your convenience, but this comes at a price. If you withdraw money from a bank ATM other than your own, be prepared to be charged Rs. 5 for every Rs. 1,000 transacted after the initial free transactions are over.

7. ATM
Withdrawals at ATMs of other banks are free for limited use, but for facilities like balance enquiry or cash, you could be charged anything from Rs. 10 to Rs. 100 per transaction.

8. Account statement
This one may come as a surprise. The Reserve Bank of India directs that all banks must send free quarterly statements to their customers. Should you require more statements (in the event of loss, for example), you may have to pay Rs. 50 to Rs. 500 per statement.

9. ATM or Debit card fees
Basic ATM cards are usually free of cost, but some do charge. For example, ICICI Bank provides a combination ATM/ Debit card, for which it charges Rs. 99 per annum.

The list doesn’t end here. There are several other charges — outstation clearing charge (Rs. 50 to Rs. 500), pay order/ demand draft charge (based on the amount), standing instruction charges, home cash delivery charges, old records retrieval charges, activation of dormant account charge, among others

There is no limit to the creativity your bank employs to get money out of you, but there is a way you can save your pennies. Visit the bank’s web site or any of the branches, for a copy of their expenses. It is mandatory for every bank to give it to you.

Did you just quickly run through your mind which of these services you have used, unknowing of these charges? Then, this article has served its purpose.

Think twice before you opt for any service from your bank. Everything comes with a price, even if it is a ‘free’ lunch or ‘free’ movie tickets

If You feel like that you have been cheated by your bank and no one is listening to you the feel free to complain for the same to the BANKING OMBUDSMAN which you can find on every banks website.

 

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