CodeMonitoringStudy.pdf

8/13/2019 CodeMonitoringStudy.pdf

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Code Monitoring Study Deposit Accounts

BCSBI recently carried out a Study relating to implementation of the Code provisions

relating to different aspects of Deposit Accounts by branches of select member

banks. The findings of the study are furnished below:

S.No

Code Provision Survey Findings

1. Opening of Deposit Accounts:

As per para 8.1.1 of the Code of Bank's

Commitment to Customers (the Code"),

when an individual opens a Deposit

Account (Savings / Current), Banks are

required to:

i. inform about number oftransactions, cash withdrawals,etc. that can be done free ofcharge within a given period;

ii. inform about the kind of charges, ifany, in case of exceeding suchlimits. (Details of the charges arerequired to be included in the TariffSchedule);

iii. inform the rate at which interest ispaid on savings deposits and itsperiodicity.

iv. minimum balance to be

maintained and penalty for non-maintenance thereof.

v. Other charges, for example,charges for cheque book; ATM /debit card; etc.

I. The observations reveal that the

banks generally adhered to the

Code provisions. However, the

practices followed differed. While

some banks provided the required

information in the Account

Opening Form, others gave

information on the back-flap of

savings bank pass books.

II. In order to ensure that the

practices followed by banks are in

consonance with the provisions of

the Code, it is desirable for

member banks to bring out Most

Important Terms and Conditions

(MITCs) on the product, which can

be given to the customer at the

time of opening the account.

2. Nomination facility in Deposit

Accounts:

In terms of para 8.1 - Deposit Accounts i. Most of the banks had put in


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(c) of the Code, Banks are required:

i. to record the fact of nomination onthe passbook / account statement

/ FDRs.ii. at customer's request, banks are

required to indicate the name ofthe nominee on the pass book /statement of account / FD receipt.

place a system to record fact of

nomination in the passbook /

statement and Fixed Deposit

Receipt (FDR).

ii. As regards giving option to the

customer to indicate name of the

nominee in the pass book / FDR, it

was observed that only a few

banks had made provision in the

Account Opening Form (AOF).

iii. Banks are, therefore, advised

that the account opening form

(AOF) should have a provision for

exercising such an option.

3 Transaction Details in

Passbook/Statement:

As per para 8.1.1 - Savings / Current

Accounts - Statements - item (e) of the

Code, Banks are required to ensure, thatthe entries in the pass book / statements

are brief and intelligible.

i. In case of debit entries, all banks

were generally observed to be

giving the instrument number andname of the payee.

ii. Banks need to make efforts to

provide the name of the drawer in

case of credit transactions

especially in view of increasing

usage of personalized cheques

with drawers name printed.

4 Term Deposits:

Banks, as per para 8.1.2 (a) Term

Deposit - of the Code, are required to

obtain instructions in the application form

from the customer for disposal of term

deposit at maturity.

Wherever such instructions are not

obtained, banks should ensure sending

Specific option for disposal of term

deposits on maturity should be

provided in the AOF. The AOF

should also indicate the term of

auto renewal in case there is no

specific instruction from the

depositor for disposal of term

deposit on maturity.


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of intimation of impending due date of

maturity, well in advance, to the

depositor, as a rule.

5 Term Deposits:

In terms of para 8.1.2 - Term Deposit -

(b) and (c) of the Code, Banks are

required to inform the customer the

procedure for withdrawal of term deposit

before maturity as also the interest rates

applicable and penalty, if any, forpremature withdrawal.

The procedure for withdrawal of

term deposit before maturity

should be incorporated in the TDR

/ Advice whether or not it is

indicated in the AOF which is

retained by the bank.

6 Term Deposits: RBI Guideline:

As per regulatory instructions, premature

withdrawal of Term Deposit requires the

consent of all the joint depositors when

all of them are alive and that of the

surviving depositor and the legal heirs of

the deceased in case of death of one ofthe depositors. If the joint depositors

prefer to allow premature withdrawal of

the deposit to the surviving joint

holder(s), it would be open to banks to do

so, provided the depositors have given a

specific joint mandate to that effect.

I. The Study revealed that only a

few banks had provided the

required option to the depositors

at the time of acceptance of

deposit.

II. Many Branch Managers wereobserved to be unaware of these

regulatory instructions despite

their reiteration by RBI vide

circular dated 16 August 2012.

III. We, therefore, advise that

suitable steps be taken for offering

the option and obtaining

necessary joint mandate from the

willing depositors, at the time ofacceptance of deposit itself.

7 Inoperative/Dormant Accounts:

As per para 8.1.6 (a) of the Code, relating

to inoperative / dormant accounts, banks

are required to, inter alia, inform the

customer three months before his

account is classified as inoperative or

I. Many branches were observed

to be non-compliant.

II. We advise that the Code

provisions should be adhered to in

letter and spirit by all the branches


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dormant and the consequences thereof. of the banks.

9 Settlement of claims in respect of

accounts of deceased depositors:

As per para 8.7.1 (b) of the Code, relating

to settlement of claims in respect of

deceased deposit accounts, where the

deceased depositor had not made any

nomination, banks are required to adopt

a simplified procedure for repayment to

legal heirs of the deceased depositor andare also required to fix a minimum

threshold limit for the balance in the

account of the deceased depositors, up

to which claims in respect of the

deceased depositors could be settled

without insisting on production of any

documentation other than a letter of

indemnity.

I. Although banks policies were

found to be in consonance with

the provisions of the Code,

practices followed by branches

differed and it was observed that

the same were not in conformity

with the policy, inasmuch as someof the branches were found

insisting on production of various

documents while settling claims of

small value within the threshold

fixed by the bank.

II. We, therefore, advise that

implementation of the policy of the

bank in letter and spirit may be

ensured so that claims within thethreshold limit in respect of the

deceased depositors are settled

without insisting on production of

any documentation other than a

letter of indemnity.

Documents

CodeMonitoringStudy.pdf