Banking Update

BANKING FEATURES : 2-11, 20 • Credit /Monetary Policy Review • Repo in Corporate Debt Securities • Disclosures in bank balance sheet • RBI Note Refund Rules • Tax Planning -Deductions • Right of Set-off • Farmers' Club Program • Deposit insurance • Finance Commission Diary of events -Jan, 2009: 13 • Policy, Economy • Banking Developments • Capital Markets & Insurance General Awareness : 15 Multi-Option questions:16-18 BANKING POLICY : 19 • Interest Subvention -Agriculture • Rupee Export Interest • Advance remittance for Imports • Bank guarantee for service Importer Data Bank : 20The Journal of Institute of Banking Career & Studies, Chandigarh Contents of this Issue Editor -Ms Gurmeet Toor, Executive Editor -S. Chand Singh, Editor in Chief -Sh. N S Toor events Banking anking Update pdate Volume -XIII No.02 February 2010 Rs.20 per copy • Annual Subscription Rs.200 Corporate & Distribution Office 1008, Sector 45-B, Chandigarh Phone 0172 2665 623 (Contact -Sh.SP Sharma /DS Rana) eMail -banking.events.update @gmail.com www.banking bankingindiaupdate update update.com Those who win, are those, who think they can Join Free Internet Class for Promotion INTERVIEW-page3 Promotion Success CD Now available !!!♦ Banking events updatE ♦ February 2010 2(COMPILATION-ARUNDEEP TOOR, in Sydney, Australia -on the basis of information available on RBI Website) Song of the Youth "As a young citizen of India, armed with technology, knowledge and love for nation, I realise, small aim is a crime" ..................Dr. APJ Abdul Kalam, Former President of India for FREE ONLINE new newTESTS Log on our website www.banking bankingindiaupdate. update. com The quarterly review of the Annual Policy Statement was announced by RBI on Jan 29, 2010. The major features are: Challenges before the Global Economy: In 2009, the advanced economies had been focussing on dealing with the financial crisis and restoring the health of the financial sector and the Emerging Market Economcies (EMEs) were engaged in mitigating the adverse impact of the global financial crisis on their real economies. In 2010, the effort in advanced economies is on, to further improve the financial conditions and strengthen the growth impulses, while the endeavour in the EMEs is to strengthen the recovery process without compromising on price stability and to contain asset price inflation stemming from large capital inflows. Indian Economy: • At 7.9 %, the GDP growth in the second quarter of 2009-10, showed continuation of the recovery, witnessed in the first quarter. • Agriculture and allied activities registered a better than expected growth of 0.9 %. This reflects only a part of the overall adverse impact of the deficient South-West monsoon on kharif output. • Strong industrial recovery was the key, underlying strength behind the recovery of GDP in the second quarter. The core infrastructure sector also exhibited stronger growth during April-Dec 2009. • Services activities (accounting for 64.5 % of the GDP) registered a growth of 9.0 % in the second quarter of 2009-10. The recovery was largely driven by 12.7 % growth due to payouts of arrears relating to the 6th Pay Commission Award. Excluding this , the services sector growth was 7.0 % during the second quarter. External Economy • Merchandise exports registered a positive growth of 18.2 % in Nov 2009 after a phase of decline over 13 consecutive months and the pace of decline in imports moderated significantly to 2.6 %. Monetary Conditions • Broad money (M3) growth exhibited some moderation in recent months and was at 16.5 % as on January 15, 2010, as against the indicative money growth projection of 17.0 % presented in the Second Quarter Review of Monetary Policy 2009-10. • On the component side of money growth, the deposit growth of scheduled commercial banks at 16.8 % was lower than the 18.0 % indicative projection in the Second Quarter Review of Monetary Policy 2009-10. • Non-food credit growth, which decelerated over 12 months following the peak in Oct 2008, has shown a reversal in the trend since Nov 2009. Non-food credit growth of Banks (SCBs) at 14.4 % as on Jan 15, 2010 remains lower than both 21.9 % growth seen in the corresponding period of last year. Financial Markets: • Money market rates remained well anchored within the liquidity adjustment facility (LAF) corridor, and in the CBLO market, which accounts for about 80 % of the volume in the money market, the rates remained below the call money rates. • Stock markets, though volatile, sustained the gains of previous months. •Among the EMEs, India was one of the strongest performers. • In the primary market, activities picked up in terms of IPOs and private placements. Net mobilisation by the mutual funds exhibited significant increase. Global Outlook (a) Global Growth : Global economic performance improved during the third and fourth quarters of 2009, prompting the IMF to reduce the projected rate of economic contraction in 2009 from 1.1 % made in Oct 2009 to 0.8 % in its latest World Economic Outlook Update released on January 26, 2010. The IMF has also revised the projection of global growth for 2010 to 3.9 %, up from 3.1 %. (b) Global Inflation: In the advanced economies, the headline inflation is expected to increase from zero in 2009 to 1.3 % in 2010. In emerging and developing economies, inflation is expected to rise to 6.2 % in 2010 from 5.2 % in 2009. India Outlook (a) Growth: In the 2nd Quarter Review of Oct 2009, RBI had placed the baseline projection for GDP growth for 2009-10 at 6.0 % with an upside bias. Assuming a near zero growth in agricultural production and continued recovery in industrial production and services sector activity, the baseline projection for GDP growth for 2009-10 has been raised to 7.5%. According to the Reserve Bank’s Professional Forecasters Survey conducted in December 2009, the outlook for 2009-10 growth has been revised upwards from 6.0 % to 6.9 %. (b) Inflation: The headline wholesale price index (WPI) inflation was 1.2 % in March 2009. It continued to decline and became negative during June-August 2009 due to the large statistical base effect. It turned positive in Sept 2009, accelerated to 4.8 % in Nov 2009 and further to 7.3 % in Dec 2009. On a financial year basis, between April-Dec 2009, WPI moved up by 8%. RBI emphasised that the conduct of monetary policy will continue to condition and contain perception of inflation in the range of 4.0-4.5%, in line with the medium-term objective of 3.0 % inflation consistent with India’s broader integration with the global economy. (c)Money and Credit Aggregates • Money supply : During the current financial year, the year-on-year growth in money supply Q3 Credit & Monetary Policy Review Fresh Recruitment in Banks for Coaching Classes Contact us at 098143 31661Banking events updatE ♦ February 2010 ♦ 3 PROMOTION EXAM Institute of Banking Career & Studies Office:SCO No.34, Sector 33-D, Chandigarh 160 047 Phone: 0172-2665623, 093178-12720 email -banking.events.update@gmail.com NS TOOR's www.banking bankingindiaupdate update update.com A large no. of bankers already succeeded by using the course material. If unable to attend class room program, this is the best option. Course Kit : The course kit include: (a) subject-wise basic study material, (b) assignment to improve retention (c) objective type practice exercise (d) recalled questions (e) mock test papers. Fee : Rs.1500 (may differ. -may be checked before remittance). Fee to be paid in advance by way of DD at Chandigarh in our favour OR be deposited in CBS a/c with PNB. How to enrol : To enrol, advise (a) name, (b) address for correspondence (c) Email address, (d) bank name, (e) scale for which appearing, (f) phone /Cell number and (f) details of subjeect for the exam (relevant course material, other than internal bank guidelines shall be sent). CORRESPONDENCE COURSE Based on latest trends of IBPS Exam CAIIB/ JAIIB Course is based on exam pattern of IIB&F. A large no. of candidate have succeeded in all 3 papers in first attempt with our study material. Course Kit : The course kit include: (a) subject-wise basic study material, (b) assignment to improve retention (c) objective type practice exercise (d) mock test papers. Fee : Rs.850 per subject. Fee payable in advance by DD on Chandigarh or in cash across our counter or credit to our PNB-CBS account. How to enrol : To enrol, advise name, address for correspondence, eMail id, mobile phone, bank name, subjects for enrolment. Free Website Class for PROMOTION INTERVIEW • If you have been called for a Promotion Interview in your bank and you want to prepare your self to face various questions on latest banking concepts, you can join our free internet class, while sitting in your office or at home, on our website. For details you can contact us. (M3) moderated from over 20.0 % at the beginning of the financial year to 16.5 % on January 15, 2010, reflecting deceleration in bank credit growth during 2009-10. • Year-on-year increase in non-food bank credit to the commercial sector, at 14.4 % as on January 15, 2010, was significantly lower than the 22.0 % growth a year ago. • Over 98 %of the net market borrowing program of the Central Government for 2009-10 has already been completed by January 28, 2010. Projections for 2009-10 (a) Indicative adjusted non-food credit growth projection : reduced to 16%. (b) Projected M3 growth in 2009-10 reduced to 16.5 % for policy purposes. (c) Aggregate deposits of banks are projected to grow by 17%. Risk Factors RBI observes that while the baseline scenario is comforting, a number of downside risks to growth and upside risks to inflation need to be recognised. (i) There is still uncertainty about the pace and shape of global recovery. There are concerns that it is too dependent on public spending and will unravel if governments around the world withdraw their fiscal stimuli prematurely. As the world discovered during the recent crisis, the global economy is heavily inter-linked through the business cycle. A downturn in global sentiment will affect not only our external sector but also our domestic investment. (ii) Oil prices have been range-bound in the recent period. However, if the global recovery turns out to be stronger than expected, oil prices may increase sharply, driven both by prospects of demand recovery and the return of the investment motive, which will affect all commodities. This could stoke inflationary pressures even as growth remains below potential. (iii) Expectations of softening domestic inflation are contingent on food prices moderating. This, in turn, depends significantly on the performance of the south-west monsoon in 2010. If rainfall is inadequate, high food prices will continue to intensify inflationary pressures. (iv) So far, capital inflows have been absorbed by the current account deficit. However, sharp increase in capital inflows, above the absorptive capacity of the economy, may complicate exchange rate and monetary management. (v) As growth accelerates and the output gap closes, excess liquidity, if allowed to persist, may exacerbate inflation expectations. Policy Stance Monetary policy stance for the remaining period of 2009-10 will be as under: • To anchor inflation expectations and keep a vigil on the trends in inflation and be prepared to respond swiftly and effectively through policy adjustments as warranted. • To actively manage liquidity to ensure that credit demands of productive sectors are adequately met consistent with price stability. • To maintain an interest rate environment consistent with price stability and financial stability, and in support of the growth process. Monetary Measures Bank Rate, Repo Rate, Reverse Repo Rate and SLR : These rates remain unchanged at 6%, 4.75%, 3.25% and 25% respectively. Cash Reserve Ratio : Increaseed by 75 basis points from 5.0 % to 5.75 % of their net demand and time liabilities (NDTL) in 2 stages. The 1st stage of increase of 50 basis points will be effective the fortnight beginning Feb 13, 2010, followed by the 2nd stage of increase of 25 basis points, effective the fortnight beginning Feb 27, 2010. As a result of the increase in the CRR, about Rs. 36,000 crore of excess liquidity will be absorbed from the system. Monetary Policy 2010-11 : The Monetary Policy for 2010-11 will be announced on April 20, 2010.♦ Banking events updatE ♦ February 2010 4 BANKING FEATURES Compilation : Arundeep Toor (Sydney -Australia). The Reserve Bank of India in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 issued the Repo in Corporate Debt Securities (Reserve Bank) Directions, 2010, to all the persons dealing in repo in Corporate Debt Securities. The features are: Commencement : These directions shall come into force with effect from March 01, 2010. Eligible securities for repo in Corporate Debt Securities a.Only listed corporate debt securities which are rated ‘AA’ or above by the rating agencies, that are held in the security account of the repo seller, in demat form, shall be eligible provided that Commercial Papers (CPs), Certificates of Deposit (CDs) and other instruments including Non-Convertible Debentures (NCDs) of less than one year of original maturity, shall not be eligible securities for undertaking repo. Eligible Participants: The following entities shall be eligible to undertake repo transactions in CDS: a.Any scheduled commercial bank excluding RRBs and LABs; b.Any Primary Dealer authorised by the Reserve Bank of India; c.Any non-banking financial company registered with the Reserve Bank of India (other than Government companies as defined in section 617 of the Companies Act, 1956); d.All-India Financial Institutions, namely, Exim Bank, NABARD, NHB and SIDBI; e.Other regulated entities, subject to the approval of the regulators concerned, viz., i.Any mutual fund registered with the Securities and Exchange Board of India; ii.Any housing finance company registered with the National Housing Bank; and iii.Any insurance company registered with the Insurance Regulatory and Development Authorit f.Any other entity specifically permitted by the Reserve Bank Tenor: Repos in CDS shall be for a minimum period of one day and a maximum period of one year. Trading: Participants shall enter into repo transactions in corporate debt securities in the OTC market. Reporting of Trades: a. All repo trades shall be reported within 15 minutes of the trade on the FIMMDA reporting platform. b. The trades shall also be reported to any of the clearing houses of the exchanges for clearing and settlement. Settlement of trades: a.All repo trades in corporate debt securities shall settle either on a T+1 basis or a T+2 basis under DvP I (gross basis) framework. b.Repo transactions in corporate debt securities shall settle in the same manner as outright OTC trades in corporate debt securities. c.On the date of reversal of repo trades, the clearing houses shall compute the obligations of the parties and facilitate settlement on DvP basis. Prohibition on sale of repoed security : The security acquired under repo shall not be sold by the repo buyer (lender of the funds) during the period of repo. Haircut: a. A haircut of 25% (or higher as maybe decided by the participants depending on the term of the repo) shall be applicable on the market value of the corporate debt security prevailing on the date of trade of 1st leg. b. Participants may refer to the rating-haircut matrix that may be published by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), to determine the appropriate haircut. Valuation: For arriving at the market value of the corporate debt security, the participants undertaking repo in corporate bonds may refer to the credit spreads published by the FIMMDA. Capital Adequacy: Repo transactions in CDS shall attract capital charge as per CRAR guidelines issued by RBI. Disclosure: The details of CDS lent or acquired under repo or reverse repo transactions shall be disclosed in the “Notes on Accounts” to the Balance Sheet. Accounting: The repo transactions in CDS shall be accounted as per the revised guidelines on uniform accounting for repo/reverse repo transactions in Government securities, which would be issued separately. Computation of CRR/SLR & borrowing limit: a.The amount borrowed by a bank through repo shall be reckoned as part of its Demand and Time Liabilities (DTL) and the same shall attract CRR/SLR. b.The borrowings of a bank through repo in corporate bonds shall be reckoned as its liabilities for reserve requirement and, to the extent these liabilities are to the banking system, they shall be netted as per clause (d) of the explanation under section 42(1) of the RBI Act, 1934. Such borrowings shall, however, be subject to the prudential limits for inter-bank liabilities. Documentation: The participants shall enter into bilateral Master Repo Agreement as per the documentation finalized by the FIMMDA. Definitions: For this purpose: a. ‘Corporate Debt Security’ means non-convertible debt securities, which create or acknowledge indebtedness, including debentures, bonds and such other securities of a company or a body corporate constituted by or under a Central or State Act, whether constituting a charge on the assets of the company or body corporate or not, but does not include debt securities issued by Government or such other persons as may be specified by the Reserve Bank, security receipts and securitized debt instruments” b. ‘Security Receipts’ means a security as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) c. ‘Securitized debt instrument’ means securities of the nature referred to in sub-clause (ie) of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956). • Repo in Corporate Debt SecuritiesBanking events updatE ♦ February 2010 ♦ 5 BANKING FEATURES • Institute of Banking Career & Studies Office:SCO No.34, Sector 33-D, Chandigarh 160 047 Phone: 0172-2665623, 093178-12720 email -banking.events.update@gmail.com NS TOOR's www.banking bankingindiaupdate update update.com We conduct class room coaching programs for various scales (Clerical to Asstt. General Managers) in banks such as SBI associate Bank, PNB, BoB, BoI, Canara Bank, CBI, Union Bank, OBC, Vijaya Bank, Corpn Bank etc. The programs are conducted in Chandigarh, Delhi, Lucknow, Jaipur, Mumbai, Patna, Indore, Hyderabad and other centres. Our results : Because of focussed attention and the hardwork during the training sessions and later on, the candidates attending these classes have given excellent results. Many of our candidates have topped the selection lists and bagged most of the top positions. Study kits : Candidates are provided study kits based on latest pattern of examination followed by IBPS, Mumbai. It consist of basic study material on all apsects of examination, practice test exercises and recalled questions of previous examinations. The study material differs from bank to bank depending up the syllabus and the level of scale. CLASS ROOM COACHING BANK PROMOTION EXAM by N S TOOR & AK GUPTA* *Director, Bankers' Training Institute, New Delhi 09350476949 FINANCIAL A AWARENESS ARENESS Digest for general knowledge requirement relating to financial and other matters. Mar 09 Issue Now Available !! New Recruitment in Banks Coaching Classes Contact us or 09814 331 661 for coaching classes. Mock Test CD for promotion & JAIIB examination : Pls refer page 13 for details. The users of the bank financial statements need information about the financial position and performance of the bank in making economic decisions. The use of notes and supplementary information provides the means to explain and document certain items, which are either presented in the financial statements or otherwise affect the financial position and performance of the reporting enterprise. The market discipline (pillar 3 under Basel II) works only if market participants have access to timely and reliable information, which enables them to assess banks’ activities and the risks inherent in these activities. Presentation: ‘Summary of Significant Accounting Policies’ and ‘Notes to Accounts’ is shown under Schedule 17 and Schedule 18 respectively by banks to maintain uniformity. Minimum Disclosures: At a minimum, the items listed in RBI circular are required to be disclosed in the ‘Notes to Accounts’. Banks are encouraged to make more comprehensive disclosures if they are significant and aid in the understanding of the financial position and performance of the bank. The listed disclosure is intended to supplement, and not to replace, other disclosure requirements under relevant legislation or accounting and financial reporting standards. Summary of Significant Accounting Policies : Banks should disclose the accounting policies regarding key areas of operations at one place (under Schedule 17) along with notes to accounts in their financial statements. A suggestive list includes -Basis of Accounting, Transactions involving foreign exchange, Investments – classification, valuation, etc, Advances and Provisions thereon, Fixed Assets and Depreciation, Revenue Recognition, Employee Benefits, Provision for Taxation, Net Profit, etc, etc. Disclosure Requirements: In order to encourage market discipline, RBI has developed a set of disclosure requirements which allow the market participants to assess key information on capital adequacy, risk exposures, risk assessment processes and key business parameters which provide a consistent and understandable disclosure framework that enhances comparability. Banks are also required to comply with the Accounting Standard 1 (AS I) on Disclosure of Accounting Policies issued by the ICAI. The enhanced disclosures have been achieved through revision of Balance Sheet and Profit & Loss Account of banks and enlarging the scope of disclosures to be made in “Notes to Accounts”. In addition to the 16 detailed prescribed schedules to the balance sheet, banks are required to furnish the following information in the “Notes to Accounts”: 1.Capital 2.Investments (1. Repo Transactions 2. Non-SLR Investment Portfolio) 3.Derivatives (1. Forward Rate Agreement/Interest Rate Swap, 2. Exchange Traded Interest Rate Derivatives 3. Disclosures on risk exposure in derivatives) 4.Asset Quality (1. Non-Performing Assets, 2. Particulars of Accounts Restructured, 3.Details of financial assets sold to Securitisation/Reconstruction Company for Asset Reconstruction 4.Details of non-performing financial assets purchased/sold, 5. Provisions on Standard Assets) 5.Business Ratios 6 Asset Liability Management 7.Exposures (1. Exposure to Real Estate Sector, 2.Exposure to Capital Market, 3. Risk Category wise Country Exposure, 4. Details of Single Borrower Limit (SGL)/Group Borrower Limit (GBL) exceeded by the bank, 5.Unsecured Advances) 8 Miscellaneous (1.Amount of Provisions made for Income-tax during the year, 2. Disclosure of Penalties imposed by RBI) Disclosure Requirements as per Accounting Standards where RBI has issued guidelines in respect of disclosure items for ‘Notes to Accounts: (1 Accounting Standard 5 – Net Profit or Loss for the period, prior period items and changes in accounting policie, 2 Accounting Standard 9 – Revenue Recognition, 3. Accounting Standard 15 – Employee Benefits, 4. Accounting Standard 17 – Segment Reporting, Part B: Geographic segments (1) Accounting Standard 18 – Related Party Disclosures (2) Accounting Standard 21 – Consolidated Financial Statements (3) Accounting Standard 22 – Accounting for Taxes on Income (4) Accounting Standard 23 – Accounting for Investments in Associates in Consolidated Financial Statements (5) Accounting Standard 24 – Discontinuing Operations (6) Accounting Standard 25 – Interim Financial Reporting (7) Other Accounting Standards (8) Additional Disclosures (9) Provisions and Contingencies (10) Floating Provisions (11) Draw Down from Reserves (12( Disclosure of complaints, (13) Disclosure of Letters of Comfort (LoCs) issued by banks Disclosures in Bank Balance Sheet♦ Banking events updatE ♦ February 2010 6 Source : Website of RBI BANKING FEATURES RBI (Note Refund) Rules 2009 The Note Refund Rules were comprehensively revised and simplified during Sept 2009, which are called, the RBI (Note Refund) Rules, 2009. The rules apply to a note (currency note /bank note), which is a legal tender on the date of its presentation before the Bank. RBI has decided that any officer of the designated branch can adjudicate mutilated notes presented to the branch. Provisions Sec 28, in RBI Act, 1934: A person cannot as a matter of right be entitled to recover from the Central Govt or RBI, the value of any lost, stolen, mutilated or imperfect currency note. Exchange of soiled notes: The facility is to be provided by all banks at all of their branches to all tenderers. Exchange of mutilated notes: The facility would be available at designated bank branch/es (including cooperative banks and RRBs) to all tenderers whether they are account holders or not. Definitions of different category of notes Bank note: Any note issued by RBI, but does not include a Govt note other than one rupees note, issued by the Govt of India, Ministry of Finance, Department of Economic Affairs. Imperfect note: Any note, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated note. Mutilated note: A note of which a portion is missing or which is composed of more than two pieces. Mismatched note : A mutilated note, which has been formed by joining a half note of any one note to a half note of another note. A mismatched note can be identified on the basis of number, signature etc. and /or after examining other security features. Soiled note: A note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note. Essential features of a note means (i) the name of the issuing authority in Hindi and/or English i.e. Bank or Govt of India, as the case may be; (ii) the guarantee clause in Hindi and/or in English; (iii) the promise clause in Hindi and/or in English; (iv) the signature in Hindi and/or in English; (v) the Ashoka Pillar emblem or Mahatma Gandhi portrait, as the case may be; and (vi) the water-mark of the Ashoka Pillar emblem or Mahatma Gandhi portrait, as the case may be. Rule : 3. Decision on Adjudication of mutilated note -For dispute in relation to adjudication of mutilated note, the same shall be referred to RBI, for its decision and RBI decision shall be binding on the claimant, his nominees and legal heirs or representatives as the case may be . Rule : 4. Presentation and disposal of claim -A claim in respect of any note may be presented before the Prescribed Officer for adjudication and payment of value under these rules. Rule : 5. Right to call for information or to hold enquiries -The prescribed officer may, if considered necessary so to do, call for any information or hold any inquiry relating to any claim presented before him under these rules, and where the genuineness of the note is doubtful, he shall send such doubtful note for expert opinion to the Currency Note Press, Nashik Road or to any other authority as designated under any law in force for this purpose. Rule : 6. General provisions in relation to all claims-(1) No claim for a note, alleged to have been stolen, lost or wholly destroyed, shall be entertained. (2) If the Prescribed Officer is satisfied that a mutilated note presented before him is one which appears to have been cancelled at any office of the Bank or the claim is one which appears to have already been paid under these rules, he may, after making enquiries under rule 5 above reject the claim on such note. (3) A claim in respect of a note, which, -(i) cannot be identified with certainty as a genuine note for which the Bank is liable under the Act; (ii) has been made imperfect or mutilated, thereby causing the note to appear to be of a higher denomination, or has been deliberately cut, torn, defaced, altered or dealt with in any other manner, not necessarily by the claimants, enabling the use of the same for making of a false claim, to defraud the Bank or the public, (iii) carries any extrinsic words or visible representations intended to convey or capable of conveying any message of a political or religious character or furthering the interest of any person or entity; (iv) has been imported into India by the claimant from outside India in contravention of the provision of any law; (v) any information called for by the Prescribed Officer or the Bank, is not furnished by a claimant within a period of three months from the date of receipt of the notice or letter asking for the information, or (vi) in the opinion of the Prescribed Officer, a deliberate fraudulent intention appears in respect of such a claim shall be rejected and shall not be eligible for consideration under any other Law for the time being in force. Rule : 7 Claims for imperfect note -The value of an imperfect note may be paid for full value/half value as specified in the tables given in Rule 8 relating to mutilated notes, if the matter, which is printed on the note has not become totally illegible, and the Prescribed Officer is satisfied, having regard to the printed matter which is legible on the note, that it is a genuine note. Rule: 8 Claims for Mutilated Notes (Rule-8): (1) Adjudication for notes of Rupee 1, 2, 5, 10, 20: (i) if the area of the single largest undivided piece of the note presented, is more than 50% of the area of the respective denomination, rounded off to the next complete square centimeter (cm), full value on mutilated notes of the above denominations shall be payable; (ii) If the area of the largest undivided piece of the note presented is less than or equal to 50 % of the area of the note, the claim shall be rejected. (2) Payment of claim for note of Rs.50 and above: (i) Full value of the mutilated notes of the above denominations shall be payable if the area of the single largest undivided piece of the note presented is moreBanking events updatE ♦ February 2010 ♦ 7 BANKING FEATURES For all types of bank interviews 5th Edn Rs.250 For Banking informattio in Hindi 7th Edn Rs.300 Practice Sets Mock Tests 10th Edn Rs.165 Banking Problems & Rationales 5th (2010) Edn Rs.250 Most-used book by bankers 30th (2010) Edn Rs.300 OUR WIDELY READ BANKING PROMOTION BOOKS • than 65 % of the area of the respective denomination rounded off to the next complete square centimeter; (ii) if the undivided area of the single largest undivided piece of the note presented is equal to or more than 40 % and less than or equal to 65 % of the area of the respective denomination rounded off to the next complete square centimeter, half the value of the note is payable. (iii) If the area of the single largest undivided piece of the note is less than 40%, no value shall be payable, and the claim shall be rejected. (iv) if the claim of mutilated notes of Rs.50 to Rs.1000 denomination notes consists of a note composed of two pieces of the same note and the two pieces, individually, have an area equal to or more than 40 % of the total area of the note in that denomination, then the claim may be refunded for full value and need not be treated as consisting of two tenders for half value. Rule:9. Payment of claim in respect of mismatched note-The payment of claim in respect of a mismatched note may be dealt with as follows, namely-(a) in case of notes upto Rs.20 denomination notes, the area of the larger of the two pieces presented may be measured and adjudicated as per the provisions of subruul (1) of Rule 8, ignoring the smaller half. (b) if none of the two pieces presented meets the minimum area stipulated as per the provisions of clause (i) of subruul 1 of rule 8 above, the claim shall be rejected. (c) in case of Rs.50 and above denominations, the two pieces may be treated as two separate claims and dealt with accordingly. Rule:10. Claimants to be bound by rules-(1) Any payment which is provided under these rules shall be made only as matter of grace. (2) Any person who makes any claim on account of an imperfect note or mutilated note shall be deemed to have made the said claim subject to the provisions of these rules, which shall be binding on all claimants and their heirs or assigns. Rule 11. Retention and destruction of note-Notwithstanding the denomination of a note or the decision of the Prescribed Officer on the claim, a note presented before the Prescribed Officer for making a claim shall be retained and destroyed or otherwise disposed of by the Bank in the following manner, namely-(a) in the case of a note in respect of which full payment is made, at any time after the payment; and (b) in the case of a note in respect of which no payment is made, ,or on which half value payment has been made, on the expiry of a period of 3 months from the date of the decision rejecting the claim or to pay half-value, as the case may be, unless within this period, an order from a competent Court is submitted to any office of the Bank or branch of the designated bank restraining the Bank from destroying or otherwise disposing of the said note. Rule : 12. Payment to Legal heirs or nominees-(1) If a claimant who has submitted a claim under these rules, is dead, his legal representatives shall be eligible to receive the payment due to the claimant subject to the determination of the claim by the Prescribed Officer. (2) The legal representatives shall be entitled to receive the payment due to the claimant, if any, upon furnishing to the Prescribed Officer an indemnity bond executed by the legal representative in favour of the branch or office of the Bank or any other institution or entity as designated by the Bank for this purpose; Provided payment upto an amount of rupees five hundred may be made to the legal heir of the claimant on a declaration for this purpose. (3) In case of mutilated note presented at the Bank through Triple Lock Receptacle (TLR ) cover, the tenderer shall indicate his name and address alongwith other details, such as, bank account number, etc. as specified on the cover, and the individual tenderers, may, at their option, in addition, also indicate on the cover, the name and address of the nominee who may receive the amount that is determined to be due on the claim without production of indemnity, subject to proper identification. Rule : 13. Printed Forms: Printed form will be used Rule: 14. Stamp Duty : paid by person executing bond. Rule: 15. Procedure when payee is untraced-(1) In case of the note having been adjudicated at the office of the Bank, the value or part of the value of a note is payable to the claimant and if such claimant, is not found or is dead, his legal representatives or the nominee specified by him cannot be found or fails within a period of three months from the date of communication to him the decision to take steps to receive payment, the amount payable shall be paid to the Banking Department of the Bank (2) In case of the mutilated note having been adjudicated at the branch of designated bank or other entities, such payment may be credited with the Issue Office of the Bank after a period of three months from the date of communication to the tenderer of the decision to take steps to receive the exchange value.♦ Banking events updatE ♦ February 2010 8 BANKING FEATURES Tax Planning -Deductions from Income Section 80C of Income Tax Act 1961, which had replaced the then existing Section 88 wef 1.4.2006 allows different types of deductions from income of an Assessee. It brought a major change in the method of providing the tax benefit. Total limit: As per this provision of the Income Tax Act, the qualifying investments, up to a maximum of Rs. 1 Lakh, are deductible from income of the assessee i.e. income gets reduced by the amount of this investment. This benefit is available to assessee, irrespective of their level of income. For example, if an assessee is in the highest tax bracket of 30%, and makes investment of Rs. 1 Lakh, he saves a tax of Rs. 30,000. Qualifying Investments Provident Fund (PF) & Voluntary Provident Fund (VPF: PF is automatically deducted from salary. Both the employee and employer contribute to it. While employer’s contribution is exempt from tax, employee's contribution is counted towards section 80C investments. The employee also has the option to contribute additional amounts through voluntary contributions (VPF). Current rate of interest is 8.5% per annum (p.a.) and is tax-free. Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is a good investment. The current rate of interest is 8% with is taxfrree The normal maturity period is 15 years. The minimum amount of contribution is Rs 500 and maximum is Rs 70,000 in a financial year. Life Insurance Premiums: Any amount that the tax paper pays towards life insurance premium for himself, his spouse or children can also be included in Section 80C deduction. But the amount of life insurance premium paid for parents (father /mother /both) or in-laws is not eligible for deduction under section 80C. If the assessee is paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private insurance companies can be considered here. Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes specially created for offering tax savings. These are called Equity Linked Savings Scheme, or ELSS. The investments that an assessee makes in ELSS are eligible for deduction under Sec 80C. Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that a tax payer pays every month to repay the home loan consists of two components – Principal and Interest.The principal component of the EMI qualifies for deduction under Sec 80C. Even the interest component can save significant income tax – but that would be under Section 24 of the Income Tax Act. For this a reference shall be required to be made to the relevant section. Stamp Duty and Registration Charges for a home: The amount paid as stamp duty while purchasing a house, and the amount paid for the registration of the documents of the house, can be claimed as deduction under section 80C in the year of purchase of the house. National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is 8% compounded half-yearly, i.e. the effective annual rate of interest is 8.16%. If Rs 1,000, is invested, it becomes Rs 1601 after 6 years. The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction. Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that is invested in these bonds can also be included in Sec 80C deductions. Pension Funds – Section 80CCC: This section stipulates that an investment in pension funds is eligible for deduction from income. Section 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs. 1 Lakh.This also means that investment in pension funds upto Rs. 1 Lakh can be claimed as deduction u/s 80CCC. 5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction. Senior Citizen Savings Scheme 2004 : Senior Citizen Savings Scheme (SCSS) is a lucrative scheme among other the small savings schemes but it is meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly. It needs to be noted that the interest is payable quarterly instead of quarterly compounding. Thus, unclaimed interest on these deposits will not earn any further interest. The interest income under this scheme is chargeable to tax. 5-Yr post office time deposit scheme: These are similar to bank fixed deposits. Although available for varying time duration like one year, two year, three year and five year, only 5-Yr post-office time deposit – which currently offers 7.5% rate of interest –qualifies for tax saving under section 80C. Effective rate works out to be 7.71% per annum (p.a.) as the rate of interest is compounded quarterly but paid annually. The Interest income is entirely taxable. NABARD rural bonds: There are two types of Bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C. Unit linked Insurance Plan (ULIP): ULIPs cover Life insurance with benefits of equity investments.They have attracted the attention of investors and tax-savers not only because they help in saving the tax but they also perform well to give good returns in the long-term. Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which the assessee needs receipts), that can be claimed as deductions under Sec 80C. •Banking events updatE ♦ February 2010 ♦ 9 Legal Aspects of Banking 4th Edn Accounting & Finance 4th Edn General Mgmt 4th Edn Rs150 Financial Mgmt 4th Edn Rs.125 Risk Management 4th Edn Rs.150 OUR CAIIB &JAIIB BOOKS Legal Aspects of Banking 4th Edn BANKING FEATURES The set-off refers to ‘combining of two or more accounts of the customer for final settlement of accounts’. It involves at least one account with a debit balance and another account with a credit balance. (say an overdraft and a current or saving bank or FDR account). Definition : The right is not defined in any Act, but it is a statutory right arising on account of contractual obligations of the bank and its customers. Different branches as a one unit: For exercising this right, all branches of a particular bank are treated as one unit, which means that a loan account in Branch -1 can be adjusted by using the funds lying in a deposit account in Branch-2, by observing the other conditions. Possession of deposit receipt or pass-book : Possession is not necessary for exercising the right of set-off. Right of lien and set-off : These are two independent rights. Where a right of set-off is available, the right of lien cannot be available. Conditions: The right can be used subject to fulfillment of certain conditions, as under: 1.Relationship : The right can be exercised when the relationship is that of debtor/creditor (deposit a/c) on the one hand and creditor/debtor (loan a/c) on the other hand and exist simultaneously. 2.Notice : The right can be exercised only after sending a prior notice to the depositor, expressing the intention of the bank to exercise the right of set-off. The notice will be of a reasonable period. 3.Type of loan: The loan should be certain, determined, due & not a future or contingent debt and where no agreement to the contrary exists. In other words, the right can be used, for those loans, which have become due for payment and repayment has not been made by the customer. Where the customer has been paying the loan as per agreed terms, the right is not available. 4.Time barred loans : Time barred loans can be recovered by use of right of set-off, since such loans continue to be lawful, otherwise. 5.Same name and capacity : It is essential that the account must be in the same name and in the same capacity/right. The money belonging to someone else cannot be made available to satisfy personal debts of some other person. Special types of accounts: Partners/partnership: Where a partner’s account shows credit balance, the right can be exercised for the dues Right of Set-Off • of the partnership firm. But where the firm’s account shows credit balance, the bank cannot set off the credit balance against the debts due from the individual partner. Guardian : Where a person has opened an account in the name of his minor child in the capacity of a guardian, the account cannot be treated in the same right as his own account with the bank. Hence, bank cannot exercise right of set-off on such accounts. Trust : The funds held by a person in a trust account (say by a solicitor by opening a Client Account to keep the funds on behalf of his clients) are to be treated in a different right from his liability as an individual. Such funds cannot be used by the bank for exercising the right of set-off. Joint accounts : If the account of a person shows debit balance, such dues cannot be recovered from his joint account with others. On the other hand, to settle the loan in the joint names, the funds lying in the individual account of one or more of them, can be used to settle the joint liability. Guarantor's account : The right can be exercised against the funds lying in the account of a guarantor but only when demand is made on the guarantor which determines his liability. Garnishee order and attachment order : The banker has right to exercise the right before the garnishee order or attachment order is made effective, for the lawful debt which is due. Term deposits which are not due: Though the right is available, but the right can be used only after the term deposit becomes due. But such term deposits can be used for adjustment of loan acconts u/s 60 of Indian Contract Act by exercising Right of Appropriation. Summary of position of availability of Set-off Deposit in the Loan in the Status of name of name of of right Single person Jointly with others Available Partner in a firm Partnership Firm Available Single name Same name Available Proprietor Proprietorship firm Available Joint Account One of joint holder Not available Partnership Firm One of partners Not available Trust Trustee Not available Trustee Trust Not available Dividend a/c of Co Loan a/c of co. Not available Minor (u/g.shipa/c) Guardian Not available Single person Single person Not available different capacity10 ♦ Banking events updatE ♦ February 2010 BANKING FEATURES Farmers’ Clubs are grassroot level informal forums. Such Clubs are organised by rural branches of banks with the support and financial assistance of NABARD for the mutual benefit of the banks concerned and rural people. Functions: The broad functions of the Farmers’ Clubs are as under: • to coordinate with banks to ensure credit flow among its members and forge better bank borrower relationship, • to organise minimum one meeting per month and depending upon the need, there can be 2-3 meetings per month. Non-members can also be invited to attend the meetings, • arange interface with subject matter specialists in the fields of agriculture and allied activities etc., extension personnel of Agriculture Universities, Development Departments and other related agencies for technical know how upgradation. For guest lectures, even experienced farmers who are non members from the village/neighbouring villages could be invited, • Liaison with Corporate input suppliers to purchase bulk inputs on behalf of members, • Organise/facilitate joint activities like value addition, processing, collective farm produce marketing, etc.; for the benefit of members. They can also sponsor /organise SHGs, • Undertake socio-economic developmental activities like community works, education, health, environment and natural resource management etc. • Market rural produce and products What is Farmers' Club Programme NABARD encourages banks to promote Farmers' Clubs in rural areas under the Farmers’ Club Programme, earlier known as Vikas Volunteer Vahini (VVV) Programme (which was launched by NABARD in Nov 1982).The VVV Programme was rechristened as Farmers’ Club Programme in 2005 by revisiting its earlier mission. Benefits of Farmers' Club to Bank Branch The formation of Farmers’ Club leads to better Banker-Borrower relationship in the area. It can help in (a) mobilisation of deposits (b) increase in the credit flow and diversification of lending (c) generation of new business avenues (d) increase in the recoveries and decline in the non-performing assets (d) reduction in the transaction costs of financial institutions/Banks (e) socio economic development of the village. • Besides, the Farmers’ Club has also been instrumental in certain social welfare measures like free eye check-up camp, Animal Health Care Camp, Mass vaccination camp, community works like road, check-dams, aforestation, etc. Financial Support from NABARD/Banks NABARD provides uniform assistance @Rs.10000 per club per annum for a period of 3 years. It is released in two instalments of 50% each (first in advance and 2nd by way of reimbursement of expenses). The assistance is towards meeting the following minimum and mandatory expenses: 1. Formation and maintenance expenses -Rs.2000 2. Awareness/orientation meet at base level -Rs.5000 3. Meet with experts programs (2 in a year) -Rs.3000 If the assistance exceeds Rs.10000, it will be met by the bank with a maximum of Rs.5000 per annum during the first 3 years. Banks will provide assistance the Farmers' Clubs up to max. of Rs.10000 per annum during 4th and 5th year. Sustainability of clubs It is to be ensured through creation of a corpus of the club over a period of 3-5 years, when the funding suport by agencies will be withdrawn. It can be by way of: (1) Token membership fee (2) Monthly savings (3) Service charges for SHG and JLG loans @0.5% and 1% respectively (4) Commission for selling insurance products. Farmers' Club Program of NABARD (5) Incentive for acting as Business facilitators for banks. (6)Any other charges. Who can organise Farmers' Clubs Any bank operating in rural area, including Commercial Banks (CB), Regional Rural Banks (RRB), & Cooperative Banks (SCB, SCARDB, PCARDB, DCCB and PACS) and all grass root level organisations such as NGO, Post Offices etc. can form Farmers' Club. There is no restriction of no. of clubs to be formed. All the clubs should have savings bank account with the bank. Set Up Farmers’ Club can be promoted in a village/cluster of villages, generally in the operational area of a Bank. While it should have minimum of 10 members, no upper limit in the membership is envisaged. Every Club would have two office bearers -One 'Chief Coordinator' and the other 'Associate Coordinator'. The office bearers would be elected by Club Members on a democratic basis for a term of 2 years. The office bearers should be residents of the area of the operation of the club. No NGO representative can be office bearer of the club. The main functions of the office bearers would be to convene meetings, to arrange meetings with experts, maintenance of Books of Accounts, coordination with Bank, Line Departments of the State Governments, maintaining proper liaison with Bank Membership All villagers except willful defaulters can become members of the club. How to form Farmers’ Club by bank branches • Bank branch can promote the clubs directly or engage Farmers’ Club promoting agencies like Krishi Vigyan Kendras (KVKs), Agriculture Universities, NGOs, Corporates, etc. • Select a village/cluster of villages suitable for launching Clubs in the operational area of the bank branch. • Identify a few borrowers with good track record of proper loan utilisation, aptitude and capacity for team work. • Encourage the members to select a Chief Coordinator and an Associate Coordinator. This will ensure collective leadership and continuance of the Club. • Provide orientation training to them with the help of NABARD (Regional Office /DDM or trained officers from the bank) before launching. • Encourage members to convene monthly meeting regularly, guide them to have meaningful discussion and take necessary follow up action. • Motivate members them to identify credit and noncreedi needs (training, socio-economic, village infrastructure, etc.), prepare a plan of action and accordingly arrange for expert talks, counselling, needbaase activities, etc. with the help of Government Departments and other agencies concerned. • Encourage members to maintain Membership Register, Minutes Book and accounts Register. • Evolve a performance parameter and measure the Clubs’ contribution annually. • Use Club as a tool in aid of branch not only in the matter of credit and recovery but also in facilitating promotion of SHGs, micro credit and convergence of services. • Source: Website of NABARDBanking events updatE ♦ February 2010 ♦ 11 B Handbook on Banking Information (30th Edn Jan 2010) by N S Toor Bank Lending (Edn : 2003) by Arun Chatterjee Model Test Papers for Bank Promotions Edn August 2009 by N S Toor Credit Management (2004) Arun Chatterjee Banking Problems/Rationales including Situational Analysis(2008) by Arundeep/N S Toor Handbook for Bank Managers (2008) by LN Kumar Analysis of Balance Sheet (6th Edition 2008) by N S Toor Credit Risk Management by Arundeep/N S Toor Mannual of Foreign Exchange R S Arora (Edn -2005) Book-Keeping & Econommic for Bankers (Edn 2005) by N S Toor How to face Bank Intervieews (Edition 2010) by N S Toor Hkkjrh; cSafdax &fof/k] ijEijk ,oa Uk, vk;ke u-l-rwj (7th Edition Aug 2009) JAIIB/CAIIB BOOKS : NEW (Objective Type -2009 Edition) Principles of Banking Accouning & Finance Legal Aspects of Banking General Bank Management Financial Management Risk Management All these books are by: Arundeep Toor & N S Toor (For detailed studies enrol to our correspondence course) : 300.00 : 500.00 : 165.00 : 400.00 : 250.00 : 275.00 : 150.00 : 225.00 : 250.00 : 150.00 : 250.00 : 300.00 SYLLABUS : 150.00 : 125.00 : 125.00 : 150.00 : 125.00 150.00 You can order these books with us OR Skylark Publications 1/5, Bhagat Singh Lane, Gole Market, New Delhi-110 001 (Ph-011 2336 1966) USEFUL BOOKS FOR BANKERS • DICGC is a wholly owned subsidiary of RBI and DICGC Act 1961 provides insurance cover on the deposits of banks. Insured Banks: The deposit insurance is compulsory for all banks in India. All commercial banks (except urban coop banks from Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, and the Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli) are covered by the DICGC. Primary cooperative societies are not insured by the DICGC. Cancellation of insurance cover : DICGC may cancel the registration of an insured bank if it fails to pay the premium for three consecutive periods or the bank is prohibited from receiving fresh deposits; or its licence is cancelled or a licence is refused to it by the RBI; or it is wound up either voluntarily or compulsorily; or it ceases to be a banking company. Types of insured Deposits : All deposits such as savings, fixed, current, recurring, etc. (except deposits of foreign Governments, Central/State Governments, inter-bank deposits, deposits of the State Land Development Banks with the State co-operative bank, any amount due on account of and deposit received outside India, any amount, which has been specifically exempted by the corporation with the previous approval of RBI). Extent of insured deposit : Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for, both the principal and interest amount held by him in the same right and same capacity (joint deposit a/c of A&B and B&A to be taken as separate accounts) as on the date of liquidation/cancellation of bank’s licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force. Deposits kept with different branches : The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount upto Rs.1 lac is paid. Deposits with more than one bank: Where a depositor has deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank, even if the two banks are closed on the same day. If a bank goes into liquidation:The DICGC pays to each depositor through the liquidator, the amount of his deposit upto Rs.1 lac within two months from the date of receipt of claim list from the liquidator. If a bank is reconstructed or amalgamated /merged with another bank: The DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less and the amount received by him under the reconstruction /amalgamation scheme within two months from the date of receipt of claim list from the transferee bank /Insured bank/transferee bank as the case may be. Operational aspects of the scheme (as per amendments wef Oct 1, 2003) Payment of deposit insurance: The deposit insurance premium (to be borne by banks) which had been 5 paise per Rs.100 of Assessable Deposit till 2003-04, was enhanced in the first phase from 5 paise to 8 paise per Rs.100 of Assessable Deposit wef the financial year 2004-05. The 2nd phase of upward revision of premium to 10 paise per Rs.100 of Assessable deposits has beome effect from the financial year 2005-06, payable by all the insured banks wef from the half-year April 2005 onwards. Half-yearly periodicity for payment of insurance premium: The half yearly period for payment of deposit premium are April-September and October-March (instead of Jan-Jun and Jul-Dec, earlier). Basis for payment of premium :The premium is payable in advance on the total deposits on the close of business on the last working day of the preceding half year (instead of last Friday of the preceding half year). Hence the premium is to be calculated on the total deposits as at the close of the business on the last working day of the relative preceding half year i.e. March and September, respectively. Time and periodicity of payment of premium : The advance premium for the respective half year is payable within 2 months (instead of 1 month as per the previous guidelines) from the beginning of the half year. Accordingly, the premium for Apr-Sep half -year is to be paid by last day of the May and that for Oct-Mar half-year, it is to be paid by November 30. Due to change in procedure, the bank need not calculate and pay the adjustment in the premium paid in advance and the actual premium payable for that half year. DEPOSIT INSURANCE12 ♦ Banking events updatE ♦ February 2010 Problem-1: Mr. Ram Kumar is valued customer of your branch. He has an FDR of Rs.6 lacs. The FDR is maturing in 2 years from now. He has requested the bank to mention the name of his three sons as nominees, on the FDR. When he was advised that only single nomination is allowed, he has requested for the following: i) Split the FDR into Rs.2 lac each. ii) Mark nomination of three sons individually on each FDR. He has also instructed that he should not incur any loss of interest and interest should continue to be credited on monthly basis to his saving bank account as earlier. How bank can help him. Decision: FDR should be split in three different accounts (and not just 3 different FDRs only), in the name of Mr. Ram Kumar. There after the nomination should be completed by obtaining DA-1 form, in the favour of one son each for each FD account. The nominee’s name can also be written, on the FDRs, as requested by Mr. Ram Kumar. Justification: A split of FDR into 3 separate FD accounts for the aggregate amount and without change in the total time period, is permitted as per RBI/IBA deposit guidelines. Such split is not be considered as cancellation of FDR and no penalty is recoverable on such split. As regards nomination, it is available on individual accounts. If one account is maintained with separate FDRs, only one nomination is can be made. But if separate accounts are opened, for each account, the nomination can be separate. Problem-2: A partnership firm has approached you to open a current account with following partners (i) Ram Kumar (ii) Ram Lal (iii) Shyam Kumar (iv) A Pvt Ltd. Company and (v) A HUF Firm. What should the bank do and why? Decision: The account cannot be opened. Justification: Under provisions of Indian Partnership Act, only the persons competent to contract, can become partners in a firm. Hence, the three individuals are competent to be partners. As regards a company, including, a private limited company, it can also become partner in a firm. HUF however, is not allowed to become partner as per Supreme Court judgement. In the given situation, the firm is not a legally valid partnership. Hence account cannot be opened. However, if the firm is reconstituted by excluding the HUF, as one of the partners, the account can be opened on the basis of fresh mandate. Problem-3: In the Annual Inspection report for the last year, the inspectors have pointed out many irregularities. Some of these are given below. You have advised by the branch head to draft an office order describing the importance of the matter and also the resultant risk involved in not doing so. i) Stop payment instructions are not being marked regularly in the stop payment register. ii) Stock Statement register is incomplete and the statements are not being submitted by parties on regular basis. iii) Letter of Credit register is not being maintained and issued LCs are not being entered in the register. Solution: The draft of the Office order shall be as under: The inspecting official has detected certain serious irregularities. The concerned officials are advised to ensure the compliance. (i) Non-marking can lead to financial loss to the customer and resultantly to the bank. Proper acknowledgement should be issued for stop payment instructions. These should be marked in the relevant records. In no case, a cheque should be paid, when it is marked stop payment. (ii) Delayed or non-submission of stock reports can convert a loan account to sub-standard category. Hence stock statement register should be completed immediately. Stock statement must be obtained without any further delay in all cash credit accounts. Further, these should be obtained in time, invariably in all cases and where these are submitted late, the list should be put up with suggested further action. (iii) In the absence of entries in the LC registrar, bank cannot ascertain its liability. It also leads to wrong presentation of the balance sheet. Hence, LC register should be completed immediately, particularly in respect of such LC which have not yet expired. Necessary contra-entry should also be passed to account for the LC in the balance sheet of the bank. In future, LCs should be issued only after entering the relevant details in the LC registered and passing of contra-vouchers. The procedural aspect in case of all the above, should also be gone through and in no case, these should be violated. Any failure to carry out these instructions, shall make the concerned official liable for departmental action. Problem-4 : A person wishes to open an RFC Account with your branch. Please list out the formalities to be completed for opening the account. Further, he wants to credit the following amount in his account, please advise whether these entries can be credited into his account given reasons thereof: i) FCNR Deposit of US $ 2 lacs ii) NRO Deposit of Rs.2.5 lacs iii)Sale proceeds of US $ 2.5 lacs pertaining to residential property at Boston, USA. Solution: The following formalities will be required: (a) copy of his pass-port indicating his arrival in India, which should be on or after April 18, 1992 (b) information relating to KYC compliance i.e. proof of address, photograph, introduction. As regard credit of amount to his RFC account, following action shall be taken: (i) FCNR deposit amount of US $ 2 lac shall be credited to the account, as the amount in FCNR/NRE-RA account which is received from abroad, can be credited to the RFC account. (ii) Amount in NRO account cannot be credited, as it is local money and cannot be remitted outside India when a person is resident. (iii) The sale proceeds of property sold abroad can be credited to the account, as the funds are in the form of inward remittances. *Based on Punjab & Sind Bank promotion exam for scale II to III -Dec 2009 ROBLEMS ON RACTICAL BANKING PBanking events updatE ♦ February 2010 ♦13 Diary of Events POLICY • POSITION OF PUBLIC-PRIVATE PARTNERSHIP PROJECTS: The country as a whole has 450 PPP Projects involving an aggregate outlay of Rs.2.24,175.75 Crore. Karnataka is the Top ranked State in using the PPP Route. It has 95 Projects with total outlay of Rs.39,491,85 Crore. Larson & Toubro (L&T) leads the domestic company category with total outlay of Rs.3,498 Crore. • J & K BANK AND RBI TO REVIVE URBAN-CO-OPs: J&K Bank and RBI have signed a MOU to constitute a Task Force on Urban Co-Ops Banks to identify potentially viable UCBs and draw up a time-bound action plan for their revival. There are four UCBs in J&K. State level Task Force of UCBs has been constituted in various states. Thus 1714 UCBs are covered under the MOU which constitute 99.6% of the total number of UCBs accounting for 99.8% of total deposits of the Sector. • COMPLAINTS POSITION IN BANKING OMBUDSMAN: According to the latest data for 2008-09, total 69,117 complaints were received at 15 Banking Ombudsman Offices throughout the country. 21,982 complaints relate to Private Banks which constitutes 32%. Private Banks were followed by SBI Group, which got 18,167 complaints which is 26% of total complaints received in Ombudsman. Other PSU Banks had only 14,974 complaints which constitutes 22%. • EAST AND SOUTHEAST ASIAN FOREX FUND: East and Southeast Asian countries are going to launch a $120 billion Emergency Fund, the Fist such Alliance in the Region, to shield themselves from a financial crises. Under the Scheme, known as the Chiang Mai Initiative Multilateralisation, Japan, China, South Korea, Hong Kong and the 10 Asian members can swap their own currency into US Dollars in case of liquidity crunch. • HIGH COURT RULING ON MISCONDUCT: In a significant judgment, the Bombay High Court has held that habitual absence from work place without taking leave or giving prior intimation amounts to misconduct on the part of employee. • SEBI PANEL ON PUBLIC ISSUE SCAM: Justice Wadhwa Committee set up by SEBI has suggested recovery of Rs.95.96 Crore from those who rigged Initial Public Offers (IPOs) between 2003-05. • FINANCE COMMISSION PRESENTS ROADMAP: The Thirteen Finance Commission, headed by Dr. Vijay Kelkar has recommended a new Roadmap for achieving medium-term Fiscal Consolidation through 2010-15. • GOVT. SHELVES INTRODUCTION OF UTN: The Govt decided to shelve the introduction of the UTN which Tax Payers need to quote along with the permanent Account number (PAN) when tax is deducted at source. The introduction of UTN was scheduled to be implemented from Jan 2010. • INDIA-ASIAN FTA TO BE EFFECTIVE: Imports of several items from Malaysia, Singapore, Thailand will become cheaper as India-Asian Free Trade Agreement comes into force with these countries in the first phase from January 1, 2010.These countries account for bulk of the $44 billion India-Asian trade. • BALANCE OF PAYMENTS DATA: The Current Account deficit was at 12.62 billion in July-Sept 2009, marginally higher than $12.57 in the same period last year. Exports declined to $42.630 billion in the second quarter 2009 as against $53.630 billion in the same period last year. Imports declined to $74.55 billion in July-Sept.2009 as against $92.75 billion in of last year. Trade Deficit has been lower at $32.2 billion for the second quarter of 2009-10. • The Country’s Total External Debt at the end of September stood at $242.8 billion, an increase of $18.2 billion over end March . • The Appointment Committee of the Cabinet has approved the appointment of Mr.R.Gopalan, currently Special Secretary, as Secretary of Department of Financial Services, Finance Ministry. • NABARD CREDIT LINE TO UP: National Bank for Agriculture and Rural Development (NABARD) has sanctioned Line of Credit of Rs.102 Crore to Uttar Pradesh under the Rural Infrastructure Development Fund (RIDF). • N.KOREA BANS FOREIGN CURRENCIES: North Korea has banned the use of Foreign Currency. As per Order issued by North Korea’s State Security Bureau, severe punishment has been warned anyone using US Dollars, Euros, Yuan and other Nonnoort Korean Currency. • UNIQUE ID PROJECT-CUSTOMER BASE: The Unique Identification Authority of India (UIDAI) plans to harness the customer base of Banks and Mobile Phone Operators in its mammoth task of issuing a Single, Universal Identity Number to all Resident Indians. • NHB FOR MORTGAGE GUARANTEE: National Housing Bank (NHB) has roped in another foreign partner for its Mortgage Guarantee Company. Unlike the two existing Foreign Investors-Asian Development Bank and International Finance Corporationtth third one is believed to be an Experienced International Player in Mortgage Guarantee Business and is a “Strategic Partner”. • RULES OF ORIGIN FOR TRADE PACTS: The Finance Ministry has come out with the Rules for Determination of Origin of Goods for the preferential trade agreement with South Korea and the Free Trade Agreement (FTA) with the 10-member ASEAN. The Rules of Origin came into force from January 1, 2010 for both these agreements in goods. • SLB CONTRACTS TENURE EXTENDED: SEBI has extended the tenure of contracts in Securities Lending and Borrowings (SLB) to 12 months from one month. In its second revision of the SLB framework since its operationalisation in April 2008, SEBI has said that the Approved Intermediary (Clearing Corporation/Clearing • For better understanding of what you have prepared. • For removing the confusions that occured while studying. • For better time management in the real exam like situation. • For testing your preparation and confidence level before Exam. You can practice on-line without use of internet. By installing the software on your computer system, you can use it by obtaining passwoor from us. Special features : Explanation given for correct and wrong options for all questions for better understanding of the mistakes made. This improves the understanding of the guidelines behind the questions and help in retaining for a longer period. • The questions are shuffled when you use the test next time. • Each time, you can set your own time to improve efficiency. online MOCK TEST -CD Bank promotion test and JAIIB exam Promotion Success-CD For exam focussed study material • For details please contact us at 0172 2665623 or our Website. • Cost-Rs.300 for each CD.♦ Banking events updatE ♦ February 2010 14 DIARY OF EVENTS Compilation : SP Sharma & Sapandeep Toor Source : Financial Newspapers, Financial News-Magazines & Financial and Institutional Web-sites House) shall have the flexibility to decide the tenure. • STANDARDISED DOCUMENT FOR SALE OF NPAs: The drafting of a Standardised Deed of Assignment is being carried out jointly by Asset Reconstruction Companies (ARC) and Banks under the aegis of IBA. The Document will eliminate ambiguities pertaining to the conveyance of Title/rights/interest in assets when the former buys loans from the later. • PAN MANDATORY FOR SHARE TRANSFER: SEBI has clarified that it shall be mandatory to furnish a copy of PAN (on) transmission of shares to the Legal Heir(s) where the deceased shareholder was the Sole-Holder of shares. Pan would also be mandatory for deletion of the name of the deceased shareholder where the shares were held in the name of two or more shareholders. • LIFE INSURANCE INDUSTRY MOUNT LOSSES: The Life Insurance Industry posted a loss of Rs.4,878 Crore in the Financial year 2008-09 as against a loss of Rs.3,413 Crore in 2007-08.The losses are mainly due to private sector Life Insurers, who were unable to translate higher expenditure into growth in fresh business premium. • SEBI FOR AUDIT OF CREDIT RATING AGENCIES: SEBI has said that all Credit Rating Agencies (CRAs) have to get an Internal Audit done every six months. Internal Audit shall cover all aspects of CRA operations and procedures, including the investor grievance redressal mechanism. • SEBI EASES NORMS FOR FINANCE COMPANIES: SEBI has said that the Regulated Finance Companies no longer need to show 100% Asset Cover while selling unsecured debt instruments to raise capital. This clarifies that in case of debt which is classified as “Unsecured”, no asset cover needs to be maintained. • EXPERT PANEL ON LOW CARBON ECONOMY: An Expert Panel has been constituted by the Planning Commission, to be headed by Mr. Kirit Parikh, one of its former member, to prepare a strategy for low carbon economy for India. The Panel will present an Interim Report outlining the Roadmap for India for low carbon growth by end April 2010 and a final report by end September. • CHINA World’s TOP EXPORTER: China is now the World’s Leading Exporter ahead of Germany. In the 11 months from January to November, Chinese exports reached a total value of $1.07 Trillion while German Exports amounted to $1.05 Trillion. • SEBI SETS TIMELINE FOR SHARING INFORMATON: SEBI has fixed a timeline for Exchanges to disseminate information on individual securities in a move to streamline operations related to Market Wide Position Limits (MWPL) in a move to streamline operations related to MWPL of derivative contracts. • RBI WARNS AGAINST UNDERPRICING OF RISK: Deputy Governor of RBI has said that the Banks are resorting to Sub-PLR short term lending due to the excess liquidity in the system. There is a temptation to under-price risk whenever there is excess liquidity and pressure to generate profits. Pricing below cost can be risky and the risk cost is very often not captured adequately. Banks should also be cautioned about large investment into debtorieente mutual funds. • CHINA RAISES BANKS’ RESERVE RATIO: China has raised the Bank’s Reserve Ratio by 50 basis points from January 18. The Central Bank of China has said that the existing levels are 15.5% for big banks and 13.5% for smaller ones. • INDIA TO JOIN WTO PANEL: India will join a WTO Panel as an “Observer” that would give the country an insight into how Governments of developed countries place multi-billion procurement orders with the Industry. The Cabinet Committee on WTO cleared the proposal for the country to join the exclusive club comprising a 14 full-fledged members and about 20 observers. • EQUIFAX –NEW CREDIT INFORMATION CO : Equifax has formed Equifax Credit Information Services (ECIS), a Joint Venture between Equifax and 6 Leading Indian Financial Institutions, to provide a broad range of Credit Data and Information Solutions throughout India. Equifax was granted in-principle approval in April 2009. • India and Finland have signed a revised Double Taxation Avoidance Agreement (DTAA). The lowering of withholding tax rates will promote greater investments , flow of technology and technical services between the two countries. • SUPREME COURT VERSION ON BOUNCED CHEQUE: The Supreme Court has ruled that notice with respect to a cheque can be issued only once. The deadline or limitation starts from the date of the first notice. Later notices do not matter. • ACCOUNTING STANDARDS ROADMAP RELEASED: The Govt has released the roadmap for convergence of Indian Accounting Standards with the Globally Acknowledged International Financial Reporting Standards(IFRS). By April 2011, the listed Companies and those with a net worth of over Rs.1000 Crore will have to convert their balance sheets to the notified Accounting Standards which are convergent with IFRS. But IFRS convergence will only be voluntary for SMEs. • CCEA APPROVES PURA SCHEME: The Cabinet Committee on Economic Affairs has approved the “Provision of Urban Amenities in Rural Areas” (PURA) Scheme with a plan outlay of Rs.248 Crore. The scheme is aimed at providing better opportunities to rural people and help reduce migration from rural to urban areas. The scheme will be implemented in Public Private Partnership (PPP) Mode. • REGULATORS CLOSE FIVE BANKS IN US: Regulators of US seized five US Banks which were taken over by other institutions. Last year, 140 US Banks failed, the Highest Annual Level since 1992 in the wake of the savings and loan crises . • TRADING ENERGY-SAVING CERTIFICATES: Under the new Perform, Achieve and Trade (PAT) Proposal, which would be implemented over 700 Industrial Units across the country will be given targets for reducing their energy consumption. Those managing the better their targets will be allowed to sell energy saving credits to those failing to achieve the required cuts. Energy Conservation Act 2001 is to be amended to enable trading of certificates. • EXPORT-IMPORT FROM INDIA: During Apr-Nov 2009 period, the exporters were USD 104.25 billion and Imports USD 170.43 billion. Accordingly, the trade balance was USD 66.18 billion. • EQUITY AND DEBT ISSUANCES IN 2009: Equity issuances for the year 2009 at Rs.72,000 Crore (37% higher than 2008) were still dwarfed by debt offerings. Debt issuances, which ranked in Rs.1,44,700 Crore, set a five-year record in 2009. • PERSONAL AND CORPORATE TAX COLLECTIONS: The Centre’s Corporate Tax Collections grew 44.03% in December to Rs.53,293 Crore as against Rs.37,002 Crore in the same month of the last year. However, Personal Income Tax Collections declined to 19.75% that month to Rs.13,117 Crore as against Rs.16,345 Crore. • COMPUTER-AIDED TEACHING SCHEME: The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, Dr. Manmohan Singh, approved the Revised Scheme on Information and Communication Technology (ICT) that aims to provide the required computer hardware, software and e-content to imparting computer literacy and ICT-enabled teaching and learning. • Corporation Bank and Canara Bank have increased the Authorised Capital from the existing level of Rs.1,500 Crore to Rs.3,000 Crore. •Subscription -1 yr: Rs.200, 2 yrs : Rs.380 & 3 yrs : Rs.560 Single Current Copy Rs.20 (Old Issues -Rs.25 per copy. For more than 2 copies add courier charges also) GENERAL AWARENESS • China unveiled the Fastest Rail Link in the World. The Train can go 394.2 km per hour. • Russia, the World’s largest Crude Exporter launched a 2,757-kilometere “Strategic” pipeline that will supply oil to Energy-hungry China and Asia pacific region in its bid to reduce dependency on problematic European markets. • Ms Kalyani Kaul, a Barrister of Indian Origin who handled high-profile cases in the UK, has been appointed a Recorder by Queen Elizabeth and will soon preside over hearings in county courts. • The Rajiv Gandhi Thermal Power Project (RGTPP) at Khedar in Hissar of Haryana created history on Project-Implementation, when it syncronised the First Sub-critical Unit of 600 Mw capacity in the Country, in a record period of 35 months. • Mother Teresa, the Catholic Nun who devoted her life to the sick and poor of India, honoured with Noble Peace Prize in 1979, will also be honoured on the New US Postage Stamps. • The facility, for mobile users to change their mobile operator, but retain their cellphone number, being delayed to April 2010, is to be implemented throughout the country instead of earlier plan of DOT in two phases. • Chandigarh City has been declared the “Best in the Country” by National AIDS Control Organisation in Blood Transfusion Services. • According to the Sectoral Survey by the National Sample Survey Organisation (NSSO), Maharashtra continued to lead the States in the Country contributing to the growth of Services Sector, which account for over 55% of the GDP. • Pop Princess Britney Spears of Los Angeles Singer, has been crowned the Biggest Star of the past decade as per New Internet Poll. • Mr. Mota Singh, who is the UK’s First Sikh and Asian Judge, also Queen’s Counsel, has been Knighted in the Queen’s New Year Honours list for “Services to the Administration of justice, community relations and to the voluntary sector. • Dr. Subbana Ayyapan has been appointed the new Director-General (DG) of the Indian Council of Agricultural Research (ICAR) • The Vienna Philharmonic’s acclaimed New year Concert was broadcast in a record 72 countries and on the Internet for the for the First Time, has been the World’s Largest Classical Music Event in terms of International Coverage. • The Burj Dubai Tower, World’s Tallest Building has been inaugurated on 4th January. • SAIL has bagged the SCOPE Meritorious Award for Research and Development (R&D), Technology Development and Innovation for 2007-08.HPCL has also won the SCOPE Award for Best Practices in Human Resource Management. • Heavy Engineering Corporation, Ranchi has received from the Indian Nuclear Society the INS Industrial Excellence Award 2008 for its outstanding contribution towards manufacturing special products for the Department of Atomic Energy. • For the First Time in its 800 Year History, Cambridge University plans to issue Bonds to raise money from the markets. • R.Gopalan has assumed charge as the Secretary for Banking and Financial Services Industry. • The J&K Government has declared 2010 as “Visit Kashmir” Year for the Domestic and International Tourists. • Leading IT Firm, Mind Tree, has been ranked Second in Asia in the Corporate Governance Poll 2009 conducted by Asiamoney Magazine. The Company has also been ranked the First for Best Overall for Corporate Governance in India. • India and Japan have decided to jointly develop One City in India as “Solar City”. The Government has so far, given in principle approval of 34 cities in the country to be developed as Solar Cities. • World’s Tallest Hotel in Dubai “Rose Rayhaan” has been inaugurated after the much awaited opening of Burj Dubai, renamed as Burj Khalifa and also is certified as the “Tallest Hotel in the World” by the Guinness Book of World Records. • According to Global Outplacement Consultancy Challenger, Grey & Christmas, with a total of 12,88,030 Layoffs in the US in 2009, the Year saw the Heaviest Downsizing since 2002. These were Higher than12,33,993 in 2008. • According to the 2010 Quality of Life Index, India has moved up 35 places to become the 88th Best Country in the World to live. Overall France topped for the fifth consecutive year, followed by Australia, Switzerland and Germany. • China supplanted the US as the World’s Largest Auto Market after its 2009 Vehicle sales jumped 46% ending more than a century of American Dominance. • Indian Posts has the Largest Postal Network in the World with over 1.55 Lakh Post offices. India Posts and Thomas Cook have tied up to provide travel-related facilities at Five post offices in Delhi and the tie-up could be extended to other post offices. • Letika Saran, a 1976 IPS Officer, became the First Woman Director General of Police of Tamilnadu, becoming the Second Woman to head a State Police Force in the Country after Kanchan Chaudhry Disclaimer : We have taken every care to provide information, we believe to be accurate and reliable and do not assume responsibility of any kind nor shall be liable for losses & consequence arising from use thereof. Since this information is based on the published reports mostly, correctness or otherwise thereof may be verified by the user with the original sources, in advance. .......................................................................Editor We strongly believe that the subscribers are the best consultants, we have. Based on their feed back, we keep on redesigning and restructring this publication. Kindly send your suggestions and views. Banking events updatE ♦ February 2010 ♦15 Bhattacharya in Uttrakhand. • Mysore, the city of palaces, has been named the 4th Best Destination in India, in the list of “31 places to go in 2010” by the New York Times citing its booming Yoga Centres which cater to everyone’s need. Srilanka topped the list. • Narain Kartikeyan, the First and the only Indian to have raced in Formula One, is ranked 126 in the Castrol Rankings for 2009. He is the Highest ranked among Indian Drivers, ahead of GP2 racer Karun Chandhok. • According to UN Report, nearly 90% of World’ 7000 Oral Languages will disappear within the next 100 years. • Science-fiction blockbuster “AVATAR” took Top Honors at the 67th Golden Globes winning Best Picture and Mr. James Cameron as Best Director as Oscars Frontrunner. • The First Rail Car for the Mumbai Monorail Project has reached the city from transportation solution major Scomi’s Kula Lumpur works. • Canadian Actress Emmanuelle Chriqui has topped an annual poll of the World’s 99 Most Desirable Women. • The Cabinet Committee on Economic Affairs has approved the setting up of Model Colleges in 74 Identified Districts in the Country in a bid to aid students in the educationally backward districts. • The Central Government has appointed the Former Foreign Secretary Shiv Shankar Menon as the National Security Advisor. • The Government Selection Committee headed by Vice-President of India, has approved the name of Mrinal Pandey for the post of “Prasar Bharti Chairperson”. • Vijay Mallya-led United Spirits, the No.1 Spirits Company in India , has emerged as the World’s Second Largest Spirits Firm in terms of volume . • Padma Shree Awards conferred on-Former ICAI President, Mr. T.N.Manoharan and Chairman of TVS Motor Company, Mr. Venu Srinivasan. • Padma Vibhushan Awards conferred on-Former RBI Governor, Dr. Yaga Venugopal Reddy, Founder of Apollo Hospitals, Dr. Pratap Chandra Reddy. • Padma Bhushan Awards conferred on-Actor Amir Khan, Promoter of Leela Group of Hotels, Captain C.P.Krishnan Nair. • The President had approved 130 Awards. In all, 6 Padma Vibhushan, 43 Padma Bhushan and 81 Padma Shri Awards have been given. • The Indian School of Business (ISB) has been ranked 12th in the Global B-School Rankings .16 ♦ Banking events updatE ♦ February 2010 MOCK-TEST PAPER Question based on latest policy 01 Disclosure of information relating to which of the following has been made mandatory, as part of ‘notes on accounts’ of balance sheet of a bank wef Mar 31, 2010: a movement of non-performing advances b fee/remuneration received in respect of bancassurance business undertaken by the bank c no. of cases and amount considered under CDR scheme d Total amount of unsecured advances outstanding as at Mar 31, 2010. 02 Banks are required to make a no. of disclosures relating to various aspects of banking. These are shown in the balance sheet as: a part of respective asset or liability b part of respective income or expenditure c notes on accounts d all or any of the above 03 RBI has issued direction relating to repo in Corporate Debt Securities by exercising powers u/s ___ of ____ Act: a 17 E, RBI Act b 22 (c) Banking Regulation Act c 22 (c) RBI Act d 45 W, RBI Act 04 Which of the following is not part of corporate debt securities, for which repo transaction can be undertaken: a debentures issued by a company b debt securities issued by a govt. c bonds issued by a company d none of the above 05 For repo transactions in corporate debt securities, which of the following condition should be satisfied (a) security should be a listed security (b) security must be rated AA or above by a rating agency (c) security should be held in demat form in account of the repo seller (d) the security should not be a commercial paper or certificate of deposit or non-convertible debentures: a a to d all b a to c only c b, c and d only d a, c and d only 06 What is the minimum and maximum period of repo in corporate debt securities? a min one day and max 6 months b min one day and max 12 months c min 7 days and max 6 months d min 7 days and max 12 months 07 All repo trades under corporate debt securities are to be reported on the ___ reporting platform within ____: a RBI, 2 days b SEBI, 1 hour c FIMMDA, 15 min d Ministry of Corporate Affair, 1 month 08 A haircut of ___ (or higher, as maybe decided by the participants depending on the term of the repo) shall be applicable on the market value of the corporate debt security, prevailing on the date of trade of 1st leg. a 25% b 20% c 15% d 10% 09 Trading in currency futures in recognised stock exchanges, is allowed in India in which of the following currency pairs: a USD-Rupee b USD-Rupee, Euro-Rupee c USD-Rupee, Euro-Rupee, Yen-Rupee d USD-Rupee, Euro-Rupee, Yen-Rupee, Pound Sterling-Rupee Questions based on Fraud Reporting & Counterfeit notes 10 If a bank fails to report a fraud required to be reported to RBI, the bank can be penalized by RBI u/s ___ of ___ Act. a 43-C, B R Act b 47-A, B R Act c 43-C, RBI Act d 47-A, RBI Act 11 Under Fraud Reporting guidelines of RBI, the banks are required to nominate an official of rank of ____ who is responsible to submit all fraud related returns: a AGM b DGM c General Manager d as decided by Board of Directors 12 For the purpose of reporting of frauds, the fFrauds are classified mainly as per the provisions of : a RBI Act b Indian Penal Code c Banking Regulation Act d Civil Procedure Cod 13 The following cases where fraudulent intention is not suspected/proved at the time of detection, will be treated as fraud and reported accordingly (a) cases of cash shortage more than Rs. 10,000/-, (b) cases of cash shortage more than Rs.5,000/-if detected by management /auditor/inspecting officer and not reported on the day of occurrence by the persons handling cash (c) cases of cash shortage more than Rs. 5,000/-, (d) cases of cash shortage more than Rs.5,000/-if detected by management /auditor/inspecting officer and not reported on the day of occurrence by the persons handling cash. a a and b only b a and d only c b and c only d b and d only 14 Frauds involving forged instruments are to be reported by : a paying bank only b collecting bank only c paying or collecting bank, as decided by them mutually d paying and collecting bank both, to collate the facts 15 In the case of collection of an instrument, which is genuine but the amount is collected fraudulently by a person who is not the true owner, the ______ , which is defrauded, will have to file fraud report with the RBI a paying bank only b collecting bank only c paying or collecting bank, as decided by them mutually d paying and collecting bank both, to collate the facts 16 In the event of an altered/fake cheque having been paid/encashed involving two or more branches of a bank under Core Banking Solution (CBS), which of the following would be responsible for reporting: a the branch which has released the payment b the branch to which the cheque actually relate c the branch which has released the payment and the branch to which the cheque actually relate d there is no need as HO can extract the information at HO level. 17 Which of the following case would not require a report to RBI: a theft, burglary only b theft, robbery only c burglary, dacoity and robbery d theft, burglary, dacoity and robbery all 18 Which of the following is not correct regarding a report about fraud to RBI, where the amount is Rs.1 lac and above: a soft copy format involving all categories of frauds to be sent in all cases b hard copy format to be sent for frauds involving an amount of Rs.5 lac or above to Central Office and also the concerned Regional Office of RBI c hard copy format to be sent to Regional Offices of RBI for amount of Rs.1 lac and above up to Rs.5 lac. d none of the above 19 Frauds of Rs.1 lac and above are to be reported to RBI on ____ within _____: a FMR 3, 2 weeksb FMR 2, 1 week c FMR 1, 3 weeks d FMR 1, one week 20 If borrower as well as the 3rd party such as builders, chartered accountants, motor vehicle dealers etc. are also involved in fraud, report about these 3rd parties is required to be submitted to: a Vigilance Commission b Reserve Bank of India c Serious Fraud Office d Indian Banks Association 21 Frauds of Rs.100 lac and above are to be reported to RBI on FMR-1 and a DO letter to DBS, RBI, within _____: a 2 weeks b 1 week c 3 weeks d immediately 22 Cases of attempted fraud where the loss is likely to be Rs.1 cr and above, had the fraud taken place, are to be reported to Fraud Monitoring Cell of RBI, with in: a 2 weeks b 1 week c 3 weeks d immediately 23 Banks should submit a copy each of the Quarterly Report on Frauds Outstanding in the format given in ____ to the Central Office and the Regional Office of the Reserve Bank under whose jurisdiction the Head Office of the bank falls within ___days of the end of the quarter to which it relates. a FMR-1, 15 days b FMR-2, 15 days c FMR-3, 15 days d FMR-1, 30 days 24 Banks should ensure that all frauds of Rs. 1.00 lakh and above are reported to their Boards within: a promptly on their detection. b within 1 week of detection c within 3 days, if the amount is Rs.1 cr or above d all the above 25 If certain conditions are satisfied, banks are allowed to close frauds for a limited statistical /reporting purpose, where the amount involved is: a Rs.5 lac and above b Rs.10 lac and above c up to Rs.20 lac d up to Rs.25 lac 26 Private banks are to report the frauds to State Police, where the amount of fraud is ______, committed by outsider of their own or in connivance with the staff: a Rs.10000 and above b Rs.1 lac and above c Rs.5 lac and above d Rs.1 cr and above 27 Private banks are to report the frauds to Serious Frauds Investigation Office, where the amount of fraud is ______: a Rs.10000 and above b Rs.1 lac and above c Rs.5 lac and above d Rs.1 cr and above 28 Which of the following statement regarding reporting of frauds to State Police by a public sector bank is false? a amount of Rs.1 lac and above – Report by Regional Head of the bank to Senior Officer of State CID b amount of less than Rs.1 lac but above Rs.10000 – Branch head to report to local police station c amount of less than Rs.10000 – Regional Head to decide whether to report or not d none of the above 29 Which of the following statement regarding reporting of fraud to CBI by a public sector bank is correct: a if amount is Rs.1 cr or above and there is staff involvement – Banking Security and Fraud Cell b if amount is Rs.1 cr or above and there is no staff involvement – Economic Offences Wing c if amount is Rs.5 cr or above – Anticorruuptio Bureau in all cases d all the above 30 Cases relating to burglary, theft, dacoity or robbery are to be reported to RBI on a ____ basis within 15 days, on ____: a quarterly, FMR-4 b half-yearly, FMR-2 c yearly, FMR -2 d no reporting required. Questions based on counterfeit notes 31 Which among the following is not authorised to impound the counterfeit note, if presented (a) branches of public sector banks (b) branches of private sector and foreign banks (c) branches of coop and regional rural banks (d) treasuries or sub-treasuries (e) RBI issue office: a b and c b d and e c b to e d none of the above 32 Each bank note is to be branded as counterfeit note, with a rubber stamp having a uniform size of: a 3 cm x 5 cm b 3 cm x 4 cm c 4 cm x 4 cm d 5 cm x 5 cm 33 When a counterfeit note is impounded, a receipt is required to be issued to the tenderer which should be signed by: a cashier b tenderer c cashier and tenderer d manager and tenderer 34 The counterfeit note impounded by the bank: a shall be kept by the bank b shall be returned to the customer c shall be sent to police by filing FIR d shall be forwarded to RBI 35 Data is required to be submitted by banks on counterfeit notes to : a RBI issue office on a monthly basis b RBI central office on a quarterly basis c Ministry of Finance, Serious Fraud Investigation Office, on a half yearly SUBSCRIPTION, RENEWAL AND NON-RECEIPT OF THE NEWS-MAGAZINE SUBSCRIPTION -By way of DD of Rs.200 (1 yr) or Rs.380 (2 yrs) or Rs.560 (3 yrs) drawn on Chandigarh favouring Banking & Management Academy, preferably giving residential address. 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Please advise full particulars of your subscription, while doing so to enable us to give due credit in your account. Banking events updatE ♦ February 2010 ♦17Name:____________________________________________________ Address:__________________________________________________ _________________________________________________________ __________________________________________Pin ____________ EMail Id_____________________________Mobile:________________ DraftNo___________Date_________drawn on___________Bank, for Rs______fvg Banking & Management Academy. PERIOD from ________ to________ ( Old Subscn No. _______ ) Subscription -1 yr: Rs.200, 2 yrs : Rs.380 & 3 yrs : Rs.560 Single Current Copy Rs.20 (Old Issues -Rs.25 per copy. For more than 2 copies add courier charges also) SUBSCRIPTION FORM • 21 mock papers based on latest tests by banks • 1500+ recalled questions • July 2008 10th Edn MODEL TEST PAPERS FOR PROMOTION IN BANKS by N S Toor Skylark Publications 18 ♦ Banking events updatE ♦ February 2010 basis d Ministry of Finance, Serious Fraud Investigation Office, on a quarterly basis 36 If counterfeit notes are dispensed by an ATM of a bank: a the said ATM operations will be automatically cancelled b it will be construed as an attempt to circulate counterfeit notes by the bank concerned. c it will be investigated by CBI d all the above 37 If a counterfeit note is returned by the police, it is to be carefully preserved for a period of ___ from date of receipt from the police authorities: a 1 year b 3 years c 5 years d 8 years Questions based on recalled questions 38 Bailment of good to secure the performance of a promise is called: a bailment b pledge c hypothecation d lien 39 When a loan is given by a bank on the security of railway receipt (RR) or goods receipt (GR) issued by a transport company, which type of charge is created: a pledge b lien c hypothecation d assignment 40 Account of X was running irregular. Bank agreed to continue the loan provided X provided some personal guarantee. X offered guarantee of Y. Later on when loan was not paid and bank initiated action against X and Y, Y took the plea that he is not liable as the fact of irregularity was not brought to his notice by the bank: a Y is not liable because full facts were not disclosed b amount can be recovered from X and Y in equal proportion ANSWERS 01 b 02 c 03 d 04 b 05 b 06 b 07 c 08 a 09 d 10 b 11 c 12 b 13 a 14 a 15 b 16 a 17 d 18 d 19 c 20 d 21 b 22 a 23 b 24 a 25 d 26 b 27 d 28 d 29 b 30 a 31 d 32 d 33 c 34 c 35 a 36 b 37 b 38 b 39 a 40 c 41 b 42 b 43 b 44 b 45 c 46 d 47 c 48 d 49 c 50 b c guarantor is fully liable for the loan as it was up him to verify the facts before giving guarantee d the amount can be recovered only from one of them only. 41 If an exporter suffers loss in an export transaction, which of the following organisations provide the export guarantee: a Exim Bank b Export Credit Guarantee Corporation c Director General Foreign Trade d Reserve Bank of India 42 A loan has been sanctioned to an enterprise which is neither located in NE Region, nor a women enterprise and not a micro enterprise. What is the amount of guarantee cover, if the balance in the account is Rs.60 lac. a no cover is available, as the amount exceeds Rs.50 lac b the amount is Rs.42.50 lac c the amount is Rs.37.50 lac d the amount is Rs.50 lac 43 Which of the following policy is known as Annual Policy Statement? a annual budget of Central Govt. b credit and monetary policy of RBI c foreign trade policy of DGFT d regulations issued by SEBI 44 What is the objective of holding a customer meet on 15th of every month: a to inform the customer about new schemes the bank has come out with b to sort out grievances of customers c to conduct such business which cannot be conducted on other normal days d all the above 45 A gold card is allowed with a standby limit to the extent of ___% of the sanctioned limit, at the time of sanction of gold card: a 10% b 15% c 20% d 25% 46 X has proposed that in his deposit account one of the following should be accepted as a nominee. Which one of these will not be accepted: a a minor with age of only 5 year b a senior citizen with age of 110 years c a person who has recently been declared insolvent d a trust, of whose X is a trustee 47 If deficit financing is financed by printing of additional currency/bank notes, it : a increases govt. borrowing b increases the supply of goods in the economy c increases the prices of goods and services and leads to inflation d reduces the liquidity in the banking system 48 Banks can sell their NPA accounts to which of the following (a) other banks (b) other financial institutions (c) nonbaan finance companies (d) asset management companies: a a and b only b a, b and c only c b, c and d only d a to d any 49 A kite flying transaction represents which of the following: a when overdraft is allowed by a bank to a firm b when additional loan is allowed by a bank to a firm to cover the amount of irregularity in the account c when loan is allowed for a transaction which is not a genuine business transaction d all the above 50 Which of the following committee had recommended the concept of working capital term loan: a Nayak Committee on working capital b Tandon Committee on working capital c Chore Committee on working capital d Kapoor Committee on SSI financingANKING POLICY Bresident in India is permitted to open, hold and maintain with an Authorized Dealer in India, a Foreign Currency Account known as Exchange Earner's Foreign Currency (EEFC) Account subject to the terms and conditions of the Exchange Earner's Foreign Currency Account Scheme. Further, in terms of RBI circular dated November 30, 2006, all categories of foreign exchange earners are allowed to credit up to 100% of their foreign exchange earnings. RBI has clarified (Dec 29, 2009) that all categories of foreign exchange earners are allowed to credit up to 100% of their foreign exchange earnings. As such, it will be in order for the Authorised Dealers to allow SEZ developers to open, hold and maintain EEFC Account and to credit up to 100% of their foreign exchange earnings, as specified in the paragraph 1 (A) of the Schedule. Advance Remittance for Import of Rough Diamonds AD Category –I banks are permitted to make advance remittance without any limit and without bank guarantee or standby letter of Credit, by an importer (other than Public Sector Company or Department /Undertaking of the Government of India /State Governments), for import of rough diamonds into India from the undernoted 9 mining companies, subject to certain conditions: i.De Beers UK Limited, ii.RIO TINTO, UK, iii. BHP Billiton, Australia, iv. ENDIAMA, E.P. Angola, v.ALROSA, Russia, vi. GOKHARAN, Russia, vii. RIO TINTO, Belgium, viii.BHP Billiton, Belgium and ix. Namibia Diamond Trading Company (PTY) Ltd (NDTC) (name of this company added on Dec 29, 2009). External Commercial Borrowings (ECB) Policy – Spectrum allocation payment Keeping in view the large outlay of funds required to be paid directly to the Govt within a limited period of time, RBI has decided (Jan 25, 2010) to make a onetiim relaxation in the end-use conditions of the ECB policy. Accordingly, the payment for spectrum allocation may initially be met out of Rupee resources by the successful bidders, to be refinanced with a long-term ECB, under the approval route, subject to the following conditions: i. The ECB should be raised within 12 months from the date of payment of the final installment to the Government; ii. The designated AD -Category I bank should monitor the end-use of funds; iii. Banks in India will not be permitted to provide any form of guarantees; and iv. All other conditions of ECB, such as eligible borrower, recognized lender, alliincost, average maturity, etc, should be complied with. Eligible borrowers in the telecommunications sector proposing to fund the payment for Spectrum allocation directly out of the proceeds of the ECBs may continue to avail of the ECBs under the automatic route as per the extant policy. All other aspects of ECB policy remain unchanged. Prudential Norms on Creation and Utilisation of Floating Provisions (Financial Institutions) The banks are permitted to use the floating provisions only for contingencies under extra-ordinary circumstances for making specific provisions in impaired accounts after obtaining Board’s approval and with prior permission of RBI. RBI has extended the same guidelines to All Indian Term Lending and Refinancing Institutions (Jan 05, 2010). Disclosure in Balance Sheet – Bancassurance Business In order to increase transparency in the financial statements of banks, Reserve Bank of India has from time to time issued circulars to banks requiring disclosures in the ‘Notes to Accounts’ to their Balance Sheet. To enhance the transparency, RBI has decided (Jan 07, 2010) that banks should disclose in the ‘Notes to Accounts’, from the year ending March 31, 2010, the details of fees/remuneration received in respect of the bancassurance business undertaken by them. Ready Forward Contracts in Corporate Debt Securities RBI decided (Jan 08, 2010) to introduce repo in corporate bonds and has issued a direction dated January 08, 2010 under section 45W of the RBI Act, 1934. Retail Issue of Subordinated Debt for Raising Tier II Capital Banks have indicated to RBI that they would like to issue subordinated debt to EEFC Accounts -Clarification In terms of RBI regulation dated May 03, 2000, a person retail investors. With a view to enhancing investor education relating to risk characteristics of regulatory capital instruments, banks issuing subordinated debt to retail investors have been advised by RBI (Jan 13, 2010) to adhere to the following conditions: a) The requirement for specific sign-off from the investors for having understood the features and risks of the instrument may be incorporated in the common application form (draft Shelf Prospectus, Shelf Prospectus and Tranche Document) of the proposed debt issue. b) For floating rate instruments, banks should not use its Fixed Deposit rate as benchmark. c) All the publicity material, application form and other communication with the investor should clearly state in bold letters how a subordinated bond is different from fixed deposit particularly that it is not covered by deposit insurance. Remittance of Salary -Relaxation In terms of RBI circular dated Sept 20, 2003, a national of a foreign state resident in India, being an employee of a foreign company or a citizen of India employed by a foreign company outside India, and in either case on deputation to the office/branch/subsidiary/joint venture in India of such foreign company, may open, hold and maintain a foreign currency account with a bank outside India and receive the salary payable to him by credit to such account subject to the conditions mentioned therein, which inter alia, include that the amount to be credited to such account shall not exceed 75 per cent of the salary accrued to or received by such person from the foreign company. The Government of India, has liberalised the above facility as indicated below: (i) A citizen of a foreign state, resident in India, being an employee of a foreign company or a citizen of India, employed by a foreign company outside India and in either case on deputation to the office /branch /subsidiary /joint venture in India of such foreign company may open, hold and maintain a foreign currency account with a bank outside India and receive the whole salary payable to him for the services rendered to the office/branch/subsidiary/joint venture in India of such foreign company, by credit to such account, provided that income-tax chargeable under the Income-tax Act,1961 is paid on the entire salary as accrued in India. (ii) A citizen of a foreign state resident in India being in employment with a company incorporated in India may open, hold and maintain a foreign currency account with a bank outside India and remit the whole salary received in India in Indian Rupees, to such account, for the services rendered to the Indian company, provided that income-tax chargeable under the Income-tax Act, 1961 is paid on the entire salary accrued in India. Banking events updatE ♦ February 2010 ♦ 19 VIRTUAL CLASS Log on our website and view free lectures on interesting aspects of current Indian Banking. •Business of Banks (Rs.in Cr) Mar31'09 Jan01'10 Aggregate deposits 4086865 4264540 Cash in hand/RBI 201249 229309 Investments 1247820 1412798 Bank Credit: 2771441 3020808 -Food 46750 46359 -Non-Food 2724691 2974448 Cash-Deposit Ratio 5.16 5.38 Investment-Deposit 31.99 33.13 Credit-Deposit 71.04 70.84 Money Stock (Rs.in Cr) Mar31'09 Jan01'10 M3 (Out of which) 4764019 5285446 (a) Currency with public 666364 729859 (b) Demand deposits-Banks 581247 625232 (c) Time Deposits -Banks 3510835 3926548 (d) Other deposits with RBI 5573 3806 Sources of Money Supply (a) Net Bank credit to Govt 1277199 1514836 (b) Bank credit to Comrcl sector 3013637 3266128 (c) Net Forex assets of Banks 1352184 1341748 Important Banking Indicators Bank rate 06.00% (29.04.2003) Statutory Liqdity Ratio 25.00% (07.11.2009) Cash Reserve Ratio 05.75% (27.02.2010) Prime Lending Rate 11.0-11.75% (Leading banks) Reverse Repo Rate 03.25% (22.04.2009) Repo Rate 04.75% (22.04.2009) Federal Reserve(US) rate: 1.00% Bank of England Rate : 0.50% European Comm. Bank 1.00% Capital & Money Market Indicators Parameter end-Jan 10 A year back Call rates (percent) 3.50 5.50 Dollar-spot TT (Rs.) 46.87 48.92 Euro-spot TT (Rs.) 66.94 69.34 BSE -Sensex (points) 16263 9002 NSE -Nifty(S&P CNX) 4978 2771 Foreign reserves(Million $) 285161 252178 Published by Gurmeet Toor (Mrs.) at 1008, Sector 45-B, Chandigarh-Printed by Gurmeet Toor (Mrs) at Golden Graphics 'n' Printers, Industrial Area, Ram Darbar, Chandigarh on behalf of INFOTECH & FINANCIAL SERVICES (Prop-Gurmeet Toor Mrs) -Editor-Gurmeet Toor(Mrs) DATA COLUMN Sh. N S Toor can be reached by readers at ns.toor@gmail.com DATE OF DESPATCH -Feb 7 /10, 2010 Registration RNI No. 67802/98 Postal Regn No.CHD /(0001) 2009-11 Licensed to Post Without Prepayment at PO Sector 47, Chandigarh No.PP/PB-3/0005/2009-11 OUR PUBLICATIONS : REFER PAGE 11 INDIAN ECONOMY-IMPORTANT PARAMETERS RBI's growth estimate for 2009-10 : 7.5% GDP growth-2008-09 (revised estimate) : 6.7% Share of service sector in GDP (Mar08) : 64.5% Share of manufacturing sector in GDP : 18.2% Share of agriculture sector in GDP : 17.3% GDP growth-2007-08 (revised estimate) : 9.01% Current Inflation Rate (Wholesale) -Dec09: 7.03% Money Supply (M3) expansion Nov"09 : 17.1% Exports during 2008-09 : 168.0 bn Trade deficit (2007-08) : 80.6 Bn Current Account position (Apr-Mar 08) : 17.4 Bn Export target for 2009-10 (in $) : 200 bn GDP at factor cost (adv est 2007-08 Cr) : 4303654 India's share in world merchandise export : 1.45% Food grain production (2007-08) -Estimate : 227.3 Poverty line ratio (2004-05) : 22% India's currency rating (S&P) : BB Postv India's external debt (Sept 2009) US $ : 242.8 Bn Fiscal Deficit Target (2009-10) 6.8% of GDP : 400996 cr Revenue Deficit Target (2008-09) 4.8 % of GDP : 282735 cr Tax-GDP ratio (2008-09) : 11.2% Apr-Nov 2009:Export 104.25 bn Imports : 170.4 bn Per capita Income 2008-09 (Rs.) : 37490 Indian economy's ranking in world in PPP : 3rd Indian economy's ranking in world in value: 10th Finance Commission The Finance Commission is constituted by the President under Article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the Union and the States and amongst the States themselves. Two distinctive features of the Commission’s work involve (a) redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the centre and the States respectively and (b) equalization of all public services across the States. Functions of the Finance Commission: It is the duty of the Commission to make recommendations to the President as to— • the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds; • the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India; • the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats in the State on the basis of the recommendations made by the Finance Commission of the State; • the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State; • any other matter referred to the Commission by the President in the interests of sound finance. The Commission determines its procedure and have such powers in the performance of their functions as Parliament, may by law, confer on them. Appointment of the Finance Commission and Members: As per the provisions contained in the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is selected from among persons who have had experience in public affairs, and the 4 other members are selected from among persons who: (a) are, or have been, or are qualified to be appointed as Judges of a High Court; or (b) have special knowledge of the finances and accounts of Government; or (c) have had wide experience in financial matters and in administration; or (d) have special knowledge of economics. Implementation of recommendations of Finance Commission : (a) Those to be implemented by an order of the President: The recommendations relating to distribution of Union Taxes and Duties and Grants-in-aid fall in this category. (b) Those to be implemented by executive orders: The recommendations in respect of sharing of Profit Petroleum, Debt Relief, Mode of Central Assistance, etc. are implemented by executive orders. First Commission & no. of Finance Commissions: The First Finance Commission was constituted under the chairmanship of Shri K.C. Neogy on 6th April, 1952. 13 Finance Commissions have been appointed at intervals of every 5 years. Composition of the 13th Finance Commission: It was been set up under the Chairmanship of Dr. Vijay L. Kelkar. Other Members of the Commission are Dr. Indira Rajaraman, Prof. Atul Sarma, Dr. Sanjiv Misra. Shri B.K. Chaturvedi (part-time Member) and Shri Sumit Bose the Secretary. Tenure of the Thirteenth Finance Commission: The Finance Commission was required to give its report by 31st October, 2009, which has already been given. Its recommendations will cover the five year period commencing from 1st April, 2010. 20 ♦ Banking events updatE ♦ February 2010