BANKING OMBUDSMAN

BANKING OMBUDSMAN

The Banking Ombudsman Scheme enables  fast and inexpensive forum to bank customers for resolution of complaints relating to certain services provided by banks. The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. As on date, fifteen Banking Ombudsmen have been appointed with their offices located mostly in state capitals. The addresses and contact details of the Banking Ombudsman offices has been provided by the banks.

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

PROCEDURE

One can file a complaint with the Banking Ombudsman simply by writing on a plain paper. One can also file it online or by sending an email to the Banking Ombudsman. There is a form along with details of the scheme in our website.However, it is not necessary to use this format.

The complaint should have the name and address of the complainant, the name and address of the branch or office of the bank against which the complaint is made, facts giving rise to the complaint supported by documents.

The Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the complainant only in the case of complaints relating to credit card operations for mental agony and harassment. The Banking Ombudsman will take into account the loss of the complainants time, expenses incurred by the complainant, harassment and mental anguish suffered by the complainant while passing such award.

It was re-introduced in the year 2006 to receive and deal with the public complaints against the banks of deficiencies in specified types of services.

Under this scheme, the customer can give his complaint to the Branch Manager and it should be responded by the Branch Manager within 30 days, if not the customer can file the complaint with the Banking Ombudsman.

AMENDMENTS:

In the year May 2007, the RBI has amended the Banking Ombudsman Scheme to enable the customers to appeal against the Banking Ombudsman’s decision. Before the scheme was amended, the bank customers could appeal only against the awards given by the Banking Ombudsman. The appellate authority for the Banking Ombudsman scheme is the Deputy Governor of RBI.

The RBI has amended the scheme again on 3rd February 2009, to include deficiencies arising out of Internet Banking. According to this new amended scheme, a customer would also be able to lodge a complaint against the bank for its non-adherence to the provisions of the fair practices code for lenders or the Code of Bank’s Commitment to Customer issued by the Banking Codes and Standard Board of India (BCSBI).

On 4TH January 2013, RBI has set up a working group to evaluate and make improvements in this scheme.

CROSSING OF CHEQUES

Crossing of Cheques:

Any cheque that is crossed with two parallel lines, either across the whole cheque or through the top left hand corner of the cheque.

This symbol means that the cheque can only be deposited directly into a bank account and cannot be immediately cashed by a bank or any other credit institution.

By using crossed cheques, cheque writers are able to simply but effectively protect the cheques they write.

It is also usual to write the words "& Co", in between these two lines. However, it is not necessary to write these words. A crossing is a direction to the paying banker not to pay the money to the holder at the counter.

Types of Crossing:

1. General Crossing:

In a general crossing, simply two parallel transverse lines, with or without the words 'not negotiable' in between, may be drawn. Such a cheque is crossed generally.

The effect of general crossing is that the payment of the cheque will not be made at the counter, it can be collected only through a banker.

2. Special Crossing:

In a special crossing, the name of a banker with or without the words 'not negotiable' is written on the cheque. Such a cheque is crossed specially to that banker.

The effect to special crossing is that the paying banker will be the amount of the cheque only through the bank named in the cheque.

3. Restrictive crossing:

This type of crossing has been recognized by usage and custom of the trade.In a restrictive crossing the words 'Account Payee' or Account Payee Only' are added to the general or special crossing.

The effect of restrictive crossing is that the payment of the cheque will be made by the bank to the collecting banker only for the account payee named. If the collecting banker collects the amount for any other person, he will be liable for wrongful conversion of funds.

4. Not negotiable Crossing:

A person taking is cheque crossed generally or specially, bearing in either case the words 'not negotiable' shall not be able to give a better title to the holder than that of the transferor.

The effect of a not negotiable crossing is that the cheque can be transferred but the transferee will not acquire a better title to the cheque. Thus a cheque is deprived of its essential feature of negotiability.

 

source:bankersadda

White Label ATMs

1.What is White label ATM?White Label ATM or White Label Automated Teller Machines or WLAs will be owned and operated by Non Bank entities.From such White Label ATM customer from any bank will be able to withdraw money, but will need to pay a fee for the services.
They will provide the banking services to the customers of banks in India, based on the cards (debit/credit/prepaid) issued by banks.

Note: The extant guidelines on five free transactions in a month as applicable to bank customers for using other bank ATMs would be inclusive of the transactions effected at the WLAs.

2. What is the purpose for introduction of White Label ATMs in India?The objective of permitting non-banks to operate white label ATMs was to enhance the spread of ATMs in semi-urban and rural areas, where bank-owned ATM penetration has not been growing.

3.Who will benefit from White Label ATMs?The white label automated teller machines are likely to benefit customers as well as banks.With the expansion of ATM network, customers will be able to withdraw funds at more locations which will be convenient and located near to their home or place of work.
Banks too support introduction of white label ATMs as such machines are likely to reduce pre-transaction cost for them and will be free from the problems relating to maintaining and running such a payment channel

4.Which is the first non-bank entity to launch first White Label ATM in India?Tata Communications Payment Solutions Ltd. (TCPSL), a subsidiary of Tata Communications, rolled out the first-ever white label Automated Teller Machines (ATMs) network under the brand Indicash.

The first Indicash ATM was inaugurated at Chandrapada, a rural village in Thane district, Maharashtra.

5.What Problems are likely to be faced by Bankers and Customers?Bankers are already sounding caution about the pitfalls of white label ATMs:1. The first and foremost concern for customers will be the inconvenience they may feel in case of failed transactions on WLAs.In such cases the dispute resolution mechanism will involve three entities — the WLA operator, the sponsorbank of the operator, and the customer's bank.
The WLA operators being non bank entities and running purely on profit basis may take longer time or avoid payments on account of failed transactions.
2. The second concern for customers will be the high cost they are likely to pay for use of such ATMs.

6. Four non-bank entities to set up white label ATMs:The Reserve Bank of India (RBI) has permitted four non-bank entities to set up white label ATMs in India.The RBI has issued Certificate of authorisation to 1. Tata Communications Payment Solutions Ltd.2. Prizm Payment Services Pvt. Ltd.3. Muthoot Finance Ltd., and 4. Vakrangee Ltd. for setting up and operating white label ATMs.


Specific Criteria and guidelines for a non-bank entity:
1. The eligibility criteria for WLA Operators (WLAO) would be as under:
i. The Memorandum of Association (MOA) of the applicant entity must cover the proposed activity of operating WLAs.
ii. Non-bank entities must have net worth of at least Rs 100 crore as per the last audited balance sheet.
iii. The net worth of at least Rs 100 crore has to be maintained at all times.

2. The authorised non-bank entity (henceforth referred to as WLA Operator or WLAO) would have the freedom to choose the location of the WLA.

3. The authorisation for setting up a WLA operation under the proposed guidelines would be initially valid for a period of one year.The scheme and number of WLAs sought to be installed would need to be indicated at the time of application.

The details of the schemes are as under:

Scheme Ai. Year -1 minimum of 1000 WLAsii. Year -2 minimum of twice the number of WLAs installed in Year 1 andiii. Year -3 minimum of three times the number of WLAs installed in Year 2The ratio of 3:1 would be applicable, i.e. for every 3 WLAs installed in Tier III to VI centres, 1 WLA can be installed in Tier I to II centres. Out of the 3 WLAs installed in Tier III to VI centres, a minimum of 10 % should be installed in Tier V & VI centres.

Scheme B: A minimum of 5000 WLAs every year for three years.
The ratio of 2:1 would be applicable, i.e. for every 2 WLAs installed in Tier III to VI centres, 1 WLA can be installed in Tier I to II centres. Out of the WLAs installed in Tier III to VI centres, a minimum of 10 % should be installed in Tier V & VI centres.

Scheme C: A minimum of 25,000 WLAs in the first year and at least another 25,000 in the next two years.
The ratio of 1:1 would be applied under this scheme. Out of the WLAs installed in Tier III to VI centres, a minimum of 10 % should be installed in Tier V & VI centres

4. Only cards issued by banks in India (domestic cards) would be permitted to be used at the WLAs in the initial stage.

5. Acceptance of deposits at the WLAs, by the WLAO would not be permitted.

6. The WLA Operator would not be entitled to any fee from the card issuer-bank other than the "Interchange" fee payable to "acquirer" bank under the bank owned ATM scenario.

7. While the WLA operator is entitled to receive a fee from the banks for the use of ATM resources by the banks customers, WLAs are not permitted to charge bank customer directly for the use of WLAs. 

FINANCIAL REGULATORS IN INDIA

FINANCIAL REGULATORS IN INDIA
The financial system In India is regulated by independent regulators in the field of Banking, Insurance, Capital Market, Commodities Market and Pension Funds. However, Government of India plays an significant role in controlling the financial system in India and influences the roles of such regulators at least to some extent.
The following are the five major financial regulatory bodies in India:

1. Financial Sector Development Council(FSDC):
Financial Stability and Development Council  is the apex-level body constituted by Government of India. The idea to create such a super regulatory body was fird=st mooted by Raghuram Rajan Committee in 1998. The recent global economic meltdown has put pressure on governments and institutions across globe to regulate the economic assests. This council is seen as an India’s initiative to be better conditioned to prevent such incidents in future.
PRESENT CHAIRMAN:  The Union Finance Minister of India (P.Chidambaram)

2. Reserve Bank of India:  Reserve Bank of India is the apex monetary institution in India.  It is also called as the Central Bank of India. It was established on 1st April 1935, in accordance with the provisions of the Reserve Bank of India Act,1934 and was given statuary powers in 1949, fully owned by the Government of India. The Head Office of RBI was initially in Calcutta and later moved to Mumbai in 1937. The Central Office is where the Governor sits and where all the policies are formulated.
PRESENT  GOVERNOR-Raghuram Rajan
PRESENT DEPUTY GOVERNOR-
a) H.R. Khan
b) Dr. K.C. Chakrabarty
c) Urijit Patel
RBI celebrated 75 years in 2010.
Note:  Anand Sinha, who was one of the Deputy governor of RBI has retired now.

3. Securities and Exchange Board of India:SEBI was first established in the year 1988 as the non-statutory body for regulating the securities market. It became an autonomous body in 1992 and more powers were given through an ordinance. Since then it regulates the market through its independent powers. SEBI celebrated 25 years on 24th May 2013.
PRESENT CHAIRMAN- Upendra Kumar (U.K. Sinha)
HEAD OFFICE-MUMBAI

4. Insurance Regulatory and Development Authority:The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India and is based in Hyderabad (Andhra Pradesh). It was formed by an Act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is “to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.”
PRESENT CHAIRMAN-T.S. Vijayan

5. Forward Market Commission in India: FMC headquartered at Mumbai, is a regulatory authority which is overseen by the Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952. This commission allows commodity trading in 22 exchanges in India, out of which three are national.
PRESENT CHAIRMAN- Ramesh Abhishek

6. Pension Fund Regulatory and Development Authority: PFRDA was established by Government of India on 23rd August, 2003. The Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.
PRESENT CHAIRMAN- Anup Wadhawan

CHEQUE TRUNCATION SYSTEM

Cheque Truncation System is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch. The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc. Thus with the implementation of cheque truncation, the need to move the physical instruments across branches would not be required, except in exceptional circumstances. This would effectively reduce the time required for payment of cheques, the associated cost of transit and delay in processing, etc., thus speeding up the process of collection or realization of the cheques.

The images captured at the presenting bank level would be transmitted to the Clearing House and then to the drawee branches with digital signatures of the presenting bank. Thus each image would carry the digital signature. In order to ensure only images of requisite quality reach the drawee branches, there will be a quality check process at the level of the Capture Systems and the Clearing House Interface. In addition, drawers could consider using holograms, bar coding or such other features, which would add to the uniqueness of the images.

RBI is proposing to implement the project on a PILOT basis in the National Capital Region (NCR), New Delhi. Based on the experienced gathered, it would consider extending the coverage to other centres.

The criteria for banks participating in the Cheque truncation system are:

i. Membership of the clearing house in the NCR.

ii. Membership of the Indian Financial Network (INFINET) 

 In respect of banks who are not members of the INFINET, the following alternatives are available

(a) They may become the sub-members of the direct members or

(b) Such banks may use the infrastructure of the other banks having INFINET membership

All the local cheques can be presented in the CTS.

Thus the benefits could be summarized as:

a) Faster clearing cycle

b) Better reconciliation/verification process

c) Better Customer Service ñ Enhanced Customer Window

d)  No Geographical Dependence

e) Operational Efficiency

f) Minimises Transaction Costs.

g) Reduces operational risk by securing the transmission route.

source:bankersadda

Bill of Exchange

BILL OF EXCHANGE: A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date. A bill of exchange is also called a draft.
Bills of exchange are similar to checks and promissory notes. They can be drawn by individuals or banks and are generally transferable by endorsements.
The difference between a promissory note and a bill of exchange is that this product is transferable and can bind one party to pay a third party that was not involved in its creation.
If these bills are issued by a bank, they can be referred to as bank drafts. If they are issued by individuals, they can be referred to as trade drafts.

Following are the various parties related to a Bill of Exchange:

a. The Drawer: The person who draws the bill and puts his signature on it is known as the drawer of the bill. He is also called the “maker” of the bill.

b. The Drawee: The person on whom the bill is drawn is called as the drawee of the bill.

c. The Acceptor: The person who accepts the bill is known as the acceptor of the bill. Usually, the drawee accepts the bill. But sometimes, a third party may also accept a bill on behalf of the drawee. The acceptor puts down his signature across the bill showing his acceptance.

d. The Payee: The person to whom the amount of bill is to be paid is known as payee of the bill. The drawer may make the bill payable to himself or to any other person he likes.

e. The Endorsee: The holder of the bill may endorse the bill in favour of someone else known as endorsee. The person who endorses the bill is called endorser.

f. The Holder: The person who holds the bill and is entitled to realise the amount of the bill from the drawee is known as holder of the bill.


Essentials of a bill of exchange:In order that an instrument may be called a bill of exchange it should satisfy the following conditions:1. The order to pay a bill must be unconditional one.
2. The order to pay must be made in writing on the bill.
3. The bill must be signed by the drawer of the bill. Without signature of the drawer the bill will not be genuine one.
4. The order to pay under a bill must be addressed to a certain person which, of course, includes individuals, firm, company, corporation etc.
5. The amount to be paid under a bill must be certain one.
6. The money under a bill must be paid in legal tender currency.
7. The amount should be payable to or to the order of a specified person or to the bearer of the instrument.
8. The amount should be payable either on demand or at a fixed determinable future time.
9. The bill must be duly stamped.
10. The other formalities like dating, stating the names of the parties concerned etc. must be observed.
11. A bill of exchange like a promissory note may be written in any language. It may be written in any form of words provided the requirements of the section are complied with.



source:bankersadda

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date is termed as Promissory Note.

A promissory note typically contains all the terms pertaining to the indebtedness by the issuer or maker to the note's payee, such as the amount, interest rate, maturity date, date and place of issuance, and issuer's signature. The 1930 international convention that governs promissory notes and bills of exchange also stipulates that the term “promissory note” should be inserted in the body of the instrument and should contain an unconditional promise to pay.

Promissory notes that are unconditional and saleable become negotiable instruments that are extensively used in business transactions in numerous countries.A promissory note is usually held by the payee. Once the debt has been discharged, it must be cancelled by the payee and returned to the issuer.

The person who makes the Promissory Note and promise to pay is called the maker and the person to whom the payment is done is called the Payee. It is duly stamped.

Features of Promissory Note:

1. The promissory note must be in writing- Mere verbal promises or oral undertaking does not constitute a promissory note. The intention of the maker of the note should be signified by writing in clear words on the instrument itself that he undertakes to pay a particular sum of money to the payee or order or to the bearer

2. It must contain an express promise or clear undertaking to pay- The promise to pay must be expressed. It cannot be implied or inferred. A mere acknowledgement of intendedness is not enough.

3. The promise to pay must be definite and unconditional- The promise to pay contained in the note must be unconditional. If the promise to pay is coupled with a condition, it is not a promissory note.

4. The maker of the pro-note must be certain- The instrument should show on the fact of it as to who exactly is liable to pay. The name of the maker should be written clearly and ascertainable on seeing the document.

5. It should be signed by the maker- Unless the maker signs the instrument, it is incomplete and of no legal effect. Therefore, the person who promises to pay must sign the instrument even though it might have been written by the promiser himself.

6. The amount must be certain- The amount undertaken to be paid must be definite or certain or not vague. That is, it must not be capable of contingent additions or subtractions.

7. The promise should be to pay money- The promissory note should contain a promise to pay money and money only, i.e., legal tender money. The promise cannot be extended to payments in the form of goods, shares, bonds, foreign exchange, etc.

8. The payee must be certain- The money must be payable to a definite person or according to his order. The payee must be ascertained by name or by designation. But it cannot be made payable either to bearer or to the maker himself.

9. It should bear the required stamping- The promissory note should, necessarily, bear sufficient stamp as required by the Indian Stamp Act, 1889.

10. It should be dated- The date of a promissory note is not material unless the amount is made payable at particular time after date. Even then, the absence of date does not invalidate the pro-note and the date of execution can be independently proved. However to calculate the interest or fixing the date of maturity or lm\imitation period the date is essential. It may be ante-dated or post-dated. If post-dated, it cannot be sued upon till ostensible date.

11. Demand- The promissory note may be payable on demand or after a certain definite period of time.

12. The rate of interest- It is unusual to mention in it the rated of interest per annum. When the instrument itself specifies the rate of interest payable on the amount mentioned it, interest must be paid at the rate from the date of the instrument.

source:bankersadda

Vote on Account

Vote-on-account: Vote-on-account deals only with the expenditure side of the government's budget. The government gives an estimate of funds it requires to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place.
The present government will have to obtain the sanction of the Parliament for an amount sufficient to incur expenditure on various items for a part of the year. This approval by the Parliament to withdraw money from the Consolidated Fund of India is known as Vote-on-Account.

Points to be noted:
1. Vote-on-account deals only with the expenditure side of the government's budget but an interim Budget is a complete set of accounts, including both expenditure and receipts.
2. The Budget is a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them. A full budget thus spells out both the manner in which the money is to be spent and how it is to be raised.
3. In an election year (like the present one), the ruling government generally opts for a vote-on-account instead of a full budget.
While technically, it is not mandatory for the government to present a vote-on-account, but it would be inappropriate to impose policies that may or may not be acceptable to the incoming government taking over in the same year.
4. Technically, it is not necessary for a government to present a vote-on-account in an election year. But a full Budget just before the elections makes a mockery of the whole exercise.
5. Also, it is ideally the new government's choice to decide how it'll raise and spend money.

How long a vote-on-account can be in force?
Normally, the vote-on-account is taken for two months only.But during election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the vote-on-account may be for a period extending two months. 
Typically this period does not exceed six months, as that is the maximum gap possible between two sittings of the Parliament.

source:bankersadda