UBD.BPD(PCB) MC.No 9 /13.01.00/2005-06
August 11, 2005
Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Maintenance of Deposit Accounts
Please refer to our Master Circular
UBD BPD (PCB)MC.No.3/13.01.00/2004-05 dated July 27, 2004 on the captioned subject
(available at RBI website www.rbi.org.in).
The enclosed Master Circular consolidates and updates all the instructions/guidelines
on the subject up to June 30, 2005.
2. Please acknowledge receipt
of this Master Circular to the concerned Regional Office of this Department.
Chief General Manager-in-Charge
Maintenance of Deposit Accounts
Acceptance of deposits and maintenance
of deposit accounts is the core activity in any bank. The very basic legal interpretation
of the word 'banking' as defined in the Banking Regulation Act, 1949 means accepting
deposits of money, for the purpose of lending or investment, from the public,
repayable on demand or otherwise, and withdrawable by cheque, draft, order or
otherwise. Thus, deposits are the major resource and mainstay of a bank and
the main objective of a bank is to mobilise adequate deposits. Various instructions,
guidelines, etc. issued from time to time to primary (urban) co-operative banks
in regard to opening and conduct/monitoring of deposit accounts are detailed
2. Opening of Deposit Accounts
2.1 Introduction of New Depositors
A large number of frauds are perpetrated
in banks mainly through opening of accounts in fictitious names, irregular payment
of cheques, manipulation of accounts and unauthorised operations in accounts.
Considering the fact that opening of an account is the first entry point for
any person to become a customer of the bank, utmost vigilance in opening of
accounts and operations in the accounts is called for. Even the legal protection
under the Negotiable Instruments Act, 1881 which governs payment and collection
of negotiable instruments and provides certain rights, liabilities (obligations)
and protections to the issuers/drawers, payees, endorsees, drawees, collecting
banks and paying/drawee banks, will be available, only if the bank makes the
payment or receives payment of a cheque/draft payable to order in due course.
Any payment or collection of a negotiable instrument is deemed in due course
only when the bank acts in good faith and without negligence and
does so for a customer.
2.1.1 Necessity of Introduction
i. Introduction of an account is
obtained not merely as a formality to get protection under section 131 of the
Negotiable Instruments Act 1881, but also to enable proper identification of
the person opening an account, so that it would be possible, to trace the person
later when required.
ii. It is necessary for banks to
know their customers and to put in place proper systems and procedures. The
practice of obtaining proper introduction should not be treated as a mere formality,
but as a measure of safe-guard against opening of accounts by undesirable persons
or in fictitious names with a view, inter alia, to deposit unaccounted
2.1.2 Proper Introduction
(i) The account should not be
normally opened without a meeting between the bank official and the customer.
(ii) The banks should invariably
insist upon prospective depositors to furnish introduction (from either any
of the existing account holders or a respectable member of the local community
known to the bank or the bank's staff) for opening not only current and cheque
operated savings bank accounts but also all deposit accounts including call,
short-term and fixed deposits. The banks should take steps to satisfy themselves
about the identity of their depositors.
(iii) The role of the introducers
should be made more specific. It is not sufficient to state that he has known
the person for a sufficient length of time.
(iv) The person giving introduction
should be of some standing and have an account with the bank for at least
six months to ensure that the accounts are not opened on the introduction of
new account holders or persons having small and marginal balances. The interval
will also enable the bank to monitor the account closely to satisfy itself that
the transactions in the introducer's account are satisfactory.
(v) Branch Managers/staff members
should be discouraged from giving the introduction.
(vi) Where the party is not able
to provide an introduction satisfactorily, it must be made incumbent upon him
to provide sufficient proof of his antecedents before the account is allowed
to be opened.
(vii) Customers of good standing
should be educated to realise the implications of introducing an account without
knowing the new parties.
(viii) In the case of a customer
who will be getting credits, say by way of salary, and making payments by cheques
to government/ semi-government agencies/individuals, simple introduction along
with photograph, may suffice.
(ix)In case of accounts, which
are likely to be used for putting through remittance transactions and for collection
of cheques of substantial amounts besides business payments, deeper enquiries
would be necessary on the part of the bank.
2.1.3 Introduction in Absentia
(i) When an introducer does not
personally call at the branch to introduce an account, the fact of having introduced
a new account should be got confirmed from him in writing.
(ii) In cases where the account opening forms bear
'the signatures of manager/officials of other branches of the bank for introduction,
apart from verifying the signatures of such introducers with the specimen signatures
available on record, the branch concerned should obtain written confirmation
of the introduction from the officials of the branches who introduced the account.
Till such time the confirmation is received, the banks should not collect cheques/draft
through the newly opened accounts.
(iii) The same procedures should
be adopted in cases where the introducers of accounts are not officials of the
bank and do not personally call at the bank to introduce an account.
(iv) The bank should send a letter
by post both to the customer and the introducer and seek their confirmation
for opening the account/giving introduction. Cheque book may be issued after
receipt of confirmation from both.
2.2 Photographs of Account Holders
2.2.1 Mandatory Obtention of Photographs
(i) The banks should obtain
photographs of the depositors/account holders who are authorised to operate
the accounts at the time of opening of all new accounts. The customers'
photographs should be recent and the cost of photographs to be affixed on
the account opening forms may be borne by the customers.
(ii) Only one set of photographs
need be obtained and separate photographs should not be obtained for each
category of deposit. The applications for different types of deposit accounts
should be properly referenced.
of persons authorised to operate the deposit accounts viz. S.B. and Current
accounts should be obtained. In case of other deposits viz. Fixed/Recurring,
Cumulative etc. photographs of all depositors in whose names the deposit
receipt stands may be obtained, except in the case of deposits in the name
of minor, where guardians' photographs could be obtained.
banks should also obtain photographs of 'Pardanashin' Women.
(v) The banks should also obtain
photographs of NRE, NRO, FCNR account holders.
(vi) For operations in the
accounts, banks should not ordinarily insist on the presence of account
holder unless the circumstances so warrant. Photographs cannot be a substitute
for specimen signatures.
(i) The photographs need
not be insisted upon by banks in the under noted cases:
(a) new savings bank accounts
where cheque facility is not provided; and
(b) fixed and other term
deposits upto an amount and inclusive of Rs. 10,000/-
(ii) However, the banks should
take usual and necessary precautions/safeguards in regard to opening and operation
of these accounts.
(iii) Where a depositor has a term
deposit of less than Rs. 10,000/- but he/she is also having a savings bank account
with cheque facility or a current account, it will be necessary to have the
photograph of the depositor.
(iv) Banks, local authorities and
government departments (excluding public sector undertakings or quasi-government
bodies) are exempt from the requirement of photographs.
(v) The photographs need not be
obtained for borrowal accounts viz. Cash Credit. Overdrafts accounts, etc.
(vi) The banks may not insist
for photographs in case of accounts of staff members (Single/Joint).
2.3 Address of Account Holders
It is not proper for banks
even unwittingly to allow themselves to be utilised by unscrupulous persons
for the purpose of tax evasion. Therefore, banks should obtain full and
complete address of depositors and record these in the books and the account
opening forms so that the parties could be traced without difficulty, in
case of need. Independent confirmation of the address of the account holder
should be obtained in all cases.
2.4 Other Safeguards
2.4.1 PAN/GIR Number
The banks are required to obtain
PAN/GIR number of a depositor opening an account with an initial deposit of
Rs.50,000/- and above.
The opening of new accounts should
be authorised only by the Branch Manager or by the Officer-in-Charge of the
concerned deposit accounts department at bigger branches.
2.4.3 Completion of Formalities
The banks should ensure that all
account opening formalities are undertaken at the bank's premises and no document
is allowed to be taken out for execution. Where it is absolutely necessary to
make exception of the above rule, banks may take precaution such as deputing
an officer to verify the particulars, obtaining a signed photograph on a suitably
formatted verification sheet, forwarding by registered A.D., mailing a copy
of the account opening form and accompanying instructions to the client for
necessary verification before any operations are conducted in the accounts.
2.4.4 Opening of current
account – Need for discipline:
Keeping in view the importance
of credit discipline for reduction in NPA level of banks, banks should insist
on a declaration from the account-holder to the effect that he is not enjoying
any credit facility with any other bank or obtain a declaration giving particulars
of credit facilities enjoyed by him with any other bank(s). The account-opening
bank should ascertain all the details and should also inform the concerned lending
bank(s). The account-opening bank should obtain No-objection certificate from
However, in case no response is
received from the existing bankers after a minimum period of a fortnight, banks
may open current accounts of prospective customers.
Further, where the due diligence
is carried out on the request of a prospective customer who is a corporate customer
or a large borrower enjoying credit facilities from more than one bank, the
bank may inform the consortium leader, if under consortium, and the concerned
banks, if under multiple banking arrangement.
Banks are advised to be guided
by the need for effective due diligence in these matters as also the objective
of customer satisfaction and ensure that suitable arrangements are in place
for prompt and serious attention to references received from banks in this regard.
3 Restrictions on Opening OF Certain
Types of Deposit Accounts
3.1 Minor's Account with
Mother as Guardian
3.1.1 Generally, the banks are
reluctant to open deposit account in the name of minor, with mother as guardian.
Presumably, the bank's reluctance to allow mother a guardian when the father
is alive, is based on section 6 of the Hindu Minority and Guardianship Act,
1956 which stipulates that, during his lifetime, father alone should be the
natural guardian of a Hindu minor.
3.1.2 The legal and practical
aspects of the problem have been examined by the Reserve Bank of India and it
is felt that if the idea underlying the demand for allowing mothers to be treated
as guardians related only to the opening of fixed, recurring deposit and savings
banks accounts, there should be no difficulty in meeting/requirements, as notwithstanding
the legal provisions, such accounts could be opened by banks provided they take
adequate safeguards in allowing operations in the accounts by ensuring that
minors' account opened with mothers as guardians are not allowed to be overdrawn
and that they always remain in credit. In this way, the minor's capacity to
enter into contract would not be a subject matter of dispute.
3.1.3 Further in cases where
the amount involved is large, and if the minor is old enough to understand the
nature of the transaction, the banks could take his acceptance also for paying
out money from such account.
4. Nomination Facilities
4.1 The Act Provisions
Sections 45ZA to 45ZF of the Banking
Regulation Act, 1949 (As applicable to co-operative societies) provide, inter alia,
for the following matters:
(i) to enable a co-operative
bank to make payment to the nominee of a deceased depositor, of the amount
standing to the credit of the depositor.
(ii) to enable a co-operative
bank to return the articles left by a deceased person in its safe custody
to his nominee, after making an inventory of the articles in the manner
directed by the Reserve Bank.
(iii) to enable a co-operative
bank to release the contents of a safety locker to the nominee, of the hirer
of such locker, in the event of the death of the hirer after making an inventory
of the contents of the safety locker in the manner directed by the Reserve
4.2 The Rules
The Co-operative Banks (Nomination)
Rules, 1985 provide for:
(i) Nomination forms for
deposit accounts, articles kept in safe custody and the contents of safety
(ii) Forms for cancellation and
variation of the nomination,
(iii) Registration of nominations
and cancellation and variation of nominations, and
(iv) Matters related to the above.
4.3 Record of Nomination
4.3.1 The Rules 2(10), 3(9)
and 4(10) require a bank to register in its books the nomination, cancellation
and/or variation of the nomination. The banks should accordingly take action
to register nominations or changes therein, if any, made by their depositor(s)hirer(s)
4.3.2 The banks should ensure
that the nomination facilities are made available to their customers.
4.4 Nomination Facility for
4.4.1 Legal Provisions
The legal provisions for nomination
and payment of depositor's money to the nominee and protection against notice
of claims of the other persons are detailed in Sections 45ZA and 45ZB.
4.4.2 Nomination Rules in
respect of Deposit Accounts
The Nomination Rules in respect
of Deposit Accounts provide as under:
nomination to be made by the depositor or, as the case may be, all the depositors
together in respect of a deposit held by a co-operative bank to the credit of
one or more individuals.
(b) The said nomination may be
made only in respect of a deposit, which is held in the individual capacity
of the depositor and not in any representative capacity as the holder of an
office or otherwise.
(c) Where the
nominee is a minor, the depositor or, as the case may be, all the depositors
together, may, while making the nomination, appoint another individual not being
a minor, to receive the amount of the deposit on behalf of the nominee in the
event of the death of the depositor or, as the case may be, all the depositors
during the minority of the nominee.
(d) In the case
of a deposit made in the name of a minor, the nomination shall be made by a
person-lawfully entitled to act on behalf of the minor. .
(e) The cancellation of the said
nomination to be made by the depositor or, as the case may be, all the depositors
(f) A variation of the said nomination
to be made by the depositor or, as the case may be, all the depositors together.
(g) The said nomination shall be
made in favour of only one individual.
(h) A nomination, cancellation
of nomination or variation of nomination may be made as aforesaid at any time
during which the deposit is held by a co-operative bank to the credit of the
depositor or depositors, as the case may be.
(i) In the case
of a deposit held to the credit of more than one depositor, the cancellation
or variation of a nomination shall not be valid unless it is made by all the
depositors surviving at the time of the cancellation or variation of the nomination.
(j) The co-operative bank shall
acknowledge in writing, to the concerned depositor or depositors the filing
of the relevant duly completed Form of nomination or cancellation of nomination
or variation of nomination, as the case may be, in respect of a deposit.
(k) The relevant
duly completed Form of nomination or cancellation of nomination or variation
of nomination filed with the co-operative bank shall be registered in the books
of the co-operative bank.
(l) A nomination
or cancellation of nomination or variation of nomination shall not cease to
be in force merely by reason of the renewal of the deposit.
4.4.3 Operational Instructions
(i) Nomination facility should
be made available to all types of deposit accounts irrespective of the nomenclature
used by different banks.
(ii) Unless the customer prefers
not to nominate, (this may be recorded, without giving scope for conjecture
of non-compliance) nomination should be a rule, to cover all existing and
(iii) Nomination facility is
available for saving bank accounts opened for credit of pension. However,
Co-operative Societies (Nomination) Rules, 1985, are distinct from the Arrears
of Pension (Nomination) Rules, 1983, and the nomination exercised by the
pensioner under the latter Rules for receipt of arrears of pension will
not be valid for the purpose of deposit accounts held by the pensioners
with banks for which a separate nomination is necessary in terms of Co-operative
Societies (Nomination) Rules, 1985, in case a pensioner desires to avail
of nomination facility.
(iv) In addition to obtaining
nomination form, banks may provide for mentioning name and address of the
nominee in the account opening form. Publicity about nomination facility
is needed, including printing compatible message on chequebook, passbook
and any other literature reaching the customer as well as launching periodical
drives to popularise the facility.
In case of joint deposits, after the death of one of the depositors, the
banks may allow variation/cancellation of a subsisting nomination by other
surviving depositor (s) acting together. This is also applicable to deposits
having operating instructions ';either or survivor';. It may be
noted that in the case of a joint deposit account, the nominee’s right arises
only after the death of all the depositors.
banks may introduce a practice of recording on the face of the pass book
the position regarding availment of nomination facility with the legend
‘Nomination Registered’. This may be done in the case of term deposit receipts
4.5 Nomination Facility
in respect of Articles in Safe Custody
4.5.1 Legal Provisions
The legal provisions providing
for nomination and return of articles kept in safe custody to the nominee and
protection against notice of claims of other persons are detailed in Sections
45ZC and 45ZD.
4.5.2 Nomination Rules
in respect of Articles in Safe Custody
The Nomination Rules in respect
of articles kept in safe custody provides as under:
(a) The nomination to be made by an individual (hereinafter
referred to as the ';depositor';) in respect of articles left in safe
custody with a co-operative bank.
(b) Where the nominee is minor,
the depositor may, while making the nomination, appoint another individual not
being a minor, to receive the said articles on behalf of the nominee in the
event of the death of the depositor during the minority of the nominee.
(c) Where the articles are left
in safe custody with a co-operative bank in the name of a minor, the nomination
shall be made by a person lawfully entitled to act on behalf of the minor.
(d) The nomination should be made
in favour of only one individual.
(e) A nomination, cancellation
of nomination or variation of nomination may be made by the depositor at any
time during which the articles so deposited are held in safe custody by the
(f) The co-operative bank should
acknowledge in writing, to the depositor, the filing of the relevant duly completed
Form of nomination or cancellation of nomination or variation of nomination,
as the case may be, in respect of the articles so deposited.
(g) The duly completed Form of
nomination or cancellation of nomination or variation of nomination filed with
the co-operative bank should be registered in the books of the co-operative
(i) Nomination facilities are
available only in the case of individual depositors and not in respect of persons
jointly depositing articles for safe custody.
(ii) While returning articles
kept in safe custody to the nominee or nominees and surviving hirers, banks
are not required to open sealed/closed packets left with them for safe custody
while releasing them.
the matter of returning articles left in safe custody by the deceased depositor
to the nominee, the Reserve Bank of India, in pursuance of sections 45ZC(3)
and 45ZE(4), read with section 56, of the Banking Regulation Act, 1949,
has specified the formats for the purpose.
order to ensure that the articles left in safe custody are returned to the
genuine nominee, as also to verify the proof of death, co-operative banks
may devise their own claim formats or follow the procedure, if any, suggested
for the purpose either by their own federation/association or by the Indian
Banks Association. As regards proof of death of depositor, the IBA has advised
its member banks to follow the procedures as prevalent in banks viz. production
of the death certificate or any other satisfactory mode of proof of death.
4.6 Nomination in respect of
Safe Deposit Locker Accounts
4.6.1 Legal Provisions
The legal provisions providing
for nomination and release of contents of safety lockers to the nominee
and protection against notice of claims of other persons are detailed
in Sections 45ZE and 45ZF of the Act ibid.
4.6.2 The Nomination Rules
in respect of Safety Locker
The Nomination Rules in respect
of Safety Lockers provide as under:
(a) Where the locker is hired
from a co-operative bank by two or more individuals jointly, the nomination
to be made by such hirers.
(b) In the case of a sole hirer
of a locker, nomination shall be made in favour of only one individual
the locker is hired in the name of a minor, the nomination shall be made by
a person lawfully entitled to act on behalf of the minor.
(d) The cancellation of the said
nomination to be made by the sole hirer or, as the case may be, joint hirers
of a locker.
(e) A variation of the said nomination
to be made by the sole hirer of a locker.
(f) A variation of the said nomination
to be made by the joint hirers of a locker.
(g) A nomination, cancellation
of nomination or variation of nomination may be made as aforesaid at any time
during which the locker is under hire.
(h) A co-operative bank shall acknowledge
in writing to the sole hirer or joint hirers, the filling of the relevant duly
completed Form of nomination or cancellation of nomination or variation of nomination,
as the case may be, in respect of the locker so hired.
(i) The relevant duly completed
Form of nomination or cancellation of nomination or variation of nomination
filed with the co-operative bank shall be registered in the books of the co-operative
4.6.3 Operational Instructions
(i) In the matter of allowing the
nominee(s) to have access to the locker and permitting him/them to remove the
contents of the locker, the Reserve Bank of India, in pursuance of sections
45ZC(3) and 45ZE (4), read with section 56, of the Banking Regulation Act, 1949,
has specified the Formats for Banking Regulation Act, 1949.
order to ensure that the amount of deposits, articles left in safe custody
and contents of lockers are returned to the genuine nominee, banks may take
action as indicated in para 4.5.3 (iv) above.
(ii) While releasing contents
of lockers to the nominee or nominees and surviving hirers, banks are not
required to open sealed/closed packets found in locker.
regards locker hired jointly, on the death of any one of the joint hirers,
the contents of the locker are only allowed to be removed (jointly by the
nominee and the survivors) after an inventory is taken in the prescribed
manner. In such a case, after such removal preceded by an inventory, the
nominee and surviving hirer(s) may still keep the entire contents with the
same bank, if they so desire by entering into a fresh contract of hiring
(v) Section 45ZE, read with
section 56, of the Banking Regulation Act, 1949, does not preclude a minor
from being a nominee for obtaining delivery of the contents of a locker.
However, the responsibility of the banks in such cases is to ensure that
when the contents of a locker are sought to be removed on behalf of the
minor nominee, the articles are handed over to a person who, in law, is
competent to receive the articles on behalf of the minor.
5 Operations in Accounts
5.1 Joint Accounts
5.1.1 Modes of Operations
in Joint Accounts
A copy of the letter No. LA.C/19-96-29
dated 28 August 1980, received from the Indian Banks’ Association, Bombay is
given in the Annexure I. Banks may consider the desirability of issuing
suitable instructions to their branches for their information and necessary
guidance on the subject.
5.1.2 Precautions in Opening
(i) In the case of too many
joint account holders, the banks should keep the following guidelines in view,
while opening joint accounts and permitting operations thereon:
(a) While there are no restrictions
on the number of account holders in a joint account, it is incumbent upon
the banks to examine, every request for opening joint accounts very carefully.
In particular, the purpose, nature of business handled by the parties
and other relevant aspects relating to the business, and the financial
position of the account holders, need to be looked into before opening
such accounts. Care has also to be exercised when the number of account
holders is large.
(b) The account payee cheques
payable to third parties should not be collected.
(c) Cheques that are ';crossed
generally'; and payable to 'order' should be collected only on proper endorsement
by the payee.
should be exercised in collection of cheques for large amounts.
(e) The transactions put
through in joint accounts should be scrutinised by the banks periodically
and action taken as may be appropriate in the matter. Care should be exercised
to ensure that the joint accounts are not used for benami transactions.
internal control and vigilance machinery should be tightened to cover the
above aspects relating to the opening and operation of joint accounts.
5.2 Monitoring Operations
in New Accounts
5.2.1 A system of maintaining
a close watch over the operations in new accounts should be introduced. While
at branches, primarily the responsibility for monitoring newly opened accounts
would rest with the in-charges of the concerned Department/Section, the Branch
Managers or the Managers of Deposit Accounts Department at larger branches should
at least for the first six months, from the date of opening of such accounts,
keep a close watch, so as to guard against fraudulent or doubtful transactions
taking place therein. If any transaction of suspicious nature is revealed, banks
should enquire about the transaction from the account holder, and if no convincing
explanation is forthcoming, they should consider reporting such transactions
to the appropriate investigating agencies.
5.2.2 Caution should be exercised
whenever cheques/ drafts for large amounts are presented for collection,
or Telegraphic Transfers (TTs)/Mail Transfers (MTs) are received for credit
of new accounts immediately/within a short period after opening of account.
In such cases, genuineness of the instruments and the account holder should
be thoroughly verified. If necessary the paying bank should check with
the collecting bank about the genuineness of any large value cheques/drafts
issued. Demand Drafts (DDs)/Cheques for large amounts presented for collection
should be verified under ultra violet lamps to safe guard against chemical
5.3 Monitoring Operations
in all Accounts
5.3.1 A system of close monitoring
of cash withdrawal for large amounts should be put in place. Where third party
cheques, drafts, etc. are deposited in the existing and newly opened accounts
followed by cash withdrawals for large amounts, the banks should keep a proper
vigil over the requests of their clients for such cash withdrawals for large
5.3.2 The banks should introduce
a system of closely monitoring cash deposits and withdrawals for Rs. 5
lakh and above not only in deposit accounts but also in all other accounts
like cash credit/overdraft etc. The banks/branches should also maintain
a separate register to record details of individual cash deposits and
withdrawals for Rs. 5 lakh and above. The details recorded should include,
in the case of deposits, the name of the account holder, account number,
amount deposited and in the case of withdrawals, the name of the account
holder, account number, amount of withdrawal and name of the beneficiary
of the cheque. Further, any cash deposits or withdrawals of Rs. 5 lakh
and above should be reported by the Branch Manager to the Head Office
on a fortnightly basis along with full particulars, such as name of the
account holder, account number, date of opening the account, etc. On receipt
of these statements from branches, the Head Office should immediately
scrutinise the details thereof and have the transactions looked into by
deputing officials, if the transactions prima facie appear to be dubious
or giving rise to suspicion. The inspecting officials from the Reserve
Bank of India during the course of their inspections will also be looking
into the statements submitted by the branches.
5.3.3 The other important
areas in the payment of cheques wherein due caution need to be exercised
are verification of drawer's signature, custody of specimen signature
cards, supervision over issue of cheque books and control over custody
of blank cheque books/leaves. While need for examining cheques for large
amounts under Ultra Violet Ray Lamps is recognised by all banks, in practice
it is rarely done as there is often a tendency to be lax in the matter
resulting in avoidable loss. In addition, due care should be exercised
in regard to issue and custody of tokens, movement of cheques tendered
across the counter and custody of all instruments after they are paid
by the banks. Depositors/ Customers should be asked to surrender unused
cheque books before closing/transferring the accounts. Also safe custody
of specimen signature cards is of utmost importance, especially when operating
instructions are changed, the change should be duly verified by a senior
official in the branch.
5.4 Issue of Cheque Books
Fresh cheque books should be issued
only against production of duly signed requisition slips from previous cheque
book issued to the party. In case the cheque book is issued against a requisition
letter, the drawer should be asked to come personally to the bank or cheque
book should be sent to him under registered post directly without being delivered
to the bearer. Loose cheques should be issued to account holder only when they
come personally with a requisition letter and on production of passbooks.
5.5 Dormant Accounts
The accounts which have not been
operated upon over a period two years should be segregated and maintained in
separate ledgers. The relative ledger(s) and the specimen signature cards should
be held under the custody of the Manager or one of the senior officials. The
first withdrawal in such segregated accounts should be allowed only with the
approval of the Manager.
5.6 Operation of Banks Accounts
by Old/Sick/Incapacitated Customers
5.6.1 In order to facilitate
old/sick/incapacitated bank customers to operate their bank accounts, procedure
as laid down in para below may be followed. The cases of sick/old/incapacitated
account holders fall into the following categories:
(i) an account holder who is
too ill to sign a cheque/cannot be physically present in the bank to withdraw
money from his bank account but can put his/her thumb impression on the
cheque/withdrawal form, and
(ii) an account holder who
is not only unable to be physically present in the bank but is also not
even able to put his/her thumb impression on the cheque/withdrawal form
due to certain physical defect/incapacity.
5.6.2 The banks may follow
the procedure as under:
(i) Wherever thumb or toe impression
of the sick/old/incapacitated account holder is obtained, it should be identified
by two independent witnesses known to the bank, one of whom should be a
responsible bank official.
(ii) Where the customer cannot
even put his/her thumb impression and also would not be able to be physically
present in the bank, a mark obtained on the cheque/withdrawal form which
should be identified by two independent witnesses, one of whom should be
a responsible bank official.
5.6.3 In such cases, the
customer may be asked to indicate to the bank as to who would withdraw
the amount from the bank on the basis of cheque/withdrawal form as obtained
above and that person should be identified by two independent witnesses.
The person who would be actually drawing the money from the bank should
be asked to furnish his signature to the bank.
5.6.4 In this context, according
to an opinion obtained by the Indian Banks' Association from their consultant
on the question of opening of a bank account of a person who had lost
both his hands and could not sign the cheque/withdrawal form, there must
be physical contact between the person who is to sign and the signature
or the mark put on the document. Therefore, in the case of the person
who has lost both his hands, the signature can be by means of a mark.
This mark can be placed by the person in any manner. It could be the toe
impression, as suggested. It can be by means of mark which anybody can
put on behalf of the person who has to sign, the mark being put by an
instrument which has had a physical contact with the person who has to
5.7 Receipt of Foreign Contributions
by various Associations/ Organisations in India under Foreign Contribution
(Regulation) Act, 1976
5.7.1 The Foreign Contribution
(Regulation) Act, requires that the associations having a definite cultural,
economic, educational, religious and social programme and receiving foreign
contribution should get themselves registered with the Ministry of Home
Affairs, Government of India and receive foreign contribution only through
such one of the branches of a bank, as an association may specify in its
application for registration with the Ministry of Home Affairs.
5.7.2 Further, the said Act
provides that every association referred to in sub-section (1) of Section
(6) may, if it is not registered with the Central Government, accept any
foreign contribution only after obtaining prior permission of the Central
5.7.3 There are also certain
organisations of a political nature, not being political parties (including
their branches/units) specified by the Central Government under Section
5(l) of the Act. These organisations require prior Permission of the Central
Government for accepting any foreign contribution. In this regard, the
banks should take the following precautions:
(i) To afford credit of the
proceeds of cheques/drafts representing foreign contribution only if the
association is registered with the Ministry of Home Affairs, Government
(ii) To insist on production
of a communication from the Ministry of Home Affairs conveying prior permission
of the Central Government for acceptance of specific amount of foreign contribution
in case the association is not registered under the Foreign Contribution
(Regulation) Act, 1976.
(iii) Not to afford credit
to the account of such associations as are not registered with the Ministry
of Home Affairs separately for the purpose of accepting foreign contribution
under the Foreign Contribution (Regulation) Act, 1976.
to afford credit to the account of such associations as have been directed
to receive foreign contributions only after obtaining prior permission of
the Central Government.
(v) Not to allow the credit
of the proceeds of the cheques/ demand drafts etc. to the organisations of a
political nature, not being political parties (including their branches and
units) unless a letter containing the prior permission of the Central Government
under the Foreign Contribution (Regulation) Act, 1976 is produced by such organisations.
(vi) To note the registration
number as conveyed by the Ministry of Home Affairs to the various associations
in the relevant records particularly the pages of the ledgers in which the foreign
contribution accounts of associations are maintained to ensure that no unwanted
harassment is caused to such associations.
(vii) In case any cheque/demand
draft has been tendered to the bank for realisation of its proceeds and credit
to the account of the association/organisation by an association or organisation
which is not registered or which requires prior permission, as the case may
be, the concerned branch of the bank may approach the Ministry of Home Affairs
for further instructions. In no case the banks should credit the account of
association/organisation of a political nature, not being a political party,
as specified by the Central Government and of an unregistered association, unless
the association/ organisation produces a letter of the Ministry of Home Affairs
conveying permission of the Central Government to accept the foreign contribution.
Where prior permission has been granted such permission is to accept only
the specific amount of the foreign contribution which would be mentioned
in the relevant letter. The Ministry of Home Affairs is invariably endorsing
a copy of the order of registration or prior permission for each association/organisation
to the concerned branch of the bank through which the foreign contributions
are to be received for credit to the Associations/ Organisations deposit
5.7.4 For the above purpose,
appropriate systems may be devised within the bank to ensure meticulous
compliance with these instructions and completely eliminate instances
of non-compliance. The system so devised may be intimated to all the branches
of the bank for proper implementation and strict compliance and the same
should be effectively monitored at Head Office level.
5.7.5 Further, banks are
also required to submit a return furnishing details of the foreign contributions
credited to the accounts of associations/ organisations on a half yearly
basis for the period ending 30th September and 31st March every year as
per the format given in the Annexure II to Government of India,
Ministry of Home Affairs within a period of two months from the close
of half year. To facilitate timely submission of half yearly returns to
the Government, the banks may designate a 'Nodal Officer' at the Head
Office who should be responsible for ensuring accurate and timely submission
5.7.6 Non-adherence to these
instructions will tantamount to violation of the provisions of the said
Act. Even non-submission of the prescribed return in time to the Government
of India would be viewed very seriously.
6 Deceased ConstItuents' Accounts
(i) The primary (urban) co-operative
banks should not insist on production of succession certificate from the
legal heirs irrespective of the amount involved. However, the banks may
call for succession certificates from the legal heirs of the deceased depositors
where there are disputes and all legal heirs do not join in indemnifying
the banks or in certain other exceptional cases where the bank has a reasonable
doubt about the genuineness of the claimant/s being the only legal heir/s
of the depositor.
(ii) The banks should adopt
such safeguards while settling claims as they consider appropriate including
taking of indemnity bond.
7 Deposit Mobilisation
7.1 Deposit Collection Agents
7.1.1 Banks are prohibited from
paying brokerage on deposits in any form to any individual, firm, company, association,
institution or any other person.
7.1.2 Banks should not employ/engage
outside persons even through firms/ companies for collection of deposits including
Non-Resident deposits or for selling any other deposit linked products on payment
of fees/ commission in any form or manner, except to the extent permitted vide
RBI Interest Rate Directives.
7.2 Acceptance of Deposits by
Unincorporated Bodies/ Private Ltd. Companies with 'Bank Guarantee'
Banks should not accept deposits
at the instance of private financiers or unincorporated bodies under any arrangement,
which provides for either the issue of deposit receipts favouring the clients
of private financiers or giving of an authority by power of attorney, nomination
otherwise for such clients receiving such deposits at maturity.
7.3 Deposit Collection Schemes
Floated by Private Organisations
It may be noted that the Prize
Chits and Money Circulation Schemes (Banning) Act, 1978 (No. 43 of 1978) imposes
a total ban on the promotion and conduct of prize chit scheme except by charitable
and educational institutions notified in that behalf by the State Governments
concerned. The lottery falls within the expression 'prize chit' under the Act
referred to above. Further, sale of lottery tickets on bank counters could be
open to abuse and avoidable complaints from members of public. Therefore, the
banks should not associate themselves directly or indirectly with lottery schemes
of organisations of any description.
8 Other Aspects
8.1 Greater Co-ordination between
Banking System and Income-Tax Authorities
8.1.1 Safe Deposit Lockers
In order to facilitate the identification
of locker keys by the Income-tax officials, the banks should emboss on all locker
keys an identification code which would indicate the bank and the branch which
had hired the lockers.
8.1.2 Co-ordination with Officers
of Central Board of Direct Taxes
There is a need for greater co-ordination
between the Income Tax Department and the banking system. As such, the banks
may ensure that they extend necessary help/co-ordination to tax officials whenever
required. Further, the banks will have to view with serious concern cases where
their staff connives/assists in any manner with offences punishable under the
Income Tax Act. In such cases, in addition to the normal criminal action, such
staff member should also be proceeded against departmentally.
8.2 Register for Unclaimed
8.2.1 The banks are required
to submit to the Reserve Bank, a return in Form VIII showing unclaimed deposit
accounts in India which have not been operated upon for 10 years or more, as
at the end of each calendar year. In order to ensure accuracy and timely reporting,
it is desirable to maintain a separate register for this purpose at all the
branches of each bank.
8.2.2 The banks should, therefore,
advise their branches to maintain a register for unclaimed deposits in
a separate register.
8.2.3 The branches may also
be advised that entries therein may be made in respect of deposit accounts
not operated upon for 10 year. A separate folio may be opened in the register
for different types of deposit accounts.
8.2.4 The branches should ensure
to note in the folio in which the relative unclaimed deposit account is maintained,
that the unclaimed deposits register should be referred to before allowing operations
in the account, so as to caution the bank not to allow operations on such accounts
in the usual course but to do so after obtaining the authorisation of a higher
9. 'Know Your Customer' (KYC) guidelines
As part of 'Know Your Customer'
(KYC) principle, Reserve Bank has issued several guidelines relating to identification
of depositors and advised the banks to put in place systems and procedures to
prevent financial frauds, identify money laundering and suspicious activities,
and for scrutiny/ monitoring of large value cash transactions. Instructions
have also been issued from time to time advising banks to be vigilant while
opening accounts for new customers to prevent misuse of the banking system for
perpetration of frauds. The following guidelines reinforce instructions
on the subject with a view to safeguarding banks from being unwittingly used
for the transfer of deposit of funds derived from criminal activity (both in
respect of deposit and borrowal accounts), or for financing of terrorism. The
guidelines are also applicable to foreign currency accounts/transactions.
9.1 KYC Policy in respect of new accounts
The following KYC guidelines will be applicable
to all new accounts.
KYC procedure should be the key principle for identification of an individual/corporate
opening an account. The customer identification should entail verification
through an introductory reference from an existing account holder/a person
known to the bank or on the basis of documents provided by the customer.
(ii) The Board of Directors of
the banks should put in place adequate policies that establish procedures
to verify the bona-fide identification of individual/ corporates opening an
account. The Board should also have in place policies that establish processes
and procedures to monitor transactions of suspicious nature in accounts and
have systems of conducting due diligence and reporting of such transactions.
9.2 Customer identification
(i) The objectives of the KYC
framework should be two fold (a) to ensure appropriate customer identification
and (b) to monitor transactions of a suspicious nature. Banks should obtain
all information necessary to establish the identity/legal existence of each
new customer, based preferably on disclosures by customers themselves. Typically
easy means of establishing identity would be documents such as passport, driving
license etc. However where such documents are not available, verification by
existing account holders or introduction by a person known to the bank may suffice.
It should be ensured that the procedure adopted does not lead to denial of access
to the general public for banking services.
(ii) A reference is also invited
to the Report on Anti Money Laundering Guidelines for Banks in India prepared
by a Working Group, set up by IBA. It may be seen that the IBA Working Group
has made several recommendations for strengthening KYC norms with anti money
laundering focus and has also suggested formats for customer profile, account
opening procedures, establishing relationship with specific categories of customers,
as well as an illustrative list of suspicious activities.
9.3 (KYC) procedures for existing customers
Banks should verify the compliance
in regard to KYC procedure for the existing customers based on the instructions
extant at that time. For this purpose banks should draw up a time bound action
plan, as indicated below, for completing the exercise to ensure verification
of the identity and address of the customers on the basis of reliable documents,
in respect of all the old accounts. In case of partnership firms, KYC procedure
may be applied to all the partners.