Problem Power

Compiled By
Shailesh Kumar
Chief Manager, Faculty
Problem Power SBLC Deoghar
INDEX
Chapter No Title Folio

1 Legal Aspect of Banking
2 KYC Guidelines & AML Policies
3 Deposit: General
4 Advance: General
5 Cash Department System & Procedures
6 Remittance & Collection
7 Safe Custody, Safe Deposit Article & Safe Deposit lockers
8 Liability & Transaction Products
9 Asset Products (PB)
10 Government Business
11 NPA, Capital Adequacy & Basel
12 Technology
We acknowledge valuable inputs received from Sri M

Venkataramanan, Chief Manager (Training), SBLC Perambur &
Sri Bavani Sankaran S, Chief Manager (Training), SBLC
Nungambakkam in compilation of ‘Problem Power’
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Problems 1 – Legal Aspect of Banking
1.1. A cheque drawn in favour of Sri Ram Kumar marked with ‘Not Negotiable crossing’ is paid
to the credit of Sri Mohan Kumar’s Account, an endorsee. Discuss the position of Paying
Banker.
Answer
As per Sec 130 of NI Act, Not negotiable crossing does not restrict the transferability of the
cheque. It can be further transferred by endorsement and delivery. However, the transferee of
the cheque does not get better title than the transferor. Thus, the words ‘Not Negotiable’ are
only a caution for the transferee to accept such cheques from well known parties or after being
satisfied with his/her title to the cheque.
Thus paying banker is justified in making payment of the cheque and crediting Sri Mohan’s
Kumar account if otherwise in order.
1.2. Smt. Veena R Shahi, a valued customer of your branch sends a cheque favouring Smt V R
Shahi for credit to her account duly endorsed by her as Smt Veena R Shahi. How will you deal
with it?
Answer
Endorsement made by Smt Veena R Shahi is not regular. Endorsement must be made by payee
in the same name as given in the cheque otherwise, it will be considered as irregular
endorsement. In this case, payee’s name in the cheque is written as Smt V R Shahi and
therefore she must endorse the cheque as ‘V R Shahi’. However, she may also write her correct
name in addition to writing the name in same manner as given in the cheque.
1.3. Mr X informs you that a cheque drawn in his favour by Mr Y, a valued customer of your
branch has been lost and requests you to stop payment of the cheque. Mr Y’s advice
regarding loss of cheque is not yet received. Meanwhile, the cheque is presented for payment
through clearing. How will you deal with the situation?
Answer
In the present case, the request to stop payment of a cheque has been received from the payee
and not from the drawer. However, the legal position is that only drawer is entitled to stop
payment of the cheque. In absence of any such instruction from Y, we may be held liable for
wrongful dishonour of the cheque.
On the contrary, the cheque is reported lost by the payee i.e. true owner of the cheque.
Therefore, the title of the presenter of the cheque is not beyond doubt and payment of the
cheque ignoring the fact of loss of cheque by the payee may not be deemed as payment in due
course (Sec 10 of NI Act).
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In view of all these, the cheque received for payment should be returned with the remark,
‘Reported Lost, Confirmation awaited’. Meanwhile, efforts should be made to obtain necessary
instruction regarding payment of the cheque from the drawer, Y.
1.4. Credit balance in the account of Mr P maintained with your branch is Rs 11000/- as at 31st
Jan 2011. A cheque dated 3rd Feb 2011 for Rs 7000/- drawn by Mr P is presented for payment
on 1st Feb 2011 and honoured. On 2nd Feb 2011, another cheque for Rs 5000/- dated 31st Jan
2011 is presented for payment which is returned and marked insufficient balance. Discuss.
Answer
Payment of a post dated cheque will not be considered as payment in good faith and without
negligence and therefore it will not be deemed as payment in due course (Sec 10 of NI Act).
Bank has no authority to debit Mr P’s account for cheque dated 3 rd Feb 2011.
In this situation, dishonour of cheque dated 31 st Jan 2011 is not proper and the paying bank is
liable for damages caused to the drawer due to its wrongful dishonour.
1.5. A cheque for Rs 500/- is issued by the drawer leaving space before the amount in words &
figures. Payee of the cheque changed the amount to Rs 5500/- . Cheque is presented for
payment and honoured by you. Please justify your action.
Answer
In this case, the amount of the cheque has been changed which is a material alteration.
Therefore, it requires drawer authentication. It also appears from the case that the payee had
been to able to make such change due to negligence of the drawer in writing the cheque and
that the material alteration may not be apparently clear.
Under Sec 89 of NI act statutory protection is available to the paying banker in case of payment
of cheques which have been materially altered provided the alteration is not apparently clear
and payment is made in due course.
In the present case, both the conditions appear to be fulfilled as there is no ground to believe
that payment has not been made in due course. Therefore, paying banker can seek protection
under the said act.
1.6. A cheque is drawn with words ‘Not Negotiable’ written across it. However, neither two
parallel transverse lines nor name of any bank is written. Can the cheque be encashed across
the counter?
Answer
Drawing two parallel transverse lines across the cheque is essential for general crossing of the
cheque (Sec 123 of NI Act)
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Writing name of a bank on the cheque is essential for special crossing of the cheque (Sec 124 of
NI Act)
Effect of general crossing is that the payment of such cheque can be made to a banker only.
Similarly, effect of special crossing is that the payment of such cheque can be made to a
specified banker only.
Mere writing the words ‘Not Negotiable’ on the cheque will not be considered as a crossed
cheque.
In present case, therefore, the Bank may pay the cheque across the counter as the cheque is
not crossed.
1.7. How will you deal with a cheque presented for payment if the amount in words and
figures differ?
Answer
It has been provided in Sec 18 of NI Act that the amount mentioned in words will be paid if the
amount mentioned in figures is different from it.
However, in practice such cheques are returned with the remark ‘amount in words and figures
differs, drawer’s confirmation required’.
1.8. M/s ABC Pvt Ltd co is maintaining a current account with your branch. Cheques are to be
drawn jointly by two directors and one Accounts officer of the company. Can we stop
payment of a cheque on the strength of a letter signed by the Accounts officer?
Answer
In case of a Joint Account, firm, Joint Stock Company or a Trust, any person authorize to sign
may stop payment. It is not necessary that the countermand order must be signed by all those
persons who had signed the concerned cheque.
But if the countermand order is to be cancelled, all the persons authorised to operate the
account must sign such letter
1.9. Mr A, Managing Director of a company M/s ABC Pvt Ltd Co is maintaining an account in
his personal name with your branch. He maintains an average balance of approximately Rs
5000/-. He deposits a cheque for Rs 90000/- for credit to his personal account with your
branch. The cheque is drawn on his company account maintained at some other bank’s
branch at the same centre. He is authorised to draw cheques alone on behalf of his company.
The cheque is duly collected by you for credit to his account. Later on the company goes into
liquidation and the official liquidator files a case against your bank for recovery of money due
to fraudulent conversion. Discuss the position of your bank in light of Sec 131 of NI Act.
Answer
A collecting banker may avail of statutory protection under sec 131 of NI Act subject to
fulfillment of the following conditions:
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a) Cheque must be a crossed one before it is deposited

b) Cheque must have been collected for a customer
c) Collecting Banker must have acted in good faith and without negligence
In the present case, it is not clearly mentioned that the cheque was crossed or open and even
though we assume that it was crossed, our bank appear to be acting negligently on account of
the following reasons:
i) Cheque is being drawn by the Managing Director (sole authorised signatory) for credit to
his personal account. His signature as drawer and the endorsement made by him for
credit to his personal account would be similar in all probability. Moreover, a bank is
presumed to know the true identity of the customer. The circumstances therefore
should generate suspicion about the title to the instrument and our bank should have
enquired about it from Mr A. In case of our failure to do so, our bank will be held liable
for conversion.
ii) Secondly, the amount of cheque (Rs 90000/-) deposited by Mr A is also abnormal i.e.
not commensurate with the level of balance maintained by him. Our bank should have
enquired about the genuineness of the transaction particularly when the cheque was
drawn by himself on the company’s account. Failure to do so amounts to negligence on
our part of our bank.
The charge of conversion against our bank is thus valid.
Problems 2 – KYC & AML Policy
2.1. On random scrutiny of some of the SB accounts in your branch, the central office
inspector informs that proper details of PAN number is not recorded in respect of many
accounts, where huge amounts of transactions are taking place. What is the implication of
this situation on the Bank as a whole? How to rectify the position?
Answer
Single Annual Information Return (AIR) in respect of savings accounts with cash deposits of
Rs.10 lakhs or more in a financial year is required to be filed at the whole bank level to revenue
authorities.
Non-reporting/non availability of PAN, in such cases where the aggregate cash deposit per
annum is Rs 10 lakh or more, is not acceptable to the Revenue authorities. They have desired
the PAN to be quoted for almost all the transacting parties reported in the AIR barring Govt.
Accounts. The purpose of the return itself is defeated as the information provided cannot be
processed when PAN is not provided/incorrect PAN is provided and address of transacting party
is incomplete or not provided.
It is quite evident from the above that the situation prevailing in our branch creates a great
amount of embarrassment and poor image of our Bank before CBDT authorities.
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To improve the situation, we may identify those accounts and arrange to obtain PAN from
those parties. Then the data in CBS will be updated.
2.2. Mrs. Aiysha Beevi a non-customer of your locality is a regular beneficiary of remittances
sent to her by various persons from Middle-East countries through Western Union Money
Transfer. Every time she is approaching you with inadequate details. What is the implication
and what are the laid down instructions with regard to such remittances?
Answer
Recently KYC guidelines have been modified as under:
“In case of transactions carried out by a non-account based customer, that is a walk in
customer, where the amount of transaction is equal to or exceeds rupee fifty thousand only
whether conducted as a single transaction or several transactions that appear to be connected
the customer’s identity and address should be verified. Further, if a bank has reason to believe
that a customer is intentionally structuring a transaction into a series of transactions below the
threshold limit of Rs 50000/-, the bank should verify identity and address of the customer and
also consider filing a suspicious transaction report to FIU-IND”
In the present case, Mrs. Aiysha Beevi is a non-customer but she is in regular receipt of
remittances from Middle-East countries through Western Union, her identity and address proof
is required to be obtained. Moreover, if it appears that she is intentionally structuring a
transaction into a series of transactions below the threshold limit of Rs 50000/-, we should also
consider filing a suspicious transaction report to FIU-IND.
2.3. Mrs. Ranjana wife of Mr. Ranjan approaches your branch for opening NRE SB account in
the name of her husband who has gone Saudi Arabia on a five year contract. Please assist her
by providing the necessary information required for opening an NRE SB account without Mr.
Ranjan visiting your branch.
Answer
NRI customers who want to open accounts without visiting the branch will be treated as “Non
Face to Face” customers and necessary due diligence, as applicable to “Non Face to Face”
customers needs to be exercised
Branches should, therefore insist on certification of documents viz. Passport and Residence Visa
Copies, duly attested by either of the following:
(i) Banker
(ii) Notary Public
(iii) Indian Embassy
(iv) A person known to Bank whose Signatures are verifiable from Bank’s records
Further, branches may also accept verification of documents by officers of correspondent banks
whose signatures are verifiable through an authorized (A/B category Forex handling branch)
branch of the Bank
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Problems – 3 Deposit General
3.1. What actions you will take in the following cases?

a) Smt. Lal approaches you for payment of a sum of Rs 56000/- lying in her husband’s account
& he is reported missing for than one year.
b) Will the situation be different if amount is more than Rs 1 lakh?
Answer
a) Under section 108 of the Indian Evidence Act, a person reported missing can be presumed to
be dead only after a lapse of 7 years by a competent court. Claim in respect of amount held in
accounts of such person can be settled only after a certificate to that effect is issued by the
court.
To alleviate the hardship of nominee/legal heirs of persons reported missing for a minimum
period of one year, it has been decided to settle Claim upto Rs 1 lakh on production of the
following documents:
o FIR
o Non-traceable report issued by the police authorities.
o Indemnity from the claimant
AGM (Admin) of the respective region has been authorized to settle such claims
In view of the above, Smt. Lal’s claim can be settled.
b) If the amount is more than Rs 1 lakh, Smt. Lal’s claim can be settled only after a lapse of 7
years when she produces a certificate issued by a competent court regarding presumption of
her husband’s death under sec 108 of evidence Act.
3.2. Y reports death of her husband X maintaining a SB A/c. She claims the money lying in X’s
account (Rs 43000/-) as nominee. She submits an acknowledgement issued by bank
mentioning therein her name as nominee to the account. On scrutiny, however, it is observed
that nomination form was not signed by X. Smt. Y is mother of a 15 year old daughter only.
How will you help Y in such situation?
Answer
Nomination in favour of Y by X cannot be considered valid as the Nomination form has not been
signed by the depositor. The bank should apologize for the mistake. They should also assure
Smt. Y of all cooperation in smooth settlement of a sum of Rs 43000/- held in her husband’s
account. She will be advised to submit the following documents:
a) Death Certificate of Mr. X
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b) Claim format signed by the Smt. X together with declaration from one independent
person, in respect of legal heirs of deceased Mr. X, known to the family of the deceased
and acceptable to bank
c) A stamped Letter of Disclaimer to be signed by Smt. Y on behalf of her minor daughter
Ms Rekha
d) A stamped Letter of Indemnity to be signed by Smt. Y (Claimant)
In this case, No sureties are required as the claim amount is below Rs 50,000/-
3.3. Mr. Ram Lal & Mr. Raushan Mehra are maintaining an ‘E or S’ SB A/c with your Branch.
They have nominated jointly Mr Ram Lal’s minor daughter Ms Rekha. Mrs Shyama Devi, wife
of Mr. Ram Lal was appointed to receive the money on behalf of Minor Nominee. Mr Ram Lal
died in an accident. Raushan Mehra approaches the Branch and requests you to change
nomination in favour of his son Suraj Mehra and this is opposed by Mrs Shyama Devi. How
will you deal with the situation?
Answer
In the present case, mandate is in favour of Mr Ram Lal & Mr Rajiv Prakash with survivorship
clause. Amount held in the account is payable to either of them or survivor. Nomination is valid
only after the death of both of them. Since Ram Lal has died in an accident, Mr Rajiv Praksh
(Survivor) is entitled to operate the account singly.
Further, Mr Rajiv Praksh is also entitled to change nomination in the account. Therefore, claim
of Mrs Shayma Devi is not justified.
3.4. Mr. Ashok Paul maintains a STDR for Rs 275000/- with your branch. He died due to a road
accident. His son, Suman Paul approaches you to claim the amount as nominee. Meanwhile,
you receive an advocate’s notice on behalf of the daughter of the deceased Mrs. Radha Paul
to stop payment of the deposit to Suman Paul. How will you handle the situation?
Answer
Payment to nominee after death of the depositor constitutes a full & valid discharge of bank’
liability. However, we should take cognizance of any order, decree, certificate or other
authority from a Court of competent jurisdiction restraining the bank from making the payment
from the account of the deceased.
In the present case, advocate of Mrs Radha Paul should be advised to obtain an injunction
order from any competent court and mere serving of a legal notice cannot be construed as an
injunction from competent court.
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In absence of any such order, payment to nominee after exercising due diligence will provide a
valid discharge to bank’s liability. Moreover, such payment to him shall not affect the right or
claim of remaining legal heirs of the deceased.
3.5. Mr. Dinesh is a software engineer. He is having SB account in your branch. Mrs.
Meenakshi, his mother one day approaches your branch and informs the sudden death of his
son. She also informs that nomination in the SB account is available in her favour. On scrutiny
you find the following details with respect to Mr. Dinesh:
Account Balance (Rs.)

Savings Plus 57,695.00
MOD-STDR 45,000.00
Personal Loan 23,507.00
(Outstanding)
How will you deal with the situation?
Answer
Nomination given by Mr. Dinesh for his Savings Plus account will also hold good for the MODs
created through auto sweep in the account. However, outstanding in the personal loan account
should be first appropriated before settling the claim in favor of the nominee Mrs. Meenakshi.
Thus, a sum of Rs 79188/- (Rs 57695 + Rs 45000 – Rs 23507) may be paid to the nominee after
exercising due diligence in ascertaining the fact of death of the depositor and in establishing the
identity of the nominee.
3.6. A Garnishee order for Rs 1.20 lakh is received in case of a Partnership Firm M/s XYZ.
Credit balance available in the account of the firm is Rs 90000/- only. Bills for Rs 20000/- are
sent for collection to their account. Credit Balance in the personal account of Partner X, Y & Z
are Rs 15000/-, Rs 6000/- and Rs 18000/- respectively. What actions you will take?
Answer
Garnishee order is not applicable to bills/cheques sent for collection but the proceeds not yet
realized.
In case of partnership firm, however, it is applicable to credit balances held in personal
accounts of the partners.
Since, there is a shortfall of Rs 30000/- in the partnership account, it can be met

proportionately from the personal accounts of the partners i.e. Rs 10000/- each. Again, only Rs
6000/- is available in the personal account of Y and therefore, shortfall of Rs 4000/- will be
equally met from the personal accounts of X and Z.
Thus, in compliance of the garnishee order, the amounts in various accounts would be attached
as under:
i) Account of M/s XYZ firm - Rs 90000/-
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ii) Personal A/c of X -Rs 12000/-

iii) Personal A/c of Y -Rs 6000/-
iv) Personal A/c of Z -Rs 12000/-
3.7. Jai Hind Trust is maintaining a current account in your branch with a substantial balance
in the account. Mr. Atma Ram the Managing Trustee is the authorized signatory of the
account. Recently you come to know that Mr. Atma Ram has been declared as insolvent.
Today your branch has received a cheque for Rs.5 lacs signed by him in clearing. The account
has sufficient balance to honour the cheque. The Manager (branch operations) approaches
you with a dilemma whether to honour the cheque or not, as the signatory has become
insolvent. Please guide him.
Answer
Manager Branch operation will be advised as under
i) Mr Atma Ram has been declared insolvent and therefore operation in his personal
account will be stopped as the amount held in it becomes payable to official receiver.
ii) However, Mr Ram’s insolvency will not affect his functions as Trustee because he is
functioning in fiduciary capacity and official receiver cannot claim the amount held in
Trust Account. Therefore, cheques drawn by Mr Ram as Trustee on the Trust account
are payable if otherwise in order.
3.8. Sri Krishna Ballabh Sinha is a visually impaired/blind person. He can sign consistently. He
wants to open a self operated cheque facility Savings Bank A/c. What procedure you will
adopt to accede to his request? If, he would not have been able to sign uniformly do you
envisage any change in the procedure?
Answer
i) In terms of revised RBI/IBA guidelines in this respect Sri Sinha will be permitted to open self
operated cheque facility SB A/c.
ii) Firstly, Sri Sinha needs to be informed/explained about his ‘rights & liabilities’ as account
holder
iii) Third party cash payment of self drawn cheques by visually impaired persons is now
permitted
iv) He is also not required to submit any undertaking
v) Since he is able to sign the cheques consistently, affixing his thumb impression at the time of
issuing cheque is not required
In case, he feels that his signature may not exhibit consistency does not mind branding “CARE –
Depositor Visually Impaired” stamp, in order to avoid the ‘cheque being returned unpaid’ on
account of ‘difference in the signature’, in such cases a written request for branding the
cheques may be obtained, cheques shall be branded and thumb impression shall also be
obtained and witnessed by the Bank Official under his signature and specimen signature
number, along with the Bank stamp
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Problems 4 – Advance General
4.1. X, Y and Z are the partners of a firm. The firm is availing an overdraft limit of Rs 5 lakh
from your branch. You come to know from reliable source that Mr X died on 27 th Jan 2011.
Two cheques signed by Mr X are presented for payment on 28 th Jan 2011. Cheques are dated
prior to the date of death of Mr X and within 6 months from the date of issue. What actions
you will take?
Answer
On receipt of information of death of a partner X in the firm, operation in the overdraft account
with us should be stopped immediately in order to determine the liability of the deceased
partner. Estate of deceased partner X will only be liable for payment of debt raised by the firm
before his death. Moreover, if we fail to do so, clayton’s rule will come into play. Any further
credit in the account will reduce the liability of the deceased partner Mr. X.
We should, therefore open a new current account in the name of reconstituted firm to facilitate
the continuance of business pending sanction of suitable credit limits. Fresh mandate for
operating the account by the surviving partners should also be obtained.
Cheques drawn by deceased partner may be paid after obtaining confirmation of the surviving
partners and not otherwise.
4.2. Mr. Raja has taken a gold loan from your branch. His whereabouts are not known and
five years have passed. One day Mrs. Raja comes to your branch with cash to close the loan
taken by her husband under the condition that the gold ornaments are delivered to her. What
will you do?
Answer
As per sec 108 of Indian evidence Act, a person reported missing can be presumed to be dead
only after a lapse of 7 years by a competent court.
In the present case, therefore, gold ornaments pledged to the Bank can be handed over to Mr.
Raja only on closure of the loan account.
Meanwhile, Mrs. Raja should be advised to repay the loan to reduce the interest liability. This is
also in interest of the bank from asset quality angle.
4.3. A, B and C are partners in a firm. A retires from the firm. B and C are willing to accept the
liability of the firm. What precautions will you take if you accept the offer of B and C?
Answer
When a partner retires from a partnership firm, the firm is reconstituted. In such case the
following precautions should be taken to avoid the applicability of Clayton’s Rule:
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i) A letter of continuing guarantee should be obtained from all the continuing and
outgoing partners as an interim measure
ii) In case the advance is guaranteed by any third party guarantor, a stamped letter of
confirmation should be obtained from them
iii) In respect of Term Loans, there is no need to obtain a fresh set of documents. Instead a
stamped letter should be executed by the continuing partners and Guarantor(s), if any
iv) In case mortgage is created over the partnership property, it will not be affected
Meanwhile, the reconstituted firm should be accorded a new sanction of limit and fresh
documents should be obtained. Outstanding balance should be transferred to a new account.
4.4. M/s Venus Dresses has a cash credit account with you. They have taken insurance cover
for the full value of the stock of raw materials and finished goods. Due to congestion in the
factory premises a portion of the stocks are shifted to a separate godown. A fire accident
takes place thereat and the stocks are fully destroyed. But the insurance Company rejects the
claim. Indicate the reasons.
Answer
An insurance policy contains the value of insured stock and also the place where the stocks are
kept. In case the stocks are shifted to another godown, the insurance cover will be available if
the change of place is notified to the insurance company and endorsed to this effect is made in
the policy.
In this case, this has not been followed by the borrowal unit and therefore the insurance
company is justified in rejecting the claim.
4.5. You have purchased securities at the request of your customer for the amount paid. Can
you exercise right of general lien over those securities?
Answer
Right of general lien can be exercised only when goods or securities of customer come into our
possession during normal course of business. Right of general lien cannot be exercised when
securities or goods are in our possession for some specific purpose.
In the present case, we have purchased the securities at specific request of the customer and
therefore, we have acted as an agent of the customer.
Right of General lien over these securities cannot be exercised
Problems 5 – Cash Department
5.1. Mahesh, a Single Window Operator, detects counterfeit notes while accepting cash from
a well known customer, Dr Binod Prasad Garg, of the Branch. Dr Garg says that his attendant
might have received these from some patient. He requests Mahesh to return the suspected
notes to him. You are Cash-in-Charge of the Branch and Mahesh approaches you for
guidance. Please, therefore, suggest him the necessary steps to be taken in such situations.
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Answer:
Mahesh will be advised to politely request Dr Garg to cooperate in this regard so that
compliance of RBI’s guidelines may be ensured:
i) Counterfeit notes will be branded with stamp reading ‘COUNTERFEIT BANKNOTE

IMPOUNDED’.
ii) An acknowledgement receipt will also be issued mentioning therein Name and address of Dr
Garg, Sl No of notes, Denomination and parameter on which the notes are deemed as
counterfeit.
iii) Receipt will be signed by Mahesh (Cashier). Dr Garg (tenderer) will also be requested to
countersign the receipt. Receipt will, however, be issued even on denial of Dr Garg to sign the
receipt.
iv) Dr Garg’s statement as to how the said notes came into his possession will be obtained.
Impounded notes along with tenderer statement shall be forwarded to the local police
authorities for investigation by filling FIR.
v) Acknowledgement of police authorities will be obtained in respect of notes forwarded to
them.
vi) A copy of FIR will also be forwarded to Forged Note Vigilance Cell of the bank.
vii) By 7th of next month, a report on counterfeit notes detected will be submitted to
a) Concerned Issue Office of Reserve Bank and
b) Asstt. Director, National Crime Records Bureau, Government of India, Ministry of Home
Affairs, New Delhi
Problems 6 – Remittance & Collection
6.1. Mr. Rahul Sharma, the purchaser of a draft of Rs 35000/- has reported its loss in transit.
He requests for the issuance of the duplicate thereof. Payee of the draft is not willing to
execute indemnity. How you will handle this situation?
Answer:
i) Status of the draft in CBS will be changed as lost
ii) Drawee branch will be advised to exercise caution in the event of its being presented for
payment and also to issue Non-Payment advice in this respect
iii) Draft appears to be sent by post on the initiative of the purchaser and therefore, Post office
may be considered acting as his/her agent
iv) In such case, delivery of the draft to the payee may be construed to be completed only after
it is received by him
v) Till such time, duplicate draft may be issued at the request of the purchaser subject to
execution of Indemnity by him and two sureties each good for the value of the draft
vi) Moreover, Payee also do not appear to object the issuance of duplicate draft to the
purchaser
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6.2. A draft for Rs 2 lakhs is received for payment unsigned by any authority. Please discuss
the implications.
Answer
Possible Consequences
i) Draft is issued by the bank after receiving its full value
ii) Denying its payment may lead to bad publicity
iii) Legal action due to wrongful dishonour may also be initiated by payee under NI Act
iv) Consumer forums have also recognized nonpayment of draft due to technical reasons as
deficiency in service
Challenges
i) If the aforesaid draft is not genuine, then the bank may incur loss
ii) In such case, passing official may also be charged for negligence of duty
Action
i) Issuing branch should be contacted to confirm the genuineness of issue of draft
ii) Details of issue of IOI can also be verified through CBS before authorizing payment
iii) Validation of Security key (BIAK) mentioned in IOI is also mandatory. Invalid BIAK cannot be
bypassed
Considering all these draft may be paid if found otherwise in order.
6.3. A draft for Rs 135000/- purchased by M/s NBCC Ltd, a Govt of India Undertaking in favor
of a contractor is reported lost in transit. Payee (Contractor) approaches you for issue of a
duplicate draft. Authorised officials of M/s NBCC Ltd are not inclined to execute indemnity.
However, they do not have any objection in issuing the duplicate draft. What actions you will
take in this case?
Answer
i) Status of the draft in CBS will be changed as lost
ii) Drawee branch will be advised to exercise caution in the event of its being presented for
payment and also to issue Non-Payment advice in this respect
iii) Draft appears to be sent by post by purchaser (M/s NBCC Ltd) at the request of the Payee
(Contractor)
iv) Therefore, Post office may be considered acting as an agent of Payee
v) In such case, delivery of the draft to the payee may be construed to be completed once the
draft is posted
vi) Therefore, duplicate draft may be issued on the request of the Payee subject to execution of
Indemnity by him and two sureties each good for the value of the draft
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vi) Moreover, M/s NBCC Ltd also do not appear to object the issuance of duplicate draft to the
Payee
6.4. A bill is received by your branch with request to remit the proceeds through draft. Bill is
retired by the drawee in cash and draft is made in favour of the drawer and sent by post.
However, lodger / drawer of the bill claims that the draft has not been received by him. What
actions you will take in this situation?
Answer
i) In such case, bank acts as an agent of the lodgers of the bill. Bank’s responsibilities continue
till the proceeds are received by the lodgers.
ii) Duplicate draft, therefore, may be issued after obtaining an unstamped letter of undertaking
from the lodgers. The lodgers undertake to the return the original draft if received.
6.5. Mr Baldev Sharma deposits a outstation cheque of other bank for Rs 25000/- issued by
his friend for credit to his account. Mr. Sharma is in urgent need of money. He requests for
immediate credit of the cheque to his account. What precautions you will exercise in this
case?
Answer
As per extant instructions under Cheque Collection Policy, immediate credit of outstation
cheques upto Rs 30000/- is to be provided in satisfactorily conducted Accounts.
Under this policy, a satisfactorily conducted account is one which fulfill the following
conditions:
i. His account should have been opened at least six months earlier after complying with KYC
Norms
ii. Account should neither be dormant nor inoperative
iii. There should not be any irregular dealings/suspicious transactions in the last 6 months
iv. Bank should not have experienced any difficulty in recovery of any amount advanced in the
past including cheques returned after giving credit
v. No adverse features attached to the account/account holders should have been brought to
the notice of the bank
Mr Sharma’s request may be acceded subject to fulfillment of the above conditions
6.6. Mrs. Asha Trivedi was issued a cheque for Rs 2.50 lakh by LIC of India against final
settlement of a policy on the death of her husband, Mr. Tribhuvan Trivedi. The cheque was
deposited in the drop box at your branch for credit to her A/c. After a lapse of one week,
when she enquired about the non credit of the cheque in her account, the cheque could not be
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traced. She is in urgent need of money due marriage of her daughter. How you will handle the
situation?
Answer:
i) Drawee bank/bank will be advised the particulars of lost cheques for exercising caution
against payment
ii) Mrs. Trivedi will be assured of our all assistance in obtaining a duplicate instrument from the
drawer/ maker of the instrument (LIC of India)
iii) Actual charges of recording Stop Payment instructions levied by drawee bank will be borne
by the Bank
iv) Actual charges levied by the drawer/bank in issuing duplicate cheque/instrument will also be
reimbursed, subject to a maximum of Rs 250/-
v) Interest on the amount of the cheque for a further period of 30 days at Savings Bank rate will
also be provided for possible further delay in obtaining duplicate cheque
Problems 7 – Safe Deposit Locker
7.1. Mr. & Mrs. S C Gupta reports that last night robbery was held at their residence in which
key of their locker at your branch was also taken away. They are quite apprehensive that the
key may be misused to operate the locker. How will you help them?
Answer
We will assure them that due care and necessary precaution is exercised at the branch in
operation of the locker to prevent any unauthorized access to it. Before allowing the access to
the locker, the signature of the hirer is obtained and verified on the SD Locker Access Register.
Mandate for operation is also verified and access is allowed to the hirer(s) as per mandate only.
They will also be advised to report the loss of key in writing signed jointly by them.
Date for breaking open the locker will be fixed with the manufacturer of the locker as per Mr. &
Mrs. Gupta’s convenience. A service charge of Rs 500/- in addition to actual expenditure
incurred for breaking open the locker and changing the lock by manufacturers of lockers shall
be payable by them. Locker will be break open in their presence
7.2. What actions you will take when rent is overdue in a locker?
Answer:
Following Procedure will be followed in case of non-payment of rent of a locker
i) Reminder will be sent to the hirer (s) on due date i.e on 2nd April
ii) If the rent is paid in 1st Quarter, normal locker rent plus 10% of annual rent will be
recovered as locker rent overdue charge. If the rent is not paid, another reminder will
be sent after 1st quarter.
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iii) In case of payment by the hirer (s) normal locker rent plus overdue locker charge (25%
of Annual rent) will be recovered. Otherwise, Notice on COS 405 will be sent after lapse
of 2nd quarter.
iv) Notice on COS 406 will be sent after 1 year. If rent is paid during the period (within 1
year) appropriate overdue charge will also be recovered alongwith normal rent.
v) In case locker rent remains unpaid even after serving notice on COS 46, the recovery of
arrears of rent may be made by sale of contents of locker.
vi) Controlling authority’s approval will be obtained before breaking open the locker
vii) After breaking open the locker inventory of contents shall be prepared in the presence
of two officers of the branch and two independent witnesses.
viii) Contents so found in locker will be valued by an approved Govt Valuer and kept on
record.
ix) Arrear of rent may be realized by sale of the contents
x) Remaining contents will be kept as a Safe Custody item under joint custody of Joint
Custodians
7.3. Mr. & Mrs. Sharma are having a locker to be operated by either of them or survivor. Mr.
Sharma requests you in writing that Mrs. Sharma should not be permitted to operate the
locker. Discuss the situation.
Answer
If the locker is in joint names, access to the hirers is allowed only after verification of mandate
for operation recorded with the bank.
In the present case, mandate is available for operation of the locker by either of them.
However, the mandate can be revoked by any one of the joint hirers. Here, Mr. Sharma (one of
the hirer) has given the notice to revoke the earlier mandate of operation (E or S). In such
situation, only joint operation of the locker can be permitted.
Bank should also make effort to persuade them to surrender this locker and get separate
lockers allotted in their sole name to prevent any further complication or litigation.
7.4. ‘A’ & ‘B’ are having a jointly operated locker. ‘A’ has nominated ‘X’ and ‘B’ has nominated
‘Y’. Both of them die in a accident.
Answer
In such eventuality, access of the locker will be given jointly to the nominees X and Y. However,
certain precautions will be exercised before handing over the contents to them. These are:
i) Genuineness of the death certificate will be ensured.
ii) Due care and caution will be exercised in establishing the identity of the nominees.
iii) Effort will be made to find out if there is any order from a competent court restraining
the branch from giving access to the locker of the deceased
iv) Nominees will be clearly explained that the access to the contents of locker has been
given to them as trustee of the legal heirs of the deceased and such access to them will
not affect the claim/rights of the legal heirs of the deceased.
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7.5. What actions you will take in case a locker is not operated for more than a year even if
the rent is paid regularly and the locker hirer is classified under High Risk category? Have you
acted differently in case the locker hirer would have been classified under Medium Risk?
Answer
Where the locker has remained unoperated for more than 1 year for a higher risk category,
following actions will be taken:
i) Efforts will be made to immediately contact the locker hirer. He/she will be advised to
either operate the locker or surrender it.
ii) Locker hirer will be asked to give in writing, the reasons why he/she did not operate the
locker for such a long period.
iii) In case the locker hirer has some genuine reasons as in the case of NRIs or persons who are
out of town due to a transferable job etc., branch may allow the locker hirer to continue
with the locker.
iv) In case the locker hirer does not respond nor operate the locker, branch should consider the
opening of the locker after giving due notice to the locker hirer.
In case of medium risk category customer, the above mentioned actions will be initiated if the
locker has remained unoperated for more than 3 years.
Problems 8 – Liability & Transaction Products
8.1. Mr. Prabhat Kumar has recently been promoted to MMGS-III. He has been given
assignment of Manager (Branch Operation) of a District Head Quarter Branch. In his previous
assignment, he was handling Service Desk at ITS Department of his Circle. Few weeks after
taking charge of his new assignment, he finds that there are large number of accounts in
which there is no transaction for more than a year and balances are also more than Rs 5000/-
. In many cases, balances are more than Rs 25000/- also. He is not aware of the guidelines in
this regard. If you are heading that Branch, what actions you will suggest to him?
Answer
i) A letter in prescribed format should be sent to the all such accountholders so that reason for
non operation can be ascertained.
ii) In case it is due to shifting of the locality, they may be asked to provide details of their new
accounts to which the balance in the existing account could be transferred.
iii) In case of inoperative accounts having balance more than Rs.25,000/- and the letter sent to
them is returned undelivered, they may immediately be put on enquiry to find out their
whereabouts or their legal heirs in case of deceased account
iv) In case, they are not traceable, person(s) who has/have introduced the account holder
should be contacted.
v) Contacting the employer or any other person whose details are available with the Bank may
also be considered.
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vi) Account holder may also be contacted telephonically if the telephone/cell number is
available.
vii) In case of non-resident accounts, account holders may also be contacted through e-mail and
confirmations be obtained.
8.2. Assume that you are the branch manager of an Industrial Estate branch. Mr. Ravi Kiran
CEO of M/s Goodluck Industries with around 500 employees of various cadres is approaching
you with a request to open salary accounts at your branch for his employees.
The employee profile of the company is as under:

 100 employees are of executive cadre drawing monthly salary of Rs.50000/- and
above.
 100 employees are of supervisory cadre drawing monthly salary of Rs.25000/- to
Rs.35000/-
 Remaining are regular employees earning monthly salary of Rs.7000/- to Rs.10000/-
The current account of M/s Goodluck Indusries is already maintained at your branch. Some of
the low salaried employees are not in favour of opening SB accounts. How will you help the
customer and what are the various alternatives available before you?
Answer
Employees of supervisory cadre & executive cadre should be offered Silver & Diamond variant
of Corporate Salary Package respectively. A host of value added features are available under
these variants of CSP such as VISA/Master Gold Card, Free Inter core transactions, Free
Unlimited SB Cheques, Free Multi City Cheques, etc.
Mr. Ravi Kiran, CEO should be offered Platinum variant of CSP. He should be accorded status of
‘Vishesh’ customer. SBI Platinum Card should also be issued.
Employees who are not willing to open SB Accounts should be issued e-Z pay card subject to
fulfillment of the following conditions:
i) Limit per card for loading / reloading not to exceed Rs. 50,000/- per month
ii) An undertaking and indemnity to be obtained from the company to the effect that the cards
are for genuine payments to the employees / agents etc., and will be delivered to them against
their acknowledgement.
iii) Complete KYC requirements of individual card holders are to be obtained and kept on record
by the company.
iv) Acknowledgment from the card holder to be obtained and submitted to branch to be kept in
record.
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Problems 9 – Asset Products (PB)
9.1. Mr. X is a Project Manager in a multinational company having a good pay package. He
wants to construct a house on a plot which was gifted to his wife by his father in law. His wife
is a housewife. How will you help him?
Answer
In the present case, the property is in the single name of the Mr. X’s wife. Although she has no
independent source of income as she being the house wife, income of her husband Mr. X
should be considered for arriving at the eligible loan amount subject to him joining as co-
borrower or guarantor and fulfillment of other terms and conditions applicable to housing loan.
9.2. Mr. Arvind, a customer of your branch, has been sanctioned home loan of Rs.25.00 lacs.
His salary is credited to his SB account maintained in ABC Bank. Newly promoted field officer
in your branch is insisting for 48 PDC leaves. But, Mr. Arvind is expressing his inability to do
so. Instead he is agreeing to give 12 PDCs. In this situation the field officer approaches you,
the branch manager, for guidance. How will you guide him in the light of recent instructions
on PDCs?
Answer
Extant instruction regarding Obtention of minimum 48 PDCs has been modified. Instead only six
undated and duly signed cheques, five cheques for EMIs and one cheque for full loan amount is
required to be obtained from borrower where mandate for repayment in the account is
received through ECS/S.I. PDCs are required only for initiating action under section 138 of N.I.
Act.
In view of the above, Field officer will be advised to obtain only 6 PDCs as stated above and
mandate for repayment in HL account through ECS Debit/S.I. from Mr. Arvind.
9.3. Mr. Ramesh Babu, a software engineer working in a leading software company MNC for
the past three years is approaching your branch for home loan. Cost of Flat, ready for
procession, as per sale agreement is Rs 30 lac. Cost of Stamp duty and Registration charge is
Rs 3 lac. SBI Life premium is Rs 1 lac .His salary details are given below:
Annual Gross emoluments Rs.624000/=
This excludes performance incentive of Rs.24000/- paid in each quarter.
Details of his monthly deductions are-
PF Rs.3000/-
Additional PF Rs.2000/-
Income Tax Rs.4000/-
Insurance Premium Rs.1200/-
SIP Rs.2000/-
Personal Loan Rs.3150/-
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Please calculate his eligible loan amount assuming that the repayment period is 20 years, EMI
is Rs.1000/- per lac and the value of Flat has been assessed to be Rs 31 lac by our empanelled
valuer.
Answer
Let us first calculate NMI
It will be equal to (Annual Gross emoluments/12) + (Quarterly Performance Incentive/3) – PF -
Income tax
i.e. (624000/12) + (24000/3) – 3000 - 4000 = Rs 60000 – Rs 7000 = Rs 53000/-
(Performance Incentive has been included in NMI and Additional PF, Insurance Premium & SIP
have not been considered as deduction)
Maximum Permissible EMI/NMI ratio is 55% (Income between Rs 5 lac to Rs 10 lac)
Maximum Permissible EMI = 55% of 53000 = Rs 29150/-

After deducting Existing EMI, Max Permitted EMI = Rs 29150 – Rs 3150 = Rs 26000/-
Max Permissible Loan Amount (in lac) in terms of EMI/NMI Ratio

= (Max Permitted EMI)/ (EMI per Lac) = 26000/1000 = Rs 26 lac (A)
Max Permissible Loan Amount (in lac) in terms of Margin

= (Project cost)*85% = 34*0.85 = Rs 28.90 lac (B)
Max Permissible Loan Amount (in lac) in terms of LTV Ratio

= (Lower of Sale agreement or Valuation Report)*80% = 30*0.80 = Rs 24 lac (C)
Max Permissible Loan Amount (in lac) – Lower of A, B and C

= Rs 24 lac
Problems 10 – Government Business
11.1. A customer deposited cash in the Government Account and came back to the branch to
collect his copy of the challan after a period of 2 days. It is not found in the tray where the
customer’s copies of the challans are kept. He requests for issue of a duplicate challan. Discuss
Answer
Credit to Government Account is made through Challans enfaced by treasury officials.
Enfacement of challans gives us the authority to credit the specified Govt. A/c. In case of loss of
customer’s copy of challan, duplicate challan cannot be issued nstead a certificate of credit can
be issued as under:
‘A sum of Rs ________ was received for credit of _________ Govt A/c from ___________
(Name) on __________’.
This is done to avoid any possible misuse of original/duplicate copy of challan by the depositor
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11.2. A PPF account in the name of a HUF entity matured on Mar 2010. Sri Dinesh K Patel,
Karta of the HUF request you to extend the deposit for another 5 years? What actions you will
take?
Answer
In this context, it will be relevant to refer GOI notification dated 13 th May 2005 in terms of
which
i) HUFs were no more eligible for opening PPF Accounts since May 2005
ii) All existing HUF PPF accounts were allowed to continue till original maturity
iii) No extension should be allowed after original maturity
iv) No interest should be allowed for the period after maturity
It is, therefore, obvious from the above instruction that the PPF account in the name of HUF
entities cannot be extended after maturity.
Problems 11 – NPA Management
11.1. The Inspecting official of your branch has observed that an advance account has been
straightway classified as doubtful asset. He wants to know the reasons. How will you explain?
Answer
Normally an advance account goes through various stages of asset classification viz.
Substandard, Doubtful Asset and loss asset.
However, an advance account can be straightway classified as doubtful asset when the
realisable value of the security is less than 50 per cent of the value assessed by the bank at the
time of last inspection.
Moreover, If the realisable value of the security, as assessed by the bank/approved Valuers is
less than 10 per cent of the outstanding in the borrowal accounts, the asset should be
straightaway classified as loss asset.
11.2. A notice has been sent to an NPA borrower under SARFAESI Act giving him 60 days
notice for payment of the dues and stating that the Bank would take over the assets of the
firm in case of default. The dues have not been paid. What action you will take to recover the
dues?
Answer
In case the Borrower fails to discharge his liability in full within 60 days, the Secured Creditor
may take recourse to one or more of the following measures to recover his secured debt,
namely
i) Take possession of the secured assets of the Borrower
ii) Take over the management of the business of the Borrower
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iii) Appoint any person, to manage the secured assets the possession of which has been taken
over
Bank also has the right to transfer the secured assets by way of lease, assignment or sale for
recovering the dues
A notice of 30 days is required to be given to the Borrower before effecting sale of the secured
assets taken over.
Problems 12 - Technology
12.1. Shri Ramesh Kumar, an SB account customer of your branch approaches you with an
ATM related issue. He says that he purchased jewels from a famous jewelry shop using his
ATM card. His account was twice debited for the amount of purchase. The POS machine used
by the shop belongs to some other Bank. The vendor said that his account was credited only
once. Now the customer wants refund of the amount debited erroneously. How will you deal
with the situation?
Answer
Shri Ramesh Kumar will be asked to provide his ATM Card No or A/c No.
His complaint will be lodged in centralized Complaint Management System (CMS) application
(URL https://10.0.22.170:8070/CMS)
A ticket number will be generated acknowledgement of complaint will be sent to the
customer by e-mail / SMS.
Since the complaint relates to erroneous debit at POS, it will be handled by ATM Switch
Centre and the customer’s Account will be credited directly
In case of delay in settlement of complaint beyond 12 days, Shri Arvind Kumar will be
compensated with Rs 100/- per day from 13th Day.
12.2. Miss Sushma Agnihotri, a customer of your branch informs you over telephones that her
bag containing ATM Card has been stolen while travelling in a train. She expresses her
apprehension that somebody else would operate her card. As a Branch Manager what action
would you take to protect the interest of the customer?
Answer
First of all Miss Sushma Agnihotri will be assured that if PIN of her ATM is secured i.e. she has
not written it anywhere and kept it in her bag, then her ATM Card cannot be used.
Immediately, her ATM card will be hot listed through Call Centre by calling on toll free numbers
1800 425 3800 or 1800 11 22 11. Card is to be hot listed either by branch official or the
customer via contact centre. A ticket number is provided by the call centre in this regard.
Details of Lost ATM card will also be entered in ‘Lost ATM Card Register”.
Duplicate card will be issued to Miss Sushma Agnihotri on her specific request. A service charge
of Rs 200/- will also be recovered.
12.3. A valued customer of your branch reports that he has forgotten the PIN number of his
ATM. How will you help him?
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Answer
From 01.07.10, requests for generation of duplicate PIN can be registered in CMS by the current
branch of the customer or any other branch. Customers can also lodge requests for duplicate
PIN through CMS via Contact Centre. A ticket number will be generated in CMS. It will always
start from “AT99999”. Current branch of the customer can track the Re-PIN request anytime in
CMS or ATM WEB. If request is lodged by another branch, they too can track it in ATM WEB.
Acknowledgement is sent to the customer when their mobile number /email id are entered.
Regenerated PIN will be dispatched to the current branch only
After dispatch of PIN, the details are sent to customers, where mobile number is available at
Core data, through sms.
Service charge of Rs 50/- will also be obtained.
12.4. Mr. Dev Anand enters your branch and wants to pay the dues for his SBI Credit Card. He
is not having an account in your branch and he also doesn’t have a cheque book. How can you
help him?
Answer
Recently a menu in CBS has been provided for accepting cash from a credit card holder against
payment of his dues.
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Compiled By

Chapter No Title Folio

We acknowledge valuable inputs received from Sri M

Problems 1 – Legal Aspect of Banking

a) Cheque must be a crossed one before it is deposited

The charge of conversion against our bank is thus valid.

Problems 2 – KYC & AML Policy

Problems – 3 Deposit General

3.1. What actions you will take in the following cases?

Account Balance (Rs.)

Since, there is a shortfall of Rs 30000/- in the partnership account, it can be met

ii) Personal A/c of X -Rs 12000/-

Problems 4 – Advance General

Problems 5 – Cash Department

i) Counterfeit notes will be branded with stamp reading ‘COUNTERFEIT BANKNOTE

Problems 6 – Remittance & Collection

Considering all these draft may be paid if found otherwise in order.

Problems 7 – Safe Deposit Locker

Problems 8 – Liability & Transaction Products

The employee profile of the company is as under:

Problems 9 – Asset Products (PB)

Maximum Permissible EMI/NMI ratio is 55% (Income between Rs 5 lac to Rs 10 lac)

Maximum Permissible EMI = 55% of 53000 = Rs 29150/-

Max Permissible Loan Amount (in lac) in terms of EMI/NMI Ratio

Max Permissible Loan Amount (in lac) in terms of Margin

Max Permissible Loan Amount (in lac) in terms of LTV Ratio

Max Permissible Loan Amount (in lac) – Lower of A, B and C

Problems 10 – Government Business

Problems 11 – NPA Management

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