Chapter 1 PDF

Annexure I
IAD Cir. No. 16 2012 dated 30.01.2012

CHAPTER - I
IBAS CODE FOR BANKING PRACTICE, OUR BANKS DEPOSIT POLICY & RBI
DIRECTIVES
A) IBAS CODE FOR BANKING PRACTICE

INTRODUCTION
Indian Banks' Association (IBA) introduced a formal system of self-discipline in the
Indian Banking Industry in the year 1973, by recommending a ceiling rate of interest on
inter-bank borrowings in call money market. In the year 1977, the Ground Rules and
Code of Ethics (GRACE) were evolved. In a highly regulated environment, GRACE
served its purpose for the last over 20 years, in bringing about a standard of ethical
behaviour among Member Banks in certain focal areas of interest to the banking public.
GRACE also served as a tool defining the boundaries for interpretation of the directives
of the Regulatory Authority in key areas. However, the framework of GRACE was
predominantly suited to a fully regulated environment.
The environment has undergone transformation following liberalisation and in the
context of financial sector reforms. It was, therefore, felt that there was a need for
comprehensively revising GRACE.
Keeping the above need in view, the IBA Committee to Monitor Code of Ethics (CMCE)
set up a working group drawing members from the CMCE itself to revise the GRACE.
The Working Group drafted a code for banking practice for uniform adoption by the
banks. The draft code for banking practice was circulated among Member Banks for
their comments. The final draft after incorporating suggestions from Member Banks and
our legal consultant was approved by the IBA Managing Committee. The Code was
then forwarded to the Reserve Bank of India (RBI) for its concurrence. RBI advised that
the IBA Code for Banking Practice is in order for uniform adoption by the Member
Banks.
2. The IBA Code for Banking Practice thus evolved, is an attempt towards fulfilling the
above need under the liberalized and deregulated environment, aiming to promote a
healthy relationship between the banks. This IBA Code for Banking Practice shall
replace the extant GRACE with effect from 1st September, 1999 for adoption by all
Member Banks.
Status of the IBA Code for Banking Practice
3. Indian Banks' Association (IBA) Code for Banking Practice (hereinafter referred to as
the IBA Code/the Code) is issued by the Indian Banks' Association (hereinafter referred
to as the Association) which has the concurrence of the Reserve Bank of India.
Updated up to 31.12.2011
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4. This is a non-statutory Code issued on a voluntary basis. It is to be observed by the

Member Banks in dealing with their personal customers (hereinafter referred to as
customers). It covers specifically banking services such as current accounts, savings
and other deposit accounts, advances (loans and overdrafts). However, principles of the
Code will apply to overall relationship between the Member Banks themselves and their
customers.
5. The recommendations set out in the Code are supplementary to and do not supplant
any relevant legislation, codes, guidelines or rules applicable to Member Banks under
the Banking Regulation Act, 1949, the Reserve Bank of India Act, 1934, the Negotiable
Instruments Act, 1881, the Banking Companies Acquisition and Transfer of
Undertakings Act, 1970 and 1980 or any other law in force in India governing the
Banking Law and Practice.
6. The Association experts its respective Member Banks to comply with the Code in
letter and spirit and observance/compliance thereof shall be monitored by a Committee
to be constituted at the Association.
7. The Code becomes effective from 1st September, 1999 and would also be subject to
review/revision from time to time; at least once in every three years.
Objectives
8. The Code is intended
(a) To promote good banking practices by setting out the minimum standards which
Member Banks will follow in their dealings with customers;
(b) To foster customer confidence in the banking system;
(c) To inculcate self-discipline amongst Member Banks with a view to promoting
healthy competition and ethical practices in respect of banking services.
9.Useful Definitions
A) "Prizes etc." means any prize, lottery, lucky dip, prize draw, gift, benefit either in cash
or in kind, attached to, linked with or flowing from any deposits/advances schemes.
B) "Term Deposits" or "Fixed Deposits" are deposits where the depositor makes a lump
sum deposit at one time for a fixed term and receives payment thereof on maturity; the
interest on the deposit is payable at simple rate either periodically or at maturity.
C) "Recurring Deposits" or "Cumulative Deposits" are deposits where the input is in
equal monthly installments and the output, on maturity, is in one lump sum.
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D) "Special Recurring Deposits" are deposits accepted in quarterly/half-yearly/yearly

installments from the institutional/corporate investors for their special needs such as
sinking/amortization funds or from individuals for any of their special needs.
E) "Annuity Deposits" are deposits where the input is either in installments or in lump
sum and the output is in installments.
F) "Permanent Income Plan" or "Perennial Pension Plan" is a scheme under which
deposits are accepted in lump sum or in installments for a specific period, on completion
on which, interest at applicable rate on the corpus built is paid monthly (discounted) or
quarterly (actual), as per terms of contract.
G) "Reinvestment Deposits" and "Cash Certificates" are deposits which are accepted in
lump sum for a fixed period, on maturity of which the principal plus interest compounded
at quarterly intervals are repaid to the depositor as a lump sum.
OBSERVANCE
Member Banks of the Indian Banks' Association (the Association) agree to observe and
abide by the following Ground Rules:
PRIZES AND GIFTS
10.Member Banks shall not give prizes, gifts, donations, etc., or any direct or indirect
benefits in the purchase price or in respect of any other transactions relating to
securities, bonds, etc., as consideration or with a view to getting or retaining a deposit
and or advance account. Promotional schemes duly approved by the Boards of
respective banks may, however, be launched within the regulatory framework of the
Reserve Bank of India. However, it may be customary to distribute gifts (cost of such gift
article should not exceed Rs.250/- per piece) at the time of Diwali or New Year to the
valued customers. Bank's policy in this regard be approved by the Board.
ASSOCIATION WITH CHIT FUNDS/SPECULATIVE VENTURES
11. Member Banks shall not associate themselves with chit fund companies, which
conduct lottery, gift schemes, etc., or any other speculative ventures. Member Banks
shall also not encourage or lend their names to promote speculative ventures of any
nature. However, it would be in order for banks to open current accounts, fixed deposits,
etc. of such companies in the banks' normal course of business.
DEPOSIT RECEIPTS
12.When Member Banks issue deposit receipts against cheques/drafts/pay-orders
drawn on local banks, the banks may pay interest on such deposits from the date on
which the relative instrument gets credited/adjusted in the bank's account at the clearing
house (RBI, SBI, etc.).
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SAVINGS BANK ACCOUNT

13.Member Banks shall not open savings bank accounts in the name of the institutions
which have been listed out in the Annexure to this Code and also as amended from time
to time.
INTRODUCTION OF ACCOUNTS
14.All deposit accounts, whether savings, current or term deposits, shall be properly
introduced.
PRINTING OF CUSTOMER'S LOGO, ETC., ON CHEQUE LEAVES
15.Member Banks shall not print or allow the customers to print any logo,
advertisement, etc., on the cheque leaves. However, this prohibition need not be
extended to dividend/ interest warrants or refund orders in view of their limited
circulation.
COLLECTION OF TERM DEPOSIT RECEIPT ON MATURITY
16.The Term Deposit Receipt (TDR) received for collection from another bank shall not
be renewed by the TDR issuing bank and delivered to the customer directly. The TDR
issuing bank shall either pay to the collecting bank or else, the instrument shall be
returned, if the issuing bank has any valid reasons not to pay.
RENEWAL OF OVERDUE DOMESTIC TERM DEPOSIT
17.Renewal of overdue domestic term deposit (from maturity date of overdue deposit)
shall be for a period extending upto at least 15 days beyond the actual date of renewal.
If the renewed overdue domestic deposit is tendered for premature
foreclosure/encashment before completion of minimum 15 days from the actual date of
the renewal, no interest be paid for the overdue period even if the total overdue period
from the date of maturity of the old deposit receipt exceeds 15 days.
PAYMENT OF INTEREST ON TERM DEPOSIT MATURING ON HOLIDAYS
18.If the noted due date of a term deposit falls on a holiday, Sunday, non-business
working day, interest be paid for such intervening day(s), at the originally contracted
rate, till the succeeding working day.
MATURITY VALUE CERTIFICATE (MVC)
19.Member Banks shall not issue Maturity Value Certificates (MVCs) under any
circumstances to any person who approach bank branches with offer to procure
substantial rupee deposits.
NEGATIVE PUBLICITY
20.Member Banks shall not make publicity of adverse/weak position of other banks, in
order to wean away the customers of the affected banks.
INTEREST PAYMENT
21.The statements with regard to the rate of interest, method of interest calculation, etc.
in any publicity literature, advertisement and other forms of publicity on deposit
scheme/s of banks shall be precise and intelligible.
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22. Member Banks may follow the Master Charts relating to payment of interest on
deposits prepared by the Association from time to time for fixing maturity values; for
payment of monthly income, annuities, etc.
23. GENERAL CONVENTIONS FOR DOMESTIC DEPOSITS
(a) Member Banks may not accept any deposits for a period longer than 10 years.
However, banks may accept deposits for periods exceeding 10 years in terms of orders
of competent courts or in the case of minors where interests of minors are involved,
provided banks are convinced that it is necessary to do so. Individual banks may decide
in this matter based on asset liability management policies being followed.
(b) Interest on deposits for fixed term may be paid, credited, transferred or reinvested
with frequency not less than the quarterly rests. However, payment of monthly interest
may be allowed, if required, by discounting the quarterly interest accrued (refer to the
Association's Master Charts).
(c) Interest on deposits where the terminal period (month/ quarter/half year etc., as the
case may be) is incomplete shall be paid on maturity.
(d) On deposits repayable in less than three months or where the terminal quarter is
incomplete, interest would be paid for the actual number of days on the basis of 365
days in a year.
(e) Where the interest is paid at discounted value on monthly basis during the currency
of the deposits: If the terminal quarter or half years consists of one month (e.g. deposit
is for 37 months), interest therefore (i.e. for 37th month) shall be paid at actuals (i.e. one
third of quarterly or one-sixth of half-yearly interest).
(f) Where the terminal incomplete quarter or half year consists of
(i) one month and over, but less than two months
(ii) two months, and
(iii) two months and over but less than three months, interest shall be paid as under:
(i) for one month and over but less than two months (e.g. deposit for 37 months and 15
days); or
(ii) two months (e.g. deposit of 38 months) - At discounted value for the first month (i.e.
37th month) and at actuals for the terminal incomplete month (i.e. 15 days) or second
month (i.e. 38th month), as the case may be;
(iii) for two months and over but less than three months (e.g. deposit for 62 months and
15 days) - At discounted value for first and second months (i.e. 61st and 62nd month)
and at actuals for the terminal incomplete month (i.e. 15 days).
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24.TERMS OF ACCEPTANCE OF DEPOSITS

(a) Member Banks shall not issue an incomplete term deposit receipt which does not
clearly mention the amount actually deposited, period for which the deposit is
placed/accepted and the rate of interest payable as also periodical rest at which interest
is payable.
(b) In case of Reinvestment Plan Deposit, Recurring Deposit and Cash Certificate in
addition to the particulars stated in the above para, banks shall also mention the
maturity value and periodical rest at which the interest shall be compounded.
OVERDRAFT IN SAVINGS BANK ACCOUNT
25.No overdraft limit on a regular basis be permitted in saving bank account.
MONITORING
26.The Committee constituted by the Association to ensure the observance/compliance
of the Code by the banks shall be empowered to investigate and follow up the cases of
violation of the Code by Member Banks that may be brought to its notice.
27. Member Banks shall not violate any of the Ground Rules merely because some
other Member Bank/s has/have violated. They shall, instead, instruct their branch
managers or any other officials that on their coming across any case of violation by
other banks, they shall bring the same to the notice of their head office, which will take
up the matter with the Association. For this purpose, every Member Bank shall
nominate a designated officer who shall liaise between the bank's branches and the
Association in the matter. The Association shall consider the complaint on violations
received from the designated officer of the complainant bank. Member Banks shall give
immediate effect to the suggestions given by the Committee in respect of any matter
related to violation of this Code.
Enquiries
28. Enquiries about the Code may be addressed to the Indian Banks' Association at the
following address:
Stadium House, 6th Floor,
Block 2 & 3, 81-83, Veer Nariman Road,
Churchgate, Mumbai-400 020.
Phone: 2289 4500
Fax : 2283 5638
B) OUR BANKS DEPOSIT POLICY
INTRODUCTION
29. As recommended by the Committee on Procedures and Performance Audit on
Public Services (CPPAPS) of Reserve Bank of India, a Working Group was set up at
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Indian Banks Association to formulate a policy on depositors rights. The working

Group after deliberating upon various aspects of acceptance of deposits from the
members of the public, conduct and operations of various types of deposit accounts etc.
framed a draft Model Policy on Bank Deposits with a view to impart greater
transparency in dealing with individual customers and also to create awareness among
the customers of their rights.
30. One of the important functions of the Bank is to accept deposits from the public for
the purpose of lending. In fact, depositors are the major stakeholders of the Banking
System. The depositors and their interests form the key area of the regulatory
framework for banking in India and this has been enshrined in the Banking Regulation
Act, 1949. The Reserve Bank of India is empowered to issue directives / advices on
interest rates on deposits and other aspects regarding conduct of deposit accounts from
time to time. With liberalization in the financial system and deregulation of interest
rates, banks are now free to formulate deposit products within the broad guidelines
issued by RBI .
31.This policy document on deposits outlines the guiding principles in respect of
formulation of various deposit products offered by the Bank and terms and conditions
governing the conduct of the account. The document recognizes the rights of
depositors and aims at dissemination of information with regard to various aspects of
acceptance of deposits from the members of the public, conduct and operations of
various deposits accounts, payment of interest on various deposit accounts, closure of
deposit accounts, method of disposal of deposits of deceased depositors, etc., for the
benefit of customers. It is expected that this document will impart greater transparency
in dealing with the individual customers and create awareness among customers of
their rights. The ultimate objective is that the customer will get services they are
rightfully entitled to receive without demand.
32.While adopting this policy, the bank reiterates its commitments to individual
customers outlined in Bankers Fair Practice Code of Indian Banks Association.
This document is a broad framework under which the rights of common depositors are
recognized. Detailed operational instructions on various deposit schemes and related
services will be issued from time to time.
Types of Deposit Accounts
33. Various deposit products offered by the Bank are assigned different names. The
deposit products can be categorized broadly into the following types. Definition of major
deposits schemes are as under: i.
ii.
Demand deposits means a deposit received by the Bank which is withdraw able
on demand;
Savings deposits means a form of demand deposit which is subject to
restrictions as to the number of withdrawals as also the amounts of withdrawals
permitted by the Bank during any specified period
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iii.
iv.
v.
Term deposit means a deposit received by the Bank for a fixed period
withdrawable only after the expiry of the fixed period and include deposits such
as Recurring / Double Benefit Deposits / Short Deposits / Fixed Deposits
/Monthly Income Certificate /Quarterly Income Certificate etc.
Notice Deposit means term deposit for specific period but withdrawable on giving
at least one complete banking days notice;
Current Account means a form of demand deposit wherefrom withdrawals are
allowed any number of times depending upon the balance in the account or up to
a particular agreed amount and will also include other deposit accounts which
are neither Savings Deposit nor Term Deposit;
Account Opening and Operation of Deposit Accounts

34. The Bank before opening any deposit account will carry out due diligence as
required under Know Your Customer (KYC) guidelines issued by RBI and or such
other norms or procedures adopted by the Bank. If the decision to open an account of a
prospective depositor requires clearance at a higher level, reasons for any delay in
opening of the account will be informed to him and the final decision of the Bank will be
conveyed at the earliest to him.
The bank is committed to provide basic banking services to disadvantaged sections of
the society. Banking services will be offered to them through no-frill accounts and
accounts will be opened with relaxed customer acceptance norms as per regulatory
guidelines.
35. The account opening forms and other material would be provided to the prospective
depositor by the Bank. The same will contain details of information to be furnished and
documents to be produced for verification and or for record, it is expected of the Bank
official opening the account, to explain the procedural formalities and provide necessary
clarifications sought by the prospective depositor when he approaches for opening a
deposit account.
A. The regulatory guidelines require banks to categorise customers based on risk
perception and prepare profiles of customers for the purpose of transaction
monitoring. Inability or unwillingness of a prospective customer to provide
necessary information/details could result in the bank not opening an account.
B. Inability of an existing customer to furnish details required by the bank to fulfil
statutory obligations could also result in closure of the account after due notice(s)
is provided to the customer.
36. For deposit products like Savings Bank Account and Current Deposit Account, the
Bank will normally stipulate certain minimum balances to be maintained as part of terms
and conditions governing operation of such accounts. Failure to maintain minimum
balance in the account will attract levy of charges as specified by the Bank from time to
time. For Saving Bank Account the Bank may also place restrictions on number of
transactions, cash withdrawals, etc., for given period. Similarly, the Bank may specify
charges for issue of cheques books, additional statement of accounts, duplicate pass
book, folio charges, etc. All such details, regarding terms and conditions for operation of
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the accounts and schedule of charges for various services provided will be
communicated to the prospective depositor while opening the account.
37. Savings Bank Accounts can be opened for eligible person / persons and certain
organizations / agencies (as advised by Reserve Bank of India (RBI) from time to time)
38. Current Accounts can be opened by individuals / partnership firms / Private and
Public Limited Companies / HUFs / Specified Associates / Societies / Trusts,
Departments of Authority created by Government (Central or State Limited Liability
Partnership), Etc.
39. Term Deposits Accounts can be opened by individuals/partnership firms/ Private
and Public Limited Companies/HUFs/Specified Associates /Societies/Trusts,
Departments of Authority created by Government (Central or State Limited Liability
Partnership), Etc.
40. The due diligence process, while opening a deposit account will involve satisfying
about the identity of the person, verification of address, satisfying about his occupation
and source of income. Obtaining introduction of the prospective depositor from a person
acceptable to the Bank and obtaining recent photograph of the person/s opening /
operating the account are part of due diligence process.
41.In addition to the due diligence requirements, under KYC norms the Bank is
required by law to obtain Permanent Account Number (PAN) or General Index Register
(GIR) Number or alternatively declaration in Form No. 60 or 61 as specified under the
Income Tax Act / Rules.
42. Deposit accounts can be opened by an individual in his own name (status: known as
account in single name) or by more than one individual in their own names (status:
known as Joint Account) . Savings Bank Account can also be opened by a minor jointly
with natural guardian or with mother as the guardian (Status: known as Minors
Account). Minors above the age of 10 will also be allowed to open and operate saving
bank account independently. However, no overdrafts will be granted to these minors.
Savings bank account can be opened by a minor represented by guardian or jointly with
a major, where minor is represented by natural guardian. Minors above the age of 10
will also be allowed to open and operate SB account subject to restriction on transaction
and no cheque books will be provided to such accounts.
43. Operation of Joint Account The Joint Account opened by more than one
individual can be operated by single individual or by more than one individual jointly.
The mandate for operating the account can be modified with the consent of all account
holders. The Savings Bank Account opened by minor jointly with natural guardian /
guardian can be operated by natural guardian only.
44. The joint account holders can give any of the following mandates for the disposal of
balance in the above accounts:
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a. Either or Survivor : If the account is held by two individuals say, A & B,

the final balance alongwith interest, if applicable, will be paid to survivor on
death of anyone of the account holders.
b. Anyone or Survivor/s : If the account is held by more than two
individuals say, A, B and C, the final balance alongwith interest, if
applicable, will be paid to the survivor on death of any two account
holders.
i. The above mandates will be applicable to or become operational
only on or after the date of maturity of term deposits. This mandate
can be modified by the consent of all the account holders.
45. At the request of the depositor, the Bank will register mandate / power of attorney
given by him authorizing another person to operate the account on his behalf.
46. The term deposit account holders at the time of placing their deposits
can give instructions with regard to closure of deposit account or renewal of deposit for
further period on the date of maturity. In case of absence of any instructions deposits
will be treated as an auto renewal deposit and should be renewed for a similar period.
47. Nomination facility is available on all deposit accounts opened by the individuals.
Nomination is also available to a sole proprietory concern account. Nomination can be
made in favour of one individual only. Nomination so made can be cancelled or
changed by the account holder/s any time. While making nomination, cancellation or
change thereof, it is not required to be attested by witnesses, however, thumb
impression of the account holders obtained on nomination forms are required to
be attested by two witnesses. Nomination can be modified by the consent of account
holder/s. Nomination can be made in favour of a minor also.
48. Bank recommends that all depositors avail nomination facility. The nominee, in the
event of death of the depositor/s, would receive the balance outstanding in the account
as a trustee of legal heirs. The depositor will be informed of the advantages of the
nomination facility while opening a deposit account.
49. A statement of account will be provided by the Bank to Savings Bank as well as
Current Deposit Account Holders periodically as per terms and conditions of opening of
the account.. Alternatively, the Bank may issue a Pass Book to these account holders.
50. The deposit accounts may be transferred to any other branch of the Bank at the
request of the depositor.
INTEREST PAYMENTS
51. Interest shall be paid on saving account at the rate specified by Reserve Bank of
India directive from time to time. However, term deposit interest rates are decided by
the Bank within the general guidelines issued by the Reserve Bank of India from time to
time.
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52. In terms of Reserve Bank of India directives, interest shall be calculated at quarterly
intervals on term deposits and paid at the rate decided by the Bank depending upon the
period of deposits. In case of monthly deposit scheme, the interest shall be calculated
for the quarter and paid monthly at discounted value. The interest on term deposits is
calculated by the Bank in accordance with the formulae and conventions advised by
Indian Banks Association.
53. The rate of interest on deposits will be prominently displayed in the branch
premises. Changes, if any, with regard to the deposit schemes and other related
services shall also be communicated upfront and shall be prominently displayed.
54. The Bank has statutory obligation to deduct tax at source if the total interest paid/
payable on all term deposits held by a person exceeds the amount specified under the
Income Tax Act. The Bank will issue a tax deduction certificate (TDS Certificate) for the
amount of tax deducted. The depositor, if entitled to exemption from TDS can submit
declaration in the prescribed format at the beginning of every financial year.
55. MINORS ACCOUNTS
i.
The minor can open Savings Bank Account and the same can be
operated by the natural guardian or by minor himself / herself, if he/she is above
the age of 10 years. The account can also be opened jointly.
ii.
On attaining majority, the erstwhile minor should confirm the balance in

his/her account and if the account is operated by the natural guardian / guardian,
fresh specimen signature of erstwhile minor duly verified by the natural guardian
would be obtained and kept on record for all operational purposes.
ACCOUNT OF ILLITERATE
56. The Bank may at its discretion open deposit accounts other than Current Accounts
of illiterate person. The account of such person may be opened provided he/she calls
on the Bank personally along with a witness who is known to both the depositor and the
Bank. Normally, no cheque book facility is provided for such Savings Bank Account. At
the time of withdrawal/ repayment of deposit amount and/or interest, the account holder
should affix his / her thumb impression or mark in the presence of the authorized officer
who should verify the identity of the person. The Bank will explain the need for proper
care and safe keeping of the passbook etc. given to the account holder. The Bank
official shall explain the terms and conditions governing the account to the illiterate
person.
ACCOUNT OF ILLITERATE BLIND PERSON
57. Accounts of visually impaired customers who use thumb impression or cannot sign
consistently may be allowed to open Saving/Current/Overdraft account with cheque
book facility. However, the use of cheque facility will be limited for issuance of cheques
in favour of the specified payees for repayment of retail loans, payment of utility bills etc.
On request, the cheque facility may also be provided in the existing accounts of visually
impaired persons for the above mentioned purposes. At the time of withdrawal/
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repayment of deposit amount and/or interest, the account holder should affix his / her
thumb impression or mark in the presence of the authorized officer who should verify
the identity of the person. The Bank will explain the need for proper care and safe
keeping of the passbook etc. given to the account holder. The Bank official shall
explain the terms and conditions governing the account to the illiterate / blind person.
ADDITION OR DELETION OF THE NAME/S OF JOINT ACCOUNT HOLDERS
58. The bank may at the request of all the joint account holders allow addition or
deletion of name/s of joint account holder/s if the circumstances so warrant or allow an
individual depositor to add the name of another person as a joint account holder.
CUSTOMER INFORMATION
59. The customer information collected from the customers shall not be used for cross
selling of services or products by the Bank, their subsidiaries and affiliates. If the Bank
proposes to use such information, it should be strictly with the consent of the
accountholder.
SECRECY OF CUSTOMERS ACCOUNTS
60. The Bank shall not disclose details / particulars of the customers account to a third
person or party without the expressed or implied consent from the customer. However,
there are some exceptions, viz. disclosure of information under compulsion of law,
where there is a duty to public to disclose and where interest of the Bank requires
disclosure.
PREMATURE WITHDRAWAL OF TERM DEPOSIT
61. The Bank on request from the depositor, at its discretion may allow withdrawal of
term deposit before completion of the period of the deposit agreed upon at the time of
placing the deposit. The Bank shall declare their penal interest rates policy for
premature withdrawal of term deposit. The Bank shall make depositors aware of the
applicable rate along with the deposit rate.
PREMATURE RENEWAL OF TERM DEPOSIT
62. In case the depositor desires to renew the deposit by seeking premature closure of
an existing term deposit account, the bank will permit the renewal at the applicable rate
on the date of renewal, provided the deposit is renewed for a period longer than the
balance period of the original deposit. While prematurely closing a deposit for the
purpose of renewal, interest on the deposit for the period it has remained with the bank
will be paid at the rate applicable on the date of deposit to the period for which the
deposit remained with the bank and not at the contracted rate. Further, the bank may
levy penalty for premature closure of an existing deposit at such rates as may be
decided by the bank from time to time.
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RENEWAL OF OVERDUE TERM DEPOSITS

63. When a term deposit is renewed on maturity, on renewed deposit interest rate for
the period specified by the depositor as applicable on the date of maturity would be
applied. If request for renewal is received after the date of maturity, such overdue
deposits will be renewed with effect from the date of maturity at interest rate applicable
as on the due date, provided such request is received within 14 days from the date of
maturity. In respect of overdue deposits renewed after 14 days from the date of
maturity, interest for the overdue period will be paid at the rates decided by the Bank
from time to time.
ADVANCES AGAINST DEPOSITS
64. The Bank may consider request of the depositor/s for loan / overdraft facility against
term deposits duly discharged by the depositor/s on execution of necessary security
documents. The Bank may also consider loan against deposit standing in the name of
minor, however, a suitable declaration stating that loan is for the benefit of the minor, is
to be furnished by the depositor - applicant.
65. SETTLEMENT OF DUES IN DECEASED DEPOSIT ACCOUNT
i.
ii.
iii.
iv.
If the depositor has registered nomination with the Bank; the balance
outstanding in the account of the deceased depositor will be transferred to the
account of / paid to the nominee after the Bank satisfies about the identity of the
nominee, etc.
The above procedure will be followed even in respect of a joint
account where nomination is registered with the Bank.
In a joint deposit account, when one of the joint account holders
dies, the Bank is required to make payment jointly to the legal heirs of the
deceased person and the surviving depositor(s). However, if the joint account
holders had given mandate for disposal of the balance in the account in the
forms such as either or survivor, former / latter or survivor, anyone of survivors
or survivor; etc., the payment will be made as per the mandate to avoid delays in
production of legal papers by the heirs of the deceased.
In the absence of nomination and when there are no disputes among the
claimants, the Bank will pay the amount outstanding in the account of deceased
person against joint application and indemnity by all legal heirs or the person
mandated by the legal heirs to receive the payment on their behalf without
insisting on legal documents up to the limit approved by the banks board. This is
to ensure that the common depositors are not put hardship on account of delays
in completing legal formalities
66. INTEREST PAYABLE ON TERM DEPOSIT IN DECEASED ACCOUNT

i.
In the event of death of the depositor before the date of maturity of deposit and
amount of the deposit is claimed after the date of maturity, the Bank shall pay
interest at the contracted rate till the date of maturity. From the date of maturity to
the date of payment, the bank shall pay interest as permissible in case of
overdue term deposits for the period for which the deposit remained with the
Bank beyond the date of maturity.
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ii.
However, in the case of death of the depositor after the date of

maturity of the deposit, where the depositor failed to renew the deposit for a
further period, the bank shall pay interest as permissible in case of overdue term
deposits.
INSURANCE COVER FOR DEPOSITS

67. All bank deposits are covered under the insurance scheme offered by Deposit
Insurance and Credit Guarantee Corporation of India (DICGC) subject to certain limits
and conditions. The details of the insurance cover in force, will be made available to the
depositor.
STOP PAYMENT FACILITY
68. The Bank will accept stop payment instruction from the depositors in respect of
cheques issued by them. Charges, as specified, will be recovered.
DORMANT ACCOUNTS
69. Accounts which are not operated for a period of two years will be transferred to a
separate dormant/inoperative account status in the interest of the depositor as well as
the bank. the depositor will be informed of charges, if any, which the bank will levy on
dormant / inoperative accounts, the depositor can request the bank to activate the
account for operating it. However, bank shall not charge any fee for reactivation of
the saving account.
REDRESSAL OF COMPLAINTS AND GRIEVANCES
70. Depositors having any complaint/grievance with regard to services rendered by the
Bank has a right to approach authority(ies) designated by the Bank for handling
customer complaint/grievances. The details of the internal set up for redressal of
complaints/grievances will be displayed in the branch premises. The branch officials
shall provide all required information regarding procedure for lodging the complaint. In
case the depositor does not get response from the Bank within 30 days from date of
complaint or he is not satisfied with the response received from the Bank, he has a right
to approach Banking Ombudsman appointed by the Reserve Bank of India.
SAFE DEPOSIT LOCKERS
71. This facility is not offered through all bank branches and wherever the facility is
offered, allotment of safe deposit vault will be subject to availability and compliance with
other terms and conditions attached to the service. Safe deposit lockers may be hired
by an individual (being not a minor) singly or jointly with another individual(s), HUFs,
firms, limited companies, associates, societies, trusts etc. Nomination facility is available
to individual(s) holding the lockers singly or jointly. In respect of lockers held in joint
names, up to two nominees can be appointed. Joint locker holders can give mandate for
access to the lockers in the event of death of one of the holders on the lines similar to
those for deposit accounts. In the absence of nomination or mandate for disposal of
contents of lockers, with a view to avoid hardship to common persons, the bank will
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release the contents of locker to the legal heirs against indemnity on the lines as
applicable to deposit accounts
SALIENT FEATURES OF THE RBI DIRECTIVES- INTEREST RATES ON DEPOSITS
1 Definitions
For the purpose of this directive,
(a) Demand liabilities and Time liabilities mean the liabilities as shown in the return
submitted by the bank under sub-section (2) of Section 42 of the Reserve Bank of India
Act,1934,
(b) Demand deposit means a deposit received by the bank, which is withdraw able on
demand;
(c) Savings deposit means a form of demand deposit which is a deposit account
whether designated as Savings Account, Savings Bank Account, Savings Deposit
Account or other account by whatever name called which is subject to the restrictions
as to the number of withdrawals as also the amounts of withdrawals permitted by the
bank during any specified period;
(d) Term deposit means a deposit received by the bank for a fixed period and which is
withdraw able only after the expiry of the said fixed period and shall also include
deposits such as Recurring/Cumulative/Annuity/Reinvestment deposits, Cash
Certificates, and so on;
(e) Notice deposit means term deposit for specific period but withdraw able on giving
at least one complete banking days notice;
(f) Current Account means a form of demand deposit wherefrom withdrawals are
allowed any number of times depending upon the balance in the account or up to a
particular agreed amount and shall also be deemed to include other deposit accounts
which are neither Savings Deposit nor Term Deposit;
(g) Countervailing interest means any benefit of interest allowed on any account in the
nature of current account maintained with the bank by its borrower;
(h) Budgetary allocation means the allocation of funds by the Government made
through the budget, wherein all the Governments expenditure is reflected. Any
institution, irrespective of the fact that it is a Government Department, SemiGovernment or Quasi-Government Body, which receives grants, loans or subsidies from
the Government is said to depend on budgetary allocation. Government grants to
institutions are also in the nature of the budgetary allocation. Governments subscription
to the share capital of these institutions also forms part of the budgetary allocation.
Local bodies like Municipal Corporations, Zilla Parishads, Taluka Panchayats and Gram
Panchayats are given grants in the nature of compensation and assignments, which
also form part of budgetary allocation, although taxes collected by these bodies are not
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covered under the definition and scope of budgetary allocation of Central and State
Governments;
(i) Public Sector Bank means the State Bank of India constituted under the State
Bank of India Act, 1955 or any subsidiary bank as defined in clause (k) of Section 2 of
the State Bank of India (Subsidiary Banks) Act, 1959 or any corresponding new bank as
defined in clause (b) of Section 2 of the Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1970 or Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1980.
Note: NRO/NRE deposits can be accepted only by banks, which are authorized by
Reserve Bank to accept such deposits.
2. Minimum tenor and rates of interest payable on Savings deposits and on Term
deposits
(i) Subject to other provision of this directive, interest on savings deposit may be paid as
under:
Banks are free to determine their savings bank deposit interest rate, subject to
the following two conditions:
First, each bank will have to offer a uniform interest rate on savings bank
deposits up to Rs.1 lakh, irrespective of the amount in the account within this
limit.
Second, for savings bank deposits over Rs.1 lakh, a bank may provide
differential rates of interest, if it so chooses, subject to the condition that banks
will not discriminate in the matter of interest paid on such deposits, between one
deposit and another of similar amount, accepted on the same date, at any of its
offices.
The above revised Guidelines would be applicable to savings bank deposits of
resident Indians only.
(ii)Bank shall obtain prior approval of its Board/Asset Liability Management Committee
(if powers are delegated by the Board) for fixing of interest rates on Savings & Term
Deposits of various maturities.
(iii) The rates of interest on savings & domestic term deposits of our Bank are subject to
revision from time to time. The latest rate of interest should be displayed in the Banking
Hall/on web site.
(iv)Such interests shall be paid at quarterly or longer rests. Interest on savings bank
accounts should be credited on regular basis whether the account is operative or not.
(v) The payment of interest on savings bank accounts by scheduled commercial banks
should be calculated on a daily product basis.
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3. Floating Rate Deposits

On Domestic Term Deposits, a bank may offer floating rate clearly linked to an anchor
rate. In order to ensure transparency, banks should not use internal or derived rates
while offering floating rate deposit products. Only market-based rupee benchmark rates,
which are directly observable and transparent to the customer, should be used by banks
for pricing their floating rate deposits.
4.Payment of interest on accounts frozen by banks
Banks are advised to follow the procedure detailed below in the case of Term Deposit
Accounts of customers frozen by the orders of the enforcement authorities:
(i) A request letter may be obtained from the customer on maturity. While obtaining the
request letter from the depositor for renewal, banks should also advise him to indicate
the term for which the deposit is to be renewed. In case the depositor does not exercise
his option of choosing the term for renewal, banks may renew the same for a term equal
to the original term.
(ii) No new receipt is required to be issued. However, suitable note should be made
regarding renewal in the deposit ledger.
(iii) Renewal of deposit should be advised by registered letter / speed post / courier
service to the concerned Government department under advice to the depositor. In the
advice to the depositor, the rate of interest at which the deposit is renewed should also
be mentioned.
(iv) If overdue period does not exceed 14 days on the date of receipt of the request
letter, renewal should be done from the date of maturity. If it exceeds 14 days, banks
should pay interest for the overdue period as per the policy adopted by them, and keep
it in a separate interest free sub-account which should be released when the original
fixed deposit is released.
Further, with regard to the savings bank accounts frozen by the enforcement authorities,
banks should continue to credit the interest to the account on a regular basis.
5.Payment of interest on fixed deposit - Method of calculation of interest
The Indian Banks Association (IBA) Code for Banking Practice has been issued by IBA
for uniform adoption by the Member Banks. The Code is intended to promote good
banking practices by setting out minimum standards, which Member Banks should
follow in their dealings with customers. IBA, for the purpose of calculation of interest on
domestic term deposit, has prescribed that on deposits repayable in less than three
months or where the terminal quarter is incomplete, interest should be paid
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proportionately for the actual number of days reckoning the year at 365 days. Some
banks are adopting the method of reckoning the year at 366 days in a Leap year and
365 days in other years. While banks are free to adopt their methodology, they should
provide information to their depositors about the manner of calculation of interest
appropriately while accepting the deposits and display the same at their branches.
If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed
with the bank will attract savings bank rate of interest.
6. Additional interest to Army Group Insurance Directorate (AGID), Naval Group
Insurance Fund (NGIF) and Air-Force Group Insurance Society (AFGIS)
A Public Sector Bank is permitted to pay additional interest of 1.28 per cent per annum
over and above the normal rate of interest permissible in terms of directives on interest
rates on deposits issued by Reserve Bank of India, from time to time, on term deposits
for 2 years and above of Army Group Insurance Directorate (AGID), Naval Group
Insurance Fund (NGIF) and Air-Force Group Insurance Society (AFGIS) only, provided
such deposits are not in any way linked with payment of insurance premia by the bank.
7. Discretion to Regional Rural Banks /Local Area Banks to pay additional interest
Regional Rural Banks/Local Area Banks may, at their discretion, allow additional
interest of half percent per annum on savings deposits. These banks are, however,
encouraged not to pay any additional interest on saving bank accounts over and above
what is payable by commercial banks.
8. Discretion to pay additional interest not exceeding one percent on deposits of
banks staff and their exclusive associations
A bank may, at its discretion, allow additional interest at a rate not exceeding one per
cent per annum over and above the rate of interest on Savings & term Deposits subject
to following conditions:
(A)In respect of a savings or a term deposit account opened in the name of:
a. a member or a retired member of the bank;s staff, either singly or jointly with any
member or members of his/her family; or
b. the spouse of a deceased member or a deceased retired member of the banks
staff; and
c. an Association or a fund, members of which are members of the banks staff;
A bank should obtain a declaration from the depositor concerned, that the monies
deposited or which may, from time to time, be deposited into such account belong to the
depositor as stated in clauses (a) to (c) above.
(B) For the purposes of sub-paragraph A. Updated up to 31.12.2011
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(i) a member of the banks staff means a person employed on a regular basis,
whether full-time or part-time, and includes a person recruited on probation or employed
on a contract of a specified duration or on deputation and an employee taken over in
pursuance of any scheme of amalgamation, but does not include a person employed on
casual basis.
a. In the case of employees taken on deputation from another bank, the bank from
which they are deputed may allow additional interest in respect of the savings or
term deposit account opened with it during the same period of deputation;
b. In the case of persons taken on deputation for a fixed duration, or on a contract
of a fixed duration, the benefit will cease to accrue on the expiry of the term of
deputation or contract, as the case may be.
(ii) A retired member of the banks staff means an employee retiring whether on
superannuation or otherwise as provided in the banks Service/Staff Regulations, but
does not include an employee retired compulsorily or in consequence of disciplinary
action;
A retired member of the banks staff means an employee:
a) Retiring whether on superannuation or otherwise as provided in the banks
Service/Staff Regulations, but does not include an employee retired compulsorily
or in consequence of disciplinary action.
b) Superannuation.
c) PNB Officers Service Regulations provide retirement on superannuation as well
as retirement at the request of the officer employee or by the bank after
completion of 30 years of service or after 55 years of age
d) The employees retiring under voluntary retirement scheme, after rendering
minimum 20 years of service of pension regulations
e) Taking pre-mature retirement due to infirmity after rendering 10 years of service.
In case of resignation by any employee other than the above listed clauses, no
additional rate of interest would be applicable.
(iii)Family means and includes the spouse of the member/retired member of the
banks staff and the children, parents, brothers and sisters of the member/retired
member of the banks staff, who are dependent on such member/retired member, but
does not include legally separated spouse;
(C). Payment of additional interest is subject to the following conditions, namely:
i.
ii.
The additional interest is payable only so long as the person continues to be

eligible for the same and in case of his ceasing to be so eligible, till the maturity
of a term deposit account;
In the case of employees taken over pursuant to the scheme of amalgamation,
the additional interest is allowed only if the interest at the contractual rate
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together with the additional interest does not exceed the rate, which could have
been allowed if such employees were originally employed by the bank.
(Explanations);
The minor's single account where guardian is a staff member shall not be
entitled for this preferential rate of interest unless the account is opened jointly
with the staff member and the minor belongs to the family of such staff member.
2. In the case of term deposits standing in the joint names of the employees with
his/her minor child, the additional interest of 1% would continue till the date of
maturity of the original deposit irrespective of the intervening incident like death
of the employee.)
1.
(D). Bank Employees Federations in which bank employees are not direct members are
not eligible for additional interest.
(E). In case of Domestic deposits, it will be in order for banks to give their retired staff,
who are senior citizens, the benefit of higher interest rates as admissible to senior
citizens over and above the additional interest of not exceeding one per cent payable to
them by virtue of their being retired members of the banks' staff.
(F). In the case of Non-Resident (External) deposits of staff members, existing or
retired, interest rate including any additional interest paid to them by virtue of their being
staff members, should not exceed the ceiling stipulated by RBI.
9. Discretion to pay additional interest not exceeding one per cent on deposits of
Chairman and Managing Director and Executive Directors of the bank
A bank may, at its discretion, pay additional interest not exceeding one per cent per
annum over and above the rate of interest on deposits accepted/renewed from
Chairman, Chairman & Managing Director, Executive Director or such other Executive
appointed for a fixed tenure. However, they are eligible to get the benefit under
paragraph 8 above only during the period of their tenure.
10. Discretion to pay interest on current accounts maintained by Regional Rural
Banks with sponsor banks
Banks may pay interest on current account of a Regional Rural Bank sponsored by
them. However, banks are encouraged not to pay interest on the current accounts
maintained by RRBs with them.
11. Discretion to pay interest on the minimum credit balance in the composite
cash credit account of a farmer
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A bank may, at its discretion, pay interest at a rate based on its perception and other
relevant factors on the minimum credit balance in the composite cash credit account of
a farmer during the period from the 10th to the last day of each calendar month.
12. Deposit Scheme for Senior Citizens
(i) Banks have been permitted to formulate, with the approval of their Boards of
Directors, fixed deposit schemes specifically for resident Indian senior citizens offering
higher and fixed rates of interest as compared to normal deposits of any size. These
schemes should also incorporate simplified procedures for automatic transfer of
deposits to nominee of such depositors in the event of death. The above additional
interest is not applicable to any type of non-resident deposits.
(ii) In the case of a term deposit which is standing in the name of an HUF, the Karta of
the HUF cannot be offered higher rate of interest, even if he is senior citizen, as the
beneficial owner of the deposit is the HUF and not the Karta in his individual capacity.
13. Premature withdrawal of term deposit
(i) A bank, on request from the depositor, should allow withdrawal of a term deposit
before completion of the period of the deposit agreed upon at the time of making the
deposit. The bank will have the freedom to determine its own penal interest rate of
premature withdrawal of term deposits. The bank should ensure that the depositors are
made aware of the applicable penal rate along with the deposit rate. While prematurely
closing a deposit, interest on the deposit for the period that it has remained with the
bank will be paid at the rate applicable to the period for which the deposit remained with
the bank and not at the contracted rate. No interest is payable, where premature
withdrawal of deposits takes place before completion of the minimum period
prescribed. However, the bank, at its discretion, may disallow premature withdrawal of
large deposits held by entities other than individuals and Hindu Undivided Families.
The bank should, however, notify such depositors of its policy of disallowing premature
withdrawal in advance, i.e., at the time of accepting such deposits.
Penalty Clause on premature withdrawal of term deposits as modified by
Resource Mobilization Division, HO from time to time may be referred.
(ii) In the case of premature withdrawal of NRE term deposits for conversion into
Resident Foreign Currency (RFC) Account, the bank should not levy any penalty for
premature withdrawal. If such a deposit has not run for a minimum period of 1 year, the
bank may, at its discretion, pay interest at a rate not exceeding the rate payable on
savings deposits held in RFC accounts, provided the request for such a conversion is
made by the NRE account holder immediately on return to India.
(iii) Conversion of NRE deposit into FCNR(B) deposit and vice versa before maturity
should be subject to the penal provision relating to premature withdrawal.
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(iv) Conversion of NRSR/NRNR deposit into NRO deposit before maturity will be subject
to the penal provision relating to premature withdrawal.
(v) In view of the discontinuance of NRNR/NRSR schemes with effect from April 1,
2002, the proceeds of NRNR deposits can be credited to NRE accounts on maturity but
not to FCNR(B) accounts, while proceeds of NRSR accounts can be credited on
maturity to NRO accounts only. In case of premature withdrawal of NRNR/NRSR
deposits, the proceeds should be credited to NRO accounts only.
14. Conversion of a term deposit, a deposit in the form of daily deposit (Mini
Deposit) or a Recurring Deposit for reinvestment in term deposit
A bank, on a request from the depositor, should allow conversion of a term deposit, a
deposit in the form of daily deposit or recurring deposit, to enable the depositor to
immediately reinvest the amount lying in the aforesaid deposits with the same bank in
another term deposit. The bank should pay interest in respect of such a term deposit in
the manner indicated in paragraph 2.11 above. On review and in order to facilitate
better asset-liability management (ALM), banks are permitted to formulate their own
policies towards conversion of deposits.
15. Renewal of Overdue deposits
In accordance of RBI instructions, all aspects concerning renewal of overdue
deposits may be decided by individual banks subject to their Board laying down a
transparent policy in this regard and the customers being notified of the terms
and conditions of renewal including interest rates, at the time of acceptance of
deposit. The policy should be non-discretionary and non-discriminatory.
Renewal of Overdue Term Deposit:
Overdue Term Deposits are to be renewed on the date of presentation and not to
be renewed from retrospective date.
The appropriate prevailing rate of interest shall be applicable from the date of
renewal of the FDR.
Interest for the overdue period is to be paid at Savings Bank rate of interest as
applicable from time to time, presently being 4% on the methodology as
applicable to Saving Bank account from time to time.
Interest on Overdue Term Deposits is not subjected to Tax Deduction at Source
in terms of section 194A of the Income Tax Act, 1961. However, in the cases
where the said overdue deposits are renewed further, the interest on such
renewed term deposits will be subjected to same provisions of TDS applicable in
the case of any other new/fresh terms deposits.
Non Renewal of Overdue Term Deposit:
If the depositor does not opt for renewal of Overdue Term Deposit, interest shall
be allowed as per guidelines issued by IAD-H.O. which inter-alia reads as under:
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Interest would be paid at savings bank rate of interest as applicable from time to time,
presently being 3.5% p.a. Interest would be calculated on Simple basis and would be
allowed as per guidelines issued by IAD-H.O. (IAD, Circular No. 17 dated
23.03.2009)
16.
Advance against term deposit; Manner of charging interest
(a) When an advance is granted against a term deposit and the deposit stands in the
name of
i. The borrower either singly or jointly;
ii. One of the partners of a partnership firm and the advance is made to the said
firm;
iii. The proprietor of a proprietary concern and the advances made to such
concern;
iv. A ward whose guardian is competent to borrow on behalf of the ward and
where the advance is made to the guardian of the ward in such capacity;
the bank shall be free to charge interest rate without reference to its Base rate
including on advances granted against NRE term deposits and repaid in Foreign
Currency or Rupees.
Provided further that if the term deposit against which an advance was granted is
withdrawn before completion of the prescribed minimum maturity period, such an
advance shall not be treated as advance against the term deposit and interest
shall be charged as prescribed in terms of the Reserve Bank of India's Directive
on Interest Rates on Advances issued from time to time.
[Circulars in this regard are issued by Credit Policy & Risk Management Division,
HO, New Delhi, from time to time.]
b.
When an advance is granted against a term deposit which is not in the
nature of those at items (i) to (iv) in clause (a) above,
i.
the banks shall be free to charge interest rate without reference to the Prime
Lending Rate, provided the advances is upto Rs.2 lakh, and
ii.
if the advance exceeds Rs.2 lakh, the interest chargeable shall be at the rate
prescribed in terms of RBI's directive relating to interest rates on advances
issued from time to time.
iii.
[For rate of interest on such advances references may be made to Loans &
Advances Circulars issued from time to time by Credit Policy & Risk
Management Division, HO.]
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iv.
Provided that the Bank, at its discretion, may not apply the rate of interest as
stipulated at (a) above in the case of advances upto Rs.3 lacs granted to a
member/retired member of the Bank's staff or the spouse of a deceased
member/retired member of the Bank's staff against their term deposits specified
in paragraph 5 above.
17.
Margin on advances against term deposits

A bank shall maintain a reasonable margin on any financial accommodation
allowed against the security of a term deposit. It may determine the margin on a
case to case basis.
[Instructions in this regard are issued by Credit Policy & Risk Management
Division, HO.]
18.
Interest payable on the deposit a/c of deceased depositor

a) In the case of a term deposit standing in the name (s) of:
(1) a deceased individual depositor, or
(2) two or more joint depositors, where one of the depositors has died.
Interest shall be paid in the manner indicated below:
i.
at the contracted rate on the maturity of the deposit,
ii.
in the event of the payment of deposit being claimed before the

maturity date, the bank shall pay interest as provided in paragraph 12 above
without charging penalty indicated therein;
iii.
In the event of death of the depositor before the date of maturity of the
deposit and the amount of the deposit is claimed after the date of maturity, the
bank shall pay interest at the contracted rate till the date of maturity. From the
date of maturity to the date of payment, the bank shall pay simple interest at the
applicable rate operative on the date of maturity, for the period for which the
deposit remained with the bank beyond the date of maturity.
However, in the case of death of the depositor after the date of maturity of the deposit,
the bank shall pay interest at savings deposit rate operative on the date of maturity from
the date of maturity till the date of payment.
iv.
If on request from the claimant(s), the bank agrees to split the amount
of term deposit and issues two or more receipts individually in the names of the
claimant(s) it shall not be construed as premature withdrawal of the term deposit
for the purpose of paragraph 12 above, provided the period and aggregate
amount of deposit do not undergo any change.
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b) In the case of balances lying in current account standing in the name of a

deceased individual depositor/sole-proprietorship concern, interest shall be paid
only from 1st May, 1983 or the date of death of depositor whichever is later till
the date of repayment to the claimant/s at the rate of interest applicable to Saving
deposits as on the date of payment.
19.
Addition or deletion of the name(s) of Joint account holders
A Bank may at the request of all the joint account holders allow the addition or
deletion of name(s) of joint account holder(s) if the circumstances so warrant or allow an
individual depositor to add the name of another person as a joint account holder;
Provided that in no case shall the amount or duration of original deposit undergo
change in any manner in case the deposit is a term deposit.
A bank may, at its discretion and at the request of all the joint account holders of
a deposit receipt, allow the splitting up of the joint deposit, in the name of each of the
joint account holders only, provided that the period and the aggregate amount of the
deposit do not undergo any change.
20.
Issue of stock-invest against term deposits (Banks Stock Invest Scheme since
discontinued)
A bank may issue stock-invest against term deposit subject to guidelines issued
by Reserve Bank of India from time to time.
21.
Rounding off of transactions
All transactions including payment of interest on deposits/charging of interest on

advances shall be rounded off to the nearest rupee, i.e. fraction of 50 paise and above
shall be rounded off to the next higher rupee and fraction of less than 50 paise shall be
ignored. Issue prices of cash certificates should also be rounded off in the same
manner. Cheques issued by clients containing fraction of a rupee should not be
rejected or dishonoured.
In the light of a judgement of the High Court of Gujarat, Ahmedabad, it is advised that it
should be ensured that cheques/ drafts issued by clients containing fractions of a rupee
are not rejected or dishonoured.
22.
Issue of term deposit receipt
A bank shall issue term deposit receipt indicating therein full details, such as,
date of issue, period of deposit, due date, applicable rate of interest, etc.
23.
Payment of interest on term deposit maturing on Sunday/holiday/ nonbusiness working day.
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In case of reinvestment deposits and recurring deposits, banks should pay

interest for the intervening Sunday/holiday/non-business working day (as also
Saturday in case of NRE deposits) on the maturity value. However, in the case of
ordinary term deposits, the interest for the intervening Sunday/holiday/nonbusiness working day (as also Saturday in case of NRE deposits) should be paid
on the original principal amount.
In respect of a term deposit maturing for payment on a Sunday or a holiday or a nonbusiness working day, or Saturday in case of NRE deposits, bank shall pay interest at
the originally contracted rate on the deposit amount for the Sunday/holiday/nonbusiness working day and also Saturday in case of NRE deposits, intervening between
the date of the expiry of the specified term of the deposit and the date of payment of the
proceeds of the deposit on the succeeding working day.
24.
Deposit Mobilization Schemes
Banks need not obtain prior concurrence of the Indian Banks' Association or prior
approval of the RBI for introduction of their new domestic deposit mobilisation schemes.
However, before launching new domestic deposit mobilisation schemes with the
approval of their respective Boards, banks should ensure that the provisions of RBI
directives on interest rates on deposits, premature withdrawal of term deposits, sanction
of loans/advances against term deposits, etc., issued from time to time, are strictly
adhered to. Any violation in this regard will be viewed seriously and may attract penalty
under the Banking Regulation Act, 1949
25. MINIMUM BALANCE IN SAVINGS BANK ACCOUNTS
At the time of opening the accounts, banks should inform their customers in a
transparent manner the requirement of maintaining minimum balance and levying
of charges etc., if the minimum balance is not maintained. Any charge levied
subsequently should be transparently made known to all depositors in advances
with one months notice. The banks should inform, at least one month in
advance, the existing account holders any change in the prescribed minimum
balance and the charges that may be levied if the prescribed minimum balance is
not maintained.
26. No frills account
With a view to achieve the objective of greater financial inclusion all banks
should make available a basic banking no frills account either with nil or very
low minimum balances as well as charges that would make such accounts
accessible to vast sections of population. The nature and number of transactions
in such accounts could be restricted, but made known to the customer in
advances in a transparent manner. All banks should give wide publicity to the
facility of such no frills account including in the local media indicating the
facilities and charges in a transparent manner.
BOI CHAPTER I
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The efforts of banks have enabled the common person to open bank accounts.
However, financial inclusion objectives would not be fully met if the banks do not
increase the banking outreach to the remote corners of the country. This has to
be done with affordable infrastructure and low operational costs with the use of
appropriate technology. This would enable banks to lower the transactions cost
to make small ticket transaction viable. A few banks have already initiated certain
pilot projects in different remote parts of the country utilizing smart cards/mobile
technology to extend banking services similar to those dispensed from branches.
Banks are therefore, urged to scale up their financial inclusion efforts by utilizing
appropriate technology. Care should be taken to ensure that the solutions
developed are (i) highly secure (ii) amenable to audit and (iii) follow widely
accepted open standards to allow inter-operability among the different systems
adopted by different banks.
27. Exemptions
The provisions in the above paragraphs will not apply to:
i.
ii.
a deposit received by the bank:

a.
from the institutions permitted to participate in the Call/Notice/Term Money
Market both as lenders and borrowers, namely, all Scheduled Commercial
Banks (excluding RRBs), Co-operative Banks and Primary Dealers;
b. for which it has issued a participation certificate;
c. under Foreign Currency (Non-Resident) Accounts (Banks) Scheme,
Resident Foreign Currency Account and Exchange Earners Foreign
Currency Accounts;
d.
under the Capital Gains Accounts Scheme, 1988, framed by the
Government of India in pursuance of sub-section (2) of Section 54, subsection (2) of Section 54B, sub-section (2) of Section 54D, sub-section (4)
of Section 54F and sub-section (2) of Section 54G of the Income-Tax Act,
1961; and
e.
under the Certificate of Deposit Scheme.
payment of interest on delayed collection of outstation instruments like cheques,
drafts, bills, telegraphic/mail transfers, etc.
28. Prohibitions
No bank should (a) pay interest on Current Account save as provided in paragraphs 10 and 18 (b)
above;
(b) pay countervailing interest on any current accounts maintained with it by its
borrowers;
(c) discriminate in the matter of interest paid on deposits, between one deposit and
another, accepted on the same date and for the same maturity, whether such deposits
BOI CHAPTER I
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are accepted at the same office or at different offices of the bank, except in respect of
fixed deposit schemes specifically for resident Indian senior citizens offering higher and
fixed rates of interest as compared to normal deposits of any size, and single term
deposits of Rs.15 lakh and above on which varying rates of interest may be permitted
on the basis of size of deposits. The permission to offer varying rates of interest is
subject to the following conditions:
(i) The permission to offer varying rates of interest for deposits of the same maturity
applies to single term deposits of Rs.15 lakh and above. Banks should, therefore, offer
the same rate of interest or different rates of interest for deposits of Rs.15 lakh and
above. For deposits below Rs.15 lakh of the same maturity the same rate will apply. In
this regard, it is clarified that it will not be in order for banks to offer higher/differential
rate of interest, as compared to other deposits of similar tenure, on deposit schemes
framed by them on the basis of the Bank Term Deposit Scheme, 2006, announced by
Government of India vide their notification No. 203/2006 dated July 28, 2006. It will also
not be in order for banks to offer higher/ differential rate of interest on deposits received
under the Capital Gains Accounts Scheme, 1988.
(ii) Banks should disclose in advance the schedule of interest rates payable on deposits
including deposits on which differential interest will be paid. Interest rates paid by the
bank should be as per the schedule and should not be subject to negotiation between
the depositor and the bank.
(d) pay brokerage in the form of commission or gift or incentives on deposits in any
manner or in any other form to any individual, firm, company, association, institution or
any other person except (i) commission paid to agents employed to collect door-to-door deposits under a
special scheme. Banks have also been permitted to use the services of NonGovernmental Organisations(NGOs)/ Self Help Groups(SHGs)/ Micro Finance
Institutions(MFIs) and other Civil Society Organisations(CSOs) as intermediaries in
providing financial and banking services including collection of deposits through the use
of the Business Facilitator and Business Correspondent models. Banks may pay
reasonable commission/ fee to the Business facilitators/ Correspondents, the rate and
quantum of which may be reviewed periodically. The agreement with the Business
facilitators/ Correspondents should specifically prohibit them from charging any fee to
the customers directly for services rendered by them on behalf of the bank.
(ii) in expensive gifts costing not more than Rs.250/-; and
(iii) Incentives granted to staff members as approved by the Reserve Bank of India from
time to time.
(e) employ/ engage any individual, firm, company, association, institution or any other
person for collection of deposit or for selling any other deposit linked products on
payment of remuneration or fees or commission in any form or manner, except to the
extent permitted in sub-clause (i) of clause (d) above.
BOI CHAPTER I
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Page 28 of 33
(f) launch prize/lottery/free trips (in India and/or abroad), etc. oriented deposit
mobilisation schemes. It is clarified that banks should not offer any banking products,
including online remittance schemes, with prizes /lottery/free trips (in India and/or
abroad), etc. or any other incentives having an element of chance, except inexpensive
gifts costing not more than Rs. 250/-, as such products involve non-transparency in the
pricing mechanism and therefore go against the spirit of the guidelines. Such products,
if offered, by banks would be considered as violation of the extant guidelines and the
banks concerned would be liable for penal action.
(g) resort to unethical practices of raising of resources through agents/third parties to
meet the credit needs of the existing/prospective borrowers or to grant loans to the
intermediaries based on the consideration of deposit mobilisation.
(h) issue any advertisement/literature soliciting deposits from public highlighting only the
compounded yield on term deposits without indicating the actual rate of simple interest
offered by the bank for the particular period. Simple rate of interest per annum for the
period of deposit should be indicated invariably.
(i) pay interest on margin money held in current account.
(j) pay interest on deposit at call receipts issued by it to the tenderers (contractors) for
submission to Government Departments/Semi-Quasi Government bodies, local bodies,
etc. against the money held in current account.
(k) accept interest-free deposit other than in current account or pay compensation
indirectly.
(l) accept deposits from/at the instance of private financiers or unincorporated bodies
under any arrangement which provides for either issue of deposit receipt/s favouring
client/s of private financiers or giving of an authority by power of attorney, nomination or
other-wise, for such clients receiving such deposits on maturity.
(m) grant advances against fixed deposit receipts or other term deposits of other banks.
(n) (i) open a savings deposit account in the name of Government departments/bodies
depending upon budgetary allocations for performance of their functions/Municipal
Corporations or Municipal Committees/ Panchayat Samitis/State Housing Boards/Water
and Sewerage/Drainage Boards/State Text Book Publishing Corporations/
Societies/Metropolitan Development Authority / State/ District Level Housing Cooperative Societies, etc. or any political party or any trading/business or professional
concern, whether such concern is a proprietary or a partnership firm or a company or an
association.
Explanation
For the purposes of this clause, political party means an association or body of
individual citizens of India, which is, or is deemed to be registered with the Election
Commission of India as a political party under the Election Symbols (Reservation and
Allotment) Order, 1968 as in force for the time being.
(ii) The above prohibition will not apply in the case of organisations/agencies listed in
Annex II.
BOI CHAPTER I
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Page 29 of 33
Annexure II
PROHIBITION AGAINST OPENING OF SAVINGS BANK ACCOUNTS
IN THE NAME OF CERTAIN BODIES/ORGANISATIONS
(Vide paragraph 9.1.3 Manual of Instructions (June 1998): Department of Banking

Operations and Development, Reserve Bank of India)
i) Savings deposit account cannot be opened by banks in the name of:
Government departments
Bodies depending upon budgetary allocations for performance of their functions.
Municipal Corporations or Municipal Committees
Panchayat Samitis
State Housing Boards
Water and Sewerage/Drainage Boards
State Text Book Publishing Corporations
Societies
Metropolitan Development Authority
State/District Level Housing Co-op. Societies, etc.
Any trading, business or professional concern (e.g. firms of Chartered
Accountants, Lawyers, etc.) whether such concern is a proprietary or a
partnership firm or a company or an association
Political Party
ii) The above prohibition will not apply in the case of the following organisations/
agencies :
Primary Co-operative Credit Society which is being financed by the bank

Small Farmers Development Agencies (SFDA)/Fish Farmers Development
Agencies (FFDAs)
Marginal Farmers and Agricultural Labourers Agencies (MFALAs)
Drought Prone Areas Programme (DPAP)
District Development Authority (DDA)
District Rural Development Agency/Society (DRDA/DADS)
Integrated Rural Development Programme (IRDP)/Development of Women and
Children in Rural Areas (DWCRA)/Self-Help Groups (SHGs), registered or
unregistered, which are engaged in promoting savings habit among their
members/Farmers Clubs-Vikas Volunteer Vahini (VVV), informal groups of rural
farmers or entrepreneur.
Integrated Tribal Development Agency (ITDA)
BOI CHAPTER I
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Page 30 of 33
Agricultural Produce Market Committees

Khadi and Village Industries Boards
Societies registered under the Societies Registration Act, 1860 or any other
corresponding law in force in State or a Union Territory.
Companies governed by the Companies Act, 1956 which have been licensed by
the Central Government under Section 25 of the said Act, or under the
corresponding provision in the Indian Companies Act, 1913 and permitted, not to
add to their names the words Limited or the words Private Limited
Institutions other than those mentioned in clause (i) above and whose entire
income is exempt from payment of income-tax under the Income-Tax Act, 1961.
Zilla Parishads/Gram Panchayats only in respect of Jawahar Rojgar Yojana
Funds
Nagar Panchayats, Nagar Palikas and Municipal bodies in relation to funds
(Central assistance + State share) given under Nehru Rozgar Yojana towards the
components of (i) Subsidy and (ii) Training and Infrastructure of the Scheme of
Urban Micro Enterprise (SUME) and Scheme of Urban Wage Employment
(SUWE) and interest earned on deposits under both the components of SUME
and on deposits under SUWE subject, however, to the condition that no such
account shall be opened with a bank other than public sector bank.
BOI CHAPTER I
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Page 31 of 33
NOTES
BOI CHAPTER I
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Page 32 of 33
NOTES
BOI CHAPTER I
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Page 33 of 33

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Annexure I

IAD Cir. No. 16 2012 dated 30.01.2012

A) IBAS CODE FOR BANKING PRACTICE

4. This is a non-statutory Code issued on a voluntary basis. It is to be observed by the

D) "Special Recurring Deposits" are deposits accepted in quarterly/half-yearly/yearly

SAVINGS BANK ACCOUNT

24.TERMS OF ACCEPTANCE OF DEPOSITS

Indian Banks Association to formulate a policy on depositors rights. The working

Account Opening and Operation of Deposit Accounts

a. Either or Survivor : If the account is held by two individuals say, A & B,

On attaining majority, the erstwhile minor should confirm the balance in

RENEWAL OF OVERDUE TERM DEPOSITS

66. INTEREST PAYABLE ON TERM DEPOSIT IN DECEASED ACCOUNT

However, in the case of death of the depositor after the date of

INSURANCE COVER FOR DEPOSITS

3. Floating Rate Deposits

The additional interest is payable only so long as the person continues to be

Advance against term deposit; Manner of charging interest

Margin on advances against term deposits

Interest payable on the deposit a/c of deceased depositor

at the contracted rate on the maturity of the deposit,

in the event of the payment of deposit being claimed before the

b) In the case of balances lying in current account standing in the name of a

Addition or deletion of the name(s) of Joint account holders

Rounding off of transactions

All transactions including payment of interest on deposits/charging of interest on

Issue of term deposit receipt

In case of reinvestment deposits and recurring deposits, banks should pay

Deposit Mobilization Schemes

a deposit received by the bank:

(Vide paragraph 9.1.3 Manual of Instructions (June 1998): Department of Banking

Primary Co-operative Credit Society which is being financed by the bank

Agricultural Produce Market Committees

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