Banking Operations Manua
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Banking Operations Manual THE A.P. STATE CO.OPERATIVE BANK LTD
TROOP BAZAR :: HYDERABAD
usage of singular be read contextually to include the plural. In compiling this
document, use has extensively been made of the Operational Manual for Co-
operative Banks [2004 edition] brought out by the National Federation of State
Co-operative Banks, Mumbai, which is gratefully acknowledged.

This Manual has been gone through in detail and vetted by various senior
officers of Head Office and the Co-operative Training Institute of the Bank.
The final version is brought out after detailed consultations with well-
experienced officers at the Head Office and Branches.

Over a period of time it is expected that this manual will be vastly
improved based on inputs from the functionaries at different levels based on
their active feedback. Further volumes of this Manual are expected to be
brought out covering various other areas in due course.

It is hoped that this volume will be useful as a basic guide for the Front
Office operations in Banking in the Bank.
M.S. Rama Rao
Chief General Manager
Centralised Monitoring, Inspection
& Audit DeptBanking Operations Manua
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Banking Operations Manua
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4 CONTENTS

CHAPTER
No.

TITLE

PAGE No.

1
Introduction
01
2
Customer Identification &
Introduction – Opening of Accounts04
3
Nomination
25
4
Current Accounts

Instant Credit
109
14
Demand Drafts & Pay Orders
112
15
Safe Deposit Lockers
119
16
Settlement of Claims of Deceased
Depositors
133
Appendix - A
Customer Relationship Policy
153
Appendix - B
Customer Service Norms
158 Banking Operations Manua
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5 CHAPTER - 1

Introduction


either in individual or representative capacity, either singly or jointly. The
Cheques, Bills, DDs etc of parties are collected through the Current Accounts and
cash/clearing payments are made in respect of cheques issued by the Account
holders. Over Drafts, secured or otherwise, are provided as per the separate loan
rules in this regard. For Accounts of individuals facility of withdrawal from ATM is
also provided.

SAVINGS BANK ACCOUNT: The Savings Bank Accounts are meant for individuals
operating singly or jointly with other individuals, Associations, Clubs etc. The
Savings Bank accounts can be operated either with cheque book facility or without
cheque book facility. Where cheque book facility is not provided or not opted for,
remittances in cash and withdrawals through withdrawal slip are allowed. There is

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a limit on the number of transactions allowed in Savings Bank account and these
accounts are not meant for business or trading activities etc. Interest at the rate
as prescribed by RBI (presently 3.5% p.a.) is paid on the monthly minimum
balance maintained in the account between 10th and last day of the month. The
interest is computed for the full month on the above basis and credited once in 6
months to the account. Where cheque book facility is extended, the party can
draw cheques on the account which can be collected by 3rd parties through the
clearing office. Deposits in cash and cash withdrawals by way of cheque or
through ATM is allowed. Cheques / DDs etc., favouring the account holder are
collected into the account.

Savings / Current account as per standing instructions or allowed to be withdrawn
in cash by the customer or paid to him by way of Bankers Cheque / Pay Order and
by way of D.D. for out-location customers. The Bank will pay interest at monthly
rests also if the customer so desires by duly discounting the interest for such
monthly payment.
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Loans against the Fixed Deposit may be issued to the customers on
surrender of duly discharged Fixed Deposit receipt with a letter of lien through a
separate Depositor Loan A/c for which interest is charged at 2% over the rate
provided on the deposit. In the event of foreclosure of deposit, the depositor loan
is also foreclosed with the rates of interest charged at 2% over the rate allowed on
the foreclosure of the deposit. [For foreclosure of deposit, the rate of interest
extended is applicable rate on date of deposit for the period for which the deposit
remained with the Bank minus 1% ].

GRUHALAKSHMI DEPOSIT: This deposit is essentially a term deposit which is
accepted for a minimum period of 6 months and for a maximum period of 120
months in multiples of Rs. 100/-, wherein the quarterly interest payable on the
deposit is cumulated and the total cumulative interest earned during the currency
of the deposit is paid in full along with the principal on the expiry of the period of


8
CHAPTER - 2

Customer Identification and Introduction: Opening of Accounts

Know Your Customer (KYC) Norms:

It is imperative that while opening accounts, the authorized officer must be
satisfied about the proper identity, standing and residential proof of the prospective
customer. It is only after furnishing of proper proof of identity through photo
identity card and acceptable address proof that accounts are to be opened.

The following is the customer verification and identification procedure:

Customer Identification Procedure
Features to be verified and documents that may be obtained from customers

Features Documents ( latest / valid )
Accounts of individuals
- Legal name and any other names used


(i) Certificate of incorporation and
Memorandum & Articles of Association (ii)
Resolution of the Board of Directors to
open an account and identification of those
who have authority to operate the account
(iii) Power of Attorney granted to its
Managers, officers or employees to
transact business on its behalf (iv) Copy of
PAN allotment letter (v) Copy of the
telephone bill.Banking Operations Manua
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Accounts of partnership firms
- Legal name
- Address
- Names of all partners and their
addresses
- Telephone numbers of the firm
and partners (i) Registration certificate, if registered
(ii) Partnership Deed (iii) Registered
Power of Attorney granted to a partner

addresses (iv) Resolution of the managing
body of the foundation/association (v)
Telephone bill.

The original documents are to be verified, copies taken and duly authenticated by
the officer of the Bank stating ‘verified with the original’.

Introduction of Customer Accounts: Salient features:
a. It is important that every prospective customer who wants to open
any type of deposit account in the branch must be properly
introduced to the Bank by a respectable person known to the Bank
(who may not necessarily be a constituent of the bank) or by an
existing customer of the Bank with satisfactory conduct of
transactions in deposit account (SB/C/a). The introducer must
normally call on the Bank and sign in the column specifically
provided for the purpose in the account opening application form.
Introduction is obtained primarily to get protection under Section 131
of the ‘Negotiable Instruments Act’ and all the members of the staff in
the branch must be made aware of the importance of a proper
introduction.
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3. Who cannot introduce a customer?

a. A Term Deposit holder who has no Current / Savings Bank Account
cannot introduce another person to open a Current / Savings Bank
Account.

b. A minor Account Holder cannot introduce. c. It is desirable that there should be a reasonable time gap of at least
six months for a new Account Holder of the bank to introduce
another new customer to the bank. This will enable the bank to
assess whether the operations by the existing Account Holder are in
order or not.
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4. Method of obtaining introduction

a. The bank must insist that the Introducer must come to the Bank in
person and sign the document before the Officer.
In case the Introducer does not come in person, then the introduction

Important:
Accounts are opened by the Bank at its discretion and upon
satisfaction of the Authorised official of the Bank as to the bonafides of the
prospective customer and subject to the fulfillment of the various requirements
stipulated in this regard including satisfaction as to veracity of introduction.
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Salient features:

i. All new Current Accounts (C.A.), Savings Bank Accounts (S.B.), Fixed
Deposits (FD), Term Deposits and Recurring Deposit Accounts (R.D.)
shall be opened only with the authorisation of authorized officers in the
branch.
ii. All applications for opening Current Accounts, Savings Bank Accounts,
Term Deposits and R.D. Accounts etc. must be made in writing in the
Bank’s printed application forms only.
iii. The prospective customer should affix the signatures at all the relevant
places on the forms prescribed in the presence of the Authorized official.

xi. The cheque book issued to the customer must be acknowledged by the
customer or his representative (duly authorized for the purpose) in the
register of ‘cheque books issued’. The cheque books should be issued
in the serial number order and if for any reason the continuous serial
number is skipped, such missing numbers should be recorded with the
reasons and attested by the authorized officer.

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xii. Requisite number of copies of photographs of the Account Holder, and
all the Joint Account Holders in case of Joint Accounts have to be
obtained while opening of accounts and affixed on appropriate forms,
after due authentication of the authorized officer, as indicated for each
type of account. b. Photographs:

i. Branches should obtain recent passport size photographs of the
customers at the time of opening of new accounts. The photographs
submitted at the time of opening of account should be compared with
the prospective customer / account holder to satisfy about the
resemblance and then only accepted. Recent passport size photographs
of the prospective customer / account holder/s (in case of joint accounts)
are to be obtained and affixed at the appropriate places in the account

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xii. In respect of accounts opened by illiterate persons and blind persons
three copies of recent passport size photographs have to be obtained.
Further, passport size photograph of the depositor must be affixed on
the specimen signature/thumb impression card, the pass book and the
account opening form duly authenticated by the authorized officer. The
signature of the Attesting Officer should be partly on the photos and
partly on the account opening form / specimen signature / thumb
impression card.
xiii. A declaration shall be taken from the illiterate depositor on the account
opening form to the effect that the contents of the account opening form
as also the rules governing the deposit account have been explained to
him, that he has fully understood the rules and that he had affixed his
thumb impression after fully knowing the rules. This declaration should
be authenticated by the depositor by affixing his thumb impression and it
should be countersigned by a witness.
xiv. In respect of accounts opened prior to 01.04.1994 photographs were not
required to be obtained. However in all such accounts in which names
have been either added or deleted after 1.4.1994, photographs of all the
Account Holders have to be obtained. However, it is advised to obtain
photographs of all Account Holders who had opened accounts
previously also, as and when they visit the branch for operation of their
accounts.
xv. In the case where the same customer has more than one type of

Partnership firms, Clubs, Religious & Charitable Institutions, Educational
Institutions, Social Organizations, Co-operative Society etc.
iv. Minor above 14 years can open and operate Savings Bank account.
However,
Minor student (i.e. literate) of age 12 years and above can
open Savings Bank account and operate by himself.
v. Bank should not open more than one Savings Bank account for the
same person in his individual name.
vi. At the time of opening joint accounts (in the name of more than one
person) instructions regarding operations and survivorship should be
obtained from all the account holders and properly recorded duly
authenticated by an officer. d. Prohibition against opening of Savings Bank accounts in the name
of certain Bodies / Organizations:

i) Savings Deposit account cannot be opened by banks in the name of:
a) Government Departments
b) Bodies depending upon budgetary allocations for performance of
their functions.
c) Municipal Corporations or Municipal Committees
d) Panchayat Samitis
e) State Housing Boards
f) Water and Sewerage / Drainage Boards
g) State Text Book Publishing Corporations
h) Societies
i) Metropolitan Development Authority
j) State / District Level Housing Co-op. Societies etc.
k) Any trading business or professional concern (e.g. firms of

i) Agriculture Produce Market Committees.
j) Khadi and Village Industries Boards.
k) Societies registered under the Societies Registration Act, 1860 or
any other corresponding law in force in State or a Union Territory.
l) 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”.
m) 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.
n) Zilla Parishads / Gram Panchayats only in respect of Jawahar
Rojgar Yojana Funds.
o) 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 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.

e. Operational Instructions:

Operational instructions in the joint accounts have to be carefully followed. They
may be:

i. Joint Account without survivorship clause: This account is to be

to the lone survivor.

v. Any variation in the instructions given by the joint account holder at the
time of opening the account can be made only if it is authorised by all
the account holders jointly.

vi. Original authority relating to the operations of joint accounts as well as
the survivorship clause may be later on revoked by anyone of the joint
account holder. f. Conversion of Accounts – Single into Joint and Joint into Single:

i. To convert an existing single account into a joint or E or S account, a
letter from the existing account holder attesting the specimen signature of the new
person(s) has to be obtained and attached to the Account Opening Form.
Specimen signatures of existing as well as the newly added person(s) have to be
obtained in a fresh specimen signature card and maintained in the specimen
signature card rack or in the specimen signatures loose leaf binder. All the
changes have to be properly recorded duly authenticated by an authorized officer
with dates of changes.
ii. In case the customer having a joint account with the Bank intends to
convert the same into a single account, it is desirable to close such account by
getting necessary instructions from the existing account holders and then open a
new account in the name of the person in whose name the account is to be
continued.


“For and on behalf of minor ”.

vi. Savings Bank account can be opened and operated by a minor
student who is above the age of 12 years or a minor of the age
of 14 and above (even if not literate).
vii. No cheque book is to be issued to minors who are operating
their Savings Bank accounts by themselves.
viii. Accounts in the name of minor to be operated by the natural
guardian or by the guardian or by the guardians appointed by
the court or to be operated by the minor himself, must be
opened in the ledger as detailed below:

Ram (Minor) Ram (Minor) Ram (Minor)
by father and (or) by guardian (or) by himself
guardian appointed by
Shri. Krishna the Court
Shri. Krishna
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in the order mentioned hereunder, to be the guardians of a minor:

– the Executor appointed by the father’s will;
– Father’s father;
– The Executor appointed by the will of the father’s father.

iii. If none of the above persons is alive only the person appointed by the
competent court can act as the guardian of a minor.
iv. Under no circumstance mother can act as guardian of the minor under
Mohammedan Law.
v. In respect of Christians, either the Father or Mother is the natural
guardian to the Minor.
vi. The RBI has advised that Banks could open Savings, R.D., and Term
Deposit accounts in the names of minors with Mothers as Guardians.

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c. Illiterate Persons:

i) The rules relating to Savings Bank or other deposit account have
to be clearly explained to an illiterate person intending to open
such accounts in a language in which he understands. He should
be advised that for withdrawing money from his account, he has
to personally come to the bank with the Pass Book, every time.

ii) Cheque Book should not be issued to him under any
circumstances.

viii) Current account should not be opened in the name of an illiterate
person.

ix) In case the illiterate person wants to open an account jointly with
a literate person such account must be opened with the condition
that it can be operated only jointly by both. No illiterate persons

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account should be opened with operation facility of E or S or
by “literate person only.”

x) No cheque book is to be issued even for such joint accounts.

d. Blind persons:

i) There is no legal bar for a blind person to open a bank account.
ii) Due care must be exercised in opening accounts for blind
persons as there may not be consistency in their signature. As
they always depend on someone the chance for their being
cheated is greater; and it may not be always possible for blind
person to come to the Bank in person and he may send a
messenger for transaction whose reliability may be known to the
bank.
iii) Three copies of recent passport size photographs of the blind
person have to be obtained at the time of opening the account —
one to be attached to Account Opening Form — second copy to

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e. Sole Proprietorship:

i. The law does not distinguish between the Proprietor and the Proprietary
Concern and therefore such accounts can be treated as individual accounts and
he has to submit a declaration in the prescribed format. However the Proprietor
must sign all the documents as well as the cheques relating to the account in the
name of the Proprietorship Concern as below: For Ganesh Trading Company, Rajkumar
Sole-Proprietor.
f. Executors / Administrators:

i. An Executor is a person named in the will and derives title immediately
after the date of death of Testator for the purpose of administration of the
property of the deceased. He must obtain a Probate from a court of law
before acting as an Executor.
ii. An Administrator is a person appointed by the Court to manage the
property of the deceased who had died without leaving any will.


i. The Bank may open accounts in the names of joint Hindu families. The
account should be opened in the name of ‘Karta’ (senior male member of
the family) or in the name of the family business. The bank has to obtain
two copies of the photographs of the ‘Karta’, one to be affixed on the
Account Opening Form and the other on the Specimen Signature Card.

ii. It must be written in bold letters in red ink as “HUF Account.” in the
Account Opening Form, Specimen Signature Card, Account in the system
and Passbook. Further, the bank has to obtain the HUF declaration duly
signed by the ‘Karta’ and the coparceners. h. Power of Attorney:

i.
A person may authorise another person to open and operate a bank
account on his behalf. This authority may be given by “Power of Attorney”.

ii. The Power of Attorney may be ‘special or general’. Special Power of
Attorney authorises a person to act in a simple transaction. A General
Power of Attorney authorises the person to have wide range of powers to
carry out various transaction.

iii. The Power of Attorney must give specific authority to open and operate a
bank account, to overdraw in Current Account, to borrow, to accept /
endorse bills of exchange, etc.

iv. Branch Officers must study the Power of Attorney very carefully and allow
operations only as per the terms of Power of Attorney. If any operation
outside the terms of Power of Attorney is permitted in the account, such


i. It is desirable that the partnership firm is a registered one.
ii. Account should be opened in the name of the firm and not in the name
of any partner.
iii. Account Opening Form should be signed by all the partners in their
official capacity (i.e., as partner) and also in personal capacity.
iv. While operating the partnership account the partners should sign for and
on behalf of the firm and not as an individual.
v. Partnership Deed should be very carefully examined and in case the
branch offices have any doubt it is always desirable to refer such cases,
before opening the account, to H.O. for examination and approval by
Bank’s Legal Department / Legal Advisor.
vi. Once a partnership account is opened operations in such account
should be strictly in conformity with the provisions of the deed. If there
are any restrictive clauses in the Partnership Deed they must be clearly
noted in Power of Attorney Register as well as system and strictly
followed while allowing operations in the account.
vii. A Partnership letter should be obtained and signed by all the partners
along with the Account Opening Form. This letter must be signed by all
the partners in their individual capacity and not on behalf of the firm.
viii. Cheques payable to the firm should not be credited to the private
account of any partners or any employee of the firm.
ix. In case any one partner in the firm advise the bank not to allow
operations on the firm’s account by the other partner(s), all operations on
the account must be stopped under intimation addressed as a joint letter
to all partners as well as the firm. This letter must be sent to all the
partners and the firm. In the event of death of any of the partner, the
operation in the account is to be stopped and a fresh account is to be
opened, provided the partnership deed permits the same.


of Commencement of Business” duly verified with the original should be
obtained.

– An officer of the Bank who verified this certificate must authenticate on the
copy submitted to the bank to the effect that “verified with the original”. This
is not required in the case of a Private Limited Company.

– List of Directors / Chairman and other office bearers of the institution with
designation.

– Before opening an account for such a company, the bank must satisfy itself
that the said company is a well established one, or the directors of the
company are well known to the Bank or properly introduced by a respectable
person well known to the Bank.

– Where an account for such a Company has been opened on the proper
introduction of a well known person, the Bank must before accepting any
cheque drawn in favour of the company for collection and issue of cheque
book, make independent inquiry about the company and its Directors.

– Specimen signatures of authorised persons to operate the account duly
countersigned by the Chairman of the meeting with the official seal of the
company.

– Recent passport size photographs of the person(s) opening the account /
authorized persons to operate the account.