Taxmann's Guide to Bank Branch Management – Enhancing Efficiency and Effectiveness of Bank Branches

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FOREWORD The aspects of Managing a branch in banks is a highly complex and challenging task. It is multi-tasking, hence demands from a person heading the bank branch a wide range of knowledge, Skills in diversified field of banking. Branch Managers are probably the most critical positions in any Bank. As the head of a profit center, a Branch Manager is not only responsible for his own performance but also the performance of his/her team.

He/She must ensure operational controls, health of assets, Growth of CASA deposits, Marketing of Products & Services, adhering laid down Compliance Norms, issues like staff matters, business potential, bad debts recovery, work prioritization, decision making, handling customer complaints, Audit & Inspection, Issues on Vigilance, customer service standard, team building, Time Management, Interpersonal Relationship, liaising with higher offices etc. These jobs are not easy for even the best and the most experienced Branch Managers in the industry. The difficulty level goes up a few notches if it happens to be for officials assigned with role as Branch Manager newly.

Further, it is highly necessary to enhance your existing skills, develop a robust plan for continuous professional development, and unleash your full potential to function as a bank branch manager. Gaining a deep understanding of the responsibilities and expectations that come with the role, from staffing and team management to creating a positive work culture and achieving ambitious performance target adhering laid down procedures are extremely difficult unless proper grooming for the Branch Manager incumbent is held in time.

In this context, the book “Guide to Bank Branch Management Enhancing Efficiency and Effectiveness of Bank Branches” drafted by senior banker & thought leader in the space of banking Shri Tara Prasad Misra is a Comprehensive Guide and a useful resource that will equip the Branch Manager incumbent with the essential skills, knowledge, and strategies needed to excel in this influential role.

The book is a timely addition to literature and is so designed that it will facilitate improving the overall banking acumen of the Bankers in general and Branch Heads and officials being selected as Branch Head in particular.

I-5

I-6

FOREWORD

The arrival of this book in the space of banking literature looks timely and I am sure, would be a useful manual for the professional bankers.

Place: Bangalore

DR. ROYCHAND CHENRAJ CHAIRMAN, JAIN GROUP OF INSTITUTIONS

PREFACE The role of Branch Manager is vital in strengthening the business and brand value of the bank branch. The Branch Manager shapes the destiny of the branch by taking along entire staff members and knitting them as a team. Branch Manager facilitates in forming a performing team, in which all team members take the defined responsibilities proactively to ensure the desired growth of the Branch. In present banking scenario, it is increasingly felt that Branch Manager position in bank and its effective functioning is the key source of competitive advantage. In the era of competition, it is only the managerial effectiveness that can give bank an edge to excel and grow. This essentially calls for imparting new skills and perspectives to the managers to grow business. Every Bank has a vision for becoming the top-class bank with exponential growth in all potential business parameters including growth in bottom line. To achieve this vision, biggest challenge is to ensure that people are engaged, contributing and energized in their work.

Lot of changes is happening including on slaught of technology. Surviving, innovating, excelling and leading in this new era require building on talent and reaching beyond effectiveness. Tapping into the higher reaches of human genius and motivation require a new mindset and a new skill set at the functional level.

Therefore, it is a much-evidenced fact that the role of the Branch Managers is multi-tasking and the management of bank branch is a highly complex and challenging task.

As a Branch Head some of the critical role expectation is that of acting as a motivating Leader, a successful conflict resolver a go getter for business, a mentor for the team and most importantly an executor of the Corporate Policies and guidelines while balancing with the ground level expectations and challenges. Keeping the above aspects in mind, the author who is a senior Banker having experience in diversified field of banking, has designed and developed the book to cover the key dimensions of the role of the Branch Managers. While designing the manuscript, efforts have been made to give specific inputs like:

Understanding the Branch and Roles & Responsibility as Branch Manager

Enhancing Operational Efficiency in Branch

Marketing Strategy at Bank Branches

I-7

PREFACE

I-8

Customer Service

Branch Management Skills

Experience Journey as Branch Manager with Extraordinary Perspective

Products & Procedures

Credit Management

Credit Monitoring & Recovery

Preventive Vigilance & Fraud Risk Management

Audit, Inspection & Compliance Measures at Branches.

In recent past, attrition on account of superannuation have posed serious threat to the banking industry. Therefore, in this context, it is necessary to develop an innovative talent SLSHOLQH DPRQJVW WKH SHUIRUPLQJ RIÀFLDOV DSDUW IURP UH JURRPLQJ WKH H[LVWLQJ ORW RI %UDQFK Managers those who could be able to lead the bank branches.

Further, while drafting the chapter Roles & Responsibility of the Branch Manager, I have narrated my experiences in handling different situations as a branch head wherever necessary to make the presentation more realistic and engaging. In a nutshell, the book covers the entire gamut of branch banking and paves the way for an effective branch management.

Each chapter contained in this book are interesting & insightful thinking process coming from a professional banker who has been with the Public Sector Bank from its formative years right up to the modern phase of the banking that has witnessed many upheavals.

In this endeavour, I have a great pleasure in presenting the book prepared with the relentless efforts. This book is a compilation of banks policies, guidelines, practices and various procedures garnered from experiences, interactions, and visiting various relevant sites, RBI reports, RBI master circulars, latest guidelines of Government of India, that will serve as a useful reference guide in banking for such target groups. Also, where ever necessary the information garnered in drafting each chapter and its source has been mentioned at the concluding part of the respective chapters.

Therefore, the book shall be one stop reference material and useful in understanding & demystifying in various areas in Branch Banking for existing branch heads and the officials who are in the process of being groomed as Branch Heads of the Bank/Financial Institutions.

Place: Bangalore

SHRI TARA PRASAD MISRA

Former Dy. GM, & Principal, Baroda Apex Academy, Bank of Baroda

ABOUT THE BOOK Branch Management in banks is a multitasking job and the role of the Branch Head is quite different from others. The Branch Managers by virtue of their role, are the kingpins of their organization, who are not only responsible for their own performances but also for the performances of their teams along with the management of their clients. This book essentially aims at facilitating Branch Managers to deliver excellence in the assigned role.

The book covers key dimensions of the roles of the Branch Head such as: Understanding the %DQN %UDQFK 5ROHV 5HVSRQVLELOLW\ DV %UDQFK 0DQDJHU HQKDQFLQJ 2SHUDWLRQDO (IÀFLHQF\ in bank branches, Marketing Strategy, Customer Service, Management Skills, awareness of Products & Procedures, awareness about nuances of Credit Management, Credit Monitoring & Recovery Procedures, Audit, Inspection & Compliance Measures at branches, Vigilance 0HDVXUHV )UDXG 5LVN 0DQDJHPHQW DFWLQJ DV D 0RWLYDWLQJ /HDGHU D VXFFHVVIXO &RQÁLFW Resolver, a go getter for Business, a Mentor for the team and most importantly an executor of the Corporate Policies and guidelines.

Therefore, we believe that this book shall give a strategic direction to the Branch Heads for inculcating the habit of keeping himself/herself abreast of the latest happenings in the Banks as well as reskilling, upskilling their banking acumen in terms of guidelines, Policies and practices.

In quest for becoming the Best in the organization, this book shall be one stop reference material and useful in understanding and demystifying in various areas in Branch Banking IRU H[LVWLQJ EUDQFK KHDGV DQG WKH RIÀFLDOV QHZO\ DVVLJQHG DV WKH UROH RI %UDQFK +HDG DV ZHOO DOO RIÀFLDOV WKRVH ZKR DUH LQ WKH SURFHVV RI EHLQJ JURRPHG IRU VXFK DVVLJQPHQW Last not the least, the chapters in the book is meticulously drafted by the author, a banker KDYLQJ PRUH WKDQ IRXU GHFDGHV RI H[SHULHQFHV LQ GLYHUVLÀHG ÀHOG RI EDQNLQJ ÀQDQFH We extend our good wishes and assure to support your endeavours for achieving excellence through quality reading material such as a book like — *XLGH WR %DQN %UDQFK 0DQDJHPHQW (QKDQFLQJ (IÀFLHQF\ DQG (IIHFWLYHQHVV RI %DQN Branches.

SHRI TARA PRASAD MISRA

I-9

ACKNOWLEDGEMENT I could develop my thought processes into a book mainly because of the divinely blessings of my late father who more often than not were the source of inspiration for me in each of my endeavour. I am especially grateful to my mother for her blessings, encouragement in all of my pursuits and inspiring me to follow my dreams despite of her debilitating illness. I owe an enormous debt of gratitude to my wife who, always tolerated my engagement with the assignment encroaching her time.

In my present professional life, I am extremely grateful to Shri Birendra Kumar, former General Manager Chief Cordination, Bank of Baroda for his unstinted support. Any interaction with him is enriching and fact findings which have assisted me in incorporating those ideas while designing the book. Without his valuable encouragement and inspiration, the endeavour in drafting the book could have not been completed.

I have been inspired and helped & guided by many colleagues, seniors for writing up my nearing four decades of experience especially on Branch Banking Operations in form of a book from my past organizations such as Bank of Baroda and Saraswat Cooperative Bank Ltd. I am greatly benefited from the inputs received during my interaction with my co-workers, bankers from various banks, thought leaders from various professional forums, Industry Associations, Branch Managers and Odisha Corporate Foundation.

I place on record my sincere thanks to all my well-wishers Shri Gautam E Thakur, Chairman, Saraswat Cooperative Bank Ltd., Smt. Smita Sandahne, former Managing Director, Saraswat Cooperative Bank Ltd., Shri Arun Kumar, former General Manager, Bank of Baroda, Mr. Sujay Kumar Shaw, former General Manager, Bank of Baroda, Mr. Dhrub Charan Kar, former General Manager, Indian Overseas Bank, Shri Kumar Arunesh, Trainer & Ex faculty, Baroda Apex Academy, Bank of Baroda, Wg. Cdr. Kishenlal Ganesh Director (Sales), Jainx Financial Consultancy Services Pvt. Ltd. and all those who always have discovered the passion in me and encouraged guided in completing the assignment.

I am thankful to my longtime associate and colleague late Mayanad Chaudhury, who always had cooperated and supported me in drafting the book.

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ACKNOWLEDGEMENT

Finally, I am grateful to the Publisher who has guided me for smooth publication of the literature.

Place: Bangalore

SHRI TARA PRASAD MISRA

DISCLAIMER This book is designed, developed and published with good faith for up skilling the readers and presented solely for general informational and educational purposes only.

The author and publisher are not offering it as legal, accounting, or other professional services advice. While best efforts have been used in preparing this book, the author and publisher make no representations or warranties of any kind express or implied, about the completeness of the contents, accuracy, reliability, suitability or availability with respect to the information, products, services, or related graphics contained in this Book for any purpose and assume no liabilities and specifically disclaim any implied warranties of merchantability or fitness of use for a particular purpose. Neither the author nor the publisher shall be held liable or responsible to any person or entity with respect to any loss or incidental or consequential damages caused, or alleged to have been caused, directly or indirectly, by the information or programs contained herein.

While writing this book, every effort has been made to incorporate latest and correct information on the related topics garnered from various sites and materials (Reference is mentioned in relevant chapter). This material and the information contained are intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). The information given in this book is for awareness and training purpose only and does not purport to substitute or supplement bank’s extant guidelines or various regulators guidelines on operational and other issues.

The information is not intended to be relied upon as the sole basis for any decision(s).

Before making any decision or taking any action that might affect banks/organization’s operations readers should refer to their book of instructions, Circulars and Guidelines issued by their respective Banks, RBI, Government of India and other regulatory Institutions from time to time.

Place: Bangalore

SHRI TARA PRASAD MISRA

I-13

CONTENTS PAGE

Foreword

I-5

Preface

I-7

About the Book

I-9

Acknowledgement

I-11

Disclaimer

I-13

DIVISION 1 UNDERSTANDING THE BRANCH AND ROLES & RESPONSIBILITY AS BRANCH MANAGER 1.

Towards New Journey as Branch Manager

3

2.

Competency Framework for Branch Managers

12

3.

Qualities of a Successful Branch Manager

21

4.

Compilation of Best Practices for a Branch Manager

29

5.

Transforming the Branch to Branch of the Future: Role of the Branch Manager

38

DIVISION 2 ENHANCING OPERATIONAL EFFICIENCY IN BANK BRANCHES 6.

Business Growth through Service Excellence

51

7.

Customer Retention and Service Recovery Strategies in Bank Branches

61

8.

Strategies for Turnaround of Loss-Making Bank Branches

68

DIVISION 3 MARKETING STRATEGY AT BANK BRANCHES 9.

Branch Marketing and Strategies for Business Development I-15

77

CONTENTS

I-16

PAGE

10. Customer-Centric Sales in Bank Branch: Best Practices

83

11. Digital Marketing A Step Forward

92

DIVISION 4 CUSTOMER SERVICE 12. Customer Grievances Redressal Mechanism in Banks

101

DIVISION 5 BRANCH MANAGEMENT SKILLS 13. Effective Communication Skills for Branch Managers

113

14. Effective Negotiation Skills for Branch Managers

122

15. Art of Giving and Receiving Feedback

131

16. Mentoring – An Essential Skill for Branch Managers

137

17. Conflict Resolution Skills for Managers

146

18. Effective Time Management Skills for Managers

153

DIVISION 6 PRODUCTS & PROCEDURES 19. Retail Lending: A Corporate Strategy for Deploying Funds

167

20. Digital Banking Services at Bank Branch

174

21. NRI Products and Services

181

DIVISION 7 CREDIT MANAGEMENT 22. Concepts and Guidelines of Credit Management

189

23. Evaluation of Borrower’s Creditworthiness

197

24. Key Principles of Sound Lending

201

25. Types of Borrowal Accounts

204

26. Types of Account Holders

212

27. Credit Appraisal Care at Bank Branch

218

28. Introduction to Financial Statement Analysis

224

29. Ratio Analysis

231

30. Working Capital Finance

237

31. Term Loan/Project Appraisal

245

32. Documentation and Creation of Charges

258

CONTENTS

I-17 PAGE

33. Importance of Credit Rating 34. Due Diligence in Takeover of Borrowal Account 35. Lending Strategies to Priority Sector in Bank 36. MSME Finance: Importance, Advantages, Issues and Challenges Ahead 37. Major Schemes of MSMEs 38. Financing Self Help Group (SHG)/Joint Liability Group (JLG)

271 282 285 295 307 313

DIVISION 8 CREDIT MONITORING & RECOVERY 39. Effect of Credit Governance on Asset Quality 40. Tools and Techniques of Credit Monitoring 41. Professional Approach in Asset Management – Roles & Responsibilities of the Manager 42. Recovery of NPA in Bank: An Approach in Present Scenario

321 326 340 349

DIVISION 9 PREVENTIVE VIGILANCE & FRAUD RISK MANAGEMENT 43. Measures in Preventing Fraud in Banking Operations 44. Preventive Vigilance in Retail Loans 45. Cyber Security in Banks: Importance, Threats and Challenges 46. RBI Framework on Cyber Security 47. Precaution to Avoid Frauds in CBS Environment 48. Revenue Leakages: Common Causes and Control Mechanism at the Bank Branches

359 368 375 383 386 391

DIVISION 10 AUDIT, INSPECTION & COMPLIANCE MEASURES AT BRANCHES 49. Types of Audits in Bank

401

50. Risk-based Internal Audit Mechanisms in Bank Branches

407

51. Compliance and Closure of Inspection Reports at the Branch

418

52. Compliance Norms for Bank Branches

425

Annexure-A : Compliance of Income Recognition, Asset Classification Norms

440

Annexure-B : KYC (Know Your Customer) Norms

445

C H A P T E R

43

Measures in Preventing Fraud in Banking Operations

It is quiet indicative from the performance of the financial sector that the Indian economic growth graph is on an upward trajectory despite of the world-wide recessionary trend. Therefore, there has been a noticeable upsurge in number of bank accounts opened, transaction through ATMs, POS and internet/mobile banking. As a sequel different bank have invested considerably to increase their banking network and their customer reach. To provide service of high quality and cost-effective banks have resorted to various alternative delivery channels which are more customer induced in nature. Providing services on mobile, social media platforms & other digital platforms with limited knowledge of the security requirements, poses a lot of threats to customers as well as the financial institutions. This unhealthy development in the banking sector produces not only losses to the banks but also affects their reputation adversely. Despite having a strong regulator, the financial services sector has emerged as the most susceptible to fraud.

Frauds have been classified by Reserve Bank of India as under, based mainly in the provision of the Indian Penal Code.

Misappropriation and criminal breach of trust.

Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property.

Unauthorized credit facilities extended for reward and illegal gratification.

Negligence and cash shortage.

Cheating and forgery.

Irregularities in foreign exchange transactions.

Any other type of fraud not coming under the specific head as above.

Further, it is observed by RBI that weakened supervision and blurred lines of control and command attributes to frauds. Several illustrative causes attributing to Bank fraud, are as under: 359

360

DIV. 9 : PREVENTIVE VIGILANCE & FRAUD RISK MANAGEMENT

In the process of increasing the CASA base of respective branches (or any unit), KYC requirements are compromised.

Staff members may use unscrupulous methods to achieve their respective targets

Lack of tools to identify potential red flags.

The symptoms of poor internal control systems increase the chances of frauds.

Lack of training, overburdened staff, competition, low compliance level is considered as the key factor.

The new technologies adopted by banks are making them increasingly vulnerable to various risks.

Banking transactions today is independent from bank branches. Most of the transactions have moved to debit/credit cards and to electronic channels like ATMs, RTGS/NEFT, ECS/NECS, Internet banking and Mobile banking. This has given a happy hunting ground to fraudsters.

Insider fraud, whether arising from coercion, collusion, or otherwise, are increasingly considered to be one of the most serious fraud threats faced by banks in India.

People with no or little experience or exposure to loans/advances are posted to branches which have large advances portfolio and are compelled to process loan proposals.

Financial innovations have led to higher aggregate borrowings, which has resulted in higher defaults.

Basic principles are not adhered that can go a long way in preventing fraud, namely the principles of knowing the customer and employees as well as partners. It is not sufficient to know only the customer alone but also pertinent to know its business, its goal and customers of the customer.

It is time to stress on good governance in banks to increase their competitiveness and to be able to raise money from markets easily. In response to the common perception that increasingly strict regulations will make business opportunities is a cause of complacency across the industry.

Rise in consumer bankruptcy can largely be accounted by the extensive margin and lower stigma associated with it.

Skill and Competencies required to ensure a robust appraisal system and to monitor asset quality of bank based on Early Warning Signals.

Underreporting/ever greening of loans on the part of the Banks as evidenced in past must be arrested.

Involvement of third-party agencies and firms in garnering the credit leads is examined with utmost precession and transparency.

CH. 43 : MEASURES IN PREVENTING FRAUD IN BANKING OPERATIONS

361

Following measures in banking Operation could arrest its occurrence: At the time of opening the account:

“Know Your Customer” (KYC) procedure is the guiding principle, for opening an account of any person.

At the time of opening the account, the KYC procedure must go beyond establishing the identity of the person and satisfying about his credentials which should inter alia include knowledge about the following: z

Identity of the person

z

Location

z

Nature of activity,

z

Source of income, ownership of funds

z

Purpose of transaction/opening the account

z

Verify/check his background

z

Allocation of risk category based on his profile

Documents submitted by the Person seeking to open the account should be verified with the original Officially Valid Documents (OVD). Further the information submitted in the Account Opening Form (AOF) should be cross checked with the OVDs. Sometimes fraudsters obtain the documents of others and produce the copies of those documents to open accounts and sign differently from what appearing on the document on the pretext that the signature has been changed.

Such cases should be handled with high caution.

Enhanced Due Diligence (EDD) for high risk and medium risk customer accounts is required to be done.

Indicative List of High-Risk Customers: z

Persons engaged in cash intensive business-like Bullion dealers (including sub-dealers) & Jewelers

z

Politically Exposed Persons (PEPs) of foreign origin e.g., Heads of States/ Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. Before opening an account of PEP, branches will take/ obtain specific precaution, NRIs

z

Trust accounts, Charities, NGOs and organizations receiving donations

z

Correspondent Banking

z

High net worth individuals (HNI)

z

Companies having close family shareholding or beneficial ownership

z

Firms with ‘sleeping partners’

DIV. 9 : PREVENTIVE VIGILANCE & FRAUD RISK MANAGEMENT

362 z

Non-face to face

Those with dubious reputation as per public information available

Fiduciary Accounts

Pooled Accounts

Bank has to identify existing customer ID based on PAN, Mobile Number, Passport, Aadhaar, Voter ID and Driving License before creation of new Customer IDs. Further Bank has to identify and merge existing duplicate customer IDs in the system respectively.

While acquiring new customers, the CBS system gives appropriate messages in case the name of the new customer matches with the name UNSCR list (United Nations Security Council Resolution). Branches should not open accounts of known criminals or Terrorist Individuals/Entities/Organizations.

Branches must verify PAN quoted by the customer, with the original PAN Card/PAN Allotment Letter and retain copy thereof for having ensured due diligence in this regard. Further, branches should verify the genuineness of PAN through the site and ensure its correctness. As per provisions of section 139A of the Income Tax Act 1961, quoting of PAN is compulsory in respect of certain transactions and it is further provided that any person who does not have a permanent account number and who enters into any transaction specified under the above rule shall make a declaration in Form No. 60.

Branches are required to ensure identification and enrichment of details of “Beneficial Owner” in all new as well as existing Accounts of Non-Individual Customers (other than Sole Proprietorship and listed Companies).

Preventive Vigilance in Current Account:

All Current A/c be opened after ensuring KYC procedure.

It is now mandatory to access CRILC database before opening and Current Account and NOC from Banks from Customer is enjoying credit facilities (As per AOF and CRILC) should be obtained.

CIBIL reference to be verified.

Further, http://www.mca.gov.in/MCA21/can be visited for due diligence on Companies and www.icai.org for verification of Auditor’s Certificate of Practice.

All transactions debit as well credit must be closely monitored in newly opened current accounts in compliance of AML/CFT guidelines.

To enquire the customers, the reasons for transferring funds to unrelated parties without hurting their sentiments and in case of unsatisfactory response, an alert may be entered through.

CH. 43 : MEASURES IN PREVENTING FRAUD IN BANKING OPERATIONS

363

Preventive Vigilance in Term Deposit Account:

Term deposit receipts should be kept in Lock and key under dual control and the stock is entered in finacle.

Proper monitoring for daily consumption of security forms should be done by the concerned officer. Loose inventory given to operator and received back from operators and that consumed during the day must be verified from the system.

Term deposit receipts should be printed through the system only. No manual receipts should be issued.

Proper receipt number should be checked from the system.

The amount of FD receipt must be verified from system and corresponding debit and credit vouchers at the time of signing the same by branch officials.

Term deposit receipts which are not collected by customer should be kept in lock and key.

Accounts, where there is no face to face interaction between the branch and ultimate customer, may be opened with proper due diligence and additional safeguards such as calling for additional documents, visit of customer and effecting first payment through the account of the customer maintained with another bank that has adhered to extant KYC/AML guidelines.

In case of misprint, other discrepancies, a fresh receipt should be printed instead of altering the printing details.

Preventive vigilance and guidelines on a continuous basis:

Large and complex transactions and those with unusual patterns, which have no apparent economic rationale and legitimate purpose.

Transactions which exceed the thresholds prescribed for specific categories of accounts.

Transactions involving large volume of cash inconsistent with the normal and expected activities of the customer.

High account turnover inconsistent with the size of the balance maintained.

Generation, checking and filing of Exceptional Transaction Reports.

Branches are required to verify the identity of the customers for all international money transfer operations.

Branches should ensure that any remittance of funds by way of demand draft, Bankers Cheque or any other mode for value of Rs. 50,000/-(Rupees fifty thousand) and above is effected by debit to the customer’s account or against cheques and not against cash payment.

364

DIV. 9 : PREVENTIVE VIGILANCE & FRAUD RISK MANAGEMENT

In case of existing customers, branches should obtain above information while updating their identification data at the prescribed intervals i.e. at least every two years for high risk individuals and entities. Full KYC exercise will be required to be done at least every ten years for low risk and at least every eight years for medium risk individuals and entities.

Fresh photographs will be required to be obtained from minor customer on becoming major.

There is a system of periodical review of risk categorization of the customers through CBS system for applying enhanced due diligence for high risk customers.

Branches should closely monitor the transactions in accounts of marketing firms, especially accounts of Multi-Level Marketing Companies and transactions through ‘Money Mules’.

Savings Bank accounts are operated either by Cheque Books or Withdrawal slips. In case cheque book is issued no withdrawal should be allowed on withdrawal slip. In exceptional cases it can be allowed after proper enquiry and full satisfaction and to the account holder only.

If a request for activation of an inoperative/dormant account is received, due diligence should be exercised while doing so and the transactions in the account, especially large value transactions, should be closely monitored for few days.

Activity in Potentially Dormant Accounts or those accounts not operated for a substantial period of time should be monitored.

If a pension account remains inoperative for some time, any withdrawal should be allowed only after concrete and thorough enquiry/due diligence.

Any cheque especially of large amount, drawn on a newly opened account presented for payment should be carefully checked for its originality, genuineness and alteration etc. before allowing payment.

When a request for cheque book is received complete address should be updated in the system after confirming form documents before lodging in the system.

The cheque book must be entered in the system.

Transactions in newly opened accounts should be monitored scrupulously.

List of accounts upgraded from Dormant to Active status during a particular period be monitored.

Preventive Vigilance in Other operational areas:

No credit is to be given to the depositor of counterfeit note.

Branches are required to send acknowledgement to them immediately upon receipt of consignment of Security forms. The consignment is to be opened immediately upon receipt in the presence of Branch Manager/Second in-charge

CH. 43 : MEASURES IN PREVENTING FRAUD IN BANKING OPERATIONS

365

and the number of books and the leaves in each book should be counted. All security forms must be entered in system.

Surprise Cash Verification should be used carried out to prevent frauds related to cash shortages.

Common observations regarding fake cheques:

Some of the cheques are simply coloured photocopy of the original cheque.

The quality of the paper of the cheque leaf is inferior. In some cases, it was parchment paper which is non-MICR paper.

The cheque leaf did not have water mark, Bank’s logo and/or Bank’s name.

The cheques are not printed with super sensitized ink. Sensitized ink is used for printing of all our cheque leaves. This ink tends to fade and dissolves/ breaks up on coming in contact with any liquid or chemical.

MICR code line is not in black magnetic ink.

The cheque design and size is different from the standard design and size of the original cheques.

In many instances color of logo on the fake cheque does not match with colour of our Bank’s logo.

Many of such cheques are presented in inter branch transactions.

Tips for Cheque Fraud prevention: The following are the tips to protect our self from cheque related fraud:

Settle our accounts regularly and on time.

Never sign blank cheques.

Only sign them once all the details are complete.

Avoid leaving gaps in the payee’s name, and write the amount in words & figures.

Keep our cheque book in a secure place to avoid theft.

Tear up or shred any cheques we have made a mistake.

Use electronic payments (if possible) for high-value amounts.

Secure our postal mailbox.

Limit the number of signatories on our account.

Make sure invoices are valid before paying them.

Ensure the signature’s not on any documents that the general public can access.

Contact immediately if our cheque’s been lost or stolen and ask to stop payment.

366

DIV. 9 : PREVENTIVE VIGILANCE & FRAUD RISK MANAGEMENT

Precautions common to all Inter - branch transactions:

All Cheques received for transfer/clearing transactions should be screened under ultraviolet ray machine for safe guarding against non-apparent chemical alteration in the tenor of the cheque.

Cheque passed and not issued messages are not to be ignored. While passing the cheques in the system sometimes it throws the message “cheque already paid”.

Despite this message by the system in certain instances officers have ignored the exceptional message and modified the cheque number and authorize. Such transactions were later found to be fraudulent transactions.

In case of High Value transfer transactions base branch is contacted for ascertaining the genuineness and confirmation be sought before passing.

It is advised to check Inter-branch transfer transactions on daily basis to monitor these transactions allowed during the day by the branch.

In case of high value cheques presented in clearing, and in case of doubt (for small value cheques) Back Offices/Main branches (handling clearing) should contact the base branch and ascertain the genuineness of the cheque.

Communication received from customers through email for Fund Transfer: It has been observed that customers are using different modes for communication with branches such as Fax, email, scanned letter etc. for different purposes including fund transfer through NEFT/RTGS/Swift. Fraud has been reported where branch has received request for fund transfer in Foreign Currency or RTGS through customer’s email.

In view of above, we advise precautions as under are required to be taken.

Fax, email and scanned letters are not a valid mode of communication for banking transactions.

Branches should not entertain request of fund transfer to third party received through fax, email or scanned letters.

Branches to ensure the transactions are taken place on the basis of proper mandate.

Cheques issued by customers in favour of “Yourself” For certain transactions such as issuance of Demand Draft, RTGS/NEFT or Tax payment, the following precautions are required to be taken.

Customer should be educated that whenever cheques are issued favouring “Yourself” or in favour of “Bank”, the purpose must be written on the back side of cheque so that fraudulent transactions if any may be avoided.

When such cheques are received transfer stamp should be affixed on it immediately and it should be kept at proper place.

The cheques should not be kept on table or counter where anybody can pick it up.

CH. 43 : MEASURES IN PREVENTING FRAUD IN BANKING OPERATIONS

367

Whenever high value cheques favouring “Yourself” or “Bank”, Account (Account No. or Name of payee) are received through 3rd party or through employees of Account holder’s organization, the credentials of payee must be ascertained from the drawer to avert any fraud.

References: 1. RBI Circular on Master Directions on Frauds – Classification and Reporting by commercial banks and select FIs-RBI/DBS/2016-17/28 DBS.CO.CFMC. BC.No.1/23.04.001/2016-17 dated July 01, 2016 (Updated as on July 03, 2017) 2. RBI/DBR/2015-16/18 Master Direction DBR.AML.BC. No.81/14.01.001/2015-16: aster Direction — Know Your Customer (KYC) Direction, 2016 (Updated upto 04.05.2023)

Guide to Bank Branch Management –

Enhancing Efficiency and Effectiveness of Bank Branches AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

TARA PRASAD MISRA TAXMANN NOVEMBER 2023 2023 EDITION 9789357784351 480 PAPERBACK

Rs. 745 | USD 40

Description This book illustrates the intricate nature of managing a bank branch, recognizing it as a multi-tasking, challenging role requiring a broad spectrum of knowledge and skills in banking. It emphasizes the criticality of the branch manager position, noting their responsibility for personal performance and that of their team. This book gives a strategic direction to the branch heads for inculcating the habit of keeping themselves abreast of the latest happenings in the Banks and reskilling, upskilling their banking acumen in terms of guidelines, Policies and practices.

This book aims to be a one-stop reference material, helpful in understanding various areas in Branch Banking for existing branch heads and the officials newly assigned to the role of Branch Head. It will also be beneficial to officials who are in the process of being groomed for such assignments.

The Present Publication is the Latest Edition and has been amended upto October 2023. This book is authored

by Shri Tara Prasad Misra (Former Principal, Baroda Apex Academy, Bank of Baroda) with the following noteworthy features:  [Outlining Key Responsibilities of Branch Manager] including:  Operational Controls  Asset Health  CASA Growth  Marketing  Compliance  Staffing  Customer Service  Team Building, etc.  [Branch Manager’s Impact] It describes the Branch Manager’s role in driving the business and shaping the bank branch’s destiny through effective team leadership  [Competitive Advantage for Branch Managers] It links managerial effectiveness with the competitive edge in the banking industry, advocating for new skills and perspectives for managers  [Exhaustive Coverage] This book covers critical aspects of branch management such as:  Operational Efficiency  Marketing Strategy  Customer Service  Management Skills  Credit Management  Vigilance  Audit  Compliance  [Practical Application] It integrates the author’s real-life experiences to provide a realistic view of the Branch Manager’s responsibilities  [Resource-Rich Contents] This book also compiles banks’ policies, guidelines, practices, and regulatory information into a valuable reference guide  [Authors’ Experience] This book leverages the author’s four-decade banking experience to ensure thorough and informed content

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