Tag Archives: RBI

Jain Co-Operative Bank Ltd, 80 Darya Ganj, New Delhi – Penalised

The Reserve Bank of India has imposed a monetary penalty of Rs2 lakh (Rs Two lakh ) on the Jain Cooperative  Bank Ltd, 80 Darya Ganj, New Delhi -110002.

The penalty was imposed for

  • violations on inter-bank exposure limit,
  • exposure to real estate sector,
  • non-adherence to KYC guidelines,
  • non-adherence to the Do’s and Don’ts prescribed for Board of Directors,
  • loans to Directors and their relatives,
  • non- submission of compliance to previous RBI reports
  • etc.

 

The Reserve Bank of India penalized the bank after issuing a show cause notice and examining its written reply. There was no personal hearing.

Daryaganj is a major commercial hub of Old Delhi, with a history dating back to early 1800s’.

Daryaganj (literally “River Trading Post/Warehouse”) is a neighbourhood of Delhi inside the walled city of Shahjahanabad (Old Delhi). The “darya” (lit. “River”) refers to the river Yamuna which was just outside the walled city.

 

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Delay in re-presentation of technical return cheques and levy of charges for such returns

 

On May 7, 2013, Reserve Bank of India, DPSS vide Notification No :RBI/2012-13/493 DPSS.CO.CHD.No. 2030/03.06.01/2012-2013, issued clarifications regarding Delay in re-presentation of technical return cheques and levy of charges for such returns

The background RBI circulars are circulars no. DPSS.CO. (CHD) No. 873 / 03.09.01 / 2008-09 dated November 24, 2008 and DBOD.No.Dir.BC. 56 /13.03.00/2006-2007 dated February 2, 2007 respectively.

In the recent instances have been brought to RBI  notice where banks are

(i)           levying cheque return charges even in cases where customers have not been at fault in the return and

(ii)          (ii) delaying the re-presentation of the cheques which had been returned by the paying banksunder technical reasons.

Both of these issues result in unsatisfactory customer service. To increase the customer satisfactory levels, RBI has taken into its hands the need to streamline the procedure followed by all banks in this regard.

Accordingly, RBI has advised all banks part of the Indian Clearing System to adhere to the following instructions with immediate effect:

Cheque return charges shall be levied only in cases where the customer is at fault and is responsible for such returns.

The illustrative,but not exhaustive, list of returns, where the customers are not at fault are indicated in the annex.

Cheques that need to be re-presented without any recourse to the payee, shall be made in the immediate next presentation clearing not later than 24 hours(excluding holidays) with due notification to the customers of such re-presentation through SMS alert, email etc.

Though the above steps are a bit harsh on the bankers, in one way, Banks invited RBI’s wrath by increasing the levels of unsatisfactory customer service. And, for RBI customer service is paramount.

With majority of Indian Banks on CBS, it should not have been difficult to exclude ‘cheque return charges’, for technical returns.

Annex

Illustrative but not exhaustive list of objections where customers are not at fault

(Applicable for Instrument and Image-based Cheque Clearing as detailed in Annexure D to Uniform Regulations and Rules for Bankers’ Clearing Houses)

 

 

Code No.      Reason for Return

 

33               Instrument mutilated; requires bank’s guarantee

35               Clearing House stamp / date required

36               Wrongly delivered / not drawn on us

37               Present in proper zone

38               Instrument contains extraneous matter

39               Image not clear; present again with paper

40               Present with document

41                Item listed twice

42               Paper not received

60               Crossed to two banks

61                Crossing stamp not cancelled

62               Clearing stamp not cancelled

63               Instrument specially crossed to another bank

67               Payee’s endorsement irregular / requires collecting bank’s confirmation

68               Endorsement by mark / thumb impression requires attestation by Magistrate with seal

70               Advice not received

71                Amount / Name differs on advice

72               Drawee bank’s fund with sponsor bank insufficient (applicable to sub-members)

73               Payee’s separate discharge to bank required

74               Not payable till 1stproximo

75               Pay order requires counter signature

76               Required information not legible / correct

 

80               Bank’s certificate ambiguous / incomplete / required

81                Draft lost by issuing office; confirmation required from issuing office

82               Bank / Branch blocked

83               Digital Certificate validation failure

84               Other reasons-connectivity failure

87               ‘Payee’s a/c Credited’ – Stamp required

92               Bank excluded

National / Regional Electronic Clearing Service (NECS / RECS) – Extension of service to remaining branches

 

 

In layman terms, the number of Bank Branches on the NEFT as well as the NECS platform should be the same. This is because both NECS as well as NEFT are on the CBS platform.

There are 60,000+branches on the NECS platform, whereas there are 70,000+branches on NEFT.

To minimize the gap between number of bank branches on the NEFT and NECS, RBI has advised all Banks to ensure that their respective Branches which are on CBS and part of NEFT, to take steps to ensure that they are also part of the NECS platform.

As Banks have to submit a time-bound action plan to RBI, the Banks will ensure quick ramping up of their remaining branches to the NECS platform.

In my view, in the long run, Banks would prefer NEFT over NECS, as NEFT has multiple cycles in a day. However, NECS can be a BCP (Business Continuity Plan) tool for NEFT or vice-versa.

Hence, it is all the more important for the number of bank branches on NEFT and NECS to be same.

Re-disseminated by Prashant N. Banker by daytime, Blogger by night.

Detection and Reporting Mechanism of Counterfeit Notes – An opportunity to migrate to Safe ePayments

 

Reserve Bank of India’s, Department of Currency Management, vide a Notification dt. 09/05/2012, has advised banks to re-align their cash management in such a manner so as to ensure that cash receipts in the denominations of Rs100 and above should not be put into re-circulation without the notes being machine processed for authenticity.

The above instructions shall come into effect immediately and are applicable to all bank branches, irrespective of the volume of daily cash receipt.

Further, RBI (DCM) has made it clear that any non-compliance will be construed as violation of the above mentioned Directive issued by Reserve Bank of India.

Background:

The notification dt.09/05/2012, is with respect to Para 127 of the Monetary Policy Statement 2012-13 announced by RBI Governor on April 17, 2012 (copy enclosed),

Para 127 is as under:

Detection and Reporting Mechanism of Counterfeit Bank Notes

It has already been stipulated that bank notes in the denomination of Rs100 and above are processed through machines conforming to the standards/parameters prescribed by the Reserve Bank, before issuing them over their counters or through ATMs. The stipulation has been made; inter alia, to ensure that counterfeit notes are detected at bank/branch level itself, thereby preventing their entry back into circulation. It is also observed that despite the above measure and after rationalizing the procedure of filing first information reports (FIRs), the detection and subsequent reporting of counterfeit bank notes by banks continue to be inadequate. This has serious repercussions in that the Reserve Bank is not in a position to assess the number of counterfeit notes in circulation and its ramifications for the economy.

In order to address the above concerns, banks are advised:

to ensure that the notes received over the counters are re-circulated only after ensuring their proper authentication through machines; and

to streamline their system in a manner which will make them bear the risk of counterfeit bank notes rather than the common man who unknowingly comes in possession of such notes.

Prior Notifications:

Directive No. 3158/09.39.00 (Policy)/2009-10 dated November 19, 2009 read with Circular No. NPD.3161/03.39.00 (Policy)/2009-10 dated November 19, 2009 on Sorting / Processing of banknotes, advising the banks that banknotes in the denomination of 100 and above may be re-issued over their counters or through ATMs, only if such banknotes have been duly checked for authenticity / genuineness by machines. Further, the banks were also advised to use such machines in all bank branches with average daily cash receipt of Rs50 lakh and above, within a definite time frame.

 

There are 80,000+ Bank Branches in India, and depending on the average cash turnover, the branch can be equipped with Heavy Duty Note Sorting Machines or Desk Top Note Sorting Machines.

As the RBI Guidelines on Note Authentication and Fitness Sorting Parameters are exhaustive, the Vendors of Note Sorting Machines can fine-tune the machines to meet the regulator requirements.

This will enable Banks also to evaluate the machines against the RBI parameters before placing orders.

 The machines are expected to perform authenticity check with reference to the features of genuine notes as disclosed by the Reserve Bank of India from time to time. Any note which is not found to be having all the features of a genuine note shall be classified by the machine as suspect.

 The Bank Notes can only be recycled / reissued if they are evaluated as genuine and fit according to the parameters laid down by RBI

 (RBI Guidelines on Note Authentication and Fitness Sorting Parameters are attached).

 There are two steps involved before the Bank Note can be re-issued i.e Authenticity Check followed by Fitness sorting.

 Authenticity check is a prerequisite for fitness sorting.

 

Fitness sorting can be done only in case of genuine notes. The machines shall be able to identify and separate suspected counterfeits and notes which are unfit for circulation in terms of these standards in a reliable and consistent fashion.

 

A fit bank note is a note that is genuine, sufficiently clean to allow its denomination to be readily ascertained and thus suitable for recycling.

 

An unfit bank note is a note that is not suitable for recycling because of its physical condition or belongs to a series that has been phased out by Reserve Bank of India.

 

All the fitness parameters laid down by RBI are to be evaluated individually.

 

A bank note must pass all the fitness parameters to be considered fit for recycling.

The standard features of note counting machines are

 Ergonomic design, sturdy, capable of working in dusty, hot and humid conditions in India

  • Number of Stackers with capacity

  • Number of Reject Stackers with capacity

  • Processing Speed programmable for diverse sorting parameter

  • Feeding Capacity – Minimum 500 Notes with Assisted Feed mechanism

  • Travel path is straight

  • First Note recognition

  • Denomination sorting

  • Orientation sorting

  • Facing sorting

  • Machine’s detect and sort suspect Notes

  • Fitness sorting: The machines perform fitness sorting functions as per criteria and standards laid down in RBI Guidelines on Note Authentication and Fitness Sorting Parameters viz

A Soiling

B Limpness:.

C Dog-Ears

D Tears:

E Holes:

F Stains:

G Graffiti:.

H Crumples/Folds:.

I Decolouration:.

J Repair:

K Mutilated, Imperfect and Mismatched Notes

 – Batching Arrangement

– Possibility of up gradation of software as per RBI directive or as per bank requirements

– The technology is image based

– User interface machine normally have attached printer, display with function, menu keys, external display for count of notes.

– Printer interface facility

– Power supply requirements and consumption

-Voltage stabilizer – inbuilt or external

– Machines have LCD graphic mode Digital display of information with value / Nos. of Notes

– Warranty (3 years, unconditional)

 

————

 

QUOTE

 Guidelines on Note Authentication and Fitness Sorting Parameters

 1. Introduction

 A fit note is a note that is genuine, sufficiently clean to allow its denomination to be readily ascertained and thus suitable for recycling. An unfit note is a note that is not suitable for recycling because of its physical condition or belongs to a series that has been phased out by Reserve Bank of India. All the fitness parameters laid down in this document are to be evaluated individually. A note must pass all the fitness parameters to be considered fit for recycling.

 These parameters provide the minimum standards for cash handling machines used by banks (hereinafter called ‘the machines’). Notes can only be recycled / reissued if they are evaluated as genuine and fit according to these parameters. Authenticity check is a prerequisite for fitness sorting. Fitness sorting can be done only in case of genuine notes. The machines shall be able to identify and separate suspected counterfeits and notes which are unfit for circulation in terms of these standards in a reliable and consistent fashion.

 The Reserve Bank of India phases out certain series (issue) of notes from circulation from time to time. These notes, though considered legal tender unless otherwise specified, are unfit for recycling. As and when the Reserve Bank of India decides to phase out a specific series (issue) of a specific denomination of notes, the machines shall sort all the phased out notes as unfit, irrespective of their physical condition.

 2. Applicability

These parameters are applicable to machines operated by banks, either directly by their staff or indirectly by their agents. These machines can be of any of the following:

(i) Machines which check the authenticity and fitness of notes, i.e. note processing machines / note sorting machines, and

(ii) Machines which check only the authenticity of notes, i.e. note authentication machines. All these machines shall classify the individual notes as either genuine or suspect.

3. Authenticity Check

The machines shall perform authenticity check with reference to the features of genuine notes as disclosed by the Reserve Bank of India from time to time. Any note which is not found to be having all the features of a genuine note shall be classified by the machine as suspect.

 4. Fitness Sorting

As a part of fitness sorting, notes with any visual or physical defects are to be sorted as unfit as per the specified criteria, set out below.

Sorting Criteria/Feature Criteria

 

1 Soiling – General distribution of dirt across the entire note

2 Limpness – Structural deterioration resulting in a marked lack of stiffness

3 Dog-ears Corner folds

4 Tears – Lengthwise and crosswise cuts

5 Holes – Holes of a specific diameter

6 Stains – Localized concentration of dirt

7 Graffiti – Deliberate graphic alteration of the note

8 Crumples – Multiple random folds

9 Decolouration – Lack of ink on part or whole of the note, e.g. a washed note

10 Folds – Folds reducing the length or width of the note

11 Repair – Note repaired using adhesive tape/ paper/ glue

 

(i) Soiling: Soiling refers to the general distribution of dirt across the entire note or in some patterns.

It is a measure of the loss of reflectivity from the unprinted areas due to dirt, ageing (yellowing), wear and extraneous markings and includes decolouration due to aging, excessive folding wear and other wearing. Soiling increases the optical density and decreases the reflectance of the notes. Notes exceeding the soiling levels shall be sorted as unfit. Both the obverse and the reverse of the note shall be checked for soiling.

 (ii) Limpness: Limpness relates to structural deterioration or wear resulting in a marked lack of stiffness in the note paper. Notes with a very low stiffness shall be sorted as unfit. Notes with very low stiffness of paper, i.e. with paper which is worn out in circulation or mechanically mutilated shall be sorted out as unfit. Detectors for paper quality shall be adapted to the same level as for soiling.

 (iii) Dog-Ears: Notes with dog-ears with an area of more than 130 mm² and a minimum length of the smaller edge greater than 10 mm shall be sorted as unfit. Chipped notes shall also be sorted as unfit.

 (iv)Tears: Notes exhibiting at least one tear at the edge shall be classified as those having tears. Notes with tears larger than those indicated in Table shall be sorted as unfit.

 Table – Tears

Sl. No. Direction Width Length

1 Vertical 4 mm 8 mm

2 Horizontal 4 mm 15 mm

3 Diagonal 4 mm 18 mm

 

Measured by drawing a straight line from the peak of the tear to the edge of the note where the tear begins (rectangular projection), rather than measuring the length of the tear itself.

 (v) Holes – This refers to notes with at least one visible hole. Notes with holes with area exceeding 10 mm shall be sorted as unfit.

 (vi) Stains – Stains are visible markings which are not part of the feature of a note. Notes shall be detected as unfit if localized – i.e. with limited extension – stain can be recognized on its surface. In case the total area covered by stains exceeds 500 mm², the note shall be sorted as unfit. A note with a single stain covering an area of more than 200 mm² shall be sorted as unfit. Both the obverse and the reverse of the note shall be checked for stains.

 (vii) Graffiti – Graffiti refers to deliberate graphic alteration of the note with for example, figures or letters. Fitness sorting criteria in case of graffiti shall be the same as those for stains. Both the obverse and the reverse of the note shall be checked for graffiti.

 

(viii) Crumples/ Folds – Crumpled / folded notes shall be sorted as unfit if the folds result in reduction of the original note in length or width greater than 5 mm.

 

(ix) Decolouration – Notes affected by decolouration shall be sorted as unfit if the ink is partially or wholly missing from its surface. Both the obverse and the reverse of the note shall be checked for decolouration.

 (x) Repair – A repaired note is created by joining parts of the same note together, for example, by using extraneous matter such as tape, paper or glue. Notes with the following types of repairs shall be sorted as unfit:

• Repairs covering an area greater than 100 mm²; or

• Thickness of the extraneous matter 50 μm or more; or

• Width of the extraneous matter 10 mm or more; or

• Length of the extraneous matter 10 mm or more.

 5. Mutilated, Imperfect and Mismatched Notes

A mutilated note is note, of which a portion is missing or which is composed of more than two pieces. An imperfect note is a note, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated note.

A mismatched note is a note, which has been formed by joining a half note of any one note to a half note of another note. Such notes shall be classified as unfit.

UNQUOTE

 In a nutshell, it would be advantageous for all the participants in the Banking cycle to migrate to ePayments (Safe ePayments).