Asset Liability Management (ALM) ?

ALM is a comprehensive and dynamic framework for measuring, monitoring and managing the market risk of a bank. It is the management of structure of balance sheet (liabilities and assets) in such a way that the net earnings from interest is maximized within the overall risk-preference (present and future) of the institutions.  The ALM functions extend to liquidly risk management, management of market risk, trading risk management, funding and capital planning and profit planning and growth projection.

Benefits of ALM – It is a tool that enables bank managements to take business decisions in a more informed framework with an eye on the risks that bank is exposed to. It is an integrated approach to financial management, requiring simultaneous decisions about the types of amounts of financial assets and liabilities – both mix and volume – with the complexities of the financial markets in which the institution operates.

 

Cheque Truncation System ?

Introduction

RBI is considering replacement of the existing system of settlement of payment on the basis of physical cheques by a new procedure called “ Cheque Truncation System” (CTS). It is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting  bank branch and transmitted electronically eliminating the actual cheque movement.

Security.

CTS is protected by a comprehensive PKI-based security architecture which incorporates basic security and authentication controls such as dual access control, user ID and passwords with crypto box and smart card interfaces.

Benefits.

  1. Shorter clearing cycle.
  2. Superior verification and reconciliation process
  3. No geographical restrictions as to jurisdiction
  4. Operational efficiency for banks and customers alike
  5. Reduction in operational risk and risks associated with paper clearing

Implementation.

CTS is Initially to be taken up as a Pilot Project in NCR before extending to the rest of the country.
National informatics Centre (NIC) would develop software in consultation with RBI and CGA by September 2006.
NIC would study and suggest mode of transmission of data from banks and ensure security system for tamper free data transfer.
NIC would provide a uniform procedure for adoption by Government Departments for archiving the cheque images.

 

Deposit Insurance & Credit Guarantee Corporation. (DICGC) ?

All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.

1. The DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits except the following types of deposits

2.Deposits of foreign Governments;

3. Deposits of Central/State Governments;

4. Inter-bank deposits;

5.Deposits of the State Land Development Banks with the State co-operative bank

6. Any amount due on account of and deposit received outside India

7.  Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India

Each depositor in a bank is insured upto a maximum of 1,00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank’s licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

 

The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount upto Rupees one lakh is paid.

 

The DICGC insures principal and interest upto a maximum amount of One lakh. For example, if an individual had an account with a principal amount of 95,000 plus accrued interest of 4,000, the total amount insured by the DICGC would be 99,000. If, however, the principal amount in that account was One lakh, the accrued interest would not be insured, not because it was interest but because that was the amount over the insurance limit. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.

llustrations

  

Savings A/C

Current A/C

FD A/C

Total Deposits

Deposits Insured upto

Shri S. K. Patil (Individual)

17,200

22,000

80,000

1,19,200

1,00,000

Shri S. K. Patil (Partner of SK’s & Co.)

 

75,000

50,000

1,25,000

1,00,000

Shri S. K. Patil (Guardian for Master Jitesh)

7,800

 

80,000

87,800

87,800

Shri S. K. Patil (Director, SK’s Udyog Ltd.)

 

2,30,000

45,000

2,75,000

1,00,000

Shri S. K. Patil jointly with Smt. K. A. Patil

7500

1,50,000

50000

2,07,500

1,00,000

 

Know Your Customer (KYC) ?

The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently. Banks should frame their KYC policies incorporating the following four key elements:

  1. Customer Acceptance Policy;
  2. Customer Identification Procedures;
  3. Monitoring of Transactions; and
  4. Risk management.

 

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

Features

Documents

Accounts of individuals

  • Legal name and any other names used
  • Correct permanent address

(i) Passport (ii) PAN card (iii) Voter’s Identity Card (iv) Driving licence

(v) Identity card (subject to the bank’s satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank

(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority

(iv) Electricity bill (v) Ration card

(vi) Letter from employer (subject to satisfaction of the bank)

( any one document which provides customer information to the satisfaction of the bank will suffice )

Accounts of companies

  • Name of the company
  • Principal place of business
  • Mailing address of the company
  • Telephone/Fax Number

(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

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) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv) Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses (v) Telephone bill in the name of firm/partners

Accounts of trusts & foundations

  • Names of trustees, settlers, beneficiaries and signatories
  • Names and addresses of the founder, the managers/directors and the beneficiaries
  • Telephone/fax numbers

(i) Certificate of registration, if registered (ii) Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the trustees, settlors, beneficiaries and those holding Power of Attorney, founders/managers/ directors and their addresses (iv) Resolution of the managing body of the foundation/association (v) Telephone bill

 

 

 

Real Time Gross Settlement System.(RTGS) ?

Transfer – any amount of Rs. 1, 00,000 and above within 2 Hours to Any Bank. The RTGS system is primarily for large value transactions. The minimum amount to be remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions.

Feature:

RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a “real time” and on “gross” basis.

This is the fastest possible money transfer system through the banking channel.

Settlement in “real time” means payment transaction is not subjected to any waiting period.

The transactions are settled as soon as they are processed.

Information Needed for RTGS.

Amount to be remitted.

Account number which is to be debited.

Name of the beneficiary bank.

Name of the beneficiary customer.

Account number of the beneficiary customer.

Sender to receiver information, if any.

The IFSC code of the receiving branch.