9th issue e-gyan may, 2014.pdf
TRANSCRIPT
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STATE BANK LEARNING CENTER MASULIPATNAM
STATE BANK LEARNING CENTER MASULIPATNAM
E-GYANSTATE BANK LEARNING CENTER
MASULIPATNAM
E-GYAN, PART-9
May-2014
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FOREWORD
Alexander the Great, after having conquered half of the world, was still very sad.
When ased for the reason, he said, !" never new success could #e such a failure.$
"n this context, success was really a failure. %uccess &ade the seeer loo outside
oneself for satisfaction. 'e did not loo at who was the seeer. (he seeer was
#usy seeing soðing outside. "t is lie an old lady who was searching for a coin
under the street light. %he has dro))ed it inside her hut, #ut decided to search
under the light #ecause it was dar inside the hut.
Only when you have learned to loo within will real *oy o)ens. Discovering the
inner source of *oy is the real success. "n the state of dee) slee) all of us are ha))y
and that ha))iness co&es not fro& outside #ut fro& within.
Our s&all contri#ution to the %+" co&&unity in the direction of creating awareness
is the current release of eG-A for /ay, 0123 which e&)hasi4es on conce)tual
clarity, )rocess integrity and )rocedural consistency in the field of day to day
#aning )ractices and ex)lores the causes and consequences of various ty)ical
situations.
'o)e you lie it5
We dee)ly acnowledge the ins)iration derived fro& our De)uty General /anager 67ircle Dev Officer %hri.Radharishna Raya#hara& , Asst General /anager 8'R9
%hri. R.%.. /urthy and 7hief /anager 8:6D9 %hri. /.%ai#a#a which resulted inco&ing out with the eeditions.
D.%-A/ ;RA%AD
A%%"%(A( GEERA: /AAGER
%(A(E +A< :EAR"G 7E(ER
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PRIORITY SECTOR LENDING – TARGETS AND CLASSIFICATION
(As on February 01, 2014)
Compiled by Sri M Sai Chakradhar, Chief Manager (Training))
1. What is meant by Priority Sector?
Priority sector refers to those sectors of the economy which may not get timely and adequatecredit in the absence of this special dispensation. Typically, these are small value loans tofarmers for agriculture and allied activities, micro and small enterprises, poor people for
housing, students for education and other low income groups and weaker sections.
2. What are the different categories under priority sector?
Priority Sector includes the following categories:
(i) Agriculture(ii) Micro and Small Enterprises(iii) Education(iv) Housing(v) Export Credit
(vi) Others
3. What are the Targets and Sub-targets for banks under priority sector?
Categories Domestic commercial banks / Foreignbanks with 20 and above branches (Aspercent of ANBC or Credit Equivalent ofOff-Balance Sheet Exposure, whicheveris higher)
Foreign banks with less than 20branches (As percent of ANBCor Credit Equivalent of Off-Balance Sheet Exposure,whichever is higher)
Total Priority Sector 40 32
Total agriculture 18 No specific target.
Advances to WeakerSections
10 No specific target.
4. What constitutes 'Direct Finance' for Agricultural Purposes?
(i) Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups(JLGs), i.e. groups of individual farmers] engaged in Agriculture and Allied Activities, viz., dairy,fishery, animal husbandry, poultry, bee-keeping and sericulture.
(ii) Loans to Corporates including farmers' producer companies of individual farmers,
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partnership firms and co-operatives of farmers directly engaged in Agriculture and AlliedActivities, viz., dairy, fishery, animal husbandry, poultry, bee-keeping and sericultureup to anaggregate limit of `2 crore per borrower.
(iii) Loans to small and marginal farmers for purchase of land for agricultural purposes.
(iv) Loans to distressed farmers indebted to non-institutional lenders.
(v) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies(FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS) ceded to or managed/controlled by such banks for on lending to farmers for agricultural and allied activities.
5. What constitutes 'Indirect Finance' to Agriculture?
(i) If the aggregate loan limit per borrower is more than `2 crore in respect of para. (4) (ii) above,the entire loan will be treated as indirect finance to agriculture.
(ii) Loans upto `5 crore to Producer Companies set up exclusively by only small and marginalfarmers under Part IXA of Companies Act, 1956 for agricultural and allied activities.
(iii) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies(FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS).
6. What constitutes Micro and Small Enterprises under priority sector?
Bank loans to Micro and Small Manufacturing and Service Enterprises, provided these unitssatisfy the criteria for investment in plant machinery/equipment as per MSMED Act 2006.
Manufacturing sectorEnterprises
Investment in plant and machinery
Micro Enterprises Do not exceed twenty five lakh rupees
Small Enterprises More than twenty fivelakh rupees but does not exceedfive crore rupees
Service IndustryEnterprises
Investment in equipment
Micro Enterprises Does not exceed ten lakh rupees
Small Enterprises More than ten lakh rupees but does not exceed twocrore rupees
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7. What is the loan limit for education under priority sector?
Loans to individuals for educational purposes including vocational courses upto `10 lakh forstudies in India and `20 lakh for studies abroad are included under priority sector.
8. What is the limit for housing loans under priority sector?
Loans to individuals up to `25 lakh in metropolitan centres with population above ten lakh and`15 lakh in other centres for purchase/construction of a dwelling unit per family excluding loanssanctioned to bank’s own employees.
9. What is included under Weaker Sections under priority sector?
Priority sector loans to the following borrowers are considered under Weaker Sectionscategory:-
(a) Small and marginal farmers;
(b) Artisans, village and cottage industries where individual credit limits do not exceed `50,000;
(c) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), now National RuralLivelihood Mission (NRLM);
(d) Scheduled Castes and Scheduled Tribes;
(e) Beneficiaries of Differential Rate of Interest (DRI) scheme;
(f) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);
(g) Beneficiaries under the Scheme for Rehabilitation of Manual Scavengers (SRMS);
(h) Loans to Self Help Groups;
(i) Loans to distressed farmers indebted to non-institutional lenders;
(j) Loans to distressed persons other than farmers not exceeding `50,000 per borrower toprepay their debt to non-institutional lenders;
(k) Loans to individual women beneficiaries upto `50,000 per borrower;
10. What is the rate of interest for loans under priority sector?
The rate of interest on various priority sector loans will be as per RBI’s directives issued fromtime to time, which is linked to
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Top 10 economic challenges that Mr Modi Govt. faces Compiled by: S.Sivajee,Mgr(Trg).
Prime Minister Mr Narendra Modi has promised to unblock stalled investments in power,road and rail projects to revive economic growth that has fallen to a decade low ofbelow 5 per cent.
Here are the list of Top 10 economic challenges that Mr Modi Govt. faces:
Goods and Services Tax (GST):
India's most ambitious indirect tax reform would replace existing state and centrallevies with a uniform tax, boosting revenue collection while cutting businesstransaction costs. GST, which could boost India's economy by up to twopercentage points, has so far faced resistance from various states, includingthose governed by the BJP who fear a loss of their fiscal powers. The BJP aimsto address state concerns and implement GST in an "appropriate timeframe".The Congress party would back the reform in opposition, a senior party membertold Reuters earlier this month. The reform needs broad backing because itrequires a change in the constitution.
Central bank policies:
A Reserve Bank of India panel in January proposed key changes includingtargeting consumer price inflation and making a committee responsible formonetary policy, and not the RBI Governor alone. This would require changes tothe RBI Act. The BJP top brass has not spoken widely on the issue, but it willlikely be a tough sell for RBI Governor Raghuram Rajan. He has the backing ofsome global agencies like the International Monetary Fund. Mr Modi'sgovernment may also look to eventually separate the debt management function
from the RBI, on the grounds that debt management sometimes conflicts with thecentral bank's monetary policy stance.
Privatisation:
The new government is likely to focus on selling its holdings in state-run firmsthat could raise much-needed revenues to trim India's ballooning fiscal deficit andboost economic growth. The rising stock market helped New Delhi raise morethan $3 billion (Rs. 18,000 crore at 60 rupees per dollar) via stake sales in the
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fiscal year to March 31 - but that was only a third of the government's originaltarget. The outgoing government announced plans to raise Rs. 56,900 crorethrough asset sales in 2014-15. This could help achieve a lower fiscal deficittarget of 4.1 per cent of GDP. These estimates may be revised by the nextgovernment.
Subsidies:
Mr Modi's government needs to examine how it subsidises basic commodities if itis to contain the fiscal deficit and avoid a ratings downgrade. Subsidies cost an
estimated 2.2 per cent of India's GDP in 2013-14. The BJP in its manifesto said itwill seek greater fiscal discipline without compromising on the availability of fundsfor development.
Labour:
The BJP wants to reform labour laws to boost job-intensive manufacturing andcreate as many as 1 crore jobs a year for young Indians entering the workforce.Changing the law would be politically tricky, though, and Mr Modi may seek toencourage competition between India's states to boost job creation.
Defence:
More foreign investment in defence would help India reduce imports, moderniseweapons systems and speed up deliveries of hardware it needs for operationsand training. India, the world's biggest arms importer, now allows 26 per centforeign ownership in defence, and proposals to exceed that limit are consideredonly for state-of-the-art technology. The BJP has said it would allow somegreater foreign investment in defence industries.
Insurance:
Attempts to raise the cap on foreign investment in India's $45 billion (Rs. 2.70lakh crore) insurance sector, to 49 per cent from 26 per cent, have metresistance from employees at state-controlled insurers and their political backers.A BJP leader said in March the party had held talks with Congress to break thedeadlock.
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Banking:
The new government will need to help state-run lenders battling rising bad loanscaused by the slowing economy, rising interest rates and project delays.Stressed loans in India - either bad or restructured - total $100 billion (Rs. 6 lakhcrore), or about 10 per cent of all loans. Fitch Ratings expects that ratio to reach14 per cent by March 2015. Rising bad loans threaten to choke the gradualrecovery in Asia's third-largest economy, according to the OECD. The interimbudget in February set aside Rs. 11,200 crore to help the sector meet key capitalratios, but analysts say more money is needed.
Power:
A BJP-led government may implement the so-called Gujarat model of distributingelectricity that has been widely praised for delivering reliable 24-hour powersupplies in the state. Mr Modi provided different power feeds to farmers,households, and companies instead of a uniform feed in his home state.
Gas pricing:
In January, India notified the new gas pricing formula that could double the pricesof locally produced gas from April 1, but the poll regulator stopped thegovernment from raising the prices until the elections are over. RelianceIndustries and its partners BP and Niko Resources last week issued a notice ofarbitration to the government seeking implementation of higher gas prices. TheBJP-led government may review the formula on the lines suggested by a seniorparty leader last year and announce the date of implementation of new prices.
** ** **
Source : NDTV Profit .
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INDIAN BANKING AT CROSSROADS –CHALLENGE OF RISK MANAGEMENT FROM GLOBALISATION TO
FINANCIAL INCLUSION
Compiled By Sri. R.Prabhakara Rao, Manager (Training)
Most business activities and operations are driven by considerations of
returns or profitability. However t h e se ar ch for returns exposes the
businesses to risks. Also risks escalate and multiply with returns sought –banks are no different; only the element of riskiness in the banks’ business and
operations is higher as they not only carry out their operations with
borrowed money and with high leverage but also attempt to provide a vast
range of financial services.
Banks perform multifarious functions. However financial intermediation and
maturity transformation are by far the most significant activities performed by
banks. Banks essentially have a liquid liability profile, as against an illiquid
asset profile, which makes them vulnerable to runs and in this process
alone, they generate or are exposed to different types of risks. Credit,
market and operational risks are t h e three pr imary risks that have a substantial
bearing on the performance of banks. There are a number of other types of
risks, emanating both from within and without that the banks are exposed to in
their day to day functioning.
As the banks perform this role of intermediation in fiduciary capacity, ensuring
a balance between the risks and returns assumes significance and the effort
towards achieving this balance can b e referred to as risk management. The
various financial crisis of the past brought to the fore the importance of
robust risk management practices in financial institutions including
banks. Progressive technological developments and advanced modelling
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techniques have, however, rendered risk management a highly complex andsophisticated discipline lately.
Risk management can be defined as a function of risk identification,
measurement, monitoring and reporting to ensure that the returns are
appropriate to the risk undertaken and the risks undertaken are
commensurate with the risk appetite and risk tolerance. Risk
management has to ensure that the bank holds adequate capital and
reserves to make sure that its solvency and stability are not threatened,
both in the short and the long run.
As a response to the global financial crisis, a package of reforms collectively
referred to as Basel III has been unleashed as part of the global
regulatory effort to enhance the soundness and resilience of the banking
system. These reforms focus on capital, liquidity, leverage and macro prudential
aspects of banking risk management. Basel III, on one hand, attempts to
improve the quality and quantity of loss absorbing capital that a bank
holds and aims at increasing the risk coverage of the capital framework, in
particular for trading activities, securitisations exposures to off-balance
sheet vehicles and counterparty credit exposures arising out of
derivatives. On the other hand, it has devised regulation for dealing with
systemic risk by prescribing countercyclical capital requirement, to contain
pro-cyclicality and a framework for G- SIBs and D-SIBs has also been laid
down to manage risks arising from inter-connectedness.
An internationally harmonised Leverage Ratio has been introduced as a
simple back-stop facility to complement the risk based capital framework in
order to contain build-up of excessive leverage in the system and
comprises of 3% loss absorbing capital relative to all of a bank’s assets,
including off-balance sheet assets without risk weighting. Certain
enhancements have also been introduced to the Basel II framework by
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raising standards for the supervisory review process and public disclosures under Pillar 2 and 3, together with additional guidance in the areas of sound
valuation practices, stress testing, liquidity risk management, corporate
governance and compensation. The liquidity requirements include a minimum
liquidity coverage ratio (LCR) intended to provide enough cash to cover funding
needs over a 30-day period of stress. As such under LCR, the banks will be
required to hold a buffer of high-quality liquid assets sufficient to deal with
cash outflows encountered in acute short-term stress scenario. At the
long-term spectrum, the net stable funding ratio (NSFR) is intended to
address maturity mismatches over the entire balance sheet for upto one year
and provides incentives for banks to use stable sources to fund their
activities. The proposals for the G-SIBS are tougher, to include combinations
of capital surcharges, contingent capital and bail-in debt as also strengthened
arrangements for cross border supervision and resolution in view of the higher
complexity, connectedness and riskiness.
The Reserve Bank too has adopted a proactive and calibrated
approach towards demanding and facilitating robust risk management efforts
by the banks. Reserve Bank has been adopting a considered approach of
limiting the systemic risk originating from both the pro- cyclicality as well as
interconnectedness dimensions. For example, countercyclical measures
were adopted as early as 2004 to stall heating up of certain specific
sectors by increasing the risk weights and provisioning ratios forsensitive sectors such as capital market, housing, commercial real estate
during the period when the boom was building up. Several measures
were taken to reduce the inter-connectedness among banks on the one
hand and between banks and NBFCs on the other, to address the cross-
sectional dimension of systemic risk and regulatory limits have been placed on
exposures to capital market exposures. Such macro-prudential approach,
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which was not widely prevalent then, s a v e d the domestic economy from the
adverse shocks during the height of the crisis.
Implementation of Basel III Capital Regulations has commenced in India from
April 1, 2013; and it will also be in phases, and would be fully implemented as
on March 31, 2019 close to the internationally agreed Basel III transitional
arrangement.
As against the minimum Tier 1 leverage ratio of 3 per cent proposed
by the Basel Committee of Banking Supervision (Basel Committee) during
the parallel run period beginning from January 1, 2013 to January 1, 2017,
the Reserve bank has prescribed a minimum Tier 1 leverage ratio of 4.5
per cent during the parallel run period. The leverage ratio framework is
being revised i n line with the recent proposals of the Basel Committee.
A survey on banking risk management, conducted under the aegis of the
Inst i tut e of International Finance, sees a renewed focus on risk culture. It reports
that risk culture is now at centre stage and banks have made significant
progress toward changing their risk governance frameworks in the wake of the
financial crisis. Board risk committees are nearly universal, and members have
received appropriate training in risk management. The role of the chief risk
officer has broadened, while its seniority and status have been enhanced.
They now report either to the chief executive officer or jointly to the CEO
and risk committee. However, th e survey lame nts that the industry continues
to wrestle with the process of embedding risk culture beyond the boardroom
and into business units while ensuring adequate risk transparency.
Risk appetite continues to be an essential part of risk governance, but the
industry continues to be challenged to embed risk appetite into business
decisions. The financial services industry recognized during the financial
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crisis that boards needed to changefocus
from share price and pro
fitability
to the risks entailed in their strategies. Also, chief risk officers needed to be
empowered to create cultural change within their organizations.
One of the challenges that banks face in developing comprehensive risk
measurement models are the scarcity of available historical and time series
loss data and the quality, completeness and reliability of the data available.
The regulatory initiatives as also the banks’ individual efforts in this direction have
certainly improved the risk management standards in Indian banks in the
last few years. Since the initiation of structural reforms in the Indian
banking sector in 1991, the reach and business volumes of Indian banks
have increased many fold; the operations have grown and assumed higher
degree of sophistication. The Indian banks' current capital base and liquidity
position are broadly comfortable, as a starting point, vis-a-vis the Basel III
guidelines
Asset quality is an important parameter to measure the health of the banks
and concomitant with asset quality is the provisioning coverage that
banks hold against stressed assets. Asset quality of the Indian banking
system had improved significantly since introduction of prudential norms,
S AR F A E SI Act, CDR Mechanism, Credit Information Companies, etc.
All Indian banks, including foreign banks in India, migrated to the
standardized approaches of Basel II by March 31, 2009 in two phases.
Large sized Indian banks and banks with international presence have
been encouraged to adopt the Basel II advanced approaches for
computation of capital for credit, market and operational risk.
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A n o t h e r very significant aspect of the bank operations, just as in any
corporate entity, and that is the commercial aspect viz., profitability
management. Profitability in banks, as in the corporates, is reflective of the
financial well-being, health and robustness of the entity and has a direct
bearing on its capital formation ability. On the flip side, if the bank’s strategies,
business models, planning and operations and risk management are weak,
obsolete or outdated or not in tune with the macro-economic environment,
the income flowing there from may be low or may end up in losses. Profitability
is impacted by the business decisions of the bank, the business model it
pursues, quality and type of asset base as also by operational efficiencies
and any noteworthy s h i f t in its strategies and policies. The risk profile of a
bank can also be gauged from its income and expenditure statement to
a great extent. However, currentl y alignment of the risk management and
profitability management ob jectives is not so much in focus.
Over the years and especially in the wake of the learnings from the global
financial crisis, banks have enhanced their efforts in the direction of
improving risk management practices as I have enumerated earlier.
However, going forward much work still remains.
SOURCE: Excerpts from delivered by Shri R Gandhi on the occasion of seminar on Banking organized by
Indian Merchant’s Chamber Assistance.
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DISCLAIMER
“We have made every effort to provide best solutions for the queries raised by
the operating staff in KHL. However, the readers of this magazine are advised
to go through the Bank’s Circulars, publications and seek advice from the
Controllers or experts before taking any action or decision based on the
information, material contained in this e-magazine.SBI/SBLC do not accept any
liability for any damage or loss of any kind, howsoever caused or of any
nature whatsoever as a result (direct or indirect) of the use of the information,
material contained in this e-magazine.”
We solicit suggestions/ feedback to [email protected] for improvement of this
magazine, e-gyan.
SIR, ONE OF OUR BORROWER HAS APPROACHED OUR BPROUTFIT FOR
CONVERSION OF EXISTING CASH CREDIT LIMIT TO TERM LOAN. PLEASE
CLARIFY WHETHER WE CAN CONSIDER THEIR REQUEST. PLEASE ARRANGE
TO PROVIDE US VIDE CIRCULAR REFERENCE FOR CONVERSION OF EXISTING
CASH CREDIT INTO TERM LOAN FOR OUR REFERENCE AT THE EARLIEST.
Sir, Cash Credit is payable on demand, if at the time of review/ renewal if the branch
officials feels that the account is not running according to the terms of sanction, we may
call up on the entire advances, if required we may fix limit reduction programme at the
mutually agreed period not exceeding upto 36 months, with the approval of the
sanctioning authority, this way we can help the borrower, but there is no such facility like
converting a CC into Term Loan.
How can we send a statement of softcopy to a customer? Also how to update mail id in
cif
Sir, Please go through the following menu. Reports->Initiate request for host reports->
screen no.69088 will open. Give the following details: Function: Create Institution Code
:3 In the field `Request branch input branch code. In the field `Report ID: Input IN055A,
Give details in the fields` From date, `To date and Give account number in respective
field and then Transmit. System will generate a reference number. You can find the
statement in the branch server, which can be copied as a soft copy.
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DEAR SIR, FOR A CURRENT ACCOUNT INB FACILITY HAS BEEN AS KHATA, ASCUSTOMER REQUESTED FOR TRANSACTION RIGHTS, IT HAS BEEN
UPGRADED TO VYAPAAR. BUT THE CUSTOMER IS ONLY A SINGLE USER, HOW
TO CHANGE IT TO SARAL? PLEASE ADVICE
Sir/ Madam, One should be cautious while providing INB Access as there are lot of
financial implications as the transfer limits are also high, you can now deactivate the
CINB Vyapaar facility in Branch Interface and issue Saral in CBS. If the problem is not
solved, please seek assistance from CINB Department available in Alternate Channels.
DEAR SIR PLZ PROVIDE STAMP DUTY CIRCULAR IN AGRI SEGMENT SIR HOW
MUCH STAMP DUTY FOR AB 1 IN CASE AG TERM LOAN SIR HOW MUCH STAMP
DUTY FOR AB 1 IN CASE AG CASH CREDIT
Sir, Bank is not issuing stamp duty circular. Stamp duty is state government issue, so
you can get it from Sub Registration office. For AB1, it is 0.50% of loan amount for TL
and CC. I will send soft copy to your e-mail regarding stamp duty for various segment
and facility.
What is the maximum premium to be paid by a KCC Borrower under PAIS ? ANSWER
IN WINGS--RS.5 IN SBLC,DEOGARH--RS.15 WHAT IS THE CORRECT ANSWER?
The premium under PAIS is Rs.15.00 per borrower per year which is to be shared @
Rs.5.00 by borrower and Rs.10.00 by bank. The premium can also be paid in advance
for a period of 3 years ( as earlier the KCC is to be issued for 3 years), so the premium
for 3 years was Rs. 45.00 ( shared atRs. 15.00 by borrower and Rs.30.00 by bank )
Sir, We propose to break open 70 lockers. In this connection we need appropriate
format of panchanama certificate for witnessing the event.
Sir, For the instructions regarding breakopen of lockers please refer to e-Circular
NBG/PBU/LIMA-SDL/23/2007 - 08 dated Thursday,November 22,2007, wherein the
relative annexures are also enclosed.
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If one opens PPF account in the name of his mentally handicapped minor son, whatwill be the procedure for payment of proceeds at the time of maturity, when the boy
becomes major; similarly, what is the operational procedure for the SB accounts
opened in the name of mentally handicapped persons
Sir/ Madam, As per Master Circular on Savings Bank Accounts (opening of accounts)
2.8. Accounts in the names of persons with Austism, Cerebral palsy, Mental retardation
and Multiple disabilities i. As per the Multiple Disabilities Act, 1999 a legal guardian so
appointed can open and operate the bank account as long as he remains the legal
guardian. ii. The provisions of Mental Health Act, 1987 also allows appointment ofGuardian by District Courts. iii. Branches are therefore advised to rely upon the
Guardianship Certificate issued either by the District Court under Mental Health Act or
by the Local Level Committees under the above Act for the purposes of opening /
operating such accounts. Branches have to ensure giving proper guidance so that the
parents / relatives of the disabled persons do not face any difficulty in this regard. The
same rules will be applied for opening of PPF account also.
Dear sir, if both wife and husband works in state bank of india in award staffdesignation, are they both eligible for LFC, can they both claime LFC in different
financial years?? thanking you sir
Dear Sir, Please go through SB Times>Human Resources>What's New>HR Handbook
Volume II> Chapter 12 (Leave Rules). Page No 211 and 223 clarify the query. It says
that, "Where the husband and wife are both working in our bank, although each will be
entitled to home travel concession/leave fare concession in his/her own right, the family
including the husband and wife taken together will not be eligible for the concession
more than once in the relative period."