banking fundamentals training

Banking Fundamentals Training

SESSION-3

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

CUSTOMER AND OFFICE ACCOUNTS

ACCOUNTS

AND

GENERAL LEDGER


CUSTOMER CREATION

• Unique identifier for customer• linking all accounts• Comprehensive details of customer• Customer – Customer relationship capture• Specific details related to Trade Finance, NRE, minors etc.,.• Preferential interest and charges• MIS details• Menu option HCUMM• Customer Relationship View

CUSTOMER ACCOUNTS


CUSTOMER ACCOUNTS

TYPES OF CUSTOMER A/C

• SAVINGS BANK• CURRENT • CASH CREDIT• OVERDRAFT• TERM DEPOSIT• TERM LOAN etc.


CUSTOMER ACCOUNTS

CONCEPTS

• Cheque operated and non cheque operated• Different minimum balance requirements• Different interest rates, methods and frequencies• Number of withdrawals• Dormancy criteria• Modes of operation• Nomination• Service charges• Overdrafts in accounts


CUSTOMER ACCOUNTS

FINACLE REPRESENTATION

Scheme types SBA, CAA, CCA, TDA, LAA and ODA in Finacle Savings public, Savings staff, Savings pensioners are different

types of savings products defined as scheme codes Scheme codes could be defined in Finacle using option GSPM Done initially during BPD phase and subsequently when new

products are introduced by the Bank Scheme code definition includes linkage to GL Sub Heads Accounts opened under combination of GL Subhead and

Scheme code Business rules defined at product level and GL subhead for

consolidation purposes Exceptions to control various transactions and events in the

accounts under each product


CUSTOMER ACCOUNTS

Features Account Number generation Minimum level for posting transactions

Allowed No of withdrawals, Minimum bal for cheque Ledger folio/service charges, Dormancy/inactive criteria, Interest methods,

Charges for account opening, maintenance and closing, statement printing, commitment, etc.,.


CUSTOMER ACCOUNTS

FeaturesCash, clearing and Transfer limits , Abnormal transaction limits,

Interest code (rate), minimum and max interest, days in a year, min interest paid, collected amounts, rounding off parameters, tax related, minimum balance etc.,.

Interest related – Normal P&L account, Interest Payable accounts, parking accounts prior to TDS, default interest frequencies etc.,.

Pegging of interest

Some Basic methods applicable for product types are pre-configured.


CUSTOMER ACCOUNTS

CONTROLS• Account Frozen • stale instrument • account name change • back dated transaction • back value dated transaction • cash transaction • customer debit without cheque


CUSTOMER ACCOUNTS

CONTROLS• TOD granting, • Account below the min bal, • Customer transaction to dormant account, • Cheques issued to inactive account, • Cheque book without min balance,• Introducer not a A/c holder,• Cash, clearing and transfer limit etc.,.


CUSTOMER ACCOUNTS

REQUIREMENTS FOR ACCOUNT OPENING• Introduction• Photographs• Supporting documents

(Passport, PAN , Proof of residence etc.,.)• Nominations• Joint Holders


CUSTOMER ACCOUNTS

TRANSACTIONS

• Cash• Clearing • Transfer

Collection Value dated Transaction and Back dated transactions Temporary overdrafts

• In Batch, • Drop in Limit, • Loan recovery, • interest calculation, • instant, • User granted etc.,.

Overdrafts – Clean and Secured


CUSTOMER ACCOUNTS

OPERATIONS IN ACCOUNTS• Issue of cheque books• Debit cards• Passbook/statement (HPSP) and different modes of sending

statement – regular and adhoc statement• Marking Lien/lifting Lien• Stop Payment of cheques• Sweeps• Account Turnover Maintenance

• Moving of accounts between schemes


CUSTOMER ACCOUNTS

CHARGES

• Account opening, maintenance, closure• Issue of cheque book• Statement to customers – regular and adhoc• MENU Options

– Batch/Deferred– BCCALC – LF charges, Acct Maintenance, Dormant, Min

bal, inactive, commitment– DEFCALC – Acct Open , Regular and adhoc statement ,

Regular interest cert and adhoc interest cert, Regular and adhoc combined statement


CUSTOMER ACCOUNTS

MENU OPTIONS

HOAAC(SB/CA/CC/OD)

HOAACV(SB/CA/CC/OD)

HACM

CAAC

CAACAU

INTTM

ICHB

HCHBM

AFSM

SPP

ATOR


CUSTOMER ACCOUNTS

TERM DEPOSIT – Features

• Associated with Tenor(Min and max period )• Min and max amount• Fixed amount (one time or recurring)• Interest pay out along with principal at the end of term or

periodic• Renewable fixed number of times or unlimited• Pre-terminated• Extended• Tax on interest • Certificate printing/duplicate printing• Adjustment of Lien on Maturity• Transfer to Overdue on Maturity• Deposit Modelling• Interest rates depending on tenor and amount slab


CUSTOMER ACCOUNTS

INTEREST PAYMENT

• Periodic• Maturity• Pre-termination• Penal interest for pre-termination• Interest definition menu option - HTVSM


CUSTOMER ACCOUNTS

MATURITY HANDLING

• Credit to sundry if no account• Credit operative account• Credit multiple accounts• Send by way of remittance• Renew • Renew till customer requests for payment • Add to renewal amount• Partial remittance and balance renewal• Overdue deposit


CUSTOMER ACCOUNTS

FLOW CONFIGURATION• Principal inflow• Principal outflow• Interest inflow• Interest outflow• Interest advanced• Consolidated inflow• Consolidated outflow• Repayment outflow• Installment outflow• Total outflow• Flow frequency

– Months and days• Flow begin and end

– Calendar, Financial, Month end, Quarterly, Half yearly, Maturity date


CUSTOMER ACCOUNTS

INTEREST METHODS• Simple interest monthly• Simple interest daily• Discounted interest• FD compound interest• Compound interest (Reinvestment scheme)• Compound interest for RD


CUSTOMER ACCOUNTS

MENU OPTIONS• HOAACTD• HACMTD• TDREN• TDRCL• SWOPS• CAAC


CUSTOMER ACCOUNTS

TDS – Tax deduction at source pay interest on the deposits Financial year In terms of Government policies, the Banks have a commitment

to deduct some percentage of interest paid to customers as TAX.

This percentage may vary from country to country depending upon the policies of Government and type of customers.

Deduct tax– Account level and Customer level. Customer level tax – parking account prior to TDS Consolidation of accounts at Branch, Sol and Data Center for

arriving at tax eligibility


OFFICE ACCOUNTS

DEFINITIONS

Voucher:It is a document in which full details of a transaction are entered; it forms the basis for accounting transactions. Details include the amount, the purpose of the transaction, the date, authority etc.

Journal:When both the debit and the corresponding credit entry are recorded in a single voucher / or a book it is called a journal entry.

Account: As already mentioned an Account is a record of transactions of the same type.


OFFICE ACCOUNTS

Examples of Accounts in Banks:

Major accounts in the bank are Deposit Accounts and Borrowal Accounts e.g.

Deposit Accounts - Term Deposit Account

Savings Bank Account

Current Account

Deposit Liability - Savings Bank

Interest Account

Term Deposit

Interest Account etc.


OFFICE ACCOUNTS

Borrowal Accounts - Demand Loan AccountCash Credit AccountTerm Loan AccountBills Account -

Demand Bills PurchasedInland Bills Discounted

Office Accounts - Inter Office Account Drafts Account Bankers’ Cheque Account

Impersonal Accounts - Suspense A/c Sundry A/C


OFFICE ACCOUNTS

Nominal Account Charges (for expenses)

Interest A/c

Exchange A/c

Commission A/c

Discount A/c

Real Account - Premises A/c

Furniture & Fixtures A/c

Stationery A/c

Cash A/c


OFFICE ACCOUNTS

Bank accounts are maintained in Ledgers and Registers. Each account in the Ledger will have debit and credit entries. The difference between the totals of the debit entries and credit totals will be the balance.

In deposit accounts, the total of the credits will be more than the total of the debits and hence the balance will be referred to as “credit balance”.

In the borrowal accounts, the balance will be the “debit balance”.


OFFICE ACCOUNTS

The deposit of money into an account is referred to as Credit (Cr)

The withdrawal of money from an account is referred to as Debit (Dr).

The real accounts (cash, furniture & fittings, stationery etc.) will always show a debit balance.

The expenditure accounts will show a debit balance; the income accounts, a credit balance.


OFFICE ACCOUNTS

Cash transactions/Transfer Transactions:

• When cash is received or paid in to an account, the transaction is referred to as Cash transaction.

• When no cash is involved but the transaction is between two accounts, it is referred to as transfer transaction.


OFFICE ACCOUNTS

Daily transactions:

• Every day there will be hundreds of transactions in a branch; they may run to tens of thousands of transactions in a very large branch. These transactions are different types. The branch management has to ensure the following:

– The depositors accounts are debited/credited with the correct amounts.

– The transactions are recorded in the accounts immediately so that the accounts reflect the correct balance owed by the bank to the customers or due from the customers to the bank.

– The expenses, income and other transactions are booked to the appropriate account.

– Any mistake/omission is detected without any loss of time and wrong entries are reversed and correct entries are passed.


OFFICE ACCOUNTS

Daily Recording/Accounting Routine at a Branch:

Keeping the above in mind, the book-keeping/accounting at a branch will be on these lines:• All debits/credits to accounts should be authorised by an

official • All debits/credits will be by way of vouchers which will

contain brief details • All vouchers should be posted to the respective

ledgers/registers before payment is effected • The correctness/appropriateness of posting will be

checked by an official


OFFICE ACCOUNTS

Daily Recording/Accounting Routine at a Branch: (Contd..)

• At the close of business, as a second check, all entries in different ledgers/registers will be cross-checked with the vouchers for the correctness, appropriateness, authenticity etc.

• The day’s transactions will be classified as per the different accounts at the branch General Ledger and the debits and credits into these accounts will be written up separately in Day Books/‘Subsidiary Day Books’ and totalled. These subsidiary day books would be called Current Account Day Book, S.B. Day Book, Demand Loan Day Book, Term Loan Day Book etc.


OFFICE ACCOUNTS

Daily Balancing:

In view of the large number of transactions put through at a branch, the transactions have to be balanced every day. Unless these transactions are balanced, we cannot say that all the entries have been correctly passed and posted or not. Also, this will help us ascertain the position of deposits, advances, income and expenditure of the branch. In the double entry system of book-keeping adopted by the banks, obviously total debits should be equal to total credits. The process is as under.

– The debits total and credits total for each of the accounts in which transactions have taken place on the day would be available in the various subsidiary day books/registers.

– These will be written up in an abstract containing all the accounts at the branch called “Day Book” or “Clean Cash Book”.


OFFICE ACCOUNTS

Clean Cash Book

01.08.1997Dr CrRs. Rs.

1000 Savings Bank Account 8002000 Fixed Deposits Account 800 Cash Credit Account 180020 Exchange Account

3820 Branch Cash Balance Account

2600

1000 Opening Cash BalanceBalance on Hand 2220

4820 Check Total 4820

NAME OF THE ACCOUNT


OFFICE ACCOUNTS

The following cross-checkings are also to be done:

• The closing balance of cash should tally with the physical cash/the balance in the Cash Book.

• The check totals should agree.• The cheques will be authorised for payment after they are

entered in a ‘Cash Payment Scroll’ by different officials. The aggregate total of the cash payments should be tallied.


OFFICE ACCOUNTS

How to write the Day Book:

• The total debits and credits include both cash and transfer transactions.

• Debits of the various subsidiary day books/registers are to be taken on the right hand side and the credits on the left hand side of the Clean Cash Book with exception of Inter Office Account.

• The number of vouchers is also recorded for each account.• The opening balance of cash has to be shown in the left

hand side of the Clean Cash Book; the closing cash balance will be worked out. An abstract of the Clean Cash Book will illustrate the position:


OFFICE ACCOUNTS

Ledger:A ledger contains accounts of same type. Eg: Debtors Ledger will contain the names of all debtors to the business. In a bank, current account ledger will contain the names of all customers having current account with the bank; Savings Bank account ledger will contain the names of all customers having current account with the bank. Some ledgers will show credit balances while others will show debit balances.

General Ledger:The general ledger contains all the accounts Eg: In the bank it will contain current Account, Savings Account, Demand Loan Account, Term Loan Account, Expenses Account, Interest Account, Commission A/c etc. Naturally most of the accounts will show credit balances while others will show debit balances.


OFFICE ACCOUNTS

General Ledger:

Every day the transactions in each of the accounts in each of the ledger accounts will be written up and totalled. The totals of debit and credit will be posted to the respective ledger accounts . Also, the totals will be written up and agreed with the opening cash and closing cash. After this the totals will be posted in the General ledger and the balances cast. At any given time, the G.L would show how much money are owed to the bank by borrowers, how much deposits they have collected, how much earnings made, how much expenses incurred etc.


OFFICE ACCOUNTS

Trial Balance:

When the balances in all the accounts in the General Ledger are listed - debit balances separately and credit balances separately- and totalled, the totals would agree. This shows that the General Ledger is arithmetically accurate. This statement is called Trial Balance


OFFICE ACCOUNTS

Balance Sheet and Profit and Loss Account.

Trial Balance is an important step in the accounting process. As indicated earlier, the accounts relate to Assets, Liabilities, Earnings, Expenses etc of the business. Hence, the Trial Balance will contain all these accounts.

If the business desires to know its financial position as on a particular date and also its performance during a period (say at quarterly, half yearly, yearly intervals), these can be ascertained.

The Earnings and Expenses account will be extracted from the Trial Balance. After passing accounting entries like depreciation etc the profit made by the business can be ascertained. This is called Profit and Loss A/c.


OFFICE ACCOUNTS

BALANCE SHEET AS ON 31st MARCH, 2004 (Rs. in thousands)

Schedule Year ended Year ended

31 March 2004 31 March 2003

CAPITAL & LIABILITIES

Capital 1 17,25,00 17,25,00

Reserves & Surplus 2 15,56,51,57 12,33,69,46

Deposits 3 2,42,57,85,12 2,05,98,93,53

Borrowings 4 8,25,41,46 4,16,42,15

Other Liabilities and Provisions 5 39,89,07,05 38,65,24,24

Total 3,06,46,10,20 2,61,31,54,38


OFFICE ACCOUNTS



31 March 2004 31 March 2003

ASSETS

Cash and balances with

Reserve Bank of India 6 18,18,20,17 18,27,11,91

Balances with Banks and

money at call and short notice 7 2,99,74,72 1,32,46,63

Investments 8 1,50,17,04,68 1,25,18,66,56

Advances 9 1,18,13,67,93 96,62,59,98

Fixed Assets 10 1,65,29,03 1,15,31,40

Other Assets 11 15,32,13,67 18,75,37,90

Total 3,06,46,10,20 2,61,31,54,38


OFFICE ACCOUNTS



31 March 2004 31 March 2003

Contingent Liabilities 12 86,76,78,06 1,05,75,55,98

Bills for Collection 10,56,63,26 9,00,13,90


OFFICE ACCOUNTS

Finacle representation

Real accounts, Nominal accounts, Contingent Accounts, Contra Accounts – Office accounts

Personal accounts –

Customer accounts

Staff accounts

Transaction happens to only accounts

No direct transactions to any GL head/GL Sub head

Updation happens to GL Sub head as a part of end of day


OFFICE ACCOUNTS

Whenever an account needs to be opened it has 4 or 5 mandatory information depending upon what type of account is being opened

Office account

for which branch

in which currency

to which product it is linked – for behaviour of account

for which GL Sub head it is linked – for consolidation purpose

Customer account

for which customer

for which branch

in which currency

to which product it is linked – for behaviour of account

for which GL Sub head it is linked – for consolidation purpose


OFFICE ACCOUNTS


GL in Finacle is only a reference code – created through HRRCDM

GL Sub head is also a reference code but consolidated position is available at this level – created through GLSHM

Consolidation happens

for each GL sub head

for each day

for each currency

for each SOL

GL Sub head as such should be available for

each SOL

each currency


OFFICE ACCOUNTS


Since each SOL should have a GL Sub head in each currency replication facility available – GLSHR

Accounts in GL are classified into 15 different types at the macro leve- pre defined

5 for internal purpose

10 customer related

Bank will define various products under the above 15 classified types

Different menu options to define products depending upon the type


OFFICE ACCOUNTS

Internal accounts are known as Office Accounts

5 types of office accounts are

OAB – Office account basic

OAP – Office account pointing type

HOC – Inter branch transactions

DDA – Demand draft and Banker cheques

OSP – System pointing – Proxy accounts

All Real, Nominal, Contingent, Contra accounts are opened under any one of the above types

During account opening it is possible to indicate whether it is an income or expenditure account


OFFICE ACCOUNTS

Income and Expenditure accounts are defined for

getting analysis report

getting monitoring reports

Account opening – ACMDB

Account replication – OACR

Account maintenance – ACMDB

Account closure - ACZDB

Verification of opening, maintenance and Closure – ACMDB

Reports

- PTW for daily reports

- PDB for generating GL


OFFICE ACCOUNTS

Reports

- PTW for daily reports

- PDB for generating GL

- IEARP for analysis report

- IEMRP for monitoring report

- MSIOGRP and MSOIRP for outstanding item report

- FTR for financial transaction report

Inquiry

- IOGLT – Consolidated position of GL Sub head for any day prior to BOD date

- IOT – Sundry and Suspense account transaction inquiry


Thank You

banking fundamentals training

Documents

office accounts accounts

payable accounts

parking accounts

product types

abnormal transaction

savings staff

savings pensioners

product level