Retail Banking and Financial Inclusion

04 Hints
Liability Products in retail banking and Operational Provisions

Cases
1 .i. (a)All public sector, private sector and foreign banks are regulated by RBI and strict
monitoring is also done for all banks for Capital Adequacy ratios, exposure norms and
conduct of the banks. So far, no bank has been allowed to fail & depositors have got full
amount of deposits held with the failed bank. Global Trust Bank share holders only lost. But
there is a perception in public mind that PSBs are safest due to Govt. backing.
Due to insurance of deposits up to Rs 1 lakh per depositor per bank, all banks are safe up to
this limit. Then comes the return offered on deposits and if returns are same then
differentiator is the customer service experience.
i (b) Current account carries no interest. SB a/c carriers 4.0 -6% p.a, Flexi deposit (Savings
Bank + fixed deposit ( upto 1 year) combo) earns higher interest as return. So, Flexi deposit
will be a better choice to get higher return plus higher liquidity. Pure Fixed Deposit for
longer term than a year yields still better return but reduces liquidity. Each Customer has his
different priority with justification and will do accordingly.
ii.

Yes. Deposit up to Rs.1 lakh only is insured by DICCC in case of failure of a bank.
The balance Rs.4 lakh is un-insured by DICGC (Deposit Insurance and Credit
Guarantee Corporation ). Moreover, liquidity is more than 40% that will reduce the
return.

iii.

No. Rs.1 Lakh per bank per depositor per bank is covered ( deposits in this name at
all branches of ICICI Bank will be clubbed) . Rs.4 lakh is still uninsured by DICGC.
The liquidity is more than 40% and reduces the return.

iv.

Yes- Rs.1 Lakh insured with ICICI Bank + Rs.1 Lakh HDFC Bank is also insured .
Still Rs.3 lakh remains uninsured by DICGC. The liquidity is more than 40%
reducing the return.

v.

The liquidity is just 40% as desired. Both Banks are highly rated, well managed
banks. However, things are uncertain always. Rs. 3 Lakh is still uncovered. Best
safety is to keep Rs.1 Lakh with each of 5 banks with sound financial position (with
no adverse reporting on date) .

2. Not allowed as per Income Tax Act (Section 269 T) . Entire sum of Rs.21000 ( the total of
all fixed deposits held at the branch due now and those become due later) being equal to
or in excess of Rs.20,000 will be credited to account. No part will be paid in cash.
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3. Not allowed as per Income Tax Act (Section 269 T). Bank has to consider all deposits at
the same branch with accrued interest ( including the one being paid) & if total amount is
Rs.20,000 or more, no amount will be paid in cash, even if the amount requested to be
paid cash separately is less than Rs. 20,000.
4. Customer will be asked to search FDR again at home and if he again comes up with this
request, he will give an indemnity letter and duplicate will be issued. Now a days, Private
Sector and Foreign banks do not insist on original for payment as they credit the account
and instructions for disposal or renewal are taken in advance at the time of issuing fixed
deposit. Moreover, banks do not give loan against fixed deposit of other banks.
5. A person who is missing for minimum 7 years is deemed as dead. After 7 years from filing
missing report with police, bank will consider him dead and pay the amount to legal heirs
of the deceased customer (Wife is one of several other legal heirs). She has to wait for
another 2 years or she can approach court & bring suitable order from court for the bank to
pay the amount before 7 years from missing.
6. Not allowed on request of one of the joint account holders. The written request signed by
both joint a/c holders is required to add or delete a name.
7. The depositor is permitted extension of term of the deposit before expiry of the original
term of deposit without application of penalty clause provided the deposit in question is
agreed to be held for a further period reckoned from the date of extension which is longer
than the remaining period of the original contract. The new FDR can be issued for a
minimum period of 1 year and 1 day from the date of extension
8. A customer has several deposit accounts with a bank. TDS on interest income above
Rs.10,000 will apply to which types of following accounts : Tick mark correct option:
i. Fixed deposits _/
ii. Fixed deposits and savings banks deposits
iii. Fixed deposits, savings deposits and recurring deposits
iv. None of the above
9. The Income Tax Exemption is available on interest income up to Rs.10,000 from Financial
year 2012-13 for the following types of accounts : Tick mark correct option:
i. Savings bank accounts _/
iii, S/B, FD and RD accounts

ii. Savings and Fixed deposit accounts

iv. None of the above

10. Income tax exemption on investment in bank deposits up to Rs.1 lakh overall under section
80 C is available for following banks deposit accounts: Tick mark correct option:
i. Recurring deposits accounts

ii. All term deposit accounts

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iii. Deposits under Bank Term deposit scheme- 2006 (5 years term)
iv. All of the above

_/

11. Ranbir Kapoor will get following amounts from SBI and Standard Chartered Bank.
Sr

Bank

Account
Name
Ranbir
Kapoor and
Nitu Kapoor
#
Ranbir
Kapoor

Type of Balance DICGC Claim

Account (Rs.)
Savings 1,26,000 # Rs. 1,00,000 for both S/B and Fixed
account
deposit accounts to joint depositor from
DICGC for SBI

SBI, New
Delhi

Ranbir
Kapoor and
Rishi
Kapoor

Fixed
deposit

Ranbir
Kapoor and
Nitu
Kapoor #
Standard Ranbir
Chartered Kapoor
Bank
and Nitu
Mumbai
Kapoor

Fixed
deposit

SBI,
Noida
SBI ,
Mumbai

SBI ,
Mumbai
2

Savings
account

Fixed
deposit

98,000 Rs.98,000 from DICGC for SBI

(This is only one single account separate
from other capacities hence full payment
upto Rs1 lakh.)
1,00,000 Rs1,00,000 from DICGC for SBI
(This is only one joint account separate
from other capacities hence full payment
upto Rs1 lakh.)
50,000

# being two deposit accounts in same right

and capacity with same bank

100,000 Rs. 1,00,000 from DICGC for Stanchart

as this is one joint account with different
bank