PROJECT REPORT

on
Topic
A STUDY ON BANKING
FUNCTIONS
IN
BANKING AND BEYOND WITH
RESPECT TO INDIA BANKING SYSTEM”
at

Sharda University
In Partial Fulfilment of the Requirements for the Research Report
By:
Abdullahi Shafiu Sys Id : 2016015975

Under the guidance of

Prof Nauma Rafique

Designation: professor
SBS, Sharda University

School of Business Studies

Sharda University
Plot no: 32,34 , Knowledge Park 3
Greater Noida - 201306

1
 DECLARATION

I the undersigned solemnly declare that the report of the research work entitled “A STUDY ON
BANKING FUNCTIONS OF BANKING AND BEYOND WITH RESPECT TO
INDIA BANKING SYSTEM” .is based on my own work carried out during the course of my
study under the supervision of Prof Nauma Rafique , Sharda University.

I assert that the statements made and conclusions drawn are an outcome of my research
work. I further declare that to the best of my knowledge and belief the report does not contain any
part of any work which has been submitted for the award of BBA degree or any other
degree/diploma/certificate in this University or any other University of India or abroad.

Abdullahi Shafiu

2
 ACKNOWLEDGEMENT
I, hereby, express my gratitude towards Sharda University, Greater Noida for granting me the
opportunity to do my report. I also take this moment to express my gratitude to Prof Nauma
Rafique, under whose guidance i could conduct my report on entitled “A STUDY ON
BANKING FUNCTIONS IN BANKING AND BEYOND WITH RESPECT TO
INDIA BANKING SYSTEM”
I am pleased to record my gratitude and sincere thanks to my guide, for sincere guidance and
valuable assistance for completing this report. I am also indebted to my parents and friends for
their support for completing this project successfully. Once more, I am grateful to all the above
mentioned people for the help, advices and suggestions they contributed in the making of my
Report during the period of March 2019.

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 CONTENT

CHAPTER-1
1 4-5
Introduction

CHAPTER-2
2 6-10
Objective

CHAPTER-3
3 11-18
Data Analysis & Research Methodology

CHAPTER-4
4 19-49
Literature Review

CHAPTER-5
5 50-55
Bank Conciliation of Collection & Withdrawal Account

CHAPTER-6
6 56-58
Conclusion & Suggestion

CHAPTER-7
7 59
Bibliography

4
Chapter-1

The banking system of India consists of the central bank (Reserve Bank of India - RBI),
commercial banks, cooperative banks and development banks (development finance
institutions). These institutions, which provide a meeting ground for the savers and the
investors, form the core of India's financial sector

In India the banks and banking have been divided in different groups. Each group
has their own benefits and limitations in their operations. They have their own
dedicated target market. Some are concentrated their work in rural sector while
others in both rural as well as urban. Most of them are only catering in cities and
major towns.

Banking development in India has been, by and large, a state-induced activity. The
Reserve Bank of India was nationalized in 1949 followed by the nationalization of
Imperial Bank of India (now the State Bank of India - SBI) in 1955. In 1969,
14 major commercial banks were nationalized and the exercise was repeated when 6
more commercial banks were nationalized in 1980. Thus, prior to economic reforms
initiated in early 1990s, banking business in India was a near-monopoly of the
Government of India

THE FUNDING MANAGEMENT SIDE OF FINANCE AND ACCOUNTING

There are some financial function which the department follows based on that laid down
procedures that lead the progress of the department.

Which Banking connection relation with all the bank related either National or international
mainly are as follows;

1. Bank Reconciliation report; This shows the accuracy of the bank statement with
respect to the department record books
2. Semi reconciliation :This stage show if there is any problem encounter by the (BRR)
it will show in this stage and it will be verify and address properly
3. Reconcile: This is final stage it show the correctness and accuracy with the bank
statement and the account department to the concern party or the university or the

5
 institution and a quorum will be made for that bank through the journal voucher so
that to enable to pass the deposit from dummy bank account to the actual concern
bank which are related.

Chapter-2
In the following section we describe the financial accounting system followed by Indian
banks and corporate bodies, as mandated by the Reserve Bank of India.

Financial Objectives
 To Ensure Adequate Return On The Capital Employed And Maintain A Reasonable
Annual Dividend On Its Equity Capital.
 To Ensure Maximum Economy In Expenditure.
 To Manage And Operate The Facilities In An Efficient Manner So As To Generate
Adequate Internal Resources To Meet Revenue Cost And Requirements For Project
Investment, Without Budgetary Support.
 To Develop Long Term Corporate Plans To Provide For Adequate Growth Of The
Activities Of The Corporation.
 To Endeavor To Reduce The Cost Of Production Of Petroleum Products By Means
Of Systematic Cost Control Measures.

6
  To Endeavor To Complete All Plan Projects Within The Stipulated Time And Cost
Estimates.

Financial Goals

 To Inculcate Cost Consciousness In User Department.

 Development Of Standard Refining Cost At Each Unit Level.
 Proper Implementation Of Budgetary Control And Submission Of Mis In Time.
 To Keep The Level Of Inventories Below The Level Fixed By The Board And
Outstanding Debts, Loan And Advances And Claims At Bare Minimum.
 Ensure Payments On Due Date To Various Agencies.
 Monitor Capital Expenditure To Ensure Completion Within Stipulated Time And
Cost.
 Optimize Utilization Of Working Capital.
 Efficient Management Of Funds,

Functions Of Finance Department

 Management Of Financial Resources For Meeting The Corporations Programs Of

Operation And Capital Expenditure Including The Investment Of Surplus Fund, If
Any.
 Ensuring Uniform Financial And Accounting Policies And Procedures, To The
Extent Possible, In The Division.
 Establish And Maintain A System Of Financial Scrutiny And Internal Checks And
Render Advise On Financial Matters Including Examination Of Feasibility Studies
And Detailed Project Reports.
 Establish And Maintain An Appropriate System Of Budgetary Control And
Management Information System For Different Levels Of Management.
 Carry Out Periodical-Special Studies With A View To Control Cost, Reduce
Expenditure, Economy In Administrative Expenditure And Improve Efficiency To
Maximize Profitability Of The Corporation.

7
  Maintain The Financial Accounts, Cost Accounts And Other Relevant Books And
Records In Accordance With The Various Statutory And Other Requirements.
 Advice On Corporate Cash Planning, Credit Policy And Pricing Policies Of The
Corporation.
 Ensuring That The Corporations Acts In All Financial And Accounting Matters As
Per Approved Policies Of The Corporation Within The Framework Of Government
Policies For Public Enterprises.

Major Accounting Activities - Corporate Finance

 Consolidation Of Divisional Accounts.

 Finalization Of Corporate Accounts.
 Finalization Of Quarterly & Half Yearly Accounts.
 Preparation Of Capital & Revenue Budgets.
 Preparation Of Financing Pattern Of Plan And Non-Plan Expenditure.
 Profit Projections On Annual & 5 Year Basis.
 Targets For Mou With Govt.
 Coordination With Oil Coordination Committee.
 Coordination With Comptroller & Auditor General And Company Affaires – Relating
To Appointment Of Statutory Auditors & Fixation Of Audit Fees.
 Statutory / Internal / Govt. Audit.
 Monthly & Quarterly Mis Reports To Management, Occ, Mop&Ng Etc.

Various Monthly & Quarterly MIS Reports to Management, OCC, MOP&NG etc.

 Core Information On Monthly Basis.

 Quarterly Performance Review - Quarterly Basis.
 Statement Of Internal & External Resources – Monthly Basis.
 Report Monthly Review Of Annual Plan - Monthly Basis.
 Report On Monitoring Of Plan Expenditure.
 Report On Foreign Currency.
 Report On Details Of Govt. Guaranteed Loans Outstanding Guarantee Fees.
 Report On Saving In Revenue Expenditure.

8
Major Accounting Activities – Treasury Group

 Arranging Foreign Exchange Loans, Finalization Of Loan Agreement.

 Arranging Rupee Loan.
 Constant Review Of Cash Resources.
 Management Of Cash By Reviewing Cash Flows On Daily Basis.
 Purchasing Foreign Exchange As Requirement On Daily Basis.

In Addition To Above, Treasury Group Also Handles:

 Coordination With Research Analysts.

 Handling All Matters Relating To Equity Shares/Disinvestments Etc.

Major Accounting Activities – Refinery Division

 Import Of Crude Oil.

 Purchases Of Crude Oil.
 Stores – Transactions.
 Production Of Petroleum Products.
 Transfer Of Petroleum Products.
 Capital Expenditure.
 Asset Control.
 Profit Reconciliation.
 Revenue Expenditure.
 Finance Concurrence.
 Statutory / Internal / Govt. Audit.
 Excise & Customs Duty Accounting.
 Freight Payment.
 Tax Deduction 7 Deposit.
 Pool Adjustments ( Up to 31.03.98)

Major Accounting Activities – Marketing Division

 Product Quantities.
 Sales – DGS&D / Non DGS&D / OMCs / Others.

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  Capital Expenditure.
 Asset Control.
 Investments.
 Banking Operations.
 Import / Export – Financial Operations.
 Stores Management.
 Maintenance Of Customer Transaction.
 Excise & Customs Duty.
 Finance Concurrence
 Profit Reconciliation.
 Public Deposit Scheme.
 Corporate taxation – tax planning & management.
 Freight Payment.
 Tax Deduction & Deposit.
 Pool Adjustments
 Pool Account Management.
 Statutory / Internal / Govt. Audit.
 Corporate Account Consolidation.
 Sales - Purchases From Other Marketing Co.’s.

Major Accounting Activities –Pipelines Division

 Revenue Expenditure.
 Capital Expenditure.
 Tax Deduction Deposit.
 Pool Adjustments
 Transportation Charges – Income.
 Excise & Customs Duty Accounting.
 Product quantity Reconciliation.
 Profit Reconciliation.
 Asset Control.
 Statutory / Internal / Govt. Audit.
 Tax Deduction & Deposit.

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CHAPTER -3
DATA Analysis

APPLICATION OF FUNDS (RS. IN CRORES) AS

ON 31.03.2009

WORKING CAPITAL INVESTMENT WIP G.F. ASSETS

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 APPLICATION OF FUNDS ( RS. IN
CRORES ) AS ON 31.3.2015

W.CAP. INVESMENT W.I.P. G.F.ASSETS

12
STRUCTURE OF FINANCE DEPARTMENT

DIRECTOR ( FINANCE )

ED
( IT & CF )
ED (IA)

DGM ( IT&T ) GM ( IA )

DGM ( CF )

DGM ( PAG )

DGM
( TREASURY )

13
STRUCTURE OF FINANCE DEPARTMENT

CORPORATE OFFICE

CORPORATE INTERNATIONAL
FINANCE TRADE

PROJECT
INTERNAL
APPRAISAL
AUDIT
GROUP

TREASURY
POLICY MATTERS
FUNCTIONS

14
15
16
17
SOURCES OF FUNDS(Rs. Crores)

ISSUED & SUBSCRIBED CAPITAL

(Rs.Crores)

2009 2010 2011 2012 2013 2014

AUTHORISED CAPITAL 150 150 150 2500 2500 150

PAIDUP CAPITAL
PAIDUP CAPITAL AT THE
BEGINNING OF THE YEAR 82 82 123 369 389 123
BONUS 41 246 246
EMPLOYEE ISSUE 20
82 123 369 389 389 369

FACE VALUE 1000 1000 1000 1000 1000 1000

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CHAPTER – 4
Literature review

INTRODUCTION:

This study of Banking Functions is basically a compilation of existing instructions, systems

and procedures for handling the banking transactions and for operations of various types of
Bank Accounts maintained by Indian Oil Corporation Limited. The functions, activities, roles
and responsibilities of the concerned work Groups at State/Head Office and Locations, in this
regard have also been covered in this study.

This study does not cover the systems and procedures of cash transactions and as such is
restricted to dealing with banking transactions only.

TYPES OF CREDIT FACILITIES:

State Bank of India continues to be the Main and Sole banker for our various banking needs
of the Corporation. Corporate Accounts Group (CAG) – Central office of the Bank at
Mumbai is the controlling office of State Bank of India having sanctioning Authority for our
various credit facilities and other banking needs of the Corporation. Corporate Accounts

19
Group (CAG) of SBI operates with network of branches called “CAG branches” in all Metro
cities.

Head office Marketing Division Co-ordinates with SBI for arranging the various banking
facilities required by the Corporation and also for its renewal at periodical intervals.

The credit facilities of the corporation can be divided broadly into two parts viz.:

I. Fund Based facility, and

II. Non Fund Based facility.

Fund based facility is primarily the amount of overdraft obtained by us from the Bank. At
present the total overdraft limit of the Corporation is controlled through Corporation’s Main
Cash Credit Account at Mumbai. All other Bank Accounts operated by locations and other
offices of the Corporation are only extension of this Main Cash Credit Account. This limit is
subject to review periodically.

Non-fund based facilities : are pure banking convenience provided by the bank to
Corporation to carry out the business transactions. It does not have any direct financial
implication on the Bank. Various Non-fund based facilities available to Corporation are as
under: -

I. Performance/ Financial Bank Guarantee facility

II. Letter of credit facility – Inland
III. Letter of credit facility – Import.

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TYPES OF BANK ACCOUNTS: -

Any banking transaction takes place by operating a Bank Account. Various types of Bank
Accounts operated by Corporation are given below: -

I. Collection Account
II. Special Current (Withdrawal) Account
III. Current (Imprest) Account
IV. Letter of Authority facility
V. Railway Credit Note facility
VI. Cash Credit Account
VII. Regional Cash Credit Account
VIII. Other specific purpose accounts like Dividend Account, Public Deposit Account,
Export Packing Credit Account, and Bond Issue Account Etc.

Salient features of different types of bank accounts maintained with State Bank of India are
detailed in the following pages. Copies of memorandum of terms and conditions of each of
the bank account are enclosed for your ready reference.

COLLECTION ACCOUNT: -

Collection Accounts are opened for various locations and other Offices

For depositing various instruments collected from customers/parties.

Opening of Collection Account

Request for opening of a Collection Account should be forwarded to Head Office after
ensuring the following main aspects.

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 1) It is ensured that the branch is able to handle the workload of our Collection account
by inquiring about the branch’s infrastructure, staff strength, facility of sending daily
telegraphic transfer of funds to controlling RCC branch Etc.

2) Wherever the CMP facility is functional in the town, the location must open the account in
CMP branch.

3) The branch should be a participating member of the local Clearing House. This is
very essential for getting timely credit for the local instruments deposited in the
Account.

The locations cannot select a branch, merely because it is nearer to Corporation office by
ignoring the aspects mentioned above.

Assess the quantum of outstation instruments (cheques/Demand Draft) that the location is
likely to deposit every month and accordingly get the DDP Limit allocated to the branch.
This will enable to get immediate credit (same day) for all outstation instruments deposited in
the Account.

DDP limit is a facility under which SBI purchases all outstation cheques and gives us
immediate credit against them, ending actual realisation of cheques from the
dealers/customers. In other orders it can be construed as a temporary advance granted by SBI
against such cheques till the time the cheques are actually realised. It is therefore the DDP
limit is required to be fixed for each location to enable the SBI branch manager for
purchasing the outstation cheques. It may be noted that once the DDP limit is granted to a
location, Corporation’s overall sanctioned cash credit limit to that extent is reduced by SBI.
Therefore it is necessary for the location to ensure that DDP limit is not fixed too high to
remain unutilized at the same time it should be sufficient to take care of the outstation
cheques requirement for 15 days.

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Quantum of DDP Limit is calculated by estimating the value of
outstation Instruments that the location will be depositing in a
period of 15 days.

The note for opening of collection account is duly approved by Finance In-charge of the
Region. DDP limit required, branch name and code are invariably mentioned in the note.

Checklist of various aspects to be observed at locations: -

Acceptance of Cheques from the customer/party at the location have been done only on
approval given by the competent authority to accept the same.

Insist on deposit of instruments by the customer/party at the collection counter by duly filling
in the form prescribed by the company in this regard.

Location must verify all the instruments before accepting it as to any errors/technical
mistakes to avoid unnecessary dishonours. Location also to ensure that only the instruments
of a scheduled bank that is also a member of clearing house, are only accepted.

Ensure that the instrument is correctly drawn in the Name of the Corporation, contain valid
date, duly signed, the amount in words and figures are correct Etc.

At the time of generation of DCR through TDM and issue of receipt to the party, due care has
be taken for capturing all the information required for segregation of instruments into various
categories like “On Branch instrument”, “Out station instrument”, “Local SBI instrument”, “
Local Non SBI instruments” Etc.

23
Location should clearly understand from the Local SBI Branch the Clearing House
arrangement of that centre (mainly the cut–off time) for acceptance of Local instruments by
the branch for including it in the days clearing. There is No fixed or standard timing for this
and it varies from City to City. This helps the location in planning the time of deposit of
instruments at the branch to get maximum benefit of earliest credit to Corporation’s Account.

Depending upon the Clearing House arrangement for Local banking Instrument, at present all
the cities in the country can be divided into three different categories Namely,

A. Day zero centre

B. Day One centre
C. Day Two centre.

In all Day Zero centres credit and transfer of funds for Local instrument is given to us on the
same day of deposit provided the instruments are deposited before the Cut-off time for
acceptances of instruments by the branch for presenting it in the days Clearing House.

Similarly in all Day One centers credit and transfer of funds for Local instrument is done on
the next day provided the instruments are deposited well before the Cut-off time for
acceptances of instruments by the branch.

However as per our understanding with SBI credit and transfer of funds for local instruments
in all day two centers should be given to Corporation on day one itself. This also is ensured
by all the locations of day two centers.

Locations should know the category of Clearing House arrangement of the city under which
are covered i.e. whether it is Day Zero or Day One or Day Two and ensure credit of local
instruments is given to Corporation by the bank accordingly and correctly. In other words

24
credit and transfer of funds to be done on the same day for Day Zero center and next day for
day one and day two centers.

Generally in most of the centers Clearing House does not function on Saturdays. In such
centers, credit for Local instruments deposited on Saturdays are given on Monday only, even
though the center is a Day Zero center.

Deposit of banking instruments is made via the Triplicate copies of DCR generated through
TDM.

It is Insisted that due stamping/acknowledging (signature/initial of the Authorised person) in

all the copies of DCR for having received the instruments at the branch have been made.

The Bank’s stamp in the DCR should clearly indicate the Date of deposit of the instrument. It
should also have the indication that the instruments are accepted for To-Day’s clearing or not.
All efforts should be made by the location to deposit the instruments before cut-off time,
however in case instruments are deposited after the cut-off time, the stamp of “Late for day’s
clearing” on the face of the DCR by the branch should be insisted upon.

One copy of the acknowledged DCR is retained at the location and one copy is forwarded to
concerned State Office/Regional Office at intervals as required/specified along with TDM
floppy.

Location verify at weekly intervals that they posses the acknowledged copy of all DCR
generated by them during the week.

It is ensured that location get themselves satisfied daily from the bank that there was no error
in the DCR deposited on the previous day both in relation to the total number of
cheques/Demand Draft deposited and the total amount of the DCR.

25
Any error reported by the bank is immediately corrected in the PAD and informed to
concerned State Office for easy reconciliation and also for passing necessary entries in the
customer ledger wherever the reconciliation is carried out at State Office. In No case the
acknowledged copies of the DCR’s is to be corrected/altered and rather circling the wrong
amount and the Total and indicating the correct value give a rectification remark.

Necessary rectification should also be done in the PAD to avoid any undue gain to the
customer/party.

Locations collect two copies of the Bank statement from the branch on daily or weekly basis
depending upon the volume of transaction. One copy to be retained at the location and one
copy to be forwarded to the concerned State Office/Region.

Detailed analysis of the bank statement is done by the locations immediately for all the
entries appearing in the statement. Various aspects to be checked are given below: -

1) The opening balance is in line with the closing balance of previous month.
2) DCR No’s are mentioned against each credit entry in the bank statement.
3) Whether the branch has offered credit for the each DCR to us in line with our MOT
with SBI.
4) Closing balance is not more than Rs. 1,000/- at the end of each day.
5) The debit entries appearing in the bank statement should be clearly divided into
dishonor debit, bank charges and entry for transfer of funds for correct accounting.
6) Check the amount of bank charges debited to ascertain that they are recovered in line
with our MOT with SBI.
7) Check for any casting errors in the bank statement.
8) Collect the weekly statement from the bank containing details of Non realization of
instruments beyond 15 days and take follow-up action with our customer/party to
liquidate the outstanding.

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 9) It is ensured that without prior intimation to Corporation, the bank does not raise debit
dishonor or Loss in transit after 60 days from the date of deposit of the instrument.
10) It is ensured that the period of overdue interest for delayed realization of outstation
instruments recovered from us is not more than 47 days (60 days–13 days). Such
overdue interest should be at Sib’s Prime Lending rate at that period. Overdue interest
is applicable only in respect of outstation instruments deposited by us drawn on a
Bank other than SBI and the branch on which it is drawn is situated at a place where
SBI does not have a branch.

Ensure that same day credit is given to our account in respect of following: -

A. All outstation instruments.

B. All SBI instruments drawn on the same branch.
C. All local instruments deposited at day zero centers where “Return” OR “Fate” of the
instrument is known on the same day.

It is ensure that no bank charges other than 0.75 paisa per Rs.100 are recovered from
Corporation for affording immediate credit for outstation instruments.

Extra charges (overdue interest) other than 0.75 paisa per Rs.100 can be debited to
Corporation’s Account only if both the following conditions are satisfied

The out station instrument deposited by Corporation is drawn at a place where SBI does not
have any Branch and

The amount charged by the other Bank is more than 0.1250 Ps per Rs.100.

Such overdue interest is debited to the customer’s account and recovered on regular basis.

Bank reconciliation is carried out every month and is completed by 12th of the month for the
previous month and all open items cleared within 7 days.

27
It is ensure that all items of unlinked credits/excess credit given by bank lying in
reconciliation for more than six months are transferred to separate liability code – 077-20-
00000 in line with the instructions contained in circular No.AC: BKG: BR dated 14.11.2001.

In respect of CMP centers the daily realization report given by the branch is checked to
ensure that all the amount deposited on the previous day have been accounted and omissions
if any noticed is to informed to the branch immediately for their rectification.

Utilization of DDP limit is monitored at periodical intervals to ensure that the branch for
affording immediate credit accepts all outstation instruments. Request is given for
enhancement in DDP limit or reduction if required/as the case may be.

It is ensured that due to shortage of DDP limit the branch is not forwarding
outstation instruments on “Collection” basis simultaneously ensuring that higher DDP limit
than what is required, is not sought as it reduces our overall cash credit limits as explained
earlier.

The instrument forwarded by State Office for Imprest Recoupment is not to be deposited in
Collection Account and also ensure that the bank does not credit Corporation’s Collection
Account by mistake in case both of its Collection and Current Account are maintained at the
same branch.

Similarly it is to be ensured that the instrument given by the customers are not deposited in
Current Account or the bank had not credited Corporation’s Current Account by mistake.

The accounting entries that are to be passed are given below: -

At the time of deposit of instrument in the bank.

Dr Bank a/c – 077-010-Location Code

Cr Customer a/c

Cr Misc Income code (bank charges collected from the party)

Entry for transfer of funds to RCC a/c based on location bank statement.

Dr 077-014-000

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Cr Bank a/c – 077-010- Location Code

Check list of various important obligations of the Bank: -

1) Submit a weekly statement containing details of Non realization of outstation

instruments beyond 15 days.
2) Statement containing details of DCR number, Cheque No, Amount, No of days delay
beyond 13 days, and rate of interest is given to locations every month for the overdue
interest recovered.
3) Non-CMP branches are providing a daily/weekly/monthly bank statement depending
upon volume of transaction per day.
4) DCR Number is incorporated against each credit entry in the bank statement.
5) The branch transfers the balance in the account daily to Regional Cash Credit account
and closing balance in excess of Rs. 1,000.00 has not been retained in the branch.
6) In case of dishonour, the original instruments along with reason for dishonour have
been handed over to location.
7) Bank charges are recovered as per MOT between IOC and SBI.
8) It is ensured that returned instruments in clearing are not to be presented again in the
clearing and are handed over to location.
9) The DCR has been duly stamped and signed with date by the branch’s authorized
officer for having received the instruments deposited.
10) Prior intimation to be given to Corporation by the branch before raising debit for
Dishonor or Loss in transit after 60 days from the date of deposit of the instrument.

CASH MANAGEMENT PROGRAMME: -

Cash Management Programme (CMP) is a new facility provided by SBI whereby the
Collections and Withdrawals from upcountry branches are transferred via electronic mode to

29
Corporation’s cash credit account at Mumbai. The facility has been tailor made to suit it’s
specific requirements like providing DCR Number in the daily reports in place of Instrument
Number and to suit MOU terms and conditions.

Features

The Cash Management Programme facility can be divided into Two Main categories namely:
-

A. Credit Module of CMP and

B. Debit Module of CMP.

Credit Module of CMP deals with Collection Proceeds and Debit Module of CMP deals with
Withdrawals.

At present the facility is made available by SBI at more than 150 Centres (Cities).

The facility is being availed by Corporation in all the centres provided by the Bank.

Entire transaction data is provided in soft copy to all Regional offices and State Offices on
monthly basis from Mumbai.

All the Memorandum Terms and Conditions of Collection Account are equally applicable to
the facility under CMP except that instead of TT transfer to RCC A/c, now daily fund transfer
takes place through electronic media direct to CC A/c at HO.

Under Cash Management Programme (CMP) virtually no new account is opened rather on
receipt of the request for collection account for a location, HO Finance gets a separate client
code allotted to the location through CMP Cell Mumbai. Such client code is unique for each
location. Since no separate collection account is opened at the center, the amount against
instruments tendered in the branch for credit, cannot be attached by local
revenue/government authority. The client code given for each of Corporation’s various
locations is to be prominently entered in the DCR copies for easy identification and

30
segregation of data among the various participating units by the branch. Client code is more
important at centres where more than one unit is participating in CMP facility in that city.

Procedure to Avail CMP

Proposal for availing CMP facility either due to shifting of Collection Account to CMP
branch or due to commissioning of New Depot/ Plant/ Terminal is to be forwarded to HO on
the same lines like opening of Collection Account. The proposal must be duly approved by
Finance in-charge of the Region and contains necessary details like Branch code, Branch
Address, DDP limit Etc.

Reports/Statements given by SBI: -

Unlike Collection Account, under CMP the local Branch does not provide any monthly bank
statement to locations. However following daily report is given:

Realization Report containing details of DCR with date of presentation and date of
realization. (Date of credit in H.O bank Account).

All locations ensure to collect the Realization report daily and check and verify that credits
are correctly given as per understanding and there are no missing Credits for DCR deposited.

In addition to above report, all other reports and statements given to locations by the branch
maintaining Collection Account is also be provided by CMP branch to Locations namely: -

Statement of overdue interest recovered with all relevant particulars like Cheque Number,
rate of interest, date of realization, number of days delay Etc. Such overdue interest is to be
immediately debited to the concerned customer and recovered.

31
Weekly statement of unrealised outstation instruments beyond 15 days. Location to take up
with the Divisional Manager and the customer for immediate clearance of such unrealised
cheques. In case a cheque of a particular customer are noticed to be regularly figuring in the
statement, divisional manager may be apprised of the delay with a request for taking
appropriate action to stop recurrence of such cases.

Monthly Statement of DDP Charges recovered with all relevant particulars. Location to
verify that charges are recovered at the agreed rate as per MOU.

Monthly statement containing details of all Dishonour debits during the month. Bank will
however continue to hand over dishonour instruments to location along with dishonour
advice on day-to-day basis. Such statement should be verified with the actual receipt of
dishonoured instrument during the month. Any case of missing dishonoured instruments
should be immediately taken up with the bank.

Under Debit Module of CMP for Special Current (Withdrawal) Account the location will
continue to get Daily/Monthly Bank statement containing details of cheques honoured by the
Bank as hither to given in withdrawal account. The only change is that day end balance shall
be transferred through electronic mode direct to Mumbai. No cheques wise detail shall be
provided.

In case of Debit Module of CMP for other than Special Current (Withdrawal) Account also
the daily withdrawal of funds will be transferred to H.O, with full details viz. LA number and
date, RCN number and date.

Accounting Entries

Following entries shall be passed: -

32
Entry for transfer of funds (Collections) from CMP branches to H.O.

Dr Bank transfers suspense code – 355-009.

Cr 077-010-Location Code.

Entry for transfer of funds (Withdrawals- LA) from branches to H.O.

Dr 077-005-Location Code

Cr Bank transfers suspense code – 355-016.

Entry for transfer of funds (Withdrawals- RCN) from CMP branches to H.O.

Dr 077-004-Location Code

Cr Bank transfers suspense code – 355-026.

Entry for transfer of funds (Withdrawals- Special Current Account) from

CMP branches to H.O.
Dr 077-009-Location Code

Cr Bank transfers suspense code – 355-021.

CMP Data to Regions: -

Following CMP transaction (collections) data in electronic form is provided by

HO to Regions: -

33
1) DCR details in text format in Dbase.
2) Details of system returns for amount debited by the bank in Dbase.
3) Details of manual entries posted by the Bank – both debit/credit entries in Dbase
format.
4) Bank statement of CMP account maintained at HO in text format.
5) Regions to check that the value dates given in this statement are inline with MOU.
Regions to segregate the above data state wise, in the format amenable to their bank
reconciliation module and send the same to states for reconciliation.

34
SPECIAL CURRENT (WITHDRAWAL) ACCOUNT: -

All Regions and State Offices operate the Special Current (Withdrawal) Account. Even some major
locations having monthly payments of more than Rs.1.00 Crores are given the facility of Special
Current (Withdrawal) Account. However, individual locations are to access their fund requirement
and put up the proposal for opening the withdrawal account as this will result in avoidance of
blockage of fund.

In case of Special Current (Withdrawal) Account No Pre-funding of the Account is done. The
daily balances are therefore transferred Via Regional Cash Credit Account to Main Cash Credit
Account at Mumbai.
All payments made from the Account are centrally funded from the Corporation’s Main Cash Credit
Account at Mumbai.

Opening of a Special Current (Withdrawal) Account

1) Request for opening of a Special Current (Withdrawal) Account is to be forwarded to Head

Office after ensuring the following aspects.
2) Ensure that the branch is able to handle the workload of Corporation’s account by inquiring
about the branch’s infrastructure, staff strength, Etc.
3) The monthly payments of various expense incurred by the location are not less than Rs.1.00
crore.
4) At Least one Accounts Officer is posted in that Location.
5) The note for opening of the account has been duly approved by ED of the Region.
6) The proposal contains all necessary details like
A. IOC Location Name
B. IOC Location Code
C. SBI branch Name
D. SBI Branch Address
E. SBI Branch Code
F. Monthly withdrawal Limit.

35
Check List of Various Aspects to Be Verified By Region/S.O/Location: -

1) Due care is to be taken to ensure that monthly limits, as fixed for the Special Current
(Withdrawal) Account do not exceed. Any request for increase in limit is to be forwarded to
H.O duly approved by Regional Head and with full justifications.
2) Bank reconciliation is done on monthly basis by the respective location/Office operating the
Account and all open items cleared within one week.
3) Cheques that are more than 6 months old are not be revalidated and the same have been
transferred to time –barred cheque code.
4) No deposit of any instruments is permitted in this account.
5) Care is taken for safe keeping of the Computerised Cheques books printed by us. As a
precaution it is recommended not to keep stock of more than six Months requirement of
Computerised Cheques.
6) Computerized Cheques books are pre-printed with “Account-payee only” crossing.
7) A register is kept to record the daily movement of the blanks cheques taken out for printing.
8) All blank cheque books given to locations by the Region/State Office for making payments to
any specific Authority (e.g. Railway Authority) are pre-printed with the name of the Payee.
No blank cheque books without the name pre-printed must be given to any location.
9) Debit entries in the Bank Statement for Bank charges recovered by SBI for issue of Demand
Draft Etc have been verified in line with the MOT.
10) Changes in the list of authorised signatories are submitted to the Bank duly approved and
Specimen Signatures verified by Dy. General Manager Finance (Grade G) of Finance
department and his/her signature is also to be duly verified by the Bank.
11) Periodical and surprise visits are made by controlling Office to ensure that the Account is
operated in the correct manner and all records are properly kept.
12) It is to be ensured that the instrument given by the customers are not deposited in Special
Current Account or the bank had not credited our Special Current Account by mistake in case
both our Collection and Special Current Account are maintained at the same branch.
13) It should be verified that the bank charges debited by the bank are in line with the charges
agreed by the Corporation. A copy of various charges agreed by IOC and SBI have been
obtained from Head Office at yearly intervals for the purpose.
14) Monthly Bank reconciliation is carried out by 5th of the month and all open items are cleared
within 7 days. A report on reconciliation and utilization of the account is submitted to Region.

36
CURRENT (IMPREST) ACCOUNT: -

Current (Interest) Bank Account is opened for all Locations to meet their day-to-day expenses.

Unlike Special Current (Withdrawal) Account, Current (Imprest) Account is to be pre-funded.

Accordingly location cannot make payment in excess of the credit balance available in the Account.

Current (Imprest) Account is an independent Account and hence its transactions are not transferred to
State Office /Region.

Opening of a Current (interest) Account

Request for opening of a Current (Imprest) Account should be forwarded to Head Office after
ensuring the following aspects:

1) Ensure that the branch is able to handle the workload of our account by enquiring about the
branch’s infrastructure, staff strength, Etc.
2) The branch is participating member of the local Clearing House for getting timely credit for
the value of recoupment instrument received from State Office and deposited in the Account.
3) The locations specify the value of DDP limit required in case there is any possibility of the
location getting Outstation cheques from State Office towards Imprest re-coupment or salary
payments Etc.
4) More than one Officer is posted in that Location.
5) The note for opening of the account is duly approved by ED of the Region.
6) The proposal contains all necessary details like
A. IOC Location Name
B. IOC Location Code
C. SBI branch Name
D. SBI Branch Address
E. SBI Branch Code
F. DDP Limit

37
In case of locations having only one Officer, Current (Imprest) Account in the Name of the
Corporation cannot be opened since as per Company’s Policy Bank Account are to be operated by
joint signatories. Such locations can be permitted to have a Savings Account Opened in the Name of
the Location in-charge till another Officer is posted to that Location. However No Cheques will be
issued from the Account. Any income earned on the account, as interest is to be surrendered to the
Corporation. Such account should be closed as soon as more than one officer is posted at the location.

Check List of Various Aspects to be Verified By Region/S.O/Location: -

1) Monthly Bank reconciliation should be completed by 5th of the month and forwarded to State
Office at regular intervals. Open items if any to be cleared within 7 days.
2) All open items observed based on Monthly bank reconciliation statement should be
immediately taken up with the branch and all items cleared within one week.
3) Cheques that are more than 6 months old should not be revalidated and the same should be
transferred to time –barred cheque code.
4) No deposit of any instruments is permitted in this account except instruments received from
State Office/Regional Office towards Imprest re-coupment or Salary and other payments.
5) Care is to be taken for safe keeping of the Computerised Cheques books printed by us. As a
precaution it is recommended not to keep stock of more than six Months requirement of
Computerised Cheques.
6) Computerized Cheques books are pre-printed with “Account-payee only” crossing.
7) A register is to be kept to record the daily movement of the blanks cheques taken out for
printing.
8) Debit entries in the Bank Statement for Bank charges recovered by SBI for issue of Demand
Draft Etc are to be verified in line with the MOT.
9) State Office to ensure that to the extent of value of time barred cheques, Imprest Re-
Coupment is not be given to the location until the value of such time barred is accounted as
time barred cheques and transferred to State Office.
10) Periodical and surprise visits should be made by controlling Office to ensure that the Account
is operated in the correct manner and all records are properly kept.
11) At locations where the Bank provides cheque books, care should be taken to affix the stamp
“Account-payee only” crossing immediately. It is advisable not to keep stock of blank cheque
books more than two months requirement.
12) Checking of unused leafs in all the cheque books should be done at regularly to ensure that
there are no in between cheque leafs missing.

38
 13) Locations should verify the bank charges debited by the bank to ensure that they are in line
with the charges agreed by the Corporation. A copy of various charges agreed by IOC and
SBI is obtained from Regional/ State office at yearly intervals for the purpose.

LETTER OF AUTHORITY FACILITY: -

This facility is given to Corporation’s locations for making payments of particular nature i.e. payment
to Customs and Excise Authorities or payment to Port Trust Authorities or payment to other refineries
for cost of product.

This facility can be utilized for making various payments provided the facility is used by the location
to make payment to any one single Authority.

Opening of a LA Facility:

1) Request for opening of a LA Facility or Enhancement in Limits should be forwarded to Head

Office after ensuring the following: -
2) The note for opening of the account or Enhancement in Limits should be duly approved by
Finance In-charge of the Region.
3) The proposal contains all necessary details like
A. IOC Location Name
B. IOC Location Code
C. SBI branch Name
D. SBI Branch Address
E. SBI Branch Code
F.Fortnightly/Daily LA Limit
G. Nature of Payment i.e. Excise duty/Customs duty/Port-Trust charges Etc.

39
LA facility is opened in such SBI branches, which have been authorized to collect
Central Excise/Customs revenue.

In case if in that centre the authorized revenue collecting Bank is other than SBI, then the SBI branch
were the facility is to be opened should be one from where the transfer of funds to the other
Bank is possible in the quickest time.

Normally the SBI branch conducting the clearing House in that centre is able to transfer the funds to
other Bank on the same day. This aspect is to be checked and verified with the SBI branch and
accordingly the branch is to be identified for opening the LA facility.

Check List of Various Aspects to Be Verified By Region/S.O/ Location: -

1) Region/Locations to verify the bank charges debited by the bank to ensure that they are in line
with the charges agreed by the Corporation. A copy of various charges agreed by IOC and
SBI is to be obtained from Regional/ State office at yearly intervals for the purpose.
2) Bank reconciliation is done on monthly basis based on LA statement forward by the locations
with debits in RCC a/c and open items cleared with in one week.
3) Checking of originating date is also done by the region for debit entries posted in RCC a/c
under Code “04” towards transfer of funds for LA payments. For this purpose every month a
list containing the date of issue of LA, LA Number and Amount of LA issued during the
month obtained from the location.
4) In respect of excise duty payments made by the locations care has been taken not to issue
more than three LA’s in a month. However in case of custom duty and other payments made
through LA facility no such restriction is imposed.
5) Monthly bank reconciliation to be completed by Regional office by 12th of the month and
open items is cleared within 7 days time.

40
IMPORTANT TIPS FOR ACHIEVING THE REDUCTION IN
FINANCING COST

In view of the fact that cost of financing is an important and major component of the overall
expenditure, there is a need to exercise due control and take suitable measures to reduce this burden of
financing cost which comprises of interest on borrowings and bank charges.

Following are the important points to be ensured for reducing the financing cost: -

1) Ensure to deposit the DCR before the cut off time so as to enable the bank to present the
instrument in the clearinghouse the same day.
2) Wherever “High Value Clearing” facility is available in the city, endeavour should be made to
deposit all high value local instruments into high value clearing so that the credit is given the
same day to us. For the purpose separate DCR may be generated for such high value
instruments with assistance of systems Dept.
3) Check that credit for all outstation instruments, is given the same day and for local
instruments on the day of funding as per MOU.
4) Meticulously check the bank charges to ensure that nothing more than the agreed rate is
charged.
5) Arrange to recover overdue interest from customer wherever the same is debited by bank.
6) Study the existing RCN arrangement vis-à-vis payment of railway freight through cheque and
recommend for the alternative beneficial to us in terms of saving in interest cost.
7) Ensure that there is no withholding of credit balance beyond Rs.1000 in collection account
under any circumstances.
8) In case of holiday for IOC but working day for bank, ensure to deposit the DCR in the bank
even on such days. This is also to be ensured for Saturday’s in case of administrative offices.
9) Quarterly review of bank charges debited vs. recovery from the customer to be made.
Identify areas/customers leading to under recovery and take corrective action.
10) Identify the major locations incurring huge payments (normally more than Rs.1 crores per
month) and explore the possibility of opening withdrawal account instead of current (imprest)
account to avoid the blockage of fund.
11) Ensure that special advances given for transport and other major payments are cleared within
5 days. Ensure that special advance is not given more than 1-2 days before the date of actual

41
 payment of bills to avoid blockage of fund. In case the payment is spread over a period of 5-
10 days, possibility should be explored to give special advances in instalments.
12) Meticulous checking should be done by RO/SO of the originating dates for TTs as per RCC
statement with the actual date of TT as appearing in bank statement of the location. This is an
area where lot of saving in interest can be achieved. Any error/omission on this account may
lead to incurrence of huge avoidable interest cost.
13) Ensure to clear all open items in bank reconciliation immediately.
14) As far as possible all major payments i.e. statutory payments/tax/excise duties should be
planned in such a way so that the payment is made on the due dates only and not before.

DISHONOUR OF INSTRUMENTS
Dishonour of instruments is one of the areas of major concern in banking activity. Timely realisation
of all the instruments/cheques has to be constantly and closely monitored by all concerned and
immediate corrective steps to be taken wherever the cases of dishonors or delay in realization are
noticed so that no financial loss occurs to the corporation.

Check List of Various Aspects to Be Verified By Region/SO/ Location: -

1) To institute a system of collection of dishonored instrument on day today basis, under

acknowledgement by our authorized person.
2) To verify bank statement and classify all debit entries into debit towards dishonor of
instruments and debit for bank charges.
3) In respect of CMP centers ensure to collect from the branch a monthly statement of all
instruments dishonored during the month and verify that against all the entries mentioned in
the statement, the original instrument were returned by the branch to our location. The details
of dishonored instruments is to be provided by state office every month to locations to enable
them to cross verify the same with the amount debited in our bank account. Any discrepancy
in amount debited by the bank for which no instrument was returned by the branch or not
reported in the monthly bank statement should be taken up to obtain the original instruments.
4) Ensure that for all debit entries for dishonor of instruments, the original instrument
(cheques/DDs) are collected/obtained from the bank. This aspect is equally applicable to
centers having CMP facility.

42
 5) As soon as the dishonor instrument is received, ensure to pass the necessary entry
immediately debiting the customer in PAD for the value of instrument along with interest and
incidental charges.
6) Procedure for issuing Notice to the drawer of cheque and further legal action should be
initiated within the prescribed time as per the guidelines contained in our letter no AC/CR/44
dated 26-6-2001 (copy enclosed).
7) Action to be taken for obtaining replacement cheques/DD from the concerned party.
Divisional Manager to be immediately informed of the dishonor.
8) Cheque facility to the party should be immediately suspended.
9) To review and monitor the weekly statement of unrealized instruments pending for more than
15 days, as provided by the bank to ascertain any delay in realization of instrument deposited
by us. In case any cases of delay are noticed in the statement following action should be taken
by location: -
10) The matter should be immediately taken up with the customer for immediate payment of
cheques. If the payment is not forthcoming, the matter to be informed Divisional Manager for
taking further action.
11) Cases of accumulation of cheques of any single party are to be viewed seriously and has to be
immediately informed to Divisional Manager for taking up with the customer. This will help
avoiding occurrence of bunching of cheques at the time of dishonor.
12) In case of the cheque any customer are found to be appearing off and on in such statement,
Divisional Manager should take up the matter with the party for changing the bank branch
etc., in order to have a permanent solution to such cases.

MOU clauses relevant to dishonour: -

Ensure that the various terms and conditions on dishonour of instruments as contained in the
memorandum of terms and conditions of collection accounts are strictly followed by the branch. The
relevant clause of MOU dealing with dishonour cases are reproduced below: -

Clause 6.i - Amount of dishonour of instrument(s) along with the overdue interest (at the cash credit
rate applicable to the Prime Interest pricing plus interest tax) for the period (beyond 13
days) for which the Bank remained out of funds to be recovered at the branch by
debiting NOC account itself. However, the interest can be charged for a maximum
period of 60 days only from the date of purchase.

43
Clause 6.ii The dishonor of instrument(s) along with the relative memo(s)) giving the reasons for
dishonor and debit advises should be given to IOC’s local terminal/depot, who had
initially deposited the instrument(s) in NOC account, against their proper
acknowledgement.

Clause 6.iii - Instruments returned unpaid on first presentation should in no case be presented again
even if so requested by the drawer bank. Such instruments should immediately be
returned to the corporation as dishonored instruments.

Clause 6.iv The amount of dishonor of instrument along with interest should be debited only when
the dishonour of instrument are received by the branch and delivered to the IOC’s
officials against their acknowledgement.

Clause 6.v - The instruments on presentation must be dispatched by the branch promptly without
delay latest by the next working day.

Clause 6.vi - Weekly statement of unrealized outstanding instruments as stated in 4 (e) below is to be
provided to the corporation and such dishonor of instruments should find a mention in it
if it is a case of non-realization for more than 15 days.

4.e The details of instruments remaining unpaid for over 15 days should be advised to
the Corporation on a weekly basis against their acknowledgement to enable the
Corporation to take appropriate steps at their end.

4.g In case the instruments purchased are lost in transit, after ascertaining the same,
debits should be raised with prior intimation to IOC giving proof of lost in transit.
Overdue interest, wherever applicable in such cases should be recovered up to a
maximum period of 60 days.

44
Reporting system: –

Cases of dishonor are to be reported to controlling offices as extant instructions, which are,
enumerated below:-

1) Fortnightly Report on Dishonor for want of funds- Location to send fortnightly report to
State/Regional Office within 2 days from end of fortnight. Regional Office to submit a
consolidated report of such dishonor to HO on fortnightly basis within 5 days from end of
fortnight.
2) Monthly Report on all cases of dishonor- Locations to continue to submit monthly report on
all dishonors to State/Regional Offices. Regional Office to submit the monthly report as per
existing format to HO by 10th of following month.

VALUEDATION

As Corporation maintains number of bank accounts through out the country for different purposes like
separate account for withdrawal of funds and separate account for sales realization Etc, it is pertinent
to pool all this debits and credits together to avoid idling of funds at one account and paying interest
to Bank on withdrawals from another account.

In order to pool all the debits and credits at one account, Regional Cash Credit Accounts were opened.
Such Regional Cash Credit Account were opened Region wise / Division wise for easy control and
proper accounting.

To overcome the drawback of time gap between transfer and receipt of funds from various collection
accounts and other withdrawal accounts at Regional Cash Credit Account, the concept of
“Valuedation” was introduced.

Valuedation is one the unique facility exclusively given to the Corporation by SBI.

Under this facility the amount received at Regional Cash Credit Account are recorded with the Date
of original transfer of amount from the collection Account or other withdrawal accounts.

For example: -

45
Amount transferred from Collection account to Regional Cash Credit Account at Chennai of Neyveli
Depot in Tamilnadu – Rs. 5.00 lakhs.

The date of transfer - 01-10-2007.

The date of posting at Chennai – 05-10-2007.

Amount transferred from Collection account to Regional Cash Credit Account at Chennai of Palakkad
Depot in Kerala – Rs. 3.00 lakhs.

The date of transfer - 02-10-2007.

The date of receipt of posting at Chennai – 05-10-2007.

The above details will be recorded in bank statement of Regional Cash Credit Account as under: -

RCC BANK STATEMENT DATE: 05-10-2000

TRANSCATION TYPE: “01”

BRANCH NAME CODES ORIGINATING AMOUNT

DATE

SBI Neyveli Say 980 01-10-2007 5,00,000.00

SBI Palakkad Say 800 02-10-2007 3,00,000.00

Similar separate statements will be made for each type of transaction (LA/RCN/WITHDRAWAL)
recorded in the RCC a/c on daily basis.

As all the amounts from various accounts are transferred to Main Cash Credit Account daily, No
Interest is to be charged by any of the SBI branches on the amount withdrawn/utilized by our
Locations.

Interest to be paid to SBI on amount borrowed is calculated for the Corporation as a whole on the
basis of daily “Validated” balance of the Main Cash Credit Account by applying the effective Rate of
Interest.

46
Such interest calculation is done on quarterly basis

validated balances are derived by recasting the bank statement at Mumbai by replacing the date and
amount posted in the bank statement with the originating date and amount. In the above example the
total credit amount of Rs. 8.00 lakhs in the bank statement of 05-10-2007 will be replaced by Rs. 5.00
lakhs in the bank statement of 01-10-2007 and Rs. 3.00 lakhs in the bank statement of 02-10-2007.

Various aspects to be checked by Location/Region: -

Location to ensure: -

A. Location must ensure that amount is credited as per MOU and the credit amount is transferred
the same day to RCC.
B. Regions to ensure: -
1) Ensure that the date given in the RCC bank statement as originating date is same as the date
of transfer of collections and payments from upcountry branches.
2) In case the date mentioned in the RCC statement is incorrect or blank the same to be taken up
with RCC branch for rectification under Type “07”.
3) Ensure that in the floppy given to H.O and in the RCC bank statement the originating date
and date of posting in RCC account are same for RCN payments under Type “05” wherever
Exchange amount is recovered by the bank. It means in all such cases the date of posting in
RCC is reflected as the originating date also.
4) In case of Railway Freight payment through MICR cheques, no exchange/charges to be
debited at all, rather such transaction shall be value dated with reference to originating date.
In other wards in such cases originating and posting date shall be different.
5) In case of Special Current (Withdrawal) Account and LA also the transaction are value dated
with reference to originating date and in such cases also originating and posting date shall
obviously be different.
6) In case of CMP transaction also validation is done wherever the transfer is not posted on same
date in CC A/c at Mumbai. Bank statements provided by HO to regions/state for CMP
transaction also contain a column for value date. In such cases Validation is done with
reference to value date mentioned by SBI in this column. Regions must ensure to that date
mentioned in value date column is correct.
7) In No case the originating Date should be later than posting date of RCC Account. For
example if the posting date is 10-12-2006-07, then the originating date should be either 10-
12-2006-07 or earlier.

47
SETTLEMENT OF GRIEVANCES

In view of the large number of accounts being operated by IOC spread at over 500 places across the
country, a grievances settlement procedure has been worked out by SBI in consultation with us, for
early redressed of any problems/unresolved issues with IOC locations against SBI branches. The
copy of SBI letter No. CAG/AMT-1/1724 dated 04.11.2007 detailing the settlement procedure is
enclosed for ready reference.

As per the agreed procedure location should act in the following manner, for settlement of any
pending issues/grievance against SBI branch: -

1) The matter must be followed up in writing with the branch manager in-charge of the branch
quoting the particular clause of MOU. In case of delay in settlement or non-response,
personal meeting should be held with the branch manager for working out the solution in a
time bound programed.
2) In the event if despite follow-ups both written and in person, the problem is not sorted out
within reasonable time, the matter should be taken up in writing with the DGM of SBI, Zonal
office. In this regard, SBI has already made extensive arrangement by way of designating one
officer in each Zonal Office as the nodal officer, who would be responsible for resolving all
the IOC complaints for the branches coming under that Zonal Office. The copy of the
correspondence should be marked to State Office who in turn can further follow-up with the
DGM or the Nodal Officer in the Zonal Office. State Office finance in-charges should be in
touch with DGM of SBI Zonal offices.
3) In case the issue is still not resolved, State Office to write the letter to Chief General Manager
of the Circle Office of SBI with a copy to IOC, HO Finance giving details of the matter. In
that case, the matter shall be further followed up by HO, Finance with SBI through SBI, CAG
– Central, Mumbai.
4) The address of SBI Zonal and Central offices, in this regard are enclosed with our letter
No.AC: BKG: MOU dated 22.11.99 for ready reference. While the above is the normal
procedure to be followed for settlement of issues, any matter having high financial
implications and requiring immediate redressal, can also be referred by State Office/ Regional
Office directly to us for immediate action apart from taking up with Zonal office.

48
IMPREST (BANK) ACCOUNT IN PERSONAL NAME:

There may be certain locations where only one officer is posted and as such regular impress account
in the corporation name cannot be opened in bank because corporation bank account is required to be
operated jointly by two persons. Under these circumstances opening of imprest account in bank in the
personal name of officer can be allowed by Regions. However such opening and operation of account
in personal name shall be subject to following conditions: -

1) Imprest is sanctioned in the personal name of the officer where only one officer is posted at a
location.
2) The officer should forward proper and periodical accounts along with bank reconciliation
statement to the Region concerned to be checked and analysed by them any interest earned
on this account will be the income of the corporation and not of the employee. No cheque
payment should be resorted to from this account.
3) The imprest account opened in the personal name should be immediately discontinued
whenever more than one office is posted in that location and fresh current (imprest) account
be opened in the name of the corporation.
4) In view of above Regions should keep a constant watch on such accounts with regard to
reconciliation and interest earned and periodically review should be conducted so as to ensure
the discontinuance of the account as soon as more than one officer is posted.

49
 CHEPTER-5

BANK RECONCILIATION OF COLLECTION AND WITHDRAWAL ACCOUNT

OBJECTIVES:

1) To overall manage the Receivables from various Retailers (customers) of IndianOil

Corporation Ltd. (IOCL), located in different districts of Uttar Pradesh.

2) To co-ordinate with various L.P.G Bottling Plants and Terminals of IOCL for Receivables.

3) To perform Reconciliation separately for various Party’s or customers (Retailers) in

different locations so as to remove any discrepancies or mismatch of accounting figures.

GLOSSARY OF TERMS USED HEREWITH:

1) DCR: Or commonly known as Daily Cash Receipts. It is the collection of Cash

Receipts from individual Party at each location (i.e. Plants or Terminals).
2) SOFTWARES: These are used at various Plants and Terminals of IOCL for
processing Cash Receipts or either Chalans. They are as follows:
i) TDM: This is Terminal Documentation Module.
ii) PDM: This is Plant Documentation Module.

3) DAT: It’s a magnetic tape inside a cassette, which records the monthly DCR’s of
each location. These locations send these cassettes to Uttar Pradesh State Office
(UPSO), at Lucknow on monthly basis.

4) ACCOUNTS MAINTAINED BY IOCL: Indian Oil Corporation has a contractual

agreement with State Bank of India (SBI) to maintain two types of accounts in various
branches of SBI spread across the different locations of IOCL. Both these accounts are
Current in nature. They are:

i) CMP A/C: It provides speedy and effective cash management to IOCL as

a whole, because the SBI branch provides Credit to particular location of
IOCL on the same day itself in exchange of instruments like Cheques or
Demand Drafts deposited by that location at the same SBI branch. Credit

50
 given at any particular location is equivalent to the proportion of the
instruments deposited at that location. At the same time in IOCL’s Head
Office in Mumbai, its account at Mumbai Branch of SBI is also
automatically credited through Telegraphic Transfer (T.T.). This facility
helps IOCL in getting its accurate daily cash position.
ii) NON-CMP A/C : this is also similar to CMP A/c with the only difference
that Telegraphic Transfer (T.T.) of Credit is done by respective SBI
branches to its Delhi Branch where Co.’s Regional Offices maintains its
account. And then Delhi branch of SBI Transfers this Credit to its Mumbai
branch where Co.’s Head Office holds its account. In this type of account
SBI branches retain a few no. of the instruments deposited with them and
so does not Credit the Co. for these transactions.

OPERATIONAL METHODOLOGY ADOPTED FOR BANK RECONCILIATION OF

COLLECTION ACCOUNT AT UPSO, LUCKNOW:

S1: Receiving DAT cassettes on monthly basis from various locations of IOC in U.P

S2: Separation of DCR’s and Chelan’s recorded in DAT cassettes; through using a UNIX
based server.

S3: Preparation of Cash Book for each and every Party (customer) in terms of its DCR’s at a
particular location.

S4: Preparation of main Cash Book for each location of IOC in terms of the total DCR’s
issued at that location.

S5: Matching the Credit provided by SBI at a particular location with the ‘cash’ or instrument
deposited at the bank at that particular location, through the use of software called ‘Bank
Reconciliation of Collection Account’.

Details of a practically done Bank Reconciliation of Collection A/C of Bareilly (Area Office)
are as follows: -

1. Tallying of list of unmatched Bank and Cash transactions, with bank statement
received from bank showing amount credited in Co.’s A/C and amounts
Telegraphically transferred to State Bank Of India, Head Office at Mumbai; amounts

51
 debited for Bank Charges and TT charges, amounts debited for Chaques Dishonored
and excess credit given by Bank on daily basis.
2. Tallied transactions are deleted from programme.
3. Statement of unmatched Bank and Cash transactions is prepared and we arrive at following
two amounts: -
I. Total for Unmatched Cash Book.
II. Total for Unmatched Bank Statement.
In following manner Balance As Per Cash Book is arrived at:

Opening Balance (Closing Balance of previous month) 210,589.00*

Add Receipts (During month) 1,000,000.00*

1,210,589.00*

Less T.T. (1,200,000.00*)

10,589.00*

Add CMP Debits (If any) 5,890.00*

16,479.00*

Less JV Passed (479.00)*

16,000.00*

Add JV Passed 400.00*

16,400.00*
Balance As Per Cash Book

NORTHERN
U.P.STATE OFFICE NAME OF BANK REGIONAL OFFICE

State Bank
BANK RECONCILIATION Of India

52
STATEMENT LOCATION CODE MONTH & YEAR
BAREILLY–A.O. 682/82
JUNE’ 2002
(Collection Account)
PARTICULARS AMOUNT (Rs.) AMOUNT (Rs.)

BALANCE AS PER CASH BOOK 16400* 00

ADD: U/L CREDITS NIL

ADD: EXCESS TRANSFER

ADD: MISCE.

TOTAL:

LESS: U/L DEBITS 16400* 00

LESS: SHORT TRANSFER

LESS: DISHONOUR INST. OR

CMP DEBITS

TOTAL:

BALANCE AS PER BANK BOOK

16400* 00

Nil

*All the amounts have been taken on assumption.

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 BANK RECONCILIATION OF WITHDRAWAL ACCOUNT
OPERATIONAL METHODOLOGY APPLIED FOR BANK RECONCILIATION OF
WITHDRAWAL ACCOUNT AT UPSO, LUCKNOW:
Steps involved in preparation of Bank Reconciliation Of Withdrawal A/C are as follows:

1. List of chaques issued but not presented for payment in previous month.
2. List of chaques issued during the month.
3. Bank statement (received from bank, showing chaques presented (debited) and bank
charges being debited & TT transfer being credited)
4. Manually tallying of (1) and (2) with (3), i.e. chaques issued but not presented for
payment in previous month and chaques issued during the month are tallied with Bank
statement.
5. Result: - non-tallied chaques lying in the bank (actual pending chaques).
6. Preparation of statement of amounts of TT (Telegraphic Transfer) being made by SBI
(HO) to particular location / branch / Dolg / Colg / Terminal /A.O. for meeting regular
payments which already have been made.
7. Statement of DD / chaques cancelled.
8. Finally a statement containing list of pending chaques is prepared.
Details of a practically done Bank Reconciliation of Withdrawal of Bareilly (Area Office)
are as follows: -

UP STATE OFFICE
BANK RECONCILIATION
STATEMENT- WITHDRAWAL
ACCOUNT
BANKERS:

CURRENT A/C NO. 47885952/25

PERIOD: - march’2015
AMOUNT (RS.)

OPENING BALANCE AS ON 01.04.2015

AS PER BANK STATEMENT (-) NIL

54
 AS PER CASH BOOK (ANNEX. V) 1458236.00

A CHEQUE ISSUED DURING THE MONTH 58769845.00

D
D: 60228081.00

SUB TOTAL

A BANK CHARGES OF THE MONTH (ANNEX. IV) 4560.00

D
D: 60232641.00

SUB TOTAL

LE CHEQUE ISSUED BUT NOT PRENSENTED (ANNEX. I 14721045.00

SS +ANNEX. II)
: 45511596.00
SUB
TOTAL

LE DD CANCELLATION (ANNEX.VI) 47896.00

SS
: 45463700.00

SUB TOTAL

LE CHEQUES OVER SIX MONTHS (ANNEX- VII) 5000.00

SS
: 45458700.00

SUB TOTAL

LE TT TRANSFER BY BANK DURING ' (ANNEX III) 45458700.00

SS
:

CLOSING BALANCE AS PER BANK STATEMENT 0.00

AS ON 31.07.2015

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CHEPTER-6

Conclusion and Suggestions:

After studying all the facts and other information, this conclusion is arrived at that all the
experience on banking and finance department of Sharda University Knowledge park 3
greater Noida. The function and objectives is based on Indian Banking department and
finance with respect of the structure of finance in Indian banking system on its function the
type of bank account they operate ,the cash management programme and the clause attach
to the policy related to the clause which was implemented by RBI.

applied/followed in Indian banking system for efficient management of cash is one of the
best systems for banking activities to reduce the financing cost and increase the liquidity of
various financial instruments (D.D./Cheques etc.)

In view of the fact that cost of financing is an important and major component of the overall
expenditure, there is a need to exercise due control and take suitable measures to reduce this
burden of financing cost which comprises of interest on borrowings and bank charges.

Following are the important points to be ensured for reducing the financing cost and bringing
efficiency in banking activities: -

1. Ensure to deposit the DCR before the cut off time so as to enable the bank to
present the instrument in the clearinghouse the same day.
2. Wherever “High Value Clearing” facility is available in the city, endeavor should
be made to deposit all high value local instruments into high value clearing so that
the credit is given the same day to us. For the purpose separate DCR may be
generated for such high value instruments with assistance of systems Dept.
3. Check that credit for all outstation instruments, is given the same day and for local
instruments on the day of funding as per MOU.
4. Meticulously check the bank charges to ensure that nothing more than the agreed
rate is charged.

56
 5. Arrange to recover overdue interest from customer wherever the same is debited
by bank.
6. Study the existing RCN arrangement vis-à-vis payment of railway freight through
cheque and recommend for the alternative beneficial to us in terms of saving in
interest cost.
7. Ensure that there is no withholding of credit balance beyond Rs.1000 in collection
account under any circumstances.
8. In case of holiday for IOC but working day for bank, ensure to deposit the DCR in
the bank even on such days. This is also to be ensured for Saturday’s in case of
administrative offices.
9. Quarterly review of bank charges debited vs. recovery from the customer to be
made. Identify areas/customers leading to under recovery and take corrective
action.
10. Identify the major locations incurring huge payments (normally more than Rs.1
crores per month) and explore the possibility of opening withdrawal account
instead of current (Imprest) account to avoid the blockage of fund.
11. Ensure that special advances given for transport and other major payments are
cleared within 5 days. Ensure that special advance is not given more than 1-2
days before the date of actual payment of bills to avoid blockage of fund. In case
the payment is spread over a period of 5-10 days, possibility should be explored to
give special advances in installments.
12. Meticulous checking should be done by RO/SO of the originating dates for TTs as
per RCC statement with the actual date of TT as appearing in bank statement of
the location. This is an area where lot of saving in interest can be achieved. Any
error/omission on this account may lead to incurrence of huge avoidable interest
cost.
13. Ensure to clear all open items in bank reconciliation immediately.

As far as possible all major payments i.e. statutory payments/tax/excise duties should be
planned in such a way so that the payment is made on the due dates only and not before.

57
Regarding Bank Reconciliation of Accounts:
Quick clearance of almost all open items while preparation of Bank Reconciliation of
Accounts it is necessary, so due care is needed while preparing following
statements/transactions:
 Daily Cash report
 Copy of Bank Statement
 Copy of Bank Reconciliation Statement being prepared by different Area
Offices/Dolgs/Colgs/Terminals.
 Data entered in software and being sent to concerned State Offices in DAT
diskettes is accurate and entries are neither missing nor duplicating in nature.
Sometimes it has been seen that customers in one region are dealing with locations in
different region. Therefore it is advised to take due care while dealing with such customers
and a different note/statement showing particulars of such customers be sent to the State
Office concerned with other details and Bank and cash data.

58
 CHAPTER-7

Bibliography:
1. http//: www.iocl.com
2. Annual-report 20010-20012, 2012-2015
3. Data from other sources
4. Self analysis

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