Core banking: RBI’s half-baked directions to banks

RBI has just come out with guidelines for issuance of “Payable at par/Multi-city” cheques to all eligible customers in a standard format. But the RBI should have thought of many other possibilities of offering a wide variety of services using CBS. Here is a list of benefits it could have allowed


Almost all the banks in our country have introduced “core banking solutions” (CBS), under which, all the branches of each bank are centrally inter-connected. This provides the flexibility of operating a bank account opened in one branch of a bank in any of the other branch of the same bank. But the full benefits of CBS are yet to percolate down to the banking public, as banks, barring a few, are generally slow in passing on the benefits to the banking public unless goaded by the banking regulator. As a first step in this direction, RBI has just come out with guidelines for issuance of “Payable at par/Multi-city” cheques to all eligible customers in a standard format, so that they are honoured, if otherwise in order, when presented at all different centres though the clearing houses as if they are local cheques. Since such cheques (payable at par) are cleared as local cheques in clearing houses, RBI has directed that customers should not be levied any extra charges for this service.
 

This is no doubt a good beginning, but the RBI should have thought of many other possibilities of offering a wide variety of services using CBS and issued a comprehensive circular covering all aspects at one stretch which would have served the cause of bank customers admirably. Here is a list of important and very useful services, which could be made available to the public through the use of CBS at little or no additional cost to the banks.
 

Payable at par/Multi-city cheques

The RBI has just directed banks to offer issuance of payable at par/multi-city cheques without any charges. But there is a catch here. As per the RBI circular issued on 10 August 2012, this facility is to be offered to “all eligible customers”, instead of saying all customers enjoying cheque facility. RBI has not clarified as to who is an eligible customer, leaving it to the discretion of individual banks. With this loophole, the banks may be tempted to offer this service only to high net worth customers stipulating a much higher minimum balance in the account to be eligible for this facility, thereby defeating the very purpose of this service. Besides, this will give rise to two class of cheques, i.e. cheques which are payable at par at all the branches of a bank, and cheques which are payable only in a single city, where drawee bank’s branch is located. In order to serve the purpose of bringing about further efficiency in cheque clearing as stated by the RBI in its circular, and to extend this facility to all those enjoying cheque facility, RBI should issue a further clarification directing banks to make this facility available to all the customers who have been offered cheque facility by the banks. This may be an unintentional omission, which needs to be corrected.
 

Withdrawing cash from branches other than the home branch

 

The aforesaid circular of RBI covers only payment of cheques through the clearing house and does not include cash payments. Recently a customer of a nationalized bank having an account in Borivili, Mumbai branch of a bank wanted to urgently handover cash to the tune of Rs50,000 to his relation living in Matunga. Even though this bank is under CBS, he was informed that the facility of drawing cash from another branch of the same bank was not available to him. Hence he was compelled to withdraw cash at Borivili and travel all the way to Matunga with the attendant risk involved in carrying cash, which could have been avoided, if only the facility of payable at par at any branch of the bank was available even for cash transactions. This facility is useful when you travel to other cities also, as withdrawal from ATMs is permitted with lot of restrictions attached to it. A few banks do allow withdrawal of cash from another branch of the same bank in a limited way, but there is neither uniformity nor clarity in this regard. As the circular issued by the RBI last week is silent in this matter, it is desirable that suitable guidelines may be issued in the interest of customer safety and convenience.

 

Depositing cash/cheques in branches other than the home branch
 

A customer of a bank in Delhi wanted to make a remittance to his son studying in Mumbai. He has many options to send this remittance, one of which is to simply credit the amount to his son’s account with the bank in Delhi, whose Mumbai branch is having his son’s account.  So he went to the nearest branch of that bank in Delhi and asked the counter clerk whether he could deposit cash for credit of his son’s account in Mumbai in the same bank, as both the branches were under CBS. He was informed that he could do so only if he was also the account holder of that bank in Delhi. Otherwise the beneficiary of the remittance would have to pay a hefty charge for receiving such a remittance. As he did not have an account with that bank in Delhi, he was asked to remit the amount through National Electronic Funds Transfer mode (NEFT), which was a cheaper mode of remittance, but the amount would be available to his son only on the next working day. If only the bank had extended the CBS benefit to the father of the account holder of the bank in another city, life would have been much simpler and the customer would have received the remittance quickly and without any hassle and cost. This is a classic case of simple things made complicated for want of understanding the customer’s needs.

 

Updating the passbook in a branch other than the home branch
 

A pensioner, receiving his pension though his account with a public sector bank in Mumbai went on a long holiday to stay with his daughter in Chennai. He was very happy to see a branch of his bank nearby and went to the branch in the first week of the month to get his pass book written up just to make sure that his pension for the previous month has been duly credited to his account. He no doubt got his pass book written up, but was surprised to find a charge of Rs10 debited to his account for extending this service. He was informed that this charge was as per the rules of the bank, though, no such charge was levied for extending the same service in his home branch. The amount of charge may be small for the bank, but not for a pensioner. Is this not a case of taking advantage of customer’s predicament?
 

There are a number of other services like renewing or encashing a fixed deposit, payment of loan instalments, even closing an account, etc which are possible under CBS in any branch of the bank, without incurring any additional cost to the bank. By extending all these services in any branch of the bank without any extra charge, banks can win over the customers and continue to enjoy their patronage, which will help them to expand their current and saving deposits, a source of low cost deposits for the banks. These may appear small pinpricks, but they certainly go a long way in making life simpler for a large number of our people who do not have access or knowledge of internet and computers. But unfortunately, many public sector banks in our country are either slow in providing innovative services to the customers or do not bother to find out the customer’s needs. They only act on getting a direction from the RBI, which alone with a little foresight can make the life of bank customers a little more comfortable and convenient in these trying times.
 

 (The author is a banking analyst. He writes for Money Life under the pen-name ‘Gurpur’.)

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COMMENTS

JIGNESH MANANI

4 years ago

As per Core Banking Solution (CBS), Customers are enables to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.

My account is at BOB – Amreli and presently I am living in surat so that I had deposited 1 cheque of transfer (BOB to BOB) in Bank of Baroda – Nanpura (Surat) branch.

It is informed to me that transfer cheques can be deposited either at issuer’s branch or in receiver’s branch. And bank staff denied to accept this cheque so that I had meet bank manager for this but he also answering same. I ask for reason why it is not accepted then he tells that this is as per bank’s rules. I ask to manager to give this statement in writing that transfer cheques can not be accepted for this reason and also ask to see me rules of bank for this but he denied to give and tells that “do whatever you can do, i will not accept this cheque”.

There is no meaning of CBS in this type of banking facilities.

Due to this type of wrong banking many customers are suffering a lot. This is done with me so many times so i had explore this issue at RBI level also.

I think this is due to there is no benefit to that branch for accepting transfer cheques of other branches.

JIGNESH MANANI

4 years ago

As per Core Banking Solution (CBS), Customers are enables to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.

My account is at BOB – Amreli and presently I am living in surat so that I had deposited 1 cheque of transfer (BOB to BOB) in Bank of Baroda – Nanpura (Surat) branch.

It is informed to me that transfer cheques can be deposited either at issuer’s branch or in receiver’s branch. And bank staff denied to accept this cheque so that I had meet bank manager for this but he also answering same. I ask for reason why it is not accepted then he tells that this is as per bank’s rules. I ask to manager to give this statement in writing that transfer cheques can not be accepted for this reason and also ask to see me rules of bank for this but he denied to give and tells that “do whatever you can do, i will not accept this cheque”.

There is no meaning of CBS in this type of banking facilities.

Due to this type of wrong banking many customers are suffering a lot. This is done with me so many times so i had explore this issue to the RBI level also.

I think this is due to there is no benefit to that branch for accepting transfer cheques of other branches.

MK Gupta

6 years ago

With ref to the opening statement that, “Almost all the banks in our country have introduced “core banking solutions” (CBS), under which, all the branches of each bank are centrally inter-connected”, it must be categorically noted that, as far as the SBI is concerned, this service is payable only at a price AND IS NOT FREE.

nagesh kini

6 years ago

The RBI certainly comes with some directions in spurts and jerks that are not just half baked but more half hearted.
The suggestions made by Gurpur are absolutely valid, coming ads they do from a veteran banker with international and equally vast domestic exposures.
There is no logic in levying any charges either for updating pass book at another branch of the same bank or withdrawing cash from another bank ATM.
All banks face long Qs for collecting cash and cheques for utility bill payments. None of them or the utilities seem to be keen on motivating them to opt for ECS. The banks can cut down on paper, entries postings, issuing of receipts and no persons in a crowded branch. The utilities in turn will benefit by instant collections that go to reduce their receivables in a jiffy!
Banks also complain that NEFT is a tedious exercise for them.
If only RBI could be more sensitive to the ground realities!

Polymer rupee notes: Slow or no progress?

As per the finance ministry, 5.21 lakh pieces of fake currency were detected in 2011-12, up from 4.35 lakh units in 2010-11 with the majority of them in Rs500 notes. When will the RBI take a call on polymer notes?
 
Recently we carried a story on the history of the pioneering effect by Australia in bringing out polymer currency notes couple of decades ago. (See: What about polymer rupee notes?)
 
Several countries followed suit including our neighbours such as Bangladesh, Nepal, and Sri Lanka besides a host of other countries like Singapore, Chile, Indonesia, Kuwait, Malaysia, New Zealand Mexico and Brunei.  It is not yet announced, but it appears some others are contemplating such a switchover from the Australian experience, which is only expected.
 
India has faced the problem of fake or counterfeit currency notes, mostly emanating from Pakistan, which is presumably used for terrorist activities and also to undermine the rupee for political reasons. After all, the Indian economy is strong and has a growing influence in international trade.
 
According to the information given by minister of state for finance, Namo Narayan Meena, as against the 4.35 lakh units of fake currency detected in 2010-11, for the period ending March 2012, counterfeit notes had increased to 5.21 lakh pieces, with the majority of them being found in Rs500 notes.  Even bankers, it was reported in the press, had failed to distinguish between the real and the fake ones, as the counterfeiters had almost reached the point of perfection in fooling people with their reproduction!
 
In fact, in order to counter this menace, a couple of months ago, it was reported that in a pilot scheme to introduce polymer rupee notes, an unannounced entry into the market was made in selected cities like Bhubaneswar, Jaipur, Kochi, Mysore and Sheila, to test the market or public reaction.
 
So far, however, the Reserve Bank of India (RBI) has not yet made its findings public on this score.  Nor do we know the quantum of such currency or the unit or face value.
 
But the crucial point is what is delaying the actual introduction of polymer rupee notes at least in the higher denomination of Rs500 or Rs1,000 as a start, as the majority of the counterfeit notes detected were in Rs500?
 
The government must take serious steps to implement the change. First is to establish a time frame to introduce the polymer notes and set a target date by which the entire paper currency system will be replaced. It must also target the date by which time the old paper currency will be totally withdrawn or even ‘demonetised’.
 
Second to gear up the production machinery that will have to be imported, most possibly from Note Printing Australia, a subsidiary of the Reserve Bank of Australia, so that indigenous supply can also be established. We must also investigate if other western or European countries are planning such a switch?
 
It may be recalled that Australia introduced the polymer notes in 1988 and completely switched over by 1996. The population and currency in circulation in Australia, during this period, have no bearing in size comparison with India, and it would probably take 10 to 15 years for such a switchover.
 
During this period, it will also give the opportunity for India to eliminate smaller coins, and replace the present Re1, 2, 5, 10 and 20 with coins, provided minting capacity is available, and possibly introduce a Rs25 polymer notes and maintaining a Rs10 polymer as well.
 
The third step is to ensure that we have the adequate supply of the required type of polymer from indigenous sources, machinery and technical know-how to make the required type of polymer sheets and obtain the technology to print them.
 
Fourth, by obtaining the collaboration from technical partner like Note Printing Australia, we must also be able to enter into long-term contract with them for continuous supply of our polymer currency notes to supplement our indigenous production efforts. It is a tall order but this can be achieved given the methodical way the RBI functions as an independent statutory body.
 
If and when these are done, the polymer rupee can become a totally convertible currency. These notes will have four times longer shelf life than the paper currency after which they can be recycled also.
 
It is time the RBI made some announcements in the progress of making the polymer rupee.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)

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SBBJ opens first Financial Super Market branch in Jaipur

The specialised banking outfit would primarily sell products like insurance, life and general, credit card and mutual fund instead of the traditional products of deposit and loan

Jaipur: The State Bank of Bikaner and Jaipur (SBBJ) on Thursday opened its first Financial Super Market branch in the city, aiming to sell non-standard products like insurance, credit card and mutual fund, reports PTI.

 

"This is a first-of-its-kind financial super market in the country. The focus of the well-equipped specialised banking outfit is primarily on selling products like insurance, life and general, credit card and mutual fund instead of the traditional products of deposit and loan," SBBJ Managing Director Shiva Kumar said.

 

The branch has been opened in a mall at Tonk Road.

 

"Cross selling of non-traditional banking products like insurance and mutual front is gaining momentum across the country and there is a need for specialised outfits to serve the needs of better educated diversifying customers," he said.

 

SBBJ Financial Supermarket will primarily sell and service products of its channel partners like SBI Life, Mutual Fund, SBI General and SBI Card, both across the counters and through electronic means.

 

The Channel partners have stationed their specialists at this Branch.

 

"Banking products are diversifying rapidly and the needs of customers are more varied now.

 

The attempt of SBBJ is an answer to the emerging needs of customers to approach a brick and mortar set up for services and resolution," he added.

 

"Customers desire a location to have the confidence of seeking resolution of any issue. The customer will get this satisfaction with the launch of this Financial Supermarket," Kumar said.

 

He informed that the Supermarket will not only serve the walk-in customers but also provide online and direct support to all its branches and customers across India.

 

"We expect to enhance our other income with the launch of the Financial Supermarket," he said.

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COMMENTS

Dev Balic

6 years ago

Good to know that the focus of the well-equipped specialized banking outfit is primarily on selling products like insurance.

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