Banking Ombudsman and KYC

Sakshi Education

Banking Ombudsman is an independent, expeditious and inexpensive forum to aggrieved bank customers. RBI introduced this system under powers granted by the Banking Regulations Act 1949. Chief General Manager or a General Manager of RBI will be appointed as Banking Ombudsman for a term not exceeding 3 years at a time.

The Ombudsman takes care of the grievances of SERVICE DEFICIENCIES IN BANK INDUSTRY, such as delayed collection of cheques, remittances, wrong debit/credit in deposit accounts and other ancillary/ advanced issues such as including fair practice code, credit card etc. and in loans - non-observance of RBI directives, delay in sanction or disbursement, time schedules are included.

The aggrieved customer can lodge his complaint in electronic mode too. Before lodging a complaint with Ombudsman the Customer should complain to the concerned bank first and wait for a month.

The period within which a customer can lodge a complaint with Ombudsman is one year from the date of cause of action. The maximum award that will be given by Ombudsman is up to Rs.10 lakh. Any party can file appeal within 30 days on receiving award or the Ombudsman rejecting his complaint to appeal authority. If the appeal is by the bank, it should be made with approval of CMD or ED or CEO only. One of the Deputy Governors will be appointed as Appellate Authority, in case the award given by the Ombudsman is not acceptable to the parties.

Types of Complaints:

Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.
Non-acceptance, without sufficient cause, of coins tendered and for charging of commission for this service.
Non-acceptance without sufficient cause of small denomination notes tendered for any purpose and for charging of commission for the service.
Failure to issue or delay in issue of drafts, pay orders or banker’s cheque.
Non-adherence to prescribed working hours.
No payment or delay in payment of inward remittances.
Failure to honor guarantee or letter of credit commitments.
Failure to provide or delay in providing a banking facility promised in writing by a bank or its direct selling agents.
Delays, non-credit of proceeds to parties’ accounts, non-payment of deposit or non-observance of the Reserve Bank directives, if any applicable to rate of interest on deposits in any savings, current or other account maintained with a bank.
Delays in receipts of export proceeds, handling of export bills, collection of bills etc. for exporters provided the said complaints pertain to the Banks operations in India.
Refusal to open deposit accounts without any valid reason for refusal.
Levying of charges without adequate prior notice to the customers.
Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/debit card operations or credit card operations.
Non-disbursement or delay in disbursement of pension to the extent the grievance can be attributed to the action on the part of the Bank concerned but not with regard to its employees.
Refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government.
Customers should have complained to the concerned Bank first and wait for one month. Complaint to Ombudsman can be writing or in electronic mode.

Award:
Ombudsman can give maximum award up to Rs.10 Lacs.

Appeal:
Any party can file appeal within 30 days on receiving appeal award or the Ombudsman rejecting his complaint to Appellate authority. If the appeal is the bank, it should be made with approval of CMD or ED or CEO only.

Know Your Customer (KYC)
Dated August 16, 2002 on the guidelines on 'Know Your Customer' norms, KYC guidelines were issued by RBI to check money laundering i.e. using of banking channel for financial frauds and conversion of illegal funds into legal funds.

Suitable Guidelines were issued based on the recommendations of Financial Action Task Force (FATF) on Anti Money Laundering (AML) Standards and on combating financing of terrorism.

Under KYC norms, banks are expected to verify the identity proof and address proof like Passport, Pan Card, Voter card, Driving license, Identity card to bank’s satisfaction, Letter from recognised public authority.

Banks should frame their KYC policies incorporating the following four key elements:
(i). Customer Acceptance Policy
(ii). Customer Identification Procedures;
(iii). Monitoring of Transactions; and
(iv). Risk management.

Liberalised KYC Norms: Simplified criteria of identification and introduction to be followed in small deposit accounts where the debits should not exceed Rs.50,000 and Credit transactions should not exceed Rs 1.00 lakh and total transactions in a year does not exceed Rs. 2 lakh (credit transaction should not exceed Rs.1lakh). In these cases, a/c can be introduced by person having satisfactory accounts for 6 months and self certification on address along with photograph.

Concepts of PAN, GIR and TAN
PAN is Permanent Account Number. PAN is being allotted to the Individuals by Income Tax Department. It is a 10 Digit Alphanumeric number, which consists of numbers and alphabets. Now PAN is mandatory for all existing Income tax assesses and future assesses and those who enter into financial transactions on behalf of self or on behalf of others. Form for applying PAN is Form 49A. One person would be given only one PAN, if issued it is permanent even if the person changes his/her profession or even change of address.

GIR means General Index Register. GIR Number, which used to be allotted by the Income Tax department for Assesses in yester years. This Number has been replaced by PAN Number and GIR Number system is now obsolete.

TAN means Tax Deduction & Collection Account Number. This is also a 10 Digit Alphanumeric number. It must be obtained by all the persons and organisation who are responsible for deducting Tax or collecting tax and remitting the same to the Income Tax Department. All employers who deduct tax at source from employee’s salaries also must obtain TAN number. TAN number shall be quoted in all TDS/TCS returns. The applicants have to submit Form 49B for allotment of TAN. Even if any Government Office deducting TDS it also shall apply for TAN, Hence all Bank branches shall individually apply for TAN.

Concept of Form 15G and Form 15H
If a Depositor is not a Senior Citizen and his Taxable Income is within the exempted limits, then he/she has to submit Form 15G to the Bank for not deducting tax at source. In the same case, if the Depositor is a Senior Citizen then he has to submit Form No.15H. In case of interest paid/payable amounts are exceeded the Tax exempted limited then Form 15G and Form 15H will not be accepted.

As per the budget pronouncements w.e.f 01. 04. 2010, depositor must submit PAN number otherwise the rate of TDS will be at 20%. If a Depositor submitted Form 15G & 15H but PAN number is not submitted, then the Bank has to deduct Tax at the rate applicable or at 20% whichever is higher.
Need for Form 60 and Form 61 while opening accounts
While opening an account, if the prospective customer does not have PAN number, then he/she has to submit a declaration in Form 60. In case, they get income only from Agricultural sources, then he/she shall to give a declaration in Form 61.

FEATURES OF NOMINATION ACT

Nomination is available for Deposit accounts and Safe custody articles and Lockers.
Nomination is available only for deposit accounts and not for loan accounts.
Nomination is available for all types of deposit accounts irrespective of nomenclature.
Nomination is available for accounts which are in the name of individuals in their individual capacity, i.e., it is not available for Partnerships, Trust, Ltd. company, Club etc.
Nomination is available to a sole proprietor provided the sole proprietor is an individual.
Nomination is available for joint account holders too.
Nomination can be made at any time during the existence of deposit in the bank. It can also be made available for previous account.
Nomination continues on renewal of term deposit unless it is cancelled or changed.
Nominee has to be an individual; hence a Firm, Club, Company, Trust etc cannot act a nominee.
In Nomination Act, the nominee is treated as an agent for receiving money. He is not the owner. He is duty-bound to pass on the money to the legal heir. So the legal heir can claim money from the nominee. But the bank on payment to nominee is fully discharged.
Nomination facility is obligatory for banks.
On death of a person, if six months are lapsed and no person turns up, the bank has to inform the nominee about nomination in case of deposit account. This information shall be passed within three months in case of locker account.
Nomination is available for both residents as well as nonresident accounts.

Banker-Customer Relationship
The relationship between banker and customer differs depending on the transaction.

Transactions	Banker	Customer
Acceptance of deposit	Debtor	Creditor
Loan	Creditor	Debtor
Collection of cheque/Sale of securities Agent Principal
On behalf of customer
Purchase of DD Agent Principal
Payee of DD and issuing bank Beneficiary Trustee
Safe custody of article	Bailed	Baylor
Safe deposit of locker	Lesser	Lessee

PRACTICE QUESTIONS

Banking Ombudsman is appointed by:
A. Reserve Bank of India
B. Government of India
C. Concerned State Govt. where RBI office is located
D. Finance Minister
E. None of the above
Before approaching Ombudsman what should the complainant do?
A. Take up the matter with State Government
B. Take up the matter with concerned Bank Branch within 30 days of cause of action
C. Approach Lok Adalat
D. Can directly approach Banking Ombudsman
E. Any of the above
What is the maximum period within which the aggrieved customer can approach Ombudsman?
A. Within 2 year
B. Within 1 year
C. Within one month
D. No such limitation period
E. None of the above
What is the maximum amount, for which the Award can be given by Ombudsman?
A. Rs 1,00,000
B. Rs 2,00,000
C. Rs 5,00,000
D. Rs 10,00,000
E. No Limit
Who will be appointed as Banking Ombudsman?
A. CGM or GM of RBI
B. Deputy Governor of RBI
C. Governor RBI is an ex-officio Ombudsman
D. Finance Secretary
E. None of the above
KYC norms are liberalised in case of following accounts:
A. Current Account
B. Savings Account
C. Term Deposit Account
D. No Frills Account
E. None of the above.
The KYC does not include obtaining the following :
A. Identity Proof
B. Address Proof
C. Customer Profile
D. Vehicle details of the customer
E. None of the above
AML Stands for
A. Anti Monitory Limit
B. Anti Money Laundering
C. Always money laundering
D. Anytime Money Laundering
E. None of the above
KYC –Know Your Customer is to identify the Customer, whereas AML- Anti Money Laundering is to identify the Source of Income:
A. False
B. True
C. True only in case of small amounts
D. Not necessary in all cases
E. Any of the above
If a Depositor is not a Senior Citizen and his Taxable Income is within the exempted limits then he has to submit ---------------- to the Bank for not deducting tax at source.
A. Form 15G
B. Form 15 H
C. Form 61
D. Form 60
E. None of the above
If prospective customer’s income comes from only Agriculture, then he has to give a declaration in Form 61.
A. True
B. False
C. He has to submit form 60
D. No such requirement
E. None of the above
Nomination is available for
A. Deposit accounts
B. Safe custody articles
C. Lockers.
D. Partnership firms
E. Only A B C
Nomination can be given only for:
A. Individuals
B. Joint Individuals
C. Limited Companies
D. Only A, and B
E. None of the above
Money deposited in a bank that cannot be withdrawn for at fixed period of time is known as _____:
A. Term Deposit
B. Checking Account
C. Saving Bank Deposit
D. No Frills Accounts
E. Current Deposit
With reference to a cheque which of the following is the ‘drawee bank’?
A. The bank that collects cheque.
B. The payee’s bank.
C. The endorsee’s bank.
D. The bank of the Drawer of the Cheque
E. None of the above
Base Rate is the rate below which no Bank can allow their lending to anyone. Who will fix this ‘Base Rate’ for Banks?
A. Individuals Banks Board
B. Ministry of Commerce
C Ministry of Finance
d) RBI
e) Interest Rate Commission of India
Expand NPA.
A. No Provision Account
B. Non Performing Asset (An asset which ceases to generate income)
C. No Profit Account
D. Non-Personal Accounts
E. None of the above
Finance Ministry advised RBI to allow common ATMs to be owned and managed by Non Banking Institutions. Such ATMs are called:
A. NBFC ATMs
B. Off Site ATMs
C. Third Party ATMs
D. White Label ATMs
E. None of the above
An ECS transaction is bounced and you are unable to recover money from your customer. Under which Act criminal action can be initiated?
A. Indian Penal Code
B. Negotiable Instrument Act
C. Criminal Procedure Code
D. Payment and Settlement Act
E. Indian Contract Act

(Note: ECS used for Electronic Clearing of Cheques – Debit ECS for Collection of loan installments and Credit ECS for payments like Dividends, Salaries etc.)

1. What is CTS
A. Cash Transaction system (in banks)
B. Cheque Transfer System
C. Cheque Truncation System
D. Cash Transfer System
E. None of the above

(CTS mean Cheque Truncation System –instead of sending cheques physically to clearing house, only scanned images will be sent in this system. It is also called Image Based Clearing. This system already started in many states of India. It reduces the collection of cheques time considerably and is advantageous to the customers.)

ANSWERS