In India the Negotiable Instruments Act was passed during 1881 which came into force wef March 01, 1882.
CHEQUE A cheque is (a) a bill of exchange (b) drawn on a specified bank and (c) not expressed to be payable otherwise than on demand. It includes electronic image of a truncated cheque and also an electronic cheque. From 1st april 2012 validity of cheque is 3 months.
Types of Cheque
1. Bearer Cheque or open Cheque When the words “or bearer” appearing on the face of the cheque are not cancelled, the cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to the bank for payment.
2. Order Cheque When the word “bearer” appearing on the face of a cheque is cancelled and when in its place the word “or order” is written on the face of the cheque, the cheque is called an order cheque. Such a cheque is payable to the person specified therein as the payee, or to any one else to whom it is endorsed (transferred).
3. Crossed Cheque Crossing of cheque means drawing two parallel lines on the face of the cheque with or without additional words like “& CO.” or “Account Payee” or “Not Negotiable”. A crossed cheque cannot be encashed at the cash counter of a bank but it can only be credited to the payee’s account.
4. Ante-Dated Cheque If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as “ante-dated cheque”. Such a cheque is valid up to 3 months from the date of the cheque.
5. Post-Dated Cheque If a cheque bears a date which is yet to come (future date) then it is known as post-dated cheque. A post dated cheque cannot be honoured earlier than the date on the cheque.
6. Stale Cheque If a cheque is presented for payment after 3 months from the date of the cheque it is called stale cheque. A stale cheque is not honoured by the bank.
7. A self cheque A self cheque is written by the account holder as pay self to receive the money in the physical form from the branch where he holds his account.
8. “A truncated cheque: It means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing. The expression “clearing house” means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.’
Parties of a Cheque :
There are three parties to the cheque
1. DRAWER : Account holder( to maker of cheque)
2. DRAWEE : The bank where the account is maintained.
3. PAYEE : The person named on the cheque.
BANKING OMBUDSMAN SCHEME : Banking ombudsman scheme was notified by R BI on 14 june 1995. But it is effected from 2006
1. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.
2. All Scheduled Commercial Banks, Regio nal Rural Banks and Scheduled Primary Cooperative Banks are covered under the Scheme.
3. The Banking Ombudsman does not charge any fee for filing and resolving customers’ complaints.
4. The maximum compensation which a BO can help a complainant to get is Rs. 10 lakhs.
5. If a complaint is not settled by an agreement within a period of one month, the Banking Ombudsman proceeds further to pass an award. Before passing an award, the Banking Ombudsman provides reasonable opportunity to the complainant and the bank, to present their case.
6. If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate authority who is the Deputy Governor of the RBI.
7. SBI highest number of complaints with Ombudsman filed against SBI as per the 2015-2016 report given by RBI on 9th dec 2016
PRIORITY SECTOR :It means provide credit to the needy sectors of the society. The sectors are:
o Agriculture
o Micro and Small Enterprises
o Education
o Housing o Export
o Weaker Sections
o Social Infrastructure
o Renewable Energy
Targets under PSL Agriculture :18 percent of ANBC(Adjusted Net Bank Credit). Out of this 18 percent, a target of 8 percent of ANBC is for Small and Marginal Farmers, to be achieved in a phased manner i.e., 7 per cent by March 2016 and 8 per cent by March 2017. Farmers with landholding of up to 1 hectare are considered as Marginal Farmers. Farmers with a landholding of more than 1 hectare and up to 2 hectares are considered as Small Farmers.
Micro Enterprises :
Weaker Sections : 10 percent of ANBC. 7.5 percent of ANBC has been prescribed for Micro Enterprises, to be achieved in a phased manner i.e. 7 percent by March 2016 and 7.5 percent by March 2017. Overall PSL Target for Domestic Bank/Foreign Bank with more than 20 Branches: 40 percent of Adjusted Net Bank Credit. Overall PSL Target for Foreign Bank with less than 20 Branches: 40 percent of Adjusted Net Bank Credit to be achieved in a phased manner.
2015-16 ———-32
2016-17 ———-34
2017-18 ———-36
2018-19 ———-38
2019-20 ———-40
MSME ACT 2006 Manufacturing sector (Goods)
Micro Enterprises ——–Do not exceed 25 lakh
Small Enterprises ——— More than 25 lakh
Should not exceed 5 Cr
Medium Enterprises——- More than 5Cr
Should not exceed 10 Cr
SERVICE SECTOR :
Micro Enterprises——– Do not exceed 10 lakh
Small Enterprises ——— More than 10 lakh
Should not exceed 2 Cr
Medium Enterprises ——- More than 2Cr
Should not exceed 5 Cr
– For Renewable Energy, bank loans up to a limit of Rs.15 crore to borrowers for purposes like solar based power generators, etc. For individual households, the loan limit will be Rs.10 lakh per borrower.
– For Housing, banks can provide loans to individuals up to Rs. 28 lakh in metropolitan centres (with population of ten lakh and above)and loans up to Rs. 20 lakh in other centres for purchase/construction of a dwelling unit per family
– Export credit will be allowed up to 32 percent of ANBC for Foreign banks with less than 20 branches in India.
– For Education, banks can provide loans to individuals for educational purposes including vocational courses upto Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad.
– Limits under Social infrastructure Bank loa ns up to a limit of ?5 crore per borrower for building social infrastructure for activities namely s chools, health care facilities, drinking water facilities and sanitation facilities in Tier II to Tier VI centres.
RBI revises priority sector lending norms for RRBs :
Seeing the growing significance of RRBs in pursuit of financial inclusion agenda, it has been decided to revise the priority sector guidelines for RRBs. Some of the salient features of the guidelines are as following:- The revised guidelines will be operational with effect from January 1, 2016.
i. Targets : 75 per cent of total outstanding to the sectors eligible for classification as priority sector lending.
ii. Categories of the Priority Sector: Medium Enterprises, Social Infrastructure and Renewable Energy will form part of the Priority Sector, in addition to the existing categories, with a cap of 15 per cent of total outstanding.
iii. Agriculture: 18% per cent of total outstanding should be advanced to activities mentioned under Agriculture.
iv. Small and Marginal Farmers: A target of 8 percent of total outstanding has been prescribed for Small and Marginal Farmers within Agriculture.
v. Micro Enterprises: A target of 7.5 per cent of total outstanding has been prescribed for Micro Enterprises.
vi. Weaker Sectors: A target of 15 per cent of total outstanding has been prescribed for Weaker Sections.
vii. Monitoring: Priority Sector Lending will be monitored on a quarterly as well as annual basis
1.TREASURY Bills : These are one of the safest money market instruments as they are issued by central govt in 1917.At present 3 types of treasury bills. They are 91-Day, 182-Day, 364-Day. These are available for a minimum amount of Rs.25,000 and multiples of Rs.25,000.
2. CERTIFICATE OF DEPOSIT(CD) : It was introduced in 1989 to enable the banking system to mobilize bulk deposits from the market. Who can issue S c h e d u l e d commercial ban ks (except RRBs) & All India Financial Institutions within their ‘Umbrella limit’. CRR / SLR Applicable on the issue price in case of banks Investors Individuals (other than minor), corporations, companies,trusts, funds, associations etc
Maturity Min: 7 days Max: 12 Months (in ca se of FIs minimum 1 year and maximum 3 years
Amount Min : Rs. 1 lac, beyond which in multiple of Rs. 1 lac Int. Rate Market related. Fixed or floating Loan Against collateral of CD not permitted Nature Usance Promissory note. Can be issued in Dematerialisation form only wef June 30, 2002
COMMERCIAL PAPER :
i. CP introduced during 1990, is a short term money market instrument issued as an unsecure d usance promissory note and privately placed.
ii. Who can issue Commercial paper (CP): Companies, primary dealers (PDs) and all-India financial institutions (FIs).
iii. A company is eligible to issue CP if:
(a) Its tangible net worth, as per latest audited balance sheet, is not less than Rs. 4 crore.
(b) Sanctioned working capital limit by bank/s or all-India financial institution/s;
(c)The borrower accounts are classified as a Sta ndard Asset by financing bank/s/institution/s and ‘
(d) Minimum credit rating from SEBI approved credit rating agency (CRA) is A3. Rating should not be due for review.
iv.Maturity: Min 7 days & max upto one year v. Amount: Min Rs.5 lakh or multiples thereof.
[1] IFSC (Indian Financial System Code): Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system. This is an 11 digit code with the first 4 alpha characters representing the bank, The 5th character is 0 (zero).and the last 6 characters representing the bank branch.For ex: PNBN0014976 :
i. First 4 character PNBN – refers to Punjab National Bank.
ii. 0 is a control number. iii. last six characters (014976) represents the PNB branch kurshi Road, Lucknow.
[2] MICR – Magnetic ink character Recognition MICR is 9 digit numeric code that uniquely identifies a bank branch participating in electronic clearing scheme. Used to identify the location of a bank branch. 1st 3 City , middle 3 Bank 3 , last 3 Branch The MICR code is allotted to a bank branch is printed on the MICR band of cheques. MICR used for electronic credit system.
[3] SWIFT Code : Society for Worldwide Inter bank financial telecommunication India was 74th Nation to join SWIFT Network. SWIFT Code is a standard format of bank Identifier code. This code is used particularly in International transfer of money between banks. A majority of FOREX related message are sent to correspondent banks abroad through
SWIFT. SWIFT Code consist 8 or 11 character when code is 8 digit, It is referred to primary office 4 – bank code – 2 – country code 2 – location code – 3 – branch code (optional)
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