Master circular on Term Deposits Dated 25-Aug-2010

1. Master circular on Term DepositsDated 25-Aug-2010 By Anitha B Aruna R Laxmi G

2. General Guidelines Term range - 7 days to 120 months Minimum – Rs.1000, Maximum – No Cap Acknowledge only by preprinted TDR (except for authorised branches) Revenue stamp – When payment (Int/Principal) not by Direct Credit TDR is Not Transferable Presenting TDR for payment at a different office than the Issuing one

3. Customer Types • Deposits in Joint Names • ‘either’/‘both’/‘former’/‘later’ or survivor’, any one/two or survivors or survivor’, ‘all or survivors or survivor’, etc. Adding new name(s),Deleting existing names etc. • Authenticating the changes • Death of one/more of the joint holders

4. Payment of Interest • Normal Frequency – Quarterly • Half yearly/Monthly(discounted) – On Request • Record interest payments in TDR • Remittance of interest • Personal Collection – after obtaining discharge • Payment by banker’s cheques/remittance to accounts in a different branch

5. Repayment/Reinvestment • Instructions for disposal to be obtained at the time of opening a/c • Automatic renewal for similar period in the absence of demand to the contrary – Goiporia Committee • Deposit transfer to Overdue Term Deposit A/c • Attachment by Court/IT • Deceased Depositor • Deposit issued in the name of Govt. Departments or Public Bodies.

6. Repayment/Reinvestment (Contd.) • Premature withdrawal – • No inherent right to claim • Interest payable for entire period on Penal rates • Extension of Maturity Period of Term Deposits • by treating the original deposit as paid before maturity sans the penal provisions • Interest payments/recoveries • Application & Additional notes

7. Transfer of deposits Receipt of written request Date of transfer recorded on the reverse The receipt should be crossed with the words ”Transferred to…… branch” Joint holders – all must sign the letter of request for transfer Deposits that are subject to attachment cannot be transferred

8. Duplicate receipt The depositor should sign a letter of indemnity on COS 14 No charges

9. Death of a depositor Can be refunded before maturity to holders of legal representation Alternatively, the names of the claimants maybe recorded on the receipt and payment made on due date Joint holders – same as above if no instructions reg payt to survivors is recorded. Loans given to survivor in special cases

10. Death of a depositor contd… • Interest may be paid for the overdue period. • The interest will be lower of : • the rate mentioned in the original receipt/advice • The rate on date of maturity for fresh deposit for the overdue period. • Splitting of receipt not construed as premature closure provided terms don’t change. • In case of joint holders also, splitting may be allowed provided the amount and period don’t change.

11. Deposits in the name of minors Issued in the names of guardians on behalf of minor. Maximum amount Rs.200000 Above Rs.200000 – undertaking by guardian that it will not be withdrawn till attaining majority. In sole name - above 10 yrs, ceiling laid down by controlling authority. Instruction by minor to pay to third party not accepted.

12. Deposits by illiterate persons Deposits accepted on same terms as for other depositors For deposits >3yrs, photos renewed after every 3 years. CO has to ascertain the details provided from the depositor.

13. Nomination Made by depositor/depositors To one/ more individuals Prescribed form DA1 Nominee-minor appoint a non minor Receive amount on behalf during minority Nomination cancellation /variation

14. Ponder….. • Mr. A opens a TDR in branch Y for 5 lacs for a duration of 3 years. • At the end of three years he does not encash the receipt • After a few months he comes for renewal of his TDR • The SWO is giving a new nomination form.

15. Discretion to pay additional interest on Bank’s staff Differential +1% per annum over and above interest for general public if: a member/retired member of the Bank’s staff, either singly/jointly with any member or members of his /her family spouse of deceased- member/ retired member of the bank’s staff Association/fund, members of which are members of the Bank’s staff

16. Prerequisites & other info A declaration -the depositor the monies deposited / to be deposited into such accounts belong to the depositor. No premature penalty levied from staff and SBI pensioners. Interest rate to be paid on premature withdrawal of term deposits by staff and SBI pensioners will be same as applicable for the period deposit remained with the Bank.

17. Discretion to pay additional interest to senior citizens Bank allows additional interest to senior citizens (60 years and above) over and above the normal card rates. 0.5%

18. Ponder…. • Mr. A is a retired AGM of SBI • He was in services till 2004 • He approaches branch B for opening a TDR for 1000 days (Normal card rate 7.25%) • What is the applicable rate of interest.

19. Ponder… • Retired staff member- a senior citizen, benefit of higher interest as admissible to senior citizens -over and above +1%. 7.25% + 1%+ 0.5% What if he has moved permanently with his son who is a doctor in Los Angeles?

20. Payment of interest on accounts frozen by bank Reserve Bank of India stipulation A request letter may be obtained from the customer for renewal for a term equal to the original term, on maturity. No new receipt is required to be issued. However, suitable note may be made regarding renewal in the account. Renewal of deposit may be advised by registered letter / speed post /courier service to the concerned Government department under advice to the depositor. In the advice to the depositor, the rate of interest at which the deposit is renewed should also be mentioned.

21. Term deposits and Deposits at Call In the names of Government officials/departments issued @ request of Contractors and traders moneys will stand entirely at the disposal of the beneficiaries (Gov) should be expressly brought out in the relative applications for the issue of such receipts on the reverse or in an annexure to form C.O.S. 402 or C.O.S. 100R,as the case may be, duly signed by the contractors or traders applying for the deposit receipts. The receipts will invariably be issued in the names of the government departments or officials or public bodies, A/c …………….. (Name of the depositor).

22. Repayments -Term deposits and Deposits at Call During repayment - ensure that the receipt is discharged by the government official concerned A letter to the Bank permitting the refund of the amount to the contractor or trader. Also when a contractor or trader approaches for premature repayment of a deposit / for an advance there against Government departments sometimes refuse to discharge deposit receipts which are eventually not lodged with them. Refund of the amount to the depositor in such cases -against a letter from the government department concerned disclaiming their interest in the deposit if considered necessary, an indemnity from the depositor. Invariably refer to the controlling authority for approval.

23. Ponder… • RR constructions has bagged a tender for the construction of bicycle lane in Annanagar connecting all the lanes leading to schools in the area • The partner of the firm Mr.A comes to Anna nagar west branch & opens a TDR for 75 lacs in the name of PWD, Annanagar for a perid of 3 months in • After two months he approaches our PBB Annanagar branch for closure of the account and transfer it to their CA in Vadapalani branch

24. Bank’s Reinvestment Plan to accept amounts in certain round sums for specified periods in special term deposits for automatic reinvestment the receipt - a clause to the effect that the benefit of reinvestment of interest at quarterly intervals will accrue to the depositor. Loans against a special term deposit receipt - stipulated margin being retained on the principal amount. Premature re-payment of a depositakin to TDR, the difference between the aggregate provision made and the actual interest payable being recredited to interest account.

25. TDS Provisions Tax liability on interest of, deposits will arise for the year in which it accrues. Tax is deducted when the total interest paid during a year to a depositor by a bank branch exceeds the prescribed limit (presently Rs 10,000/- in a financial year). TDS should be deducted as per guidelines issued by Govt. of India.

26. IBA Instructions Display of TDS provisions prominently Educating customers Advising depositors - requirements of submission of form 15H/15G. Making 15G/15H available Submission of consolidated certificate at the end of the financial year

27. Ponder… • Mr. A has opened a STDR for 75,000 in our Nungambakkam branch for a period of 5 years on 15 sep 2008 • He duly filled Form 15G and gave it to the SWO • He went on vacation to the Hawaii islands for the summer season in 2010 and has just returned back . • He visited the branch for getting his account statement and enquired about the accumulated interest in his STDR

28. Cases • A TDR is standing in the name of XYZ. A request is received signed by all the depositors to substitute the name of Y and Z with A & B. The bank accedes. Sometime later, request is received signed by X,A&B to substitute the name of X with C. Can this be acceded to? ANSWER

29. Cases 2. A and B(wife of A) maintain a TD for Rs.100000 payable to either or survivor. A dies before due date of deposit. .A week before the due date, C’s lawyer has sent notice instructing the bank not to pay the deposit to B. The lawyer has alleged that the amount belongs to C, who is the real wife of A. He also stated that he will be arranging for a court order shortly. Discuss ANSWER

30. Cases • A had opened a fixed deposit account and a nomination was inadvertently made in favor of his 2 wives. Subsequently A died and both widows put up a claim on the bank. Bank refuses on ground that only one can be nominated. What is the legal position of the banker? Can he refuse payment? ANSWER

31. Cases 4. A TDR for one year has been issued on 1st Jan to A,B &C payable to anyone or survivor. A dies on 9th May, B on 30th May and C on 1stJan next year, the due date. Examine who were/was entitled to the deposit on 9th May, 30th May and on the 1st of Jan? ANSWER

32. BREAK YOUR HEAD!!!

33. THANK YOU!