Policy on Pricing of Liability Products

Transcription

1 Policy on Pricing of Liability Products 1. Preamble One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area of the regulatory framework for banking in India and this has been enshrined in the Banking Regulation Act, The Reserve Bank of India is empowered to issue directives / advices on interest rates on deposits and other aspects regarding conduct of deposit accounts from time to time. With liberalization in the financial system and deregulation of interest rates, banks are now free to formulate deposit products within the broad guidelines issued by RBI. This policy document on Pricing of Liability outlines the guiding principles in respect of pricing of various liability products offered by the Bank and terms and conditions governing the payment of Interest on Liability Products. Typically, liability products include deposit products, eg; current deposits, savings deposits, money market accounts and certificate of deposits (CDs). The document aims at dissemination of information with regard to various aspects of acceptance of deposits from the members of the public, conduct and operations of various deposits account, payment of interest on various deposit accounts, closure of deposits account etc., for the benefit of customers. It is expected that this document will impart greater transparency in dealing with the individual customers and create awareness among customers of their rights. The ultimate objective is that the customer will get services they are rightfully entitled to receive without demand. While adopting this policy on Pricing of Liability, the bank reiterates its commitments to individual customers outlined in the code of Banks Commitment to Customer adopted by the banks in respect of payment of Interest on deposits. This document is a broad framework under which the rights of common depositors are recognized. Detailed instructions on operational / payment of interest, on various deposit schemes and related services will be issued from time to time. 2. Product Pricing: In a deregulated environment pricing of liability as well as asset products is essential to ensure that the required spread is realized. In a highly competitive scenario, the interest rates on the Bank s various deposit products generally depends on market conditions, the Reserve Bank of India s policies, Competitor Bank s interest rates, and the Bank s need for mobilization of funds. Pricing of liability products, where the Bank has the option of pricing will be done based on the Bank s asset-liability mix, cost of funds, and the opportunities available for the Bank to deploy funds with a positive spread and future interest rate outlook. The pricing model will also look into reducing the liquidity risks. 3. Deposit Policy of the Bank: Bank s policy relating to opening and maintenance of deposit accounts, revision in interest rates and the various charges on such accounts and the revisions in such policy and the charges, will be informed to the depositors in the following manner. 63

2 a. As required by Law, while opening the various deposit accounts, we will satisfy ourselves about the identity, including verification of address of a person/s seeking to open an account, to assist in protecting the prospective customers, members of the public and ourselves against fraud and other misuse of the Banking system duly observing the Know Your Customer [KYC] guidelines of RBI. b. The terms and conditions for opening a deposit account and the charges that will be levied on the account will be given in the account opening form for the information of the depositors before opening the account. c. In case of any revision the revised policy/requirements and revised charges will be displayed in a prominent place in branches. d. Additionally, depositors will be informed about the revised policy/requirement/ charges either through press releases or advertisement in print media and or by displaying in Bank s web site 4. Interest Payments and Charges: Interest shall be paid on saving account / term deposit at the rates of interest as decided by the Bank within the general guidelines issued by the Reserve Bank of India from time to time. In terms of Reserve Bank of India directives, interest shall be calculated at quarterly intervals on term deposits and paid at the rate decided by the Bank depending upon the period of deposits. In case of monthly deposit scheme, the interest shall be calculated for the quarter and paid monthly at discounted value. The interest on term deposits is calculated by the Bank in accordance with the formulae and conventions advised by Indian Banks Association. The rate of interest on deposits will be prominently displayed in the branch premises and website of the Bank. Changes, if any, with regard to the deposit schemes and other related services shall also be communicated upfront and shall be prominently displayed. The Bank will also publish the same in the Banks website for the information of the general public and customers. The Bank has statutory obligation to deduct tax at source if the total interest paid / payable on all deposits (where ever TDS is applicable) held by a depositor exceeds the amount specified under the Income Tax Act. The Bank will issue a tax deduction certificate (TDS Certificate) for the amount of tax so deducted. The depositor, if entitled to exemption from TDS can submit declaration in the prescribed format at the beginning of every financial year. 4.1 Payment of interest on Frozen accounts In the case of Term Deposit Accounts of customers frozen by the orders of the enforcement authorities, the following procedure is followed in payment of Interest. a. A request letter will be obtained from the customer on maturity for renewal of the deposit for further term for which the deposit has to be renewed In case the depositor does not exercise his option of choosing the term for renewal, bank may renew the same for a term equal to the original term. 64

3 b. No new receipt is required to be issued. However, a suitable note should be made regarding renewal in the deposit ledger. c. Renewal of deposit will be advised by registered letter / speed post / courier service to the concerned Government department under advice to the depositor indicating the period, rate of interest at which the deposit is renewed. d. If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal should be done from the date of maturity. If it exceeds 14 days, bank will pay interest for the overdue period as per the policy adopted by them, and keep it in a separate interest free sub-account which should be released when the original fixed deposit is released. 4.2 Payment of Interest on Premature withdrawal of term deposit The Bank on request from the depositor, allow withdrawal of term deposit before completion of the period of the deposit agreed upon at the time of placing the deposit unless other wise restricted in the scheme for such pre mature withdrawal. The rate of interest applicable for the prematurely closed deposits shall be as per the prevailing Bank guidelines. The Bank shall declare the penal interest rates to be collected as per the policy for premature withdrawal of term deposit. 4.3 Payment of Interest on Premature renewal of term deposit In case the depositor desires to renew the deposit by seeking premature closure of an existing term deposit account, the bank will permit the renewal at the applicable rate on the date of renewal, provided the deposit is renewed for a period longer than the balance period of the original deposit. The rate of Interest for the period up to the date of renewal shall be the rate applicable for the period for which the deposit had already run prevailing on the date of opening the original deposit account with out applying penalty. Premature renewal can be done only from the date of presentation of the deposit for such renewal. 4.4 Payment of Interest on Renewal of Matured/Overdue term deposits If the depositor approaches for renewal of matured term deposit, following procedure is adopted for payment of interest for the overdue period. On the portion of overdue domestic term deposit (in part or full) renewed as fresh deposit SIMPLE INTEREST shall be paid for the actual overdue period the deposit remained and renewed with the bank at the lesser of the following two interest rates: a. The rate of interest applicable for the period for which the subject overdue deposit has remained with the Bank, as prevailing on the date of maturity of overdue deposit. OR b. The rate of interest applicable for the period for which the subject overdue deposit has remained with the Bank as prevailing on the date of renewal as fresh deposit. If the fresh deposit, so made / renewed is prematurely withdrawn before completion of 7 days from the date of renewal, such fresh deposits will not earn any interest. Further, the simple interest paid for the overdue period for such deposits should also be recovered. 65

4 4.5 Payment of interest on deposits maturing on a holiday: In respect of a term deposit maturing for payment on a holiday or a nonbusiness working day, bank would pay the interest for the intervening holidays irrespective of whether the depositor seeks repayment on the succeeding working day or later on. 4.6 Interest on deceased depositors account: In the case of a term deposit standing in the name/s of a deceased individual depositor, the interest on such deposits is paid as follows: a. At the contracted rate of the deposit if the deposit is paid on the maturity date. b. In respect of the deposit of the deceased closed before maturity and repaid to the legal heirs/ representatives of the deceased depositor, interest is payable at the rate applicable for the period for which the deposit actually remained with the bank without charging premature closure charges. c. In the case of death of depositor before maturity date and amount is claimed after the date of maturity, interest is paid at contracted rate till the date of maturity and from the date of maturity to the date of payment, simple interest is paid at the applicable rate operative on the date of maturity, for the period the deposit remained with the bank beyond the date of maturity. d. In the case of death of the depositor after the date of maturity of the deposit, interest is paid at Savings Bank rate operative on the date of maturity from the date of maturity till date of payment. 4.7 Charges for maintaining and operating the deposit account: While there is no charge for maintenance of term deposit accounts, incidental charges as decided by the Bank from time to time are payable on operating accounts viz. Savings Bank accounts and Current Deposit accounts, such as request for cheque books, issue of duplicate pass book/statement of accounts, etc. The Bank will also publish the Service Charges on liability products, in the Banks website for information of the general public and customers. 5. TYPES OF DEPOSITS AND INTEREST PAYABLE 5.1 Current Deposits Current account is a business account maintained with the Bank for the purpose of receiving and making payments arising out of business transactions by the way of cash, clearing and transfer of funds. Current Accounts are designed to meet the needs of such sections of the public who operate their account regularly and frequently. i.e. Traders, Businessmen, Corporate bodies or the like who receive money and make payments very often. Current accounts are suitable to such category of customers as there are no restrictions on the number of withdrawal or deposit. Current account can be opened by individual / HUF, a proprietary concern, a partnership firm, a company, a trust, a local body, Govt. department by signing prescribed account opening form(s) and with proper introduction, identification, address proof etc., accompanied by prescribed documents. Interest Payable: No interest is paid on credit balance kept in Current Account. 66

5 Charges: a. Service charges are levied for Ledger folio used, Cheque books issued, Non maintenance of minimum balance, Request for chequebooks, Return of cheques, noting of stop payment instructions / missing blank cheque leaves, entertaining ECS facility etc. b. Cash deposited into the account, over and above the prescribed limit, shall attract service charges as fixed by the Bank from time to time. c. If the account is closed incidental charges will be recovered (except where premature closure of an account is due to the death of the account holder, transfer to another branch, transfer for term deposits or for opening another joint account). 5.2 Savings Bank Deposits: Savings Bank account, as the very name suggests, is intended for savings for the future. These accounts can be opened by eligible persons and also certain organizations and agencies (as approved by the RBI). There are no restrictions on the number and amount of deposit that can be made on any day. Deposit to the account shall be in multiple of Re.1/- subject to minimum of Re.1/- per occasion. Interest Payable: a. Balance kept in Savings Bank account earns interest at rates determined by the Bank from time to time. (With effect from October 25, 2011, RBI has deregulated Saving Bank account interest rates and now banks are free to decide the same within certain conditions imposed by RBI.) b. Interest on Savings Bank Account is paid at the prescribed rate on daily products. Such interest is calculated for the periods February to July and August to January and credited on the 1 st day of succeeding month. Interest so calculated will be rounded off nearest to a rupee. If interest comes to less than a rupee no interest will be paid for that half year. c. The interest rates applicable on the domestic savings deposit will be determined on the basis of end-of-day balance in the account. Accordingly, while calculating interest on domestic savings bank deposits, bank will apply the uniform rate on end-of-day balance up to ` 1 lakh and for any end-of-day balance exceeding ` 1 lakh, bank may offer the differential rate(s) as fixed from time to time. d. With regard to the savings bank accounts frozen by the enforcement authorities, banks should continue to credit the interest to the account on a regular basis. Charges: a. The account holder is required to maintain minimum balance in the operative account, as specified by the Bank from time to time, separately for branches of different population group and also depending on whether account holder wants to avail the cheque book facility or not. b Maximum withdrawals other than through ATM are restricted. Service charges will be collected if the number of withdrawals exceeds 50 for every half year period of February - July and August- January. c. Similarly, the bank may specify charges for issue of cheque books, additional statement of accounts, duplicate passbook, folio charges, etc. 67

6 d. Cash deposited into the account, over and above the prescribed limit, shall attract service charges as fixed by the Bank from time to time. e. If the account is closed within one year from the date of opening of the account (excluding 14 days of free look period) incidental charges as decided by the Bank from time to time will be recovered (except where premature closure of an account is due to the death of the account holder, transfer to another branch, transfer for term deposits or for opening another joint account). 5.3 Basic Savings Bank Account / Small Account a. Bank has a basic savings bank account. The V-Basic Savings Bank Account/ Small Account can be opened with a minimum initial deposit of `10/- by using the existing deposit account opening form. The balance in the account can go below `10/-. The account can continue with even zero balance. b. There will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals c. The Basic Savings Bank Deposit Account would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time. d. If such account is opened on the basis of simplified KYC norms, the account would be treated as a Small Account and would be subject to conditions stipulated for such accounts as per RBI guideline on KYC norms / AML standards / Combating of Financing of Terrorism (CFT) / Obligation of banks under PMLA, e. The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt / credit of money through electronic payment channels or by means of deposit / collection of cheques drawn by Central / State Government agencies and departments; Interest Payment: Charges: As applicable to normal Savings Bank Account a. No folio charges will be levied. b. No penalty for non-maintenance of minimum balance. c. No charges will be levied for noting standing instructions. However, for execution of standing instructions, the charges will be levied. All other terms and conditions applicable to normal Savings Bank account shall also apply to this scheme. 5.4 Term Deposits: Term deposit means a deposit received by the Bank for a fixed period withdrawable only after the expiry of the fixed period and includes deposits, such as, Recurring / Fixed Deposits/Vijaya Cash Certifictae/ Vijayashree Units etc. The term fixed in Fixed Deposits (FD) denotes the period of maturity or tenor. Therefore, the depositors are supposed to continue such Fixed Deposits for the length of time for which the depositor decides to keep the money with the Bank. 68

7 Term Deposits Accounts can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs/ Specified Associates / Societies / Trusts, Departments of Authority created by Government (Central or State), Limited Liability Partnership, Resident Senior Citizens / Staff members of the Bank/ Retired Staff Members etc. The Bank has tailored various term deposit schemes to suit the needs and expectations of the investors. The minimum period for placing deposits under Term deposit scheme is 7 days, and 6 months under Recurring Deposits and Vijaya Cash Certificates. The Maximum period for deposits under Term Deposits and Recurring Deposits is 10 years. Interest Payable: a. The card rates of Interest as published from time to time are applicable for the period of deposit and amount of deposit. b. Interest shall be calculated at quarterly intervals on term deposits and paid at the rate decided by the Bank depending upon the period of deposits. Interest on deposit is payable either monthly at discounted value or quarterly or half yearly or yearly or on maturity. The interest on Term deposits is calculated by the Bank in accordance with the formulae and conventions advised by Indian Banks Association. Charges: a. There is no charge for maintenance of term deposit accounts. However, penal interest will be charged for prematurely closed term deposits as decided by the Bank from time to time. 5.5 Capital Gains Accounts Scheme: The Income Tax assesses who are eligible for exemption under Sec 54(54B,54D,54F,54G) of the Income Tax Act 1961, may open Acount A which is in the form of Savings Bank account or Account B which is in the form of Term deposits with an option to the depositor to keep the deposit as cumulative or non-cumulative deposit. Interest Payable: a. Interest shall be allowed at such rates as may be specified by the Bank from time to time. In case of Account-A, interest shall be allowed as applicable to Saving bank deposit. Under Account B, branches are also permitted to quote the rates of interest / differential rates of interest as applicable to domestic term deposits as communicated from time to time. 5.6 Vijaya Tax Savings Scheme a. Vijaya Tax Savings Scheme- Investment under which the depositor is entitled for benefit Under Section 80C of the Income Tax Act, 1961 Interest Payable: a. Under the scheme in force the depositors are eligible for the Interest rate applicable for the period 5 years period as communicated by the Bank from time to time. 69

8 b. Resident Senior Citizens are eligible for additional rate of interest as per the prescribed rates. c. Staff members are not eligible for additional rate of Interest. However, such deposits made by Bank s retired staff members, who are also senior citizens, are eligible for senior citizen benefit as decided by the bank from time to time. 6. DIFFERENTIAL RATE OF INTEREST: The Bank may at its discretion offer certain percentage of additional interest over and above the card rate on deposits of ` 1 crore & above as communicated from time to time and the same will be published in the website of the Bank. 6.1 Deposits of Staff Members 1) Deposits made by our Bank s staff/retired staff members (on superannuation or otherwise as per Bank s Rules, but excluding employees retired compulsorily or in consequence of disciplinary actions or resigned employees), are eligible for 1% p.a additional interest over and above the card rate is being paid in respect of Savings Bank or a term deposit account. a) a member or a retired member of the bank s staff, either singly or jointly with any member or members of his/her family; or b) the spouse of a deceased member or a deceased retired member of the bank s staff; and c) an Association or a fund, members of which are members of the bank s staff; d) Branches should obtain a declaration from the depositor concerned, that the monies deposited or which may, from time to time, be deposited into such account belong to the staff/retired staff, etc as stated in clauses (a) to (c) above. 2) However, this additional interest benefit of 1% is not to be extended in respect of the following schemes: a) Deposits under Capital Gains b) Vijaya Tax Savings Scheme c) Special deposit scheme (at the discretion of the Bank) 3) Deposits accepted from senior citizens under the above two Tax schemes are, however, eligible to additional interest applicable to senior citizens. Retired staff members, who are also senior citizens (60 years and above) are extended both the benefits, i.e., additional interest of 1% p.a. over and above the card rate and a further additional interest benefit as applicable to other senior citizens as decided by the Bank from time to time. a) For the purposes of Sl.No.(6.1) above, a member of the bank s staff means a person employed on a regular basis, whether full-time or part-time, and includes a person recruited on probation or employed on a contract of a specified duration or on deputation and an employee taken over in pursuance of any scheme of amalgamation, but does not include a person employed on casual basis. 70

9 4)a) b) In the case of employees taken on deputation from another bank., the bank from which they are deputed may allow additional interest in respect of the savings or term deposit account opened with it during the same period of deputation. c) In the ease of persons taken on deputation for a fixed duration, or on a contract of a fixed duration, the benefit will cease to accrue on the expiry of the term of deputation or contract, as the case may be. A retired member of the bank s staff means an employee retiring whether on superannuation or otherwise as provided in the bank s Service/Staff Regulations, but does not include an employee retired compulsorily or in consequence of disciplinary action or a resigned employee; b) Family means and includes the spouse of the member/retired member of the bank s staff and the children, parents, brothers and sisters of the member/ retired member of the bank s staff, who is dependent on such member/retired member, but does not include legally separated spouse. 5) Payment of additional interest is subject to the following conditions, namely, a) The additional interest is payable only so long as the person continues to be eligible for the same and in case of his ceasing to be so eligible, till the maturity of a term deposit account b) In the case of employees taken over pursuant to the scheme of amalgamation, the additional interest is allowed only if the interest at the contractual rate together with the additional interest does not exceed the rate, which could have been allowed if such employees were originally employed by the bank. 6) Bank Employees Federations in which bank employees are not direct members are not eligible for additional interest. 7) No additional Interest is allowed to existing or retired staff members on deposits under NRE/NRO/FCNR(B) 8) Bank may, at its discretion, pay additional interest not exceeding one per cent per annum over and above the card rate of interest stipulated on deposits accepted/renewed from Chairman, Chairman & Managing Director, Executive Director or such other Executive appointed for a fixed tenure. However, they are eligible to get the benefit of additional interest as above only during the period of their tenure. 6.2 Senior Citizens a. The additional interest clause stated above also applies to a staff member, who is a senior citizen. b. If the depositor becomes a senior citizen during the contracted period of the Term Deposit, the applicable additional interest offered to senior citizens as above on the said existing Term Deposit will come into effect only after maturity i.e, at the time of renewal of the existing Term Deposit. c. Bank may at its discretion offer Fixed deposit schemes specifically for resident Indian senior citizens, offering higher and fixed rates of interest as compared to normal deposits of any size. 71

10 d. The additional interest rate so offered to resident Indian senior citizens is in his/her individual capacity and not as HUF/Karta. In the case of a term deposit which is standing in the name of an HUF, the Karta of the HUF cannot be offered higher rate of interest, even if he is a resident Indian senior citizen, as the beneficial owner of the deposit is the HUF and not the Karta in his individual capacity. e. Bank at its discretion may define the ceiling on the deposit amount and the period to offer additional rate of interest on different maturity. f. Senior citizens are exempted from levying of service charges for not maintaining minimum balance in their Savings Bank deposit accounts. 7. SPECIAL TERM DEPOSITS In response to market conditions and customer preferences Bank may at its discretion introduce Special Term Deposit scheme for a limited period to boost business by offering special interest rates, periodically reviewing our interest rates depending on the market rates, competitor banks interest rates, our cost of deposits, maturity profile, etc and also keeping in view the competitive edge required vis-à-vis other banks. 7.1 Wholesale (Bulk Deposits) a. Wholesale (Bulk) Deposit means term deposits of `1 crore and above. b. The competent authority to accept the bulk tem deposits with differential rate shall be the Chairman and Managing Director (CMD) and in his absence the Executive Director. c. The limits under the above Bulk deposits shall be reviewed from time to time by the Bank based on the market conditions and/ or directives of the Regulator. 7.2 Retail Term Deposits: a. Retail Term deposits means Term deposits below ` 1 crore. b. The limits under the above Retail Term deposits shall be reviewed from time to time by the Bank based on the market conditions and/ or directives of the Regulator. 8. NON RESIDENT DEPOSITS: 8.1 Non Resident (Ordinary) Accounts: NRIs can open Non-Resident Ordinary (NRO) deposit accounts for collecting their funds from local bona fide transactions. NRO accounts being Rupee accounts, the exchange rate risk on such deposits is borne by the depositors themselves. When a resident becomes an NRI, his existing Rupee accounts are designated as NRO. Such accounts also serve the requirements of foreign nationals resident in India. Foreign nationals who have come to India on employment and are eligible to open/hold a resident savings bank account to re-designate their resident account maintained in India as NRO account on leaving the country after their employment to enable them to receive their legitimate dues subject to certain conditions. NRO accounts can be maintained as current, saving, recurring or term deposits. 72

11 8.2 Non-Resident (External) (NRE) Accounts : The Non-Resident (External) Rupee Account : Any NRI can open an NRE account with funds remitted to India through a bank abroad. An NRE rupee account may be opened as current, savings or term deposit. 8.3 NRO-Savings Bank Deposits & NRE - Savings Bank Deposits NRO-Savings Bank Deposits & NRE-Savings Bank Deposits means a form of demand deposit which is subject to restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the Bank during any specified period. The interest on Ordinary Non-Resident Savings deposits as well as Savings deposits under Non Resident (External) account Scheme shall be 4.0 % pa. Bank may at discretion offer differential rate of interest for those accounts who maintain ` one lakh average balance. For NRO & NRE Savings Bank deposit Account, the Bank will normally stipulate certain minimum balances to be maintained as part of terms and conditions governing operation of such accounts. Failure to maintain minimum balance in the account will attract levy of charges as specified by the bank from time to time. For NRO & NRE Saving Bank Account the bank may also place restrictions on number of transactions, cash withdrawals, etc., for given period. Similarly, the bank may specify charges for issue of cheque books, additional statement of accounts, duplicate passbook, folio charges, etc. All such details, regarding terms and conditions for operation of the account and schedule of charges for various services provided will be communicated to the prospective depositor while opening the account. 8.4 NRE Term Deposits The minimum maturity period for NRE deposits is one year. The maturity of the NRE term deposits may be from one to three years, in line with FCNR (B) deposits. However, bank will accept NRE deposits above three years from its Asset-Liability point of view. The rate of interest on such long term deposits is not higher than that applicable to three year domestic deposits. a. No penalty will be charged on NRE term deposits which are prematurely closed after one year from the date of deposit but before the contracted period. b. Minimum tenure of any NRE term deposit is one year, i.e., NRE deposits cannot be accepted for tenure of less than one year. c. No interest will be paid on NRE Term deposits, originally accepted for a period of more than one year, but prematurely closed before completion of one year from the date of deposit. Interest Payable: Interest rates offered by the Bank on NRE and NRO Term deposits cannot be higher than those offered on comparable domestic rupee deposits. The interest rates on NRE/NRO savings deposits should be the same as applicable to domestic savings deposits. 73

12 I. Bank will pay interest on NRE savings deposits and NRE term deposits, at the rates specified. II. The Bank will calculate interest on NRO/NRE-Savings Bank accounts on a daily product basis. III. Consequent to the deregulation of interest rates of Domestic, NRO and NRE savings deposits accounts, the Bank may at its discretion determine its savings bank deposit interest rate, subject to the regulatory norms. 9. INSURANCE COVER FOR DEPOSITS: All bank deposits are covered under the insurance scheme offered by Deposit Insurance and Credit Guarantee Corporation of India (DICGC) subject to certain limits and conditions. The premium for such insurance cover will be borne by the Bank. 74