Desccribe the various banking system and its norms.


Banking means the accepting of deposit of money from the public for purpose of leading or investment, which are repayable on demand or otherwise. Its essential duty is the payment of the orders given on it by the customers, its profit mainly from the investment of money left unused by them

The first banks provided operations with coins (conversion, authenticity checking, coin metal content, safekeeping). The aim of present banks seems to be quite different because of the development of production relation. The main task of present banks is to operate as financial institutions providing bank loans; moreover, the banks ensure relatively safe opportunities for optimal investments of available investors´ finances. In market economy it is possible to identify many banks which are included into the banking system. The banking system includes all banking operations carried out in the country and also includes mutual relations of these banks. It also takes in lawful orders, rules and procedure

2. Banking system:

[1]There are several types of banking systems:

2.1 One Stage Banking System – all banks can be engaged in all banking operations (commercial ones and money issue. This system was typical for centrally planned economies in 20th century when just one bank existed (The Czechoslovak State Bank in the CR – former Czechoslovakia).

2.2 Two Stage Banking System is the most frequent model. The first stage is the central bank (bank of issue) and the other one is formed by commercial banks. The origins of two stage banking system were found in 17th and 18th centuries when money-issue activities were concentrated into particular banks


3. The banking system can follow two theoretical models:

3.1 Universal Banking Model – commercial banks are involved in banking activities and can also provide investment operations as share dealing.

3.2 Separate Banking Model is based on the separation of commercial and investment bank. This model is typical for the UK and the USA.

4. General banking system of the all countries:

4.1 Central Bank (Bank of Issue) – its role is executed by  every government with the seat in Prague. Actually the National Bank is a central authority in the central bank.

4.2 Commercial Banks have been operating in many cities and towns in the every city. They represent an executive role of the two stage banking system. They provide a huge variety of banking services for their clients. Commercial bank run for the commercially they are not related with government. Their main target is making profit. But they follow some all restriction national bank.[2]

5. National banks:

 National banks ran by the government of the own country. Actually national bank looks after the government financial parts. Although they look – after and monitor all commercial bank of the country. They also confirm the foreign reserve of the country.

6. Norms and system for the attract customer worldwide:

6.1 Customer Service Committee of the Board:

[3]Banks are required to constitute a Customer Service Committee of the Board and include experts and representatives of customers as invitees to enable the bank to formulate policies and assess the compliance thereof internally with a view to strengthening the corporate governance structure in the banking system and also to bring about ongoing improvements in the quality of customer service provided by the banks.

6.2 Role of the Customer Service Committee:

Customer Service Committee of the Board, illustratively, could address the following:-

• Formulation of a Comprehensive Deposit Policy

• Issues such as the treatment of death of a depositor for operations of his account

• Product approval process with a view to suitability and appropriateness

• Annual survey of depositor satisfaction

• Tri-ensile audit of such services.


6.2 Monitoring the implementation of awards under the Banking Ombudsman Scheme:

[4]The Committee should also play a more pro-active role with regard to complaints   grievances resolved by Banking Ombudsmen of the various States. The Scheme of Banking Ombudsman was introduced with the object of enabling resolution of complaints relating to provision of banking services and resolving disputes between a bank and its constituent through the process of conciliation, mediation and arbitration in respect of deficiencies in customer service. After detailed examination of the complaints / grievances of customers of banks and after perusal of the comments of banks, the Banking Ombudsmen issue their awards in respect of individual complaints to redress the grievances. Banks should ensure that the Awards of the Banking Ombudsmen are implemented expeditiously and with active involvement of Top Management

[5]Further, with a view to enhancing the effectiveness of the Customer Service Committee, banks should also:

a) Place all the awards given by the Banking Ombudsman before the Customer Service Committee to enable them to address issues of systemic deficiencies existing in banks, if any, brought out by the awards

b) Place all the awards remaining unimplemented for more than three months with the reasons therefor before the Customer Service Committee to enable the Customer Service Committee to report to the Board such delays in implementation without valid reasons and for initiating necessary remedial action.

6.3 Standing Committee on Customer Service:

The Committee on Procedures and Performance Audit of Public Services (CPPAPS) examined the issues relating to the continuance or otherwise of the Ad hoc Committees and observed that there should be a dedicated focal point for customer service in banks, which should have sufficient powers to evaluate the functioning in various departments. The CPPAPS therefore recommended that the Ad hoc Committees should be converted into Standing Committees on Customer Service.

The constitution and functions of the Standing Committee may be on the lines indicated below:-

i) The Standing Committee may be chaired by the CMD or the ED and include non-officials as its members to enable an independent feedback on the quality of customer service rendered by the bank.

ii) The Standing Committee may be entrusted not only with the task of ensuring  timely and effective compliance of the RBI instructions on customer service, but also  that of receiving the necessary feedback to determine that the action taken by various  departments of the bank is in tune with the spirit and intent of such instructions.[6]

iii) The Standing Committee may review the practice and procedures prevalent in the bank and take necessary corrective action, on an ongoing basis as the intent is translated into action only through procedures and practices.

iv) A brief report on the performance of the Standing Committee during its tenure indicating, inter alia, the areas reviewed, procedures / practices identified and simplified / introduced may be submitted periodically to the Customer Services Committee of the  Board.

6.4 Branch Level Customer Service Committees:

[7]Banks were advised to establish Customer Service Committees at branch level. In order to encourage a formal channel of communication between the customers and the bank at the branch level, banks should take necessary steps for strengthening the branch level committees with greater involvement of customers. It is desirable that branch level committees include their customers too. Further as senior citizens usually form an important constituent in banks, a senior citizen may preferably be included therein. The Branch Level Customer Service Committee may meet at least once a month to study complaints/ suggestions, cases of delay; difficulties faced / reported by customers / members of the Committee and evolve ways and means of improving customer service.

The branch level committees may also submit quarterly reports giving inputs / suggestions to the Standing Committee on Customer Service thus enabling the Standing Committee to examine them and provide relevant feedback to the Customer Service Committee of the Board for necessary policy / procedural action.

 6.5 Nodal department/ official for customer service:

Each bank is expected to have a nodal department / official for customer service in the  HO and each controlling office, with whom customers with grievances can approach in  the first instance and with whom the Banking Ombudsman and RBI can liaise.

6.6 Board approved policies on Customer Service

Customer service should be projected as a priority objective of banks along with profit, growth and fulfillment of social obligations. Banks should have a board approved policy \ for the following.

6.7 Comprehensive Deposit Policy:

[8]Banks should formulate a transparent and comprehensive policy setting out the rights of the depositors in general and small depositors in particular. The policy would also be required to cover all aspects of operations of deposit accounts, charges loveable and other related issues to facilitate interaction of depositors at branch levels. Such a policy should also be explicit in regard to secrecy and confidentiality of the customers. Providing other facilities by “tying-up” with placement of deposits is clearly a restrictive practice.

6.8 Customer Compensation Policy:

Banks must have a well-documented Customer Compensation Policy duly approved by their Boards. They could use the model policy formulated by the Indian Banks’ Association (IBA) in this regard in formulating their own policy. Banks policy should, at a minimum, incorporate the following aspects:-

(a) Erroneous Debits arising on fraudulent or other transactions

(b) Payment of interest for Delays in collection

(c) Payment of interest for delay in issue of duplicate draft

(d) Other unauthorized actions of the bank leading to a financial loss to customer.

6.9 Customer Grievance Redressed Policy:

Banks must have a well-documented Customer Grievance Redressed Policy duly approved by their Boards. The Policy should be framed based on the broad principles enumerated in paragraph 16 of this circular.

6.10 Giving publicity to the policies:

(i) Banks should ensure that wide publicity is given to the above policies formulated by them by placing them prominently on the web-site and also otherwise widely disseminating the policies such as, displaying them on the notice board in their branches.

(ii) The customers should be clearly apprised of the assurances of the bank on the services on these aspects at the time of establishment of the initial relationship be it as a depositor, borrower or otherwise.

(iii) Further, they may also take necessary steps to keep the customers duly informed of the changes in the policies formulated by them from time to time.

6.11 Financial Inclusion: Service for financial support which help the customer to take the right choice.

7. Basic banking ‘no-frills’ account:

[9]With a view to achieving the objective of greater financial inclusion, all banks should make available a basic banking ‘no-frills’ account either with ‘nil’ or very low minimum balance as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transactions in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks should also give wide publicity to the facility of such a ‘no-frills’ account including on their web sites indicating the facilities and charges in a transparent manner. The number of such deposit accounts opened by the bank may be reported to Reserve Bank of India on a quarterly basis.

8. IT-enabled Financial Inclusion:

[10]Though the banks make available a basic banking ‘no-frills’ account so as to achieve the objective of greater financial inclusion, yet financial inclusion objectives would not be fully met if the banks do not increase the banking outreach to the remote corners of the country. This has to be done with affordable infrastructure and low operational costs DBOD-Master Circular on Customer Service 2011 with the use of appropriate technology. This would enable banks to lower the transaction costs to make small ticket transactions viable

A few banks have already initiated certain pilot projects in different remote parts of the country utilizing smart cards/mobile technology to extend banking services similar to those dispensed from branches. Banks are, therefore, urged to scale up their financial inclusion efforts by utilizing appropriate technology. Care may be taken to ensure that the solutions developed are:

• Highly secure,

• Amenable to audit and

• follow widely accepted open standards to allow inter-operability among the different systems adopted by different banks.

9. Printed material in trilingual form:

[11] In order to ensure that banking facilities percolate to the vast sections of the population, banks should make available all printed material used by retail customers including account opening forms, pay-in-slips, passbooks etc., in trilingual form i.e., English, Hindi and the concerned Regional Language.

 10. Operating service for the customer which full fill their demand:

10.1 Customer Identification Procedure for individual accounts

  Banks should be generally guided by RBI instructions on KYC / AML for opening of accounts.

 10.2 Savings Bank Rules

As many banks are now issuing statement of accounts in lieu of pass books, the Savings Bank Rules must be annexed as a tear-off portion to the account opening form so that the account holder can retain the rules.

10.3 Photographs of depositors:

[12]Banks should obtain and keep on record photographs of all depositors/account holders in respect of accounts opened by them subject to the following clarifications:

(i) The instructions cover all types of deposits including fixed, recurring, cumulative, etc.

(ii) They apply to all categories of depositors, whether resident or non-resident. Only banks, Local Authorities and Government Departments (excluding public sector undertakings or quasi-Government bodies) will be exempt from the requirement of photographs.

[13](iii) The banks may not insist on photographs in case of accounts of staff members only (Single/Joint).

(iv)The banks should obtain photographs of all persons authorized to operate the accounts viz., Savings Bank and Current Accounts without exception

(v) The banks should also obtain photographs of the ‘ Pardanishin’ women.

(vi)The banks may obtain two copies of photographs and obtaining photocopies of driving license/passport containing photographs in place of photographs would not suffice.

  (vii) The banks should not ordinarily insist on the presence of account holder for making cash withdrawals in case of ‘self’ or ‘bearer’cheques unless the circumstances so warrant. The banks should pay ‘self’ or ‘bearer’ cheques taking usual precautions.

(viii) Photographs cannot be a substitute for specimen signatures.

(ix) Only one set of photographs need be obtained and separate photographs should not be obtained for each category of deposit. The applications for different types of deposit accounts should be properly referenced.

(x) Fresh photographs need not be obtained when an additional account is desired to be opened by the account holder

10.4 Payment of interest on accounts frozen by banks 

[14]Banks are at times required to freeze the accounts of customers based on the orders of the enforcement authorities. The issue of payment of interest on such frozen accounts DBOD-Master Circular on Customer Service 2011 was examined in consultation with Indian Banks’ Association and banks are advised to follow the procedure detailed below in the case of Term Deposit Accounts frozen by the

10.5 Enforcement authorities: 

(i) A request letter may be obtained from the customer on maturity. While obtaining the request letter from the depositor for renewal, banks should also advise him to indicate the term for which the deposit is to be renewed. In case the depositor does not exercise his option of choosing the term for renewal, banks may renew the same for a term equal to the original term.

(ii) No new receipt is required to be issued. However, suitable note may be made regarding renewal in the deposit ledger.

(iii) 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.

11. Conclusion:

 Customer behavior in retail banking changed dramatically over the past few years. This survey has touched on some of key changes in customer expectation and the ways which these changing demands can be met by banks that offer customer-focused innovative services. Those that do so will be able to differentiate their organization and drive growth. Some suggestions are given below to capitalize on these opportunities

  • By investing in branches delivering personal attention across channels and combining customer insights with technology to improve offerings
  • By building customer insights, tailoring offerings, incentivizing customers to access more products and effectively responding to complaints banks can grow up their loyalty.
  • By refocusing on the customer relationship, paying particular attention to clarity of language, transparency of pricing and simplicity of interaction they can build trust


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