Mar Wragas yest Crier ete > 1. Overview of Banking : ‘; 1.1 Definition of Bank / Banking / British: banker is an individual, partnership or corporation whose sole pre dominant business is receipt of money deposited by customer are core and necessary for the above function. * Lending or investing the funds so collected to generate income and earn profits. Remittance of funds on order and demand by customer to pay the deposited funds to another person Jentity. With the increase in volume and complexities of trade / business, bank’s functions evolved and got aligned to , changing need of country, customers, global economy etc. Some of these functions / services are: . * Correspondent or Agency functions to transfer / collect funds locally, within country and across borders. | * Custodial services vide safe deposit lockers and demat accounts, * Advisory service for wealth management (investment options) and risk cover (insurance schemes), > oncurrent or deposit account, and payment of cheques drawn by and the collectron ot. ‘cheques paid in by a \ customer. \ “USA: A bank includes every person, firm or company having a place of business where credits are oggned Dp she > deposit or collection of money or currency, which is to be paid or remitted on draft, cheque or orderjorinoney.is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes are received for dicount or > sale. ~ Indian:A bank accepts deposits of money from public for the purpose of lending or mC, i, which is repayable * on demand or otherwise and can be withdrawn by cheque, draft, and order or otherwise, te) ” 1.2 Functions of Bank: “ i 5 The above definitions hold and provide the most important functions of a Bank Traditional and core functions ma 3 ‘* Acceptance of deposits from public which can be current / sayings'or term in nature and repaid on demand or on maturity SAY * Paying cheques issued by customers that are drawn on the Bank 3nd collection of cheques that are 1.3 Principles of Banking t . The evolution of Indian banking model, of apex body RBI regulating the scheduled banks and their branches were similar to the British model and quite different from the USA banking system. However the basic principles to perform the functions and provide services mentioned above were similar and common across geographies. * Principle of Trust-This is the faith held by customers / central bank / government in banks, for adherence to regulatory guidelines, ethical practices, sound governance and transparency in financial dealings, while (Placing their deposits for safe keeping and generating interest. */ Principle of Liquidity-To retain the above trust banks need to build the capability of repaying the deposits on demand. This is enforced by RBI through the regulatory mandate to banks to maintain percentage ome deposit in cash (Cash Reserve Ratio - CRR) and liquid, in form of securities (Statutory Liquidity Ratio - SLR} * Principle of Intermediation - Banks accept deposits and lend as 1) intermediaries or link between those with surplus money and those in deficits, and 2) also as cushion’or shock absorber between depositors and borrowers by undertaking or absorbing the risk of default and delinquency. * Principle of Profitability - Professional management of funds is needed to generate income and have profitable business through the spread of interest paid on deposits and earned on loans. * Principle of Solvency-Adherence to above principles along with maintenance of healthy capital adequacy ratio and low non-performing assets is needed for growth and to be financially solvent in the long term. :2. Legal Aspects of Banking: 2.1 Banker Customer Relationship: Im our eartier chapters we have covered the definition of a Bank / Banker. \ stomer is person or entity availing of Bank’s products or services. Banking is a trust ~ based relationship Which Veries with different product or service availed by customer or provided by the bank. < ) X Debtor — Creditor Deposits in current, savings and term deposits made by the customers are to be repaid by the Bank on demand by the customer. Here the Bank is DEBTOR and customer the CREDITOR. ‘There some conditions associated and few listed below: > Although Bank is the debtor, it only pays when there is a demand made by the customer=™ > Customer needs to make demand through negotiable instruments such as cheques, drafts etc. and not over phone or verbally. However now we have internet, ATM, POS also for withdrawal. - Customer needs to place this demand on working days and during working hours of the Bank. However with anytime, anywhere money this condition does not hold. - Money deposited by customer becomes bank’s prerogative to use the money as it likes. ~ The bank is not bound to inform the manner of utilization of funds to the depositor nor can he claim profits. ~ No security / collateral provided by the Bank for the deposited amount. Creditor — Debtor ~ This is role reversal where Bank lends money to the customer. Bank is the CREDITOR and customer the DEBTOR. Few of the conditions associated are listed below: - Customer needs to complete documentation and provide security except for some unsecured loans / advances such as credit cards, overdrafts. - Customer needs to repay at regular frequencies or lump sum as per agreement. - Bank has the right to know the purpose and monitor the end use of the borrowed money. Lessor —Lesse — Banks lease their immovable property - safe deposit lockers and customers hire them under a stamped agreement of “Memorandum of Letting”. The Bank is LESSOR and customer LESSEE. = Customer can enjoy the rights to this property during Bank working hours on payment of rent. ~ Bank does not assume any responsibility for any damage / loss of contents kept in the locker = Bank also does not insure the items kept in the locker. ~ However Sank has the right to break open locker when customer defaults in rent payment or on regulatory authority (Income Tax / Court) instructions. Bailee — Bailor — Bailment is a contractual transfer of possession of goods / assets. The transferee or BAILEE is only in physical possession and the ownership rights remain with the transferor or BAILOR. Example — security / collateral of customers (bailor) held with the Bank (bailee) for a loan given. Example ©A customer of bailor can designate a bank or bailee to supervise an investment portfolio. Bailee is in possession of the asset but not the owner, and entrusted by bailor to take good care of the portfolio. = Customer can take legal action for loss of goods while in possession of baile - Banks / bailees charge fees for such safe keeping of goods. Agent ~ Principal -An arrangement, where the Bank as 2 legally appointed AGENT, acts on behalf of the customer, «oho is the PRINCIPAL. Bank, as an agent of the customer, collects cheques, bills, executes standing instructions, pays cheques, utility bills, insurance premia, etc. ‘Commission is paid by the principal to the agent for all these actions. ‘Acts done by the agent are binding on the principal Principal is liable to the party for the acts of the agent.LON Ocoee ass las Eerenek ucla Customer Being the ultimate owner or BENEFICIARY of the goods / property. ‘In case of liquidation the goods / property kept with the trustee Is not available for distribution to creditors. Trustee — Beneficiary ~ Bank holds valuables and securities of customers in its safe custody as a TRUSTEE with the | j 2.2 Banks’ Obligations and Rights 4 Inall the relationships mentioned above, Bank plays @ also enjoys certain rights. Obligations & Duties Obligation to maintain secrecy of account: Another obligation of{the banker is to mai customer's accounts and its transactions. The duty of maintaining secrecy continues.evet death of the account holder. However information may be disclosed: g a) Under compulsion of law when regulatory or administrative authorities demat income Tax Act - Income Tax authorities have powers to calf‘for documents or books of account of customers, Banks should furnish only specific information on receipt Of signed order and also keep customer informed. af ‘ «Banker's Books Evidence Act -in legal disputes between banks book of accounts may be produced to the Court on receipt of wr «Reserve Bank of India Act - the RBI is empowered to collect tre relating to their customers. & » * Banking Regulation Act - every bank is compelled to: submit'an annual return of deposits which remain inoperative and unclaimed for 10 years. ~ © Companies Act - The banker must produce all books and paps appointed by Central Government to investigate the affairs of joint stock company. Criminal Procedure Code -When summoned for by the investigating police officer bank needs to provide customer information. . b)_ In public interest: For protecting ni ¢)_Inprotecting bank's own interest: d) Under express or implied consent of the customer: licences / open accounts. 2 -ustomer and third party certified copies of ten, duly signed order. information from Banking Companies ers relating to the Company to the inspector jational interest against any criminal / terrorist activities. in sharing information between banks of borrowers or introducers information provided for customer to obtain various Care: Bank needs to exercise reasonable care or diligence in discharging its duty as debtor / -an claim specific damages to make good the loss the banker Duty of Reasonable Greditor / trustee / agent / baile etc. of the customer. Customer ¢ due to bank's negligence carrying out his expressed instructions. In case of no instructions available, must take actions as per prevailing practice in the location. Duty/to Maintain Proper Accounts: Banks are duty bound to maintain and provide proper accounts to the customer of all the transactions done by him. Bank should provide a statement of accounts / passbook to the customer containing all the credit and debit transactions in the account. The banker is under legal obligations to honour the cheques of the customer as gation, he will be responsible for any ion of the banker Obligation to honour the cheques: and when they are presented for payment. If the banker fails to meet his ol loss and or damage suffered by the customer due to non- payment of cheque. However, this obligati arises on the fulfilment of certain conditions like: the customer must has sufficient available and without lien funds in the account; «the cheque is properly drawn with valid date, amount and signature; ‘¢ cheque not stopped for payment by the drawer o Copyright © 2014 Tata Consultancy Services Limited. All Rights ReservedDLW Mee Umer aaa) ictus However the Bank can refuse payment of the cheque under following circumstances: * Gamishee / attachment order received from court / Income Tax authority or other re ‘© Notice of death of account holder ‘© Insolvency or lunacy of account holder at the time of Issuing the cheque. ~\ oN 2.3 Bank's Rights ~ a ies. The rights are: Any contractual relationship between two parties as implicit privileges and rights along with »gulatory body 4) Right of lien: Lien can be a) particular or b) general in nature. + A’particular lien’ gives the right to retain possession only of those goods in given, “a NA . + A’general lien gives the right to retain possession of any goods in the legal possesion of the creditor until the all dues are paid. itis Bank’s statutory right available even without agreement. spett of which the credit was However the following conditions are to be satisfied: x . im The right of lien on goods and securities is available to atbank'when it feceives the same in the capacity of a creditor. ‘~ —— «Bank can exercise right of ien on goods and secufities that are owned by the borrower(s) and have been legally entrusted to the bank by the borrower(s)*s.. “\. cn v7 i «Bank can exercise right of lien on the securities héld by customers in same right as the account holding. «© Goods, securities held in the capacity of a “trustee” for safe custody, such as articles in safe deposit locker @—~"™— cannot be liened. . . > . oo 2) Right of Set Off: Bank can avail this statutory right to set off a debt owed from credit balances held in other accounts of the borrower. €¢ . oo Bank can combine the debit and cFedit balances of the borrower to arrive at a net sum due. ‘© The right is also available for deposits kept in other branches of the same bank. _~ «The capacity and right of the creditor in all the accounts must be similar, for instance, a bank cannot set off = any credit balance of a company account against money due from one or more of its partners /directorson their individdial accounts. However, in case ofa sole proprietor the accounts in his personal and that of the Cam firm's name are deemed to be in the same capacity. Bank can exercise this right of set off after borrower(s) death, insolvéncy, company dissolution, or after re _receipt of garnishee / attachment orders from regulatory / administrative body. ‘* The customer is provided with a formal notice about bank’s intention to exercise the right of set off. A » “The right of set off can be exercised for debts owed and not for future or contingent debts, 3) am ‘of Appropriation: When a customer has more than one debt and makes a payment which is not sufficient ®\_, to discharge his entire dues, appropriation of payment becomes necessary. ‘When money is paid with the express or implied intimation to repay particular debts, bank, i g d debts, bank, if acceptin —N money, must apply it according tothe direction of the customer. Appropriation isa right primarily of wr see debtor and for his benefit rt ‘+ However when the debtor (customer) has omitted to intimate any specific appropri : bto PPropriation of m i him, the bank has discretion to apply the money to any lawful debt actually due from the debtor netaaing even the time - barred debts. The creditor (bank) needs to declare its intentions in express terms. ; e Copyright © 2014 Tata Consultancy Servicés Limited. All Rights Reserved TCS CONFIDENTIAL (TATA CONSULTANCY SERVICES," isirenneeecac] ‘© Inabsence of appropriation intimation by neither party the payment shall be applied to discharge the debts > in the order of time. > a) Ifthe debts are of equal standing, the payment shall be apportioned equally. 1 : b) Payments made by the debtor are first adjusted for interest and thereafter for principal payment . Unless there is any agreement to the contrary. | ~ ¢)_facustomer has oniy one current overdraft account the credit entries wll set off the debitehtries in | chronological order as per famous landmark ruling of Devaynes vs. Noble known as Clafton’s case. en 4) Right to Charge Interest / Commission: Banker has an implied right to charge interest for advances and, jon for services rendered to a customer as per mutually agreed upon and prevailir terms. Some charges comm ___ listed below: 7 2 Bank can charge interest, including compound interest in cases where unpald Titezest juefS added to the principal amount. a ‘+ Bank levies various types of charges for service rendered such a: _ ~~ ~ a) Processing charge for advance / loan Ny b) Incidental charges for providing banker's certificate, signature verification etc. ©) Commission for collection of cheques, issuance of drafts (Sys, d) Penal charges - account balance below prescribed amountor dishonour of cheques issued / deposit ww 2.4 Bank's dealing with Special Customers: % ? Customers of banks consist of private individuals, business entities 6f limited company, sole traders or partnerships. Banks need to take care in opening and operation of accounts for some customers who - ‘© Are not competent to enter into valid contracts - persons like minors, drunkards, lunatics and insolvents. @ Act on behalf of others and have limitations on their powers persons like agents, trustees, executors, etc. 1) Minor Accounts: A minor is a person who has fot attained the age of 18 and in case of appointed guardian itis 21 Some of the precautions to be taken by the banker on opening and operating account of a minor are- | ‘© Accounts are opened under guardianship of father / mother or court appointed legal guardian. | ‘® The bank should record the genuine date of birth of the minor at the time of opening the account. # Minors able to read and write may open account in sole name when they are twelve years without ‘cheque books. * The banker may open a savings account but not a current account as it incurs no liability to the minor. + Minor should not be allowed to overdraw his account since contract with a minor is void and not enforceable against him in court of law. Guarantée provided to bank for money borrowed by a minor is invalid. However the adult standing as ‘guarantor is liable to pay the money owed irrespective of borrower being a minor. With the consent of other partners minor can be included to the benefit of partnership but will not be liable for the losses or debts. Within 6 months of attaining majority he has to assume / repudiate liability. 2) tunatic’s account: Lunatics are persons of unsound mind. Lunatics are disqualified from contracting, but a contract entered by lunatics during their period of sanity is valid. * Since a lunatic has no capacity to contract, bank knowingly should not open the account of a lunatic. * fan existing customer becomes insane, the bank must immediately suspend operations of the account in order to avoid the difficulty of choosing between the risk of unjustifiably dishonoring cheques and being held responsible of debited his account without adequate authority. P . + Bank must get definite information about the lunacy of the customer and make careful note of lunacy order. = Copyright © 2014 Tata Consultancy Services Limited. All Rights Reserved TCS CONFIDENTIALBN Veo tbr Wieats\y lds) areca It should return all cheques of customer's account with the word ‘refer to drawer’ and not ‘customer insane’. r * Third party authority to operate account ceases when the customer becomes insane since agent can no 4 longer act for principal, who cannot act for himself. ‘+ fone party to a joint account becomes mentally incapable of managing either party to operate the account. affairs, the banker should not allow Yin Hits name ) hso the customner and 3) iliterate’s account: An illiterate person is competent to contract and bank may open an account following certain precautions. : * Account may be opened when personally present along with a witness known bot! bank. The contract terms are explained by a bank official. 4 ‘© Illiterate person's passport size photograph needs to be identified in his/her presence and thie sameneedsto be attested by the bank officer / witness. — + Depositor’s one or two identification marks should be noted on the accotint opening form. ( + Cheque book facility is generally not provided for such account. m™~ ‘© The illiterate person should be provided with a passbook which should also cOntain his attested photograph. * Customer can withdraw funds through thumb impression, being physically present with identity proofand passbook in the presence of bank official. as 4) Visually impaired person’s account: The RBI advisedto render all possible‘Sssistance to the visually challenged for |‘ availing the various banking facilities.” © Banking facilities including cheque book facility ‘operation of ATM / locker, etc., to the visually challenged as they are legally competent to contract,» © The terms and conditions governing the account shall be expiained by the Bank official to the visually f impaired personand also assist them in withdrawal of cash. © Avisually impaired customer should not be forced to operate the bank account jointly with any person or in the presence of any person. * If the visually impaired customers so desires, he may be allowed to appoint a person/persons as their Power of Attorney or Mandate Holder to opefate the bank account. | 5) Hindu Undivided Family (HUF) account: The HUF is governed by Mitaksara law, where all the members acquire right in the property by birth. A HUF consists of al persons lineal descended from a common ancestor and their wives. Following are the precautions to be taken by the banker in opening and operating accounts: ‘© The account may be opened in the name of Karta or in the name of family business. © The account opening form should be signed by Karta and all adult coparceners, though Karta would operate. «-Thé HUF declaration / undertaking to be signed by the Karta and all coparceners including minor coparceners (guardian to sign on behalf of minor) and state the powers of the Karta. » ‘The burdesi to prove the need of loan by Karta, for purposes beneficial to the family, lies on the banker. The Banker also has to prove that reasonable inquiries were made and was satisfied with legal need for the loan. « to ratify previous transactions, the bank should obtain signatures of minor coparceners after they become major, on the existing account opening form. «Any coparcener can stop payment of a cheque drawn by Karta. Bank should stop all operations in the account on receiving any such dispute notice tll further instruction from a competent court is obtained. 6) Trust Accounts: Trust isan obligation attached to the ownership of property, and arising out of a confidence placed in and accepted by the owner, or declared and accepted by him, fr the benefit of another, or of another and he person who places the confidence is called the author of the trust. The person in whom the the ome ts VE Ose tls a Hcg tacky Pee Uewel cad on Velrel s ¢ ty Fede Nn, eves on behall v H_benoles avn of YA Law Copyright © 2014 Tata Consultancy Services Limited. All Rights ReservedLOL ase Uy ads Wl cd Lee sige confidence is placed is the trustee. The person for whose benefit the trust is formed is called beneficiary. The Precautions to be taken while opening and operating trust accounts are: ‘© The bank should examine the trust deed concerning instructions regarding opening and operating the account. * No trustee can delegate his power to another trustee nor can all trustees delegate their powers to an outsider. 4% © Bank on receipt of death or retirement notice of a trustee should suspend all account operations, However Bank can allow account operations if trust deed is silent on such matters. C\ ‘The funds in the trust account cannot be credited to trustee's individual account, or fopfiquidating trustee's personal debts. , Ss ‘© Ifthe trustees are authorised by court or trust deed to borrow to discharge the furiction3of the}trust, the banker must get specific assets of the trust as security. aN 2.5 Specific Customer Instructions: In all bank — customer contractual relationships mentioned earlier, the customer may provide specif the bank for security and or better management of funds. Some of the instructions are as follows: ‘Nomination: For ease of release of deposited funds and or articles Kept in safe custody of the bank, customers can provide nomination instructions to be executed on their death / reported missing. While accepting and executing * nomination requests bank should exercise caution and ensure that: © Nomination facility is given for sole or joint accounts of individtials and sole proprietary concern. © Nomination can be made only in favour of individuals, Non individual entity such as association, trust, society or any other organisation or any office-bearer théreof in his official capacity cannot be a nominee © Each deposit account, either sole or joint, can have only one nominee. «Banks may allow variation/cancellation of an existing nomination by all the surviving depositor(s) acting together irrespective of operating instructions of "either or survivor", “former or survivor” etc.. In the case of a joint deposit account the nominee's right arises only after the death of all the depositors. Nomination forms with thumb-impressions(s) of customers shall be attested by two witnesses. Signatures of the account holders need not be attested by witnesses. In case of nominee being alminor, the depositor or depositors together, may appoint another individual who is not a minor, to receive the amount on behalf of the nominee in the event of the death of the depositor UU UO Pt dh dd df dd while the nominee is still a minor. Power Of Attorney: It is usually a deed executed by one or more person (called donor or principal) by a formal / > legal agreement to give authority to act on his behalf to another person (called donee or agent).This legal document ___ duly stamped is given by the customer for records and information to the bank of his account being operated by an 7 authorized agent/ attorney. Banks should ensure that the document: . «Js stamped and notarized, valid and not time barred. Gives specific authority to the named and identified person to operate the named account of the customer. «Binds the principal / customer for all transactions done by the attorney Has specified authorities of the attorney to overdraw account, create mortgage, execute loan agreements etc. POAs are widely used for nonresident account operations where customer / principal cannot be present. Bank should additionally exercise caution for operation of NRE / NRO accounts by POA holders on remittance and repatriation of funds are done per extant FEMA guidelines given below:‘WATA CONSULTANCY SERVICES Sirol aleeteclae la oy POA holder i permitted to make local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Ban! ; POA holder permitted to remit ouside india curent Income of the non-resident individual on Indian sol, net of applicable taxes. ; int holder. Resident POA older is permitted to repatriate funds outside India only to the non-resident accounh LO. POA holder cannot make payment by way of gift toa resident on behalf of the non-resident accou . POA holder cannot transfer funds from the NRO account to another NRO account. a ~ Mandate / Authorised signatory: Is a simple authority given by the customer in writing on a letter: gogng Ris the decision or resolution taken in case of clubs / societies / trusts / limited companies etc. for operation o! account by authorised person/s. Bank should ensure that the mandate / authority is specific on: ‘©The duration and validity period of authority given to the signatory ae) ‘©The specific financial limits of the authorised signatory. Webliography: &. 1. RBI site:http; .in/Seri ViewMasCirculardetalls.aspx?id=81310511 2, RBI site:http://rbi.org.in/Scripts/BS ViewMasCirculardetallsiaspx?id=8131#10bh ? de d « COCOCCELL ILS ELE E Sd dd i, I | ~~ Lf w PLU Wee) VW ag Baile Experience certainty, 3. RISKS AND CONTROLS Banks in its function of financial intermediation are confronted with credit, interest rate, foreign exchange rate, liquidity, legal, regulatory, reputational, operational, etc, "these rise are highly interdependent and events that affect one area of risk can have ramifications for a range of other fk categories too.” Recent developments in the global economy in last decade have also shown that afar are not restricted to a particular financial institution only or the financial industry, and countries. The risks that have maximum impact on any financial institution are: 1. Credit Risk-_ 5 2. Market Risk— ¢ 3. Reputational Risk. 2. 4, Operational Risk — 9 3.1 CREDIT RISK: rm This has been the single largest reason for failures of banks and financa insitutidhs since the evolution ofthis Industry. Lending involve many risks. In addition to the risks related to creditworthiness of the borrower, the banks are also exposed to interest rate, forex and country risks. As given In RBI site “Credit risk or default risk involves inability or unwillingness of a customer to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions.” The Credit Risk is generally "nade up of: + Transaction risk or default riskand > 7 = Portfolio risk The credit risk of a bank’s portfolio depends on both éxtervial and internal factors, External factors are: # State of economy, = Wide swings in commodity / equity prices, = Foreign exchange rates and interest rates, «Trade restrictions, economic’sanctions, Government policies, etc. Internal factors are: * Deficiencies in loan policies/administration, Absence of prudential credit concentration limits, inadequately defined lending limits for Loan Officers/Credit Committees, Deficiencies in appraisal of borrowers’ financial position, Excessive dependence on collaterals and inadequate risk pricing, 2+ Absence of loan review merhanism and post sanction monitoring, et. Management of Credit Risk: All banks / financial institutions need to have a well-defined credit risk management policy approved by its board and form a high level Credit Policy Committee with Chairman / CEO, Heads of Treasury Department, Credit Department etc. as members for its management. The broad credit risk management processes would include the following: a, Measure risk through credit rating b. Quantifying risk through expected loan losses estimate over a chosen time and the amount of actual losses that exceed the expected loss. cc. Risk pricing on a scientific basis 4. Risk control through effective loan review mechanism and portfolio management. Banks need various tools / instruments tools to implement the risk management processes mentioned above. They are: ‘and exposed to various kinds of risks such as fferariications but can spread across Industries ( {i i "lf tf « 16 Copyright © 2014 Tata Consultancy Services Limited. All Rights Reserved ‘ ree PAMEINENTIALYN MeO AL a ela \ (as) Sree ket 1. Credit Approving Authority: “+ Banks should also evolve multi-tier credit approving, up the grid basis the portfolio size or the credit risk rating. “Banks can also consider the option of approvals moving up across of branch, regional, zonal, head offices. ork Credit approving officers should be delineated from any business targets and ¥" independently. pm, 2. Prudential Limits: < ' ‘Banks should define single / group borrower limi e tient Banks should stipulate bate fam cree limits to industry / sectors and be flexible to limit adjustments in case of slowdown of a particular industry 1 Banks may also set limits depending onthe maturity profile of the Gaget book to mitigate the market and / or liquidity risk. ~ provvals snore stern or grid and Joan 99% perating levels 5 different OF “Banks should devise a single credit rating system that Hives asa reference to take consistent credit decisions in diverse situations ‘ . : > Risk ratings can be done basis the size or entity type such as sole traders, large corporates that are exposed to other market / liquidity /forex risks Risk rating also needs to be done on the quality.and availability of collaterals ; To add accuracy and objectivity in probable loss Calculations the rating review should be done by an independent group. ( + The risk rating score to be in a numeric range'/scale basis credit quality. Risk Pricing: “ ( higher interest rate, “Apply risk-return pricing where borrowers with low credit rating pay isation andincollateral + Maintain flexibility to revise the pricing with change in risk categ value, “Check with competition pricing of asset with same risk rating and avoid price-cutting to 0 inérease market share with such risky loans that may lead to NPAs. : 5 Portfolio Management: “Prescribing quantitative limits of exposure of the assets in various risk categories. ; “Evaluate the rating-wise distribution of borrowers in various industry, business segments, etc) Undertake risk rate reviews and move / update borrower ratings at frequent (quarterly / half yearly) intervals, 4 Implement discretionary and discriminatory time schedules for renewal of credit limits of low credit rated assets, “Have prudent planning to target volume of loans basis credit rating, probable losses, ‘provision requirements, Necessary restructuring to be done in case of any deviation, (6 Loan Review Management: R\ “Prompt identification of potential bad loans and initiate corrective measures, ¢ 4 Regular assessment of adequacy and compliance of loan policies and procedures, 7 4 Regular evaluation of portfolio quality and inform adequate determination of loss provisioning, : + Keeping top management informed about the credit related activities. 3.2 MARKET RISK: Historically, credit risk management has been the primary challenge for banks. With gradual deregulation, any adverse changes in market variables, such as interest rate, foreign exchange rate, equity price and commodity price has become important factors of market risk. z 16 a Copyright © 2014 Tata Consultancy Services Limited. All Rights Reserved TCS CONFIDENTIALTATA CONSULTANCY SERVICES bees set nee eee ‘Market risk takes the form of: 1. Uquidity Risk: arises from funding of long-term loans by short-term deposits 2. Interest Rate Risk: refers to adverse potential impact to earnings and capital due to of market interest rates. . aT 3, Foreign Exchange Rate (Forex) Risk: is the risk of banks st suffering losses due to adver: eee ed irwhich khsson open postion ins porte fregneureney Co 4. Commodity Price Risk: The risk that a change in the prices of a production inputs will adversely impact the producer / manufacturer é ag Equity Price Risk: is the risk that the fair value of equities decreasing and incurring, Sas changes in 5. eqtity prices in the stock exchange indices or in public market. , ¢ . ‘Management of Market Risk: Banks “Boards should have clear articulated market risk thanageMtreft policies, wD prudential risk limits, review mechanisms, reporting and auditing systems.” ad ‘> "The Asset-Liability Management Committee (ALCO) should function/as the top'gperational unit for managing the balance sheet within the performance / risk parameters la by the Board”.* > > > 7 > ee ~ > => > > TATA CONSULTANCY BSS [a 9 ERieekegen = Internal controls and regular / surprise audits (internal and external) ‘The operational risk management indicative tools or checklist may be as follows: “Close management oversight. Procedures and process guidelines with financial limits of individuals / groups. + Segregation of duties (maker / checker / authoriser / reviewer). Purchase of proper and adequate insurance. Exiting risky / unprofitable businesses. Employee training. Employee / vendor background checks. “Robust Business Continuity Plan with dry runs done at regularintervals, = Bes Ow ra ¥ ‘ With increase in products, complexities and competition in the financial industry, bitamehecessary to proactively manage risks and also for stricter supervisory control and regulations. Each’ €ountry developed their own risk management framework and regulations depending on the incidents affecting the finantial industry in its soi. 1. Sarbanes- Oxley Act (SOX) c™ ‘Also known as the Public Company Accounting Reform and Investor Protection Act, it was enacted by two US. ‘congressmen, Senator Paul Sarbanes and Representative Michael Oxley if 2002. It is a United States federal law that set new and enhanced standards for all U.S. public company boards, management and public accounting firms, ‘The bill was enacted as a reaction to a number of cofporate accounting scandals and breakdowns such as Enron, Tyco International, Adelphia, Peregrine Systems dnd WorldCom: from additional corporate board responsibilities, individual statements, measures to restoreinvestor confidence, whistle ‘Act also prescribes the need for Comptroller General and ‘and implement necessary rulings to comply with the The act contains 11 titles or sections, ranging, responsibility for accuracy of reported financial blower protection, white collar crimes etc, The Securities and Exchange Commission (SEC) to investigate law. 2, STATEMENT AND AUDITING STANDARDS NO. 70 (SAS 70): SERVICE ORGANISATIONS Outsourcing of services is common across the world and the banking industry isheavily dependent on such application service providers; managed security providers, credit processing organizations, clearinghouses, aerromer call processing services, etc. These outsourced services impact the control and delivery environment of the banks and itis imperative that these service organisations’ internal checks and controls are independently audited as well? SAS 70s developied ahd issued by American Institute of Certified Public Accountants (AICPA)-This is @ globally accepted auditing statement providing guidance on Pree he factors an independent auditor should consider when auditing the financial statements of an entity ‘service organizations to process transactions — User Auditor's report. Who issue reports on the processing of transactions by a service organization for “Service Auditor's report. There are two types of Service Auditor's reports: ‘con the fairness of control he service organisation to meet jenerally once @ that uses one or more *\ independent auditors use by other auditors + Type 4 report: This report includes the Service Auditor's opinion descriptions, adequacy and suitability of the controls in place at t the control objectives of the client being catered to. The frequency of review is & year. This report generally forms the base to move to Type 2 report ype 2 report Tis includes the Service Auditor's opinion ifthe controls mentioned in reper type 1 were in effective execution during the period of review. This au generally performed nice a year but can be of higher frequency and the auait review period ranges from 6 months to 10 Copvright © 2014 Tata Consultancy Services Limited. All Rights ReservedTATA CONSULTANCY SERVICES srdinetecieais One year. Service organisation having multiple clients will require multiple such audits at different frequencies depending on the thelr different financial year end cycles of 31” March, 30" June, 3oth September or 31" December. Thus the Service Auditor's report can be utilised by the User Auditor to understand the controls in place and the effectiveness of such controls at the service provider company. However SAS 70 is not utilised by the financial statement auditors of the service organisation, since the audit Scope is the environment supporting the user / client organisation's processes. 7 With the introduction of SOX which put stress on understanding the controls over financial reporting, Type 2 SAS 70 report was identified as the acceptable independent report by a third party on service organisation's available controls and their effectiveness. Similar Guidance / Audit Reports In other countries \ United Kingdom: Similar to SAS 70, is the guidanceprovided by the Audit and Assurance Faculty of the Institute of Chartered Accountants in England and Wales titled AAF 01/06. India: Reporting requirements are defined as Audit and Assurance Standards 24 (AAS 24) “Audit Consideration Relating to Entities Using Service Organizations” issued by the Institute of Chartered Accountants of India, 3. CAMELS RATINGS This supervisory rating system was originally developed in the U.S. to ascertain a bank's overall condit applicable to all financial institutions (banks, credit unions, etc.) in the U.S. and also implemented outside U.S. by various banking supervisory regulators. ‘The ratings are assigned based on an analysis of the financial statements along with on-site reviews made by a designated supervisory regulator, such as the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration and the Federal Deposit Insurance Corporation (Fo1c). The banks are assessed on sit factors or components: * Capital Adequacy itis + Assets + Managementadality + Earnings 'y (asset liability management - ALM) to market risk, especially interest rate risk) © Liqui + Sensitivity (sensit Banks are assigned a score on a scale of one (best) to five (worst) for each factor. The ratings are provided to the top management ofthe financial institution and not made public especially when there is a CAMELS rating downgrade, toavoidabank run. Bank with an average score of less than two is considered to be a high-quality institution, while banks with score greater than three are considered to be less-than-satisfactory establishments, in need of supervisory attention, and / Or intervention for a formal resolution process designed to protect retail depositors. 4, BASEL Basel Committee of Banking Supervision (BCBS) was established in December, 1974 to improve collaboration among bank supervisors. It was established undeF the auspices of Bank of International Settlements located in Basel, Switzerland. The formation of the Committee was triggered by the messy liquidation of Herstatt Bank in 1974. | For Bank to be safe and sound, capital adequacy requirements became priority. To insulate banks from failures specific regulations were required for: meme ee an Copyright © 2014 Tata Consultancy Services Limited. All Rights ReservedLAS Cee tanita gs eed Experience certainty. co 1. Providing a buffer against bank losses > 2. Protecting creditors inthe event of bank failure oS 3. Asa disincentive for excessive risk taking SS pases C~_ twas the first accord issued in 1988 by BCBS and became effective in the G-10 countries in 1992. The purpose = \ was to: ak, o> ‘a. Prevent international active banks from building business volume without adequate capital backing tt ant created a level playing field for foreign banks if competing for same loans, they wilfhaveto et aside 7s almost same amount of capital. ¢ a b. Focus was on credit risk by creating asset classification system by using simple capt = Set minimum capital standards for banks. . sk Categories of assets in Basel 2 “ns = 4 0X- cash, bullion, home country central bank & government debts and any OECD country debt — 4 10% - OECD bank debt, development bank debt, cash in collection, an) + 20%- Mortgage Backed Securities with highest AAA rating IN 50% - Residential mortgages. \ + 100% - Corporate debt / commercial loans, non OECD bank debt. Banks that operate internationally are required to hold capital equal to.8% of their risk weighted assets. oS om > BASELZ SF ____Thesecons Base Accord, known as Bast vas dnactbdi1993. In 2001 the 3 pillar approach was introduced ad 5 and implementation will continue till 2015 in Base! Committee member and non-member countries. The 3 pillars are: =“ Pillar 4: Minimum regulatory capital requirements for credit risk, market risk and operational risk (newly o added). —— Pillar 2:Supervisory Review Process: Better regulating tools and frameworks than Basel 1 for dealing with a Proniphral or residual ise such a 5)tefic ist concentration ris, putational isk, legal ris, Nqulty risk, etc. faced by banks. oo Pillar 3: Effective use of matket discipline to strengthen disclosure to facilitate assessment of the bank by investors, analysts, customers, other banks, and rating agencies that will foster safe and sound banking. Vie practices / good governance. —— BASEL3 ‘This is the third set of Basel Accords for global regulatory standards on bank capital adequacy, stress testing and = market liquidity risk voluntarily agreed by the BCBS members in 2010 ~ 2011 to be implemented by 31" March 2018, 7 Basel 3 was developed in response to the financial crisis faced by banks globally in 2008 that revealed the 4 deficiencies of financial regulations of earlier Basel accords. The purposes or objectives of Basel 3 remain aligned Ne with the 3 pillars of Basel 2. The proposed major changes of Basel 3 are: ‘a. Better Capital Quality: Better quality capital means higher loss-absorbing capacity allowing Banks to withstand financial stress. b. Capital Conservation Buffer: Banks will be required to hold a capital conservation buffer of 2.5%. Conservation buffer is a cushion of capital that can be used to absorb losses during periods of financial and economic stress. Minimum Common Equity and Tier 1 Capital Requirements: The minimum requirement for common equity has been raised from 2% to 4.5% of total risk-weighted assets. The overall Tier. 1 capita ” Copyright © 2014 Tata Consultancy Services Limited. All Rights Reserved wen 2, TCS CONFIDENTIALLorrie keg Fequirement will also increase from Fequirement will remain at the current Leverage Ratio (relative amount of ca the current minimum of 4% to 6%. imum total capital "8% level and with conservation buffer it will increase to 10.5%. pital to total assets}: Assumptions from historical experience poe wrong in i aoe financial crisis when value of many assets fell faster. .A 3% cap on swelling of Be ratio included to serve as safety net its effi roduction in January 2018, ty and also to test its efficacy before mandatory tau lity Ratios: New framework for liquidity risk management to be created and introduced Liquid Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) in 2015 and 2018 respectively” \ systemically Important Financial institutions (SIFI): For macro prudential risk management, . systemically important banks will be expected to maintain loss-absorbing capacity beyond the Basel 3 recommendations which may be in the nature of capital surcharges, contingent capital and bail-in-debt. & Countercyclical Buffer: Introduced with the objective to increase capital requirements in good times and decrease the same in bad times. .The buffer will comprise of common ediity and other capital capable of absorbing loss and will range from 0% to 2.5%. \K Basel 2 and Basel 3 Capital Requirements table: % - Requirements Under Basel li] Under Basel Itt ‘Minimum Ratio of Total Capital To RWAs Saar 10.50% Minimum Ratio of Common Equity to RWAS ; 2% 4.50% to 7.00% Tier I capital to RWAs 4% 6.00% Capital Conservation Buffers to RWAS Nil 2.50% Leverage Ratio Nil 3.00% Countercyclical Buffer Nil 0% to 2.50% Minimum Liquidity Coverage Ratio Nil TBD by 2015 Minimum Net Stable Funding Ratio Nil TBD by 2018 2. RBI site:http://rbidocs.rbi.org.in/rdocs/notification/PDFs/9492.pdf shttp://rbidocs.rbi.org.in/rd ification/PDFs/9492.pdf 4. RBI BI site:http://rbi.org.in/upload/notification/pdfs/61494.pdf Copyright © 2014 Tata Consultancy Services Limited. All Rights Reserved TCS CONFIDENTIALONSULTANCY SERVICES Experience certainty. CUSTOMER SERVICE ‘As Gandhiji described a customer and the service provider's attitude and responsibility towards him: dependent on us, we are dependent on him. Hi He is not : ot an interruption of our work, he is the purpose of it, He is not an outsider to our business, he is part of it. We are not doing him a favour by serving him, he is doing asa favour by giving us an opportunity to do so.” This was said long before customer service was delineated and outsourced from business generation by/compahies globally and in India the phenomenon was visible much later. However this late entrance to the outsourced service industry was made up by being the country of choice for major European & North American companies to outsource their processing and servicing jobs to India. \ ° Definition: Customer service is the process of ensuring customer satisfaction with a product or service provided. Often, customer service takes place while performing a transaction for the customer, such aS making a sale or returning an item. Customer service can happen during an in-person interaction, a phone call, self-service systems, or byperforming transactions such as making a sale or returning a product. ~ Need: The purpose of any business is to sell its products and services to'generate income and profit which comes from the customer. Customers are the backbone or main support structure of organizations possessing the power to make or break any organisation irrespective of its nature and size. Hence, itis necessary to take adequate care of them and increase their numbers through quality service. «Ina free market economy to buy his product, a customer.has multiple choices. ‘© It costs more to gain anew customer than to reétain’and existing one. © Asatisfied customer is the best marketing manager, «Ifyou do not look after your customer. someone else will Banking being a financial service industry, itis imperative to focus and invest in customer service and technologies associated with it. The formation of variolls committees and boards by GOI & RBI emphasizes the importance of extending speedy, effi = In 1975, the GO! had appointed the Talwar Committeeon customer service in banks. = In 1990, RBI appointed the Goiporia Committee on customer service in banks. «In 1995 RBI introduced the grievance redressal ~ Banking Ombudsman Scheme. 5 in 2004, the Tarapore Committee recommendations led to formation of Board level committees for monitoring customer service in banks. In 2006 setting up of Banking Codes and Standards Board of India (BCSBI) ,In.2010 RBI set up the Damodaran Committee on Customer Service. nt fair and courteous customer service in banking industry. Customer Service Methods and Channels: With the increase in product and service delivery channels it becomes imperative to improve technology and increase methods of providing customer support and service. Customer service is increasingly being automated to provide greater accessibility and round the clock service to customers. 1 Following are the present day service methods: Face to Face: Customer service provided by a Bank’s employee or representative ¥ At Bank's business premises ¥ By Relationship Manager at customer's premises Y Doorstep Banking for drop and pick up service by Bank appointed vendor ; } © Telephonic: Service through call centres which may / may not be outsourced. Here again the service can be provided ) ory Copyright © 2014 Tata Consultancy Services Limited, All Rights Reservedaay eer In person: Manned call ce ntres accey redress complaints, Pling calls to respond to queries, take service requests and INR (automated): Interactive Voice nes Fequest and complaint types. * ATMs / Kiosks: Machines that can ‘ATM machines are now equipped inclusive service. Internet: This is gaining importance and maintain and/o Ponse customer service by touch-tone phone for predefined Provide fast and secure service with almost negligible error. with voice and Braille keypads as per RBI guidelines to provide customer LcnB GEIR Popularity by leaps and bounds. However there is a cfiallenge to agents are invisible and alee we a experience of online customer service, Here customers ‘and)service haben Iso inaudible to each other and hence customer may not receive the bestiof onal treatment. This lack of visual and tactile presence makes it imperative to Cfeate and maintain a Personalised human to human connection in the online domain. The internet also has various different methods of service: Le ¥ Email / links: This is the plain vanilla option available at any sef ide, website, where mails can be sent / standard e-forms can be filled and submitted for service requests /'complaints. Y Avatars / Online agents: Based on artificial intelligence these are onliné service assistants to bring in human interaction while customers are on self-service on the company website, Basic Principles to be followed and adhered in customer service’ are: . xd) 1) Treating Customers Fairly: This has become an internationally accepted primary objective in customer service. This includes many customer right and service aspects that are being stressed at international levels by United Nations, USA, UK and other countries. \ '* Protection of Customer Interest: 7 \e~ Y Advice on products and services that is suitable for him taking into account his age, social, financial position. Access of customers to adequate information to enable them to make informed choices. Customer to be advised / educated on the*financial impacts of his choice. Y Banks and service providers should strengthen / maintain measures relating to the control of restrictive and other abusive business practices harmful to customers. Data integrity and expeditious removal of name from defaulter list when resolved in advising credit agencies. Y Protection against loss in all customer induced transactions utilising modern day technology driven banking on the net, mobile, ATMs. © Transparency: ‘Y Advertising and promotional literature should be clear and not misleading and clear information 6 given about products and services. Y Clear information to be given explaining the salient features of products and services including terms and conditions, applicable interest rates, fees and charges. ‘Ve send regular statements (where appropriate) and keep customer informed about changes to the. interest rates, charges or terms and conditions. Financial Inclusion and Equal Rights: ; ¥ No Frills Account or a basic product should be offered for financially weaker section to avail without paying service charges. ¥ There should not be any discrimination regarding facilities and services such as interest rates, minimum balance, and service charges. ; V Allow customers to avail plain yanilla products without being forced to take bouquet / bundled products and or services which may not be required by the customer. P| ata Consultancy Services Limited, All Rights Reserved ce nt © 2014 Tata Consultancy Se ices Limited. yrighty MAC Cee by Wand Baile Experience certainty. ¥ © Confidentiality: Y Except for compliance to rey ive dem ni Bulatory or administrati fi cept for compli demands, customer data confidentiality to be Y Data confidentiality and security by Bank’s vendors and o ovidi fi it e y Bank's vendors and outsourced service provider Y Donat Call /Do not Disturb instruction to be accepted and implemented rome > Grievance Redressal: . Y There should not be any unreasonable deterrents to make a complaint or submit adiim ina, > dispute. ) Y Complaints to be promptly and efficiently attended to and resolved. NS Escalation procedure with names, contact details of senior member of the Grganisationand regulatory body to be provided and displayed in the premises and website. SF th of companies. Much mer delight. 2) Service Standard: This is another aspect that has been key driver in business gr research, surveys have been done to improve service from customer satisfaction t0cu Benchmarks have been designed to measure the service level and its efficacy. Have clear customer centric policy frameworks with defined sefvice lev Y Timelines For product and service delivery between internal units and customers Y Charges— Reasonable price and penalties of products and services «Process: Robust and detailed processes framework with cléar.responsibility and accountability Y Compliance ~ should comply with customer, regulatory and industry requirements Y Design — should have adequate checks and balances to.throw up errors and frauds «People: They provide tangible difference for any service provider since similar policies and procedures are adopted by all in the Banking industry... \f~ © Code of Conduct: Banks should fave faid down polices on ethical business practices and should ensure strict adherence to it with zero tolerance to lapses. ‘Integrity: This is the most important aspect Banking industry is built on trust Gift policy: Level of formality to be maintained in banks acknowledging their business patrons ‘and customer acknowledging his satisfaction. ribery: Products and services to be sold on customer «of Interest: individual's personal interest should not corrupt his performance as @ Bank employee. professionalism - Should be courteous, adhere to timelines promised to customer Comfnitment - go extra mile to provide customised solution for customer needs knowledge ~ Should be adequately rained and skilled to handle queries and issues Communication — Should have good listening skils and positive, polite attitude in their body and verbal language. el agreements SAKK vice industry will have customer dissatisfaction but companies need to d for prompt and comprehensive redressal. and resolution. ute Redressal: Any ser 3) Grievance / Disp implemente @have policies ‘published and i « TAT=To be communicated for receipt acknowledgement, response © Garhiesation For financlgal and opportunity loss where Bankis at fault J Fecalation ~ In cases of customer not satisfied with the resolution or response representative he should be allowed to and advised about: ¥ Senior Official name and contact details for escalation Y Contact details — address, email id of Regulatory body (RBI). pispute Settlement: f required when not resolved satisfactorily, reco toa third Pisrration (Banking Ombudsman, Consumer Courts etc.) should be avalable Cee 15 Limited. All Rights Reserved of the complaint handling, party. arbitration / copyright © 2014 Tata Consultancy Service ee mruaTLON UMS) Sar le aia} LSyeattle staid eS Exits: It should be easy for customer to exit the relationship, wit service charges. ‘© Resolution: 1out imposition of any penal / restrictive ‘As banker-customer an unequal relationship both in terms of resources and information levels, banks should not indefinitely delay implementing decisions favoring the customers by escalating the issues to higher levels as customers cannot fight mighty organisations”. 4 4) Customer Feedback / Satisfaction Survey: This is required for Banks to improve on its products arid set Moreover escalation complaints to regulatory and legal bodies made RBI to direct Banks to introduce and, provide customer satisfaction surveys. These have been implemented at various process and stages of customer este service. Recording: CCTV installation and call recording at phone banking units to train employees improve quality and or detect any deviation from set standards. ~— Online Feedback: Many Banks have implemented feedback loops that allow/them to capture feedback at the point of experience. Technology has made it easy for Banks to obtain feedback from their customers. independent Agency: Many Banks have implemented independent agencies to record customer experience and feedback at various levels of interaction ~ after on boarding, after transaction, after account closures © Complaint / Suggestion Box & Register: This is a mandatory requirement prescribed by RBI to be maintained at Bank's premises. . ‘ Social Media: Some Banks have gone the extra mile of capturing feedback from social media such as Facebook, Twitter etc. TA 6 ices Limited. All Rights Reserved 2014 Tata Consultancy Services Limited. All Rig Copyright ©LONE Mee UR eats a sy Peek os — 5.CUSTOMER COMPLAINTS & DISPUTE HANDLING Shy customers expect prompt rectification of errors made by thelr service provider ~_—~ ‘© COMPLAINT DEFINITION: “Its a dissatisfaction expressed orally or in writing by the customer or hi aa representative about the company’s provision or the failure to provide a service. ~ DS + common complains: y\ ¥ Rude Service /Response over the counter / phone on} ¥ Unattended phone calls N Delayed / Faulty / No Service wed? .7 3 insensitivity and Apathy Towards Customer ~ — Y Uninformed Staff oe =F __« Complaint Management: All Banks as per RBI requirements need to hava complaint management system = which should be displayed at the Banks’ premises, ATMs and also published on the Website, It should clear 4 A state the policies of the Bank on the following: é Ss “= ¥ For Customers Information: ¢ ‘ ~ 4 Complaint Description: What constitutes and can Bé accepted as a complaint. Difference of = feedback from complaint. \) ~~ 4 Timelines: Specify TAT of receipt acknowledgement Interim response and resolution. > 4 Complaint Procedure: Where, with whom and how customers can lodge complaints. ~ 4+ Escalation: Customers right to refer Complaint to Ombudsman if unhappy with the final response or no response within prescribed timeline ~—, ¥ For Internal Management and Monitorin ‘Who can receive, handle and respiond to complaints. Internal escalation matei¥and time line if not resolved at the previous level Root cause and trend analysis to take remedial measures. Regulatory reporting at stipulated frequencies and publishing data on website. ‘© Staff Training: \ Y Objectivity in handling of Complaints: Customers complain against the Bank’s products or service or the employee providing it and not against any individual Avoid Confrontation: You may win the argument but may lose the customer. Opportunity: Welcome complaints to improve products and service. CUSTOMER SERVICE VOICE all centres are complex operating environments and need a wide variety of sophisticated technology to process transactions and maintain auditrails. Call centre technology is almost the same across different organisations and industries, but it is the agent’s service quality that becomes the deciding factor of customer retention and future { Ss COPPPEES q business. Some of these systems / applications are: = % 2 S. 1, Automatic Call Distributors and/or Dialers: ACD is used by inbound call centres to manage the flow of incoming eatin to route them tothe mos appropriate agent. Meanwhile to place and complete al, outbound cll DS __ centres require a diater. (2. AGRM application isthe next most important technology in call centres after ACO. Agents use the servicing "= application to respond to customers with an understanding of their overall relationship value to the company / “sp, _ bank. CRMs also used for capturing customer complaints and requests and actions taken for their logical ¢ > —_losure. This is utilised to create a record of interactions that can be accessed the next time the customer — Sy, reaches out for assistance. = ~S t 7 Copyright © 2014 Tata Consultancy Services Limited. All Rights Reserved TCS CONFIDENTIALsel 39 er aaneket ae ‘Campaign Manageme: know whom to contac facilitates agents to re int system (CMS): This is re t, OF to produce a list of applications, The most basie function of CTIis to deliver a “screen pop up," desktop which saves time and effort duplication for agent and i ne Provides security and confidentiality of key identificatio bringing up the customer's decount on customer. 7 n details given by customer over the v and service environments ~ inbound or outbound. ns to be able to reproduce the same if there is a question al o \. ~ require recording systems for quality improvement, bout an interaction and ako ind improves service quality for routine ment software(WFM) can hel to meet targets, taking into account agent breaks, Queries and also when live agents are not available. Ip call centre managers schedule the optimal number of agents , training classes, planned leaves and unplanned absenteeism. 7. Quality Management applications (QM) These applications give management insight into call centre Performance and to measure how well call centre agents adhere to internal policies and procedures and the ‘software is considered critical for in bound call centres, 9. Time Division Multiplexing over IP(TDMOIP)is mechanism for transporting call centre transactions (calls, emails, chats, faxes) and it can be processed over cheaper standard telecom data network, instead of the old-fashioned voice network designed for analog signal's communications, 10. Email Management system — Another must have for imy proved customer service that can scan and filter out spam mails and allot ticket numbers. It also has intelligence for data enhancement by tagging mails for further Processing and retrieves earlier relevant information of customer. SPECIFIC CUSTOMER SERVICE DIRECTIVES SPECIFIC CUSTOMER SERVICE DIRECTIVES Across the globe “treating customers fairly” has become the norm and countries have formed guidelines and ‘regulations to provide basic banking facilities and rights to customers across regions, financial standing, cultural and religious background without discrimination. % United Nations: UN General Assembly passed United Nations Guidelines in 1985 for consumer protection. The guidelines were on government's proactive role and inclusive policy such as: * “Promotion and protection of economic interests of the consumer.’ * (Promotion of sustainable consumption patterns (taking into account the basic human needs of all sections of society, reducing inequality) Goals for eradicating poverty, satisfying United States: The Federal Deposit Insurance Corporation (FDIC) Advisory Committee on economic inclusion: + Advice and recommend on initiatives on expanding access to banking services for under-served populations, Financial inclusion is viewed as part of ensuring financial stability. + Community Reinvestment Act (CRA) prohibits discrimination by banks against low and moderate income neighbourhoods. ‘+ United Kingdom: The Financial Services Authority (FSA) prescribes banks to make commitment non-discriminatory and recommends financial inclusion: We and firms need to take account of the limited financial capability of most consumers. on being fair, 28 2014 Tata Consultancy Services Limited. 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