MA0039 –Retail Banking

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Summer 2013

Master of Business Administration- MBA Semester 3

MA0039 –Retail Banking– 4 Credits

(Book ID: B1619)

Assignment- 60 marks

Note: Answer all questions. Kindly note that answers for 10 marks questions should not exceed 400 words. Each question is followed by evaluation scheme.

Q1. The Banking Laws (Amendment) Act 1983 introduced section 45 ZA in the Banking Regulation Act, 1949, which facilitates applicability of nomination to all deposit accounts. What are the benefits of nomination to a depositor?

( explanation of nomination-4 marks; benefits-6 marks) 10 marks

Answer : Explanation of nomination :

Nomination is a facility that enables a deposit account holder(s) (individual or sole proprietor) or safe deposit locker holder(s) to nominate an individual, who can claim the proceeds of the deposit account(s) or contents of the safe deposit locker(s), post the demise of the original depositor(s) or locker holder(s).

Basic guidelines for nomination :

Q2. Electronic clearing services include both credit and debit. It is regulated by RBI. Explain Electronic Clearing Service (ECS).

( explanation of ECS debit - 5 marks+ ECS - Credit - 5 marks 10 marks

Answer : Electronic clearing services :

It is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc. or for loan installments of financial institutions/banks or regular investments of

persons.

Types of ECS :

Ans: There are two types of ECS called ECS (Credit) and ECS (Debit).

1.  ECS Debit System :

It is used for raising debits to a number of accounts of consumers/account holders for crediting a particular institution. ECS Debit is used by an institution for raising debits to a large number of accounts (for instance, consumers of utility services, borrowers, investors in mutual funds etc.) maintained with bank branches at various locations within the jurisdiction of a ECS Centre for single credit to the bank account of the user institution. ECS

Q3. Banks need to implement KYC guidelines for all prospective customers before entertaining new business. Explain KYC guidelines.

(introduction of KYC guidelines-3 marks; explanation of KYC guidelines - 7 marks) 10 marks

Answer :Introduction of  KYC guidelines :

KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks prudently.

KYC Guidelines :

KYC Policy :

(i) "Know Your Customer" (KYC) procedure should be the key principle for identification of an individual/corporate opening an account. The customer identification should entail verification through an introductory reference from an existing account holder/a person known to the bank or on the basis of documents provided by the customer.

Q4. Cross selling is an act of selling a range of additional products to a customer who has already availed of a particular product or service from the seller or the service provider. Explain Cross selling.

( explanation of cross selling- 5 marks; benefits-5 marks) 10 marks

Answer : Explanation of cross selling :

Selling of banks products/services to an already existing customer—is the broad definition of what cross sell means. It can be selling an existing checking account customer a credit card or selling an existing credit card customer a mortgage. Banks have been using cross sell as a marketing approach to expand their footprint and also increase their customer base.

Tools Enablement :

Successful cross-selling requires that banks understand what their customers need and that the bank keep track of their interaction via phone banking, web, walk in, etc. Just making phone calls to sell loans or plastic cards that the customer does not desire may often end up annoying him.

Q5. The services extended by banks through technology enabled channels are cost effective and increase the profitability of the bank. Explain Internet banking.

( explanation– 5 marks; benefits- 5marks) 10 marks

Answer : Internet banking :

Internet Banking refers to the banking services provided by the banks over the internet. Some of these services include paying of bills, funds transfer, viewing account statement, etc. Banks also deliver their latest products and services over the internet. Internet banking is performed through a computer system or similar devices that can connect to the banking site via the internet.

Benefits of internet banking :

Internet Banking has several advantages over traditional banking which makes operating a bank account simple and convenient. Internet banking allows you to conduct various transactions using the bank's website and offers several advantages. Some of the advantages of internet banking are:

Q6. Explain inter bank settlements.

( introduction- 3 marks; explanation- 7 marks)

Answer : Introduction to Inter bank settlement :

Central banks have come to view interbank clearing and settlement as a major area of strategic interest, not only for the implementation of monetary policy but also under their responsibilities for financial stability. Reflecting this, they have become increasingly involved in the operation of these systems. By considering the evolution  of interbank settlement arrangements and central banking functions in a number of  diverse examples, this paper seeks to improve understanding of the development of,  and reasons for, this current role.

Explanation :

The interbank payment system hasn’t been immune from earlier crises. While the US Fed wire system did not break down even in the aftermath of the September 2001 terrorist attacks, operational problems at the Bank of New York

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