Introduction

Technological progress in payment and settlement systems and the qualitative changes in operational systems and processes that have been undertaken by various players in the market have enabled market forces of competition to come into play to improve efficiencies in providing better service to the users of the system. It will be the bank's endeavor to offer services to its customers with best possible utilization of its technology infrastructure. Withdrawal of the Reserve Bank of India instructions to banks on time frame for collection of outstation cheques, payment of interest on delayed collection of outstation cheques/instruments, with effect from 1st November 2004, had offered bank further opportunities to increase its efficiency for better performance. This compensation policy of the bank is therefore, designed to cover areas relating to unauthorized debiting of account, payment of interest to customers for delayed collection of cheques/instruments, payment of cheques after acknowledgement of stop payment instructions, remittances within India, foreign exchange services, lending, etc. The policy is based on principles of transparency and fairness in the treatment of customers.

The objective of this policy is to establish a system whereby the bank compensates the customer for any financial loss he/she might incur due to deficiency in service on the part of the bank or any act of omission or commission directly attributable to the bank. By ensuring that the customer is compensated without having to ask for it, the bank expects instances when the customer has to approach Banking Ombudsman or any other Forum for redressal to come down significantly.

It is reiterated that the policy covers only compensation for financial losses which customers might incur due to deficiency in the services offered by the bank which can be measured directly and as such the commitments under this policy are without prejudice to any right the bank will have in defending its position before any forum duly constituted to adjudicate banker-customer disputes.

1. Unauthorized/Erroneous Debit

If the bank has raised an unauthorized/erroneous direct debit to an account, the entry will be reversed immediately on being informed of the erroneous debit, after verifying the position. In the event the unauthorized/erroneous debit has resulted in a direct financial loss for the customer by way of (i) reduction in the minimum balance applicable for payment of interest on savings bank deposit or (ii) payment of additional interest to the bank in a loan account, the bank will compensate the customer for such loss. Further, if the customer has suffered any direct financial loss incidental to return of a cheque or failure of direct debit instructions due to insufficiency of balance on account of the unauthorized/erroneous debit, the bank will compensate the customer to the extent of such direct financial losses. However, financial loss mentioned hereinabove will not cover any loss incurred by the customer due to loss of reputation or loss of profit.

In case verification of the entry reported to be erroneous by the customer does not involve a third party, the bank shall arrange to complete the process of verification within a maximum period of 7 working days from the date of reporting of erroneous debit. In case, the verification involves a third party, the bank shall complete the verification process within a maximum period of one month from the date of reporting of erroneous transaction by the customer.

The RBI guidelines for reversal of erroneous debits arising on fraudulent or other transactions are as under :-

i) "In case where bank s are at fault, the banks should compensate their customers without demur and"

ii) "In case neither the banks are at fault nor the customers are at fault but the fault lies elsewhere in the system then also the banks should compensate the customers ( up to a limit, as specified below ) as a part of the Board approved customer relation policy ".

As regards clause no. (ii) above we shall compensate depending upon the facts of the case and on case to case basis upto 25% of the loss suffered by the customer subject to a maximum of Rs.1 lac (one lac) only.

Accordingly we have got our policy approved by the Board of Directors during its meeting held on 28.11.2002. In terms of the Policy the delegation of powers to the Executives/Officers as approved by our Board of Directors for compensating customers where -

a) Bank is at fault ;

b) Neither bank nor customer is at fault but the fault lies elsewhere in the system are as under:-

As a part of our exercise of reviewing of policies, the discretionary powers of the various levels of executives are being suggested as below for necessary approval of the Board of Directors :-

At present our bank is not having Credit Card Service so the erroneous transaction reported by customers in respect of credit card operations which require reference to a merchant establishment will not applicable at this stage but as and when our bank will start the Credit Card Operation suitable amendments will be carried out as per rules laid down by card association.

2. ECS direct debits/other debits to accounts

The bank will undertake to carry out direct debit/ECS debit instructions of customers in time. In the event the bank fails to meet such commitments customer will be compensated to the extent of any financial loss the customer would incur on account of delay in carrying out the instruction/failure to carry out the instructions.

The bank would debit the customer's account with any applicable service charge as per the schedule of charges notified by the bank. In the event the bank levies any charge in violation of the arrangement, the bank will reverse the charges when pointed out by the customer subject to scrutiny of agreed terms and conditions. Any consequential financial loss to the customer will also be compensated.

3. Payment of Cheques after Stop Payment Instructions

In case a cheque has been paid after stop payment instruction is acknowledge by the bank, the bank shall reverse the transaction and give value-dated credit to protect the interest of the customer. Any consequential financial loss to the customer will be compensated as provided under para 1 above. Such debits will be reversed within 2 working days of the customer intimating the transaction to the bank.

4. Foreign Exchange Services

The Bank would not compensate the customer for delays in collection of cheques designated in foreign currencies sent to foreign countries as the bank would not be able to ensure timely credit from overseas banks. It is the bank's experience that time for collection of instruments drawn on banks in foreign countries differ from country to country and even within a country, from place to place. The time norms for return of instruments cleared provisionally also vary from country to country. Bank however, would consider upfront credit against such instrument by purchasing the cheque/instrument, provided the conduct of the account has been satisfactory in the past. However, the bank will compensate the customer for undue delays in affording credit once proceeds are credited to the Nostro Account of the bank with its correspondent. Such compensation will be given for delays beyond one week from the date of credit to Nostro Account/due date after taking into account normal cooling period stipulated. The compensation in such cases will be worked out as follows :

a) Interest for the delay in crediting proceeds as indicated in the collection policy of the bank.

b) Compensation for any possible loss on account of adverse movement in foreign exchange rate.

c) As per FEDAI Rule 4.A.3(II) compensation @ 2% above the saving account rate , for amount up to Rs. 10,00,000/- for delay beyond 10days from the date of receipt of remittance advice, in case of amount exceeding Rs.10,00,000/- for delay beyond 3 days( including Saturdays ) from the date of receipt of credit advice in sending remittance advice to the beneficiary.

5. Remittances in India

If a customer want to remit money within India, bank will disclose the details of all charges including commission that a customer has to pay for the services as per the Tariff Schedule as amended from time to time.

6. Payment of Interest for delayed Collection of Outstation Cheques

The compensation on account of delays in collection of instruments would be as indicated in the bank's collection policy:

a) The bank will inform the customers about the clearing cycle for local instruments and the outstation instruments including details such as when the customer can withdraw money after lodging collection instruments and when the customer will be entitled to earn delayed interest as per our Cheque Collection Policy.

b) Provide details, if bank offer immediate credit for outstation cheques, including the applicable terms and conditions, such as the limits up to which the instruments tendered by the customers can be credited, operating accounts satisfactorily, etc.

c) Proceed as per our cheque collection policy and provide all assistance to obtain a duplicate cheque/ instrument in case the tendered instruments lost in transit.

d) The above information will be given at the time of opening of the account and whenever ask for. If any change in the policy, the revised policy will be displayed on our website and will be available at all our branches.

e) If a customer want to remit money within India bank will disclose the details of all charges including commission that a customer have to pay for the services as per the Tariff Schedule as amended from time to time.

Time frame for collection of local/ outstation instruments

Local Cheques/Instruments :        1 to 3 days
Outstation Cheques/Instruments : 7 days for National Clearing centers
10 days in case of State Capitals
other than North Eastern States &
Sikkim
14 days for rest of the country

As part of the compensation policy of the bank, the bank will pay interest to its customer on the amount of collection instruments in case there is delay in giving credit beyond the time period mentioned above. Such interest shall be paid without any demand from customers in all types of accounts. There shall be no distinction between instruments drawn on the bank's own branches or on other banks for the purpose of payment of interest on delayed collection.

Interest for delayed collection shall be paid at the following rates :

a) Savings Bank rate for the period of delay beyond 07 days for National Clearing Centres / 10 days in case of State Capitals (other than North Eastern States & Sikkim) / 14 days for rest of the country as the case may being collection of outstation cheques.

b) Where the delay is beyond 14 days after the time frame for collection of outstation instruments (07/10/14 days as indicated in "a" above) interest will be paid at the rate applicable for term deposit for the respective period.

c) In case of extraordinary delay, i.e. delays exceeding 90 days after the time frame (07/10/14 days as indicated in "a" above) for collection of outstation instruments interest will be paid at the rate of 2% above the corresponding Term Deposit rate.

d) In the event the proceeds of cheque under collection is to be credited to an overdraft/loan account of the customer, the bank would consider value-dating the proceeds keeping normal period required for collection in mind.

It may be noted that interest payment as given above would be applicable only for instruments sent for collection "within India".

The bank's compensation policy for financial loss suffered by the customers due to loss of instrument after it has been handed over to the bank for collection by the customer would also be as indicated in our Bank's Cheque Collection Policy (clause no.5 of the said policy).

7. Cheques/Instruments lost in transit/in clearing process or at paying bank's branch

In the event a cheque or an instrument accepted for collection is lost in transit or in the clearing process or at the paying bank's branch, the bank shall immediately on coming to know of the loss, bring the same to the notice of the accountholder so that the accountholder can inform the drawer to record stop payment and also take care that cheques, if any, issued by him/her are not dishonored due to non-credit of the amount of the lost cheques/instruments. The bank would provide all assistance to the customer to obtain a duplicate instrument from the drawer of the cheque.

In line with the compensation policy of the bank the bank will compensate the accountholder in respect of instruments lost in transit in the following way :

a) In case intimation regarding loss of instrument is conveyed to the customer beyond the time limit stipulated for collection (07/10/14 days as the case may be) interest will be paid for the period exceeding the stipulated collection period at the rates specified above.

b) In addition, bank will pay interest on the amount of the cheque for a further period of 15 days at Savings Bank rate to provide for likely further delay in obtaining duplicate cheque/instrument and collection thereof.

c) The bank would also compensate the customer for any reasonable charges he/she incurs in getting duplicate cheque/instrument upon production of receipt, in the event the instrument is to be obtained from a bank/institution who would charge a fee for issue of duplicate instrument.

8. Violation of the Code by Banks Agent

In the event of receipt of any complaint from the customer that the bank's representative/courier or DSA has engaged in any improper conduct or acted in violation of the Code of Bank's Commitment to Customers which the bank has adopted voluntarily, bank shall take appropriate steps to investigate and to handle the complaint and to compensate the customer for financial losses, if any.

9. Transaction of "at par instruments" of Co-operative Banks by Commercial Banks

The RBI has expressed concern over the lack of transparency in the arrangement for payment of "at par" instruments of co-operative banks by commercial banks resulting in dishonor of such instruments when the remitter has already paid for the instruments. In this connection it is clarified that the bank will not honour cheques drawn on current accounts maintained by other banks with it unless arrangements are made for funding cheques issued. Issuing bank should be responsible to compensate the cheque holder for non payment/delayed payment of cheques in the absence of adequate funding arrangement.

Therefore, once arrangement made is in public domain (Bank's website) the paying bank should honour the cheque and settle the matter separately with the issuing bank

10. Force Majeure

The bank shall not be liable to compensate customers for delayed credit if some unforeseen even (including but not limited to civil commotion, sabotage or other labour disturbances, accident, fires, natural disasters or other "Acts of God", war, damage to the bank's facilities or of its correspondent bank(s), absence of the usual means of communication or all types of transportation, etc. beyond the control of the bank) prevents it from performing its obligations within the specified service delivery parameters.