COMMERCIAL BANK

MANAGEMENT

Deposit Mobilization
Concept: What and why is deposit mobilization?
• Collected public money in various forms.
• Makes banks balance sheet unique than any other business
• The main raw materials for loan and progress of a bank
• Symbol of public confidence and trust
• Main base for sustainability of a bank
• Deposit management as acquisition of stable and low-cost deposit and not
only in high volume
• Deposit mobilization to conduct lending functions
• In order to maintain competitive strength on lending
 Importance of deposits
• For Bank:
– Trust, financial soundness and confidence with the bank
– Outlets and channels for service
– Good range of deposit products
– Efficiency in product delivery and quality of customer services
– Interest rates and other features offered in comparison with peers
– Brand Image- how market perceives
 Importance of deposits
• For Depositors:
– Easy withdrawal facility and liquidity
– Ready convertibility to cash through various tools
– Quick and easy transferability across parties
– Safety
– Reasonable interest earning
– Systematic auto record keeping as bank statement
– To enjoy other embedded facilities, cards, discount in rent of locker,
insurance coverage, e banking, mobile banking etc

• For Economy:
– Intermediates between surplus and deficit groups
– Channelizes the public savings to productive use
– Boosts the economic activities hence aids in economic growth
 Types of deposits
• On the basis of currency
– Local Currency
– Foreign currency

• On the basis of interest

– Interest bearing
– Noninterest bearing

• On the basis of collection

– Recurring
– Nonrecurring

• On the basis of maturity

– Demand – any time
– Time deposit- at the ending of fixed time
– Call Deposit- at short notice or call
 Types of deposits Contd..
• Current Deposit
• Saving Deposit
• Time Deposit/Fixed Deposit
• Call Deposit/Hybrid Deposit
• Margin Deposit

(Interest to be paid on agreed rests and tax on interest

applicable as per law of land should be deducted on TDS basis.)
 Types of deposits Contd..
• Current Deposit
o Interest free deposit

o Used by business entities for day-to-day operations

o Cheques / Bills collection and purchase may be embedded with

o No restrictions on number and amount of withdrawals

o Highly volatile in nature

o Bank should manage high liquidity for balances in such

accounts
 Types of deposits Contd..
• Saving Deposit
o Interest bearing deposit

o May be some restrictions on number and amount of

withdrawals

o Encourages habit of savings or thrift in people

o Less volatile

o Less concentrated, Huge portfolio minimizes the risk

o Meant for individuals only (NRB restricted others from 2066

BS)

o Various facilities may be embedded with

o Provides stability to deposit mix

 Types of deposits Contd..
• Fixed/Time Deposit
o Opened for a predetermined period with a fixed maturity date

o Banks provide highest interest rate to fixed deposit as they can freely use the fund
up to maturity, as per NRB directive, such deposit can start from 3 months period

o Minimum level of liquidity needed for such balances, as customers need to incur
losses of interest and even may be charged with penal intertest if they approach
for untimely withdrawal of such accounts

o A receipt of the fixed deposit account is provided to the depositor with all detail of
amount, holder’s name, face interest rate and maturity date. FDR is a
nontransferable instrument.

o At maturity date, it should be renewed with prevailing rate or paid off to the
depositor.

o Depositor can get loan against the collateral of FDR.

o Meant for all type of customers from individuals to corporates who have idle for
relatively longer period and want to earn more as interest income.

o Strengthens to deposit mix

 Types of deposits Contd..
• Call Deposit
o Hybrid scheme with the features of both current and
saving deposits

o Tough competition to grab deposits has evolved this

scheme

o Generally opened by banks, companies and other cash

rich business houses

o Certain interest rate is payable generally fixed by

negotiation

o Deposits are not maturity specific but payable on

demand or on short notice.
 Types of deposits Contd..
• Margin Deposit
o Noninterest bearing deposit

o Required to avail banking facilities line Bank

Guarantee, Letter of Credit and other specific
facilities.

o Payable at the expiry or settlement of the original

facility for which the deposit has been maintained as
margin fund.
 Account Opening
• Form should be comprehensive with
fulfillment of minimum regulatory guidelines
• Form should collect minimum inevitable
records of individuals and/or account opening
entities. Like name, DOB, permanent address,
present address, phone no, email address,
mobile number, photograph,
Citizenship/Passport/National ID/ Passport
No, residence mapping etc.
• KYC guidelines to be strictly followed
 Account Opening for individuals
For Single account
• Copy of citizenship

• Photograph

• Introduction from existing accountholder

For Joint accounts

Written instruction for mode of operation of

account signed by each account holders is
required other than above.
Account Opening for Sole Trading Concern
(Proprietorship Firm)

• Copy of citizenship of the proprietor

• Photograph

• Copy of Business Registration

Certificate with approved validity
• Copy of PAN/VAT certificate

• Introduction from

• existing account holder

Account Opening for Sole Trading Concern
(Partnership Firm)
• Copies of citizenship of all partners

• Photographs

• Copy of Business Registration Certificate

with approved validity
• Copy of PAN/VAT certificate

• Copy of partnership deed

• Introduction from existing account holder

 Account Opening for Joint Stock Company

• Copies of citizenship of all directors

• Photographs
• Copy of Business Registration Certificate with
approved validity
• Copy of PAN/VAT certificate
• Copies of Article of association (AOA) and
Memorandum of Association (MOA)
• Board Resolution (minute for account opening and
authorization of operation of account)
• Introduction from existing accountholder
 Process of Account Opening
• Form is developed as a valid contract between bank and account
holder with authorized specimen signature.
• Form should be properly filled and signed in all required places.
• The customer opening an account must be legally competent.
• All necessary document evidences should be obtained.
• Documents obtained should be verified with originals and from
referrals as far as possible.
• Review all documents as per KYC guidelines.
• Get approved from the competent authority
• Do system entry and assign a unique account number
• Capture the signature and documents (digitization)
• Regularly update and review the account.
 Legal Issues in Account Opening

• Lunatics, drunkards and insolvent persons are refrained from

account opening.
• Minors can open account but with the help of
parents/guardians only. Once they are eligible for legal
contract, they can operate the account at their own.
• If nominee is duly declared, the proceed of the account shall
be transferred to him/her upon death of the accountholder.
• Minimum balance requirement
• Unauthorized disclosure of account is banking offense.
• Bank collects the tax on interest earning on TDS basis.
• Tax exempted entities should produce valid documents at the
time of account opening itself.
 Closing of Account
• Accountholder is entitled to terminate the legal
contract with bank with a written application and
return back of unused cheques/card etc.

• He/she is entitled to get the amount with

interest till date after deducting closing charges
and other liabilities to bank if any.

• Bank need to diarize the reason of account

closure and take corrective actions in future.

• Retaining customer is less costly and outgoing

dissatisfied customer may hamper reputation of
bank.
 Closing of Account

Cases when accounts can be closed upon

information to the customers.

• Closure on customer’s request

• Closure by Bank
o Death

o Insolvency

o Court order
 Process of Account Closing
• Duly signed account closing request to be obtained and signature should
be verified with the specimen signature with the bank.
• Unused cheques, debit cards etc to be collected.
• Circulate the ongoing closure of account to all departments and get
ensured about any liabilities is pending or not from the customer.
• Get approval from the concerned authority.
• Close the account and arrange for balance payment after calculating
interest to date, applicable tax and deducting account closure charge and
other liabilities if any.

(For joint accounts, closure request to be signed by all individuals. For

partnership account, all partners should sign the closure request or
partnership deed must authorize person/persons to do so. For joint stock
company, board resolution should be obtained for closure of account)
 Structure of Charge

• Interest rate fixation

• Market penetration and retaining strategies
• Provisions of NRB
• Interest payment and calculation rests

• Various charges
• Opening/closing Charge
• Maintenance Charge
• Balance below minimum balance
• Statement printing Charge
• Charge for various facilities like mobile banking, internet
banking, atm card etc
 Know Your Customer (KYC)
• Subjective vigilance for verified identity and
residence, understood source of income and
understood the authenticity of his transaction
patterns in disclosed personal circumstances and
abilities.
• Be safe from money laundering, illegal, fraud and
terrorism activities.
• Bank should well understand the business of the
customer first before allowing to open account.
• Bank should have clear, documented customer
acceptance policy and procedure made upon
proper evaluation of risk.
 Brief of KYC guidelines
• Preparation of KYC policy
• Customer identification.
• Acceptance of customer
• Ceiling of cash transaction
• Monitoring of cash transaction
• Risk management (Risk rating of customers)
• Monitoring procedures
• Verification of submitted documents
• Protection of documents till 5 years
• Reporting (STR and TTR)
• Submit the transactions and documents to NRB
• Review the risk rating of customer.
• Periodic review of KYC policy as well
 Card Services
Card is an instrument which is used to withdraw or debit the balance with the
account being maintained at the bank. It is also called plastic cheque. Via using
a card, we can do the following functions;
• Withdraw cash from ATM (Automated Teller Machine)
• Make payment by swapping at point of sale
• Make payment through internet

Card embeds coded data of the bank account in its chip or magnetic strip which
is used to get debiting the balance from the attached operating account
through above mentioned means. It reduces the queue in bank’s counter and
also makes the customer conduct payment from the balance in odd banking
hours also (24*7). Many banks issues cards in association with card providers
like VISA, Mastercard, Maestro etc to access in their huge network worldwide.

Magnetic Strip based card vs Chip based card

Banks used to issue cards with magnetic strips but due to securty issues, now
almost all banks issue chip based cards. Chip based cards are considered more
safe than the cards with magnetic strips.
 Types of Card
• Debit Card

– used to debit the balance in own account

• Prepaid Card

– used to debit from prepaid amount

• Credit Card

– used to enjoy credit line provided by the bank,

if due date of payment is crossed bank charges
heavy interest rate and fine but the credit is
free if the due settled in the given time period
Deposit Marketing and Customer Care Service
• Current banking scenario
– More number of players
– Limited market
– Cutthroat competition

• Marketing Strategies
– No business without customer can exist – to be understood
– Motto should be to create, win and retain customers
– Products should be designed in the convenience of customers
– Suitable products to be targeted to the targeted customers
– Quality of service delivery should be customer oriented
– Customer satisfaction should be the goal of all activities
– Take suitable strategies for market penetration and targeting various slabs of
customers

• Relationship banking
Deposit Marketing and Customer Care Service

• Factors affecting customer’s banking behavior

– Location
– Safety
– Return
– Customer Service
– Range of services offered
– Easy and hassle-free procedures
– Specialization

• Importance of 4Ps: Product, Price, Place and

Promotion