CRR/SLR Shortfall and a Customer's Complaint
At a scheduled commercial bank branch in Bhubaneswar the position on the reporting Friday is: net demand and time liabilities ₹120 crore; cash held in the currency chest ₹1.20 crore; balances with the Reserve Bank of India ₹2.40 crore; and approved government securities held ₹20 crore. The bank applies a cash reserve ratio of 4% and a statutory liquidity ratio of 18%. On the same day, a savings account customer complains that the branch has debited ₹118 for an SMS alert service he never opted for, charged ₹59 for an NEFT transfer that failed, and did not credit interest on his balance for two quarters. On top of this, the controlling office has written asking for the branch's maintenance position and an explanation of the complaint, and has reminded the manager that the bank is answerable to the regulator.
1. Compute the CRR and SLR requirements and the shortfalls, and explain which assets qualify.
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CRR: 4% × ₹120 crore = ₹4.80 crore. Eligible balance is only the balance with RBI, ₹2.40 crore. Cash in the currency chest is the bank's own cash held for currency operations and is not a CRR-eligible balance. Shortfall = 4.80 − 2.40 = ₹2.40 crore.
SLR: 18% × ₹120 crore = ₹21.60 crore. Approved government securities held ₹20.00 crore, so the shortfall = ₹1.60 crore. SLR must be held in cash, gold or approved securities; encumbered securities or securities under lien to another bank do not count.
Also note: at least 90% of the required CRR must be maintained on all days of the fortnight, and the balance on the reporting Friday is the base for the fortnight. NDTL includes liabilities to others, not the bank's own balances with the system.
Conclusion: the branch is short on both fronts. Present the computation to the controlling office at once, arrange funds before the next reporting Friday, and identify whether the shortfall arose from a reporting error or from actual fund mismanagement.
2. What are the consequences of these shortfalls, and what should the branch do immediately?
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Consequences:
- CRR shortfall is a default under section 42(3) of the Reserve Bank of India Act, 1934. RBI charges penal interest at the prescribed rate (higher for the first fortnight of default and steeper for continuing default) and may restrict the bank's operations.
- SLR shortfall is a contravention of section 24 of the Banking Regulation Act, 1949; RBI may impose a penalty and require the bank to make good the deficiency.
- Both are reported in RBI's supervisory returns; repeated shortfalls affect the bank's rating, expansion approvals and even access to liquidity facilities.
Immediate action:
- Recompute NDTL from the source books; a wrong classification of liabilities is the most common cause of an apparent shortfall.
- Buy approved securities or place funds with RBI to cover the deficiency before the deadline; do not wait for the fortnight end.
- Report to the Asset-Liability Committee and record the corrective entry in the maintenance register.
- Fix responsibility for daily monitoring, with the treasury and the branch reconciling the position every day and not just on reporting Fridays.
The branch cannot cure the default by counting vault cash towards CRR.
3. How should the manager handle the customer's three complaints, and what is the escalation route if he is not satisfied?
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Each head is separate and each is a service deficiency.
- SMS alert charge of ₹118: the bank must show the customer's consent - a signed mandate, a request form or an authenticated digital consent. Without it, the charge is unauthorised and must be reversed with the date of debit.
- ₹59 for a failed NEFT: RBI's directions do not permit charges for NEFT transfers that fail; charges are payable only on successful transfers. Refund the ₹59.
- Interest not credited for two quarters: interest on savings balances must be credited at the prescribed frequency (now quarterly) at the applicable rate. Compute the shortfall, credit it with the value date, and pay the interest on the delayed interest if the bank's policy provides for it.
Process: acknowledge the complaint in writing, give a complaint reference, and resolve within 30 days. If unresolved or if the customer is dissatisfied, he may approach the bank's Nodal Officer and then the RBI Integrated Ombudsman Scheme, 2021 - free of cost, online or by post, through the Centralised Receipt and Processing Centre. The complaint must first be made to the bank; the Ombudsman can award compensation for the deficiency. The branch should also fix the consent-record and charge-posting controls so the error is not repeated.