JAIIB · PPB · Unit 15Chapter Notes6–8 Marks Expected

Ancillary Services

Principles & Practices of Banking | Unit 15 Chapter Notes

The broadest chapter in the module — covering remittances (DD/BC/NEFT/RTGS), EBT scheme, safe deposit lockers, portfolio management, merchant banking, government business, and service charges. Data-heavy and MCQ-rich.

✓ By Bankopedia.co.in✓ Updated 2026✓ Module A · General Banking Operations

📌 Why This Chapter Matters in JAIIB

Chapter 15 is the widest chapter in PPB and regularly delivers 6–8 marks. It has zero case law — instead, it tests specific numbers, thresholds, and operational rules. The highest-yield areas: NEFT vs RTGS comparison, DD/BC thresholds (₹20K/₹50K rules), locker liability (100× rule), and the EBT scheme model. Learn the numbers first; the concepts follow naturally.

All Key Numbers at a Glance — Memorise These First

Rule / Threshold	Value	Note
Duplicate DD timeline	Within 14 days (a fortnight)	Bank pays interest at FD rate for delays
DD/BC validity	3 months; revalidated once within 1 year	After 1 year: cancelled
Cash ceiling (DD/BC issue)	₹50,000+ must be through banking channels	DD/BC ≥ ₹20,000 not payable in cash; must credit account
Account payee crossing	Mandatory for DD/BC of ₹20,000 and above	Since Sept 15, 2018: purchaser's name must appear on DD/PO/BC
Locker claim settlement	Maximum 15 days from receipt of claim	Death certificate + identity document of nominee required
Locker inoperative period	7 years — bank may transfer/dispose contents	Even if rent is being paid regularly
Rent unpaid break-open	After 3 consecutive years of non-payment	After notice + public notice in 2 newspapers (English + local)
Locker liability	100× prevailing annual locker rent	For theft, burglary, robbery, fire, building collapse, or fraud
Service charge change notice	At least 30 days in advance	Customer gets 30-day window to exit the relationship
RTGS minimum	₹2 lakh (no upper ceiling)	Credit within 30 minutes at receiving bank
PMS minimum period	1 year (long-term funds only)	Deployed only in capital market instruments

Section 1

Remittances — DD, BC, MT, TT

Remittance means transfer of funds from one branch to another — whether within the same bank or to a different bank. Conventional modes (MT, TT) are now nearly extinct because of core banking and digital payments. The examiner still tests rules around DD and BC.

Aspect	Demand Draft (DD)	Banker’s Cheque (BC)
Purpose	Remittance to another centre	Local payments (same city)
Drawn on	One branch on another branch of same bank	Branch itself (for local settlement)
Bearer form	CANNOT be bearer — violates Sec 31 RBI Act 1934	CANNOT be bearer
Validity	3 months; revalidated once within 1 year	3 months; revalidated once
Countermand	Purchaser CANNOT countermand after delivery to payee	Same — purchaser cannot stop payment
Duplicate issue	Within a fortnight of request; interest at FD rate for delay	Same rules apply

DD / BC — Critical Thresholds (MCQ hotspots)

🏦

₹50,000 and above

Issue must be through banking channels only — NOT in cash

🚫

₹20,000 and above

Payment of DD/BC must NOT be in cash — only by credit to a bank account

✂️

₹20,000 and above

Account payee crossing is mandatory on the instrument itself

📌 From September 15, 2018

The name of the purchaser must be mentioned on the face of every DD, PO, BC, etc. This was mandated to check misuse and money laundering.

Mail Transfer (MT)

Amount remitted by customer is directly credited to beneficiary’s account at another branch. Instruction sent by post. Now almost extinct due to core banking.

Telegraphic Transfer (TT)

Same as MT but instruction sent by telegram/telex/fax. Credit within maximum 2 days of receipt. No relevance now — replaced by NEFT/RTGS.

Section 2

NEFT vs RTGS — Master Comparison

This comparison generates more MCQs than almost anything else in this chapter. Know it cold: the core difference is that NEFT settles in batches (DNS) while RTGS settles individually in real time without netting.

Dimension	NEFT	RTGS
Full form	National Electronic Funds Transfer	Real Time Gross Settlement
Operated by	RBI	RBI
In operation since	November 2005	2004 (updated to 24×7 in 2019)
Settlement basis	Deferred Net Settlement (DNS) — batches	Real-time + Gross (individual transaction)
Transaction processing	Batch-wise; next available batch	Continuous, one-by-one
Minimum amount	No minimum (any amount)	₹2 lakh
Maximum amount	No ceiling	No ceiling
Credit timeline	Within a few hours	Within 30 minutes of receiving the message
Availability	24×7×365	24×7×365
Indo-Nepal facility	Yes — one-way to Nepal	No
Inward transaction charge	Nil (no charge)	Nil (no charge)

🧠 NEFT benefits mnemonic

Easy · Secure · No wait · No courier · No refund paperwork · Recurring payments · Lower charges · Fast · Assured · Confirmation sent

Remember: NEFT = batch mode = a bus that leaves at fixed times. RTGS = direct cab = leaves the moment you book it.

🧠 RTGS key facts

→ Minimum: ₹2 lakh (no upper ceiling)
→ Credit within: 30 minutes of receiving RTGS message
→ Available: 24×7×365
→ Settlement: individual transaction (gross), no netting
→ IFSC required for both sending and receiving bank
→ Credit based solely on account number — name not cross-matched

⚠️ Exam trap: MCQ 4 — “Only corporates and Government can use RTGS”

This is FALSE — the correct answer to MCQ 4 is (b). RTGS is available to all customers (individuals, firms, corporate, Government) subject to the ₹2 lakh minimum. The RTGS system is maintained by RBI, not by individual banks, and all RTGS participant banks must open a dedicated settlement account.

Section 3

Duplicate DD/BC — Rules and Timelines

Conditions for issuing a Duplicate DD/BC (MCQ 2: answer is (e) — all the above)

1.Payment of the original DD/BC has NOT already been made by the drawee branch
2.The purchaser (or payee) gives intimation to the issuing branch about the loss
3.An indemnity is furnished and signed by both the payee AND the purchaser
4.(If applicable) Payment of a fee as applicable for duplicate issue

Timeline

RBI has directed that duplicate DD/BC must be issued within a fortnight (14 days) of the request.

Penalty for delay

For delay beyond the fortnight, the bank must pay interest at the FD rate for the corresponding maturity period. This does NOT apply to third-party holders — only to the purchaser/beneficiary who made the request.

Section 4

Electronic Benefit Transfer (EBT) Scheme

EBT is a Financial Inclusion product. Its objective: government welfare payments (MNREGS wages, pensions, NOAPS) reach the correct beneficiary’s bank account directly — without leakage, on time. MCQ 5 answer: EBT is for low value accounts — option (c).

Old model vs current model

Old: “One District — One Bank” (Direct Benefit Transfer / DBT initial model)

Current: “One District — Many Banks — One Leader Bank”

Core mechanism

→ State Govt deals only with the Leader Bank per district
→ Leader Bank distributes to other banks on revenue-sharing contract
→ State Govt → Leader Bank Savings A/c (Nodal Dept) → Participating banks → Beneficiaries (same day)

EBT account features

→Smart cards issued to beneficiaries through Business Correspondents (BCs)

→Beneficiaries enrolled, accounts opened by participating banks

→Whole range of banking services: deposit, remittance, entrepreneurial credit

→Preferred deposit: variable recurring deposit with in-built overdraft (OD)

→Credit products: GCC (General Credit Card) / KCC (Kisan Credit Card)

→All PSBs joined Aadhaar Payment Bridge of NPCI

→Onsite ATM at all branches in identified districts; Debit Card to all beneficiaries

→Complaint Redressal Officer nominated in each district for Aadhaar seeding grievances

Section 5

Safe Deposit Lockers — Comprehensive Rules

RBI issued comprehensive revised locker guidelines in August 2021. The new rules (effective January 1, 2022) cover every stage — from hiring to liability. This is the section most prone to tricky MCQs.

Who can / cannot hire a locker

CAN hire

✓Individuals — single or joint names
✓Firms (partnerships)
✓Limited companies
✓Associations
✓Trusts and societies

CANNOT hire

✗Minors (cannot hire individually)
✗Bearer locker cannot exist — dual key control mandatory

MCQ 3 answer: (b) — the FALSE statement is “lockers cannot be hired by limited companies, associations and societies”. They CAN. Minor is the only excluded category.

Dual Control — How lockers work

Customer key

Held by the locker hirer. Cannot open the locker alone — needs custodian key first.

Master key (custodian)

Held by the on-duty officer-in-charge. Operates all lockers at the branch.

Opening sequence

Custodian key first, then customer key. The locker can be LOCKED by the hirer's key alone.

Hiring Rules — Key Points

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KYC / CDD

Must complete KYC/CDD before allotting a locker. Existing KYC-compliant customers do not need fresh KYC. Photographs of hirer(s) and authorised operators required.

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Model Locker Agreement

Banks must adopt the IBA model locker agreement, in conformity with SC directions in Amitabha Dasgupta vs United Bank of India (Civil Appeal No. 3966 of 2010). No unfair or onerous terms.

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Term Deposit as security

Banks can take term deposit to cover 3 years' rent + break-open charges as a safeguard. However, this CANNOT be insisted upon from existing locker holders or those with satisfactory operative accounts. Bundling lockers with term deposits beyond this is a restrictive practice.

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Locker rent

Sizes: small, medium, large, extra large — varying rents. Rent payable in advance. Penalty for overdue rent. Proportionate refund on surrender of locker.

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Allotment transparency

Branch-wise list of vacant lockers and a wait-list must be maintained in CBS. Transparency in allotment is mandatory.

Locker Operations — Key Rules

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Access

Only the hirer or a duly authorised person can access the locker, after identity verification during normal banking hours. All access recorded in the Access Register (date, check-in, check-out, signature).

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Privacy

The bank's officer and other locker hirers must NOT be in the locker room when a locker is being opened by any hirer.

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Alerts (w.e.f. Jan 1, 2022)

Bank must send email and SMS to registered contact, intimating the date and time of every locker operation. Must include a redressal mechanism for unauthorised access.

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Daily checks

Officer-in-charge must verify all lockers are properly closed at day-end. Physical check to ensure no person is trapped and no item left outside.

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Lock changes

Locks must be interchanged when a locker is surrendered. Duplicate master keys deposited at another branch; keys of vacant lockers kept in sealed envelopes.

Nomination Facility (Sec 45-ZC to 45-ZF, BR Act)

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Sole hirer: Nomination for ONE individual only.

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Joint hirers: Two or more joint hirers can nominate one or more persons.

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Photograph: Photographs of nominee(s) may be obtained at the customer's option.

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Thumb impression: If thumb impression used, attestation by two witnesses required.

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Acknowledgment: Must be given for every nomination / cancellation / variation form.

Section 6

Locker Liability, Claim Settlement, and Closure

HIGH VALUE MCQ

Bank Liability — The 100× Rule

Bank is liable to pay = 100 × prevailing annual locker rent

This compensation applies when the loss/damage is due to:

Theft

Burglary

Robbery

Fire

Building Collapse

Fraud (by bank staff)

💡 When the bank is NOT liable

Natural calamities or Acts of God — earthquake, floods, lightning, thunderstorm. The bank must still take appropriate precautions (water/fire protection) but is not liable for losses from these events.

Claim Settlement on Death of Locker Hirer

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Time limit

Maximum 15 days from receipt of claim. Bank requires death certificate + identity document of nominee.

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Sole hirer + nominee

After verifying death certificate and identity/genuineness of the sole nominee → nominee allowed access and to remove contents, after inventory is taken.

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Joint hirers — survivor

Either/survivor mandate: surviving hirer(s) follow the mandate and are given access.

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Joint hirers — all must sign

Joint operation with nominee: on death of one, survivor(s) and nominee(s) jointly access and remove contents after inventory.

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No nominee, no survivorship

Bank may provide access to legal heir(s) as per its policy, with due documentation and caution.

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Access is as trustee

Access given to nominee/survivor is as trustee of the legal heirs — it does not affect any claim that any person may have against the nominee/survivor.

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No succession certificate

Banks should NOT insist on succession certificate, letter of administration, probate, or bond of indemnity/surety from nominee/survivor.

When Can a Bank Break Open the Locker?

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Hirer requests (lost key)

Only after proper identification of hirer + written authorisation + in presence of customer and authorised bank official.

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Court / enforcement order

IT, Police, ED with court/competent authority order. Inventory prepared with Govt authorities + two independent witnesses + bank officer. Video recording wherever legally permissible.

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Non-payment of rent — 3 years

After due notice. Public notice in 2 newspapers (English + local) if hirer untraceable. Break open in presence of bank officer + two independent witnesses. Contents kept in sealed envelope in fireproof safe.

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Inactive for 7 years

Even if rent is paid regularly, bank may transfer contents to nominee/legal heir or dispose transparently. Only after following the due procedure.

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Hirer not cooperating

Bank needs the locker back due to hirer not complying with agreement terms.

Section 7

Custodial Services · Portfolio Management · Merchant Banking · Government Business

15.9 — Custodial Services

A custodian bank holds customers’ securities (stocks, bonds, other assets) in electronic or physical form for safekeeping — to prevent theft or loss. Services include: settlement, safekeeping, and reporting of marketable securities and cash.

Customers served: mutual funds, investment managers, bank fiduciary/retirement plans, insurance companies, corporations, endowments, foundations, private banking clients. Banks that are not significant custodians provide this service through arrangement with a larger custodian bank.

15.10 — Portfolio Management Services (PMS) — RBI Guidelines

Portfolio (definition)

A basket of investments — mix of debt securities (yield interest) and equity securities (yield dividend + capital appreciation). A proper combination of different securities reduces risk through diversification.

PMS (definition)

Management of a combination of securities to get the most efficient portfolio in terms of risk, return, and liquidity. In a broader sense: advising for a fee on deployment of surplus funds — at the risk and responsibility of the fund owner.

🧠 RBI PMS Rules — 9 Key Conditions

1.Managed at customer's risk — no guaranteed pre-determined return.

2.Long-term funds only; minimum period of one year.

3.All transactions must be booked at market rates only.

4.Funds accepted cannot be entrusted to another bank for management.

5.Deployed in capital market instruments — NOT in call money, bill market, or corporate loans.

6.A definite fee independent of the return to the client is charged.

7.Transactions between the bank's investment account and portfolio account must be at market rates.

8.Portfolio account transactions must be clearly identified when put through.

9.CRR/SLR has to be maintained on undeployed funds.

6 Basic Principles of Portfolio Management

Portfolio matters, not individual securities — Risk of a security = its contribution to portfolio risk.

Large returns require large risk — Most important decision: the acceptable amount of risk.

Risk depends on when investment is liquidated — Risk reduces by choosing securities with payoff close to liquidation date.

Diversification works — Diversification across securities reduces the portfolio's overall risk.

Tailored to owner's needs — Tax rates, knowledge, transaction costs — portfolio strategy must match the owner's unique characteristics.

Competition for abnormal returns is extensive — Security prices adjust instantaneously to new information if speculators are truly effective.

Mnemonic: PLRDTC — “Pretty Large Risks Demand Tailored Courage”

15.11 — Merchant Banking

As summarised by the Narasimhan Committee: the main business of merchant banking is —

“Management and Underwriting of new issues, Syndication of Credit, and Provision of Advisory Services to Corporate Clients on fund-raising and other financial aspects.”

Banks engaged in merchant banking for debt/equity issues of corporate customers need to register with SEBI as Category I Merchant Banker. Banks may also provide bridge loans against issues as part of banking functions.

15.12 — Government Business

Approval required from

→ CGA (Controller General of Accounts) — for Central Govt business
→ Finance Dept of State Govt — for State Govt business
→ DGBA, RBI (Department of Government and Bank Accounts) — always

Eligible banks (Dec 2021)

All public sector banks and 19 private banks are eligible to conduct government business as agents of RBI.

Government services handled by banks include:

→Collection of Central Excise and Customs

→Collection of Direct Taxes (Capital Gains, Gift Tax, Income Tax, Wealth Tax)

→Opening of PPF Accounts

→Collection of GST and/or Professional Tax

→Treasury Work (Treasury Accounts)

→Collection of Railway Station Revenues

→Ministry of Health and Family Welfare Accounts

→Post Office Receipt and Payment Accounts

→DSRGE and DSREPSC deposit schemes

→Payment of Central and State Govt Pensions

→Applications for 8% Relief Bonds, 6.5% Savings Bonds, 8% Savings Bonds

Section 8

Service Charges — Rules and NEFT/RTGS Fee Table

Core principles for levying service charges

→Banks are free to prescribe their own service charges — but charges must be reasonable and related to the average cost of the service.
→Charges must be fixed with prior approval of the Board of Directors.
→Low-volume customers must not be penalised.
→For basic services: charges for individuals must be lower than for non-individuals.
→Rural individuals, pensioners, and senior citizens: more liberal rates than other individuals.
→Ad-valorem charges for basic services must only cover incremental cost and be subject to a cap.
→Customers must be given complete and timely information about charges upfront.
→Change notice: at least 30 days in advance. Customer gets a 30-day window to exit the relationship.
→RBI Working Group identified 27 basic banking services.

RTGS and NEFT Maximum Charges (as at May 31, 2022)

RTGS Outward Transactions

₹2 lakh to ₹5 lakh	₹24.50 + GST
Above ₹5 lakh	₹49.50 + GST

NEFT Outward Transactions

Up to ₹10,000	₹2.50 + GST
₹10,001 to ₹1 lakh	₹5 + GST
Above ₹1 lakh to ₹2 lakh	₹15 + GST
Above ₹2 lakh	₹25 + GST

✓ No charges on INWARD RTGS or NEFT transactions — receiving bank cannot levy any charge on the beneficiary.

MCQ Explained

Check Your Progress — Answers Explained

1. A Demand Draft is valid for ___

✓ Answer: (c) 3 months

DD and BC are both valid for 3 months. A DD can be revalidated once, and must be done within 1 year of the date of issue. After 1 year from issue, the DD is cancelled entirely — even if within the revalidation window it expired and was not renewed.

2. A customer is entitled to a duplicate DD provided ___

✓ Answer: (e) All the above

All four conditions are cumulatively required: (a) due intimation to issuing branch, (b) payment of original DD not already made, (c) indemnity signed by both payee AND purchaser, (d) applicable fee if any. Satisfying only one or two is not enough — all must be met.

3. One of the following is NOT true about a locker facility ___

✓ Answer: (b) 'A locker cannot be hired by limited companies, associations, and societies'

This is FALSE. Lockers CAN be rented to firms, limited companies, associations, trusts, and societies. The only excluded category is minors. The other statements are all true: (a) sole hirer = one nominee; (c) nominee can access on death of sole hirer with nomination; (d) survivor under either/survivor clause can access on death of a joint hirer.

4. One of the following is NOT true about RTGS ___

✓ Answer: (b) 'Only corporate and Government departments can avail of RTGS'

FALSE — RTGS is available to all (individuals, firms, corporate, government), subject to the ₹2 lakh minimum. The other statements are true: (a) RTGS enables branch-to-branch transfers; (c) RTGS is maintained and operated by RBI; (d) each participant bank must have a dedicated settlement account.

5. EBT is meant for which type of customers?

✓ Answer: (c) Low value accounts

EBT is a Financial Inclusion product for the poor and marginalised — people receiving low-value welfare payments (MNREGS wages, pensions, NOAPS). It is not for HNIs (b), not for pensioners alone (a) though pensioners benefit, and not for disabled persons (d) specifically — it covers all low-value beneficiaries of government welfare schemes.

✅ Exam Strategy for Chapter 15

✓Memorise the Key Numbers table at the top of this page — the exam loves testing specific numbers (₹2L, 30 min, 3 months, 15 days, 7 years, 3 years, 100× rent).
✓NEFT = batch/DNS. RTGS = real-time + gross. These two words alone distinguish them in every MCQ.
✓RTGS minimum = ₹2 lakh. No maximum. Available 24×7. NOT limited to corporate/government.
✓Locker: minors CANNOT hire. Firms, companies, associations, trusts, societies CAN. (MCQ 3 trap.)
✓Locker liability: 100× annual rent for theft/burglary/robbery/fire/building collapse/fraud. NOT for Acts of God.
✓Duplicate DD timeline: within a fortnight. Delay = bank pays FD rate interest. Third-party holders: no interest.
✓EBT = financial inclusion = low value accounts. Model = one district, many banks, one leader bank.
✓Merchant banking registration: Category I Merchant Banker with SEBI.
✓PMS: customer's risk, no guaranteed return, long-term only (≥1 year), capital market instruments only, CRR/SLR on undeployed funds.
✓Service charge changes: 30 days' notice. 30-day exit window for customer. Inward RTGS/NEFT: always free.

Ancillary Services

All Key Numbers at a Glance — Memorise These First

Remittances — DD, BC, MT, TT

NEFT vs RTGS — Master Comparison

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