Unit-3 ORGANIZATION OF A BANK BRANCH(part 1) | Banking term 1 CLASS 12

Here you will find notes for CBSE vocational Skills 

Unit-3 
ORGANIZATION OF A BANK BRANCH 

1 Bank Branch Set up, Strong Room 

2 Front Office & Back Office 

3 Security Arrangements in Bank

4 Clearing Houses 

1. Explain the typical structure of a Bank branch?
2. Explain the Branch Manager’s duties as a Retail banker?
3. What are the different service channels available to the Bank for servicing the customers?

Branch set up: The Bank branch plays a very important role as the face of the Bank to the customer. The location, decor, layout of the branch and the courtesy of the branch representatives guide the customer’s decision about using the bank services.

Despite growth in the number of customers using mobile and online banking to access their accounts and make transactions, branches remain the first point of call for availing financial services and products. Although in some cases such as taking out a mortgage a customer values face-to-face interaction because he is dealing with large sums of money.

 In the olden days (as late as 40 years ago in the 1970’s) branches were housed in big buildings to accommodate many staff members to caterto the huge number of customers for avarietyof transactions undertaken personally. Today, branches do not require huge space, since all the operations are computerized and so transactions are conducted at great speed and accuracy. They also do not require too many staff members. 

In Sept 2013, RBI relaxed its policy for opening of new bank branches, i.e. allowing commercial banks to open new outlets in major cities without seeking prior approval. Under the new policy, Indian banks will also be allowed to open a larger number of branches in top-tier cities over and above their allowed quota, if the banks meet certain criteria. Branch layout should have ambiance conducive for the customers. Big banks have developed standard branch layouts across their branches for the customers to have the same feel while visiting any branch

Branch Structure:

A typical Branch has the following category of staff :

•   Branch Manager
•   Relationship Managers 
•  Sales Desk manned by Officers
•   DSA coordinator
•   Service Desks
•   Head Teller 
•  Tellers 
•  Helpers

 The varieties of services offered by the branches are:-

or

Services of Banks

Advancing of Loans

Banks are profit-oriented business organizations. So they have to advance a loan to the public and generate interest from them as profit. After keeping certain cash reserves, banks provide short-term, medium-term, and long-term loans to needy borrowers.

2. Overdraft

Sometimes, the bank provides overdraft facilities to its customers through which they are allowed to withdraw more than their deposits. Interest is charged from the customers on the overdrawn amount.

Discounting of Bills of Exchange

Discounting of Bills of Exchange is another popular type of lending by modern banks. Through this method, a holder of a bill of exchange can get it discounted by the bank. In a bill of exchange, the debtor accepts the bill drawn upon him by the creditor (i.e., holder of the bill) and agrees to pay the amount mentioned on maturity.

After making some marginal deductions (in the form of commission), the bank pays the bill’s value to the holder. When the bill of exchange matures, the bank gets its payment from the party, which had accepted the bill.

4. 

Cheque Payments

The person who holds an account in the bank is provided with the cheque pads.Thus, the account holders draw cheque upon the bank when they are required to pay the money.So after verifying formally, banks pay for the cheques and proceed with the official procedures.

5. Collection and Payment Of Credit Instruments

Different credit instruments such as the bill of exchange, promissory notes, cheques, etc., are used in modern business.

Banks deal with such instruments. Modern banks collect and pay different types of credit instruments as the representative of the customers.

9. Lockers:

Banks also offer safe deposit to their clients to store their valuables safely, at minimal fees.

6. Foreign Currency Exchange

Banks deal with foreign currencies. As customers’ requirement, banks exchange foreign currencies with local currencies, which is essential to settle down the dues in the international trade.

7. Consultancy

Modern commercial banks are large organizations. In this function, banks hire financial, legal, and market experts who advise customers regarding investment, industry, trade, income, tax, etc. They can expand their function to consultancy business.

8. Bank Guarantee

Customers are provided the facility of bank guarantee by modern commercial banks.

When customers have to deposit certain funds in governmental offices or courts for a specific purpose, a bank can present itself as the guarantee for the customer instead of depositing funds by customers.

9. Remittance of Funds

Banks help their customers in transferring funds from one place to another through cheques, drafts, etc.

10. Credit cards

A credit card is a card that allows its holders to make purchases of goods and services in exchange for the credit card’s provider immediately paying for the goods or service. The cardholder promises to pay back the purchase amount to the card provider over some time and with interest.

11. ATMs Services

ATMs replace human bank tellers in performing giving banking functions such as deposits, withdrawals, account inquiries. Key advantages of ATMs include:

• 24-hour availability
• Elimination of labor cost
• Convenience of location

12. Debit cards

Debit cards are used to withdraw funds directly from the cardholders’ accounts electronically. Most debit cards require a Personal Identification Number (PIN) to be used to verify the transaction.

13. Home banking

Home banking is the process of completing the financial transaction from one’s own home instead of utilizing a branch of a bank. It includes making account inquiries, transferring money, paying bills, applying for loans, directing deposits.

14. Online banking

Banks offer online banking that allows account holders to access their account data via the internet. Online banking is also known as “Internet banking” or “Web banking.”

Online banking through traditional banks enables customers to perform all routine transactions, such as account transfers, balance inquiries, bill payments, and stop-payment requests. Some even offer online loans and credit card applications.

Account information can be accessed anytime, day or night, and can be done from anywhere.

15. Mobile Banking

Mobile banking (also known as M-Banking) is a term used for performing balance checks, account transactions, payments, credit applications, and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA),

16. Accepting Deposit

Accepting deposits from savers or account holders is the primary function of a bank. Banks receive the deposit from those who can save money but cannot utilize it in profitable sectors.

People prefer to deposit their savings in a bank because by doing so, they earn interest.

10. Money Transfer:

There are several ways banks offer to transfer money from one part of the world to the other with the help of demand drafts, money orders, cheques, online banking, and more.

Role of Branch Manager’s: 

• Generally, the Branch Manager (BM)is not directly involved in matters of the front office customer service, unless there is some issue which is beyond the capacity of the front line staff.
• Create strategies to grow business opportunities.
• Build new customer relationships
• Retain existing customers.
• Resolve customer issues.
• Ensure customers’ financial needs are met.
• Promoting and marketing the branch and its products
• Meeting with customers and resolving any problems or complaints
• Ensuring there’s a high level of customer service
• Monitoring sales targets
• Reporting to head office
• Mass contact programmes like meetings with the near-by Housing Society members to sell the bank’s products – similarlya group of college students, group of employees in any office etc. can be target groups for mass contact programmes. 

Security set up at the Branch: 

Following points, about the layout and minimum security safe-guards must be kept in mind before opening a new branch. 

 Selection of area for location of Currency Chests or bank branches should be done keeping the safetyand securityin view and commercial considerations should not be given under weightage.

  The layout of the branch, i.e. Manager’s cabin, cash vaults, Cashier’s cabin, entry / exit points should be designed keeping in view the securityaspect. 

 Proximity to Police Station and functional communication system are veryimportant aspects for the security of bank’s staff and treasure.  The main entrance should be provided with shutter gates.

  Collapsible gate with chain and locking arrangements permitting only eighteen inches opening should be ensured at the branch entrance. 

 Strong room/safe should be out of the view of the public. Following points, about the layout and minimum security safe-guards must be kept in mind before opening a new branch. 

 All instructionsregardingspecification forstrongrooms (whereverprovided) includingFBR strong room doors maybe strictlyimplemented. 

 The instructions on custody of keys under dual key looking mechanism and safe-keeping of duplicate keys maybe strictlyimplemented.

  Care may be taken while positioning the cashiers’ cabin which may be as far away as possible from the entry/exist.

  Emergencylights should be installed and should always be in working condition. 

 Windows / ventilators should have proper standard grills.  Posting of guards (armed or otherwise) should be decided on the vulnerability of the branch, keeping in the view the threat perception in the area. 

 All themodern securityequipments likenight latches to cashier’scabin, grill gates to strongrooms, alarm system etc. should be provided. 

 Hot line connection/s to Police Station / Police Control Room / Fire Brigade and auto dialler, if found necessary, should be provided to all CurrencyChest and Branches. 

 All weak points like opening for exhaust fans and air-conditioning ducts, skylights and windows should be strengthened with appropriate RCC work or steel plates, steel grilles etc. Unnecessary windows should be closed permanently. 

 Gun and ammunition should be kept in metal gun cabinets. It should have more than the normal number of two hinges and adequate/strong locking managements.

 Gun cabinets should be embedded in the wall, if they are not kept inside the strong Room. Proper review of such embedment of Gun Cabinet should be made. 

Branch Security set up: 

 Police should be requested to step up patrolling in night in the areas around the bank branch, especially on Saturdays and Sundays nights or on long week-ends or consecutive holidays. 

 Surprise visits to the High - risk branches by the Officers from Area and Controlling Offices should be arranged to check and implement various security measures. 

 Electrical shafts / electrical junction boxes should also be strengthened and kept locked.

  The Police authorities should be consulted before locating a branch. 

 The branches, which have no security arrangements at night, may be provided with sensors connected to alarm system and if possible to an auto dialler. 

 In addition to the provisions of intruder alarms and police patrol of the branches during holidays / long weekends, locals may also be involved to keep a watch especially with regard to suspicious movement, noises during night etc. during holidays/weekends.

 Bank Strong Room (Vault): 

ABank vault (or strong room) is a secure space where Money,Valuables, Records and Documents can be stored. It is intended to protect their contents from theft, unauthorized use, fire, natural disasters, and other threats, just like a safe. Modern bank vaults typicallycontain many safe deposit boxes, as well as places for teller cash drawers, and other valuable assets of the bank or its customers. 

Bank Vault Operations: Following care should be used for Vault Operations  2 separate custodians of dual keylocking mechanism  Safe-keeping of duplicate keys at offsite and exchange once in 6 months  Combination lock password to be kept at offsite  Designation of Primary& Secondarycustodians  Audit trail for change in custodian  Audit trail of dailyopening and closing of vault with timer & arming of systems details  Grill door to be locked all the time BankVault comes with various technologies such as dual combination lock with timer, Grill Door with dual keys for operations and technology devices such as heat sensors, motion detectors and alarms. Vaults should be fire resistance standards which need to be followed as laid down by RBI.

1.  Explain the functions of the front office of the Bank?
2.  Explain the functions of the middle office of the Bank?
3. . Explain the functions of the back office of the Bank?

3.2 Front Office & Back Office Banks 

are divided internallyinto three areas which are Front office, Middle office and Back office. The reason for segregating the functions into different office is to have segregation of roles and responsibilities toavoidfraudsandensureaccountabilityandhaveabetter focusoneacharea.Employees require different skills for carrying out various operations.

 Front Office: As the name suggests, Front Office is the front (face) of the Bank to its customers. Front office is responsible to take care of the customer needs and also to get new customers for the Bank. Their main activity is to sign up new customers for the Bank. Front office staff consists of the sales personnel and corporate finance employees. It’s in the front office where revenues are generated. The staffs of the Front office are the first to come into contact of the customer, it is important to always remember the vision, mission and theme of the bank. Their duties vary from making and receiving phone calls to anyother duty that might be assigned. 

Middle Office:Middle office manages risk and IT resources for the Bank. Middle office is seen more in the case of Investments Bank operations. Middle office workers are an integral part of making money for the Bank. They directly support a deal but their actions have to be initiated by front-office staff. A middle office worker cannot as a result of their own actions increase bank profits. Functions of the Middle office include Regulatory compliance, Risk management and financial control for the institution. This differs from customer service operations at the front office and the technical support tasks undertaken in the back office. Employees in the middleoffice maybe engaged in a variety of activities to assist their superior authorities. One aspect of the work in a bank middle office is regulatory compliance. Staff members need to keep track of current and pending legislation that pertains to the bank’s activities. They draft documents to educate other employees, maintain records for inspection by government officials,and research planned

product offerings to determine if they fall within the law. If bank staffs have questions about the legality of an activity, they can consult the middle office for a review and recommendations. Risk management involves analysis of financial markets and products to help banks make the right decisions. Bank middleoffice staff mayrecommendpurchases and sales of securitiesand other financial products. Theycan also be involved in product development to help the bank limit risks and increase the earnings. Policies concerning lending and other activities mayoriginate in studies conducted bythe middle office to explore risks and benefits and make suitable recommendations on how to proceed. Financial control involves the management of a firm’s assets. The bank middle office can choose how and where to invest and maintains detailed records on the bank’s financial health. This ties in with regulatory compliance and risk management, as the bank personnel need to obey certain legal requirements and must consider potential risks when theydecide how and where to invest money.Their detailed records may also be open to auditors and other interested parties who want to keep track of the bank’s activities. These members of a bank’s middle office staff may need to attend conferences,read relevant publications, and engage in other activities to keep themselves up to date with the developments in the word of finance. This helps keep them aware of trends and ready to adapt as the market developments. 

Back Office: 

Back offices provide administrative and support services to the front office. An efficient back office is vital because if customers don’t get statements and confirmations on time they will dislike the bank and mayshift to some other bank. 

Functions of the Back office: 

The functions carried out by the Back office are: 

 Checking and Opening Clients’ accounts as per the details provided 

 Issuance of cheque books

  ExecuteClients’instructions 

 Cheque clearing 

 Positioning for all Bank products viz. cheques, cards, personal loan, mortgage loan etc 

 Sendingstatements 

 Resolvingclients queries 

 Processingclients’standinginstructions 

 Making changes to clients’ static data 

 Closingclients accounts 

 Processing all EMI 

 Reconciliation of all entries processed

REFERENCE :- 

https://www.allbankinginfo.com/2020/08/cheque-clearing-process.html?m=1

https://www.totaljobs.com/advice/bank-manager-job-description

https://www.iedunote.com/bank-services