Saturday, July 24, 2010

Indian Laws affecting Bank Management

The list of laws, rules, guidelines etc affecting directly or indirectly the banking industry in India is exhaustive.  I am not too sure as to with which law the list should start.  Bankers deal in deposits (short and long term, domestic and foreign customers, individual and institutional and so on), loans and advances (individual and institutional customers, for working capital and term loans, fund based and non-fund based, domestic and foreign businesses and so on) as also other services like Safe Deposit Lockers, Safe Custody and Deposit, Remittances (DD, MT, TT, EFT, NEFT, ECS Debit and Credit, RTGS, etc), Issue of Guarantees and Letters of Credit, Insurance Laws, Sick Industrial Companies Act, BIFR Rules, RBI Prudential Norms, etc., and serve the customers in rural, semi-urban, urban and metro areas all over India.  He also deals with minors, women, customers from different religions, etc.

Knowledge of law is essential for a banker - be at junior or senior level, over the counter or at the policy making level.  He can not depend on a Lawer every time a transaction comes up nor he can solicit opinion or decision from higher authorities.  He has to make decisions on the spot or at best at the earliest opportunity. Eg., is settlement of deceased accounts, negotiation of bills of exchange, dealing in foreign exchange transactions, etc.  Many a time, a banker is required to face risks of several types in course of business.

I may begin with Contract Act, and add Partnership Account, Companies Act, Stamp Account, Negotiable Instruments Act, Transfer of Property Act, Banking Regulation Act, Consumer Protection Act, RBI Act, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, Indian Trusts Act, Anti-Money Laundering Act, Foreign Exchange Management Act, Uniform Customs and Procedures for Documentary Credits (UCPDC), Rules pertaining to NRIs/PIOs, Information Technology Act, Income Tax Act, Debt Recoveries Tribunals Act, Deposit Insurance and Credit Guarantee Norms, RBI Guidelines on several matters of day to day business, and so on.

If all the above are concerning business, a banker is also a HR man in course of his tenure.  He is expected to have knowledge of Provident Fund Act, Pension Rules, Workmen Compensation Act, Industrial Relations Act, etc.  These requirements make a Bank Manager to play  diverse roles as a Business Development Manager, Public Relations Officer, Credit Officer, Human Resource Manager, Lawyer, a Consultant, a Technical Personnel and so on to be an effective manager and a many-faceted diverse personality to excel. He needs to have very good communication skills (both verbal as well as written), soft skills, domain knowledge, principles and policies of the organisation he works for, general awareness of markets, comfort in handling number related transactions like foreign currencies, foreign exchange, investments, etc.

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