Performance Appraisal

Jobs are becoming more challenging and demanding day by day. Consistency in progress and development depends on the quality and effectiveness of the workforce. Organisations have therefore to create an environment for motivating, retaining and rewarding good performers. Taking stock of the workforce and assessing their performance on regular intervals, helps management in utilising the potentialities, abilities, talent and capabilities of employees to the fullest extent. Just because a worker is performing effectively, does not mean that he would continue to perform effectively in future. Organisations need only performers. Employees receiving poor appraisal are termed as non–performer. No employer can tolerate poor performance, as poor-performers are parasite on the institution. They can either be shown the door or can be counseled groomed to cope up with the new emerging challenges. All depends on the circumstances. As organisations want to grow with the performing employees, they too want to grow with the job and with the organisation.
Why Performance Appraisal?
Organisations employ people for performing various tasks. It is the basic need of the management to know whether employees are performing and achieving the goals of the institution. What difficulties are they facing in discharging duties and what can make them excellent performer. How their efficiency, effectiveness can be enhanced, sharpened and properly channelised for the betterment of the institution. Performance appraisal is one of the systems for understanding and evaluating the performance of employees. It is an important tool in the hands of management for tracing, measuring and documenting performance towards achieving results.
Advantages of appraisal:
The spirit behind performance appraisal is to continuously improve individual performance for improving overall productivity of the organisation. It helps an organisation in communicating and reinforcing priorities, goals, and work values to employees. It helps them in knowing their duties, responsibilities and management’s expectations. Performance review not only covers the specific performance objectives for the individual employee, but also covers the overall standards and work values of the organisation. Employees’ productivity is enhanced by encouraging them with financial or non-financial rewards and incentives. Performance of poor performers is improved by providing them training in the areas of deficiencies.
Performance appraisal provides feedback to employees about their performance and work behaviour. It helps them in identifying their needs for development and getting over performance deficiencies. It also acts as a motivating factor.
Procedure involved in Performance Appraisal:
Every employee wants to know the expectations of management, his responsibilities and duties, and the feedback about performance. Therefore, the first and foremost step in performance appraisal is to determine the results that the institution wants an employee to achieve. Assessment of performance enables management in distinguishing between high and low performers. Appraisal is done on a pre-designed standard form, as off–the–cuff evaluations generally defeat the purpose.
Basically appraising involves following steps
1). Setting of work standards:
It is defining the key job responsibilities and objectives that an employee has to perform. These are decided and documented at the beginning of the year by the reviewing authority with mutual consultation and agreement. It enables an employee to know his prime responsibilities during the year. If a job responsibility needs revision, employee can discuss with his supervisor for revision in key performance areas. Standards should be clear and specific so that employee understands his duties, expectations, and how his work is linked to the overall goals of the organisation. It should be simple and expressed in measurable terms. Setting of work standards is like entering into a memorandum of understanding between superior and employee.
2). Periodicity:
Periodicity and system of review differs from institution to institution. In some organisations appraisal is done annually and in some, performance is a reviewed continuously. Performance evaluation acts as a feedback to an employee about his performance, efficiencies, deficiencies and management’s expectations. It helps him in improving potentialities and performance. Working in any organisation and not having one’s progress periodically evaluated is like playing a game without keeping a score.
3). Who assesses performance?
Those in daily contact with the employee’s conduct, output and performance can best measure performance. In some organisations, subordinates, peers, group members, or a combination of one or more review employee’s performance. The system of getting performance reviewed by cross section of employees reduces chances of injustice to the person whose performance is being reviewed.
4). Assessment of actual performance:
Performance review is not a once or twice yearly task, but a full-time duty. One way to assess performance is through a formal review on a periodic basis. At the end of the designated time period, the supervisor discusses with the employee his performance and evaluates it in accordance with the established performance objectives, standards mutually agreed and accepted. The performance review process is a collaborative effort between supervisor and employee; therefore, it needs to be formal and fair. Performance is judged both on qualitative and quantitative parameters. By turning the appraisal into a real discussion, the supervisor learns some insightful information that could help boost employee’s performance in the future.
Objectives of Performance Appraisal:
Performance appraisal is an integral part of management. It is powerful and effective management tool for managing and measuring performance of employees. It enables management in identification of aspiration, competencies, talent, capabilities, and potentialities of employees that in turn can result into growth and development of the organisation. It provides job role clarity to employees and helps them in knowing their duties, responsibilities, and expectations of the management. It prepares them in improving their current positions and future opportunities. The objective of all performance appraisals is to
* Review an employee’s overall achievement, based on established performance objectives.
* Review his work related behaviour, willingness to accept reasonable responsibility and learning new skills, attitude towards taking initiative, his attitude and behaviour with colleagues , ability to work in team .

* To judge the integrity of employee in the conduct of work.
*To measures performance of employees in his key responsible areas and rewarded performers either by giving monetary benefit or promotion or both.

*To take appropriate corrective measures against those who are poor, ineffective or non-performers either by showing them the door, or by persuading them to improve or by making them a part of performing team so that group pressure may improve his performance.
* To identify individual’s specific developmental needs for improving the performance.
*To know the strengths and weaknesses of the organisation. Bottlenecks, deficiencies and difficulties being faced by employees in discharging their duties so that corrective measures can be taken.

*To gather useful data on the abilities, potentialities and capabilities of employees for shouldering higher responsibilities or jobs where those skills can be better used.
* To identify, skill gaps and bridge them by imparting training.
*To develop career goals for employees for better performance and stimulating their latent desire for self-development.
*To give opportunities to employees to highlight their performance (self appraisal) and achievements from their perspective.
*To know about employee’s aspirations, their developmental and training needs and what can make them good performers.
*Providing constructive feedback, both positive and negative to employees and the areas needing improvement.
* Know whether he is punctual, regular and respects the value of time for self and others.
Effective performance appraisal recognises employee’s desire to progress. It helps him in identifying strengths and weaknesses and in improving performance for future responsibilities and assignments.
Types of Appraisals:
1. Appraisal for confirmation of service:
Every institution has a definite period of probation for new entrants. During the trial / probation period employees performance, attitude, approach, behaviour, remain under close supervision and observation. Employees are confirmed in the service when their performance is found satisfactory. Many organisations have separate appraisal forms for confirmation. To name a few, these forms contain detailed information about various aspects of employees’ performance, behaviour, attitude, and approach exhibited during the probation period. Management takes decision of retaining or terminating the services of employee on the basis of the appraisal report. Therefore, performance appraisal for the period of probation plays vital role in the organisation, as any wrong assessment may adversely affect future of the organisation.
If reviewing authority feels that on all the major parameters the probationer has performed well but in some minor parameters he was found wanting the probation period is extended with a view to giving him an opportunity to improve. In such an event employee’s probation period is extended and his appraisal is done accordingly.
2. Appraisal for Extending the Probation Period:
While extending the probation period, the reviewing authority mentions both the strong and week areas of the probationer, areas needing improvement and the reasons for recommending extension along with the period of extension. After satisfactorily completion of the extended period of probation, performance is again reviewed for confirmation.
3. Comprehensive appraisal:
As per the system, procedure and practice prevalent in an organisation, performance of employees is reviewed at regular intervals. It is generally conducted once a year. However, in some organisations mid-term review is also done. In mid-term review, the reviewing authority elicits response, views of reviewee and communicates deficiency or excellence in his areas of performance. This helps in identifying the problems that hinder effective performance and keeps open the communication between the superior and subordinates.
4. Change in position:
In addition to regular review, some organisations review performance of employees at the time when they are due for promotion or elevation in organisational hierarchy. The performance review plays important role in taking decision about career progression of employees. Organisations also obtain self-appraisal from employees, thus giving them a fair chance to bring to the notice of the management about their achievements.

Popular methods of appraisal:
1.Ranking of all employees in a group:
Under this appraisal system, instead of reviewing performance of individual employee, performance of all the employees working in the group, division, or department is reviewed. The under line principle is that the out put or performance is the result of teamwork. Common rating is awarded to all the employees in the group. The draw back of this system is that it becomes difficult to distinguish between good and bad performers or non-performers. The good performers get frustrated and demotivated.
2. Peer Ranking:
In the peer ranking approach, performance of an employee is assessed in relation to other employees. Pitting of one employee against another creates negative impact on performance, which adversely affects collaborative environment at the work place. In case of large number of employees, it becomes difficult to rate performance of an employee objectively.
3. Ratings:
Under this system employee is rated as above average, average, and below average. Critical incidents i.e. favourable and unfavourable performance is recorded. Unless the organisation have scientific and logical rating system, subjectivity and bias plays major role in this type of performance review.
4. Weightages:
Employees’ performance is appraised on various objectives, parameters and attributes which are assigned different scores and weightage. The reviewing authority assigns scores against those objectives, attributes and parameters. The reviewee is rated on the basis of his total marks. The probability of subjectivity is minimal.
5. 360-Degree Review:
360-degree is the most comprehensive appraisal. It is multi source assessment, which includes self-ratings, peer review, and assessment by superiors. Feedback is sought from everyone. 360-degree review gives a chance to reviewee in knowing how others view his skills and style. It brings out those things, which are normally never spoken. It helps in reducing tension and improving communications, and raising employees' performance. It helps in improving communications between people.360-degree review helps in bringing out every aspect of an employee's life whether it is cooperation with people within or outside the department, attitude towards peers, subordinates, and customers. This system also helps in eliminating conflicts. The review has high employee involvement and has strongest impact on behavior and performance as it provides people with a good all-around perspective. The employee has to be psychologically matured and not to be sensitive to criticism as probability of conflict arising out of adverse feed back from peers may strain interpersonal relations.
Self- Appraisal:
Self- Appraisal is based on the idea that no one knows the job better than the person performing it, therefore his involvement is essential. He is expected to narrate his achievements Vis-à-Vis key responsible areas, outstanding performance; self perceived training needs, constraints, areas of strength, weakness and factors that may improve performance. Self- appraisal enhances dignity and self-esteem of employees and plays important role in his development.
Self-appraisal is doing self-introspection and genuine analysis of one’s own performance. It is identification of individual’s strengths and weakness .It gives employee an opportunity to analyse the causes of his success and failures, and how to become an effective performer. The general impression is that self-appraisal tends to exaggeration and employees rate themselves high. However, studies have shown that most employees find it difficult to evaluate their own performance and they tend to under rate their performance.
Self-appraisal is a kind of feedback to management about on the job and off the job problems, difficulties faced by employee in discharging duties and responsibilities. It is an opportunity to employee to bring to the notice of management his outstanding performance and achievements which might have been overlooked by the authority reviewing the performance.
Role of Supervisor / Appraiser:
The immediate supervisor who does the actual appraising has to be familiar with the basic techniques of appraisal and should avoid problems that can cripple an appraise. Appraiser has to be fair in his judgment. He should be able to judge whether the employee could have put in more effort in work, or could have made better use of the resources available to him. He should know the difficulties and also the constraints under which employee worked. Adequate credit is to be given for ability of performing more than one task i.e. shouldering multi tasking responsibilities, handling special assignments during the review period. Appraising authority has to gain the respect and confidence of his subordinates.
Problems in Appraisal:
1.Halo Effect:
While reviewing the performance it is necessary that reviewing authority have a comprehensive view of subordinate’s, personality, strengths, weaknesses, specific traits, work environment, relationship with superiors, peers, subordinates. In many cases while reviewing the performance, the reviewer is influenced by one particular quality or performance parameter of his subordinate and may rate him high or low, this is known as ‘Halo effect’. This is due to the strong bias towards the revieeew. Thus the ratings based on one-trait are unrealistic. The problem occurs with employees when they are friendly or unfriendly with supervisor.
In the study conducted by Heneman, Greenberger & Anonyou (1989) it was found that subordinates are divided into ‘ two groups: in-groupers and out-groupers’. In groupers are those subordinates who are favoured by their supervisors. They enjoy "a high degree of trust, interaction, support and rewards" in their relationship with the boss.
On the other hand, out groupers do not do as well. They appear to be permanently out of favour and are likely to bear the brunt of supervisory distrust and criticism. Supervisors tend to judge them as either good or bad.
It was found that when an in grouper did poorly on a task, supervisors tended to overlook the failure or attribute to causes such as bad luck or bad timing; when they did well, their success was attributed to effort and ability. But when an out grouper performed well, it was rarely attributed to their effort or ability. And when an out grouper performed poorly, he was termed as lazy or incompetent. This bias lead to a distortion of the appraisal process, and results into a source of frustration for those employees who are discriminated against.{ Heneman, R.L., Greenberger, D.B. & Anonyou C., (1989) Attributions and exchanges: the effects of interpersonal factors on the diagnosis of employee performance, Academy of Management Review, Vol. 32, No 2.}
2.Central Tendency:
Some appraisers do not prefer to give high or low marks against any parameter. As they do not want to spoil personal relations with low performers and do not want good performers to get rewards. They play safe and rate every employee as average. This tendency is known as ‘Central Tendency’. They have a preconceived notion that subordinates given a high rating may expect immediate rewards or employees given a low rating will become troublemakers. This reflects self-inadequacy of appraiser.
3.Leniency:
With a view to appear ‘ nice’ to the reviewees, reviewing authority assigns high marks leniently on all parameters, sacrificing objectivity. This defeats the spirit behind performance review.
4 Strictness:
The problem occurs when a supervisor has a tendency to rate all subordinates low.
5.Bias:
It is the tendency to differentiate employee on the basis of age, race, and sex while appraising. Even previous performance can also affect the evaluation of current performance.
6. Disruptive bias Matthew effect:
It is named after the Matthew of biblical fame who wrote, "To him who has shall be given, and he shall have abundance: but from him who does not have, even that which he has shall be taken away."In performance appraisal, the Matthew Effect is said to occur where employees tend to keep receiving the same appraisal results, year after year. That is, their appraisal results tend to become self-fulfilling: if they have done well, they will continue to do well; if they have done poorly, they will continue to do poorly. The Matthew Effect suggests that no matter how hard an employee strives, their past appraisal records will prejudice their future attempts to improve.
{Gabris, G.T. & Mitchell, K., (1989), The impact of merit raise scores on employee attitudes; the of performance appraisal, Public Personnel Management, Vol 17, No 4 (Special Issue).}
7.Other flaws:
Instead of reviewing the performance for the total period of review, reviewing authority sometimes assigns marks on the basis of the recent past performance. Some reviewing authority tend to review performance of their subordinates on the basis of how their own performance is going to be evaluated. Some reviewing authorities consider performance review as an opportunity to settle scores. Many reviewing authorities do not rate subordinates better as they apprehend that the subordinate if elevated may supersede him. In those cases where two persons in the same grade and rank work together and one person by virtue of holding position perform the functions of reviewing authority, the reviewing authority underrates colleague, as the person is a direct competitor in career progression. While appraising performance of employee, a prudent reviewing authority should be free from all above flaws, personal prejudices and errors. His biggest challenge is self-discipline, to be more objective while evaluating performance of his subordinate.
Performance review in Banks:
In most of the nationalised banks in India, performance is reviewed once a year. Banks adopt two-tier system for performance review. The immediate superior under whom a person works first reviews performance. Thereafter, an authority higher than the one who had evaluated the performance evaluates performance of the concerned employee on the same parameters. The objective is to have fairness in appraisal. Both the authorities award numerical marks. Thereafter average of marks allotted by both the authorities is worked out and grading is done on the basis of pre decided range mentioned the review format. In banks, performance review system is a closely guarded system and is considered to be confidential. Generally no discussion is done with the employee at the time of review. Hardly any feed back about performance is given to him and employee remains in dark.
Following are the important parameters on which performance of an individual is evaluated;
1. Knowledge level of employees. :
Progress of an organisation depends on efficiency, knowledge and competency of its staff. Employee’s performance is directly linked to his knowledge of rules, regulations intricacies about the job, economic development and opportunities. Hence one of the important parameters in performance evaluation is Job Knowledge of the reviewee, his ability to learn new things and approach towards work.
2.Work performance:
An employee knows well in advance his key responsible areas and expectations of management, as the immediate superior in consultation with the employee decides it. Hence, another important factor in appraising performance is evaluation of actual performance with the agreed one. Whether business growth and cost control were in accordance with the agreed and accepted targets?
3. Attitude, Behaviour and Personality:
Attitude and behaviour of an employee affects the work environment and image of the organistion. It also has impact on business and customer service. Therefore while reviewing the performance reviewing authority judges employees willingness to assume responsibilities, level of dependency during difficult or challenging situation, his stamina and stress tolerance ability, honesty and integrity, initiative-and innovative approach, maintaining interpersonal relations, approach towards superiors, peers, subordinates, customers and coordination with other segments of organisation for achieving business goals without shirking responsibility.
4.Leadership:
Working in organisation is not performing in isolation .It is a teamwork. Without the support and cooperation of superiors, peers, and subordinates work cannot be performed effectively. Leadership plays an important role in motivation, harnessing dormant abilities and talent and promoting mutual trust and respect. A leader can make or mar the institution. Therefore leadership qualities have major role to play in achieving corporate goals and objectives.
Reviewing authorities therefore evaluate employee’s ability in development of team spirit, approach towards delegation of responsibilities, capacity to lead in crisis and quality, prudence, quickness, consistency in decision-making and ability of maintaining congenial work environment.
5.Administrative skills:
It covers enforcing punctuality and discipline at the place of work and judicious use of infrastructure. Handling grievances and ability of counseling.
6. Observations and Opinion of Reviewing authority:
As an employee remains in close contact, observation and supervision of the reviewing authority. Therefore, he knows positive and negative traits of employee, his ability to shoulder higher responsibilities, his areas of interest and training needs and how can he be made a better and excellent performer, in which assignment his latent /dormant capabilities can be best utilised so on so forth. Thus these observations in performance appraisal plays important role for taking managerial decisions.
Role of Reviewing Authority:
Success of any system depends on its credibility. The quality of appraisal process depends amongst others, on the nature of day-to-day “supervisor–subordinate relationship”. Without a good supervisor– subordinate relationship, no performance appraisal system can be effective and meaningful. The performance review should be objective. Reviewing Authority has to play basic role of developer of human resources i.e. his subordinate(s) working under him. Therefore, endeavour has to be made by him to integrate needs of the institution and individual growth & development of reviewee.
Conclusion:
Performance appraisal is a part of career development and the main object is to continuously improve employees’ performance, by giving them feedback on performance and improving performance by imparting training, which in turn helps in improving overall performance of the institution. Unfortunately in most of the organisations performance appraisal is used as a tool for revising salaries. With a view to eliminating probability of injustice due to central tendency, hallo effect, bias etc., some organisations also seek reports on performance of employees from different persons under whom or with whom the person had worked. For making the whole performance management process meaningful the entire system needs to be formalised and documented. The efforts have to be made to improve the performance in view of high competitive environment and on the other hand to retain the talent available in the organization. Good organisations seek to improve employee productivity through personal development and their enhanced involvement in operational matters.

Human Resource Development and Management

Necessity of Work Force: -
We need capital for economic activities. It is a general belief that shortage of capital creates bottleneck for industrial development of a country. However, it is not so. The question is can an organization function without experienced, knowledgeable, dedicated and motivated work force? Bottleneck arises due to inability on the part of organization to recruit and maintain a good and qualitative work force. It is the human capital, which is important. It is man that makes money. Money does not make man.
Machines have made in road in the organizations, they are tools in the hands of man .It is the man behind the machine continues to play the crucial role. People are our most valuable asset, which is never shown as an asset side in the balance sheet of an organization, although a great amount of money is invested on this. What we see in the profit and loss in the balance sheet are the expenses incurred on human resources. When we consider human as a cost, it is obviously a liability, and when we treat expenses on human as investment, they are asset.
Need for Human Resource Management:
In the era of intensified global competition, deregulation when technical advances have triggered an avalanche of change, the future belongs to those who can best manage change. For managing change, committed and dedicated employees who can do their job with excellence are needed.
Human resource practices and policies play vital role in fostering employees’ commitment.
Organizations, which have understood the real importance of human resource, have developed appropriate human resource management policies. The high level of the performance of most of the Japanese firms can also be traced in their effective HRM practices. In our country those organizations, which have taken proactive approaches in human resource management, have greatly benefited in terms of organizational effectiveness.
Human resource Management is necessary for managing human potentials in productive manner and getting best out of the workforce. It is maximum utilization of their abilities, potentialities and dormant energy. It is managing people for getting the best out of them, developing their talents, creating opportunities for their growth, promoting positive contribution to their institution.
Role of Human Resource Management:
Human resource management plays important role in any organization. It helps in improving efficiency and productivity by adopting best practices, which ultimately motivates and boosts morale of the work force. It is analyzing each job role and understanding the key performance areas of a particular job and diagnosing the grey areas for taking remedial action for betterment of the workforce and the organization. It helps in:
1.Allocating right job responsibility to employees keeping in view their talent, ability, interest, knowledgeand experience. 2.Eliminating role ambiguity and role overlapping. This helps in utilizing the potentials to the fullest extent. Employees develop feeling of satisfaction, sense of achievement and enhance their morale. 3.Job rotation, job enrichment and jobs design. This generates interest in work. Staff members learn higher skills and new capabilities for shouldering higher responsibilities. It also enhances their decision-making capabilities and responsibilities.
4.Finding out why people avoid or shirker work, treat job as burden, and alienate, reasons for absenteeism, employee frustration, demotivation, and hostility so that corrective measures can be taken.
5.Knowing what motivates employees and to keep employees motivated.
6.Knowing the environment at the place of working attitude and approach of superior and their style of leadership.
7.Developing the staff in their job role and in finding out the methods for improving skills
8.Deciding proper reward and punishment, compensation to the work force and ensuring salary withjob and responsibility.

It would thus be observed that human resource management is channelising human potentialities for maximum out put for getting profitable returns. It is developing skills in performing duties, responsibilities, and functions with excellence and improving quality of work force.
Man Power Planning: -
Manpower planning envisages estimation, acquisition, developments and optimum utilisation of manpower resources. It is a known fact that both understaffing and over staffing are dangerous for an organization. Whereas, understaffing adversely affects business, customers, productivity and exposes staff to stress, overstaffing creates job ambiguity, conflicts, reduces productivity, competitive efficiency and increases expense.
Man Power Planning is the process that helps in identifying the types of personnel required for the organization, which leads to recruitment and selection.
It is planning for staff requirement and their optimal utilization. It is assessing the existing staff strength in terms of gaps in job knowledge, expertise developed, types of jobs performed and to take corrective measures for staff utilization.
Human Resource Management in Banks?
Human Resource Management is an essential integral part of every organization. It is the process of attracting, holding and monitoring people. Getting results through people is the name of the game. Human resource management is actually a conglomeration of several sub systems, which are continuously interacting with each other. Failure of any of the sub systems can cause damage to performance effectiveness.
At the time of Nationalisation of banks in July 1969, it was thought to have better quality of staff in the industry for carrying out banking functions more efficiently and effectively. With this in view, systematic and scientific selection process was adopted to recruit better personnel both in clerical and officers level. Banking Service Recruitment Boards were established. Banks recruited large number of highly qualified persons many of them with postgraduate qualifications in clerical level. However, due to improper utilization of human resource and improper manpower planning and failure on the part of HRM policies i.e. placement, transfers, career progression path ways, proper training, and on the job utilization, the recruits could not be utilized in the desired manner which resulted in frustration and low level of performance. Employees became more attracted to off the job activities than to on the job activities. This had direct impact on the behaviour and attitude of the staff members.
Human Resource Management Functions:
Human Resource Management can be broadly classified in to following basic functions
1.Employment Function
2.Compensation function
3.Training and developmental Function
4.Labour relation function
5.Administrative
6.Preventive
1.Employment Function:
This relates to hiring, recruitment and selection of right people for the job. It is finding out the type of personnel required by the organisation. Whether it needs specialized or technical or general category of staff. Before starting recruitment and selection process, job analysis is done to find out the kinds of people needed to manage and run the organization and to meet objectives? It is deciding the qualities, attitudes and characteristics applicants should possess. It has to be ensured that while recruitment equal opportunity is to be given to all. No discrimination on the basis of cast, creed and sex is to be done. Government guidelines on reservation to be adhered. Thereafter system and procedure for recruitment and selection is decided. A few of them are enumerated below.
1.Whether fresh recruitment is to be done or internal promotion is to be done.
2.What will be the method of recruitment or selection?
3.Whether it will be by way of campus selection, or by advertising through media and the job description to be written while advertising.
4.Whether it will be by way of poaching i.e. by attracting staff with high reputations from existing employers or competitor’s.
5.What will be the package?
6.Whether recruitment and selection will be done by external expert consultants or by internal team.
7.Whether written test would be for assessing aptitudes, general intelligence or testing special knowledge.
8.Whether there should be group discussion for ascertaining personal skills, Leadership style, Group dynamics and problem solving capabilities.
9.Finalizing interview panel and interview schedule.
2.Compensation function:
For providing uninterrupted qualitative service, an organization has to retrain staff, and for this it has to have proper reward, appraisal and communications systems. Compensation functions include deciding pay, benefits and perquisites to employees. Deciding whether compensation should be linked with performance or it should be flat, whether it should be a running scale or should be linked with the position in the organizational hierarchy. On promotion from one grade to another what would be the system of fitment?
3.Training and Developmental Function:
This deals with developing human resource within the organisation. People joining an organization come from different walks of life with different culture, beliefs, knowledge, background values, and skill. Training brings them closer to the organization’s expectations. It is usually provided through the induction and orientation processes. This helps the employees to adjust to their social –space relationships. Training is the systematic development of the attitude, knowledge, and skill required in performing the job efficiently. Most people in the organisations have inherent desire to enhance the quality of their lives by learning more for better performance and career development. Training increases efficiency, productivity and standards of performance, and enhances decision and risk-taking abilities of the work force. It is also a source of inspiration and motivation. For imparting training areas of requirement of the organization is decided and the blue print of course contents is designed. It is decided whether work force need technical, operational supervisory or training in some special area. It is also finalized whether the staff members are to be trained in-house or they are to be provided external training or on the job training.
Other developmental functions include promotion, performance appraisal, career progression planning, career budgeting, and succession planning.
4.Labour / Industrial relation function:
The employees, trade unions and management are the three major players in industrial relations. Labor Relations focuses on relationship between the management and employee unions. Unions act as a bridge between the work force and the management. They try to help in building trust and in developing cordial relations. They represent workers and helps in collective bargaining and in voicing grievances of workers.
When industrial relations develop strains, government intervenes for averting situation of conflict between the management and the workers and plays meditative role through the framework of Industrial Disputes Act. Industrial Disputes Act is an effective grievance redressal system.
Responsibilities of Human Resource functionary in industrial relations vary from organization to organization. However he has to keep himself abreast of industrial law and to keep advised the field functionaries about their responsibilities and legislative requirements.
5. Administrative:
Administration is the process of organising people and resources efficiently and directing activities toward corporate goals and objectives. It consists of wide spectrum of activities, which includes transfers, assigning higher responsibilities, building employee commitment etc. The whole objective is marinating employee discipline, implementation of management decisions, policies for proper and efficient utilization of resources.
Output of an institution depends on the quality of its personnel. Therefore, the emphasis of administration is to make the organisation attractive enough to get most suitable personnel and to provide measures, which will maintain their levels of excellence and will also meet their expectations.
6.Preventive:
This deals with cordial human relations, improving organisational culture, and creating an environment of mutual trust and respect. It basically deals with grievance management, counseling and motivation.
Grievance handling:
A grievance is generally against an authority however; it can also be against an individual manager or supervisor, another employee, or a group of employees.
It is a complaint about a managerial decision, act or omission or injustice or wrong related to work or the work environment such as the abuse of employee rights, denial of a promotion, an improper transfer or dismissal without cause, discrimination, harassment, bullying, victimizations, or any other forms of treatment which the person feels, is unfair or unjustified.
Grievance management is the process by which an individual can air complaints about work-related problem and seek remedies. It is a constructive way of dealing with individual and group grievances. It helps in the preventing disputes and employee frustration.
All grievances are to be dealt with as quickly as possible and within a fixed time frame. All parties to a grievance are to be given a chance to put their case and be heard. Those investigating the matter should be impartial. Relevant information is to be collected and considered in the resolution of the grievance.
Counseling:
Counseling is talking with a person in a way that helps him or her solve a problem. It is an effective system for discussing the problem that usually has emotional content with an employee and helping him in coping with the problem and improving his mental health. Counseling is an art. It understands human psychology, nature, and implementing compassion, and kindness.
There are two type of counseling. Theses are directive and nondirective. In directive counseling, the counselor identifies the problem and tells the counselee what to do about it. In nondirective counseling the counselee identifies the problem and determines the solution with the help of the counselor. The counselor determines which of the two, or some appropriate combination will be suitable.
Steps for counseling:
Before starting the process of counseling the problem, its causes are to be found out. On that basis it becomes easy to determine what forces influences worker’s behavior and which of these forces you have control over and which of the forces the worker has control over. Counseling session is accordingly planned, coordinated, and best time to conduct the session is decided. The session is to be conducted with sincerity, compassion, and kindness. The person must be heard and his problem solved. Let the person know that you care about him as a person. All facts must be looked into for taking action to correct the problem. Person should not be humiliated in front of others. Counseling is to be conducted in camera immediately after noticing the undesirable behavior. The person should be informed about his undesirable behavior. Do not hold a grudge after the counseling is over.

Marketing

What is marketing?
Marketing is one of the major and important functions of any industry whether it is manufacturing or service industry. It is a business philosophy that states that the customers’ want and satisfaction are the economic and social justification for the existence of an organization.
Marketing is identification of customers’ needs, stimulating demand for a product and then satisfying the need by selling the product at the right time, at the right place and at an acceptable price. It is rejuvenating the dormant buying activities by innovation and introduction of new products.Thus it is an activity of creating, promoting and delivering goods and services to consumers. It relates mainly to channel of distribution of goods and services with the aim of providing satisfaction to the needs and demands of the customers.
Broadly it includes activities covering assessment of the demand of products, studying competition, government policy and regulations, behaviour pattern of customers, pricing module, promotion and distribution of product. It also includes measuring of out put of selling activities and taking suitable steps for boosting sales in the target market.
Marketing is finding today the opportunities in tomorrow’s market. It is teamwork that demands commitment from one and all in the organization for converting new ideas into profit. It also includes ongoing promotions, including advertising, public relations, sales and customer service.
Marketing and Selling: -
Though marketing and selling sound to be synonyms but they are different.
The main task involved in marketing is identification of different types of customer needs thorough market intelligence and then drawing suitable scheme to suit their needs and execute them in an effective manner. In marketing the demand is created first by germinating and inciting the latent needs and desires. A feeling of necessity is induced. Marketing is satisfying the need of the customer by designing the product to suit the need. There is an element of innovation.
In marketing, demographic pattern, market trends, changes in consumption pattern, impact of cultural invasion etc, are studied and prototype of the product is designed, tested in the market lab and thereafter the final product is shaped and placed in the market.
Under selling concept, goods are produced first and by various methods of selling, customers’ are persuaded to buy the products. A salesman sells what he has on his shelf, in his store and stock. He tries to bend the customers’ demand to fit with his product. Selling is preoccupied with sellers need to convert his product in to cash. Selling focuses on the needs of the seller and marketing on the needs of the buyer. The end result is increase in business turnover.
Marketing Management: -
Marketing Management understands human behaviour in response to the stimuli to which they are subjected. A skilful marketer is one who is practical psychologist and sociologist, who has keen insight into individual and group behaviour, who can foresee changes in the behaviour that develop in dynamic world, who has creative ability and can visualize probable response of customers.
Fundamentals of Marketing: -
For effective marketing one has to identify the needs of the market, demand of products, and methods to serve the market. Therefore analysis of market is necessary for marketing a product. It is helps in understanding:
1.The group of existing and potential customers in the market.
2.The group of customers to be targeted in the market?
3.Various needs of these customers?
4.The products or services to be developed to meet the needs.
5.Probable response of the customers in using the products and services.
6.Who are other players i.e. competitors in the market?
7.What is the price structure of competitors and their pricing policy?
8.What are the marketing strategies of competitors, their channels of distribution and after sales service policy?
9.To which group of people they are targeting in the market?
What are needs and wants: -
Needs are the basic human requirement. A seller does not create needs. Needs pre-exists. These needs become wants, which are directed to specific object for their satisfaction. Wants are shaped by ones environment, knowledge, culture, society etc. The seller influences wants and induces dormant desire and makes it active, and attractive to the purchaser to buy things, which they were not intending to buy. Therefore understanding customer is necessary for getting larger share in the market.
What is Market?
Traditionally, by the term market we visualize it to be a place where buyers and sellers meet to buy and sell goods. However, in the present era, market is no more restricted to a physical place or to a geographical boundary. Globalization and technological developments have widened the scope of market and has liberated it from the shackles of geographical boundaries as buying and selling activities can now be undertaken from any place. It is no more necessary that buyer and seller meet physically for sale and purchase. Internet has opened a new set of market-“e-market”. It is a virtual market where different products are offered for sale through web and purchases are also made through websites. A purchaser can have the visual of the product from different angles. Payment modes are also prescribed on the site, which is either through credit/debit card or directly through the account of the purchaser.
Marketing Network: -
It consists of entire range of customers i.e. stakeholders, customers, employees, suppliers, distributors, retailers, agencies etc, with whom the institution has built mutual profitable business relationship.
Buying decision: -
Marketing is stimulating demand for the product. A sale does not materialist unless it involves purchase. Buying is a complex behaviour. Before finally going for a product, a customer ascertains whether the product;
a.Is suitable, serves his purpose and meets his need.
b.Is within his budget and in his price range?
c.Is to his convenience?
d.Is the best deal in the market?
e.What is the life of the product
f.Has short obsolesce life or long life.
g.Has got warranty and after sales service facility.
And once the buyer is satisfied he
1.Develops belief about the product.
2.Develops favorable attitudes and inclination about the product.
3.Makes a thoughtful choice.
Major role in making the decision to buy a product depends on the feed back of those who are either using the product or have used the product. Their feedback or advice influences the decision of purchaser.
Elements of successful marketing:
Successful marketing campaign depends basically on following three factors. These are market, message, and timing.
1.Market: -
Since marketing of products is no more restricted to a particular physical place, one has to select a market, which has enough resources to support the business in a big way. The business cannot work unless market players both buyers and sellers are active. There has to be unrestricted, uninterrupted supply of variety of products in the market and buyers, enough resources, and then only transactions can materialize.
2.Message: -
For successful marketing, one has to understand customers’ wants apprehensions, problems, and desires etc. The message, including the offer, must be clear and appealing. It should not only address customer’s apprehensions but should also be harmonies with his thinking. Talking to people to find out their views and problems can be helpful in marketing to a group with a common background.
3.Timing: -
The timing of launching the product is critical. Markets tend to go through "waves" when they are receptive to certain products and messages the time is then ripe for launching the product. Seasonal products like woolens can be marketed only in winters and not in summer.
Attracting Customer: -
Today’s customers are smart and their knowledge level is high. They are also well aware of their rights and duties of seller. They can no longer be taken for granted. They are more informed, more demanding, and less forgiving. They are both price and quality conscious. For attracting customers following aspects are given importance.
1. Product Concept:
The business is guided by the assumption that consumers’ prefer those products, which are unique, which offers most innovative features and give quality performance. The term product includes set of attributes and conditions, which buyers normally desire for satisfaction of want or need. These include physical products, services, benefits, information and experience or anything that can be offered to a market. Buyers admire well-made products. Organizations therefore focus on making superior products and improving the quality and features on a regular basis.
2. Selling Concept:
It is believed that consumers show buying inertia or resistance or reluctant to change the product, which is being used by them. Hence they must be coaxed for buying or should be given exchange offer for the product having extra features. Therefore organizations undertake aggressive selling and promotion efforts.
3. Marketing Concept:
The premise behind this concept is to be more effective than the competitors in creating, delivering and communicating superior customer value for achieving organizational goals.
4. Customer Retention:
Customer retention is the outcome of customer satisfaction. A highly satisfied customer stays longer, talks favorably to others about the product and services. He is more loyal.
What is Brand?
A brand is an offering from a known source. Brand conveys attributes, benefits, values, culture, and personality of the institution and its product. Branding is the art and corner stone of marketing. It is a name, term, sign, symbol, or design or a combination of them. Brand helps in identifying and differentiating the goods or services of a seller or group of sellers.
Customers pay significant presence for brands that meet their requirement. When brands’ meaning is positioned in a customer’s mind, he or she will remember the brand and opt for the product. A brand name creates an image of the product in the mind of the people e.g. Maruti, Indica, Hyundai for car, Bata for shoes, LG., Sony for electronic goods etc.
Advantages of Brand: -
Brands help in building the corporate image and make it easier in launching new products. The brand name makes it easier for the seller to process orders and track down problems. Brand name and trademark provides legal protection and helps in facing competition. Branding also helps the seller in segment markets
Who is Brand Ambassador?
Now a day’s corporate and big business houses are roping up celebrities for marketing their entire range of products and services. These celebrities are known as brand ambassador for that organization. For example Hema Malini is the brand ambassador for Bank of Rajasthan, Rahul Dravid for Bank of Baroda, Sania Mirza for Tata Tea, Amitabh Bacchan for the products of Dabur.
Market Segmentation:
As the choices, preferences, perception, utility differs from individual to individual, organizations marketing a product can rarely satisfy every one. Hence profile of distinct groups of buyers about their needs, wants, demands and requirement of various products and services is worked out after examining demographic, psychographic and behavioural pattern. Segmentation is identification and bifurcating the target market into sub sections according to their needs. For example a bank decides to target its product to medical practitioners. This is segmenting the market as there are also other professionals viz architects, chartered accountants, advocates, consultants, fashion designers, engineers etc.
Facing Competition: -
Globalisation and technology have opened floodgates of challenges. Technology has broadened the vision of customers, made them knowledgeable and intelligent and has raised their expectations. Their awareness level is quite high and is increasing with the passage of time. They want instant satisfaction of product, service and their information needs. As an Internet user, customers are also aware of other institutions offering the similar or improved products and or services.
To face competition it is necessary that the end user is kept apprised on a continuous basis about the product and services. Sending details of the product or service on regular basis to the end user keeps him aware of the organization.
Keeping constant touch and maintaining liaison with the customers is an excellent way of eliminating competition from their minds. With the technological development, e-mail has become an instant and cheapest mode of communication. Constant communication and touch both close and remote with the consumers plays an important role in facing competition. It improves the sale value of the business. When customer's need or want for the product or service is "satisfied," he doesn't tend to look for other providers for the same or a similar product or service. He does not migrate to other service provider, which benefits the institution.
Acknowledging suggestions and attending efficiently and promptly to the grievances of the user creates credibility of the organization and helps in building customer loyalty.
Systems of Marketing: -
Organizations adopt different strategies to keep customers aware of their products, services and induce them to go for their products. They make them loyal and dependent customers by building strong bonds of trust. Some of the marketing methods are discussed below.
1. Relationship Marketing: -
The idea behind relationship marketing is to establish a learning relationship with customers. Relationship helps in creating cross-selling opportunities. The goal of relationship marketing is to increase customer satisfaction and to minimize any problems. Relationship marketing builds strong economic, technical and socialites with the customers who are valuable and profitable. It cuts down transaction cost and time. Relationships is building mutually satisfying long-term relationship with key parties, customers’ etc., for retaining their business. It makes most sense for customers whose lifetime value to the organisation is the highest.
In banking industry relationship makes customer more loyal and willing to invest additional funds. The purpose of high-end relationships is not only to increase customer satisfaction and retention, but also to cross-sell and bring in investment. By engaging in "smarter" relationships, a bank can learn customers' preferences and develop trust. Regular contact with the customers, whether over the Internet, through a phone call, or through personal contact, helps in building trust and mutual loyalty. As relationships develop, customers tend to make use more services of the bank.
2. Digital Marketing:
Technology has not only made consumers demanding but has enhanced their desire for personalized service and to find everything they need under one ‘rooftop’. Customers want convenient access and ‘one stop’ web sites that can provide them all information.
The growing popularity of wireless devices has opened the "virtual" marketplace. Non-traditional competitors have started offering products and services. As the technology advances both the Internet and mobile will have the ability to gather more information about a consumer, their preferences, buying pattern location, etc.
3.Data Based Marketing:
For selling more products data of potential consumers is must. Data based marketing is defining the needs of customers and matching the appropriate products and services to those needs. Database marketing is necessary for achieving success of a product. Data helps in analyzing and deciding ways to serve customers intelligently and customizing product sand services based on customer information.
According to Phillip Kotler “ Marketing is becoming a battlefield more on information than on sale power visible" for that customer. Many organisations are using customer relationship management (CRM) software for data based marketing.
4.Vertical Marketing: -
In the conventional marketing system business firms independently concentrate to maximise. They compete with each other and non-coordinates with others for having complete or substantial control over the market. However, in vertical marketing system the players in the market act in a unified manner. This eliminates or minimizes conflicts e.g. Hindustan Lever, Proctor and Gamble, and Gujarat Cooperative Milk Marketing Federation are able to get cooperation from their distributors and retailers in implementing their strategies for sale promotion and policies.
5.Horizontal Marketing: -
Every organization has certain expertise and core competencies. They also have some grey areas. Under this system two or more independent and non-related business organizations join hands in exploring new marketing opportunities and take benefit of the expertise of other. For an example Tata Group does not finance but {Through Rallis India} has teamed up with ICICI bank to give agricultural inputs, Car manufacturers and car dealers, have tied up with banks for financing purchase of vehicles, estate agents and builders have tied up with banks for housing loans.
6.Multiple Marketing: -
Under this system organizations use two or more than two marketing channels for reaching one or more customer segment e.g. in addition to direct marketing banks have also outsourced marketing of Credit Cards.
7. Telemarketing: -
Telemarketing is marketing conducted over the telephone. The purpose of telemarketing is to make a sale. Most telemarketing calls are known as "cold calls". These are unsolicited commercial calls where the called subscriber has not given explicit prior consent to the calling party.
Telemarketing is one of the most controversial types of marketing. Sometimes telemarketers have personal information about a customer, or the caller randomly selects the names and telephone numbers either from telephone directory or service provider or from other vendors or outlets and contacts the person. A large number of subscribers find that such calls are a nuisance and inconvenient since they encroach on the called party’s time and often interfere with the called party’s activities. Additionally, such calls disturb the privacy of the subscriber. In the wake of widespread public resentment against such calls, Telecom Regulatory Authority of India (Trai) has formulated the Telecom Unsolicited Commercial Communications Regulations (TUCCR). The Department of Telecommunications (DoT) has issued guidelines for telemarketers in order to check unsolicited commercial calls.
Launching of products: -
Before launching products an organization has to do lots of thinking and mental exercise. It has to decide the target market i.e. identification of segments and groups i.e. whom to sell, where to sell, when to sell, and in what quantity to sell. It has to develop a system to find out the probable response of customers, market and competitors. Thus it has to decide in detail on the following aspects.
a) The Product: It covers the line of, type of, range of products to be offered in the market. This includes product variety, quality, design, features, brand name, packaging, sizes, services, warranties, and returns. It includes identification of market and innovation and launching of new products.
b) Price: Before launching a product or service in the market it is necessary to decide the price. The price has to be competitive. A pricing policy is necessary for deciding wholesale price, retail price, discount, payment period credit terms etc? Organisation has also to address whether there will be one price or varying price? What will be the level of pricing?
c) Branding: It is selection of trademark, unique product identification.
d) Channels of distribution: Selection of location of outlets through which the products and services would be offered.
e) Selling Policy: Whether it should be wholesale selling or retail selling. What target group is to be approached and what will be methods of selling?
f) Sales Promotion: What is the budget for advertisement, public relations, building corporate image, and market penetration. Whether there will be direct marketing?
g) Servicing policy: What arrangements are to be made for providing after sales service.
h) Fact finding: What will be the system for ascertaining the impact of marketing operations, obtaining feed back about the product, quality of after sale service from the end users.
Forecasting Market:
Marketing and selling are continuous process. Sales are the end result of marketing. Sales cannot materialize unless there are users and the organisation marketing a product has reputation. Organizations have realised that there is something worse than losing money in any particular quarter or period and that is losing reputation. Hence Maintenance of reputation is must. Therefore, for projecting future demand and deciding on marketing strategies following factors need to be examined.
1.Individual Factor:
a. What are the motivational factors behind purchasing i.e. behaviour in response to the stimuli

to which they are subjected?
b. Changes in consumers’ buying behaviour.
c. What are customers’ buying habits and buying capacity?
d. What are living habits of customers?
e. What is the social status and environment (Present and future, as revealed by friends,

consumers attitudes towards product)
2.Competitor’s Position:
a. Number of competitors in the market, their size and strength.
b. What other products are being offered in the market
c. Degree to which competitors compete on price vs. no price
d. Trends both technological and social
3.Government policy:
a. What regulations affect price
b. What are the regulations affecting fair competition
Marketing in Banking: -
Marketing is not new in banking. Increasing competition has forced banks to have a scientific and tested marketing and sales planning system. Banks have realized that it is the knowledge and awareness that makes a product or service to take off in the market and the inherent quality and uniqueness of the product keeps it alive resulting into constant demand from consumers. Hence, unless masses know the range of service products offered by banks no one will have special leaning towards the bank and its products. In a non-marketing climate the customer remains anonymous and unimportant to the growth of the business. Banks are therefore adopting marketing orientation, identifying the important customer and formulating suitable strategies to fulfill the demands of customers
Marketing activity in banks is associated with identification of current and potential customer needs, development and promotion of products and services that are acceptable to the customer at a price that is realistic and profitable to the bank.
With the help of experts in the field of marketing, banks are developing in house skills of selling financial services. Banks are re-looking, reengineering and modifying systems and procedures and fusing it with technology to meet the spurt in demand of financial products. In present days marketing has become aggressive and combative. Therefore knowledge of technology and marketing is must for sustainable growth. This also helps in improving customer satisfaction. Banks are improving the customer services by professionalisation, by modernizing their systems and by creating greater degree of customer consciousness amongst staff. Banks are also inculcating passion for efficiency in their staff.
Marketing approach in Banks:
Today banks are operating in a highly competitive, rapidly changing and dynamic environment. With the opening of private sector new generation banks the competition has become tough. These new generation banks have different work culture, work ethics and do not carry the weight of past legacies they are technologically advanced and are not averse to change. These banks have opened floodgates of competition not only in the traditional banking operations but also in modern line of business. With their innovative marketing management skill these new generation banks have gained an edge over old stalwarts in the field.
Banks are finding the going tough and for profitable survival, they have to find out new ways of selling services and explore new markets to increase their competitive edge. Banks have realized that for meeting competitive challenges they have to adopt a ‘Marketing Philosophy which revolves around need satisfaction of the customer. For successful marketing commitment of staff at all level is necessary. Bank officials, branch managers have therefore to identify different types of customers, their needs and draw up a suitable scheme to suit their needs and execute them in an effective manner. Bankers have to be innovative and should foresee the future demand. A banker has to have through knowledge of his area so that he can assess the changes taking place and ascertain the opportunities existing for profitable deployment. He should be aware of the cultural environment in which he operates and be familiar with the attitudes of local people towards savings, borrowing, spending their values and, traditions. This knowledge goes a long way in designing and offering new products, and in creating marketing strategies.
For satisfying the identified needs of different segments and sub segments of customers banks have introduced number of packages of services by combing more than one core service. Broadly speaking there are three basic strategies as under.
1.Market Penetration: - In this existing range of services are sold to the existing customers’ e.g. a term deposit customer may be approached by bank for another type of deposit account or for a credit facility. Proper database helps in market penetration.
2.Market Development: - By offering vide range of services to new or potential customers their base is enlarged.
3.Product Development:- New services are developed to meet the needs and demands of existing customers.

Banking a Service Industry: -
Banking is a service industry where no physical products are sold. Service is an activity or benefit that one party offers to another. Services are people based. They are intangible and cannot be seen. Customer service is not a static concept. A service that may be regarded as good today may not be so tomorrow. Due to the spread of awareness and awakening and increase in the general level of education, people have become conscious of their right to receive prompt, efficient and courteous customer service from banks. From the banker’s point of view, proper customer service and customer satisfaction is important not only to lure new business and customers but also to retain existing one. Banks deal only in various types of financial products and services. A physical product can be seen, touched; its quality can be tested and ascertained by the purchaser. A physical product has shelf life. It can be stored. Whereas, all these are not possible in case of banking services as the services provided by banks are intangible. Service delivery depends on the service provider. We see the person delivering the product but the way the product is delivered is only felt. It is the feeling of satisfaction that makes the service good or bad. It is the feeling that makes the difference in marketing of banking services.
Satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product perceived performance or outcome in relation to his or her expectations. The customer is satisfied if the performance meets the expectations; he is dissatisfied if the performance is short of his expectation. Level, criteria and standard of satisfaction differs from person to person. Hence in banking industry it is the service provider i.e. employees who play an important role in customer satisfaction and marketing of financial products. A satisfied customer is in himself publicity for the bank as he does publicity with the word of mouth. As he does positive publicity a dissatisfied customer does adverse publicity dissatisfied customer drives out satisfied customers from the bank. A dissatisfied customer patronizes the bank only out of sheer necessity and does not bring more business of his own and his acquaintances. Having an alternative he migrates to other bank. Feeling of customer satisfaction is dependent on employees. It has been found that higher employee satisfaction ultimately further customer satisfaction, which results in customer retention.
Cross Selling: -
Market penetration strategy is the fundamental of cross selling. Cross selling is based on the principle of ‘matching need’s with need arousal. For every service that a customer is cross-sold the bank gains in following ways.
a. Other services of banks are sold.
b. Probability of customer switching over to another bank is reduced
c Banks cost of operations is reduced
d. Income /earning goes up

To make cross selling effective it is necessary that

1.Bank staff has a broader perspective about the variety of needs of the customer,
2.Staff members have complete knowledge and are aware of the entire range of services being

offered by the bank.
3.There is full involvement of all the employees
4. Staff is well aware of the positive points of the product and salient features of the products of

competitors.
5.Employees have to come out of the cocoon of their restricted operational approach.

6.Environment in the bank is charged with motivation and zeal to excel.
Marketing is must for survival of an institution. It gives publicity to the institution and makes

its presence felt in the market. It indicates that the institution is alive to the needs of masses.

Management Information System (MIS)

What is system?
System is an established or organized procedure; a method, a set of components for accomplishing some purpose. It is a group of interdependent items that interact regularly to perform a task.
What is business information?
Every business depends on information. It is the means by which data flows from one person or department to another and includes every thing from inter-office mail and telephone links to a computer report. Information is the most vital resource for management. Management functions in darkness in the absence of information. Information is the searchlight. Management Information System is a procedure, system, technique, methodology; a channel through which management of an organization gathers information on various aspects of functioning.
Information management is an umbrella term that consists of all the systems and processes within an organisation for the creation and use of corporate information. Information management is, about the business processes and practices that underpin the creation and use of information.
Need for Management Information System:
Management information system is a core component of management. It is the lifeline of an organisation in the absence of which, an organization cannot function properly. It is the diagnostic tool in the hands of the management of any organization, that helps in knowing and evaluating whether the institution is functioning in a planned and budgeted manner. It also provides helping hand to the management to have proper supervision and control on the functioning.
The purpose of information systems is to process input, maintain files of data about the organisation and produce information, reports and other outputs. It enables managers and employees to continually monitor actual performance and compare it against planned productivity. In case of variance corrective measures are initiated.
All systems have standards against which actual performances are compared. Activities too far above or below standards are noted and corrective measures taken.
Every systems has a basic control model that include -
· A standard for acceptable performance
· A method of measuring actual performance against the standards
· A method for the feedback.

Management Information System (MIS):
In any organisation, decisions are made on various issues that recur regularly (Weekly, monthly, quarterly) and require a certain set of information for making a decision. MIS provides input for managerial decision process and assists management in decision-making and problem solving.
Since the decisions supported by MIS are structured decisions, management of an organisartion knows what factors to consider in making the decisions, and the information needed to formulate decisions is identified.The reports/ information is prepared in a predesigned form and presented in a predetermined format to support these recurring decisions.
Management Information System in Banks (MIS):
In banks, management information system relates to reports based on the transaction. Reports on deposits, advances, recovery, non performing assets, cash and bank balance, interest paid and received etc., are the routine information used by bank management to keep informed on the performance of individual branches / offices. The information is also collected from other external sources on those issues, which directly affect the business of bank viz about economic trend, demand for loans, rate of consumer spending, cost of borrowings etc.
MIS a decision Support system:
MIS is the formal system of gathering, processing, integrating, comparing, analyzing and deciphering information of data and converting it intelligently for providing it to managers at all levels who use it for planning, decision-making, marketing, building better customer relations, monitoring and supervision and control.
MIS is the core of planning. It is comprises collection, manipulation, and dissemination of data or information. The activities involved include inputting, processing and storage of data into information, and preparation of management reports.
MIS is not just statistics and data analysis, but is assessment of human capabilities. It helps in:
· Establishing relevant and measurable objectives
· Monitoring results and performances.
· Alerting organization, on all deviations between results and pre-established objectives and

budgets.
MIS helps in selecting a course of action from among alternatives and plays vital role in decision-making. It helps banks in taking scientific decisions for the problems faced viz., What will be the impact on deposits if the rate of interest on deposit is increased by x % or reduced by y %? What will be impact on advances portfolio if interest rate on advances is increased by x % or reduced by y %? Or what if we open a branch at a particular location or close down a branch at a particular location or merge two branches?
Quality of Information:
The management requires database information for taking policy decisions as well as for taking other corrective measures. A strong build-up of information and data is required for this. The quality of data goes a long way in improving the efficacy of control mechanism. There has to be consistency in the data and it should not be out of date information.
It is not that reporting of correct data is necessary, but its timely submission is must. Delay in submission of a return/information may not only defeat its very purpose, but may expose bank to risks and may also entail penalties if the information of statutory nature is not submitted in time. It is also necessary that the returns/information is not only furnished correctly but is to be submitted in the prescribed formats.
It would thus be observed that following five essential elements are must for any effective management information system. Management decisions and strategies may be rendered invalid or, in fact, detrimental should and one of these components be compromised.
· Timeliness
· Accuracy
· Consistency
· Completeness and
· Relevance
For taking right decisions, it has to be ensured that:
1. The information is current and available to all appropriate users to facilitate timely decisions.

This necessitates prompt collection and editing of data.
2. A sound system of internal controls must be in place to ensure the accuracy of data.

Information should be properly edited and reconciled, with the appropriate control

mechanisms in place.
3. Any change in collection or reporting procedures should be clearly defined, documented and

communicated to all users.
4. Information provided by MIS mechanisms must be complete.
5. Information provided must be relevant.
6. All pertinent information is to be provided in a comprehensive and concise format.
Information Collection in Banks:
Banks operate their business through network of their branches spread over a vast geographical area. Banks control operations and take decision with the help of descriptive and statistical information collected in the form of statements, data, reports etc. Some times MIS is also tailored to meet specific management needs.
Compilation and integration of raw data provided on various facets of operations are analyzed from various angles by controlling authorities for taking policy decisions, guidance, monitoring and control.
Banks gather information not only from its operations i.e. branches /offices but also collect information from other external sources i.e. reports published in media, Information published by Reserve Bank of India and other statutory bodies, Government departments, research organisations/agencies, published reports of other banks and institutions.
It is not that only banks require information for monitoring its affairs, but also those who have stake in the bank i.e. Shareholders, those who deal with the bank, those who supervise, monitor and control the affairs of bank. Even a member of public can call for information under Right of Information Act.
Information is also required for meeting various statutory requirements viz. SLR/CRR; achievement of various targets in respect of directed lending etc.
Utilising information:
The type of information required at different tiers of management varies. At the apex level the information is required for formulation of policies, planning and directing. At the controlling level bank management requires information to find out whether the branches are proceeding as per the plan so that corrective measures can be taken before it is late.
Smart branch managers use data for business growth, monitoring, improving profitability, cash management, reducing operational risks, improving staff productivity, house keeping facing market challenges, supervision of borrowal accounts, reducing Non Performing Assets, making presence in market, improving reputation and market share, and so on so forth.
MIS helps banks in
1. Planning /coordinating
2. Controlling /supervising operations
3. Business Development
4. Profit planning
5. Cash management
6. Risk Management
7. Marketing
8. Decision taking
9. Human resource development
1.Planning /Coordinating
MIS is a tool, which plays important role in planning and budgeting. It helps in preparing long-term vision of a bank, and preparing its road map.It helps in coordinating various functions and functionaries.
2.Controlling /Supervising operations
MIS helps in controlling the affairs of the bank and in ensuring that all activities are being carried out in planned and programmed manner. Inspection is also an important and vital part of management information system. It enables banks in finding out loopholes in it’s operations and in the areas that need prompt action and attention.
3.Business development: -
By analyzing the business data received from branches, banks can find out the trend in the business growth and chalk out detailed business development plan, and marketing strategies.
Since every quarter Reserve Bank of India publishes business figures i.e. Deposits and Advances of banks in a district, individual banks work out their performance in the district in which it has branches and chalks out district wise business strategies.
After comparing the past figures , banks work out whether their market share in a particular district is increasing or decreasing, accordingly they take appropriate corrective measures and decide marketing strategies
4.Profit planning: -
Data related to income and expenditure helps bank in identifying the major areas of cost and income and helps them in augmenting its sources of income and in controlling expenses.
As banks’ major source of income is from its credit portfolio and major outgo of funds is towards meeting interest liabilities, MIS helps in having proper assets and liability management. It also helps banks in analyzing whether its non-interest income is increasing or decreasing. MIS helps in taking corrective measures by analyzing the trend in establishment expenses and other operative expenses.
5. Cash management: -
Proper cash management improves profitability of a bank. MIS helps bank in finding out pockets where heavy cash is generated and for making arrangement of its disposal either by directing surplus / excess cash to Currency Chests or to those branches which have heavy cash requirements. MIS also helps in knowing excess bank balances with its correspondent banks and enables bank in diverting to call money market or investment in Government or other securities.
6.Risk Management: -
MIS helps bank in managing Liquidity risk, Currency Risk, Interest Rate Risk, Credit Risk.
7. Marketing: -
MIS helps banks in scientifically marketing its products and services by scrutinizing the data collected. It also helps in deciding ways and means to serve customers intelligently. Many organisations are using customer relationship management (CRM) software for data based marketing.
Collection of Data: -
Banks collect data both for its internal and the use of other external authorities. These external authorities are the statutory authorities who need information for supervising, controlling and monitory functions of banks. Information is submitted to them in the form of returns, statements and report.
Internal use:
With a view to having proper supervision and control, bank management collects information on various aspects of its operations .On the basis of information, developmental strategies are chalked out. Major and vital information includes Weekly Asset & Liability Statement, statement-containing details of deposits, advances and other assets and liabilities.
The statement is necessary for ascertaining demand and time liability of the bank on which Statutory Liquidity Ratio and Cash Reserve Ratio of a bank is computed and maintained. The data relates to business figures of Friday. In the event of Friday being a Holiday data of the preceding day is mentioned.
External use:
Data is collected for submission to Reserve Bank of India, NABARD, SIDBI, DICGC, etc. These organizations have supervisory role and control mechanism over the banks. The data also helps in deciding economic policies.
Conclusion:
Success of management information system depends much on management philosophy, policies and commitment of its executives. MIS can help in bringing cultural change, which can be achieved only through strong leadership. Effort has to be put into generating a sufficient sense of urgency amongst the entire work force. Since the banks are now are switching over core banking solution, with the click of mouse information on any aspect functioning can be obtained decision on any aspect of managerial functions can be easily taken.

NON-RESIDENT DEPOSITS

Who is a Resident in India?
The definition of Resident in India has been discussed at length at the following two places.
A- Income Tax Act
B- Foreign Exchange management Act, 1999
Background: -
Under Foreign Exchange Regulations Act, (FERA) {now substituted by Foreign Exchange Management Act. 1999 (FEMA)} the intention of person while going abroad or returning to India was a decisive factor in deciding the residential status of a person. The definition under FERA was not in harmony with the definition given in the Income Tax Act, which was creating confusion about the status of resident. FEMA has taken care of this confusion and it has described resident person in the similar lines to those of the Income Tax Act.
Income Tax considers the stay of a person in India in the current financial year, whereas, FEMA considers the stay of a person in the previous financial year.
Definition as per Income Tax Act: -
As per Income Tax Act, the residential status of a person is decided on the basis of his stay in India. A person is resident in India if
a) He stays in India for 182 days or more during the previous year
b) Stays in India for 60 days or more during the previous year and 365 days or more

during four preceding years.
Exception
c) A citizen who leaves India in any year for employment is not treated as resident in that year

unless he has been in India for 162 days or more.
d) An Indian citizen or a person of Indian origin, who is abroad comes on a visit to India, in the

previous year, the period of stay of 60 days (in (b) above) is extended to 182 days.
Additional Conditions
e) A person should be Resident in India at least 9 out of previous 10 preceding years and
f) Should be in India for 730 days or more during 7 years preceding previous year.
Definition as per FEMA 1999: -
According to Section 2v of Foreign Exchange Management Act, 1999, following categories of persons are treated as Residents in India.
(i) a person residing in India for more than 0ne hundred eighty two (182) days during the

course of the preceding financial year but does not include those persons
(A) Who have gone out of India or who stays outside India, either
(a) For taking up employment outside India, or
(b) For carrying on outside India a business or vacation outside India or
(c) For any other purpose, in such circumstances as would indicate his intention to stay outside

India for an uncertain period.
(B) A person who has come to or stays in India in either case otherwise than
(a) For or on taking up employment in India, or
(b) For carrying on in India a business or vocation in India, or
(c) For any other purpose, in such circumstances as would indicate his intention to stay in India
for an uncertain period;
Person other than Individual
(ii) Any person or body corporate registered or incorporated in India.
(iii) An office, branch or agency in India owned or controlled by a person resident outside India.
(iv) An office, branch or agency outside India owned or controlled by a person resident in India.
Person Resident outside India - Non Resident Indians
As per Section 2w of FEMA 1999, a person resident outside India is a person who is not resident in India. Non- resident Indians generally fall under one of the following broad categories:

1. Indian citizens who stay abroad for employment or for carrying on a business or vocation or

for any other purpose in circumstances indicating an indefinite period of stay outside India.
2. Indian citizens working abroad on assignment with Foreign Government, Government

Agencies or International / Regional Agencies like United Nations Organization (UNO) and

its affiliates, IMF, IBRD, UNDP, World Bank etc.
3. Government officials (both central and state) and other officials of public sector undertakings

deputed abroad o assignment or posted abroad (including Diplomatic Missions)
Note: Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all facilities available to NRIs under FEMA. (RBI/2006-07/22 Master Circular No. /04/2006-07 July1, 2006).
Persons of Indian Origin (PIO): -
A Person of Indian Origin (PIO) as a person, being a citizen of any country
(a) Who at any time held an Indian Passport or
(b) A person who himself or either of his parents or any of his grand parents were citizens of

India by virtue of the Constitution of India or the Citizenship Act, 1955, or
(c) Spouse of an Indian citizen or
(d) Spouse of a person covered under (a) or (b) above.
However, the citizens of Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are not considered as person of Indian origin (PIO) even if they satisfy the above conditions under FEMA for different purposes under different regulations.
Overseas Corporate Body (OCB):
“ A company, partnership firm, society or any other corporate body owned directly or indirectly to the extent of at least 60% by non-resident Indian and includes overseas Trust in which not less than 60% beneficial interest is held by non-resident Indians directly or indirectly but irrevocably” is considered as Overseas Corporate Body.
Change of Status from Non Resident to Resident:
Persons, who were resident outside India, cease to be Non Residents on their return to India for permanent stay. Therefore, immediately on their return to India, they should declare to the bank about the change in their status.
Maintenance of Account: -
Non Resident Indians and Persons of Indian origin (both together indicates NRI’s) can maintain account in Rupees as well as in permitted foreign currencies.
Permitted Foreign Currency: -
These include Pound Sterling, US Dollar, Deutche Mark, Japanese Yen, and EURO.
Non –Resident Accounts:
Non-Resident bank accounts are those accounts, which are maintained by Indian Nationals and Persons of Indian origin residing abroad, foreign nationals and foreign companies in India. The opening, maintenance and operation of Non-Resident Accounts are subject to compliance with Exchange Control Regulations in force from time to time.
Types of Non Resident Account:
These accounts can be classified in to following three categories.
1. Non-Resident (Ordinary) Rupee Account
2. Non Resident (external) Rupee Accounts
3. Foreign Currency (Non Resident) Accounts (FCNR)-B
4. Resident foreign currency account: (RFC)
1.Non-Resident (Ordinary) Rupee Account:
These account are known as Non-Resident (Ordinary) Rupee {NR (O)} Account. Banks can open these accounts in the name of non-resident individuals /entities without approval of Reserve Bank of India for the purpose of putting through bonafide transactions in rupees. NR (O) A/C in the name of individuals with Pakistani/ Bangladeshi nationality cannot be opened without prior permission of Reserve Bank of India. NR (O) accounts can be opened /maintained in the form of current, savings, recurring or fixed deposits.
A non-resident can open NR (O) accounts in three ways: –
1) By redesigning his existing savings bank account into a NR (O) account after his becoming a

non-resident. The accounts of Residents in India (i.e. Indian Nationals) are redesignated as

NR (O) account once they go abroad (other than to Nepal or Bhutan) for taking up

employment or for profession or vocation or for indefinite stay.
2) By opening a NRO account by remitting foreign exchange from abroad in an approved

manner.
3) Transfer of funds from NRE A/c of same person.
NR (O) accounts can be opened and held jointly with residents who are close relatives. As announced in the Annual Policy Statement for the year 2007-08 Para 146(ii) (ii)], NR (O) account can be operated by a resident in whose favour the non-resident account holder has given a Power of Attorney.
Restrictions on, the holder of power of attorney:
1.He is not permitted to repatriate funds held in the account outside India.
2.He cannot make payment by way of gift to a resident on behalf of the non-resident account

holder.
3. He cannot transfer funds from the account to another NRO account.
What the holder of power of attorney can do?
1. The holder can make all local payments in rupees including payments for eligible

investments subject to compliance with relevant regulations made by the Reserve Bank; and
2. He can remit current income in India of the non-resident individual account holder, net of

applicable taxes outside India.
Permissible Credits:
The credits that are permitted in the account are: -
1. Proceeds of remittances received from outside India, through normal banking channels or in

foreign currency, which is freely convertible.
2. Any foreign currency, which is, freely convertible tendered by the account holder during his

temporary visit to India. Foreign currency exceeding USD 5000/- or its equivalent in form

of cash should be supported by Currency Declaration Form. Encashment Certificate should

support rupee funds, if they represent funds brought from outside India.
3. Transfers from rupee accounts of non- resident banks.
4. Legitimate dues in India of the account holder. This includes current income like rent,

dividend, pension, interest, etc. as also sale proceeds of assets including immovable property

acquired out of rupee/foreign currency funds or by way of legacy/inheritance. (Income tax is

deducted on the half- yearly interest credited in the account and remitted to appropriate

authority.)
Permissible Debits:
1. All local payments in rupees including payments for investments in India subject to

compliance with the relevant regulations made by the Reserve Bank.
2. Remittance outside India of current income like rent, dividend, pension, interest, etc. in India

of the account holder.
3. Remittance up to USD One million, per financial year (April-March), for all bonafide purposes,

to the satisfaction of the authorised dealer bank.
Note: -
The existing regulations permit Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO) to remit up to USD one million per calendar year for any bonafide purpose out of the balances in their Non-Resident Ordinary (NRO) accounts. The balance in the NRO accounts may also include the sale proceeds of immoveable property acquired by the non-resident out of her/his resources in India, or sale proceeds of property received by way of inheritance or gift. The remittance of sale proceeds of the immoveable property is at present subject to a lock-in period of 10 years.
RBI/2007-08/19 Master Circular on Non-Resident Ordinary Rupee (NRO) Account Master Circular No. 03 /2007- 08 July 2, 2007
2. Repatriable Accounts:
Non-resident (External) Rupee account (NRE):
In order to encourage remittances from Non-Resident Indians, NR (E) accounts were introduced with effect from 21st February 1970 under the Non-resident (External) Accounts Rules, 1970.
NR (Ext) accounts are opened in the name of NRIs/OCBs (Overseas Corporate Body) with remittances received from abroad in an approved manner in a freely convertible currency.
The account can be opened as Saving, Current or Term deposit accounts in Indian rupees.
The accounts opened under these rules enjoy the following benefits:
1.The rates of interest on term deposit kept under NR (E) are generally higher than the rates of

interest on NRO deposits
2. The interest on deposits and any other income accruing on the balances in the account are

free of Indian Income Tax.
3.The entire credit balance (inclusive of interest earned thereon) can be repatriated outside

India at any time without any reference to Reserve Bank of India.
4.Purchase of units of Unit Trust of India (UTI), Central & State Government securities and

National Plan/Savings Certificates can be made freely from the balances in NR (E) account
5.Special chequebooks for operations on these accounts are supplied to facilitate prompt

disposal.
6.Accounts under the scheme can be opened by Non-Residents of Indian nationality or origin . Opening of Account:
Non- Resident (External) Rupee accounts can be opened on receipt of funds through following banking channel.
1 MT/TT/DD in foreign currency favoring accountholder
2 Transfer of balance from an existing NRE A/c/FCNR A/c of the accountholder

3.By tendering foreign currency traveller's cheque issued in the name of the NRI in his own

name or by tendering foreign currency notes or coins, while on a temporary visit to India,

provided he has not ceased to be a non- resident.Such amount tendered should be endorsed

on the Currency Declaration Form if the amount exceeds currency notes equivalent of

US $ 5000.
4.Joint accounts in the name of two or more NRIs can be opened. No joint account can be opened

jointly with a resident. When one of the joint accountholders becomes a resident, there are two

options available
(1) The name of the resident accountholder is deleted and account continues as NRE A/c. or
(2) The account is redesignated as a resident/NRO/RFC account at the option of the

accountholder
6. Residents having appropriate power of attorney can operate Non Resident (Ext.) Accounts for

making local payments on behalf of Non Resident Indian.
7. The resident power of attorney holder cannot repatriate funds held in accounts outside India

under any circumstances or make payment of gifts on behalf of the account holder.

Rates of Interest:

he rates of interest payable on NR (Ext.) accounts are subject to change from time to time as per directions issued from Reserve Bank of India.
Permitted credits:. Interest accruing on the deposit account
·Interest on government securities, dividend on units of UTI, approved mutual funds, provided the securities /units were purchased to the debit of NRE/FCNR account of the customer.
.Maturity proceeds of government securities, including NSC,sale proceeds of units of UTI, or any approved mutual fund, provided the securities/units were originally purchased by debiting NRE/FCNR account.
·Refund of share/debenture subscription to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from another NRE/FCNR account of the accountholder or by remittance from abroad through normal banking channels.
.Any other transaction covered by general or special permission of RBI subject to compliance of conditions, if any.

Transfer from one NRE account to other account
Permitted debits:
. Local disbursements/payments
. Remittance abroad (Exchange risk is borne by the account holder)
.Transfer to NRE/FCNR accounts of the same accountholder.
Non –Resident (Foreign Currency) Account (FCNR- B):
Non-resident Indians and overseas corporate bodies can open and maintain these accounts with an authorized dealer. An authorized dealer is normally a bank specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities.
The account is maintained in designated currencies in the form of term deposits of the following three maturities.
1. One year and above but less than two years
2. Two years and above but less than three years
3. Three years only
The interest is payable in designated foreign currency and the deposit amount and interest is fully repatriable. Such accounts are free from risks on account of exchange rate fluctuations. The opening, maintenance and operations of these accounts are subject to compliance of Exchange Control Regulations in force from time to time.

Permissible Debits / Credits:

All debits/ credits permissible in respect of NRE accounts are applicable in respect of this account also.

Resident foreign currency account: (RFC)

Persons of Indian nationality or origin, who have returned to India on or after 18th April 1992 for permanent settlement (Returning Indians), after being resident outside India for a continuous period of not less than one year, are permitted to open foreign currency accounts with banks in India for holding funds brought by them to India. The balances standing to the credit of NRE and FCNR accounts at the time of return can be credited to RFC accounts. Foreign exchange brought to India in the form of foreign currency notes/bank notes/travellers cheques should have been declared to Customs at the time of arrival on the Currency Declaration Form (CDF) if it exceeded U.S. $ 10,000 or its equivalent. In the case of foreign currency/bank notes, such a declaration on form CDF is compulsory if the amount exceeds U.S. $ 2,500 or its equivalent.
Persons who have returned to India before 18th April 1992 can also open RFC account if
(a) They are holding foreign currency assets abroad with Reserve Bank's permission or
(b) They are in receipt of pension or other monetary benefits from their erstwhile employers abroad .

The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India. The account is maintained in the form of Current Account and does not attract any interest. There is no ceiling on the balances in the account.
Latesst Amendments:
1.RBI vide circular number RBI/2011-12/173 A.P. (DIR Series) Circular No. 12 September 15, 2011 has liberalised the savings bank account maintained by residents in India. Individuals resident in India are permitted to include non-resident close relative(s) (relatives as defined in Section 6 of the Companies Act, 1956) as a joint holder(s) in their resident bank accounts on ‘former or survivor’ basis. However, such non- resident Indian close relatives shall not be eligible to operate the account during the life time of the resident account holder.
2.RBI vide circular number RBI/2011-12/174 A.P. (DIR Series) Circular No. 13 September 15, 2011 has authorised Non-Resident Indians (NRIs), to open Non-Resident (External) Rupee Account Scheme/Foreign Currency (Non-Resident) Account (Banks) Scheme (B) accounts with their resident close relative(s) on ‘former or survivor’ basis. The resident close relative would be eligible to operate the account as Power of Attorney holder in accordance with existing instructions during the life time of the Non-Resident Indian/ Persons Indian Origin account holder.
3.Vide circular number RBI/2011-12/175 A.P. (DIR Series) Circular No. 14 September 15, 2011 RBI has authorised a person resident in India to give to a person resident outside India, by way of gift, any security/shares/debentures of up to USD 50,000 in value per financial year without approval of the Reserve Bank of India.
4.RBI/2011-12/176 A.P. (DIR Series) Circular No. 15 September 15, 2011 has advised that resident individuals may be permitted to include resident close relative(s) as defined in the Companies Act, 1956 as a joint holder(s) in their / Exporter Earners’ Foreign Currency (EEFC)/ Residents’ Foreign Currency (RFC) bank accounts on ‘former or survivor’ basis. However, such resident Indian close relative, now being made eligible to become joint account holder, shall not be eligible to operate the account during the life time of the resident account holder.
5.RBI vide circular number A.P. (DIR Series) Circular No. 17 September 16, 2011 has permitted a resident individual to make a rupee gift to a NRI/PIO who is a close relative of the resident individual [close relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c.
The gift amount would be within the overall limit of USD 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) for a resident individual. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances under the LRS during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.
6.RBI vide circular number RBI/2011-12/183 A.P. (DIR Series) Circular No. 19 September 16, 2011 has permitted a resident to repay the loan of a close relative (relative as defined in Section 6 of the Companies Act, 1956), of the Non-Resident Indian by crediting the borrower's loan account through the bank account of such relative.
7. Vide circular number RBI/2011-12/184 A.P. (DIR Series) Circular No. 20 September 16, 2011 RBI has been decided that where the medical expenses in respect of NRI close relative (relative as defined in Section 6 of the Companies Act, 1956) are paid by a resident individual, such a payment being in the nature of a resident to resident transaction may be covered under the term “services related thereto” under Regulation 2(i) of Notification No. FEMA 16 /2000- RB dated May 3, 2000.


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