Compensation Policy

April 2013

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Particulars
Introduction
Objectives of the Policy
Scope of the Policy
Unauthorised / Erroneous Debit
ECS direct debits/other debits to accounts
ECS Credit
Payment of Cheques after Stop Payment Instructions
Foreign Exchange Services
Collection of Instruments (Local & Outstation-Domestic)

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Payment of Compensation for delay in Clearance of Local Cheques

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Cheques / Instruments lost in transit / in clearing process or at paying
Banks branch
Violation of the Code by Banks agent
Issue of Duplicate Draft and compensation for delays
Transaction of at par instruments of Co-operative Banks by
Commercial Banks
Return of Documents of Title
ATM Failure
Compensation in case of frauds (other than Internet Banking)
Reversal of Erroneous/Unauthorised/Fraudulent debits arising on
Internet Banking (Vishing/Smishing) related transactions
Other areas of deficiencies in services
Force Majeure

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Compensation Policy
1. Introduction

1.1

Technological progress in payment and settlement systems and the

qualitative changes in operational systems and processes that have been

undertaken by various players in the market have enabled market forces of
competition to come into play to improve efficiencies in providing better service
to the users of the system. It will be the Banks endeavor to offer services to its
customers with best possible utilization of its manpower / technology
infrastructure.

1.2

Policies of the Bank, made at the instruction of Reserve Bank of India (RBI)

on Know Your Customer / Anti Money Laundering (KYC/AML), Model Deposit,

Customer Acceptance, Customer Severance etc., have enabled the Bank to
increase its efficiency for better performance and to bring in transparency in
dealing with customers.
1.3

RBI has advised that each Bank should have a Board approved

Compensation Policy which would provide compensation in the event of

various areas of interaction with client.
1.4

IDBI Bank is one of the leading Banks in the country, which deploys state -

of the - art technology to provide world-class service to customers. The Vision

Statement of the Bank is To be the most preferred and trusted Bank enhancing
value for all stakeholders.
1.5

As customers are the biggest stakeholders for the Bank, the Vision

Statement truly reflects the commitment of the Bank to enhance value to the
customers. The Compensation Policy (the Policy) of the Bank is a reflection of

Compensation Policy

the Banks on-going efforts to provide better service to our customers and set
higher standards for performance.

1.6

The Mission Statement of the Bank, inter alia, incorporates the following:
a. Delighting customers with our excellent service and comprehensive suite
of best-in- class financial solutions;
b. Continuing to act in an ethical, transparent and responsible manner,
becoming the role model for corporate governance;
c. Deploying world class technology, systems and processes to improve
business efficiency and exceed customers expectations;
d. The Bank understands that one of the important requirements for
customer delight is to have ethical and transparent policy in all its
dealings.

1.7

Thus, the Bank acknowledges that the customer is the core constituent of

the Bank and every action of the Bank should be aimed at Customer Delight
and the Bank should not allow its operations to lead to any monetary loss to the
customer.

1.8

However in the extraordinary circumstance of the Banks action / service

leading to any financial loss to the customer, the Bank will compensate the
customer for the financial loss. Towards this end, the Bank has formulated a Loss
Compensation Policy that gives the rights and responsibilities of the Customer
and Bank, in matters relating to compensation for the loss, if any, incurred by the
customer in their day to day operation with the Bank.

Compensation Policy

2.

Objectives of the Policy

2.1

To lay down a Policy Frame work for abiding by RBI guidelines on Loss

Compensation
2.2

To ensure transparency and equality in the treatment of customers.

2.3

To create a system whereby the Bank compensates a customer for any

financial loss that he might incur on account of any deficiency in service /

omission / commission directly attributable to the Bank.
2.4

Pay such compensation without the customer asking for the same and

thereby reducing instances where the customer has to approach forums such
as Banking Ombudsman etc.
2.5

To enable the Customer to know before or during a relationship, his rights

and responsibilities in matters relating to Loss Compensation.

2.6

To reiterate existing system / put in place proper system in a transparent

manner so that the Customer can take an informed decision in matters relating
to Loss compensation.
2.7

To ensure that the staff at all levels in the Bank are aware of the policy of

the Bank in this regard, so that dealings with the Customer is uniform across
geography

and

types

of

customers

and

is

based

on

transparent

standards/procedures.
2.8

It is reiterated that the policy covers only compensation for financial losses

which customers might incur due to deficiency in the services offered by the
Bank which can be measured directly and as such the commitments under this
policy are without prejudice to any right the Bank will have in defending its

Compensation Policy

position before any forum duly constituted to adjudicate banker-customer

disputes.
3.

Scope of the Policy

3.1

This policy is applicable across all branches / business segments of the

Bank, and is to be read in conjunction with related operational guidelines issued

from time to time.
3.2

The contents of the policy shall always be read in tandem/auto-corrected

with the changes/modifications that may be advised by RBI and / or by any

regulator and / or by the Bank from time to time.
3.3

Definition of Customer for the purpose of this Policy: Customer is defined

as a person or entity that maintains an account with the Bank or availing or has
availed any service in the normal course of Banking.
3.4

This Policy attempts to deal with the financial loss to the customer on

account of deficiency is service / omission / commission directly attributable to

Bank.
3.5

This Policy excludes compensation, if any relating to non-financial loss.

4.

Unauthorised / Erroneous Debit

4.1

If the Bank has raised an unauthorized / erroneous direct debit to an

account, the entry will be reversed immediately on being informed of the

erroneous debit, after verifying the position. In the event the unauthorized /
erroneous debit has resulted in a financial loss for the customer by way of
reduction in the minimum balance applicable for payment of interest on savings
bank deposit or payment of additional interest to the Bank in a loan account,
the Bank will compensate the customer for such loss. Further, if the customer has
suffered any financial loss incidental to return of a cheque or failure of direct
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Compensation Policy

debit instructions due to insufficiency of balance on account of the

unauthorized/erroneous debit, the Bank will compensate the customer to the
extent of such financial losses.

5.

ECS direct debits/other debits to accounts

5.1

The Bank will undertake to carry out direct debit/ ECS debit instructions of

customers in time. In the event the Bank fails to meet such commitments
customer will be compensated to the extent of any financial loss the customer
would incur on account of delay in carrying out the instruction/failure to carry
out the instructions.

5.2

In the event of any ECS/Other debit which results in any financial loss to

the customer by way of reduction in the minimum balance applicable for

payment of interest on saving bank deposit or payment of additional interest to
the Bank in a loan account, the Bank will compensate the customer for such
loss.

5.3

If the customer has suffered any financial loss incidental to return of a

Cheques or failure of direct debit instructions due to insufficiency of balance on

account of the ECS /Other debit, the Bank will compensate the customer to the
extent of such financial losses. However, customer will not be entitled to claim
any compensation for loss of reputation or loss of profit.

5.4

The compensation for such financial losses will, however, be restricted only

to reimbursement of actual expenses incurred by the customer e.g. penalty /

interest paid by the customer to regularize the schedule which got disturbed on
account of delay in carrying out the instruction/failure to carry out the
instruction.

Compensation Policy

5.5

The Bank would debit the customers account with any applicable service

charge as per the schedule of charges notified by the Bank. In the event the
Bank levies any charge in violation of the arrangement, the Bank will reverse the
charges when pointed out by the customer subject to scrutiny of agreed terms
and conditions. Any consequential financial loss to the customer will also be
compensated.
6.

ECS Credit

6.1

Bank would give ECS Credit on the same day of receipt subject to

beneficiary details received from sponsor Bank match with the customer records
as available with Bank. In case of any delayed ECS Credit, Bank will pay penal
interest at the current RBI LAF Repo Rate plus two per cent from the due date of
credit till the date of actual credit for any delayed credit to the beneficiaries'
account. Penal interest shall be credited to the Beneficiary's Account even if no
claim is lodged

7.

Payment of Cheques after Stop Payment Instructions

7.1

In case a cheque has been paid after stop payment instruction is properly

submitted and acknowledged by the Bank, the Bank shall reverse the
transaction and give value-dated credit to protect the interest of the customer.
Any consequential financial loss to the customer will be compensated as
provided under para 4 above. Such debits will be reversed within 2 working days
of the customer intimating the transaction to the Bank.

8.

Foreign Exchange Services

8.1

The Bank has Policy on Collection of Cheques including Foreign Currency

Denominated Instruments. Such instruments are accepted for collection on

best of efforts basis. Bank may enter into specific collection arrangement with

Compensation Policy

its Correspondent Banks for speedy collection of such instruments. The timelines
for collection of such cheques are as follows:

Collection Method
For

USD

GBP/

Collection Timeframe
EUR

Cheques

/ Credit to the customers account after

Instruments sent under Cash Letter expiry of the cooling period i.e 21 days
Arrangement

(CLA)

of

our from the date of provisional credit in

Correspondent Banks.
For

USD

GBP/

EUR

Nostro Account
Cheques

/ Immediate credit to the customers

Instruments sent under Final Collection account after sighting the funds in
Services (FCS) / Preferred Collection Nostro account.
Services (PCS) of our Correspondent
Banks.
For Cheques/Instruments sent under Immediate credit to the customers
Direct Collection Arrangement (DCA).

account after sighting the funds in

Nostro account.

8.2

The

above

time

norms

are

applicable

irrespective

of

whether

cheques/instruments are drawn on the Banks own branches or branches of

other Banks. The Bank may permit selective withdrawal of funds before the
expiry of the cooling period depending on the customers credit worthiness,
relationship with the Bank, KYC compliance, indemnity undertaking, etc as per
the delegation of power (DOP) for waiver of cooling period by the designated
authority.

8.3

Bank takes adequate care for prompt and expeditious despatch and

realisation of all clean instruments. In view of different clearing rules and legal
provisions prevailing in different countries with regard to the collection of clean
instruments, it is difficult to ascertain the exact due date of payment towards the
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Compensation Policy

FC denominated Cheques/Instruments sent for collection. However, in case of

delay in the applying the credit after sighting the funds in the Banks Nostro
account or after the expiry of the cooling period as the case may be, the
depositor will be paid interest for the delayed period at the rate applicable to
the Savings Bank deposit. If the Cheque/Instrument amount is kept as Foreign
Currency Deposit in the same currency, the deposit will be value dated as the
date of the Nostro credit.
9.

Collection of Instruments (Local & Outstation-Domestic)

9.1

The compensation on account of delays in collection of outstation

instruments would be as indicated in the Banks collection policy, which is

reproduced below:
a. Bank shall pay interest on the amount of collection instrument, in case
there is delay in giving credit beyond the prescribed time period without
any demand from the customer. The following time norms are applicable
for Cheques and other instruments sent for collection to outstation centers
within the country:

i.

Cheques presented at any of the four major Metro Centers (New

Delhi, Mumbai, Kolkata and Chennai) and payable at any of the
other three centers: Maximum period of 7 days.

ii.

Metro Centers and State Capitals (other than those of North Eastern
States and Sikkim): Maximum period of 10 days. (eg. . Cheque sent
for collection from any location to Metro center as mentioned
above or any State Capital location other than those of North
Eastern States and Sikkim).

iii.

In all other Centers: Maximum period of 14 days. (eg. - Cheque sent

for collection from other than Metro or State Capital center to any
location other than Metro or State Capital center).
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Compensation Policy

iv.

Where IDBI Bank Ltd does not have a branch and Cheques collected
through correspondent Banks: Maximum 21 days.

b. The Bank will pay interest if there is delay in giving credit beyond the time

period mentioned above. The interest is to be paid for delayed period

beyond 7/10/14/21 days, excluding maximum permissible period as
mentioned above, as the case may be, at the following rates:
i.

Savings Bank rate for the period of delay beyond 7/10/14/21 days, as
the case may be, in collection of outstation Cheques.

ii.

Where the delay is beyond 14 days interest will be paid at the rate
applicable to for term deposit for the respective period.

iii.

In case of extraordinary delay, i.e. delays exceeding 90 days interest

will be paid at the rate of 2% above the corresponding Term Deposit
rate.

iv.

In the event the proceeds of Cheque under collection was to be

credited to an overdraft/loan account of the customer, interest will be
paid at the rate applicable to the loan account. For extraordinary
delays, interest will be paid at the rate of 2% above the rate
applicable to the loan account.

9.2

As per the Banks Code for Commitment to Customers, 2009, monitored

by BCSBI, Bank shall make payment of the said compensation to the customers,
in case of delay in realization of outstation Cheques, beyond the prescribed
period, without any demand from the customer and through computer
automated process. However, due to system limitations, compensation / interest
would be paid to CC / OD / Loan accounts for delayed realization through
manual intervention.

Compensation Policy

10.

Payment of Compensation for delay in Clearance of Local Cheques

10.1

The compensation on account of delays in collection of Local Cheques

would be as indicated in the Banks collection policy, which is reproduced

below for information.
10.2

Local cheques are subjected to clearing process as per the clearing

cycle of the respective location. Thus the cheques accepted across counter
and cleared from drop boxes before the cut off time shall be sent on clearing
on the same day while those accepted beyond the cutoff time shall be taken
up for clearing the next day.

10.3

If there is any delay in collection of local cheques beyond the period

mentioned above, the Bank will pay interest equal to savings bank rate for the
period of delay.

11.
Cheques / Instruments lost in transit / in clearing process or at paying
Banks branch
11.1

The Banks compensation policy for financial loss suffered by the

customers due to loss of instrument after it has been handed over to the Bank for
collection by the customer would also be as indicated in our collection policy.
The same is extracted below for information:

11.1.1 In the event a cheque or an instrument accepted for collection is lost

in transit or in the clearing process or at the paying Banks branch, the
Bank shall immediately on coming to know of the loss, bring the same
to the notice of the accountholder so that the accountholder can
inform the drawer to record stop payment and also take care that
cheques, if any, issued by him / her are not dishonored due to noncredit of the amount of the lost cheques / instruments.
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Compensation Policy

11.1.2 The Bank shall provide all assistance to the customer to obtain a
duplicate instrument from the drawer of the cheque, if required. In
case of an international cheque is lost, the Bank shall also advise the
correspondent/

drawee

Bank

all

particulars

of

lost

cheques/

instruments for exercising caution. The Bank shall arrange to get

payment of the international instrument based on the photocopy/
scanned image of the instrument wherever the practice is prevalent.
11.1.3 In line with the compensation policy of the Bank the Bank will
compensate the accountholder in respect of instruments lost in transit
in the following way:
a) In case intimation regarding loss of instrument is conveyed to the
customer beyond the time limit stipulated for collection (7/10/14 days
as the case may be) interest will be paid for the period exceeding the
stipulated collection period at the rates specified in para 9.2 above.
b) In addition, Bank will pay interest on the amount of the cheque for a
further period of 15 days at Savings Bank rate to provide for likely
further delay in obtaining duplicate cheque/instrument and collection
thereof.
c) The Bank would also compensate the customer for any reasonable
charges, he/she incurs in getting duplicate cheque/instrument upon
production of receipt, in the event the instrument is to be obtained
from a Bank/ institution, which would charge a fee for issue of
duplicate instrument.
d) Bank shall bear all the cost for obtaining duplicate instrument when a
cheque, which has been discounted, is lost. But the customer will assist
in obtaining duplicate instrument. His/ her liability under Negotiable
Instrument Act will not be extinguished till Bank receives the proceeds
of Cheque.

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Compensation Policy

12.

Violation of the Code by Banks agent

12.1

In the event of receipt of any complaint from the customer that the

Banks representative / courier or DSA has engaged in any improper conduct or

acted in violation of the Code of Banks Commitment to Customers which the
Bank has adopted voluntarily, Bank shall take appropriate steps to investigate
and to handle the complaint and to compensate the customer for financial
losses, if any.

13.

Issue of Duplicate Draft and compensation for delays

13.1

Duplicate draft will be issued within a fortnight from the receipt of request

complete with all documentation to that effect from the purchaser of the Draft.
For delay beyond the said period, interest at the rate applicable for Fixed
Deposit of the corresponding period will be paid as compensation to the
customer for such delay.

14.
Transaction of at par instruments of Co-operative Banks by Commercial
Banks
14.1

The RBI has expressed concern over the lack of transparency in the

arrangement for payment of at par instruments of co-operative Banks by

commercial Banks resulting in dishonour of such instruments when the remitter
has already paid for the instruments. In this connection it is clarified that the
Bank will not honour cheques drawn on current accounts maintained by other
Banks with it unless arrangements are made for funding cheques issued. Issuing
Bank should be responsible to compensate the cheque holder for nonpayment/delayed payment of cheques in the absence of adequate funding
arrangement.

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Compensation Policy

15.

Return of Documents of Title

15.1

Security documents of title shall be returned to customer within 15 working

days of repayment of all dues by the borrower, including principal amount,

interest, EMI, costs, service charges, and all other amounts due. This is subject to
there being no outstanding under any other loan / overdraft / other financial
facility availed by the borrower from the Bank. Unreasonable delay on the part
of the Bank in returning such documents will lead to compensation at the rate of
Rs100/- per day to be paid to the customer.

15.2

For loss of property documents a compensation not exceeding Rs. 25000/-

subject to actual expenses towards release of advertisements, lawyers fees and

incidentals, if any, thereto will be paid.
15.3

In cases of loss of property documents, in addition to the above, Bank will

compensate a lumpsum amount of Rs 5000/- for loans upto Rs 20 lakhs and Rs

10,000/- for loans above Rs 20 lakhs on account of hardship to the customer.
16.

ATM Failure

16.1

Bank would reimburse the customer, the amount wrongfully debited on

account of failed ATM within a maximum period of 7 working days from the
receipt of the complaint. For any failure to re-credit the customers account
within 7 working days from the date of receipt of the complaint, Bank shall pay
compensation

of

Rs.100/-

per

day

to

the

aggrieved

customer.

This

compensation shall be credited to the customers account automatically

without any claim from the customer, on the same day when Bank affords the
credit for the failed ATM transactions.

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Compensation Policy

16.2

Any customer is entitled to receive such compensation for delay, only if a

claim is lodged with the issuing Bank within 30 days of the date of the
transaction.
17.

Compensation in case of frauds (other than Internet Banking)

17.1

The following is laid down for all the fraud cases other than those

pertaining to Internet Banking Frauds. Typically these frauds are of the following
types:

Lottery

Job Rackets

Transfer of Funds towards emails received.

(a) In case of any fraud, if the Bank is convinced that an irregularity / fraud
has been committed by its staff towards any constituent, the branch
should at once acknowledge its liability an pay the just claim.
(b) In case where Bank is at fault, the Banks shall compensate customers
without demur,
(c) In case where neither the Bank is at fault nor the customer is at fault, but
the fault lies elsewhere in the system, the Bank will compensate the
customer upto a limit of Rs 10000/- . Such compensation would be paid
only once in the lifetime of an account / Customer.
17.2

If the Bank has received any fraudulent funds into the account of any of

its clients, the amount, subject to availability of balance in the account, shall be
paid back to the remitting Bank / remitter after completing a process of internal
investigation and after getting a letter from the client / indemnity from the
remitting Bank. In case a freeze on such amounts are marked consequent to

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Compensation Policy

instructions by investigating authorities, payment will be made after the

investigating authorities instruct the Bank to do so.
18. Reversal of Erroneous/Unauthorised/Fraudulent debits arising on Internet
Banking (Vishing/Smishing) related transactions
18.1

For cases where the Bank has acted in good faith, in normal day to day

conduct of business, but the customer has either acted fraudulently or

inadvertently compromised his Internet Banking security details (example: ID,
passwords, date of birth, mothers maiden name etc) or acted without
reasonable care (which includes not taking steps to protect computers from
hackers) Bank/Customer will be bound by Clause number 9.7 of the revised
code of commitment by Banking Codes and Standards Board of India which
stipulates that Banks are not responsible for losses caused by a third party when
customers have acted without reasonable care.

18.2

However, in exceptional circumstances Bank may compensate the

customer for cases where the customer has not compromised any personal and
confidential security parameters required to complete an Internet banking
transaction and based on deliberation of various facts such as:
a. Justification given by the customer
b. Immediate or delay in reporting by the customer based on SMS alert,
account statement,mini statement, etc received by the customer
19.

Other areas of deficiencies in services

19.1 Where loan has been allowed against NSCs, KVPs, LIC policy and the
Branch after maturity of the instruments does not collect the proceeds of the
instruments in question from the concerned Post Offices/ LIC Offices, thereby
charging interest in the loan account is continued, excess interest so charged in
the loan account will be reversed to the customer immediately.

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Compensation Policy

19.2 In case of affecting reversal of excess interest charged in the borrowal

accounts due to non-adjustment of liquid securities like Fixed Deposits/
NSC/KVP/ LIC policy etc in time the concerned Branch will have to obtain prior
permission /approval from the controlling Regional Offices.
20.

Force Majeure

20.1

The Bank shall not be liable to compensate customers due to unforeseen

event (including but not limited to civil commotion, sabotage, lockout, strike or
other labour disturbances, accident, fires, natural disasters or other Acts of
God, war, damage to the Banks facilities or of its correspondent Bank(s),
absence of the usual means of communication or all types of transportation, etc
beyond the control of the Bank prevents it from performing its obligations within
the specified service delivery parameters.

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