Banking operations training

1. Shabelle Bank
30 April 2023
Banking Operations Training

2. Learning Objectives:
Participants will:
• Understand the intermediation roles of banks and other
financial institutions
• Understand banking operations terminologies to build self-confidence and profession
Understanding banking operations is a key requirement for all entry level staff of financial
institutions.
This course on basic banking operations has been designed to provide participants with the
knowledge and skills required for gaining general knowledge of effectively processing banking
transactions. They will also learn the control measures in order to eliminate failures in measuring
their subordinates performance appraisals.
• Understand the various banking products – their features and benefits to customers
• Understand banking operations control systems
• Appreciate their roles in working with other departments of the organization for effective

3. Banking
Deposit Trade Finance
Loan &
Advances
Remittance
Cash
Customer
Service
Clearing
Bancassurance &
Others

4. “In Banking Sector Value of
Operations depend upon the
product-quality as well as the
service quality model”.

5. WHAT IS CASH ?
 Cash is money in a physical form, such as notes and coins. It is the simplest, most
broadly accepted and reliable form of payment, which is why many businesses
only accept cash. While checks can bounce and credit/debit cards can be declined,
but cash in hand requires no extra processing.
 Inflow and outflow of the cash from the bank through many transactions is very
common since its main function is taking cash as deposits and lending it to the
people who needs it. So many day to day operations that are performed in bank
like depositing, lending, remittance, foreign exchange are directly related to cash.
So we can easily say that the reason for the existence of the bank is cash.

6. CASH MANAGEMENT IN BANK
In every bank there is a teller department that handles and manages the cash and keeps the record of the
cash and its daily cash transaction. Management of cash includes:
 Determination of optimum amount of cash in bank in order to maintain liquidity
 Prompt collection of cash and efficient disbursement of cash Implementing safety features as
follows:-
 By confirming the cash amount before receiving and giving
 By verifying cash is fake or not
 By storing cash in vault that has good security features
 By putting cash transaction under the surveillance of cc camera
 By hiring the armed security guards
 By adding the feature of alarm system to alert the nearby local police station

7. Deposit collection
 Bank deposit means the money placed into the banking
institutions for safekeeping.
 Bank accept the deposit from the public and mobilizes the
fund to productive sectors.
 Collection of adequate deposit is required for the efficient
and effective operations.
 Lending power of a bank depends on the amounts they can
borrow by way of deposits.

8. Types of deposit account
Current deposit(Demand deposit):
 Maintained by the traders and businessman .
 No interest is paid.
 These deposits can be withdrawal at anytime by means of cheque.
Saving deposit:
 account is maintained by general public and non profit making organizations.
 Certain restrictions on depositors regarding number of withdrawals and the
amount to be deposited in given period.
 Interest is payable on certain frequency.

9. Fixed deposit:
 Payable on maturity.
 Fixed amount and interest rate.
 Interest paid in certain frequency i.e. monthly, quarterly or on maturity.
Call deposit:
 Hybrid deposit that means combination of current and saving deposit.
 Any amount can be deposited and withdrawn in a call.
 Interest on mutual agreement.
Recurring deposit:
 Fixed amount is deposited at a regular interval for a fixed term.
 Repayment of principal and accumulated interest is made at the end of the term.
 Targeted to the investors who want to deposit a fixed amount every month.

10. Payment Instruments
Cashier’s payment order (CPO)
C.P.O is an endorsable payment instrument issued up on
request of a customer for specific purpose; Such as to
participate in bid, to effect payment to government offices
mainly tax, etc. CPO’s is payment instruments that are
presented to the issuing branch either by the purchaser or
the beneficiary as case may be. When a CPO is prepared to
allow the order of the CPO to participate in auction, it is in
the name of the auction awarding organization. The
instrument is valid for six months.

11. Cheque
There are many ways to define a cheque .The following definitions are from banking
perspective.
A cheque is simply an order written by someone, a “drawer “ directing the bank, the
“drawee “ to pay a specified sum to the order of a certain named person(s),the “payee
“.The cheque also directs the bank to debit the drawer’s account by the amount of the
cheque .
A cheque is a customer‘s order to the bank to pay on demand a nominated sum of
money from their cheque account.
Characteristics of a cheque
There are three parties to a cheque;
- The drawer (who writes /signs the cheque)
- The payee (Who receives the money)
- The drawee (the bank the cheque is drawn on )

12. Features of cheques
A cheque bears the following elements across its face:
Name of the bank
Name of the branch
Date of cheque
Name of account holder and account number
Name of payee/beneficiary
Amount in words and figures
Cheque number
Signature of the account holder or Signatories

14. What is Customer Service ?
 Customer Service is the front desk of any organization. It is the main and most
important department which needs to deal with customer more than any
department in bank.
 The image and reputation of the bank depends upon effective functioning of this
department.
Excellent customer service can improve the bank’s ability to lure affluent
prospects, elevate the bank’s profitability, lower the bank’s operation costs, and
create greater customer loyalty.

15. Functions of CSD
 Answer participant questions, as well as question participants to obtain
full understanding of what information is being requested.
 Analyze customer needs and demand and try to fulfill those demands.
 Deliver qualitative services to customers.
 Promote bank products and services.
 Maintain and manage existing accounts.
 Capture new accounts.
 Respond to customer inquiries and resolve.
 Assist customers in depositing and withdrawing cash.
 Ensure best practices in rendering services to customers

16. Factors contributing to Excellent Customer Service
 Timeliness
 Attitude
 Empathy
 Ownership
 Active Listening
 Expertise
 Dependability

17. Key Skills
 Understanding bank procedures, products & Services
 Communicate well and help customer understand system
 Be patient & consistent
 Customer Appreciation
 Get Feedback
Benefits of Good Customer Service
 Increase profitability
 Lower bank operational cost
 Create customer loyalty.

18. Bank Guarantee
Letter of Credit

19. Bank Guarantee
Written obligation of the issuing bank
to pay a sum to a beneficiary on
behalf of their customer (applicant) in
the event that the customer doesn’t
fulfill his/her contractual obligation
agreed with the beneficiary or doesn’t
pay the beneficiary

20. Letter of Credit
 written commitment by a
bank issued after the
request by an importer
(applicant) that the
payment will be made to
exporter (beneficiary)
provided that the terms
and condition stated in
Letter of Credit be met

21. Daily Cash management
At the end of this topic trainees should be able to:
 Discuss the detail process in opening of daily cash
operation
 Enumerate the procedure in handling cash during
the day and closing of daily cash operations

22. Steps to follow at opening and starting of daily
Operations
 Chief Cashier
 A. Opens the vault and makes transfer of cash that will be needed for the day’s
operations jointly with the Accountant/CSS or Branch Manager;
 B. Transfers the amount of cash withdrawn from the vault against the denomination
through ‘Internal Cash Transfer;
 C. Distributes adequate physical cash in all kinds of denominations to the Tellers;
 D. Transfers all the required cash and petty cash to the Tellers through the system
separately;
 E. Hands over the cash box that was kept locked in the vault to each Teller;
 F. Balance the daily branch cash and records the movement of cash on cash register
book; and

23. Cont…
 Chief Cashier
 A. Opens the vault and Transfers cash to the Chief cashier’s
drawer box that will be needed for day’s operations jointly
Accountant/CSS
 Accountant/CSS
 B. Writes cash received from the Vault by denomination on
the bound book and makes the Chief cashier put his/her
signature on it as acknowledgment of receiving the cash;
 C. Approves the vault to Drawer box Transfer; and

24. Cont…
 Teller
 A. Collects the cash box from Chief cashier in the morning;
 B. Opens the cash box in front of Chief cashier to confirm existence of petty cash , together with
cash stamp;
 C. Collects cash from Chief cashier and checks all the complete bricks to ascertain that each one of
them contains 10 bundles and that all of them have been wrapped;
 D. Ensures that the signatures or the initials of the cash counter and the verifier have been affixed to
the bundle and counts carefully each notes of Birr 100 and 50 in front of Chief cashier;
 E. Verifies the amount of petty cash transferred through the system against previous day’s record
and accepts/rejects;
 F. Checks the amount of cash transfer through the system, accepts/rejects the ‘Cash transfer’ as
acknowledgment of receipt Cash receipt for the daily operation immediately; and
 G. Adjusts the date of the stamps before starting the day’s operations.

25. Request for Additional Cash Movement
 Teller
 A. Requests the Chief cashier the required additional cash movement;
 B. Collects the cash, counts and ascertains the correctness of the amount and the denominations thereof,
by comparing it with what was requested in front of Chief cashier; and
 C. Acknowledges the receipt of the cash by approving the cash movement through the system.
 Chief cashier
 A. Coordinates and supports the activities of the Teller and follows-up the balance through the system as
well as physically;
 B. Receives the message from the Teller when they need additional cash movement;
 C. Prepares the amount of cash requested by them after ascertaining actual need for big amount;
 D. Sends the required physical cash, and transfer the same amount of cash through the system; and
 E. Ensures the Teller has accepted through system immediately

26. Movement of Excess Cash in the Middle of Cash
Operations
 Teller
 A. Sorts the cash at hand into bundles, in accordance with denominations and
balances thereof;
 B. Hands over the cash to the Chief cashier, and transfers the amount of cash
through the system (Internal Cash Movement); and
 C. Ensures the Chief cashier has Approved (accepted) through the system
immediately.
 Chief cashier
 A. Receives the cash and counts it with help of the Cash office attendant assigned
on the cash table;
 B. Ascertains the correctness of the cash received in accordance with the
denominations written down;
 C. Acknowledges the receipt of the amount of cash by approving through the
system;

28. What is Remittance ?
The transaction of cash from one place to another simply is remittance. In
present context, remittance has been the integral part of retail banking and a
good source of income for banks.
Types:
 Inward or National Remittance
 Outward or International Remittance

29. Modes:
Bank draft, fax transfer, telegraph, SWIFT, Electronic transfer, Traveler’s
cheque, letter of credit, etc..
IMPORTANCE:
 Minimizes risk of travelling with huge amount of cash.
 Easy and prompt method of transferring money.
 Banks get certain commission while transacting cash.
 Banks get interest free funds to be collected.

30. Other Operating Functions
 Bancassurance
 Digital Banking
 Trade Facilitator
 Locker Facility

31. Bancassurance
It refers to selling of insurance products through the banking channels.
Benefits:
 Revenue and channel diversification
 Customer retention
 Increase in sales and profit volume
 Increase in non interest fee income
 Convenience
 Better product image

32. Digital Banking
INCLUDES ADVANTAGES
Payment Easy Access
Business Process Management Time Saving
Marketing Prompt
Increase Efficiency
Increase Income
Reduce Human Error

33. Trade Facilitator
Roles:
 Issue Term Loan
 Issue Letter of Credits
 Issuing Bank Guarantee
 Fund Transfer

34. Custodial Service
 Safeguards the customers’ securities
 Minimizes the loss from theft or other damages
 Interest free income

35. Operational Risk
 The Basel II Committee defines operational risk as, “Risk
of loss resulting from inadequate internal process,
people and system or from external events”.

36. Operational Risks Include
Basel II officially lists seven event types as operational risk factors
 Internal Fraud
(misappropriation of assets, tax evasion, intentional mismarking of
positions, bribery)
 External Fraud
(theft of information, hacking damage, third-party theft and forgery)
 Employment Practices and Workplace Safety
(discrimination, workers compensation, employee health and safety)
 Clients, Products, and Business Practice
(market manipulation, antitrust, improper trade, product defects, fiduciary
breaches, account churning)

37.  Damage to Physical Assets
(natural disasters, terrorism, vandalism)
 Business Disruption and Systems Failures
(utility disruptions, software failures, hardware failures)
 Execution, Delivery, and Process Management
(data entry errors, accounting errors, failed mandatory reporting, negligent
loss of client assets)

38. Internal Fraud
 Unauthorized Activity.
 Transactions not reported.
 Transaction type unauthorized.
 Mismarking of position.
 Theft and Fraud.
 Fraud/credit fraud/worthless deposits.
 Theft/extortion/embezzlement/robbery.
 Misappropriation of assets.
 Forgery.
 Insider trading.
 Money laundering.
 Willful blindness.

39. External Fraud
 Theft and Fraud.
 Theft/robbery.
 Forgery.
 Identity theft.
 Systems Security.
 Hacking damage.
 Theft of information (with monetary loss).

40. Operational Risk Management
Employee training.
Close management oversight.
Segregation of duties.
Employee background checks.
Procedures and process.
Purchase of insurance.
Exiting certain businesses.
Using new technologies (CCTV).