Introduction to Operational Risk Management for Bank Junior Officers in India

INTRODUCTIONTO
OPERATIONAL RISK MANAGEMENT
FOR
BANK JUNIOR OFFICERSBANK JUNIOR OFFICERS
BY
M.L.VENKATARAMAN

OPERATIONAL RISK MANAGEMENT
FOR JUNIOR OFFICERS

X BRANCH INCIDENT
Trickle Feed
Turns into
Tsunami
Foot Note :‘Trickle Feed’ is a program for automated bulk posting of
transaction entries in Core Banking System.

Sl No
Name of the Officer/
Employee
Desg Account No TOTAL Rs.ps
1 A E 99923277997123 35,973.00
2 B E 99900596458578 37,831.00
3 C E 99922667457075 30,874.00
4 D E 99937604747848 30,519.00
5 E E 99904871312858 24,292.00
6 F S 99914532553108 102.00
7 G E 99914596985812 71,460.00
8 H C 99915704562792 26,534.00
9 I E 99987154555978 60,916.00
10 J C 99907840269669 12,891.00
Z... Z..... Z......& so on Z......& so on
TOTAL AMOUNT 2,343,640.00
Foot Note: This is the list of credits to be posted to employees’ accounts.This data was provided by the Employer in an Excel sheet file

Name of the Officer/
Employee
TXN
TYPE
AC NO AMOUNT DESCRIPTION
A
1
99923277997123 54,023,277,998.00
By sal
B
1
99900596458578 64,000,596,459.00
By sal
C
1
99922667457075 64,022,667,076.00
By sal
D
1
99937604747848 54,037,604,749.00
By sal
E
1
99904871312858 64,104,312,859.00
By sal
F
1
99914532553108 54,014,553,109.00
By sal
G
1
99914596985812 54,014,596,813.00
By sal1 By sal
H
1
99915704562792 54,014,562,793.00
By sal
I
1
99987154555978 54,014,555,979.00
By sal
J
1
99907840269669 64,050,269,670.00
By sal
Z Z
Current A/C
54
12345678901 952,814,66,16,468.00 To Salary paid
Footnote:The Excel sheet had a hidden column (containing a formula - for Employer’s use).This fact was neither disclosed by the
employer nor observed by the Bank staff.As a result, when the program was run, it generated a text file in which the amount was
exponentially inflated to thousands of crores ! The text file was processed by CBS server and all accounts were credited with inflated
amounts.The error was noticed during End of Day activities, and immediately thereafter, rectificatory measures were initiated on war
footing. This event was a‘near-miss’ event.

WHY DO THINGS GO WRONG ?
? ? ?? ? ?

WHY DO THINGS GO WRONG ?
MURPHY’S LAW :- "If there are two or more ways to do something,and
one of those ways can result in a catastrophe,then someone will do it."
“If something can go wrong,it will”.
PARETO’S PRINCIPLE :- “ 20 : 80 Rule”PARETO’S PRINCIPLE :- “ 20 : 80 Rule”
“The Law ofVital Few”.
80% of the effects come from 20 % of the causes.
80% of business come from 20% of branches.
80% of business come from 20% of products.
80% of profit come from 20% of customers;
80 % of the losses have come from 20 % of the events

WHAT HAPPENS WHEN
SOMETHING GOES WRONG ?
? ? ?? ? ?

WHAT HAPPENS WHEN
SOMETHING GOES WRONG ?
LOSS – Monetary Loss
Actual Loss (Loss incurred as direct consequence)
Potential Loss (Additional Loss on account of Litigation,
Investigation, Disciplinary Proceedings etc.,)
Near Miss (Loss recovered immediately)

BANK’S LOSS DATA OVER THE YEARS
EVENT
->
Total
Internal
Fraud
External
Fraud
Employment
Practices
&
work place
safety
Clients,
Products
&
Business
Practices
Damage
to
Physical
Assets
Business
Disruptions
&
System
Failures
Execution,
Delivery
&
Process
Managemen
t
YEAR
YEAR 1-2 X X X X X X X X
Grand Total X X X X X X X X
FootNote: Maximum losses suffered by most Banks are due to FRAUDS.

– AMOUNT IN FRAUDS
Financial
Year
External Frauds Internal Frauds Grand Total
No. of Frauds Amount No. of Frauds Amount No. of Frauds Amount
YEAR 1-2 X X X X X X
Grand Total X X X X X X
FootNote: Maximum frauds are Advances related.

ANALYSIS OF FRAUDS
Type of Frauds Amount in Rupees % share in Total Amount
General Advances (TL, CCR) XXXXXX 16.13
Housing XXXXXX 6.94
Vehicle Loan XXXXXX 0.28
Bill Discounting XXXXXX 72.75
Sub Total Advances XXXXXX 96.09%
Cheques Payment frauds XXXXXX 1.47%
Govt Business XXXXXX 1.07%
BGL A/c Frauds XXXXXX 0.88%BGL A/c Frauds XXXXXX 0.88%
Cash Related XXXXXX 0.25%
Misappropriation XXXXXX 0.12%
Cheque Collection XXXXXX 0.06%
Clearing XXXXXX 0.03%
ATM Fraud XXXXXX 0.01%
JD, Pension XXXXXX 0.02%
Total XXXXXX 100.00 %
Footnote : A whopping 96 % of losses are advances related.
Bill Discounting frauds constitute 72.75 % of the total losses.

RISK - in general
WHAT IS RISK?

RISK
Risk is derived from Italian word‘Risicare’meaning‘to dare’
Risk is the potential that a chosen action or activity
(including the choice of inaction) will lead to a loss (an
undesirable outcome).
A probability or threat of damage, injury, liability,A probability or threat of damage, injury, liability,
loss or any other negative occurrence that is caused by
external or internal vulnerabilities, and that may be
avoided through pre-emptive action.
A Risk is a potential problem, a situation that, if it
materialises, may adversely affect the business.

RISK
Basel Committee defined risk :
as the probability of the unexpected happening.as the probability of the unexpected happening.
The probability of suffering a loss
Footnote: The above definitions are too vague to explain to common people !!

RISK
In Information Security, Risk is
defined as "the potential that a
given THREAT will
exploit VULNERABILITIES ofexploit VULNERABILITIES of
an ASSET or group of ASSETS
and thereby cause HARM to the
organization".
Foot note :The above definition is simple, easy to understand and to explain !!
This can be told as a story – a sheep story !

SHEEP STORY
Foot note :There was a sheep farm in which hundreds of sheep were being reared. It was adjacent to a forest full of wolves.
To protect the farm, a shepherd was appointed and he was provided with a German Shepherd dog. The farmland was
protected by a high fence. Initially, everything went well. But over a period of time, the Shephered and his dog became lax.
The fence was damaged in many places and was not repaired. One night, the wolves entered the farm through a hole in the
fence, attacked the sheep and devoured them. Next day, the shepherd was shocked to find all his sheep killed.

ASSET
An Asset is any tangible or intangible thing
that has value to an organization.

THREAT
A threat is anything (Manmade or Act of
Nature) that has the potential to cause harm.

ASSETS SHOULD HAVE CONTROLS
Controls are safeguards or countermeasures to
protect the assets
.

CONTROLS REDUCE THE RISK OF ASSET
LOSS
Foot note :A political cartoon - Govt. using CBI to control dissident allies. !

VULNERABILITIES
A vulnerability is a weakness in the asset itself or
in the Controls.The weakness could be
exploited and harmed by one or more threats.

EXPLOIT
To Exploit is to take unfair advantage of a person or
situation, especially for personal advantage, causing harm.

HARM - LOSS
When vulnerabilities are exploited, assets are
stolen/damaged, resulting in loss of assets and
financial harm.

What are a Bank’s
- Assets
- -Threats
- Controls
RISK FOR BANK
- - Controls
- -Vulnerabilities
- &
- Harm

Threats
Foot note: Hackers, fraudsters, dacoits, terrorists, conmen etc., - even customer dissatisfaction can lead to loss
– both financial & reputation

HOWEVER, THE BITTER TRUTH IS :-

Threats - Acts of God
(Fire, lightning, storm, earthquake, tsunami, floods)

CONTROLS - The Shepherd
(The Management Team – Top, Senior, Middle and Junior executives)

CONTROLS – Watchdog
(CLOCKWISE) RISK MANAGEMENT DEPT; COMPLIANCE DEPT; VIGILANCE DEPT; AUDIT DEPT

Controls
.
BCSBI FIMMDA NHB
CDSL IBA NSDL
CCIL IRDA PFRDA
FEDAI NABARD SEBI

Vulnerabilities
(Not following the laid down procedures, heavy work burden, Unbearable pressures from various
quarters, loopholes in systems, acts of blunder )
...

Vulnerabilities - 5 TYPES OF CONTROL BREAKDOWNS – as per ‘RBI’
1. Management’s Inattention & Laxity in Control Culture;
..

Vulnerabilities - 5 TYPES OF CONTROL BREAKDOWNS – ‘RBI’
2. Inadequate Recognition and assessment of Risks.

3. Absence of Key Control Structures and activities

4. Inadequate/ineffective Audit.
..

5 . Inadequate communication.

Harm (Bank goes into liquidation)

Harm (When a Bank goes into liquidation, depositors are unhappy, borrowers are happy,
Competitor Banks feel relieved, but robbers are angry !)

So, Risk is ……….
"the potential that a
given THREAT will
exploit VULNERABILITIES ofexploit VULNERABILITIES of
an ASSET or group of ASSETS
and thereby cause HARM to the
organization".

TYPES OF RISKS
Capital risk,
Country risk,
Default risk,
Delivery risk,
Economic risk,
Exchange rate risk,
Interest rate risk,
Liquidity risk,
Strategic Risk
Reputation Risk
Regulatory Risk
Legal risk
Liquidity risk,
Market Risk
Operations risk,
Payment system risk,
Political risk,
Refinancing risk,
Reinvestment risk,
Settlement risk,
Sovereign risk,
Underwriting risk.

4 Steps to Risk Management
Risk management is a discipline that enables people and
organizations to cope with uncertainty by taking steps to protect
its vital assets and resources.
1) Risk identification - identify risks as yet unidentified,
uncontrolled and/or underestimated risksuncontrolled and/or underestimated risks
2) Risk monitoring – monitor risks that matter, changes in
risk, and risk management process.
3) Risk measurement – measure likelihood and impact of
risks and changes in risk levels
4) Risk mitigation -initiate efforts to mitigate the risks to
stay within acceptable risk levels

4 Steps to Risk Mitigation
1)Avoidance (eliminate,
withdraw from or not
become involved)
2) Reduction (optimize –
mitigate) by building
appropriate controls

4 Steps to Risk Mitigation
3) Sharing (transfer –
outsource or insure)
4) Retention (accept and
budget)

Unconventional approaches – NOT RECOMMENDED FOR BANKS !
The ostrich approach: Ignoring all risks, or
pretending they don’t exist.
The denial approach: Recognizing that
certain situations may cause problems for your
business, but refusing to accept that thesebusiness, but refusing to accept that these
situations may occur.
The prayer approach: Looking to God to
solve all your problems or to making them
disappear

OPERATIONAL
RISK INRISK IN
BANKS

Basel Committee Definition
“The risk of Loss
resulting from Inadequate or Failed
Internal Processes,
Operational Risk - Definition
Internal Processes,
People,
Systems,
External Events.
(excluding strategic and reputation risk)”

Examples of Operational Risk events
Causal Factor Examples
INTERNAL PROCESS KYC guidelines not followed leading to frauds
Delays in settlement of funds (Govt/RBI) leading
to penalties / penal interest
PEOPLE Lack of integrity – leading to internal frauds
Data entry errorData entry error
Employee disputes (compensation claims)
Inadequacy of skill
SYSTEMS System downtime due to communication network
/ power failure resulting in loss of business hours
and Hardware / Software issues
EXTERNAL EVENTS Natural disaster (Flood / Earthquake)
Fire
Riots & Vandalism; External Frauds

Why Operational Risk is becoming more
complex and substantial - as per RBI
Deregulation & Globalisation
Highly AutomatedTechnology.
Emergence of E-Commerce.
Emergence of Banks acting as very large volume
service providers.service providers.
Outsourcing
Large scale acquisitions, mergers, de-mergers and
consolidations
Risk mitigation measures themselves (e.g.collateral,
derivatives,netting arrangements and asset securitisation)
produce other types of operational risks.

Objectives of Risk Management
To Reduce Impact and Probability of Loss Events
To Improve Controls and Mitigate Risks
To Create Awareness among staff
To Comply with Regulation
To Improve Quality of Services/Products/ProcessesTo Improve Quality of Services/Products/Processes
Minimizing losses & customer dissatisfaction due to
failures in processes by putting in place mitigating
measures.
To Have Better Capital Management

8 BUSINESS LINES – as per BASEL
1. Corporate Finance;
2. Trading and Sales;
3. Payment and Settlement;
4. Retail Banking;4. Retail Banking;
5. Commercial Banking;
6. Agency Services;
7. Asset Management; and
8. Retail Brokerage.

7 RISK EVENTS - as per BASEL
Internal Fraud :- Losses on account of intentional misreporting of positions,
employee theft, and insider trading on an employee’s own account, etc.
External Fraud :- Losses on account of robbery, forgery, kite-flying, and damage
from computer hacking, etc.
Employment Practices andWorkplace Safety :- Losses on account of
workers compensation claims, violation of employee health and safety rules, organised
labour activities, discrimination claims, and general liability, etc.
Clients, Products and Business Practices :- Losses on account of fiduciaryClients, Products and Business Practices :- Losses on account of fiduciary
breaches, misuse of confidential customer information, improper trading activities on the
bank’s account, money laundering, and sale of unauthorised products, etc.
Damage to Physical Assets :- For example, terrorism, vandalism, earthquakes,
fires and floods, etc.
Business Disruption and System Failures :- Losses on account of hardware
and software failures, telecommunication problems, and utility outages, etc.
Execution, Delivery and Process Management :- Losses due to data entry
errors, collateral management failures, incomplete legal documentation, and
unauthorized access given to client accounts, non-client counterparty mis-performance,
and vendor disputes, etc.

RISK ORGANIZATION STRUCTURE – a sample

Three Lines of Defence
3rd Line of Defence2nd Line of Defence1st Line of Defence
Business Groups
Circle Office
Network
Modules
Risk
Audit
Compliance
Define, Oversee, Monitor, Facilitate
and Guide
Risk appetite & strategy
Risk management policy
Risk management methodologies
Design Develop, Execute and Monitor
Risk Reporting
Risk capital calculation & allocation
Responsibilities
Execution and Quality
Assurance
Risk appetite & strategy
Risk management policy
Risk management
methodologies
Provision of independent and
Objective Assurance
Provision of independent and objective
assurance over the design and
effectiveness of controls operating
in the 1st and 2nd line of defence
.

Operational Management Risk Framework (ORMF)
The Basel Accord requires a bank to establish an operational risk framework for risk identification,
measurement, monitoring and management.
Risk and Key Loss DataStrategic Risk
Identification & Assessment Monitoring Measurement
Operational Risk Framework
Organizational Structure, Governance Structure, Policies & Procedures,
Risk Appetite
Aligning Business Unit’s Objectives with
ORM requirements / efforts
Risk and
Control Self
Assessment
(RCSA)
Key
Risk
Indicators
(KRI)
Loss Data
Manage-
ment
(LDM)
Strategic Risk
Assessment
Business Initiatives
Regulatory and Economic Capital Computation & Use Test
Risk Reporting
Identification & Assessment
Monitoring Measurement

Operational Risk Measurement System
(ORMS)
1. It has a Statistical Model to estimate the capital
for Operational Risk;
2. It has aValidation process to validate the model
used to compute the capital for Operationalused to compute the capital for Operational
Risk;
3. More importantly, the Operational Risk
Management Solution (ORMS) will capture,
compute and report the Operational risk levels
to Senior Management as a daily Dashboard .

O R Management process
Risk identification -- through RCSA (Risk &
Control Self Assessment) identify risks as yet
unidentified, uncontrolled and/or underestimated risks
Risk monitoring – through KRIs (Key Risk
Indicators), monitor risks that matter, changes in risk,Indicators), monitor risks that matter, changes in risk,
and risk management process.
Risk measurement – through LDM (Loss Data
Management) measure likelihood and impact of risks
and changes in risk levels
Risk mitigation -- initiate efforts to mitigate the
risks to stay within acceptable risk levels

Control & Mitigation of Operational Risks
Internal Controls and Systems
Training, Placement and Rotation of staff
Fraud Monitoring
Disciplinary Proceedings system
Risk focussed InternalAudit
InsuranceInsurance
Business Continuity Management
IT Security
Physical Security
Outsourcing
Approval of new products/services; changes in existing products/ services /
processes
Best Practices.

KEY RISK INDICATOR (KRI)
Key Risk Indicators are early warning signals, which enable
management to monitor and mitigate operational risks that
are reaching beyond acceptable levels.
KRIs are developed and used over a period of time to assess
potential losses arising out of day to day operational
activities.activities.
KRIs indicate when the RiskAppetite and RiskTolerance are
reached / breached. (Risk appetite is the acceptable level of loss that an enterprise can take in
the normal course of business, keeping in mind its business objectives and resources. Risk tolerance is the
maximum level of loss above its risk appetite that an enterprise can withstand before going bust).

Key Indicators – KPI, KCI and KRI
Key Indicators are an effective means to measure the health
of the organization and to identify potential changes in the
internal and external environment.
Always measure the health of a branch from 3 perspectives:-

Key Performance Indicators
Branch :A branch
Branch Manager : Sri. XYZ
Period of Incumbency : 10 months
No. of working days : 261 days
Staff : BM, 2 SWOs.
Growth in Levels of Advances : 695.46 lacs from 21.00 lacsGrowth in Levels of Advances : 695.46 lacs from 21.00 lacs
Gold Loans : 528.39 “” from 6.09 “”
No. of Loans sanctioned : 736 - Gold Loans 643 a/cs
No. of Loans closed : 115 - Gold Loans 108 “”
Position in the Gold Loan Campaign II : nth place
Growth in advances : 3211.71 % Gold loan 8576.35 %

KEY CONTROL INDICATORS
Whether loans sanctioned are within branch discretion?
Whether Control Returns have been submitted ?
Whether CR acknowledgements have been obtained?
Whether loan documentation is executed as per instructions?
Whether advance value is correct ?
Whether gold apprisal done by an approved valuer?Whether gold apprisal done by an approved valuer?
Whether interest subvention is being claimed?
Whether KYC documents, RTC/Khata/Patta/NREGA
card/Certificate fromVillage Accountant (VA) obtained?
Whether interest rate is as per instructions ?
Whether gold ornaments are kept in joint custody in strong room?

KEY RISK INDICATORS
Sudden spurt in Advances by 3211.71 % & Gold loan by 8576.35 %
Single Officer branch, with 1 Head Cashier and 1 SWO. No sub staff. No Armed
Guards.
Manager himself is the Sanctioning Authority + Joint Custodian + Opens loan
A/cs in CBS. No segregation of duties.
Competitor Bank already well established in the village since 1960s.
Village has 1097 households with a population of 5548 (2010 census).Village has 1097 households with a population of 5548 (2010 census).
736 loans disbursed; 115 loans closed ; in about 10 months time.
Gold Loans o/s Rs.5.28 crores and the value of gold > Rs. 5. 28 cr.Whether the
branch has sufficient storage space in Strong Room ? ; whether insurance cover is
available (over and above Rs. 2.25 crores available under Banker’s Indemnity
Insurance) ?
Whether interest rates are correct ? Is there any interest loss ?
Whether security arrangements are available? Atleast CCTV; Nearest Police
Station ?

GROUP EXERCISE :
Read the Operational Risk Stories given to your team. Discuss about
the operational risks you notice in the story.
You should place yourself in the position of Ms. Praveena / Mr.
Vikram Kennedy and tell the audience how you would deal with theVikram Kennedy and tell the audience how you would deal with the
situation to prevent such risks.
DISCLAIMER :ALL STORIES ARE BASED ON MY
EXPERIENCE. ALL NAMES & PLACES ARE FICTIONAL.

Disclaimer : All are stories based on my experience- Dramatised but real. All
names and places are fictional.
Individual / Group Exercise : Read the stories and discuss the operational
risks that you have noticed in them and how you will deal with them.
(Also, You are encouraged to classify the events under the BASEL Matrix of
8 Business Lines X 7 Risk Events)
----------------------------------------------------------------------------------------
1. Corporate Banking - Story of Sri. Vikram Kennedy.
2. General Banking, Retail Advances & IT related – Stories of Ms. Praveena.
----------------------------------------------------------------------------------------------------------------
STORIES IN OPERATIONAL RISK IDENTIFICATION –
CORPORATE BANKING (HIGH RISK)
Story of Sri. Vikram Kennedy
-------------------------------------------------------------------------
Excerpts taken from the Diary of Sri. Vikram Kennedy, Assistant General Manager
May 12, 2009
What I did on arrival :-
I was feeling fresh and excited even after a long journey from Mysore to Bangalore to Mumbai. I
was feeling elated to assume charge as Asst. General Manager for one of the prestigious branch of
the Bank after my recent promotion. As I entered the Malabar Hills Branch, I was struck by the
rich ambience of the branch, and I couldn‟t help comparing the new branch with my previous branch,
which was always crowded with all sorts of people, with a very high decibel level. There were
hardly any customers sitting in the banking hall, and soft music was being piped through the
speakers.
I went to the Chief Manager‟s cabin and introduced myself as the new AGM for the branch. The
CM immediately got up, shook hands and welcomed me. He showed me my Cabin and requested me
to occupy the AGM‟s Chair. As the word spread, I could see staff members talking animatedly
about the arrival of the new AGM. The CM took me around the branch, and introduced all staff
members one by one, including the Sweeper, the temporary peon cum chai-wallah, and the Contract
Armed Guards. I took care to listen and get acquainted with each and every one in the branch. I
asked them personal questions about their families, their native place, their total service in the
Bank, the work that they were doing in the branch, their previous branches etc., In the meanwhile,

CM had arranged for Hot Jilebis, Hot Samosas and Hot Tea. Seeing that there were no customers
in the branch, I decided to address the staff members extempore. I introduced myself and spoke
about my previous branches. I told them that I had worked in various parts of Karnataka and that
the present assignment is my first outside Karnataka. I admitted that I had not worked in a metro
branch, nor exposed to forex business earlier. I briefly spoke about the high expectations that
the Top Management has about the branch, and appealed to all staff members to extend their full
co-operation and to work as a team to achieve the goals. I assured them that they can meet me
without any hesitation for any business issue at any time. I was overjoyed when the staff
reciprocated by pledging their co-operation. The Special Assistant said the staff members are now
happy to work under a new, friendly, approachable, helpful AGM.
What I learnt about the branch on the first day :-
Malabar Hills branch was opened in 1980. It had a slow and steady growth till 2005, when Mr.
Gaonkar took over the branch as Chief Manager. He changed the fortunes of the branch and
doubled the business within a year. The turnover of the branch crossed 500 crores and the branch
was upgraded to AGM scale. He was promoted as AGM and transferred. The next AGM in 2008 was
Mr. Ravi Tandon. He had to face tremendous challenges viz.,
a) to maintain the high growth tempo of the predecessor in business development, especially
when the economy was facing severe downturn all over the world.;
b) increased competition from International Banks who opened branches in the vicinity;
c) sudden transfer of Mr. Raghuvir Shenoy , Manager who was an expert in Forex; and Mr.
Dwarakanath, Manager (C&I Advances) back to Karnataka for mandatory semi-urban
assignments.
d) posting of a Chief Manager who had no experience in credit or forex; and posting of 2
Asst. Managers, who had just completed their probation.
e) M/s. SIBA Fritz Iron & Steel Ltd., shifted all their accounts to Citibank in compliance
with their HQ instructions, hitting the branch both in deposits and advances.
f) During the interim period when the new incumbents were taking charge of their desks,
there was lot of confusion due to their lack of skills and experience. Many longtime Forex
customers became impatient and agitated, as they were not getting the excellent service as
earlier. Some of them left the branch for other Banks.
Mr. Tandon was a task master and had an aggressive management style. He kept people on their
toes and was intolerant of difference of opinions. He had given budgetary targets for the Manager
(Advances) for “P” and “SIB” advances, and cross selling, and monitored his achievements on a daily
basis. The “C&I” segment was looked after by him personally. As he went about business
development in an aggressive way, there were rumours that rules and regulations are being
overlooked, systems and procedures are not being followed, and that compliance to Audit has taken
a back seat.
Business Level when I took over :-
Deposit level : Rs. 56.90 Crores
Advances level : Rs. .
Profit : Rs. . “
Non Performing Assets (NPA) : Rs. Nil
Advances Under Collection (AUC) : Rs. Nil

What I learnt about the Branch Set up :-
The Branch has 1 Chief Manager, 1 Manager for advances, 1 Deputy Manager for Forex, 1 Asst.
Manager for System Administration, and 1 Asst. Manager for Accounts and Miscellaneous work.
There were 3 Award staff including 1 Special Assistant, and 1 sub staff. Total 9, including me.
Chief Manager Mr. Shivaswamy told me :- I am entrusted with overseeing all advances,
Forex and Trade Finance; I am the Relationship manager for corporate accounts; I attend
consortium /MBA meetings; I monitor Review/Renewal of accounts; I Attend to various audit
requirements and audit compliance; monitor followup of advances; and oversee overall
administration of the branch. I have good experience in general advances and branch
administration, but I lack skills and experience in Forex and Trade Finance. I need training in these
areas. I am not comfortable with computer systems.
Manager (Adv) Mr. Anand Kini told me :- I look after all activities related to advances viz.,
Pre and Post sanction inspections, Appraisal, sanction, maintenance, review, renewal, recovery, legal
proceedings etc., I do marketing of our loan products and Business Development. I am
overburdened with workload. I had earlier worked in small branches with limited exposure to
advances and no exposure to Forex at all. I am very busy in my department that I did not find time
to learn about forex and trade finance.
Deputy Manager (Forex) Mr. Suhas Bhide told me :- I look after Foreign Inward/Outward
remittances; Issue of inland/foreign Bank Guarantees and LCs; discounting of bills under
Inland/foreign LCs; Collection of Export/Import Bills ; Followup; I was recently promoted, but
retained in the same branch; I have completed 2 years service in the branch; I am overburdened
with workload; I am the only officer who can attend to forex business; I am not formally trained in
Forex but learnt the routines from my senior; I need formal training in Forex and Trade Finance, so
that I can get knowledge of provisions of various Acts.
Asst. Manager (systems) Mr. Gopal Reddy told me :- I look after system administration of CBS
and EXIMBILL; I trouble shoot all IT problems at branch. I do EOD & BOD. I give printouts and
reports to D M (Forex) whenever he requires it. I also help him in sending and receiving SFMS
messages.
Asst. Manager (Accounts) Mr. Pradeep Kulkarni told me : I look after all accounts, deposits
and deposit loans. I help Manager (Adv) in DOSCIS, BASEL II, P Report, MIS reports and all
miscellaneous work.
The Special Assistant and the two clerks help in clerical routines. There is no formal Office Order
specifying the work allotted to various staff. However, all of them carry out the work as and when
allotted to them and they have been doing the same work year after year. The industrial relations
in the branch is good. The clerical staff are quite efficient and co-operative, don‟t waste time,
finish their work by 4.45 pm and leave immediately to catch their trains.

What I learnt about the way things work in the branch :-
SIB advances, and P Segment advances :- The Manager (Advances) would apprise the loan
proposals and after observing all formalities, sanction the loan and put up the Control Return to the
Chief Manager/ AGM for noting. Proposals beyond his discretionary powers would be sanctioned by
CM and noted to AGM. Above CM‟s discretionary powers, the proposal would be recommended by
him and sanctioned by AGM and the Control Return would be sent to DGM of the Region.
Forex & Trade Finance :- all the inward/outward remittances would be carried out by the Deputy
Manager (Forex) under his powers. Beyond his powers, the transactions would be referred to
CM/AGM for passing. In respect of bills, all proposals would be put up by the Desk Officer to the
Chief Manager, who would recommend for sanction/approval to the AGM. After sanction, control
returns would be sent to the Controller viz., DGM of the Region, once in a month.
SFMS messages :- would be prepared by the Asst. Manager and passed by the Deputy Manager.
There was only one PC for EXIMBILLS and one PC for SFMs, both of which were near the Deputy
Manager. SFMS messages would be sent and received by the Asst. Manager. Only the Asst.
Manager, the Deputy Manager, and the AGM had access rights to the application. Due to No one
including the Chief Manager had access to the SFMS system. Messages sent and received were not
recorded, as they are readily available in the system.
EXIMBILLS: - Branch had faced several problems in the software as well as in the Hardware from
the beginning. The EXIMBILLS server crashed once. Subsequently, the branch has discontinued
EXIMBILLS and continued with manual ledgers. Various returns and reports are compiled manually.
The People whom I met on the first day :-
Mr. Natwarlal Dani :- MD of the company M/s. Sneha Global Impex pvt. Ltd., which has a LC bill
discounting facility limit of Rs. 75 crores sanctioned by the Branch, Packing Credit Limit of Rs. 10
crores and Non LC Bill Discounting Limit of Rs. 12 crores sanctioned by ZOCC. He was accompanied
by Vice President (Finance) who is a qualified Chartered Accountant, Company Secretary and MBA
in International Business. Mr. Natwarlal requested to increase the LC Bill discounting facility to
Rs.100 crores. When I said it has to go to Head Office for sanction, the CA said that as per RBI
directives and Bank‟s delegation of discretionary powers, the Branch Head has unlimited
discretionary powers for bills backed by LC. When I told him that ZOCC had sanctioned the other
two limits, and once a limit is sanctioned by a higher authority, any further increase in exposure
should be referred to the higher authority, the CA pointed out that such provision is not there in
Bank‟s circular instructions, and that in any case, LC backed bills are exempted by RBI. He also
suggested fixing a suitable limit for M/s. Deepa Exim Pvt. Ltd., another company with the same
directors, to overcome policy restrictions. He said the AGM can sanction advances falling within his
discretionary powers to various concerns of a group independently. Mr. Dani said he had introduced
the branch to several of his friends and business colleagues because of the excellent service
provided by the branch. Many of his trade partners have began doing bill discounting business with
this Bank instead of other Banks.

Mr. Omik Jain, MD of M/s. Oorvee Cotton spinning Mills Pvt. Ltd. The elderly man came in person
to get acquainted with the new Branch Head. He said he has been banking with this Bank since more
than 40 years, and that he had availed Working Capital limit of Rs.20 crores and Term Loan Limit of
25 crores recently. He claimed that his account was one of the oldest and well conducted account
in the Bank and that he knows the Bank MD from his probationary period! However, he had
suffered losses recently in the cotton crisis of 2008, and had to write off Rs. 40 crores as on
31/3/2009. His proposal for restructuring with enhanced limits was turned down by HO, as there
was blatant diversion of funds with an ulterior motive to defraud the bank. Fearing a possible
criminal complaint by the Bank to the CBI, he has come forward with a compromise offer to pay the
entire dues within 6 months, requesting waiver of accrued interest of Rs. 5 crores. He wanted an
expedited settlement.
Mrs.Banhi Bawa :- Proprietrix of M/s. Shubh Home Builders, along with Mr. Dasgupta, the
Financial Consultant cum Home Loan Marketing Agent for various Builders & Developers. Mr.
Dasgupta claimed that he was instrumental in getting the entire project with 140 flats (4 flats x 7
storeys x 5 blocks) of M/s. Shubh Home Builders, to the branch for Housing Loans. He praised
Manager (Adv) for his wholehearted support to the project. Mrs. Bawa said that, in the first three
blocks, work has progressed to the 4th floor, and foundation work has commenced for the other
two blocks. She thanked the branch for releasing 90 % of the loan amount for the first three
blocks in one shot. She requested to release Rs. 15.12 crores (90 % of the loan amount for the
other two blocks) also immediately, so that the work can progress smoothly. I told her that I need
some time to settle down and will definitely do the needful at the earliest. She said she had earlier
helped the branch in getting government deposits, as her brother is in Thane Municipal Corporation.
She promised to give some more short term deposits. She said she has invested substantially in
SBI LIFE individual policies, and enquired whether any new scheme has come up as she wants to put
her savings in some good ULIP with good returns.
Mr. Srinivasan, Partner of Vasan & Singhania Chartered Accountants :- Mr. Srinivasan
introduced himself as the Concurrent Auditor for the branch. He said he is on the panel of 3 more
banks and that he had been specialising in various Bank audits (Concurrent, Statutory, Revenue,
expenditure and Information Systems Audit) for more than a decade. He introduced Ms.
Aishwarya, who is doing articleship in his firm. He said Ms. Aishwarya will come to the branch
every day in the afternoon and carry out all the tasks entrusted to her by him.
Later, after he left, I asked her what all things she would verify and how she would go about it.
She said she is new to banking work, and that the previous AGM was kind enough to tell her what
are the areas she must audit and what are the issues that she must report etc., She said she will
update the CA on weekly basis and that he would visit the branch only if there is a need for his
personal appearance (like today). I asked her what are the important concern areas that should be
monitored from the audit angle. She said everything is fine, no problem.
Mr. Prabhu Dutt, DGM of Western Region :- The DGM called me and informed me that he would
be visiting the branch after lunch. He said he is passing by, and would like to meet me on the first
day of reporting. He said his quarterly inspection of the branch is overdue and so, he would like to
get it done with. He instructed the CM to compile and keep in readiness the Controller‟s Visit
Report, as he does not have much time. After lunch, DGM called on the branch.
The DGM went through the Controllers‟ Visit Report. He asked for the VVR reports and irregularity
reports and verified them. He told me that there is an irregularity of Rs. 18.83 crores in M/s.

Sneha Global and asked me to regularize at the earliest. I called Mr. Bhide and asked him for the
latest update. He said one bill of Rs.5.60 crores has realised today and that he would be passing
the entries shortly. He said bills usually get realised 45-75 days after the due date, and that there
is no problem, as RBI permits time upto 180 days. He said even discrepant bills, for which the
foreign banks have sent discrepancy messages through SWIFT, have been paid albeit with a delay.
Before leaving, DGM wanted to send an urgent letter to Bangalore. I asked the peon to send the
courier to my cabin, as soon as he comes. The peon told me that the courier boy will come only if we
call him, as there are very few mails for dispatch on daily basis. What about DHL, SkyPak, Fedex ?
The peon told me that all the foreign/local bills are handed over to the customers themselves, who
will forward them to the foreign banks/drawee banks at their own cost on the same day. Only one
quarrelsome forex customer, who will send complaints to Head Office at the drop of a hat,
demands that all his bills be sent by the Bank through courier.
Things I did on my first day :-
Discounting of a bill for Rs.8.25 crores for M/s. Sneha Global :- Mr. Bhide brought the Bills
Register along with export bill no. LN 90 for USD 27,36,585=00 (Rs. 12.15 crores). The bill was
drawn under LC established for M/s. Sunflame Apparels Ltd., by Punjab National Bank, Hong Kong in
favour of the company for consignment to be sent to Alrajhi Traders, Dubai. In the submission, it
was mentioned that the balance is Rs. 82.91 crores, and after discount of the bill, it would be
Rs.95.06 crores, as against the sanctioned limit of Rs. 85 crores. It was recommended by the Chief
Manager for discounting. I pointed out to the CM that the limit is being exceeded. The CM said the
account is overdrawn most of the time and it is a long time practice. Mr. Bhide said all the bills are
getting realised, and the overdrawn position will be regularized as soon realization proceeds are
received. I asked what about the security for the excess portion. He said as the bills are backed
by 100 % LC, further security is not required. I asked him whether all the conditions stipulated in
the LC are satisfied, and whether the corrections made in the Air Ways Bills under seal of the
M/s. Fedex Express is OK. Mr. Bhide said it‟s OK, and such bills have been realised, so there‟s no
problem. I felt odd, but keeping in view the long standing relationship of the borrower and the
precedents, I authorized discounting of the bill. I told him to prepare the Control Return and
submit it to the Controller today itself.
Mr. Bhide brought in a new person and introduced him as Mr. Ankit Wadia, the proprietor of M/s.
Ankit Exports. He has a current account with Bank of India, Bhiwandi. He had a bill for Rs. 4.20
crores drawn in his favour under LC issued by the branch on behalf of M/s. Sneha Global. Mr.
Bhide said Mr. Ankit is a high net worth individual having landed properties worth more than 100
crores. He recommended discounting the bill at the branch and sending the proceeds by RTGS to
his account with BOI, Bhiwandi. He said the branch would gain substantial commission for the
transaction, apart from bringing him into our fold. Mr. Ankit also promised to open his Current
Account within a week, duly furnishing all KYC documents. Mr. Bhide whispered aside in Kannada
that we could exploit him for cross selling business. I authorized the transaction. I told him to
prepare the Control Return and submit it to the Controller today itself.

13.05.2009 Tuesday
I was busy travelling the entire day. I visited the Regional Office, Treasury, and Bandra Branch
and Matunga Branch on the way. I also visited important corporates viz., M/s. RISCO, M/s. ALM
Engineering Ltd., M/s. SJ Corporation Ltd., and M/s. SRI Impex Ltd.,
14.05.2009 Wednesday
Sri. Charles Arulraj, Chief Manager (Advances) in the RO called on the branch. He told me that he
has come for surprise inspection of the project site of M/s Shubh Home Builders and the
borrowers who have purchased the flats. He wanted Mr. Anand Kini to accompany him and desired
that I also come along. Remembering what Mrs. Banhi Bawa told me yesterday, I decided to have a
first hand account of the developments. When Mr. Kini was asked to accompany us, he appeared
flabbergasted. The project site at Virar was 80 kms away from the branch and we travelled by I
Class train. It took 1 ½ hours of train travel. When we reached Virar Station, Mr. Kini called up the
valuer and asked about the directions to the project site. I asked him whether he has visited the
site before. He said no, because the place is far away from the branch and that he resides in Navi
Mumbai which is on the other side. He said the valuer has visited the project site and taken photos
of the project, which he had seen.
Mr. Kini said the branch usually do not entertain “P” segment retail business. However, one financial
consultant brought the proposal of M/s. Shubh Home Builders, which would increase our Home Loan
portfolio by Rs. 42 crores. He said the financial consultant did all the home work viz., getting legal
opinion, valuation of the property, KYC documents, Income Tax Returns etc., All paper work
including documentation was done by him. Otherwise, the branch would have found it very difficult
to put through bulk loan proposals within a short time.
We took a taxi and with great difficulty reached the project site. The security did not allow us to
go in. He called up the Builder and after some discussion, let us in. Mr. Kini got a call on his mobile
from the Project Manager who said had he known earlier, he would have made all arrangements.
When we compared the construction with the layout plan, we saw many modifications. The first
block and second blocks had come up to 4th floor, while the third block, foundation was being laid.
There was a project site Office which was very well constructed, and which will become a club
house later. The 4th
and 5th
blocks have not even started. We went inside the first block to look at
the flats. The 2 BHK flats appeared to be about 600-700 sq ft as against 820-960 sq. feet in the
plan. In each floor, there were 4 flats of 2 BHK and 1 studio flat of about 450 sq. feet. There were
very few workers for the project of that size, but the security said many workers have gone to
their native states for festival holidays.
Mr. Charles told me that borrowers also have to be contacted. We took few borrowers‟ names and
addresses from the branch over the phone, and tried to visit their houses. Since neither the field
officer nor the Valuer had visited the borrowers‟ residences in the area, we could not locate them.
In few addresses, the neighbours said they did not know any such person and may be the address is
wrong.

We came back to Branch by evening, tired. Later Mr. Charles told me that control returns for the
housing loans have not been received for more than 100 accounts, and that I should arrange for
early submission.
16.05.2009
Today, I met some old customers. I authorized discounting of more than 20 bills for many
corporates, including M/s. Sneha and M/s. Deepa . I sanctioned LC Bills discounting facility for 2
new trading firms. I authorised realization of 6 bills where the remittances have come from
Standard Chartered Bank, Sharjah, whereas they should have come from Punjab National Bank,
Hong Kong. Mr. Bhide said this is the usual way they do their business.
17.05.2009
Morning, DGM of Mumbai Treasury called me and said about 25 bills are overdue for more than 75
days and said I should follow up for their realization immediately and if not realised, to crystallize
them immediately. I told him that I have just reported, and that I am going on Joining Leave, and
would be back after a week. I assured him that I will do the needful immediately. I called Mr. Bhide
the update of the outstanding bills, he asked for 2 days time to prepare the list manually. I asked
him whether reminders have been sent to the overseas Banks and whether any response received. I
asked him whether there are any system generated reminder letters / alerts. He said he does not
know, because the EXIMBILLs package is not being used. I asked him how he is following up on
overdue bills. He said that he will usually call up Mr. Dani and give him the details and ask him to
arrange for remittance immediately. He said delay in realization by 45 to 75 days is normal and
that RBI permits upto 180 days.
Today, after a hectic day at the branch, I came back to Bangalore for availing joining time.
21.05.2009
I got repeated calls from the Branch and also from many exporters requesting for discounting of
bills. Mr. Bhide said 2 bills have realised and that the list of outstanding bills is being prepared and
will be given on my return to the branch.
29.05.2009
I came back from leave today. I asked Bhide about the list of outstanding bills. He said he was not
well and he had taken 3 days leave and hence, it is not ready. I asked him whether he has submitted
Control Returns to the Zonal office. He said 5 Control Returns are ready and the rest will be
prepared and submitted within a week. I was angry about this inefficient, unorganised,
procrastinating officer, but I have to tread carefully, as he is very popular among customers, staff
as well as Top Management.
I received a reminder for submission of replies to Credit Audit Report of 21.01.2009. I went
through the Credit Audit Report and found some critical observations :-
(a) ECGC cover was not obtained for Non LC bills ;

(b) As many as 80 export bills are overdue for more than 75 days;
(c) 10 Bills were discounted for non-constituents;
(d) Some Bills were discounted even before receiving sanction from ZOCC (ie., in anticipation
of sanction).
(e) Non submission of control returns for discounting beyond the sanctioned limits.
(f) 2 Packing Credit accounts are outstanding even after one year.
(g) Lorry receipts given for inland bill purchase do not appear in the IBA list of approved
transport operators.
(i) In respect of M/s Sneha Global :-
1. No Dues Certificate was not obtained from Central Bank of India;
2. 20 % Margin for issue of Inland Letter of Credit not obtained at the time of issue;
3. Export documents were not verified with the original LCs, and discrepant
export documents have been negotiated;
4. Equitable Mortgage (EQM) by deposit of title deeds was not created before
discounting of bills.
5. EQM confirmation letters were not evidenced.
I was asked to submit replies within a week. I was very angry as I am made answerable for my
predecessor‟s actions. I called Ravi Tandon over landline as well his mobile. He did not respond till
late evening. Then he called me. I asked him about the audit report. He said these auditors will
write their usual observations and we have to give standard replies and close the report. He asked
me to take the help of Suhas Bhide to frame suitable replies as per old audit compliance replies.
30.05.2009
I am getting the feeling that something is fishy. The way the things are happening in the branch is
making me uneasy.
I have to seek first hand guidance from an experienced, knowledgeable Forex Manager about forex
and trade finance, and also about the computer systems, SWIFT, SFMS etc.,
In the meanwhile, to be on the safe side, I will only discount bills which are in compliance with
terms and conditions of Sanction, and that too, only within sanctioned limits.
08.06.2009
Last one week, I had to face severe criticism from all quarters, especially, many exporters for
being „rigid and indecisive‟. I overheard Bhide telling exporters that the new AGM is creating
bottlenecks in the smooth functioning of business. My efforts to get realisation proceeds for
overdue bills went in vain. I kept calling Mr. Dani every day to regularise his accounts, but he kept
on giving different excuses everytime. Bhide told me that customers are feeling insecure and
uncertain and that their funds flows have been adversely affected, and consequently, realisation
of pending overdue bills will be affected.

16.06.2009
Today was a bad day. High Tension. I refused to discount bills for Sneha Group of companies, as
many were overdue, and the DGM of Treasury informed me that he has reported to the Controller
about not crystallizing the overdue bills and sent a copy of the fax sent to the Controller and to
the Credit Department.
Mr. Dani called me and repeatedly requested me not to crystallize the bills, as he would incur heavy
losses on account of fluctuating exchange rates. I said NO.
I asked Mr. Bhide sternly to crystallize the bills immediately and confirm to the Controller and the
Treasury.
Something tells me that I am going to face lot of troubles in the coming days. Oh God, Help me!

Circular Letter dated 03.12.2009
TO ALL OFFICES OF THE BANK:
STAFF SUPERVISING: SUSPENSION OF:
1. Sri. Vikram Kennedy, AGM, Malabar Hills Branch, Mumbai.
2. Sri. Ravi Tandon, AGM, Kalighat Branch, Kolkatta.
3. Sri. Shivaswamy, CM, Malabar Hills Branch, Mumbai.
4. Sri. Anand Kini, Manager, Malabar Hills Branch, Mumbai.
5. Sri. Suhas Bhide, Deputy Manager, Malabar Hills Branch, Mumbai.
The above officers have been placed under suspension with effect from
18.11.2009, for certain serious irregularities, acts of omission and commission
allegedly committed by them while working at Malabar Hills Branch. Branches are advised
to take note of the suspension of the officials.
2. The branches are further advised:
a) not to act upon any instructions/advices etc., signed by the above officers;
and
b) not to negotiate/encash any cheques in case they any of branches to do so.
Sd/-
CHIEF GENERAL MANAGER.

Breaking News (in Newspapers and TV channels) :-
BANK FRAUD
Fraud in Bills : 186.77 crores
Fraud in Housing Loans : 22.68 crores
Fraud in C.Cr : 38.05 crores
Total : 247.50 crores
------------------------------------------------------------------------------------------------------------------------------------------------
1. Have you identified the operational risks in the story?
2. Can you relate the story to the 5 vulnerabilities as mentioned by RBI ?
3. How the risks could have been prevented? Or mitigated ?
4. Whether the exercise helped you in spotting similar operational risks in your branch in the past / present? Whether you
can identify them in future, and remediate well in time before things turn for the worse ?
5. Ca you ide tify the Strategic Risk i this story? Hi t : Strategic Risk is the risk of failure of a age e t strategy
resulti g i a loss
-X-

Disclaimer : All are stories based on my experience. All names and places are
fictional.
Individual / Group Exercise : Read the stories and discuss the operational
risks that you have noticed in them and how you will deal with them.
Story of Ms. Praveena.
My name is Praveena. I joined as P O on 2/7/12. I have completed training in 2
branches. I am now posted to Malgudi Branch for agriculture banking training.
Malgudi branch is a semi urban branch, situated about 120 kms from our Head Office. After a
very tiring journey, I reported to the Manager at 10.00 am. He enquired about the training inputs
given in the previous branches. I told him that I had initially worked in LCPC branch and then in
Lalgudi branch. He asked me how good I am in banking in general, and advances in particular ? I
told him that my exposure to advances is very limited, but I have some good exposure to core
banking.” He said “well, you need training in all areas of retail banking. You also need to have
complete picture of branch functioning, before you get to work in agri advances. So, be our Grahak
Mitra for a week. Next week onwards, you will be on on-the-job training in agricultural advances.”
I said “Yes Sir.”. He said, “being a Grahak Mitra, you should not only attend to customer queries,
complaints etc., you should also run around and get the issues resolved. OK”.
I said “Sir, I have a problem. I cannot speak the local language”. He said, “It is not a problem. It is
an opportunity for you to learn. Anyhow, you can manage with Hindi. Further, our Peon Papanna will
be with you and help you in translation”.
Thus began my journey into Banking and I have plenty of very very interesting stories to tell you :-
----------------------------------------------------------------------

STORIES IN OPERATIONAL RISK IDENTIFICATION – GENERAL BANKING
1. An illiterate poor woman Smt. Sathyabhama, came to me with lot of anxiety written on her face.
She said that somebody had drawn her hard earned savings of Rs. 1,50,000/-from her SB account.
Her husband said they want to draw the entire amount immediately for meeting daughter‟s
marriage expenses.
Problem : When I verified, I found that 3 accounts were linked to the same CIF Id. One account was a
pension account with an ATM card. The second account was inoperative with just Rs.200/= and the third
account had a balance of Rs.1,51,252=00, which had been drawn through the ATM over the last 2 months
by the pensioner, and the present balance is Rs.1,252=00.
2. Mr. Ashok Kumar was very bitter when he deposited his cheque with me for collection. “Your
previous branch manager had misled me and put me to big loss. He forced me to buy a insurance
policy from SBI Life saying it would be fetch me very high returns, but now what I got after 3
years is less than bank interest. I have taken a Birla Sun Life policy from your Special Assistant‟s
wife. There also I have lost heavily.”
3. Mrs. Koshy wearing expensive dress and jewellery came to me and enquired about Dirhams to Rupee
conversion rates. She gave me AED 10,000=00 and asked me to get the best rate for the amount.
She left saying she will come later in the afternoon. I called up SITA travels and arranged for
conversion at Rs.14.85. Got a cheque for the amount and credited the amount to her SB a/c. Later
in the evening, Mrs. Koshy called up. When I told her that the amount has been encashed at Rs.
14.85 and credited to her account, she became annoyed and shouted “how can you convert it
without my consent? You should have called me on my mobile. Today‟s rate is Rs. 15.05 and can go up
to Rs.15.25 tomorrow. Pls return the money to me”. I was shocked and don‟t know what to do.
4. Mr. Revanna Siddappa, Head Master of Huskur Govt High School requested me to give the DD
favouring his school to him personally, instead of sending it through courier, which will delay things
by one more day. He explained that the salary bill of the school was sent by Huskur branch to
Malgudi branch for submission to Treasury for payment. On approval, the Treasury had issued a
cheque in favour of the school. The cheque was paid and a DD was issued on Huskur branch, being
the proceeds of their SC No. 741 dated 4.2.13. The cheque should be sent directly to Huskur
branch, but the Head Master wants hand delivery, so that they can draw their salaries today itself
(12.2.13). I sympathised with him, saying that their salaries are delayed by almost 2 weeks. He told
me, “Madam, we pay Rs. 50 per head to the Treasury people and Rs. 50 per head to your peon
„Soma‟ every month to get our salary bill cleared. If we don‟t pay, it will be delayed by another 3-4
days”.
5. An old man, aged about 65 years, came to me with a form and told me that he would like to submit
his Pension Life Certificate. I accepted the form, which contained the SB a/c number, name of the
pensioner, 2 declarations, and his PPO number. He said he encounters unwanted problems whenever
he comes to the branch, staff are not helpful and customer service is very bad etc., and wanted my
acknowledgement for having submitted the Life Certificate. I was about to initial and give the
acknowledgement, when I thought I should verify the account. I typed the account number and
verified the photo and signature. Both were different from the one who is in front of me. I was
puzzled and asked him “is this your account? the photo and signature are different”. He said, “it
is mine only.............. The account belongs to my father. He is in Bangalore and bed ridden.” I told
him, “Sir, our Manager has instructed me that I should collect Life Certificates only from the

pensioners, that too, only after verifying their photo and signatures and confirming their
identities”. He flared up, “I am also a retired government officer. How can you say that pensioner
should come in person? Show me the circular. Do you want me to bring my bedridden father all the
way from Bangalore to your branch, just for signing in front of you? I will go to your head office
and complain to your General Manager”.....
6. First, there was a call from Head Office, and later on several calls from Zonal Office, Regional
Office, several officers. (from Union and Association also) and Manager was very upset. He called
the Accountant and the Head Cashier. I could hear lot of heated discussion. I learnt that RBI had
levied a penalty of Rs.20.00 lacs on the Bank, because the soiled notes remittance sent by the
branch to RBI had a cash shortage of Rs. 10.00 lacs. RBI does not tolerate mistakes in cash
remittance and directly debited Bank‟s C/A account (with them) with Rs.20.00 lacs (Rs.10 lacs
towards shortage, and Rs. 10 lacs towards penalty). Manager, Accountant, Head Cashier and 2
peons went down to the Currency Chest. Accountant almost fainted out of fear and Head Cashier
was nervous. Manager immediately conducted quick cash verification, and thank god, there was Rs.
10 lacs soiled notes bundles in one of the unused locker bin. Manager was greatly relieved and
regained his composure. He said “OK, We have made a mistake, but thank god, there was no cash
shortage. We can do fire fighting now without much damage. We can get the penalty reversed”. By
evening, AGM and CM came from Regional Office arrived in the branch and handed over a memo to
the Manager.
7. One customer came rushing to me, saying that his mobile phone kept on the desk while he filled up
the challan, was stolen by somebody. He frantically wanted to see the CCTV camera images to find
out who stole his mobile, as he wanted to file a police complaint. When I verified, I found that the
CCTV system is down and there were error messages on the monitor. When I told the customer, he
flew into a rage, “What kind of people you are? What kind of security you have? Don‟t you have
responsibility?”
After he left, Papanna whispered to me “Madam, don‟t tell anyone. This guy Madan (Armed Guard) is a
drunkard and he will sleep off during the night, after drinking. To avoid being caught in the camera, he
will always switch off the power supply during nights and switch on early in the morning.”
8. Later, I called Madan and told him CCTV is not working. He said “Madam, this is a regular problem.
Everytime, the engineer has to come from Bangalore to set things right. The system is very old and
should be replaced with a new one”. As he leaned and talked to me, the gun that he carried on his
shoulder, touched my shoulder. I was scared. “Be careful” I told him. He laughed and told me in a
hushed voice, “Madam, don‟t be afraid. The gun is not loaded. The bullets are safely stored in the
cover in my belt.”
9. I saw 2 well dressed gentlemen entering the branch with briefcases. I wished them and said “how
can I help you, Sir”. One of them smiled and said “definitely, I need your help for inspecting your
branch books”. Then he said, “We are from the Income Tax Department. We have come for
inspection”. I took them to Manager‟s cabin. I arranged for whatever books they asked for. Smt.
Nagalakshmi, who is looking after Fixed Deposits Section, sat with them and answered all their
queries. By end of the day, the IT officials submitted their report, which pointed out that (1) Form
15 G/ 15 H have not been obtained in duplicate, in many cases. (2) A copy of the form 15 G/H have
not been forwarded to the Circle Income Tax Office. (3) TDS deducted have not been remitted to
govt account within 7 days, on several occasions. (4) TDS deducted by the system have been

reversed to the credit of respective SB accounts, without obtaining Form 15H/G and PAN copy
(248 a/cs amounting to Rs. 3,72,568=00). (5) Copies of many TDS certificates given by the branch
to the deposit holders are not held on record, and TDS details are incomplete. (6) TDS waived/not
collected in respect of 15 accounts, without obtaining the latest Tax exemption certicate from
ITO..... etc.,
10. I opened the drawer to take out the keys. I was surprised to find 3 bundles of old Bankers
cheques, lot of returned cheques with return memos etc., Some of the bankers cheque were for
huge sums in favour of Tahsildar, Sub Registrar, Social Welfare Dept etc., They were dated
backwards upto 2002.
11. Mr. Muralidhar introduced himself as Special Assistant of Ulsoor branch in Bangalore. He said he
has sold his property at Malgudi for Rs. 40 lacs. He said the Registration is over and that he will
be bringing the cash within half an hour. He wanted to open a SB account in his wife‟s name and 2
sons‟ names and deposit the cash, and then get the accounts transferred to Bangalore at a later
date. I asked him to furnish all KYC documents along with PAN cards for opening the accounts. He
said he has not brought KYC documents and that he would send them by post within 2 days. He said
he does not have PAN card for his 2 sons, who are still minors. I expressed my inability to open the
accounts, and told him that as a staff of our Bank, he should know better. He thought for a while
and said „please give me an empty locker. I will keep the cash in the locker, because I am afraid of
taking the cash by car. Please help”.
12. Papanna informed me that Mrs. Soundarya, daughter of Mr. Satyanarayana Setty, would be coming
to the branch in 10 minutes. Mr. Setty is a well known trader in Malgudi, having more than 100
acres of land worth about 10 crores; he is very influential,very helpful and highly respected. His
daughter is a MBBS doctor who has settled down in USA; her husband is a techie. They are earning
crores in USA...etc., I asked him what he wants me to do. He said give her good service on first
priority. Later, she came to me and said she wanted to operate the locker. When I verified the
locker register, I found that the locker was in the single name of her husband only. I told her
“Madam, I am sorry, locker is in your husband‟s name.”. I can see her annoyance. She told me “I
have operated the locker so many times, but nobody said anything”. Papanna told me “Madam, Pls let
her operate. If any paper is required, we can get it from USA”.
13. Sunder raj came to operate his locker. I verified his SB account and observed that some cheques
favouring Birla Sunlife, ICICI prudential etc having been paid earlier. I remembered manager
telling me to canvas for SBI Life insurance products. So, I asked him whether he would like to
invest SBILIFE scheme, which is a new one and very attractive. He agreed. He said he is having
8000 US dollars, which can be invested in the SBI LIFE. I was very happy that I could get the
business in the very first instance. Then he said, “I will give you the dollars tomorrow, please get
them converted into rupees and then you can invest that in the SBILIFE scheme. But make sure
that the money does not pass through my SB account”.
14. Afternoon, I was feeling somewhat uneasy and dizzy. I went out for a cup of tea and fresh air. I
came back after 10 minutes and resumed my work. Papanna enquired about my health. Then he said,
“Madam, there is a drainage canal passing close to our branch wall and frequently we will be getting
dirty smell. Then there is a car garage where most cars in Malgudi are being serviced. There is lot

of smoke from the garage and we complained to the Manager. He immediately arranged for
installing 10 heavy duty exhaust fans in the branch on both sides of the hall. Now there is lot of
improvement. You will get used to it within a week.”
15. I was embarrassed to see Mr. Kantharaj, proprietor of Malgudi kiln works after more than a month.
He had been earlier complaining to me that SBILIFE policy – Hospital Cash Policy- had not been
delivered to him even after 3 months after making payment of Rs.24696/- for a cover of Rs. 5 lacs
for himself, wife and 2 children (10650+7610+4590+4590-2744). SBILIFE officer Mr. Rajkrishna
was a very careless unresponsive executive and he told me after 3 months that the policy proposal
was not issued because of KYC deficiencies. I was very angry with him because he had not told me
about the rejection of the proposal. Now that Mr. Kantharaj is here in front of me, I decided to be
very diplomatic in informing him of the rejection. So, I just smiled at him and said “Sir, long time
no see.” Before I could say anything, Mr. Kantharaj told me that his son had met with an accident
and suffered head injuries and was in the hospital ICU for a week. Kantharaj was in such great
tension that he had a heart attack. He had underwent Angioplast and was in ICU for 3 days + 2
days in Room. He had incurred heavy expenditures. He gave me Photostat copies of the hospital
bills and asked me to get him reimbursement for the hospital expenses, which work out to Rs.5.40
lacs.
(Eligible amount as per policy
= Father = (ICU Rs.10000x3)+(Room5000x2)
Son = (ICU Rs.10000x7)
Family Care = Rs.10000=00
Total = Rs.1.20 lac)
16. There were heavy rush on Thursday. As usual staff shortage. Mr. Natarajappa SWO was very co-
operative. Although he is very naïve and inexperienced, he handled heavy payments and receipts.
Evening, after tallying cash, he reported a cash shortage of 8.10 lacs. He became very nervous and
hyper active. He called every body to help find the shortage. Lot of people searched the vouchers
but no luck. Then, I brought all the vouchers and started checking. I found that he had not written
the denomination on the backside of the voucher. When I asked him, he said, I pay according to
the CBS cash screen only. One voucher caught my eyes. It was a cheque for Rs.90000 written very
shabbily. I asked Natarajappa whether he paid 90000/- or 900000/- He immediately became
horrified and cried. “Oh my God, I have wrongly paid 9 lacs instead of 90 thousand. I gave the
money to Puttaiah, peon in the Irrigation Dept. He is a drunkard and corrupt fellow. Pls help me
get the money back from him”. He took the cheque and wrote on the back 100x9000. Our Head
Cashier has a very good relationship with the local inspector and so, he immediately called him and
asked him to help recover the money from Puttaiah. In the meanwhile, a gold loan of Rs. 810000
was raised and the cash was closed. The next three days were holidays and so I went to Bangalore
for holidays. But being curious, I called up the Accountant and asked what has happened. Madam
told me that Puttaiah was unofficially arrested from his village where he had gone for holidays. He
did not have cash. His office was checked, but no cash. Puttaiah is still in police station, but he is
not budging inspite of police treatment. I came back to office on Monday, but still no cash
recovered. Puttaiah still in police station. No FIR filed. At 11.30 am, the principal of Wellingdon
School of Nursing called the Manager over the phone. He informed that his clerk had made a
mistake. Instead of writing Rs.1099709=90 which is the total of 17 cheques, he had written Rs.
1909709=90 in the slip of paper which he handed over to Natarajappa. So there is cash excess of
Rs.8,10,000/- which he has sent back through his clerk. He apologised for the mistake.

17. After attending a training programme on Operational Risk Management, I decided to change the
ATM Pins for all the ATMs. Head Cashier said he will not change his number, as he has memorised
them and is comfortable with them. Branch has 3 ATMS, 2 outside the branch, and 1 inside the
branch.
Evening after loading Cash in ATMs, I changed my pin in all the ATMs. While in 2 ATMs, the PINs
were only 3 digits, the third one inside the branch, had a pin of 16 digits. I changed the PIN,
keeping the old PIN, but changing only 2 digits in the middle.
Before going to sleep, while writing the diary, I suddenly remembered that I had not written down
the PINs and put them in sealed envelope.
Next day, first thing I did was to write down the PINs. But suddenly, I had a doubt. “Whether the
PIN for the third ATM is correct or not. Where did I change the digits, which were the two digits
that I changed?”
As soon as Head Cashier, we went to the third ATM and tried to open the ATM locker. My PIN did
not work. I tried different combinations, but it did not work. Head Cashier said, “Madam, I told you
not to change the PIN, It is dangerous if you can not remember it”. I was sweating. Even after 30
minutes of trying, my PIN did not work.
I was almost crying. I called up the ATM vendor. He said, “Madam, we don‟t have any master keys
with which we can open the ATM locker unit.” When I asked him whether the PIN can be reset, he
laughed and said, “Madam, there is no such option. The only alternative is to cut the locker open and
install a new lock. It would cost you about Rs. 70,000=00 approximately.
18. Mr. Narayan Nayak, Chief Manager, Risk Management Dept at Bangalore H O came to draw cash.
After usual courtesies, he said he needed my help. “Praveena, you know I am trying to get an
alliance for my daughter. Now we have found one boy, who is the son of Sri. Champaka Nayak, well
known industrialist in Malgudi having Export Limits with you. Now I have to do background
verification before finalising the marriage. Please get me a copies of Short Credit reports of all
the family members, plus their last year P&L, Balance Sheet and IT returns. I also want to cross
check CERSAI and CIBIL on the family members. I also want to check them against RBI
Defaulters‟ List. This is not available at Head Office, you know”.
19) I was deputed to RS Betta branch for a week as the Branch Manager was proceeding on leave.
The branch is a Single Officer Branch, with one Head Cashier and one Special Assistant and one peon.
The place was beautiful, in the midst of a hill forest, surrounded by colonies of tribal people. 10 KMs
from the branch was the famous Temple of Ranganatha Swamy in the temple town of KEEL KOTE.
On my first day, there was a call from R O. and the officer enquired about me and then told me that one
of the important duty of the branch manager at RS Betta is to escort Top Management Officials from
Head Office, who visit the temple. He asked me to take utmost care to take care of their needs,
especially the Special Darshan during Festivals and Holidays, Preferential VIP treatment for them and

their guests, Food and Acccommodation and travel. He said I had to be at the branch even on holidays if
and when the top officials visit the temple.
The Head Cashier asked me, “Madam, who called you?” I said, “someone from the Regional Office. I did
not ask his name. He asked me to take care of all Top Officials who visit the temple. It is very
irritating.”
On the second day, there was a call from Pune branch Manager. He said he is visiting the temple on
Sunday and wanted help for accommodation and special darshan. Head Cashier gestured to me not to say
“Yes”. So I told him that I will not be in the branch on Sunday, so he can contact the Temple Office, who
will help him. I can sense that he was very unhappy with me. Head Cashier told me not to entertain
anyone below the rank of General Manager, except when our AGM recommends specific persons.
On the fourth day, there was a call from RO and the officer said MD is likely visit the temple and so be
ready. Then he hung up. I told Head Cashier that MD is visiting the temple. We all waited. There were
no calls till evening.
On the fifth day, there was call on my mobile from a person who identified himself as Suresh Heblikar,
Liaison Officer at Head Office. He said he is waiting at Keel Kote Airport to receive MD, who will be
landing at 11.30 am. He said MD‟s Private Secretary, Mr. Vikram Pandit is also with him. He asked me to
be ready and as soon as he calls me, I should come to the temple to escort MD to the temple. He casually
mentioned that Muthappa Rai, my batchmate, is well known to him.
I was excited. I am going to escort MD to the temple. I have seen his photo in the house magazine, but
never met him in person. After half an hour, he called me again and said there is a problem. I asked him
what problem. He said MD had brought 1 kilo of gold for offering to the Temple without declaring it. The
Customs Officials found the gold while checking his baggage. They have seized the gold and will be filing
a case against MD. However, MD‟s PS has a close relative working in Customs at Bangalore and through
him, he is trying to “solve” the problem. But, it seems the local Custom Officer will not let MD go, unless
he is paid a bribe of Rs. 10 lacs. MD‟s PS offered a Cheque for Rs.10 lacs, but the Custom Officer wants
only in cash.
Suddenly, he gave me the phone to MD and asked me to speak to him directly. I became tense but at the
same time, I wanted to please him and create a very strong impression about myself. MD spoke to me
very calmly, inspite of the predicament he was in. He enquired about my name, date of joining, my service
in the Bank, the branches I have worked earlier etc., and said he would be pleased to meet me at his
Chamber in Head Office. He told me that there is a small problem at the Airport and he is being held at
Customs Office and so he could not come out. However, his PS Mr. Vikram Pandit would meet me for
further action. He thanked me and gave the phone to his PS.
Then Mr. Vikram Pandit came on my mobile, and introduced himself. He asked me to come immediately to
the Airport with Rs. 10 lacs in “issuable notes of Rs. 100 and Rs. 500, and told me that he has to get MD
out of the Customs Office as quickly as possible, as otherwise press people might come to know about
the news. He told me that this is very confidential and that I should not inform others, because the local
newspaper reporters would get the news coup. It would affect MDs reputation as well as Bank‟s
Reputation and Image. So, I told him I will come immediately with the money.

I took Rs. 10 lacs from Head Cashier, and rushed to the Airport along with Peon in Head Cashier‟s
Motorbike.
Mr. Heblikar received me at the Airport Entrance. He then took me to Mr. Vikram Pandit, a tall and
heavy man wearing Dark Blue Ties, and Bank‟s ID card pinned to his shirt . The PS thanked me profusely
and said that I have saved MD from a police case.
We all went towards the Airport‟s Custom Office. PS showed me a Middle Stature Man in grey suits
sitting in a Cabin at a distance of 80 feet, as the MD. He was surrounded by 2 Customs Officers in white
uniform.
He asked us to wait outside, while he went inside. After 5 minutes, I got a call on my mobile. PS asked
me to come to the Restaurant at the far end of the Airport, where we all can have Coffee and snacks.
Mr. Heblikar was very happy and shook hands with me. “Madam, you saved us today, otherwise, we would
have been fired”. He said he will go and get the Car for MD.
Me and peon Poovaiah went to the Restaurant and sat at a window side table and waited for MD and his
PS to come. I was feeling like a hero, or rather, a heroine, who saved the day for the Bank.
Time passed, but no one came. Poovaiah became impatient. Head Cashier called me on my mobile and
enquired about MD. Slowly, I became suspicious. I called Hebliker on mobile. It was switched off. I
called PS, and got the message that the number is out of service area. Now, I panicked and ran towards
the Customs Office. I entered the building, and no one was there. It was empty. I ran out of the
building, and searched everywhere. I could not find any one of them. I ran back to the Restaurant and
asked the Cashier, “Where is the Customs Office? I want to meet the Customs Officer.” The Cashier
said “Madam, there is no Customs Office in this airport”.
20. Saturday, Accountant Madam was on leave. So I was in cash charge. As usual a hectic day. At about
11.30 am, my dear Mohan called me on my mobile and asked me to come to Bangalore tonight for a special
moonlight dinner at Hotel Le Merdien. He said today is his birthday and that I should attend his party
without fail. I was thrilled and excited. I had to finish cash before 3.30 at any cost and catch the
Bangalore Express at 4.00 pm so that I can reach Bangalore by 8.30 pm and join him before 9 at Le
Meridien. I was surprised with myself at the speed at which I was working. Things went smoothly and
very fast.
At 2.00 pm, Manager called me on my intercom and said Mrs. Maya Chander, mother of one of our VIP
customer would come to operate the locker and even though the official time is over, that I should
oblige her. I got terribly irritated. The lady came around 2.45 pm. I took her to the locker cabin which
is situated in the strong room, which has two partitions, one for Currency Chest and the other for
Lockers. She was middle aged, heavy weight and breathing heavily, as she climbed the stairs down. She
thanked me and said “Sorry for troubling you. I had gone to a Marriage with all my jewellery. Now I have
come back and want to deposit all the jewellery back, because it is dangerous to keep them at home”. I
left her in the locker cabin and came back.
Being Saturday, most of the award staff had already left. Head Cashier, who is a very nice person, who
knew my urgency, cooperated with me in closing the cash very fast. There were many cheques on my
table to be cleared. It will take at least half an hour to clear them all. It is already 3 pm. So I handed

over my Cash Keys to Head Cashier and requested him to finish all the formalities in the Currency Chest
on my behalf and that I will join him shortly. Within 10 minutes, I cleared all the batches pending in the
queue. I skipped checking of individual entries, because detailed checking is time consuming. I ran down
to the Currency Chest. Head Cashier had already finished everything. We just came out, locked the
Chest, switched off the lights and came up to the Banking Hall. I locked everything and kept the keys in
safe places, as per Accountant‟s instructions. I caught the 4 o‟ clock train.
While travelling, Risk Management Chief Manager Mr. Rajashekar called me and asked me to update
LGID data immediately. After 10 minutes, phone calls started coming from Regional Office and Zonal
Office. I got irritated and switched off the mobile and did not switch it on till I reached Bangalore.
I reached the Hotel in time and Mohan was already waiting. We went to the terrace garden and had a
wonderful moonlight dinner. It was so romantic. When we were having dinner, I saw phone call coming
from Nagaiah, the Armed Guard of my Branch. I did not answer and put the mobile in silence mode. Later
I saw some calls coming from the Cash Peon and the Head Cashier. I did not respond.
Suddenly, Mohan took out a small box from his jacket, opened it, took out a beautiful Ring and offered it
to me and asked me “Will you marry me?”
I was speechless. It was a magical moment. Tears came up in my eyes. I cried with happiness. I was in
love with Mohan for over a year, and now he is asking me to marry him. I thanked heavens and hugged
him.. At that moment, my mobile again vibrated. It is a call from Manager. I got terribly irritated.
Doesn‟t this man know etiquette? Doesn‟t he know that he should not call a lady officer late in the night
? Doesn‟t he have a family? . I will not allow him to disturb me at this important moment. Let me see
what he can do to me ?. So, I switched off the phone.
Sunday night, I travelled back to Malgudi. I reached the Office at 8.30 am. Manager was sitting in his
cabin, talking continuously on phones. The Armed Guard just stared at me and did not speak. Even the
sweeper did not speak to me and avoided me. This is unusual.
I went to my seat and sat down. I slowly drank water, trying to figure out why no one is speaking to me.
Suddenly, the Manager came to me and threw a newspaper at me, and shouted “See what you have done”
=========================================================================
Southern Chronicle Monday 11/4/2013
Woman Trapped in Bank for 10 Hours
Malgudi: A 57 -year-old woman got locked inside the Locker Room of Malgudi Branch, while depositing the valuables in
her safe deposit locker. The bank closed at 3.30 pm and the employees had simply forgotten she was in there.
The woman was discovered 10 hours later, after her children complained to the police, who acted quickly to trace her. She
was rescued after midnight, after spending about 10 hours in the Locker Room. The woman, who has diabetes and forgot
to take medicine with her, had passed out and when discovered was unconscious and cold to the touch.
The woman, whose name is withheld, is in critical condition at Bangalore Manipal Hospital. Bank Officials said they are
investigating the incident.
===========================================================================
11/04/2013 : I was suspended today. I do not know what to do. What to tell my family ? and Mohan ?
-----------------------------------------------------------------------------------------------------------------------------
-x-x-x-x-x-

STORIES IN OPERATIONAL RISK IDENTIFICATION – GENERAL BANKING
1. Mr. Narayanappa, retired school teacher, aged around 80 years, came to me with his 10 years
RID deposit receipt for Rs. 20,000=00 and said he wanted to close the account prematurely, as
he needs money urgently for his medical expenses. When I verified the account, I found that
the account was closed prematurely during September ‟12 and credited to the Agricultural
Term Loan account (Cow Loan) of Sri. Honnaiah, for whom Sri. Narayanappa had stood as
guarantor. Mr. Narayanappa was shocked and said how can the Bank appropriate his deposit,
when it was not under lien to the loan account, that too, without informing him in advance. When
I informed the manager, he said we have the right of set-off and that notice of intimation was
sent by ordinary post in September itself. He said “I sympathise with him, but can‟t do
anything. Let him recover the money from Mr. Honnaiah.” Mr. Narayanappa left the branch,
vowing to sue the branch manager.
2. Mr. Rakesh Jain called on the phone. He said he is a senior citizen and a very old customer of
the branch, with a relationship going back to 40 years; that he is having a C.Cr account since
last 10 years but of late, the service at branch is very bad; that interest rates have been
revised on this account several times and that he is paying a very high rate of interest, even
though his is a SME firm; that he has not been informed of the changes in interest rate; that
the explanation of the branch manager is not convincing; that he is a kidney patient and is put to
severe tension by the unhelpful manager; that he wants mobile number of the Managing
Director to complain about the branch manager. When I informed the branch manager, he
simply laughed and asked me to give the landline phone number of MD.
3. Manager had told me earlier that the C.Cr A/c of M/s. Bismi Hardwares is overdue for renewal and
that I should put up the proposal to ZOCC for Rs. 80 lacs. When I told him that my exposure is not
much, he said “you will learn only by doing. So, do it”. That afternoon, Mr. Amit Jain, a Chartered
Accountant, met me and told me that he had brought the soft copy of loan proposal („S‟ Format) of
M/s. Bismi Hardwares along with audited balance sheets, CMA data in Excel sheet, IT returns,
VAT returns, latest valuation of collaterals, EC & TPR, short credit reports, Credit Risk
Assessment Rating etc. I told him that this is going to be my first proposal and that I need time
to go through it. He assured me that the proposal is ready in all aspects and that I don‟t have to do
anything at all except putting my signature wherever required and give it to Manager tomorrow
itself. I felt greatly relieved. I took him to Server Room and let him copy the proposal in .doc
format file to a folder in the Server.
4. Manager asked me to take up advances portfolio from today. He asked me to handle all loans for
better experience. First person to meet me was Mr. Siddalingaswamy, Proprietor of M/s. Gowri
Agro Agencies, dealers for Eicher Tractors. He told me that the branch had helped him by
sanctioning several tractor loans earlier. He has about 12 potential buyers for the new models of
tractors recently introduced in the market and wanted us to consider the loan favourably. He said
all the borrowers are very honest, hardworking and deserving people; whatever documentation
required, he will get it done, including mortgage of land etc., He said all the loans are within branch
powers, so sanction the loans at the earliest. Then he said, “Madam, pls don‟t mistake me. The
Tractor Company is giving us liberal incentives. We pass on a small portion of the incentive amount
to the borrower. But, we give the maximum incentive to the Bankers who help us by giving loans.”

5. Mr. Ramaiah, proprietor of Sri Maruthi Transports wanted a loan of Rs.12 lacs to purchase a 7
year old second hand Bharat Benz Heavy Duty Truck of 31 T. I told him that Bank does not
consider loans for second hand vehicles aged above 5 years. But we can seek permission from R.O.
He said he is in a hurry, otherwise the vehicle will be sold to somebody else. He asked me whether
we can give Gold Loan. Yes, we can give. He asked me what is the interest rate? I said it is 13 %. He
said “No, No. It is only 7 %”. I told him 7 % interest rate is for agricultural loans only, upto 3 lacs.
He said he does not have agricultural land but he will arrange to get Pani of his relatives, and he
wanted 4 agricultural gold loans of Rs. 3 lacs in his, his wife‟s and his sons‟ names.
6. Evening at 7 pm, one man came to me. He appeared to be drunk. He said his father and brothers
are taking a loan from the branch, and they have registered the agricultural land in bank‟s favour
today. He said that he is not in good terms with his family, and that they have decided to raise the
loan without involving him. I told him that the mortgage is already over and the Registered Deed is
with me. He wanted to see the Deed. When I showed the deed, he said his cousin has impersonated
him in the registration process, and that they have cheated him and the Bank. He wanted the loan
not to be disbursed.
7. I was checking the loan documents (for taking over the Agri and “P” segment documents). I found
that there were no securities (National Savings Certificates for Rs.1.00 lacs) against a Demand
Loan of one officer who is presently working at Surat branch. As the NSCs were issued by Malgudi
Post Office, I telephoned the Post Office and enquired about the procedure for obtaining
duplicate NSC certificates. They took the NSC numbers, verified and informed me that the NSCs
have been repaid by them a year back.
8. Mrs. Sindhu Vadhyar, is the proprietrix of M/s. Tasty Pickles, with a limit of Rs. 8.00 lacs and a
balance of Rs.3.63 lacs. Her husband works at Turkey and she had gone to Turkey for a month for
family reunion. I received a call from her. She told me that due to some medical exigencies, she
had borrowed money from her husband‟s friend, which she wants to repay. She asked me to
transfer Rs. 4.00 lacs from her C.Cr account and remit it to the friend‟s account with Standard
Chartered Bank, Fort Branch, Mumbai through RTGS. She gave the account details and the IFSC
code and asked me to ensure that the NRE check box in the remittance screen is ticked without
fail.
-X-

STORIES IN OPERATIONAL RISK IDENTIFICATION – INFORMATION TECHNOLOGY RELATED
1. Mr. Amit Jain introduced himself as the only Chartered Accountant of Malgudi. He said all the
banks in Malgudi utilise his services. He said he has canvassed business for the Bank for many
managers. He had brought the soft copy of loan proposal („S‟ Format) of M/s. Bismi Hardwares
along with audited balance sheets, CMA data in Excel sheet, IT returns, VAT returns, latest
valuation of collaterals, EC & TPR, short credit reports, Credit Risk Assessment Rating etc., He
asked me to plug his drive into the Server and transfer the files. He told me there is a folder in
his name on the Server which contains all his files, which will be copied to & fro his drive. The
accountant is not very computer savvy, and so she would let him do such things in the server, I
learnt.
2. Mr. Kempe Gowda, Director, M/s. Malgudi Oil Refinery, wanted a corporate Internet Banking
account. As the account is a very important constituent of the Bank, Manager himself did all the
formalities for opening the corporate internet facility, using Authoriser 1 and Authoriser 2 user
ids and passwords. The Director sat in front of the Manager, and the monitor was kept in the
middle of the table in such a way that both can see the screen. The mouse and the keypad were
used by them one after the other, as per the system prompts. It took almost 2 hours before the
account could be successfully opened. A sample transaction was done online and was successful. The
Director was very happy that the Manager himself did everything and having spent so much of his
valuable time.
3. Mrs. Manjula Kamath, Retired Branch Manager of Gauribidanur branch visited the branch. The way
the staff greeted her showed that she was a very popular person and respected by all. I could
make out that she is a highly knowledgeable, highly intelligent, and very dynamic lady. She
introduced herself and said she had come to Gauribidanur to inaugurate the first branch of
Muthoot Bankers at Gauribidanur, in her Official capacity as Regional Manager for Karnataka. She
enquired about the well being of all staff; development of branch business; introduction of new
deposit and lending schemes; development of local economy; She said she would like to keep herself
abreast of latest developments in Banking, especially, the macro issues, such as Basel II & III,
Risk Management, Compliance, Bank policies etc., She requested me to include her email id to the
subscriptions of online magazines, especially, “Knowledge Management Tools” in Bank‟s Intranet
website. She requested me to send soft copies of banking related developments/issues/news to
her email id. Later, she spoke to me about busy schedule and continuous touring, for opening new
branches all over Karnataka and to recruit the right people. She asked me whether I would like to
recommend any of my relatives/friends/acquaintances for employment in their company.
4. Today is Computer Security Day. Manager asked me to don the cap of System Administrator and
organize a security awareness meeting in the evening and to make a presentation to the staff on I
S Security. I was confused “OMG, what can I speak on I S Security.” I went around the branch
trying to find something to speak about.
I went to the Server Room, which was situated opposite to the Head Cashier‟s cabin. Lot of
corporate customers were sitting on the chairs waiting for their cash remittances to be taken. The
Server Room was open, and Santhosh was working on the server. I asked him what he is doing

there. He said there are no PCs for him to work except the Server. I observed that many windows
were open viz.,. 3 for CBS, 1 for BANKNEST (Bank‟s intranet website), 1 for IP Messenger, 1 for
EMS. There were a chain of messages in the IP Messenger; inward mails were opened in
Malgudi@bank.co.in , BANKNEST was showing circulars and circular letters etc., He was changing
from one to another at great speed and doing many things at the same time. As I was wondering, he
said “ I am a multi-tasker and I am very good in typing.” He said the Accountant had asked him to
verify the day‟s mail and reply to emails from the customer queries. He said the accountant had
asked him to check all system suspense entries, trace the differences and reconcile, pass the
entries and send to her, so that she can keep the housekeeping under control. The heavy duty
printer was printing continuously and there were lot of stationery boxes in the room. Behind a
partition in the server room, there were electrical & AC cabling, UPS and batteries. The server
room was hot and stuffy, and Santhosh was keeping 2 small fans in front of him. One was for him
and the other directed towards the PC. The exhaust fan was not working. The AC is also not
working. Santhosh said technicians are not coming from Bangalore to Malgudi because it is far away.
Even the ACs in the ATM cabin are also not working. The inside room was full of dust and cobwebs.
As I tried to go inside and look at the UPS, my feet tripped on the wires and there were sparks and
smoke from the UPS, luckily nothing happened. I looked out for fire extinguishers, and there were
none, excepting one water based fire extinguisher outside. I saw a laptop and Datacard on the
table. Santhosh said it is his. “I am tech savvy and I always carry them around”. Just then,
Jitendra, System Officer from Regional Office called up and said he has to do some maintenance
jobs on the server and so, he wanted the password for the server. Santhosh told him the password
and Jitendra worked on the server remotely for about 15 minutes. After that, Santhosh continued
with his work.
There was heavy rush in the counters. In counter no. 3, customers were agitated. One of them
shouted at me, “can‟t you get somebody instead of this man? “ The counter was manned by Pramod.
I saw that even though he is fast in PC, he was slow in taking receipts or making payments. Later,
when I went back to my chair and opened the BANKNEST, I observed that Pramod was live and
very active in Chat Forums, with many threads to his credit. Papanna told me “this fellow is lazy
fellow. He won‟t even switch off his PC when he is leaving in the evening. Every day, the accountant
only switches off the PCs when she is leaving the branch.”
-x-
ADVICE TO YOUNG OFFICERS.........

Protect Your Bank by Protecting Yourself
Remember these Lessons in your day to day working :-
1. Knowledge is power. Knowledge is your shield of defence. Knowledge is also your weapon of offence.
Keep yourselves always updated on Banking. Become CAIIB qualified.
2. Personal life and Office life are mutually exclusive. Never mix up.
3. Trust but verify. Remember no one is always a Saint, nor a Devil.
4. Always maintain calmness, and don‟t become nervous / panic.
5. Remember you are dealing in public money and that you need to have very high standards of
integrity.
6. Do not violate systems and procedures- even if you are 100 % confident of yourself or convinced
about the customer; or pressurised by Customer/Superior/Colleague/anybody.
7. Always create records/written evidence – prepare vouchers, submit inspection reports, write
official notes/letters, send control returns, etc.,
8. If you commit a mistake/blunder, do not hide it or try to undo the damage yourself. Immediately
report to the Manager/Superior and seek their advice and help.
9. When you make a mistake, admit it and say Sorry to the other person. It immediately reduces the
conflict and tension.
10. Remember - Customer is always right. Never get into argument with them.
11. Be helpful to Borrowers, but never get too close to them. Be very careful if you want to transact
with them.
12. Never comment on others, whether colleagues, customers or superiors or subordinates. Tomorrow it
will backfire on you.
13. Never get influenced by others‟ opinions. Always try to form your own opinion, based on your own
analysis.
14. Maintain a dairy and every night before going to sleep, write down the day‟s events.
15. If you find any suspicious/corrupt/malafide activity in the branch, please report to Vigilance
Department, Online Whistleblower or ORMD.
16. When you find yourself in a tight spot/pressurised atmosphere/ moral dilemma/ embarrassing
situation due to ignorance etc., and don‟t know what to do, remember “Kaun Banega crorepati”
episode and its “Helpline”. Call up your immediate supervisor/Controller/Peer/Colleague/friend and
apprise them of your situation and seek help.
-x-

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