Banking Transactions – Manual Days
This article is an attempt to appraise readers of the processing of banking transactions prior to bank automation. Though we may feel it meaningless at this stage but it is important to bring it to the fore as the automated processes still follow these in the background. Anyone seeking the career of Systems Analyst in Banking Domain will find it useful.
This article is a high-level recap of what we had undergone during manual processing days and is specially for those who came in the banking industry post computerization and are not aware of how a savings or current account used to be managed and serviced those days. The scope of the subject is very vast and a full volume only justifies it. However, I will try to give a concise view of the flow in couple of pages.
Savings and Current accounts were maintained in hard bound ledgers. Couple of bigger branches in main cities had ledger posting machines called Accounting Machines that were used to post current accounts maintained on cards. Process flow followed on these machines was similar to ledger based accounts except that the day book was auto-posted as backing sheet in the machine and no one had to prepare account statements for the customers manually except in cases where customer request for a duplicate statement.
Each ledger binder for savings had around 400 accounts. For current account these were in the range of 150 – 200 depending of transaction volume in each account. There used to be separate binders for inoperative and unclaimed accounts. Depending on branch size number of binders for savings and current accounts could be anywhere between 50 and 300. Fixed Deposits register copies were maintained in box files. No of such files could be any one’s guess.
Every evening after day’s work all the ledgers and FD box files were moved to book safe and every morning these were taken out and distributed on staff desks in respective departments.
Posting process flow
Daily Sheet used to be raised for each savings and current account ledger separately for every day. Each daily sheet had two sections Credit and Debit. There were three columns for Cash, Transfer and Clearing transactions under debit and credit.
Any voucher to be posted were first entered in Daily Sheet and then in the ledger. The checker was required to ensure the correctness of posting in correct account, correct column (Dr/Cr), proper description entered, balance after the posting is correctly calculated and appropriately mentioned Dr/Cr. and that it has been posted correctly in the daily sheet.
Branches where Ascota Accounting machines were used for Current Accounts, the backing sheet used to be loaded is the machine every day. This backing sheet was nothing but the day sheet for the machine.
Ledger Summary/ Control Sheet was maintained for each ledger for the month. Day’s total debits and credits from respective ledger’s Daily Sheet were posted in ledger summary and the balance derived.
In the beginning of month a new Ledger Summery sheet used to be raised bringing forward the previous month closing balance.
It also had details of Interest accrued and paid in the ledger during the month. Closing balances for interest also used to be carried forward to next month sheet.
Once a month balances of all the accounts ledger wise were add-listed and the totals reconciled against the balance appearing in control sheet for the ledger for that date. Any differences used to be investigated and corrective action taken.
For interest accrual minimum balance during 10th and penultimate day of the month used to be identified for each ledger, interest for the month calculated on this amount and accrual entries passed.
For Current accounts these would have balance net of overdraft in the ledger. Also interest accruals for current account debit balances were calculated and passed in overdraft sheets and not in control sheets.
At close of month the closing balance of accrued interest net of interest paid for every ledger used to add listed for all the ledgers in savings product wise, for example general, Staff, NRE, NRO, and reconciled against the balance of respective interest accrual account in Subsidiary General Ledger.
For Fixed Deposit These control sheets were known as Rate Control Cards. Rest process being almost the same.
Current Account Overdraft Sheets were raised for every current account ledger every month. Each page had multiple columns and around 35 rows. Each column was to be used for a customer. Opening of the month for all those customers having sanctioned limits, customer name and limit and interest rate used to be mentioned on top of the column. Last 1-2 pages were for over the limit and casual overdrafts. Daily closing debit balances in the customer account used to be entered under respective columns. For any customer if the outstanding balance was exceeding the limit then Limit would be entered under regular column and over the limit balance under customer column in the limit excess / casual OD pages.
These sheets were used to:
- Report Overdraft figures as and when required including in balance sheet since the GL used to reflect only the net balance those days,
- Monthly interest accruals, and
- Quarterly interest recovery from the customers.
Account Statements / Passbooks were prepared / completed manually and sent / delivered to the customers.
Journals were used to record vouchers raised in the department or those recd from other department for posting. Color of debit and credit journal sheet was yellow and white respectively. Each department used to raise one set (debit & credit) of journal daily. Each sheet was horizontally divided into two sections. Upper half was journal and lower half was offset section. There were multiple columns in each section.
In Journal section these columns were meant for General Ledger Headings and in offset section these columns were meant for department names. Any vouchers raised in the department and to be processed within the department were entered in journal section under respective GL heads in both debit and credit transaction sheets. Any voucher that is to be sent to other department for processing / posting used to be entered in offset section in the respective sheet (debit or credit as the voucheris) and delivered these to respective department against acknowledgement. Receiving department of such vouchers would enter these in their journal under respective GL Head and contra in the offset against the department name from which it was received.
To illustrate let us assume Remittances department raised a set of vouchers towards remittance from Savings account. The vouchers raised are
Cr. Agency Account
Cr. Commission
Cr. Telex Charges
Dr. Savings
Remittance department would enter CMA, Commission and Telex charges under Journal section on while (Credit) journal sheet under respective 3 GL Heads. The Savings voucher would be entered in offset section in yellow (debit) journal sheet and deliver it to Savings department. The savings department would enter it under Savings GL Head in debit journal section and under remittance department in credit offset section in their journal.
Consolidation of Journals and GL writing
Journals from all departments along with GL vouchers used to be sent to Accounts department for GL and Subsidiary General Ledger posting.
There was lot of processing for CMA vouchers, SGL and GL that are not being discussed here. But one aspect worth mentioning is Offset Reconciliation. All debits and credit offset balances from all journals for the day used to be add listed and checked that they were equal. In case of mismatch, the difference would mean some voucher sent to a department had not been responded or processed but not entered in the receiving department journal. It was to be investigated and resolved as otherwise the GL would also be out. Such were the controls in place.
Interest payment on savings account was to be made every half year. The smaller branches could do it in say May / Nov or June / Dec every year as the number of ledgers used to be less. It was a major problem in larger branches. This activity was distributed over various months and the total ledgers were grouped in 6 groups with each group having mix of operative and inoperative ledgers. During each month of half year interest on ledgers of one group, say group 1 in Jan / Jul, group 2 in Feb / Aug etc, was calculated and posted. Interest for the half year till prevous month end used to be paid.
There used to be a dedicated team in the branch comprising of adequate number of staff and checkers. For each ledger in the group for which interest is to be paid they would examine each and every account, identify monthly minimum balance for each month in the half year and note these on the ledger sheet (right hand side), add list these six figures. Thereafter calculate the interest and note it also near the totals. Addlisting and interest calculation was done by electronic calculator and the printout retained for checking and audit.
Checker would then verify minimum balances and calculations. Once that was done the total of interest for the ledger was addlisted and the interest posted to individual accounts. The total was entered as intrest paid in the ledger summary and following accounting entries passed for the total interest for the ledger.
Dr Provision for Interest Payable (PFIP) – respective GSL A/c-
Cr Savings Account
Ideally the total interest paid for the ledger should have been equal to the outstanding accrued interest brought forward in the Ledger Summary. But mostly there used to be a difference due to variety of reasons. In case the difference was petty (within prescribed percentage of total interest paid) it would be adjusted by passing the adjustment entries with contra to Interest Payable.
However, in case the difference was beyond prescribed limit, it was to be investigated by rechecking of calculations, interest paid during last 6 months on accounts closed, interest accrued during last six months and large value transactions on the same day that might not have substantially impacted the minimum balance and thus resulted in excess interest accrual.
Finally, after the entire process was complete these ledger balances used to be add listed and balanced against the Ledger Summary.
During first week of the following month all the interest differences and its current status used to be reported to the area office in Monthly Operations Report.
Post automation all these are done behind the scene on circuit boards. What we see is simple debit and credit in the account and nothing else..
