2. 2
BANKING-SEC.5(b)OF BRA1949
• Accepting of deposits
• Lending or investing(Purpose)
• From Public
• Payable on demand or therwise
• Withdrawal of deposits by cheque, draft
etc.
3. 3
CUSTOMER
• Maintaining any type of a/c
• Submission of a/c opening form fulfilling
KYC requirements
• Customer of specific branch only but with
CBS advantages
• Not defined till 1986. Only mention in Sec
131 of N.I.Act. Now defined in Consumer
Protection Act 1986.
6. 6
TERMINATION OF
RELATIONSHIP
• Notice of Death/insolvency of customer or
liquidation of company/lunacy
• Closure of a/c by customer (Voluntary)
• Closure of a/c by bank (Due Notice)
7. 7
DUTIES OF BANKER
(1) To honour cheques provided
1. Cheque properly drawn
2. presented within business hours
3. Regular/proper endorsement
4. Sufficient balance in a/c/Limit
5. Relation is not terminated:
a. death
b. insolvent/lunatic
6. Payment is not stopped by drawer
7. Garnishee/income tax order
8. 8
DISHONOUR OF CHEQUES
• Funds insufficient/exceeds arrangement
• Stop Payment by customer or by attachment
order or court order/ withdrawal stopped owing
to death or lunacy or insolvency of a/c holder/
Cheque Altered & no authentication, Cheque
post dated, un-dated, out dated, Effects not
cleared-Present again, A/c closed, Refer to
drawer ect.
• Instrument specially crossed to -----------
• Earmarked balance not sufficient
9. 9
(2) DUTY TO MAINTAIN SECRECY
• Moral and legal duty
• Reputation of customer
• Applicable to transactions & security
• Continues even after death/closing of a/c
• Applicable for information obtained from outside
• Divulge customary information
Subject to exceptions to duty of secrecy.
10. 10
CONTINUED
• Information to be furnished provided:
* Request is in writing under
relevant section and act
* Request is by authorised person
* Furnish only asked information
* Only specific(not general) infomation
* Diff in a/c, name no info. to be furnished
* Fact to be advised to a/c holder
11. 11
(3)DUTY TO RENDER ACCOUNTS FOR
SERVICES
To provide passbook or statement of a/c
duly completed in all respects
(4)To collect cheques, drafts etc.
(5) To give reasonable notice before a/c is
closed.
12. 12
LIABILITY IN CASE OF BREACH
OF DUTY OF SECRECY
• LIABLE TO CUSTOMER
• LOSS OF MONEY AND REPUTATION
• COURT TO CONSIDER ACTUAL LOSS OF
MONEY AND DAMAGE OF REPUTATION
13. 13
RIGHTS OF A BANKER
• PARTICULAR LIEN: I.e. TAILOR’S LIEN
• GENERAL LIEN: LEGAL POSSESSION
UNTIL THE WHOLE OF THE DEBT IS
PAID.
• (1)BANKERS LIEN IS GENERAL LIEN
KNOWN AS “IMPLIED PLEDGE”
• RIGHT OF SALE IS ALSO AVAILABLE TO
BANK WITH REASONABLE NOTICE.
• AGAINST TIME ‘BARRED DEBTS’ ALSO
14. 14
BANKERS RIGHT OF LIEN
• GEN. LIEN ON ALL GOODS & SECURITIES
• GOODS & SECURITIES IN THE NAME OF
BORROWER ONLY
• AVAILABLE AFTER REPAYMENT OF LOAN ALSO
• CHEQUES FOR COLLECTION
• CREDIT BAL. SUBJECT TO RIGHT OF SET-OFF
AND NOT LIEN
Subject to exceptions to Banker’s Right of Lien
15. 15
(2)BANK’S RIGHT OF SET-OFF
• COMBINE SEVERAL A/Cs OF BORROWER
• LETTER OF SET-OFF TO BE OBTAINED
• REASONABLE NOTICE TO CUSTOMER
• CUSTOMER HAS NO CORRESPONDING
RIGHT OF SET-OFF TO COMBINE HIS
A/C’s FOR PURPOSE OF WITHDRAWAL
16. 16
SET-OFF IS APPLICABLE IF
• A/Cs ARE IN SAME NAME AND RIGHT
• BELONGING TO ONE PERSON i.e. SB A/C AND
PROPRIETORSHIP FIRM’S ACCOUNT
• PARTNERS INDIVIDUAL A/C(CREDIT) AGAINST
FIRMS DEBT AS LIABILITY OF PARTNERS IS
JOINT & SEVERAL
• INDIVIDUALS A/C CREDIT BAL. AGAINST DEBIT
BALANCE IN JOINT A/CS
• ALSO FORTWO A/CS AT DIFFERENT BRANCHES
• EVEN AGAINST TIME BARRED DEBTS
• SET-OFF BEFORE GARNISHEE/IT ORDER
17. 17
RIGHT OF SET-OFF IS NOT
APPLICABLE IF
• FUTURE & CONTIGENT DEBTS
• DEBIT BAL. IN PERSONAL A/CS AGAINST
CREDIT BAL. IN JOINT A/C, CAPACITY AS
TRUSTEE, AGENT, GUARDIAN, EXECUTOR
ETC
• NO CLEAR CREDIT BALANCE
18. 18
(3)RIGHT OF APPROPRIATION
(CLAYTON’S RULE) &. 59 TO 61 OF
IND. CONTRACT ACT 1872
• DEBTOR’S INSTRUCTIONS TOWARDS SPECIFIC
DEBT
• IN ABSENCE OF DEBTOR’S INSTRUCTIONS,
BANK TO APPLY TOWARDS ANY LAWFUL DEBTS
(EVEN TIME-BARRED DEBTS)
• IN ABSENCE OF BOTH AS ABOVE ,TO BE
APPLIED IN ORDER OF TIME OF CREATION OF
DEBT WHETHER TIME-BARRED OR NOT. IF
DEBTS ARE OF EQUAL STANDING, PAYMENT TO
BE APPLIED PROPORTIONATELY>
20. CUSTOMER’S DUTIES
• A/c to be conducted satisfactorily.
Maintain Min. Reqd. Bal.
• Cheques to be drawn properly so as not to
facilitate forgery or fraud.
• To give full & proper instructions while
countermanding a cheque.
• To make demand for payment
• To pay charges for services rendered
