Collecting Banker is one which undertakes the responsibility to collect money in favor of its client from other banker. collectiong banker. paying banker. lending banker. precautions and protuctions of collecting, paying banker. types of loan

1. Mr. Rathesh J
Asst. Prof,
New Horizon College,
Kasturinagar

2. Collecting Banker
 Collecting Banker is one which undertakes the
responsibility to collect money in favor of its client from
other banker

3. 1. Duties & Responsibilities of
Collecting Banker
 Due care & diligence in collection of draft
(cheque)
 Acts as an agent
 Present of cheque with in stipulated time
 Serve notice for dishonor of cheque
 Collection of Bill of Exchange
 Settlement of proceeds

4. 2. Precautions to be taken by
collecting banker
Collects cheque of its customer
Verify the title of customer
Verify the validity
Confirm the information of cheque
Confirm crossing of cheque
Verify the place of clearing
Collect amount early as possible

5. 3. Statutory Protections of collecting
Banker
Protection for crossed cheque only
Protection for credit of amount after
actually collected.
The cheque should be collected for
customer only
Must act in good faith & without
negligence.

6. 4. Negligence.
 Failure to obtain introduction for an account
 Irregularity of endorsement
 Crediting cheque to pvt. account of an authorized
person of Co.,
 Crediting cheque to agent than Principal & vice
versa
 Crediting cheque to Trustee’s Pvt. account of trust
 Crediting cheque to partner’s Pvt. account of
partnership
 Collecting cheque having No Endorsement
 Crediting cheque wrongly to another Co., account

7. 5. Collecting banker as Holder for value
If collecting banker pays draft money to
customer before the draft has been
collected then banker becomes holder for
value.
In such circumstances bank collects
money for himself & not for client.

8. Banker becomes Holder For value in
following cases
When bank pays draft amount or part
before
When bank deliver the cash over the
counter
When bank grants advance payment
against bill
When bank allows the customer to
withdraw before it cleared.

9. Rights of Collecting Banker
Right to collect cheque amount for
himself
Right to recover money incase of
dishonour
Right to recover money incase of
illegal title
Right to recover money incase of
defective title

10. Holder in due course
 Holder in due course a person who has taken a
bill of exchange in good faith and for value
with no suspicion that it might be no good,
claimed by another, overdue, or previously
dishonored.
 Who receives an instrument innocently
 Who has paid value for the same
 Who has received the instrument before its
maturity

11. Paying Banker
Paying banker means “on whom a
cheque is drawn or the banker who
required to pay the cheque drawn on
him by a customer

12. Precautions to be taken by paying banker
Proper form of the cheque
Date of the cheque
Amount of the cheque
Funds must be sufficient in
account
Use of loan or overdraft granted
Use of minimum balance
Chronological order of receipts

13. Continue….
Presenting 2 cheques at a time
Material alterations
Forgery of drawer’s signature
Facsimile signature (stamp or print)
A cheque should not Mutilated
A cheque must be presented within banking
hours

14. Statutory Protections of paying
Banker
Protection in case of an order cheque
Protection in case of an bearer cheque
Protection in case of crossed cheque

15. Dishonour of cheque is an act of paying
banker refusing to pay the amount of
cheque due to certain definite reason.
Reasons:
Notice to stop payment
Notice of death, insolvency, insanity
Notice incase of winding up of business
Notice of Assignment of balance

16. Continue….
Garnishee order
Breach of trust
Defective title of the party
Incase post-dated or stale cheque
Incase of material alteration

17. Loans & Advances (lending banker)
Principles of bank lending
Safety or security
Liquidity
Profitability
Purpose of lending
Sources of repayment
Diversification of risk

18. Forms of Advances
Loans
Cash credit system
Overdraft
Bills purchased & discounted

19. Letters of credit (LOC)
LOC issued by the importer’s bank in
favour of exporter on behalf of
importer.
Parties of LOC
Applicant (importer)
Issuing bank (importer’s bank)
Beneficiary (exporter)
Advising bank

20. Types of LOC
 Documentary & clean LOC
 Revocable & Irrevocable LOC
 Fixed & Revolving LOC
 Confirmed & Unconfirmed LOC
 With or without Recourse LOC
 Transferable & non-transferable LOC
 Back-to-back LOC
 Red clause LOC
 Green clause LOC
 Travellers LOC

21. Non-performing Assets