PROMOTION MATERIALS – 2010 BANKING TERMS – A SERIESACCEPTANCE:A Bill is presented for acceptance which has two parties.i.e. drawer and drawee.Acceptance is writing the name of the drawee across the face of the bill by whichdrawee agrees to the order of the drawer.Bills payable after sight require presentation for acceptance in order to fix the date ofthe maturity of the bill. Acceptance should be given by the drawee on the bill itselfacross the face of the bill, by putting signature, as a token of acceptance. Theconcept of acceptance is completed only when the drawee after accepting the billdelivers it back to the holder.ACCEPTOR:When the drawee in a bill agrees to the order of the drawer he shows his ascent bysigning his name across the bill for acceptance, and when it is done he is called theacceptor. The acceptor is the person who is expected to retire the bill on mautiry.ACCEPTOR FOR HONOUR:Generally no person other than the drawee or drawee in case of need specified inthe bill can accept it. However, in case the original drawee refuses to accept the billto furnish better security when demanded by the notary any person not liable on thebill who wishes that the bill should not be dishonoured without acceptance by thedrawee, may accept it with the consent of the holder to honour the bill. Such anacceptor is called as “Acceptor for honour”ACCEPTANCE FOR HONOUR:When the bill is noted or protested for non-acceptance by the named drawee theacceptor shall declare in writing on the bill for having honoured the bill. The usualform of such acceptance is “Accepted for the honour of XY-AB”ACCOMMODATION BILL:
A bill which is drawn to accommodate another person without receiving anyconsideration is called as accommodation bill. The main objective of such bill is tofacilitate the drawer to raise funds. Such bills are also called as “Kite Flying”“Windmills”. The party who draws such a bill is called as “Accommodated party”whereas the acceptor is called as “Accommodation party”. The transaction takesplace only by mutual consent without any consideration. The bills are mostly drawnfor round sums and drawees do not exist. The bills are drawn with sister concernswithout movement of goods. Normally around the due date the drawer presents nextbill for discount and remits the proceeds to the drawee to retire the earlier Bill. Thebill is normally inflated and is not linked to turnover of the party. The banker shouldbe cautious while handling the bills.ACCOUNT PAYEE:“Account payee” are the words used in the crossing of cheques indicating thepurpose that the proceeds of the cheque should be credited to the payee’s accountnamed therein.The practice of so crossing a cheque has all along been recognized by courts. Thetransferability of a cheque is restricted when it has been crossed account payee, asthe payee therefore becomes the true owner of the cheque. The collecting bankerhas the responsibility, in the wake of a series of frauds in encashment of theinstruments. IBA has decided that the Account Payee crossing should be treated inthe true sense and necessarily proceeds should invariably flow into the account ofthe payee named in the instrument.ACTUAL DELIVERY:It is a process of actual handling over the instrument/security by one person toanother or to an agent on his behalf, which constitutes “a change of actualpossession”. For example, in KCC advance the borrower delivers the goods to theBank to be kept under lock and key indicating bank’s charge over the goods.ACTIONABLE CLAIMS:Actionalable claim represents a claim to any debt, other than a debt secured bymortgage of immovable property by hypothecation or pldge of movable property.Civil courts recognize as affording grounds for relief whether such debt be existent,accruing conditional or contingent. Book debts are actionable claim under law.
ACTUAL POSSESSION:In order to create a valid pledge the owner of the goods i.e. pledger/borrower mustdeliver the goods to the pledge (lender/banker). The delivery is complete, when thepledger actually hands over the goods to the pledge and the pledge i.e. the banker issaid to have “actual possession” of the goods as security. i.e. gold loan, OD againstsecurities etc.,ACID TEST RATIO:The acid test is meant for ascertaining the soundness/health of a company and itindicates the company’s preparedness to meet the immediate demands on itsliquidity besides the current ratio. It is the relation between all current liabilities otherthan bank finance and immediately realizable current assets such as cashreceivables and investment. Th Acid test ratio indicates the solvency or ability tomeet immediate current obligation.ADHESIVE STAMP:As per the Indian Stamp act all duties with which any instruments are chargeableshould be paid and such payments should be indicated by means of stamps. Thedetermination of valid document is known by the fact of proper stamping. There arethree kinds of stamps namely, adhesive, impressed and non judicial. Adhesivestamps are affixed by gum on the documents as quoted in the official gazettepublished by the Government.Some examples are –-Bills of Exchange and promissory notes drawn or made in sets.- Entry as an advocate, vakil, or attorney on the roll of a high court.- Notary acts- Transfer of shares etc.Adhesive stamps require to be cancelled in terms of Sec 12 of Indian Stamp Act sothat it cannot be used again.ADJUDICATION:
The process of determining the duty to be charged on an instrument document forexecution by the competent authority is called adjudication. Hence concept refers toproper stamping of a document.ADMINISTRATION:Administrator is a person appointed by the court to manage the property of thedeceased. There are two circumstances/situations:Where the person dies “intestate”, i.e. without leaving a will. In this situation the courtappoints a person usually the next of kin to manage the property of the deceased,called as an administrator.Where the person does leaving a will.i) but does name any one to act as executorii) The executor named therein died before the testator.iii) The executor named therein refuses to actThe court appoints an administrator granting “Letter of Administration” with willannexed, to itAD VALOREM:It is a Latin word meaning “According to the value”, and used in connection withduties and customs on some goods by stamp duties, relating to the value of thesubject matter to which the document pertains to.AFFIDAVIT:It is a written declaration given on oath before an authority who administers the oathas a solicitor, a magistrate consul or notary public. Such authority is conferred by thestate or central government. The affidavit should be on a stamp paper of requisitevalue and contain, deponent name, address and signature properly attested by theauthority before whom it is sworn.AFTER SIGHT:
These words are sometimes written on Bills of Exchange or Promissory notes it isbrought to the sight of the holder on presentation.- In case of Promissory Notes it is brought to the sight of the holder onpresentation.- In case of Bills of Exchange, after acceptance by the drawee, or noting for anacceptance or protest for non acceptance as per Sec 21 of Negotiable InstrumentsAct.AGENT:Section 182 of Indian Contract Act defines an agent as a person who representsanother i.e. principal in his dealings or brings him into legal relationship with thirdpersons. A minor and a person having unsound mind cannot become an agent.Principal kinds of agents are auctioning brokers, commission agents, del credereagents, factors and co-agents.Agents are classified into three groups:i) General Agent: Acts within limitsii) Special agent: Entrusted with a particular commission/assignmentiii) Universal agent: Unlimited authority to do any act on behalf of his principalALLONGE:It is a slip of paper annexed to a bill for making endorsements when there is nospace left on the bill. There is no legal limit for number of endorsements and thisdoes not require fresh stamps. There is a practice to make the first endorsement onthe allonge over the junction to prevent the allonge being removed from one bill andattached to other bill.AMALGAMATION:It is the process of merger of two or more companies to form a new company whichcomes into existence having all the property, rights and powers and subject to all theduties and obligation of the constituent companies by virtue of powers contained in
the memorandum. The process may take place by, sale by shares, by sale ofundertaking, by sale and distribution or by virtue of arrangement.AMBIGUOUS ENDORSEMENT:The word ambiguous means uncertain or doubtful. When in an endorsement thename of the endorsee is not clearly ascertainable the endorsement becomesambiguous. Eg. If an endorsement reads “Pay to x or y and z then the endorsee canbe either (i) x or (ii) y and z or (III) x and y jointly, Such ambiguous endorsementshould be got amended by the payee/endorsee under full authentications.AMORTISATION:The gradual reduction of any amount such as the retirement of a debt by serialpayments to the creditor is called amortization.ANAMALOUS INSTRUMENT:Instrument which does not fall within the purview of the Negotiable Instruments Actbut possesses characteristics akin to negotiable instruments are called anomalousinstruments e.g. dividend warrants, interest warrants, coupons, pension paymentorder etc.,APPARENT TENOR:It means what appears on the face of the instrument to be the intention of the partiessuch as date, amount in words and figures, signature, cheque serial number, branchname, crossing etc. Payment in accordance with apparent tenor is treated aspayment in due course and paying banker gets protection accordingly.APPROVED SECURITIES:Securities such as Government of India loans, state government loans and othertrustee securities as defined under section 20 of the Indian Trust Act, 1882 are calledapproved securities, for the purpose of computing the SLR to be maintained.ARBITRATION:
It is a procedure adopted to settle a dispute between two parties by referring it to anagreed third party, who is called as an Arbitrator. The parties agree to abide by thedecision given by the arbitrator who acts as a judge. The process is carried outwithout the intervention of the court.ARTICLE OF ASSOCIATION:It is one of the important documents containing the internal regulations or bye laws ofa joint stock company by which the affairs are governed and distinctly defines thepowers of the directors. The printed articles of association should bear theprescribed stamp duty.ARTISANS:Artisans are those who are engaged either in traditional or cottage industries orhandicrafts like shoe making, weaving, tanning, blacksmiths, carpet making etc.,ASSIGNMENT:It means the transfer or making over of an existing or future right, property or a debtby one person to another. It is a form of offering security to the creditor. The one whotransfers is called assignor and the one in whose favour it is transferred is called“Assignee”ASSOCIATE:Where the interest of one company in another is exactly 50% unless the secondcompany is said to be an associate or an affiliate of the first. The balance of theshare capital may be held by another company or by shareholdersATTACHMENT:Attachment refers to seizure of property so that it can be put under the control of acourt. Where a person has obtained a judgement for the recovery of money, anapplication to the court may be made to obtain attachment relating to assets insatisfaction of a judgment. It may be in the form of prohibition order which prohibits
the bank from releasing an asset without the permission of the court, or in the form ofattachment order with reference to specified amount of an account of asset attachedby the court, making it incumbent on the bank to pay the amounts/deposit the assetsin the courtATTESTATION:Attestation is formal witnessing of a signature. In law, three documents requirecompulsory attestation:i) Mortgage deedii) Deed of Giftiii) A willAttestation to an instrument must be made by two or more witnesses each of whomhas seen the person executing the instrument.Essential of a valid attestation:i) The document must be signed by the executant first and then by theattesting witnessesii) The executants must sign in the presence of the attesting witness.iii) The attesting witness should also sign in the presence of the executant.iv) An attesting witness need not know the contents of the document as he isattesting only the signature of the executantv) A party to the document cannot be an attesting witnessAFFREIGNMENTIt is a contract by ship owner to transport goods by sea in consideration of a certainpayment called: “freight”AUTHORISED CAPITAL:A company whether private limited or public limited before raising capital throughissue of shares, should mention in its articles of association for authorizing such an
issue. The quantum of the capital to be raised depends on the promoter’s estimate ofthe funds required for the business. The capital mentioned in the articles may besuitably amended in case of any need for increase in the capitalAIR CONSIGNMENT NOTE:Also called as airway bill, it is a document which acknowledges receipt by the airlinerof the goods for dispatch by air. It contains three copies i.e. consignor copy,consignee copy and one for the carrier. It is not a document of title to goods as it isnon-negotiableARBITRAGE:Relating to Foreign Exchange business arbitrage means simultaneously buying andselling of foreign currencies with the expectation of profits from temporary disparitiesin exchange rates prevailing at the same time in different centres or in differentcurrencies.