Opening an account with a bank creates relationship between the bank and the account holder. Anyone who can enter into a contract can open an account. Even minors can open account jointly with their guardians. Individuals, sole proprietors, partnerships, Hindu Undivided Family (HUF), trusts, associations and Limited companies are some examples of those who can open an account with the bank. As per RBI guidelines an account can be opened only if the person wanting to open an account has an introducer. The guideline further suggests that the introduction should be by an existing customer, a respectable person of the local community, and another banker. The bank can insist on a photograph before opening the account except in cases of savings account where no cheque facility is provided, fixed and term deposit upto an amount of Rs 10,000, accounts like cash credit and overdrafts etc. and staff members. Apart from furnishing a proof of address banks can also insist on a declaration that he/she does not enjoy credit facilities from other banks.
Collecting Banker: Duties, Statutory Protection and Concept of Negligence, Position of a Collecting Banker, Duties and Responsibilities of Collecting Banker,Statutory Protection to Collecting Banker, Holder
and
Holder in Due Course
Collecting Banker: Duties, Statutory Protection and Concept of Negligence, Position of a Collecting Banker, Duties and Responsibilities of Collecting Banker,Statutory Protection to Collecting Banker, Holder
and
Holder in Due Course
Savings account is focused on individuals and puts a limit to the amount of money the depositor can withdraw from the same. Except specified institutions a saving account cannot be opened in the name of a government department. The procedure for opening a saving account is similar to the procedure followed for opening any other type of bank account. In times of calamities however RBI has permitted banks to allow an individual to open a saving account either against electricity bill or any other document of identity or through an introduction from another account holder. When it comes to depositing money in a saving account, a holder cannot deposit third party cheques into the saving account. There is no transaction tax to be paid in case of a saving account. Interest paid to saving account (3.5%) is calculated by taking into account the lowest balance on the 10th and end of the month. An additional 1% interest is payable to retired employees or spouse of a retired employee if the latter is deceased. The operation of saving account is stopped if the customer dies or becomes insane or insolvent. If the customer cannot be traced then the bank will place the balance in an unclaimed deposit account.
Banks accept deposits so that they can provide for loans. Accepting deposits is therefore treated as the backbone of the banking system. There are different types of deposits such as demand deposits and fixed deposits. Demand deposits are further categorized into current account, saving account and call deposit. Demand deposits are primarily deposits that the customer can withdraw at will. Fixed Deposits on the contrary come for a fixed period. It cannot be withdrawn before the date of maturity. The other forms of Fixed Deposits are re-investment, annuity and recurring.
Usually, a current account is opened for commercial or business purposes and is a form of demand deposit from which the holder can withdraw money any number of times or upto an agreed amount. Opening a current account is a risky proposition for the banks. For instance, if the bank makes an overdraft by mistake, then the bank has to bear the loss if it is unpaid. There is no restriction to the amount deposited in the current account. This form of account is liable for transaction tax especially if the individual or a Hindu Undivided Family (HUF) withdraws Rs 50,000 in cash on any single day. Similar tax is also levied on a corporate entity if the withdrawal is Rs 1,00,000 and above. Although no interest or countervailing interest is payable on a current account however banks are entitled to pay interest to the account of a regional rural bank or the account of a deceased individual. As far as nomination is concerned a single depositor can make nominations while nominations cannot be made by incorporated entities or other trade bodies. With respect to current accounts there are several prohibitions placed on the banks. For example, the bank cannot lure the depositors by announcing prizes or attractive lottery schemes. Similarly, banks also cannot pay brokerage or gifts to agents for deposits placed at the bank.
Banking Law - Conclusive Evidence Clause in MalaysiaAzri Nadiah
Conclusive Evidence Clause in Malaysia generally has been exercised with caution by the courts. In Canada and Singapore, CEC application is more lenient.
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Opening of Deposit Accounts
1. Opening of Deposit Accounts
Introduction
Who Can Open Account
Introduction to Open Account
Photograph & Address of Account Holder
PAN/GIR Number
Additional Precaution
Documentation
Opening of Deposit Accounts Retail Banking Chapter 03
2. Introduction
By opening deposit account, an individual who has no
other account with the bank, begins a relationship. As this
relationship imposes various obligations on a bank, he must
therefore be careful regarding whose account he opens. An
account can be opened by anyone who can enter into a valid
contract. Minors may also open an account jointly with their
guardians. This chapter will explain factors that you should
consider and the documents that you should procure to open an
account.
Opening of Deposit Accounts Retail Banking Chapter 03
3. Who Can Open Account
These accounts can be opened by those who have funds
in hand. But the person who have unsound mind can’t open
account. The others like eligible to open an account. e.g. are:
1. Individuals
2. Sole proprietorship
3. HUF
4. Partnerships
5. Trusts
6. Associations
7. Limited companies etc.
Opening of Deposit Accounts Retail Banking Chapter 03
4. Introduction to Open Account
The RBI insists the account should be properly
introduced. The banker will get legal protection u/s 131 of the
Negotiable Instrument Act only if the bank has acted in good
faith and without negligence. RBI also states that proper
identification enables the bank to trace the person later if
required. The account should not be opened without meeting
between the bank official and the customer. The introduction
should be by:
-An existing customer
-A respectable person of the local community
-Another bank/ banker
Opening of Deposit Accounts Retail Banking Chapter 03
5. Photographs
Bank must obtain photographs of the customer/
customers to check the identity of the person operating the
account. In the case of minors, the guardian’s photographs
should be obtained. The photograph should be recent. The cost of
such photographs may be born by the customers. The customers
must submit two photographs. Photographs cannot be a
substitute for specimen signatures. Photographs need not be
insisted upon in following cases:
-A new saving account where cheque facility is not
provided.
-Fixed and other term deposit up to an amount of
Rs.10,000/-
-Account like cash credit, overdraft etc.
-Bank also need not insist on photographs for accounts of
staff member (single/joint).
Opening of Deposit Accounts Retail Banking Chapter 03
6. Address of Account Holder
Bank must obtain full and complete address of
depositors. Independent confirmation of the address must be
obtained in all cases (like recent telephone bill, electricity bill
that is in his name or some other acceptable correspondence or
document like ration card. A driving license and even a passport
(sometimes) is not an acceptable document in support of one’s
address (as they may not be up to date). As a precaution, bank
should, after the account has been opened send a letter to the
customer at the address on the account opening form.
Opening of Deposit Accounts Retail Banking Chapter 03
7. PAN/GIR Number
When any account is opened by initial deposit of Rs.
50,000/- or more, PAN/GIR number must be obtained. If an
account opener does not have a PAN/GIR number, he must be
requested to submit Form 60 of the Income Tax Department.
The specimen signature of the client has to be procured
with the account opening documentation.
The opening of new accounts should be authorized by
the branch manager or by the person to whom the authority has
been delegated.
It must be ensure that all account opening formalities
are undertaken at the bank’s premises and no document is
allowed to be taken out for execution.
Opening of Deposit Accounts Retail Banking Chapter 03
8. Additional Precaution
Following is the additional precaution for opening of
current account.
Bank must insist on a declaration from the account holder to
the effect that he is not enjoying any credit facilities with other
banks. If customers are enjoy any such facilities the particulars of
such to be obtained. The account opening banks should obtain a
no-objection from lending banks. If no response is received after a
fortnight the account may be opened.
Opening of Deposit Accounts Retail Banking Chapter 03
9. Documentation
Following is the list of different entities who wish to open
a deposit account. Let’s look briefly the documentation and the
other information required by each of them for opening an
account.
Individual:
Make an application in prescribed form.
Proof of identity any one of following;
Driving license
Passport
Photo credit card
Election ID card
PAN card
Opening of Deposit Accounts Retail Banking Chapter 03
10. Documentation
Proof of Address any one of following;
Telephone bill
Recent electricity bill
Ration card etc.
Signature verification: by passport or self cheque if customer has
another account.
Client accounts opened by professional intermediaries:
The client must be identified.
Banks may hold ‘pooled’ accounts managed by professional
intermediaries on behalf of entities like mutual funds, pension
funds etc.
Opening of Deposit Accounts Retail Banking Chapter 03
11. Documentation
Where funds held by the intermediaries are not co-mingled
at the bank, the entire beneficial owner must be identified.
The ultimate responsibility for knowing the customer lies with the
bank.
A Sole Proprietorship should submit:
A certified true copy of its shops and establishment, license or any
other approval from the government.
A declaration from the sole proprietor that he is the sole
proprietor.
Opening of Deposit Accounts Retail Banking Chapter 03
12. Documentation
Accounts of Politically Exposed Persons
Bank should gather sufficient information on any
person/customer of this category intending to establish a
relationship and check all the information available in the public
domain.
Banks should verify identity of the person and should seek
information about sources of funds.
The decision to open account of PEP should be taken at senior
level.
The above norms may also applicable to the closed relatives or the
family member of PEPs.
Opening of Deposit Accounts Retail Banking Chapter 03
13. Documentation
Accounts of non-face-to-face customers
With the introduction of telephone and electronic banking there
must be specific and adequate customer identification procedure to
mitigate the higher risk.
Certification of all the documents presented may be insisted.
Lower Income Group: In October 2005 the RBI stated
that KYC guidelines should not be an excuse for banks to keep the
poor away from the banking system.
A simplified procedure could be provided for opening of accounts
in respect of those persons who do not intend to keep balances
above Rs. 50,000/- and whose total credit in one year is not
exceeds Rs. 1,00,000/-.
Opening of Deposit Accounts Retail Banking Chapter 03
14. Documentation
Hindu Undivided Families:
A HUF deed.
The account is opened in the name of KARTA or in the name of
the HUF business.
Certified true copies of return for last two/three years.
A HUF declaration that has been signed by all the coparceners
affirming the composition of the HUF.
Opening of Deposit Accounts Retail Banking Chapter 03
15. Documentation
A Trust/Nominee or Fiduciary Account
A certified true copy of the trust deed or the charter under which
it is opened.
Its byelaws;
A list of its trustees including their address and telephone number;
A resolution of the trustees to open the deposit account and the
manner it is to be operated.
Opening of Deposit Accounts Retail Banking Chapter 03
16. Documentation
Partnership Companies Should Submit
A certified true copy of partnership deed.
A list of all partners and their address mentioning if they are
limited partners.
Attested true copy of resolution of the partners to open the
account.
Power of attorney granted to a partner or an employee to transact
business.
PAN card
Telephone bill for address proof.
Opening of Deposit Accounts Retail Banking Chapter 03
17. Documentation
An Association/Club/Society should submit
Its certificate of registration.
A copy of its governing body resolution.
A certified true copy of its byelaws
List of management committee members.
Management committee resolution to open the account and the
manner it is to be operated.
Opening of Deposit Accounts Retail Banking Chapter 03
18. Documentation
Limited Companies should submit:
Their Memorandum and Articles of association.
The certificate of incorporation.
The certificate of commencement of business in case of public
limited companies.
Principal place of business.
Copy of PAN card.
Mailing address and fax number.
Proof of address.
Opening of Deposit Accounts Retail Banking Chapter 03
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