The document discusses key concepts related to cheque processing and payment between banks. It defines a paying banker as the bank upon which a cheque or bill is drawn and pays it. A collecting banker collects the proceeds of a cheque on behalf of a customer from the paying banker. The document outlines precautions a paying banker takes before honoring a cheque, reasons for dishonoring a cheque, statutory protections, and duties of a collecting banker. It distinguishes a paying banker, who is required to pay cheques drawn on it, from a collecting banker, who collects cheque amounts from paying bankers on behalf of customers.

3. MEANING OF PAYING BANKER
THE BANKER UPON WHOM A
CHEQUE IS DRAWN, OR AT
WHOSE OFFICE A BILL IS
ACCEPTED, AND WHO PAYS IT,
EITHER TO THE HOLDER OR TO A
COLLECTING BANKER, IS CALLED
THE PAYING BANKER.

4. PRECAUTIONS BEFORE
HONOURING A CHEQUE
1. PRESENTATION OF THE CHEQUE
2. FORM OF THE CHEQUE
3. SUFFICIENT BALANCE
4. SIGNATURE OF THE DRAWER
5. ENDORSEMENT
6. LEGAL BAR
7. MINOR PRECAUTIONS

5. DISHONOURING OF A CHEQUE
a) COUNTERMANDING
b) RECEIPT OF NOTICE OF DEATH OF A
CUSTOMER
c) RECEIPT OF NOTICE OF INSOLVENCY
d) RECEIPT OF NOTICE OF INSANITY
e) RECEIPT OF NOTICE OF GARNISHEE ORDER
f) RECEIPT OF NOTICE OF ASSIGNMENT
g) WHEN A BREACH OF TRUST IS INTENDED
h) DEFECTIVE TITLE
i) OTHER GROUNDS

6. STATUTORY PROTECTION
• STATUTORY PROTECTION UNDER
INDIAN LAW: SEC 85 OF INDIAN
NEGOTIABLE INSTRUMENTS ACT,
1881
• ORDER CHEQUE
• ENDORSED BY PAYEE OR HIS ORDER

7. PAYMENT IN DUE COURSE
i. APPARENT TENOR OF THE
INSTRUMENT
ii. PAYMENT IN GOOD FAITH AND
WITHOUT NEGLIGENCE
iii. PAYMENT TO A PERSON WHO IS
ENTITLED TO RECEIVE PAYMENT

8. RIGHTS OF A HOLDER IN DUE
COURSE
• HE OBTAINS A BETTER TITLE
• DEFECTIVE TITLE WILL NOT ADVERSELY AFFECT HIS
RIGHTS
• HE CAN PASS ON A BETTER TITLE TO OTHERS
• EVERY PARTY IS LIABLE TO HIM UNTIL THE FINAL
DISCHARGE OF THE INSTRUMENT
• EVEN THE DRAWER CANNOT CLAIM INVALIDITY
• HIS CLAIM CANNOT BE DENIED

10. MEANING OF COLLECTING
BANKER
• COLLECTING BANKER IS THE ONE WHO
ACCUMULATES THE PROCEEDS OF A
CHEQUE FOR THE CUSTOMER.
• BANKER AS A HOLDER FOR VALUE
• BANKER AS AN AGENT

11. STATUTORY PROTECTION
• CROSSED CHEQUES ONLY
• COLLECTIONS ON BEHALF OF CUSTOMERS AS AN
AGENT
• IN GOOD FAITH AND WITHOUT NEGLIGENCE
• PROTECTION EXTENDED TO DIVIDEND WARRANTS,
DRAFTS, ETC
• NEGOTIABLE INSTRUMENTS ACT 1922

12. DUTIES OF A COLLECTING
BANKER
1. EXERCISE REASONABLE CARE AND DILIGENCE IN
HIS COLLECTION WORK
2. PRESENT THE CHEQUE FOR COLLECTION
WITHOUT ANY DELAY
3. NOTICE TO CUSTOMER IN THE CASE OF
DISHONOURING OF A CHEQUE
4. PRESENT THE BILL FOR ACCEPTANCE AT AN EARLY
DATE
5. PRESENT THE BILL FOR PAYMENT
6. PROTEST AND NOTE A FOREIGN BILL FOR NON-
ACCEPTANCE

13. PAYING BANK VS. COLLECTING
BANK
PAYING BANK
• THE BANKER ON WHOM A CHEQUE IS
DRAWN.
• THE BANKER WHO IS REQUIRED TO
PAY THE CHEQUE DRAWN ON HIM BY
A CUSTOMER
COLLECTING BANK
• A BANKER WHO UNDERTAKES TO
COLLECT THE AMOUNT OF
A CHEQUES & BILLS FOR HIS
CUSTOMER FROM THE PAYING
BANKER.
• A BANKER IS UNDER NO LEGAL
OBLIGATION TO
COLLECT CHEQUES DRAWN UPON
OTHER BANKS FOR A CUSTOMER