The document discusses various types of entities that can open bank accounts and the considerations for bankers when doing so. For individuals, minors cannot enter valid contracts but bankers must be careful with overdrafts. For partnerships, the partnership letter and deed outline account instructions and internal disputes can stop operations. For companies, bankers require documents showing incorporation and authorized signatories. For trusts, the trust deed outlines account operations. For HUF, the karta can bind family members but others also sign documents. For joint accounts, all holders must sign and any can stop payments.

2.  Under Indian Contract Act , a contract with or by a
lunatic is void. The reason being the lunatic being
of unsound mind is not competent to comprehend
a contract.
 If the banker without knowing that the person is
lunatic opens an account and enters into a
contract acting in good faith is protected. But
when once he gets a notice of lunacy of a person,
he should not entertain any contract either existing
or new.

3.  Under section 12 of Indian contract act 1872, a
sane man who is delirious from favor or who is
drunk that he cannot understand the contract, or
form rational judgment cannot enter into contract
while such delirium or drunkenness lasts.
When a customer who is drunk presents a
cheque across a counter the payment must be
witnessed.

4. Any person under the age of 18 yrs is a
minor. If a court appoints a guardian and
the minor is below 18 yrs the minority
extends up to 21 yrs.
A minor is not competent to enter into a
contract and all the contracts entered in by
him are void.
The banker can open an account but he
has to be careful that the account will
never be allowed to be overdrawn.
The minor can be a partner but cannot
be held liable for the liabilities of the
partnership.

5. Section 4 of the Indian Partnership Act 1932,
defines partnership as a relationship subsisting
between persons who have agreed to share the
profits of a business carried on by all or any of them
acting for all.
While opening an account the partnership letter
should be signed by all the partners. The purpose of
the business address, names and other details should
be clearly obtained.
The partnership letter and the deed should
contain as regards to instructions pertaining to
opening a bank account and the operations.
In case of any internal dispute among partners, if
any of them gives notice of stoppage of operations,
then the account would only be operative by all
partners jointly.
Death of the partner deserves the partnership. In
order to determine the liability of deceased partner
the banker should close the account

6.  Company is a legal entity and the formation of the company is
governed by Companies Act 1956.While opening an account on
company’s name the banker has to ask for:
 Certifies copies of memorandum and articles of association and
certificate of incorporation.
 Names of the directors
 Certificate of commencement of business.
 Copy of resolution appointing the bank as companies bank. And the
names of the persons authorized to operate that account along with
the signatures.
 Death of authorized signatories does not demand the stopping of
payments since the company is in existence.

7. According to Indian Trust Act 1882, trust is
an obligation annexed to the ownership of
a property, arising out of confidence
reposed in and accepted by the person for
the benefit of another person.
The person who reposes are declares
confidence is called the author of the trust.
The person who accepts the confidence
is the trustee. The person for whose benefit
the confidence is accepted is a
beneficiary.
The instrument by which the trust is created
is the trust deed. Bank has to study the trust
deed as regards to the opening and
operations of the account.

8. Where a hindu dies leaving a
business, the business is passed onto the
legal heads. It becomes HUF property. The
members of the family are called
Coparceners and eldest male child is the
manager or the karta.
The karta has the employed authority to
avail loan and execute necessary
documents. It binds all the members.
The other members of the family are also
required to sign the documents as a
precautionary measure even though legally
they are bound by the actions of the karta.

9. A joint account is an account opened by two
or more persons , while opening an account the
account opening form should be signed by all
the account holders.
Instructions for opening an account may be any of
the following:
 Either or survivor
 Former or survivor
 Both jointly
Any of them can stop payment of the cheque
issued by any bother joint account holder.
The instructions for operations in the account
will stand countermanded in case of
insanity, insolvency, death of any of the joint
holders and the operations in the account will be
stopped.

10.  SAFETY
 LIQUIDITY
 PROFITABLE
 PURPOSE
 DIVERSIFICATION OF RISK
 SECURITY

11. THE REPAYMENT DEPENDS UPON :
i) CAPACITY TO PAY
ii) WILLINGNESS TO PAY
iii) INCOME GENERATION
THE THREE ‘C’s ARE
CHARACTER, CAPACITY AND CAPITAL
THE THREE ‘R’s ARE
RELIABLITY,RESPONSIBILITY AND
RESOURCES

12. 70% OF THE DEPOSITS ARE DEPOSITS
REPAYABLE WITHIN ONE YEAR.SO THE
AMOUNT LENT IS TO BE AVAILABLE FOR
REPAYMENT OF DEPOSITS.
LIQUIDITY IS THE NATURE OF THE ASSEST TO
GET COVERTED INTO CASH.

13. IN ORDER TO CASRRY ON THE
OPERATIONS, TO RUN THWE MACHINERY OF
BUSINESS AND AT THE END TO EARN
SOMETHING OUT OF THE BUSINESS ACTIVITY
IN RETURN FOR THE EFFORTS PUT IN PROFIT IS
AIMED AT.
IN VIEW OF VARIOUS LENDING ACTIVITIES
AND VARIOUS OBLIGATIONS , A CLEAR CUT
PATH IS ENVISIGED KEEPING IN VIEW THE
PROFIT FACTOR.

14. WHILE LENDING THE PURPOSE OF THE
ACTIVITY FOR WHICH THE LOAN IS EXTENDED
IS TO BE GIVEN PRIORITY. LOANS FOR
UNDESIREABLE AND SPECULATIVE PURPOSES
CANNOT BE GRANTED.

15. SHOULD NOT LAY ALL THE EGGS IN ONE
BASKET. THE LOAN PORTFOLIO SHOULD BE
DISTRUBUTED TO DIFFERENT SECTORS,
DIFFERENT GEOGRAPHICAL AREAS AND
DIFFERENT SPECTRUM OF PEOPLE.

16. Since the funds that are lent to
public are the borrowed funds and
since they are to be paid on demand
or otherwise, the main priority of the
banker is the relisability of the funds
lent. In order to secure the funds, in
case of any eventuality, certain
precautions as regards to security are
taken. They are keep in
margin, relisability of
security, adequacy of the security
and free from any encumberence.