LAW AND PRACTICE OF BANKING

VIKAS DONGRE

BANKER AND CUSTOMER

Banker: A banker is one, who performs the business of banking. Indian Banking governed by RBI, BR Act, Government.. The Regulations are not uniformly applicable, but depends on type of bank.

Banker as an Intermediary
Money Surplus Units BANKS Money Deficit Units

Liability - Asset transformation: Deposits-Loans Size transformation: Small Deposits-Large Loans/Investments Maturity transformation: Matches Maturity/Liquidity Requirements Risk transformation: Diversified

Classification
Table

Legislation
Banks deal mostly in public money Role in Monetary and Fiscal Functions Need for Catering to Rural, Semi Urban and Priority Sectors Role in Regulation Inflation (CRR-SLR) RBI Act, 1934 and BR Act 1949 were passed

RBI Act, 1934

RBI Central Bank -1st April 1935 Note issue Bankers Bank Banker to the Government Developmental and Promotional Functions

BR Act, 1949
Earlier Banking companies Act Abuse of powers by some promoters Safe guard interest of depositors Indian Companies Act, 1913 contained regulations for Banking co, but were inadequate BR Act, 1949 was passed

Definition BR Act, 1949

According to Section 5(b) of the Banking Regulation Act, 1949, the term 'Banking means 'accepting for the purpose of lending or investment of deposits of money received from the public repayable on demand or otherwise and 88 by cheque, draft order or otherwise".

Explanation to Def.
a. b.

Two Essential Functions: accepting deposits lending or investing the same. deposits of money from the public - The banker accepts deposits of money and not of anything else public - accepts deposits of money from anyone who offers his/her money for such purpose. Time and mode of withdrawal of the deposits

Bank different from institutionsGrounds

Deposit Accounts: For General Public. SB, RD, FD Current Accounts: For Business People Cheque Facility: Mode of Transfer and Withdrawal Collection of Cheques and Drafts Money Lenders- Not Banks

Customer
"to constitute a customer there must be some recognizable course or habit of dealing in nature of regular banking business- Sir John Paget 1st: Account Holder 2nd:recognizable course or habit of dealing 3rd: Dealing must be banking Business Individual, firm, Company, Government Department etc..

General Relationship
Starts with a Contract: Offer+Acceptance Offers to open an account + Banker Accepts= Contractual Relationship

Relationship as Debtor and Creditor

Bank is a Debtor and Customer is a Creditor Primary general relationship Bank Accept Deposit Debtor/Borrower Customer Deposits Money Creditor/Lender (Bank Owes Money to the Customer to such extant) Note: Banker is a Privileged debtor and differs from ordinary commercial Debtor relations

Relationship as Creditor and Debtor

Banker is a Creditor and Customer is a Debtor bank lends money to the customer- Creditor/Lender customer borrows money-Debtor/Borrower

Relationship as Trustee - Beneficiary

Banker as a Trustee and Customer as Beneficiary Covered under Section 3 of the Trust Act, 1882 'Trustee' is "one to whom property is entrusted to be administered for the benefit of other". beneficiaries are persons for whose benefit property is held by trustees Bank accepts Securities, Valuables - Trustee Customer for the safety of valuables keeps it with a trusted (Trustee)- Beneficiary- Benefited Banker should preserve the Valuables and had over to the Customer on demand. Note: possession with BankerOwner - Customer

Bailee - Bailer Relationship

A 'bailment' is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. Bank - Bailee and Customer - Bailor The 'bailee' is the party to whom personal property is delivered under The 'bailor' is the party who bails or delivers goods Sometimes Dual Relation i.e Trustee and Bailee Banker accepts Documents, Shares, Valuable etc for Transfer or Safe Cutody- Bailee- Cant use for Personal Interest- return when demanded-Liable for Loss

Pawnee - Pawner Relationship

Banker - Pawnee and Customer Pawner 'Pawnee' is a person with whom a pledge is made for payment of money lent. 'Pawner' is a person depositing a pawn 'Pawn' is a thing given, deposited or left in another's keeping as a security for debt E.g. Loan on Gold Ornaments Possession- Banker Owner- Customer

Principal and Agent

Banker is Agent and Customer is Principal "An 'agent' is a person employed to do any act/Represent for another The person for whom such act is done is called the 'Principal'. Collects Cheques, Drafts, Promissory bills ECS Facilities for Electricity, telephone etc Bank Agent acting on Behalf of the Customer.

Lessee and Lessor

Banker is a Lessee and Customer is a Lessor Lessee- Owner-Interested in Leasing Out(Worng) Lessor-Enjoys the Property- Specified period Customer- Hires Bank Locker-Lessor Bank-Owner of Locker- Leases- Lessee Lessee tenant Lossor-owner

Mortgagee and Mortgagor

Banker is a Mortgage and Customer is a Mortgagor 'Mortgagee' is a creditor having a lien on land for his debt 'Mortgagor' is one who transfer an interest in specific immovable property Customer takes a loan on a property-mortgager Banker gives loan on land-Mortgage

Guarantor and guarantee

Bank as Guarantor Guarantor is one who gives a promise to answer for the payment of some debt or the performance of some duty in the case of the failure of another person A bank, as guarantor gives guarantee to its customer by issuing a 'letter of credit'. It is a kind of credit facility to its customer

Special Relationship between Banker and Customer

Obligations to honour Cheques Obligations to maintain Secrecy of Accounts Rights of the Banker: General lien Rights of Set-off Right of Appropriation Right to claim incidental charges Law of limitation and banker Right to charge interest

Obligations to honour Cheques

statutory obligation to honour cheques issued by his customers Account to have sufficient funds Cheque to be presented within reasonable time and a postdated cheque No garnishee order or attachment

Garnishee Order
Order of the court to freeze the account Debtor fails to pay-creditor approaches court-court gives garnishee order on debtors banker Happens in two steps 1. Order Nisi: freeze the account Show cause from banker as to why the amount in the debtors account should not be given to creditor 2. Order Absolute: court orders bank to pay either full or part money to the creditor

Wrong full dishonor of cheque

Wrongful dishonor- Banker must compensate 1. trader:Ordinary damages+damages for reputation loss 2. Non trader: ordinary damages-Loss of reputation if proved then damages should be provided

Obligations to maintain Secrecy of Accounts

Banker must maintain secrecy or customer information and transactions Section 13 of the Banking Companies (Acquisition and Transfer of undertakings) Act, 1970 Exceptions: as under laws: The Income Tax Act, 1961; Under the Companies Act, 1956 ; Under the Reserve Bank of India Act, 1934

Right of Lien
legal claim to hold property as security untill the debt is paid In normal course lien is only a security and creditor cannot sell to adjust to the debt Particular lien: Lien for a particular debt (eg. Sewing machine and tv repair) General lien: lien for whole of the debt bankers lien general lien and has right to sell the security and adjust to the debt

Right to set off

Set off a particular debt by combining two accounts. E.g. A has defaulted to pay a debt of Rs.10,000 on a overdraft a/c . he has a SB a/c having a balance of 25,000 the banker can set off the debt by combing both the accounts

Right of Appropriation
debtor has the right to direct his creditor to appropriate amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer

Right to Charge Interest, Incidental Charges

banker has the right to charge interest on the advances The banker also has the right to charge charges for the services rendered to the customers

Chapter 2 Paying Banker

Introduction
The banker upon whom duty to pay the amount of the cheque is imposed, is called the paying banker. The 'paying banker' is defined as "is the banker to whom the order to pay, where the order takes the form of a 'cheque' is addressed when a person opens an account with a particular branch of bank".

Negotiable Instruments Act, 1881

all the transactions do not take place in terms of money businessman may not have ready cash may not like to carry huge amount of money needs certain facilities to enable him to facilitate the business dealings adopted a new method of exchanging documents in place of actual currency These documents which are used as substitute for money, as known as negotiable instruments.

Meaning
'Negotiable Instrument' consists of two parts 'negotiable' and 'instrument 'negotiable' means transferable by delivery, and the word 'instrument' means 'a written document negotiable instrument means a written promise or order to pay money whose ownership can be freely transferable by one person to another.

Definition
A 'Negotiable Instrument' is a piece of paper which entitles a person to a sum of money mentioned in it, and which is freely transferable from person to person. It serve as substitute for money A 'Negotiable Instrument' is a written promise or order to pay money which may be transferred from one hand to another as a substitute for money "a promissory note, bill of exchange, or cheque, payable either to order or to bearer, whether the words 'order' or 'bearer' appear on the instrument or not". -- NI Act, 1881

Definition Explanation
The instrument is freely transferable by custom of trade or law. The holder of the instrument is entitled to receive the money represented by the instrument. The person who obtains it in good faith for value gets it free from all defects and is entitled to sue upon it in his own name

Characteristics of a Negotiable Instruments

must be in writing must be signed by its marker must contain an unconditional promise or order to pay must contain certain (i.e., definite) amount of money must be freely transferable from one person to another

Kinds of NI
Promissory Note:a promise in writing by a person to pay a certain sum of money to a specified person written and signed promise to pay a certain sum of money to a specified person or his order. Rs. 5000 Bangalore, 5th April 2008. Three months after date, I promise to pay 'B' or order the sum of rupees Five Thousand for value received. To: 'B' (A) Signatures across the stamp Addresses_______________

Kinds of NI
Bill of Exchange: is a three party instrument The term 'bill of exchange' may defined as an order, in writing, requiring a certain person to pay a certain sum of money to specified person Drawer: Maker Drawee: Person ordered to pay money Payee: to whom money is payable

Cheque
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand A cheque is always drawn on a specified banker, and A cheque is always payable on demand.

Parties to a Cheque
Drawer: He is a person who makes the cheque Drawee: He is a person who is directed to pay the amount. In other words, he is the banker on whom the cheque is drawn. Payee: He is a person to whom the amount of cheque is payable

Dating of the cheque

Antedated: old dated cheques Post dated: cheques having a later dates

Holder
Holder of a negotiable instrument is the person who is capable of receiving the amount due upon it "The 'holder' of a promissory note, bills of exchange or cheque means any person, entitled in his own name, to the possession thereof and to receive or recover the amount due thereon from the parties thereto- NI Act 1881

Who can be a holder

Payee Endorsee Bearer Someone who finds or steals a bearer instrument or takes an instrument under a forged endorsement is not a holder An agent holding an instrument for his Principal is not a holder

HoIder in due Course

a holder in due course is a person who takes the possession of negotiable instrument in good faith and for value (i.e., consideration).

Conditions of 'Holder in due Course

must be a holder of the Negotiable Instrument: "due course" status is that a person should be holder first He must have obtained the Negotiable Instrument for valuable consideration holder must be a possessor in case of a bearer instrument holder must a Payee or endorsee in case of an order instrument must have obtained the Negotiable Instrument in good faith

Methods of Negotiation
Negotiation by delivery Negotiation by Endorsement and delivery

Negotiation by delivery
In case of bearer instruments, the negotiation can be made by simple delivery of the instrument. Delivery means a voluntary transfer of possession of the instrument from one person to other transferring of possession without an intention to transfer of property does not constitute a delivery

Negotiation by endorsement
The holder must endorse the negotiable instrument, i.e., he must sign his name on the instrument; and The duly signed instrument must be delivered to the transferee (endorsee) term 'endorsement' may be defined as "signing one's name on the negotiable instrument for the purpose of transferring it to another person

Essentials of a Valid Endorsement

made on the instrument It should be made in ink made by a holder of the instrument an intention to negotiate endorsement must be of the entire instrument

Types of Endorsements
Blank Endorsement:If the endorser signs his name only, the endorsement is said to be in blank Full or Special Endorsement:endorser signs his name on the instrument and also writes the name of the endorsee
Restrictive Endorsement:when the endorser signs his name on the back of the instrument and adds some words by which the rights of endorsee are restricted e.g. "pay the amount to 'B' only"

Types of Endorsements
Partial Endorsement:endorsement which transfers the rights to receive only a part payment of the amount E.g. 'X' was the holder (endorser) of a bill for Rs. 5,000/-. He endorsed it as Pay to 'A' or Order Rs. 2,500". This is an invalid endorsement

Types of Endorsements
Conditional Endorsement: payment on the instrument is made dependent on the occurrence of a specified event e.g. pay to 'A, provided he completes renovation of 'X's house by August 2006 Valid endorsement. The instrument contains an unconditional order, only the endorsement contains condition. Can be further transferred but at the risk of endorsee.

Types of Endorsements
Sans recourse Endorsement: When the endorsee does not want to incur any liability in further negotiation as endorser; in such cases, he may exclude his liability by express words in the endorsement. He can do so by adding certain words such as "sans recourse

General Rules regarding Endorsements

Signature of the Endorser Spelling Made in Ink Full and complete name In case of illiterate person: Thumb impression + attestation from a literate person+address

Crossing of Cheques
1. open cheque: payment made at the counter 2. Crossed cheque: payment made through the account drawn on specified banker Further, in case of a crossed cheque generally, the following two bankers are involved for its payment Paying Banker Collecting Banker

Types of Crossing
General Crossing:when two parallel transverse lines are drawn across the face of the Cheque. With or without any words are drawn on the left hand top corner Special Crossing:name of some banker is written across the face of the cheque. payee or holder of the cheque can get it collected only by opening an account with the specified banker whose name appears across the cheque

Types of Crossing
Not Negotiable Crossing: 'Not Negotiable' may also be written in both types of crossing - general and special, and a crossing with these words is said to be 'Not Negotiable' Crossing

Precautions to be taken by a Paying Banker:

Precaution regarding 'form of the Cheque: Though the form of cheque is not defined, Banking practices follow some convention with regards to the cheque Precaution regarding date of Cheque : must bear a date. Post-dated Cheques: No honouring. Stale Cheque: Out of date cheque. More than 6 month old

Precautions to be taken by a Paying Banker:

Precaution regarding amount: The banker should see that the amount mentioned both in figures and words in the cheque are the same. In case the amount in words differs from the amount in figures, the banker is justified in returning the cheque Precaution regarding 'Sufficiency of Funds' There should be sufficient funds in the account of customers for payment of the cheque; inadequacy of funds in the customer's account will result in the dishonour of the cheque

Precautions to be taken by a Paying Banker:

Precaution regarding Drawer's Signature: paying banker to confirm the signatures of his customers. Incase of mismatch not to houour Precaution regarding Material Alteration :an alteration is considered as material alteration if it affects the operation of the instrument; before honouring a cheque, the paying banker should see that material alteration is confirmed by the initials or by signature of the drawer. If a cheque is signed by more than one person, material alteration should be confirmed by all the persons

Precautions to be taken by a Paying Banker:

Precaution regarding Mutilated Cheques : A multilated cheque is one which is torn into two or more pieces. if the cheque was multilated with the intention to cancel it. If such intention is evident, the banker should not pay the cheque. In other cases, banker should get the drawers confirmation on the multilated cheque for payment.

Precautions to be taken by a Paying Banker:

Precaution regarding Proper Endorsement: Banker to dishonour if the endorsement is improper. (rules for proper endorsement to be followed) Precaution regarding Order of Payment : The cheques must be paid in chronological order of receipt; serial number of their issue or date is not important

Statutory Protection to the Paying Banker

Protection in case of Order Cheque (Section 85(1) Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course- means even if the endorsement is forged the banker will not be liable for making payment. For getting the protection, the banker must follow the following two conditions Endorsement must be regular : if the signature is tallying either with records or if signature or name is tallying

Statutory Protection to the Paying Banker

Payment must be made in Due Course: Payment made at or after the maturity of a bill of exchange to its holder in good faith and without notice that his or her title to the bill is defective "payment in accordance with the a parent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount mentioned therein

Conditions for payment in due course

payment must be made in accordance with the apparent tenor of the instrument. payment must be made in good faith and without negligence. payment is made to a person who is in possession of the instrument. payment is made to the payee only when there are no circumstances to doubt bonafides of the payee as regards his title to the cheque

Statutory Protection to the Paying Banker

Protection in case of Bearer Cheques : bearer cheque always retains its bearer character irrespective of the type of endorsement The banker shall be discharged if he makes payment of an uncrossed barer cheque to the bearer in due course In case, a bearer cheque is stolen or lost and the banker honours the cheque without any knowledge, the banker will be discharged from his duty under the protection

Statutory Protection to the Paying Banker

Protection in case of Crossed Cheques: banker making payment of a crossed cheque is, thus, given protection (Coditions) He has made payment in due course The payment has been made in accordance with the requirement of the crossing Regular crossing-pay through account and not over counter Special Crossing: paid through the specified banker only

Statutory Protection to the Paying Banker

Protection in case of Obliterated Cheques: obliterated (i.e., destroyed or erased) at the time of presentment for payment, a cheque does not appear to be crossed or where the crossing is obliterated banker making the payment in good faith and without negligence will be discharged from his liability

Statutory Protection to the Paying Banker

Protection in case of Payment of Cheque by Mistake (One man's cheque into another man's account ) Mistake of Law: non recoverable Mistake of fact: recoverable.

Statutory Protection to the Paying Banker

Protection in case of Forgery: Forgery of customerbanker liable- forgery of endorsement-banker not liable. Endorsement to be regular.

Grounds for Dishonor of Cheque

When the Cheque is post-dated: If honours, then customer countermands payment banker will be liable. Honors a post dated cheque and another cheque(current date) comes for clearance, banker cant dishonour for insufficient funds When the Cheque is out dated i.e., Stale: refuse generally but can honour after confirming with drawer When the Cheque is mutilated: creates suspicion about validity so dishonour

Grounds for Dishonor of Cheque

funds in the customer's account are insufficient: refuse payment not supposed to make part payments. Drawer is criminally liable Signature does not agree: Not tally with bank records banker has a claim for Set-off :claims against his customer (e.g., claim for loan given) customer has countermanded (i.e., stop) Payment customer has died: notice to reach the banker before cheque is honoured Garnishee Order

Wrongful Dishonour
Liability towards the drawer of the Cheque: Ordinary damages+Loss of reputation if proved Liability towards the Payee: No contractual obligation b/w payee and banker so no damages to payee.

Chapter 3 Collecting Banker

Meaning
One who collects a cheque drawn upon another banker for his customer. How ever there is no legal obligation for the banker to collect the cheques, but in practice because of crossing collection of cheques has become important and an obligation for banker

May act as
May act as a Holder for Value Act as an agent Holder for Value : Banker collects the cheque and allows the customer to withdraw the amount before collection. E.g Receives a cheque in settlement of existing debt Act as an Agent: becomes an agent when he collects a cheque on behalf of the customer. Credits the customers account only after realization.

Duties
Collect cheques only for his customers While opening of account banker should comply with statutory guidelines like introduction, KYC Examine the regularity of endorsements Examine validity of title of customer Ensure that cheques are crossed Present the cheques for clearance within reasonable time Inform the customer incase of dishonor Make enquiries in case of suspicious transaction

Negligence
Failure to verify regularity of endorsements Opening of new account without complying to statutory guidelines Crediting private accounts when it needs to be paid to official account Like: agent-principal Trustee- trust Partner-firm Directors-company

Conversion
Wrongful interference with another persons goods or property E.g. A issued a cheque to B C stole it from B C deposits it with his banker If banker negligently accepts the cheque and gets it cleared. Banker is said to be a party to conversion and will be held liable

Protection
Statutory protection against risk of conversion(sec 131 of NI Act) (conditions) Cheque is crossed Banker had acted in good faith Banker has not acted in negligence No suspicion in normal course

Chapter 4 Types of Customers and account holders

Introduction
Most Basic activity: Accept deposits and Advance(lend) money Pay interest on deposits and charge interest on lons. Difference profit accepts deposits from the public engaged in various kinds of economic activity, belonging to different segments of the society and different financial position

Types of Deposits:
Demand Deposits: which can be withdrawn any time from the bank with no time period for withdrawals. obligation of a banker to pay a certain sum of money to depositor or specified individual on demand Time Deposits: which can be withdrawn only after a given period of time.

Current Account
deposit account repayable on demand Current accounts are opened by businessmen, firms, companies, public enterprises, etc running account between the customer and the banker The credit balance to the customer's current account is always repayable on demand No restrictions on no. of deposits or withdrawals no interest is paid by the banker on current account deposits Loans and advances granted by the banker is through the current accounts

Savings Bank Account

is an account for people who wish to save a part of their current income for their requirements and to earn certain interest income on their savings salaried class, low and middle income groups, farmers, small traders, etc. amount of money can be deposited any number of times to their account by the account-holder There are restrictions on the withdrawals from this account. Since this account is opened in order to promote savings, banks do not allow frequent withdrawals

Can be individual or Joint minor can open this account but the account is to be operated by a guardian

Fixed Deposit Accounts

'Fixed Deposit' means the money deposited by a customer with a bank for a fixed specified period of time- repayable on the expiry of the specified period of time advantageous as it ensures safety of his/her money and provides steady and regular fixed income Bankers also prefer fixed deposits because such deposits enable the bankers to use the funds profitably for relatively longer periods as the funds are not returnable on demand

a relatively higher rate of interest than any other types of deposit accounts The minimum period of a fixed deposit is 30 days while the maximum period is three or more years. withdrawable only after the expiry of the period can be withdrawn only by returning to the bank; the fixed deposit receipt duly signed Interest on may be made payable either quarterly or half yearly or yearly or on the maturity

Recurring Deposit Account

also known as 'Cumulative deposit account accounts is deposited in monthly instalments for a fixed period of time and is repaid to depositors along with interest on maturity encourage regular habit of saving by the public

Opening of Current and Saving Deposits Accounts

Application on a Prescribed Form prescribed forms for opening different types of deposit accounts and for different types of persons mention his name, occupation, full address, specimen signature and the name and signature of the introducer Affix photograph Also contains certain rules and regulations to be followed by account holder

Introduction
(RBI) has issued directives to all commercial banks requiring them to obtain introduction (existing customer) in all types of accounts with a view to checking benami or fictitious transactions tells the banker that the prospective customer is indeed a respectable member of society and not an undesirable person no legal responsibility of a introducer Not liable for the acts of the account holder Responsibility is confined only to the identity of the depositor being known to him

Risks in Opening Accounts without Proper Introduction

Statutory Protection Not Available Risk in Case of Overdrafts

Photograph of the Applicant

Passport size photograph with signature help to prevent impersonation and for easy identification of account holders

Specimen Signatures
Along with the application in a prescribed form and proper introduction and photograph, the applicant must also give his specimen signature to the banker in the prescribed form/card name in capital letters first, and has to sign his full signature customer's signature thereon must strictly tally with that on the specimen signature card

Compulsory Quoting of PAN/GIR Number

Mandate
Mandate is an authority in writing by which the account holder empowers another person to operate on the account on his behalf mandate is generally used for delegating powers to operate on the account during the temporary absence of the account holder Specimen signature on the authorized person to be taken

Verification of Documents
like memorandum of association, articles of association, bye-laws, partnership deed copy, registration certificate duly obtained from the Registrar of Firms etc.VAT certificates etc

Tendering of Deposit of Money

It is essential that the new party (applicant) must deposit some amount in cash at the time of opening of an account. An applicant becomes a customer only after deposit of some money

Pay-in-Slip Book, Cheque Book and Pass Book

customer is supplied with a pay-in-slip book. The pay-in-slip is a document which is used for depositing cash or cheque or bill into the account. It has a counterfoil which is returned to the customer for making necessary entries in his books. also supplied with a cheque book. A cheque leaf is used for the purpose of withdrawing money. If the customer does not like to have a cheque book, he can make use of the withdrawal form for withdrawing money

Operating of Current and Saving Bank Account

Operating the bank account means that the depositing money and cheques into the bank and withdrawing money from it through withdrawal forms or cheques Forms used in operating CA and SB Pay-in-slip Book. Cheque Book.
Pass

Book

Pay in Slip
pay-in-slip book contains slips perforated counterfoils to be filled in by the depositor at the time of depositing cash, cheques, drafts, bills slip contains information relating to the name of the depositor, number and nature of the account, among to be deposited, details of denominations of currency notes and coins (in case of cash), the cheque number and the name and place of the drawee bank

The Cheque Book

The cheque book contains blank cheque form with counter foils - serially numbered- is used to withdraw money from the bank - cheque book issued to the customer is recorded by the bank

The Pass Book

is a small bound book issued by the banker to his customer contains an extract of the customer's account as it appears in the bank's ledger authenticated record of dealings between the customer and the banker purpose is to enable the customer to ascertain whether the entries made therein are correct or not prepare Bank Reconciliation statement at the end of every month with the help of the Pass Book

Effect of entry inPass Book

In favour of Customer: any extar credit entry in the pass book can be used as an evidence in favour if the customer. Banker by mistake entered a higher amount in the pass book, customer believeing the entry issued a cheque. Banker cant dishonour Against the customer: wrong debit has been givencustomer on finding out the mistake may get the balance rectified- in case the customer in negligent, the banker will not be liable

Opening and Operation of Fixed Deposit

can be opened by any individual, firm, society, company, corporation, association, trust etc depositor has to fill in an application form in which he mentions the amount of deposit, period of deposit, his name and address and his nominee, and puts his specimen signature the amount of deposit in cash or by cheque drawn in his favour banker then issues a receipt called Fixed Deposit Receipt (FDR),