MODELANSWER

BANKINGLAW &PRACTI
CE
ACCORDI
NGTOKSLUPATTERN( 2020)

SUBJECTTEACHER:Mr
sYasmeenTabassum
(Vi
cePr
inci
pal)

1.DISCUSS THE VARI

OUS TYPE OF BANKS ALONG WI
TH THEI
R
FUNCTIONS

Broadl y,banksar ecl assi fiedei theri nt ocommer cialbanksorascent ral

bank.Theyar ealsocl assi fiedasSchedul edandNon- schedul edBanks.
Schedul edbankshav ebeeni ncl udedi nt hesecondschedul eoft he
Reser veBank, andf ulfilst hef ol l
owi ngt hreecr it
eria:
1.Itmusthav eapai dupcapi tal ofatl eastRs.5l akhs.
2.I tmustf ulfi
ltheRBInor msaboutnoact i
v i
tythatmaybedet riment al
tothedeposi t
ors’inter est s.
3.ItmustbeaCor porat ion( notapar tner shiporasi ngleowner shipfi
rm) .
Non- Schedul edBanksar eexcl udedf rom t heSecondschedul eofRBI .
TheReser veBankdoesnotexer cisemuchcont rolov erthem,butt hey
reportmont hlytoRBI .
Thecent ralbankhast hepr imar yf unct i
onofr egulat i
ngcommer cial
banks and ot hereconomi c act iviti
es i nt he economy .I tact s as a
Banker ’
sBank.I nI ndi a,t hecent ralBanki st heReser veBankofI ndi
a.I t
i
st he apex bank who cont rol s al lot herbanks by r egul at
ing and
super visingt heiract ivi
t i
es.
Commer cialbanks,Thesear et hosebankswhi ch pr ovidebanki ng
servicest opeopl ewi thapr ofi
tmot ive.Theychar geacer tainpr escri
bed
amountf ort heser vicest heypr ov ide.
Ther ear esev eralt ypesofcommer cialbanksf unct i
oni ngi nI ndiabased
upondi fferentcat egor ies:
I.Publ i
cSect orBanks–Maj orityst akei sheldbyGov er nment
•Stat eBankofI ndi aandi tsassoci atebanks:Theseassoci atebanksar e
StateBankofBi kaner&Jai pur,St at eBankofHy der abad,St ateBankof
My sor e,St ate Bank ofPat iala,and St ate Bank ofTr av ancore.•
National isedBanks–Thesear et hosecommer ci
albankst hathav ebeen
national i
z edf orfulfil
li
ngt hesoci al obj ectivesoft hegov er
nment .
Ther ear e20Nat ional isedbanksi nI ndi a.Thesear e–Al lahabadBank,
Andhr a Bank,Bank ofMahar asht ra,Bank ofBar oda,Canar a Bank,
Cent ralBankofI ndia,BankofI ndia,,Cor porationBank,DenaBank,
IndianOv er seasBank, IDBIBankLt d.,OrientalBankofCommer ce, Indian
Bank,Punj ab&Si ndBank,Punj abNat i
onalBank,Uni onBankofI ndi a,
Syndi cat eBank, Uni tedBankofI ndia,UCOBank, andVi jayaBank.
•Regi onalRur alBanks( RRB) – Thesebankshav ebeenest abl ishedt o
strengt hent her uraleconomy .Theyf acili
tatet hecr edi tanddeposi tf low
forf armer s,ar tisans,l abour er si nt heirlimi t
edl ocalar ea.Thesebanks
arej oint lyownedbyt hecent ralandst ategov ernmental ongwi tha
sponsorcommer cial bank.
II
.Pr ivat e Sect orBanks – Maj orit
y shar e capi tali s wi th pr i
vat e
i
ndi vidual s&cor por ates
•Ol dPr ivat eBanks–Ther ear ef ourteenol dpr ivatebanksoper at i
ngi n
India.These banks wer e notnat ionalized when ot herbanks wer e
nat i
onal izedi n1969and1980.Thesear e-Cat hol i
cSy r
ianBankLt d.,
Dhanal akshmiBank Lt d.,Ci tyUni on Bank Lt d., Feder alBank Lt d.,
LakshmiVi lasBankLt d.,ING Vy syaBankLt d.,Kar ur VysyaBankLt d.,
Kar natakaBankLt d.,,Nai nitalBankLt d.,Rat nakarBankLt d.,Jammu&
Kashmi r Bank Lt d. ,Sout hI ndi an Bank Lt d. ,SBI Commer cial&
Internat ional BankLt d,andTami lnadMer cant il
eBankLt d.
•New Pr i
v ateBanks-Ther ear esev ennew pr i
v atebanksf unct ioningi n
theI ndianeconomy .Thesear e-Axi sBankLt d.,Dev elopmentCr edi tBank
Ltd, I
CI CIBankLt d.,IndusI ndBankLt d.,Kot akMahi ndr aBankLt d.,HDFC
BankLt d.,andYesBankLt d.
•For ei
gnBanks-Thesebankshav et heirr egisteredheadof f i
cesi na
foreigncount r
y,whi let heyoper at ethei rbr anchesi nI ndia.Theycan
oper atei nI ndiaei thert hroughwhol ly-
ownedsubsi diari
esort hrough
branches.Ther ear e32f oreignbanksoper ati
ngt heirv ar i
ousbr anchesi n
India.
•Co- oper at iveBanks–Cooper at ivebanksar et hoseschedul edbanks
thatar er egul atedbyRBI ,underacooper at i
vest ruct uret opr ov idecr edi t
to allact egor i
esofbusi nesses.Thei rowner shi pst ructurei suni que
wher el ikemi ndedi ndividualsandcompani espooli nmoneyt oget hert o
suppor tcr edi tfacilit
iest obusi nesses.Thesecanoper at eineit herUr ban
orRur alset ti
ng.Thati s anot hercr it
er i
at o di fferent i
atet hese co-
oper ativebanks.

2.WRITE AN EXPLANATORY NOTE ON THE FUNCTI

ONS OF
COMMERCIALBANKOFINDI
A.
I
nmoder neconomycommerci
alBanksplayanimport
antr
olei
nt he
fi
nanci
alsect
or.ABankisaninst
it
uti
ondeal
i
nginmoneyandcredit
.
Credi
tmoneyi st
hemajorcomponentofmoneysuppl
yinamoder n
economy .Commer ci
albanksar ethecreatorsofcr edit
.Thest rengthof
economyofanycount rybasicall
ydependsonasoundandsol vent
bankingsy stem.
A Commer ci
albanki sapr ofi
tseekingbusi nessf ir
msdeal ingi n
moneyorr atherclaimst omoney .I
tsafeguardst hesavingsofthepubl ic
andgi veloansandadv ances.
TheBanki ngCompani esActof1949,def inesbankingcompanyas
“acceptingfort hepur poseofl endi
ngori nv estmentofdeposi tmoney
from thepubl i
c, r
epayableondemandorot herwiseandwi thdr
awabl eby
cheque, draf
ts,orderorot her
wise”.

 
   
  
  
FUNCTI ONSOFCOMMERCI ALBANKS: -
Moder ncommercialbanksperf
orm av ari
etyoffuncti
ons.They
keept hewheel sofcommer ce,tr
adeandi ndustryalwaysrevol
vi
ng.
Majorf uncti
ons ofa commer ci
albank are:-Pr i
mary orBanking
functi
onsandSecondaryorNon-Banki
ngfunct
ions.
Pr i
mar yFuncti
ons:-
Commer ci
albanks havetwo i
mpor t
antbanking f
unct
ions.One i
s
accept
ingdeposi
tsandot
heri
sadvanci
ngloans.
1) Deposi
ts:
-
Oneofthemai nfunct
ionsofabankistoacceptdeposi
tsf
rom t
he
publ
i
c.Deposi
tsar
eacceptedbyt
hebanksi
nvar
iousf
orms.
a) Cur
rentAccountDeposi
ts:
-
Curr
entAccount sareusuallyopenedbybusi nessmenwhohav ea
numberofr egulartransact
ions wit
ht he bank,bot h deposi
ts and
wit
hdrawls.Thereisnor estr
ict
iononnumberandamountofdeposi ts.
Thereisalsonorestri
cti
ononwi t
hdr
awls.Nointeresti
spaidoncur r
ent
deposi
ts.Banksmayev enchar geint
erestforpr ovi
dingthi
sf aci
li
ty.
Theseaccountsar eal
soknownasdemanddeposi tsasamountcanbe
wit
hdrawnondemand.
b) Sav
ingAccountDeposi
ts:
-
Savi
ngAccount sar eopenedbysal ar
iedandotherlessincomepeople.
Therei
snor estr
icti
ononnumberandamountofdeposi ts.Wit
hdr
awl s
aresubjecttocer t
ainrest
ri
ctions.I
tearnsInt
erestbutlessthanfi
xed
deposi
ts.Itencouragessavinghabitamongsal ar
yearnersandothers.
Savi
ngdeposi t
sar eanimportantsour
ceoffundsforbanks.
c) Fi
xedAccountDeposi
ts:
-
Depositsi nfixedaccountaretimedeposit
s.Moneyunderthisaccounti s
deposi
tedf oracer t
ainfixedper i
odoftimevaryi
ngf r
om 15day st o
sever
aly ears.A highr at
eofi nt
eresti
spaid.Ifmoneyi swi thdrawn
befor
eexpi r
ydat e,t
hedepositorrecei
vesl
owerrat
eofinterest.Deposits
canber enewedf orfur
therperiod.Manybankssancti
onl oansagai nst
secur
ityoff ixeddeposits.
d) Recur
ri
ngAccountDeposi
ts:
-
In Recur
ring deposit
,a specifi
ed amountisregular
lydeposit
ed by
accountholder,atani nter
nalofusuall
yamont h.Thi
sistoformt he
habitofsmallsav i
ngsamongt hepeople.Att
heendofmaturit
yperiod,
theaccounthol dergetsasubstanti
alamount.I
nter
estonthi
st ypeof
depositi
salmostequal tofi
xeddeposi
ts.
Thusbycreat
ingvari
etyofdeposi
ts,banksmoti
vat
epeopl
einav
ari
ety
ofwaysandencouragesavi
ngsint
heeconomy .
2) LoansandAdv
ances:
-
Banks notonl
ymobili
ze moneybutal so l
end t
oi t
s creditworthy
cust
omer sf
ormaxi
mizi
ngprof
it
s.LoansandAdvancesaregrantedTo:-
a) Busi
nessAndTr
ade:
-
Commerci
albanks gr
antshor
t-
ter
m l
oans t
o busi
ness and t
rade
acti
vi
ti
esi
nfoll
owi
ngforms:
-
i
) Ov
erdr
aft:
-
Commercialbanksgrantov er
draftfacil
i
tytocur rentaccountholders
Underthi
ssy stem abor r
oweri sallowedt odr aw mor et hanwhati s
deposi
tedinhisaccount.Thebor rowerisgr ant
edt oafixedadditi
onal
amountagainstcol
lat
eralsecuri
ty.I
nterestischargedforact ualamount
drawn.
i
i
) CashCr
edi
t:-
Cashcredi
tisgi v
enbythebankt oanybusinessmantomeetregul
ar
workingcapi
talneeds,
agai
nstthesecuri
tyofgoodsorper
sonal
securi
ty.
I
nteresti
schargedonactualamountdrawnbyt hecust
omer.
i
i
i) Di
scount
ingOfBi
l
ls:
-
 Whent hehol
deroft hebil
lisnoti napositiont owai
tti
llt
hemat ur
it
y
ofthebi l
landrequir
escashur gentl
y,hesel l
st hebil
lofexchangeto
bank.Bankadvancecreditbydiscountingbil
lsofexchange,gover
nment
securi
ti
es orany ot herappr oved financi
ali nstr
uments.The bank
purchasesthei
nstr
ument satadi scount.
i
v) MoneyAtCal
l:
-
Banksalsograntloansforaveryshortper
iod,general
lynotexceedi
ng
7day s.Suchadv ancesar erepayabl
ei mmedi atel
yatashor tnoti
ce
hencet heyarecal
ledasMoneyatCal lorCallmoney .Theseloansare
gi
vent odealer
sorbr oker
sinst
ockmar ketagainstColl
ater
alSecuri
ti
es.
v
) Di
rectLoans:
-
Loans ar
e gi
ven t
o customers agai
nstt
he securi
tyofmov eabl
e
proper
ti
es.Thei
rmaturi
tyvari
esfr
om 1t o10year
s.Inter
esthastobe
paidonenti
rel
oanamountsancti
oned.
Loansar
eofmanyt
ypesl
i
ke:
-
a)Per
sonall
oans,t
erml
oans,cal
lloans,par
ti
cipat
ivel
oans,col
l
ater
al
l
oansetc.
b) Loanst
oAgr
icul
tur
e:-
Banksgr
antshor
t-
ter
m credi
ttoagri
cul
tur
eatalowerrat
eofint
erest.
Loansaregrant
edfori
rri
gati
on,pur
chaseofequi
pments,i
nput
s,cattl
e
etc.
c) LoansToI
ndust
ri
es:
-
Banksgrantsecuredloanstosmal landmedi um scaleindust
ri
esto
meetthei
rworkingcapit
alneeds.Thetimeper i
odmaybef r
om oneto
fi
veyear
s.Itmaybeintheform ofOver
draf
t,cashcr
editordir
ectl
oan.
d) LoansToFor
eignTr
ade:
-
Loansar egrant
edtoex portandimporti
nthefor
m ofdir
ectl
oans,
di
scountingofbi
ll
s,guar
anteefordef
err
edpay
mentset
c.Her
etherat
e
ofint
eresti
slow.
e) ConsumerCr
edi
t/Per
sonal
loans:
-
Banksalsograntcr
edi
ttohousehol
dinal imi
tedamounttobuysome
durabl
e consumergoods l
i
ke tel
evi
sion set
s,ref
ri
ger
ator
s,washi
ng
machi
neetc.Suchconsumercredi
tisrepayabl
eininst
all
ments.Under
20-
pointpr
ogramme,t
hescopeofconsumercr edithasbeenextended
tocov
erexpensesonmarr
iage,
funer
aletc.
,aswell
.
f
) Mi
scel
l
aneousAdv
ances:
-
Banksal sogi
vesadv ancesl
i
kepackingcredi
tstoexport
ers,exportbil
l
purchased ordiscounted,i
mportfi
nance,f i
nance t
o self
-employed,
credi
ttoweakersecti
onsofsoci
etyatconcessi
onalrat
esetc.

I
I. Secondar
yFunct
ions:
-
Banksgi
vesvariousfor
msofser vicest o publ
ic.Such ser
vicesar
e
ter
medasnon-banki
ngorsecondar
yf unct
ions:-
1. AgencySer
vices:
-
Banksperfor
m cert
ainfunct
ionsonbehalfoftheircust
omers.Whi l
e
perf
orming t
heseservi
ces,banksactasagentst otheircust
omer s,
hencethesearecal
l
edasagencyservi
ces.Import
antagencyfunct
ions
are:-
a) Col
l
ect
ion:
-
Commer ci
albanks col l
ectcheques,dr aft
s,bill
s,promissory
not
es,divi
dends,subscri
pti
ons,r
entsandanyot herrecei
ptswhichar
eto
berecei
vedbyt hecustomer.Fortheseser
vicesbankschar geanominal
amount.
b) pay
ment:
-
Banksal
somakespay mentsonbehal foft
heircust
omer
slike
payingi
nsurancepremi
um,rent
,taxes,el
ect
ri
cit
yandtel
ephonebi
l
lsetc
forsuchservi
cescommissi
onischarged.
c) I
ncome–TaxConsul
tant:
-
Commerci
albanks act
s as income-t
ax consul
tant
s.They
pr
epar
eandfi
nal
i
setheincometaxret
urnsofthei
rcl
i
ents.
d) Sal
eAndPur
chaseOfFi
nanci
alAsset
s:-
Aspert
hecust
omer
sinst
ruct
ionbanksunder
takesal
eand
purchaseofsecuri
ti
es,shar
esandanyot
herf
inanci
alasset
s.Nomi
nal
chargesar
echargedbyabank.
e) Tr
ust
ee,
Execut
orAndAt
tor
ney:
-
Asat r
ustee,banksbecomesthecustodianandmanagerof
cust
omerfunds.Bankalsoactsasexecut
orofdeceasedcustomer’
swil
l
.
AsanAtt
orneythebankssi gnt
hedocumentsonbehalfofcustomer.
f
) E-Banki
ng:
-
Thr
oughElectr
onicBanking,acustomercanoperat
ehi sbank
accountthr
oughi
nternet.Hecanmakepay mentsofv
ari
ousbil
ls.Hecan
eventransf
ermoneyfrom oneplacetoanot
her.

2. Ut
il
it
ySer
vices:
-
Modern Commerci
albanks also per
for
ms cer
tai
n gener
alut
il
it
y
ser
vicesf
orthecommunit
y,suchas:-
a)Let
terOfCr
edi
t:-
Banksalsodeali
nforei
gntrade.Theyi
ssuelet
terofcredi
tand
prov
ide guarant
ee tofor
eign t
radersforthe soundness of t
hei
r
cust
omer s.
b)Tr
ansf
erOfFunds:
-
Banksarrangetransf
eroffundscheapl
yandsafel
yfrom one
pl
acetoanother.Transfercanbeintheform ofDemanddr
aft
,Mail
tr
ansf
erTrav
ell
erschequesetc.
c)Guar
ant
or:
-
Banksoff
eraguaranteeofpaymentonbehal
fofi
mpor
tert
o
f
aci
l
itat
eimpor
tswit
hdef
erredpayment
s.
d)Under
wri
ti
ng:
-
Thi
sf aci
l
ityis provi
ded t
o Joint Stock Compani
es and to
governmentto enablethem torai
se funds.Banks guar
antee t
he
pur
chaseofcertai
npropor
ti
onofshar
es,i
fnotsoldi
nthemarket
.
e)LockerFaci
l
ity:
-
 Saf
eLocker
sar
eprov i
dedtothecust
omer s.Sothatt
heycan
deposi
tthei
rval
uabl
esl
ike Jewel
ler
y,Securit
ies,Sharesand ot
her
document
s.
f
)Ref
eree:
-
Banksmayactasr ef
ereewit
hr especttofi
nanci
alst
andi
ng,
busi
nessreput
ati
onandr
espect
abil
it
yofcustomers.
g)Cr
edi
tCar
ds:
-
Credi
tcardfaci
l
ityhavebeeni nt
roducedbycommer ci
albanks.
Itenabl
estheholdertominimizetheuseofhar dcash.Credi
tcardisa
conveni
entmedium ofexchangewhi chenablesitsholdertobuygoods
andservi
cesfr
om member–est abl
ishmentwi t
houtusingmoney.

I
II
. Subsi
diar
yAct
ivi
ti
es:
-
Manycommer
cialbanks al
so under
takes subsi
diar
yact
ivi
ti
es
suchas:
-
1) Housi
ngFi
nance:
-
Housingfi
nanceisprov
idedagai
nstthesecur
it
yofimmoveableproper
ty
oflandandbuil
dings.ManybankssuchasSBI ,BankofI
ndiaetc.have
setuphousingfi
nancesubsi
diar
ies.
2) Mut
ual
Funds:
-
A Mut ualfundisaf inanci
alint
ermedi
arythatpoolst hesavingsof
i
nvestorsforcollect
iveinvest
mentin div
ersi
fied por
tfol
i
o securi
ti
es
Many banks like SBI,Indi
an Bank et
c.hav e setup mut ualfund
subsi
diari
es.
3) Mer
chantBanki
ng:
-
Av
ari
etyofser
vicesar
eof
fer
edbymer
chantbanki
ngl
i
ke:
-
Management,Marketi
ng and Underwri
ti
ng of new issues,proj
ect
pr
omotion,
corpor
ateadvi
sor
yserv
ices,i
nvest
mentadvi
soryservi
cesetc.
4) Vent
ureCapi
tal
Fund:
-
Venturecapit
alfundpr ovidesstart-
upsharecapitaltonew v ent
uresof
l
itt
le known,unr egi
stered,risky,young and smal lprivat
e business,
especiall
yintechnologyor i
ented and knowl
edgei ntensiv
ebusi ness.
Manycommer cialbanksl i
keSBI ,Canar
aBanket c.hav esetupv entur
e
Capit
al FundSubsidi
ari
es.
5) Fact
ori
ng:
-
Factoringisaconti
nuingarrangementbetweenaf i
nanci
alint
ermedi
ary
(fact
or)andabusi nessconcer n(cl
i
ent)wherebythefactorpur
chases
theclientsaccount
sr ecei
vable.Banksli
keSBIandCanar aBankhav e
establ
ishedsubsidi
ari
estopr ovi
defact
ori
ngservi
ces.
3.DI
SCUSS THE POWERS OF RESERVE BANK OF I
NDI
A UNDER
BANKI
NGREGULATIONACT,1949

TheReser veBankofI ndi a( RBI )r egulatesandsuper visesPubl icSect or

and Pr ivate Sect or Banks.Under t he pr ovisions of t he Banki ng
Regul ationAct ,1949, itcan, interal i
a―
i
.I nspectt hebankandi tsbooksandaccount s( sect ion35( 1)i bi
d.);ii.
Exami neonoat hanydi r
ect ororot herof fi
ceroft hebank( section35( 3)
i
bid. );i ii.Causeascr ut i
nyt obemadeoft heaf f
ai rsoft hebank( section
35( 1A)i bid.);i
v.Gi vedi rectionst osecur et hepr opermanagementoft he
bank( sect i
on35Ai bid. );v.Cal lf oranyi nformat i
onofaccountdet ail
s
(sect ion27( 2)i bid.)
;v i.Det ermi net hepol icyi nr elationt oadv ancesby
thebank( sect i
on21i bid.);v i
i.Di rectspeci alaudi toft hebank( section
30( 1B)i bid.);andv ii
i.Di rectt hebankt oi niti
atei nsol vencyr esolution
processi nr espectofadef aul t,undert hepr ov isionsofI nsolvencyand
Bankr upt cyCode, 2016( sect ion35AAi bi
d.) .
Fur ther ,inr espectofnat ional izedbanksandt heSt ateBankofI ndia
(SBI ),undert hepr ovisionsoft heBanki ngCompani es( Acquisiti
onand
Transf erofUnder takings)Act sof1970and1980( “BankNat i
onal i
zation
Act s”)andt heSt ateBankofI ndi aAct ,1955( “SBIAct ”)r espectively,
inter
ali
a―
1.RBI ’snomi neeDi r
ect orisamemberon—
i
.t henat ionalizedbank’ sManagementCommi tteeoft heBoar d,whi ch
exer cisest hepower soft hebank’ sBoar dwi thregar dt ocr editproposal s
abov especi fiedt hreshol d( sect ion9( 3)(c)oft heBankNat i
onal i
zation
Act s, andpar agr aph13oft heNat ionalizedBanks( Managementand
Miscel l
aneousPr ovisions)Schemesof1970and1980madebyt he
Gov er nmentundert heBankNat ionalizationAct s) ,and
i
i.theExecut iveCommi tt
eeoft heCent r
alBoar dofSBI ,whi chmaydeal
withanymat t
erwi thint hecompet enceoft heCent ralBoar dsubj ectt o
SBIGener alRegul ations,1955andCent r
alBoar d’
sdi rections( sect i
ons
19(f)and30ofSBIAct ,andr egulat i
on46ofSBIGener alRegul ations,
1955) ;
ii
i.RBIappr ov est heappoi ntmentandf ixest her emuner ationoft he
bank’ sauditors( sect ion10oft heBankNat ional i
zationAct s, andsect i
on
41oft heSBIAct );and
iv.RBIcan appoi ntaddi ti
onalDi rector s on t he nat i
onal i
zed banks’
Boar dsandSt ateBankofI ndi a’sCent ralBoar d( section9Aoft heBank
National i
zationAct s,andsect ion19Boft heSBIAct ).
I
naddi ti
on, whol e- t
imeDi r
ect or sofnat ional i
zedbanksandSt at eBankof
I
ndiaar eappoi nt edi nconsul tationwi t
hRBI .
RBIhaspower sunderot herl awsaswel l
,whi chi nclude,i nt eral ia,t he
powerundersect i
on12oft heFor eignExchangeManagementAct ,1999
toinspectf orcompl iancewi t
ht heActandr uleset c.madet her eunder .
RBIal so mai nt ains t he Cent r
alReposi tor yofI nformat ion on Lar ge
Credits( CRILC)onaggr egat ef und- basedandnon- fund-basedexposur es
ofRs.5cr or eandabov eofal lbanks.Fur t
her ,RBImai nt ainst heCent r al
FraudRegi stryandbanksr epor tal lfraudsi nvolvingamountabov eRs.1
l
akh t o RBI.I n addi ti
on,RBI ’sMast erDi rections on Fr auds l ayout
guidelinesoncat egor ization,r epor tingandr ev i
ew off rauds,al ongwi th
normsf orconsequentpr ov isioning.
Thepower sofRBIar ewi de- rangi ngandcompr ehensi vet odealwi th
vari
oussi t
uat i
onst hatmayemer gei nal lbanks,i ncludingpubl i
csect or
banks.Nopr oposalwi thr egar dt ochangei nRBI ’spower si nr espectof
public sect orbanks i s pr esent ly underconsi deration/ consul tation.
I
mpr ovementi nr egul atoryf unct i
oning bei ng an ongoi ng pr ocess,
Gov ernmentengageswi t
hst akehol der s,incl udingRBI ,anddi scusses
i
ssuesast heyev olv e.

4.DEFI
NECHEQUE.EXPLAI
N THEDIFFERENTKI
NDSOFCROSSI
NG
OFCHEQUEALONGWITHTHEIREFFECTS

MeaningofCheque–Chequei sanegot i
ablei
nstrumentusedt omake
paymentindayt odaybusinesst ransacti
onmi nimizi
ngt heriskand
possi
bil
i
tyofloss.Iti
susedbyi ndividual
s,busi
nesses,cor por
ateand
other
stotr
ansactformaki
ngandr eceivi
ngpayment .
Aspernegoti
ableinst
rumentact1881,A“ cheque”isabi l
lofexchange
drawnonaspecifi
edbankerandnotexpr essedtobepay ableotherwi
se
thanondemand.
Ther ear et hreepar t
iesi nChequeTr ansact i
on–Dr awer ,Dr aweeand
Pay ee.
•Dr awer( MakerofCheque)–Theper sonwhoi ssuet hechequeorhol d
theaccountwi thbank.
•Dr awee–ThePer sonwhoi sdi rect edt omaket hepay mentagai nst
cheque.I ncaseofcheque, i
tisbank.
•Pay ee–Aper sonwhosenamei sment ionedi nt hechequeort owhom
thedr aweemakespay ment .Ifdr awerhasdr awnt hechequei nf av ourof
sel fthendr aweri spay ee.
TYPESOFCHEQUES
(A)OPEN CHEQUE-I ti sanuncr ossedchequewhi chi spay abl eat
count eroft hebank. ItcanbeBear erChequeorOr derCheque.
BEARERCHEQUE-Whenachequei spay ablet oaper sonwhosename
appear sont hechequeort ot hebear eri .
e.t ot heper sonwhopr esent s
thechequet ot hebankf orencashment ,iscal ledbear ercheque.I tcan
bet ransferredbymer edel iveryanddonotneedendor sement .
ORDERCHEQUE-Whenachequei spay ablet oper sonnamedi nt he
chequeort ohi sor der,iscal l
edOr derCheque. Whent hewor dBear eris
cancel l
ed,t hechequebecomest heor dercheque.I tcanbet r
ansf erred
onl ybyendor sementanddel i
very.
(B)CROSSEDCHEQUE-I tisthechequeonwhi cht wopar alleltransv erse
l
inesar edr awnacr osst hetopl eft,wi t
horwi thoutt hewor d:
(i)' &Co. '
(ii
)NotNegot iable
(ii
i)A/ cPay ee
Itcannotbeencashedatt hecount eroft hebank, canonl ybecr edi tedt o
theaccountoft hepay ee.
(C)STALECHEQUE-Thev alidityofchequei sf ort hreemont hs.I t
chequei snotpr esent edwi t
hint het hreemont hs,i tgotexpi redand
becomest heSt al
eChequeorOut -dat edcheque.
Ear li
erthev alidit
yofchequewasf orsi xmont hs, ithasbeenr educedt o
thr eemont hs, wi t
hef fectf rom Apr i
l 1,2012.
(D)ANTE-DATEDCHEQUE-Achequecont ainst hedat eonwhi chi tis
dr awn.I fitbear sapr iordat eorbackdat e, iti
scal ledAnt e-Dat edcheque.
Bankwi l
lhonourt hischequeunt ilitexceedt het hreemont hs,i.e.st ale
per iodofcheque.
(E)POST- DATEDCHEQUE-I fthechequebear st hedat el at erthant he
dat eonwhi chi tisdr awn,i scal l
edPost -
Dat edCheque.Thi scheque
cannotbehonour edbef orethedat ewr i
ttenoni t.
(F)MULTI LATEDCHEQUE-Achequewhi chi st orni ntopi ecesi scal led
Mul ti
latedcheque.
CROSSI NGOFCHEQUES
Crossi ngofChequesmeanst odrawt wol i
nest ransversepar allelonl eft
handcor neroft hecheque. Itdirectst hebankt odeposi tt hemoney
dir
ect lyintot heaccountandnott obepaycashatt hebankcount er.
MODESOFCROSSI NGBel owar et hemodesofcr ossingofchequesand
theef fectofcr ossi ngofcheques:
(1)GENERALCROSSI NG-Whenachequebear st wot r
ansv ersepar allel
l
inesatt hel efthandofi t
st opcor ner.Wor dssuchas' andcompany ' or
anyot herabbr ev i
at ion( suchas&co. )maybewr itt
enbet weent heset wo
parallell i
nes,ei t
herwi thorwi thoutwor ds' notnegot i
abl e',iscal led
Gener al Crossi ng.
Effect
Pay mentcanbepai dt hroughbankaccountonl y,andshoul dnotbe
madeatcount erofpay ingbank.
(2)SPECI ALCROSSI NG-Whenachequebear st henameoft hebanki n
betweent het wopar allellines, withorwi t
houtt hewor ds' notnegot iable'
i
scal ledSpeci al Crossi ng.
Effect
Thebankwi llpayt ot hebankerwhosenamei swr i
tt
eni nbet weent he
crossingl ines.
(3)RESTRI CTI VECROSSI NG /ACCOUNTPAYEECROSSI NG -I nt his,
crossingofchequesi sdonebywr iti
ngAccountPay eeorAccountPay ee
onlyinbet weent hecr ossi ngl ines.
Effect
Pay mentwi llbecr edi tedt ot heaccountofpay eenamedi nt hecheque.
(4)DOUBLECROSSI NG-Whenachequebear st wospeci alcr ossing,i s
calledDoubl eCr ossi ng.I nt hissecondbankactasagentoft hef irst
collecting banker .I ti smadewhent hebankeri nwhosef av ourt he
chequei scr osseddoesnothav ebr anchwher et hechequei spai d.

5.BANKER’SDUTYOFSECRECYISNOTABSOLUTE.EXPLAI
NWHEN
THEDISCLOUSREOFACCOUNTISJUSTI
FIED

Bankingisoneoft hemostatr i
sksect orsforpr i
vacyviolationsduet o
thesensiti
veandhighlyper
sonal natureofinformationt
hati sexchanged,
recorded,and ret
ained.Indivi
duals mustt rustbanks wi th per sonal
i
dent i
fyi
nginfor
mation,t
heirfi
nancialrecords,theaccessinf ormationto
theiraccount
s,andt hei
rcredi
thi st
or y
.Thus,pr iv
acyviolati
onsar enot
taken li
ghtl
y and heavil
yi mpactt he i
ndividualwhose pr ivacy was
violated.Way si nwhi chav iolat i
onofpr iv acycant akepl acei nt he
banki ngsect ori nclude:shar ingper sonali nf ormat i
onwi tht hirdpar ties
withoutconsentf ormar ket ingpur poses,st ol enorl ostbanki ngnumber
orcar d,shar ingper sonali nfor mat ionoral lowi ngaccesst ot hir dpar ties
withouti nf ormed consent ,i nadequat e not i
f i
cat ion t o an i ndiv i
dual
concer ni ngwhatwi l
lbedonewi tht hei rdat a,col lect i
ngmor eper sonal
datat hani snecessar y,ref usalt opr ov idef inanci alr ecor dsuponr equest
bycl ient ,i ncor rectlyr ecor di ng per sonali nf ormat ion,and l ossof a
cli
ent sper sonal dataduet oi mpr opersecur itymeasur es.
Exampl esofpr i
v acyv i
ol ationsi nt hebanki ngsect or:
Ther ehav ebeenmanyi nst ancesi nwhi choneoft heabov ev i
olations
hasoccur red.Theex ampl esbel owdemonst ratet hatapr ivacyv i
olat i
on
ofanynat ur eisnev erassi mpl eas“ t
hedi scl osur eofper sonaldat a”or
“unaut hor izedaccess” .Eachv iolationhasauni quecont extt hatr aises
i
mpor tantquest ions t hatmustbe answer ed when f ormi ng pr ivacy
l
egi slat ion,whi l
eatt hesamet imedemonst ratingt heneedf oracer tain
l
ev elofpr i
v acypr otect iont obeappl i
edacr osst heboar di nt hef i
nanci al
sect or.
In 2008 i nt hecaseoft hePunj abNat i
onalBankv s.RupaMahaj an
Pahwaabankwaschar gedofi ssuingadupl icat epassbookofaj oint
sav ing bankaccountofahusband and wi febei ng mai nt ained wi th
“oper at ional inst ructions”ofei therorsur vivor ,toanunaut hor i
zedper son.
Thebankwashel daccount abl ef ort hedi scl osedi nfor mat ion,andwas
char gedaf i
newi t
ht hei nst ruct i
onst ol ooki ntot heconductoft he
officialswhower esuppl yingi nf ormat i
ont ot heunaut hor i
zedi ndividual .
Thef actt hatabankempl oy eeper mi ttedanunaut hor i
zedper sonaccess
to per sonali nf ormat ion r aises t he quest i
on of whet her pr ivacy
l
egi slat ion shoul dr equi ret hatempl oy eesi nt hef inanci alsect orgo
throught rai ningonpr i
vacypr ocedur es[ 2].
Thisex ampl efur therdemonst ratest heneedf or:
•Speci f i
cgui del i
nest ot hei nst ancesi nwhi cheacht y peofi nf ormat i
on
canbedi scl osed.
•Appr opr iat enot iceshoul dbegi vent ocost umer sf ort hedi scl osur eof
personal i
nf or mat i
on.Not i
cesofdi sclosur eshoul di ncl ude:i nitialprivacy
noticesoft hef inanci ali nst it
ut ionspol iciesandpr act i
ceswi thr espectt o
thedi scl osur eandpr ot ect ionofper sonali nfor mat ion,annualnot ices.I f
therear eexcept ionst obemade, theseshoul dbecl earlyest abl ished.
InthecaseofCanar aBankv s.Di stRegi st rarandCol lect ort hedi strict
Regi st rar ,ent eredi ntoCanar a' sbankspr emi seandi nspect edi t
sbooks
anddocument s.Af t
eri nspect ingt hedocument st heyf oundaner r
or ,and
sei zedt hemat erial.Thebankar guedt hatt hought heRegi st r
arcoul d
i
nspectt hedocument s,t heydi dnothav et heaut hor i
tyt osei zet he
document swi t houtnot i
cet ot heper sonsaf fect ed.Ther ulingoft he
case hel dt hatt he excl usi on ofi l
legi timat ei ntrusions i nt o pr iv acy
dependsont henat ureoft her ightbei ngasser t
ed,andt hewayi nwhi ch
i
ti sbr oughti nt opl ay.Thi scasedemonst ratest hatcont exti sacr uci al
elementofpr ot ectingpr i
v acyanddef iningt her i
ghtt opr i
vacy ,andr aises
thequest i
onofhow pr ivacyl egi slati
onshoul ddef inecont extf ort he
financi al sect or .
•Ther ulesandr est ri
ctionspl acedonbankst hatr elatet oconf ident i
al ity
andsecr ecy ,
•Theexcept ionst ot heobl i
gat ionsofsecr ecy ,
Bot hi nbanki ngcust omsaswel lasst at utes,t her ei sast andar di zed,
recogni zedobl i
gat ionofsecr ecy .Thewor dingi nt hef ollowi ngsect ioni s
repr oduced i dent ical l
yi n many banki ng r elat ed act si ncl uding:SBI
Act ,1955 – Sect ion44, SBI ( Acqui si
tion and Tr ansf er of
Under takings) 1980–Sect i
on13,Cr edi tInf ormat ionCompani esAct 2005
-sect ion29, andThePubl i
cFi nanci alInst itut i
onsAct ,1983- sect i
on3.The
sect ioni sappl icabl et ot her espect i
veBank
asawhol eandi tsdi rect or s,localboar ds,audi tor s,adv iser s,of fi
cer sor
ot herempl oyeesoft heSt at eBank, andcr editorsar er equi redi naddi tion
toaf fi
rm anoat hofsecr ecyaspr ov ided.
Sect ion44.Obl igat ionast of idel ityandsecr ecy :Obl i
gat i
onast of idel ity
and secr ecy .(1)The St at e Bankshal lobser ve,exceptas ot her wi se
requi redbyl aw,t hepr act icesandusagescust omar yamongbanker s,
and, inpar ticul ar,itshal lnotdi v ulgeanyi nformat ionr elati
ngt oort ot he
af fairsofi t
sconst i
tuent sexcepti nci rcumst ancesi nwhi chi ti s,i n
accor dance wi t ht he law orpr act i
ce and usage cust omar yamong
banker s,necessar yorappr opr iat ef ort heSt ateBankt odi v ulgesuch
i
nf or mat ion.( 2)Ev erydi rect or ,memberofaLocalBoar dorofaLocal
Commi t
tee,audi tor,adv iser ,of ficerorot herempl oy eeoft heSt at eBank
shal l,bef oreent eringuponhi sdut i
es,makeadecl arationoff idel i
tyand
secr ecyasi nt hef or m setouti nt heSecondSchedul e.
In Shankar l
alAgar wallav .St at e Bank ofI ndi a,AI R1987 Cal 29,a
cust omerowned261bankcur rencynot esofRs.l .
000/ -each.Fol lowi ng
thedemoni ti
sat i
onofhi ghv al uecur rencynot esi n1978,het ender ed
these not es t ot he bank al ong wi tht he requi site decl ar ati
on and
i
nst ructedt hebankt ocr edi thi sCur rentAccountwi tht heamount .The
bankmadedecl arat i
onmadebyt hecust omerav ailablet ot heI ncome-
taxDepar t
mentwhoi ssuedanot iceunderSec. 226( 3)oft heI ncome- tax
Act,at t
achi ngt hesai dsum.Lat ert hesum wasr eleased.TheCal cut ta
HighCour tobser v edt hatamongt hedut iesoft hebankert owar dst he
cust omerwast hedut yofsecr ecy .Suchdut yisal egalonear isi ngoutof
the cont ractand was notmer elya mor alone.Br each ofi tcoul d,
therefore,gi veacl aimf ornomi naldamagesorf orsubst ant ialdamages
i
fi njuryi sr esul tedf rom t hebr each.I twas,howev er,notanabsol ute
duty .butwas a qual i
fied one subj ectt o cer tain except ions.The
i
nst ancesbei ng:
(l
)Thedut ytoobeyanor derundert heBanker s'BooksEv idenceAct .
(2)Caseswher eahi gherdut yt hant hepr i
v atedut yi sinv olv ed, aswher e
dangert ot heSt ateorpubl icdut ymaysuper sedet hedut yoft heagent
tohi sprincipal
(3)Ofabanki ssui ngawr itcl aimi ngpay mentofanov erdr af t
, st atingon
thef acet heamountofov erdr aft ,and
(4)Thef ami l
iarcasewher et hecust omeraut horizesar ef erencet ohi s
banker .Thel ear nedJudgef ur therobser vedt hatt heSt at eBankofI ndia
wasdi r
ect edbyt heReser veBankofI ndi aandt heMi nist ryofFi nancet o
furnishal lpar ticul arsr egar dingdeposi tofbanknot est ot heI ncome- tax
Depar tmentassoonassuchnot iceswer er ecei ved.Thi si nst ancehad,
therefore,come wi thi nt he except ions.The r ecent Pay ment and
SettlementSy st emsAct ,2007i mposespr i
v acyobl igationsont hosewho
manageonl i
nepay mentandset tl
ementsy stemssuchasRTGS/ NEFT
etc.Sect ion22oft heActenj oi ns“ sy st em pr ov ider ”nott odi scl oset he
existenceorcont ent sofanydocumentorpar tofanyi nf ormat i
ongi ven
tohi m byasy stem par ticipant , exceptwher edi sclosur ei s:
(a)Requi redundert hepr ov i
sionsoft hi sAct
(b)Madewi tht heex pr essori mpl iedconsentoft hesy stem par ti
cipant
concer ned
(c)I n obedi ence t ot he or der s passed by a cour tofcompet ent
j
ur i
sdiction
(d)I n obedi enceofast atut or yaut horityi n exer ciseoft hepower s
conf err
edbyast at ute.
Reser veBankofI ndi ar egul ations
TheReser veBankofI ndi ahasper i
odi cal l
yi ssuedgui del ines, r egul at i
ons
andci r
cul arswhi chr equi rebankst omai ntai nt heconf i
dent ialityand
privacy of cust omer s.Thus,t he Mast er Ci rcular on Cr edi tCar d
Oper ati
onsofbanksi ssuedbyt heRBIi nJul y2010cont ainsanel abor ate
setofpr ovisionson“ Rightt oPr i
v acy ”and“ Cust omerConf i
dent iali
t y”
underasect iont itl
ed‘ Prot ect i
onofCust omerRi ghts’.Thepr ovisions
i
nteral i
a,f or bidt hebanksf rom maki ng unsol i
cited cal ls,del i
v ering
unsol icitedcr editcar dsandf rom di sclosingcust omeri nf ormat iont o
anyt hi rdpar tywi thoutspeci f i
cconsent .Similarl
y,t heMast erCi rcul aron
Cust omerSer vi
cei nbanksi ssuedi n2009cont ainsadet ail
edcl auseon
Cust omer Conf i
dent ialit
y Obl igat ions. The cl ause r eaf fi
rms t he
cust omar ybanki ngobl igat i
onofsecr ecyandext endsi tbyf or biddi ngt he
usageofcust omeri nfor mat ionf or“ cr oss-selli
ngpur poses” .Iti mposes
ar estr i
ction on dat a col lect i
on byr equi ri
ng Banks t o“ ensur et hat
i
nf ormat ionsoughtf rom t hecust omeri srelevantt ot heper cei vedr isk,
i
snoti ntrusive,andi si nconf or mi tywi ththegui delinesi ssuedi nt his
regar d” .
In2006, t
heReser v eBankofI ndi aal ongwi thsev eralbanksoft heI ndian
BanksAssoci ati
on( IBA)est abl ishedabodycal ledt heBanki ngCodes
andSt andar dsBoar dofI ndi at oev olv easetofv olunt ar
ynor mswhi ch
bankswoul denf orceon
theirown.Anumberofgui del i
nesandnot i
ceshav ebeenpr oducedby
theBCSBIi ncludingt he“ CodeofBank' sCommi tmentt oCust omer s”
whi chmostbanksi nI ndiaadher et o.Enf orcementi st hr
oughaser iece
ofi nter nalGr ievancer edr essalmechani smswi t
hineachbanki ncl uding
adesi gnat ed“ CodeCompl i
anceOf fi
cer ”andanOmbudsman.
Thought hesegui delinesdo pr ov idedi f
feri
ng andusef uldegr eesof
secur ityandpr ivacy ,thel ackofl egi slat i
veov ersi ghtandenf or cement
all
owst hest andar dst obeappl iedperi nsti
tuti
onand per -cont ractand
enf orcementi snotguar ant eedt hr oughpar li
ament arysanct ions.
Whatl egi slati
onappl iest odat apr otect ionint hebanki ngsect or ?
Banks ar e gov erned by t he I nf or mat i
on Technol ogy Act 2000 as
amendedi n2008.Thel atteramendment scont ainpr ov isi
onst hatenj oi n
i
nt eral ia,bankst oadoptr easonabl esecur it
ypr act i
ceswi thr espectt o
theirdat abases.Cust omer sofbankscan,undert he IT Act ,obt ai n
compensat oryr eli
eff orl ossesar isingoutofdat al eakagesaswel las
unaut hor iseddi sclosur eofi nf ormat ionbyt hebanksf orgai n.

6.EXPLAI
NTHEANCI
LLARYSERVI
CESOFABANK

Alltheser v
icesprovided bybankscanbebr oadlydivi
ded i
ntot wo
categori
es.Thefi
rstonei sprimaryser
viceswhichconsistofaccepti
ng
demand depositsand l endi
ng moneyt oit
scust omersaspert heir
requir
ement.Apartf r
om t heirdail
yprimaryactiv
iti
es,bankspr ovi
de
manyot hersupport
ingser vi
ces;t
hesear ecal
ledancil
lar
yservi
ces.Let
uslookataf ewimportantservi
cesofthem.
REMI TTANCESERVI CES
 - Itmeansat ransferoff undsf rom onebr anchofabankt oanot her
branchoft hesamebankoradi ffer entbank.
- Onecanmakel ocal remi tt
ancest hr oughBanker sCheque( BC)and
remi tf undsf rom onecent ret oanot hert hroughDemanddr af t
s
(DD) ,Tel egr aphic Tr ansf er( TT) ,Mai lTr ansf er( MT) ,Nat i
onal
Elect ronicFundTr ansf er( NEFT)andRealTi meGr ossSet tl
ement
(RTGS)atspeci fi
edser v icechar ges.
- Thecust omershal lfillinf ullpar ticul arsregar dingt her emi tt
ance;
suchas-
- Nat ureoft her emi ttancei .e.byf illingi nDD/ TT/ MTet c.
- Nameandaddr essoft hebenef ici ar y
.
- Nameoft hebr ancht owhi cht her emi ttancei st obemade.
- Name,addr ess,anaccountnumberoft her emi tt
er /
cust omeri f
requi red.
CUSTODI ALSERVI CES
- Thi sf aci lit
yi spopul ar l
yknownasSaf eDeposi tLocker .
- Iti sext endedt ot hecust omer st oenabl et hem t okeept heir
valuabl es/ i
mpor t
antdocument si naspeci all
ydesi gnedl ocker .A
prescr i
bedr ental i
schar gedont hem.
- Locker scanbehi redbyi ndividual s( notmi nor s),f i
rms,l imited
compani es, speci f
iedassoci ationsandsoci eties.
- Locker scanber ent edf orami nimum per i
odofoney ear.
- Ther ear ef ourdi fferentt ypesofl ocker si.e.smal l
,medi um,l arge
andex t
r al argewi thv ar yingr ental s.
- Nomi nat ionf acil
ityisav ailabl et oani ndivi
dual hirer.
- Inacaseofov erduer ent sbankcanchar geapenal ty.
FOREXSERVI CES
- Whenaper sont r
av elst odi fferentcount riesorwant stobuyany
foreignmer chandi ses, thent heyr equi reforeigncur rencies.
- Bankpr ov idet hesecur renci est oi tscust omer s.
- Al lt ransact i
onsar edoneov ert hecount erandonl yaut horised
bankbr anchescanper for mt hesef unct i
ons.
- Whenaper sonear nsorr ecei vesf oreigncur renci esf rom abr oad,
hecanal sosendt hem t obanks.
- Thesef or eignexchanget r ansact ionsar edoneaccor dingt ot he
rulesandr egul ati
onsoft hecent ral banksofr espect ivecount r
ies.
- InI ndia,al lt het ransact i
onsar esubj ectedt ot her egulationsof
For eignEx changeManagementAct( FEMA) ,1999.
CARDSERVI CES
- Pr imar ilyt hecar dser viceswer ei ntroducedf orconv enienceand
 saf etypur posesbutnowaday si thasbecomet hemostpopul ar
pay mentmodeamongpeopl e.
- Thebanki ssuescust omer st wobasi ct ypesofcar dst hosear e
creditcar dsanddebi tcar ds.
- Wi tht hehel pofacr editcar d,t hecar dhol dercanobt ai
nei ther
goods orser vices f rom mer chantest abli
shmentwher e such
arrangementexi sts.Thenabi llissentt ot hecar dhol deri ndicat ing
theduest hathe/ shehast opaywi thinaper iodof30- 40day s.I t
car ri
esaf ixedi nter est .
- Debi tcar dsar esameascr edi tcar ds.Theonl ydi ff
er encei st hata
numberofduesf oreacht ransact ioni sdebi tedt ocar dhol der ’
s
accountaseacht ransact ioni snot ifi
ed.
E-
BANKI NGSERVI CES
- Nowaday si ti st he mostpopul armet hod ofdoi ng banki ng
oper at i
onwher ey oudon’ tneedt obephy sical l
ypr esenti nt he
bankbr anchf orper for minganyf unct ion/oper ation.
- Itisal soknownasonl inebanki ngori nternetbanki ng.
- Onecandoanumberofact iviti
esbyj ustsittingi nf r
ontofone’ s
comput erscr eenorsmar tphone.Suchas-Tr ansf eroff undsf rom
oneaccountt oanot heri nt hesamebankordi fferentbanks,Keep
sur plusf undsi naf i
x eddeposi taccount ,Onl i
neshoppi nget c.
- Theonl yt hinghe/ sheneedst odoi st oaccesshi s/ herv irtual
accountwi tht hehel poft heI DandPASSWORD,pr ov idedbyt he
bank.E- Banki ngSer vices.
I
NSURANESERVI CES
- Banksdel iverawi der angeofi nsur anceofi nsur ancepr oduct st hat
cov erst her iskofal mostev er yaspectofahumanl ife,suchas-
Life,Heal th,Val uabl e asset sl i
ke Per sonalv ehicles,Debi tand
creditcar dset c.-I ti sal soknownasBancassur ancei nwhi cha
bankandani nsur ancecompanyf or m apar t
ner ship.
- Thei nsur ancecompanysal esi t
sdi ff
erentpr oduct st ot hebank' s
cli
entbase.
- Thispar tner shi pi spr ofit
abl ef orbot hcompani es.Bankscanear n
addi ti
onalr ev enue by sel ling t he pr oduct s and t he i nsur ance
companycanex pandi tscust omerbase.
- Exampl e-I CICIPr udent ial
, Baj aj Al l
i
anzet c.
- Somebanksal soof ferI nv est mentser v i
cesf orthei rcor por ate
cust omer s.I ti sal soknownasPor tfoli
oser v
ices.Theygui det hei r
cli
ent sespeci allyabouthowt oi nvestadequat elyorr aisef inanci al
capi t
alf ort hei rbusi ness.Anyi ndividualcust omercanal soav ail
 t
hiski
ndofser
vicesf
rom t
hei
rrespect
ivebank.

7.EXPLAI
N THEGENERALPRI
NCI
PLES RELATI
NG TO LOANSAND
ADVANCES.

Thepr imar yf unct i

onofbanksi saccept ingdeposi tsf ort hepur poseof
l
endi ngandi nv est ment .Lendi ngandi nv est ment sar et hepr i
mar ysour ce
ofi ncome.Lendi ng off unds t ot he const it
uent s,namel yt rader s,
businessmenandi ndust rialent erpr i
ses,const it
utest hemai nbusi ness
ofabanki ngcompany .Themaj orpor tionofabank’ sf undsi sempl oy ed
bywayofl oansandadv ances,whi chi smostpr ofitabl eempl oy mentof
i
tsf unds.Themaj orpar tofbank’ si ncomei sear nedf rom i nterestand
discountont hef undssol ent .
Thebusi nessofl endi ng,nev er theless,i snotwi thoutcer taini nher ent
ri
sks.Lar gelydependi ngont hebor rowedf undsabankercannotaf f
or d
tot ake undue r i
sks i nl endi ng.Whi l
el endi ng hi sf unds,a banker ,
thereforef ollowsav er ycaut iouspol icyandconduct shi sbusi nesson
thebasi soft hewel l
-knownpr inciplesofsoundl endi ng i nor dert o
mi ni
mi set her i
sks.
LoansandAdv ances
Loans:
Inor dinar ysense,' loan' means‘ al endi ng’or‘ t
hatwhi chi sl ent ’.Tol oan
i
st ol endat hingt oanot her ,ei thergr at uitousl yorf orr ewar d.Inor dert o
const i
tut eal oan, theremustbeat hingl oaned, alender ,andabor rower ,
aswel lasacont ractbet weent hepar ties.
'
Loan'meansal oanwhet herofmoneyori nki nd,andi ncl udedany
transact ionwhi chi si nt heopi nionoft heCour t,i
nsubst anceal oan.The
wor d' l
oan'i ncl udesanadv anceati nt erest ,whet herofmoneyorki nd
wi t
horwi thoutsecur i
ty .Loani sacont ractbywhi chpr oper tyormoney
i
st r
ansf erredbyal endert oabor r
oweront hepr omi seoft hebor rower
tor eturnt hepr operty,ori t
sexactequi valent,atast at edt i
meoron
demand.Loanmaybea' terml oan' or' ademandl oan' .
Adv ances:
Thewor d‘ adv ance’conv ey st hei deaoff urnishing,t ender ingorof fering
somet hingwhi chmayber etur nedi nt hesamef orm.' Adv ances'means
moneyorcommodi ties f ur nished on cr edit.Adv ances i nclude cash
credit,ov erdraf t, l
oansandadv ancesofev erydescr ipt i
on.Theadv ances
madebycommer cialbankscanbecl assi fi
edi nto:( i)loans, cashcr edits
andov erdr afts; and( ii
)bi ll
sdi scount edandpur chased.
Distinctionbet weenLoansandAdv ances:
Thef ol lowi ngar ethedi fferencesbet weenl oansandadv ances:
(1)Loansi ncl udeadv ancesbutadv ancesdonoti ncl udeal lloans.
(2)Loansar er epay abl eaccor dingtoat imeschedul ewhi leadv ancesar e
repay abl eondemand.
(3)Loansar egener al lygr ant edf oracqui ringf ixedasset s( mov ableand
i
mmov abl e)wher eas adv ances ar e gener ally gr ant ed f oracqui ri
ng
currentasset s.
(4)Forl oansl aw ofl i
mi tation appl i
esf r
om t hedat eofdef aultof
i
nst allment ,butf oradv ances,l awofl i
mi tationappl iesf r
om t hedat eof
adv ance.
(5)I ncaseofl oans, debi tbal ancecont inuesatal ltimeort heaccounti s
closed,whi let her emaybea debi torcr editbal ancei nr espectof
adv ances.
3.Gener alPr incipl es ThePr i
nciplesofsoundl endi ngr eferst ocer tain
princi plest hatgui det hebanksi ngr antingl oansandadv ances.Banks
l
endmoneyt ot hei rcust omer sandnon- cust omer sal so.Theyhav et o
l
ookatandexami net het rustwor thinessoft hebor rower st or et urnthe
moneywi t
hi nterest .Inor dert hatthemoneyoft hebankwhi chi sbeing
adv ancedmaynotbel ost ,thebankerhast ot akei nt ohi s
consi der at i
ont hef undament alprinciplesofsoundl endi ng.Thesear e
mai nl yt hef ollowi ng:
(i
)Saf et ySaf etyf irstshoul dbet hegui dingpr inci plet obef ollowedi n
grant ingl oansandadv ances.Thet erm‘ saf ety’ meanst hatt hebor rower
i
si naposi ti
ont or epayt hel oan,al ongwi thi nter est ,accor dingt ot he
termsoft hel oancont ract .Ther epay mentofbor rower sint ur ndepends
upont hebor rower '
s( i)capaci tytopay ,( ii
)wi l
li
ngnesst or epay ;and( i
ii
)
thecol lat eralsecur ityof fer ed.Thecapaci tyt o payoft hebor rower
dependsuponhi st angi bleasset sandt hesuccessofhi sbusi ness;i fhe
i
ssuccessf uli nhi sef f
or ts,heear nspr of i
tsandcanr epayt hel oan
prompt ly .Ot her wi se,t hel oani srecov er edoutoft hesal epr oceedsof
hisot hert angi bleasset s.Thewi l
li
ngnesst opaydependsupont he
honest yandchar act eroft hebor r
ower .Thebankershoul dseet hatthe
busi nessf orwhi cht hel oani sbei nggr ant edi sasoundoneandt he
bor roweri scapabl eofcar ryingouti tsuccessf ully.Thebor r
owershoul d
beaper sonofi nt egr ity,goodchar act erandr eput at i
on.Thesecur i
ty
givenoft angi bleasset soft hebor rowermustbewor thwhi lef orr ecov ery
oft hel oanamount .
(i
i)Li qui dityBanksadv ancel oansf orshor tt erms.Theyl endmoneyf or
wor kingcapi t alpur posesf orshor tper iods.Thebankerhast oascer tain
whet hert hel oanbei ngadv ancedcanber epai dondemand, thati stosay ,
whet hert hebor roweri si nsuchaposi tionandst atus.Thenat ureof
asset sownedbyt hebor rowerandpl edgedwi tht hebankeri st obe
caref ully ex ami ned. Goods and commodi t
ies whi ch ar e easi l
y
mar ketabl ear etobepr efer redt ot hel andedpr oper t
ieswhi cht aket ime
tobesol dorauct ionabl eandev ent hatmaybr ingl ossofwor thwhi l
e
proceeds.
(i
ii)Pr of itabi l
ityBanksadv ancel oanst oear npr of itsbywayofi nterest
ther eon.Theyar epr of itear ni ngi nst itutions;t henat ional i
sedbanksar e
noexcept i
ont ot hi s.Theyar et oempl oyt hei rf undspr of i
tabl y .But the
bankcanchar gei nt erestaccor dingt ot hedi rect ionsoft heReser veBank
ofI ndi a,i ssuedf rom t imet ot i
me.Thei nterest schar gedf rom di fferent
categor iesofbor rower smaydi ffer .Thebankmaychar geal esserr ate
ofi nterestf rom acust omerofhi ghf inanci alst atusandr eput ati
on,
wher easi tmaychar gehi gherr ateofi nt erestf rom
per sonsofdoubt fulr epay i
ngcapaci tyandsuchadv ancesul ti
mat ely
prov et obei rrevocabl et ot hedet rimentoft hei nt erest soft hebanksand
i
tsdeposi tor s.
(i
v )LoanPur poseThepur posef orwhi chal oani sbei ngt akeni san
i
mpor tantconsi der ationf orabanker ,whi leadv anci ngl oan.I fi snot
necessar yf orabankt ogr antl oanf orpur posef orwhi chl oani sbei ng
takeni scr eat iveandpr oduct ive.Forspecul at i
onpur posesl oanscannot
andshoul dnotbegr ant edbyt hebanks.Nat ional isationofBanksi n
1969hasdi ver t
edt hef undsoft hebanksf orl oanst obegi vent osmal l
entr epr eneur s,smal lscal ei ndust r
ies,agr icultur e,and smal lscal e
i
ndust riesal l
iedt oagr icultur e.Thebankshav ebegunt ogi vel oanst o
star tsuchsmal ltr adesi nor dert ol essent heunempl oy mentpr obl em.
(v)Di ver sificat i
onofRi sksApr udentbankeral way st r
iest osel ectt he
bor rowerv er ycar eful l
yandt aket angi bleasset sassecur it
yt osaf eguar d
hisi nter est s.Tangi bl easset sar enodoubtv aluabl eandt hebankerf eels
safewhi legr antingadv ancesont hesecur ityofsuchasset s,y etsome
ri
ski sal way si nv ol vedt her ein.Ther eal way sr emai nr i
sksi nl endi ngt o
bor rower sofdi ffer entcat egor iesandofdi fferentr egions.Ani ndust r
yor
trademayf acedepr essi onar ycondi tionsandt hepr iceoft hegoodsand
commodi tiesmayshar plyf all.Ther emaybenat uralcal ami tiesl ike
drought ,heav yr ai nf all
sandf loods,f ami ne,ear thquakeet c.whi chmay
frust r
at et her epay mentofl oansf rom apar ticularsect ionofbor rower s
ort hebor rower sofapar ticul arr egi on.Hencet hebankdi v ersi f
iest heir
spr eadofl oansi ndi fferentsect ionsofsoci etyandi ndi fferentr egions
sot hatt heymayf ul f
illthedef i
ciencyorl ossesf rom ot hersect i
onsor
regionsl oansgr ant edbyt hem.Theyf ollowt hepr i
nci ple" Donotkeepal l
theeggsi nonebasket ".Thust heydi versif
yt her iski nl endingmoneyt o
borrower s.
(vi
)Techni calCompet enceThepr oprietor/par tner sshoul dbet echni cally
qualifi
ed per sons ort hey shoul d hav e pr acticalexper ience i nt he
concer nedl i
neofact ivity.Thi sisnecessar ysoast oensur et hatt he
entrepr eneurwoul dbeabl et omanuf act uret hei t em ofgoodqual ityt o
withstandcompet iti
oni nt hemar ket .
(vi
i)Manager ialAbi lity Apar tf rom t he t echni calcompet ence,t he
entrepr eneurshoul dhav ebusi nessacument omanaget heaf fairsoft he
unitinacoor dinat edmanner .He
shoul dbeabl et omai nt ainanuni nterruptedpr oduct ionschedul eand
handl el abour ,f inanci alandot hermat t
er sef fect ively.Agoodgui det o
compet encemayl iei nhow t her equestf orassi st ancei spr esent ed.A
carelessori nadequat eappr oachmayi mplypoorper for mancel ater ,one
canal soassesshow qui ckl yandt horoughl yquer iesar eanswer edand
additional det ailspr ov ided.
(vi
ii
)Secur ityNobankerseest hehor oscopeofacust omerandl ends.
Hecal culat eshi sl endi ngr iskandl end.Tomi nimi set hechancesofr isk,
secur i
tyshoul d be i nsisted.The secur itymustbe adequat e,easi ly
reali
zabl eandf reef rom encumbr ances.But ,unduei mpor t
anceshoul d
notbegi v ent osecur it
ies.Theyar el i
kecushi ont of al lbackuponi n
ti
mesofneed.Ther eshoul dusual lybesuf fi
cientmar gint opr ov i
de
againstf l
uct uat i
onsi nv al ue.Thecust omershoul dbepr evailedupont o
chargeatt heout set ,ev ery thingav ail
abl eandaccept abl et othebankso
thathemaynotbor row agai nstt hosesecur i
tiesf rom ot hersour ces.
Wher e pr inci palsecur ityi s deemed as hi ghlyf luct uati
ng or not
conv enient lycont rollable,asuppor t
ingsecur i
t ymaybeaskedbyt he
banke. g.,equi tabl emor tgageoft hepr oper t
yownedbyt hepr opr i
et ors, i
f
any,orat hirdpar tyguar ant ee.
(i
x)Assur ed Repay ment( Economi cVi abili
ty )A bankershoul d come
forwar dt ol endonl ywhent her epay menti sassur ed.Thepr ojectshoul d
beaneconomi cal l
yv i
abl eone.Theuni tmustgener atesur pluscash
suffi
ci entt or epayt hel oani nstallment si nt i
me.I fthel endi ngi snot
selfl
iqui dat i
ngi .e.i ft hei tem acqui redorpr ojectf inanci aldoesnotofi ts
ownaccor dgener atesuf ficientf undst or epayt hebor rowingwi thina
reasonabl eper iodoft ime,t hepr oposalshoul dnotbeconsi der edf or
sanct i
onunl esst her ear eal ternativesour cesofr epay mentav ail
abl et o
thesat i
sfact ionoft hebanker .Itisnotgoodt or el yonr epay mentf rom
thethi rdpar t
y .
(x)Mar ket abi lit
yThemar ketdemandoft hepr oducti sani mpor t
ant
factor .Unl esst hepr oducti spr of i
t abl ysol d,t heuni twi llnotbei na
posi t
iont of unct ionsmoot hly.Themar ket ingar rangement smadef or
thedi sposal oft hepr oduct sshoul dbel ookedi nt o.
(xi)Soci al Object i
v es
Whi lemaki ngadv ancest hebankershoul dgi vet hehi ghestpr i
orit
yt othe
nat i
onali nt erest.Todaybankshav east r
ongsoci alobj ect iveandsoci al
consci ence.I tist her esponsi bil
ityofeachandev erybankt oensur ethat
thebankcr editflowssmoot hl yt othenegl ect edsect or soft heeconomy
andt ot heunderpr i
vilegedsect orsoft hesoci et y .Towar dst hisendi n
view, bankshav egi venupt hei r‘secur i
ty -
or i
ent edl endi ng’ andhav et aken
up‘ need- basedl oans’or' pr oduct i
v ity-orient edl endi ng'andhav et aken
upshor tt erml oanst opr i
mar ysect orandsmal l scal esect or.
(xii
)Quant um ofFi nance The l oan appl ied f orshoul d be adequat e
enought omeett hepr oj ect edl evelofpr oduct ion.Thebankershoul d
giveal oan/ adv ancewhi chi sanappr oxi mat er equi rementoft heuni t
aftert aki ngi ntoconsi der ationt hef ol lowi ngpoi nt s:
(a)Tot al costofpr oject /busi ness.
(b)I nv est mentbyt hebor rower .and
(c)Bor rowi ngs f r om ot herr esour ces.I ti s essent ialt hatan obj ect
assessmentoft he bor rower '
sr equi rementi s made and f inancial
assist ancepr ovidedaccor di ngl y.
(xii
i)LawofLi mi t
at ionandAdv ancesAl endi ngbankershoul dalsobear
i
nmi ndt hel aw ofl imi tat i
on.Accor dingt ot heLi mi tationAct ,1963,a
debtwi l
lbecomeabadoneaf tert heexpi ryoft hr eey ear sf rom thedat e
oft hel oan.Thi sappl i
cabl et ol oansandadv ancesgr ant edbybanks.
Hence,eachandev er ybankershoul dbev erycar efuli nr enewingt he
l
oan,y ear af t
er y ear ;ot her wi se t he l oans woul d become bad
subsequent ly.
Themai nbusi nessofabanki ngcompanyi st or ecei v
edeposi ts
andl endmoney .Recei vingdeposi ti nv olvesnor isk, sincei tisthebanker
whoowesadut yt or epayt hedeposi t,whenev eri tisdemanded.Ont he
otherhand,l endi ng al way si nv olvesmuch r iskbecauset herei sno
cer t
aint yofr epay ment .A bankershal lbe v er ycaut iousi nl ending,
becausehei snotl endi ngmoneyoutofhi sowncapi tal.Amaj orpor t
ion
oft hemoneyl entcomesf rom t hedeposi tsr ecei vedf rom t hepubl i
c.
Thesedeposi tsar emost l
yr epay abl eondemand.Hence,whi lelending
money ,abankershoul df ollowav er ycaut iouspol icy .Heshoul dobser ve
thepr inci plesofsoundl endi ngwhi char edi scussedabov e.

8.WHATI
SNEGOTI
ABLEI
NSTRUMENT?WHATARETHEDI
FFERENT
 KI
NDSOFNEGOTI
ABLEI
NSTRUMENTS?

ANegot i
ableinstrumentisawr i
ttendocumentwhi chenti
tl
esaper son
toasum ofmoneyandwhi chist ransferablefr
om per
sontoper sonby
mer edeliveryorindorsementanddel i
very.Theper
sontowhom i tisso
transferr
edbecomesent i
tl
edt ot hemoneyandal so totherightt o
furthertr
ansferit
.
TheNegot i
ableInst
rument sAct ,1881doesnotdefineanegot iabl
e
i
nst rumentandSect ion13mer elyst atesthat“ANegoti
ableInst
rument
meansapr omissorynote,bil
lofexchangeorchequepay ableeitherto
orderort obearer.

Essent
ial
Feat
uresofNegot
iabl
eInst
rument
sar
egi
venbel
ow:
1.Wr
it
ingandSi
gnat
ure:
Negotiabl
eI nst
rument
s mustbe wr it
ten and si
gned bythe par
ties
accordingtotherul
esrelat
ingt oPr
omissoryNotes,Bi
l
lsofExchange
and Cheques.Demand Dr af
ts ar
e also constr
uelas Negot i
able
I
nstrumentsintheli
miti
ngcaseast heyhavethesamepr oper
tyasN. I
.
Inst
rumes.
2.Money
:
Negotiablei
nst
rument
sar epayabl
ebylegalt
endermoneyofI
ndi
a.The
l
iabil
i
ties ofthe par
ti
es ofNegot i
ableInstr
ument
s arefi
xed and
deter
mi nedi
ntermsoflegal
tendermoney.
3.Negot
iabi
l
ity
:
Negot iabl
eInstr
ument scanbet r
ansferr
edfrom oneper sontoanot her
byasi mpleprocess.Inthecaseofbear eri
nstrument s,deli
verytot he
transfereeissuff
ici
ent.Inthecaseoforderinstr
ument st wot hi
ngsar e
requiredforav al
idtransfer
:endorsement(i
.e.
,signatureoft heholder)
anddel i
ver
y.Anyi nstr
umentmaybemadenon- transferabl
ebyusi ng
suitablewords,e.
g.,“
payt oXonly.
”
4.Ti
tl
e:
The t
ransfer
ee ofa negot i
abl
ei nst
rument,when he ful
fi
ls cer
tain
condi
ti
ons,iscal
ledtheholderi
nduecour se.Thehol
deri
nduecour se
getsagoodt i
tl
et otheinst
rumentevenincaseswherethetit
leofthe
tr
ansf
erreri
sdefecti
ve.
5.Not
ice:
I
tisnotnecessaryt
ogivenot
iceoftransf
erofanegot
iabl
einst
rument
t
othepart
yliabl
etopay
.Thetransf
ereecansuei
nhisownname.
6.Pr
esumpt
ions:
Certai
npresumpt i
onsapplytoallnegoti
ablei
nstr
uments.Example:I
tis
presumedt hatthereisconsi
derati
on.Itisnotnecessarytowritei
na
promissorynot et hewords“forvaluerecei
ved”orsimil
arexpressi
ons
becauset hepay mentofconsi der
ati
oni spresumed.Thewor dsare
usuall
yincludedt ocreat
eaddi
tionalevi
denceofconsi
derati
on.
7.Speci
alPr
ocedur
e:
Aspecialprocedur
ei sprovi
dedforsui
tsonpromi
ssorynotesandbil
ls
ofexchange(Theprocedureispr
escri
bedi
ntheCiv
ilPr
ocedureCode)
.A
decreecanbeobt ainedmuchmor equi
ckl
ythanitcanbei nordi
nary
sui
ts.
8.Popul
ari
ty:
Negot
iabl
einst
rument
sarepopul
ari
ncommerci
alt
ransact
ionsbecause
oft
hei
reasynegoti
abi
l
ityandqui
ckr
emedi
es.
9.Ev
idence:
A documentwhich f
ail
sto qual
if
yas a negoti
abl
einstrumentmay
never
thel
essbeusedasevi
denceofthef
actofi
ndebt
edness.

PROMI SSORYNOTES
Sec.4:“APr omissorynoteisani nst
rumenti nwr i
ti
ng,notbeingabank
note(Anegot i
ablepromissorynoteissuedbyabankandpay ablet
othe
bearerondemand.Theamountpay ableisstatedonthefaceofthenote)
oracur rencynote,contai
ninganuncondi t
ionalundert
aking,si
gnedby
themaker ,topayacer tai
nsum ofmoneyonl ytoortot heorderofa
cert
ainperson,ortothebeareroftheinstrument .
”
Twopar ti
es:
Maker :
whomakest hepromi ssor
ynoteandpr omissest
opay .
Payee:thepersontowhom t hepay mentistobemade.

From t
hedefini
tiongi
veni
ntheActitisappar
entthatt
hef ol
lowi
ng
essent
ialr
equir
ementsmustbef
ulf
il
ledbyaninst
rumentint
endedto
beapr
omi
ssor
ynot
e:
1.Thei
nst
rumentmustbei
nwr
it
ing.
2.Theinstr
umentmustbesi gnedbyt hemakerofi t.A si
gnatur
ei n
penci
lorbyarubberst
ampoff acsi
mi l
eisgood.Ani l
l
iter
atepersonmay
useamar korcrossinst
eadofwr i
tingouthi sname.Thesi gnatur
eor
markmaybepl acedanywher
eont hei nst
rument,notnecessari
lyatthe
bott
om.Itmaybeatthetoporatthebackoft heinst
rument.
3.Theinst
rumentmustcontai
napr omisetopay.Thepromi
setopay
must be ex pr
ess. I
t cannot be impli
ed or inf
err
ed. A mere
acknowl
edgementofi
ndebt
ednessisnotenough.
Example:“Mr.SenI.O.U.Rs.1000″
.HereI .O.U.st
andsf
or,“Ioweyou.
”
Thisisonlyanadmi ssionofi
ndebtedness.Thereisnopromisetopay
andtheref
oretheinstr
umentisnotapromi ssor
ynote.
4.Thepromiset
opaymustbeuncondit
ional
.Ifthepr
omi
set
opayi
s
coupl
edwit
hacondi
ti
oni
tisnotapr
omissorynote.
Exampl
es:
(
i)“
IPromi
setopayBRs.1500f
ir
stdeduct
ingt
her
eoutanymoney
whi
chhemayoweme.
”
(i
i)“Ipr
omisetopayBRs.1500onD’
sdeat
hpr
ovi
dedD l
eav
esme
enoughtopayt
hissum.
”
(i
ii
)“Ipromi
setopayBRs.1500, sevenday
saf t
erJD’
smarr
iage.
”These
i
nstrumentsarenotpr omi
ssorynotesbecausethepromi
set opayis
coupledwit
hacondition.“
IpromisetopayBRs.500ondemand”i sa
notewithanuncondi
ti
onalpromi
se.
Sti
pulati
ons oft he fol
l
owing ty
pe ar
e notr egarded as condi
ti
ons:
promiset opayataspeci f
iedti
meorataspeci f
iedplaceorafterthe
occurrenceofanev entwhichiscert
ainto occur,orpay mentafter
calcul
atingi
nter
estatacert
ainrate.
Exampl
e:
“Ipromiset
opayBRs.1500on1stApr il
,2000.”“
Ipromiset
opayBRs.
1500ondemandatBombay .
”“IpromisetopayBRs.500sev endays
aftert
hedeathofC.
”Thesear
eallv
ali
dpr omissor
ynotes.
5.Themakeroft
hei
nst
rumentmustbecer
tai
nanddef
ini
te.
6.APr
omi
ssor
ynot
emustbest
ampedaccor
dingt
otheI
ndi
anSt
amp
Act
.
7.Thesum ofmoneyt
obepai
dmustbecer
tai
n.
Exampl
es:
(i
)“Ipromi
set
opayBRs.1500andal
lot
hersumswhi
chshal
lbeduet
o
hi
m. ”
(i
i)“
Ipr
omisetopaysomemoneyontheoccasi
onofhismarr
iage.
”The
abovei
nstr
umentsar
enotpr
omissor
ynot
esbecausethesum ofmoney
tobepai
disuncer
tai
n.
8.Thepaymentmustbei nthelegalt
endercur
rencyofI
ndia.Apr
omise
topaycert
ainquant
ityofgoodsoracertai
namountofforei
gnmoneyis
notapromissor
ynote.
9.Themoneymustbepay abletoadef
ini
tepersonoraccordi
ngtohis
order.Anoteisval
idev
enifthepay
eei
smi snamedorisi
ndicat
edbyhis
offi
cialdesi
gnat
iononl
y.Evi
dencei
sadmissibl
etoshowwhot hepay
ee
real
lyis.
Exampl
e:
Adocument,i
fitot
her
wisesat
isfi
esthedefi
nit
ionofpromissor
ynote,
wi
ll
notceasetobesomerel
ybecausethewor
ds“ t
oorder”ar
eabsenti
n
t
hedocument.
10.Thepromissor
ynot
emaybepay
abl
eondemandoraf
teracer
tai
n
defi
nit
eperi
odofti
me.
11.TheReser
veBankActpr
ohi
bit
sthecr
eat
ionofapr omissor
ynot
e
payabl
eondemandtothebear
erofthenot
e,exceptbytheReserv
e
Bankandt
heGover
nmentofI
ndi
a.
Kindsofpr omissorynote:
Si
nglepr omissorynote:i
tismadebyasingl
eperson.
Jointpromissorynote:madebytwoormor eper
sonsjoi
ntl
y
Jointandsev eralpr
omissorynot
e:madebytwoormor epersonsi
nthei
r
j
ointandsev eralcapaci
ty.

BI
LLOFEXCHANGE
Sec5oft heNegot iabl
eI nstr
umentActdef i
nes“ABi l
lofExchangei
san
i
nstrumentinwr i
ti
ng,cont ai
ninganuncondi t
ionalor
der,signedbythe
maker,dir
ecti
ngacer t
ainper sont opayacer t
ainsum ofmoneyonlyt o,
ortotheorderof, acertainper sonortothebeareroftheinstr
ument
”.
Parti
estoaBillofExchange:
Threeparti
es
Drawer:whodraws(gi vesanor dertopay)thebill
.
Drawee:Theper sonwhoi sdirectedtopay
Payee:Thepersont owhom t hepay mentistobemade.

ABi l
lofExchangeisaninst
rumentinwri
ti
ngcontai
ninganuncondi
ti
onal
order,si
gnedbyt hemaker,dir
ecti
ngacer t
ainpersontopayacer t
ain
sum ofmoneyonl yto,
ortotheorderofacert
ainpersonort
othebearer
oftheinstr
ument.”
Themakerofabi l
lofex changeiscall
edt heDr awer.Thepersonwhoi s
dir
ectedt opayiscalledt hedrawee.Theper sonwhowi l
lreceivet he
moneyi scall
edthePay ee.Whent hepay eehascust odyofthebi l
l
, heis
call
edt heHolder
.Iti
st heholder’
sdutytopr esentthebillt
othedr awee
forhisacceptance.Thedr aweesi gni
fi
eshisaccept ancebysi gningon
thebil
l.Aft
ersuchsignaturethedraweebecomest heAcceptor.
I
n a bil
lofex change someti
mes t he name ofanotherperson i
s
menti
onedast heper sonwhowillacceptthebil
lift
heorigi
naldr
awee
doesnotacceptit
.SuchapersoniscalledtheDr
aweeincaseofNeed.
Abi
l
lofexchanget
obev
ali
dmustf
ulf
ilt
hef
oll
owi
ngr
equi
rement
s:
1.Thei
nst
rumentmustbei
nwr
it
ing.
2.Thei
nst
rumentmustbesi
gnedbyt
hedr
awer
.
3.Theinstr
umentmustcont
ainanor
dert
opay
,whi
chi
sexpr
essand
uncondi
ti
onal.
4.Thedr awer
,dr
aweeand t
hepay
eemustbecer
tai
n and def
ini
te
i
ndi
vidual
s.
5.Theamountofmoneyt
obepai
dmustbecer
tai
n.
6.Thepay
mentmustbei
nthel
egal
tendercur
rencyofI
ndi
a.
7.Themoneymustbepay
abl
etoadef
ini
teper
sonoraccor
dingt
ohi
s
or
der
.
8.Abi
l
lofexchangemustbepr
oper
lyst
amped.
9.Thebil
lmaybemadepayabl
eondemandorafteradef i
nit
eper
iodof
ti
me.Butnooneexceptt
heReser
veBankandtheGov ernmentofIndi
a
candrawabil
lpay
abl
eondemandtot
hebearerofthebil
l
.
Therequi
rement
saremor eorl
esst
hesameasinpromissor
ynot
esand
aresubj
ectt
osimil
arcondi
ti
onsasr
egar
dssi
gnatur
eetc.
I
fanyoft
herequirement
sment
ionedabov
eisnotf
ulf
il
led,
thedocument
i
snotabi
llofexchange.
Exampl
es:
(
i) “Pl
easeletthebearerhavesevenpoundsandobl i
ge.”Thisis
notabil
lofexchangebecausei
tisarequestandnotanorder.
(i
i)“Weherebyaut
hori
seyoutopayonouraccountt ot
heorderofX,
£600.
”Thi
sisnotabil
lofex
changebecausei
tisnotanor
dert
opay.

CHEQUE

DEFINITI
ONOFCHEQUE
Sec.6ofNegot i
abl
eInstr
umentsAct,1881:“Cheque”.—A“ cheque”isa
bi
llofexchangedr awnonaspeci fi
edbankerandnotexpr essedt obe
payabl
eot herwiset
hanondemandandi tincludestheelect
ronicimage
ofatruncatedchequeandachequei ntheelectroni
cfor
m.Expl anat
ionI
.
—Forthepur posesofthi
ssect
ion,
theexpressions—

(a)“
achequei
nt heelectr
onicfor
m”meansachequewhi chcont ainsthe
exactmirr
orimageofapapercheque,andi sgenerated,writtenand
signedi
nasecur esystem ensur
ingt
hemini
mum safetystandar dswith
theuseofdigit
alsignature(wit
horwit
houtbi
ometricssignatur e)and
asymmetri
ccryptosystem;

(b)“at runcat
edcheque”meansachequewhi chistruncatedduringt
he
courseofacl ear
ingcycle,ei
therbytheclearinghouseorbyt hebank
whet herpay i
ngorrecei
vingpay ment,immediatel
yongener at
ionofan
electronicimage fortransmission,substi
tuti
ng the furt
herphy si
cal
mov ementoft hechequeinwr i
ting.
Explanat i
on II
.—Fort he pur poses ofthi
s section,t he expr
essi
on
“cl
ear
inghouse”meanst hecl
eari
nghousemanagedbytheReser
ve
BankofI ndiaoracl
ear
inghouserecogni
sedassuchbyt
heReser
ve
BankofIndia.

Ther
ear
ethr
eepar
ti
esi
nchequet
hesear
e:
Drawer:Theper
sonwhodrawst hechequeisknownast
hedr
awer
.The
personwhosenametheaccountstandsi
sthedrawer
.
Dr
awee:
Thebankonwhi
cht
hechequei
sdr
awni
sknownast
hedr
awee.
Payee:Thepersoninwhosefavorthechequeismadepayabl
eist
he
pay
ee.Ifthechequeisdrawnpayabl
etoself
,thedr
awerhi
msel
fwoul
d
bethepayeeofthecheque.
ESSENTI
ALSOFCHEQUE
1.I
nWr
it
ing:
-Thechequemustbei
nwr
it
ing.I
tcannotbeor
al.
2.Unconditi
onal:
-Thel anguageusedi nachequeshoul dbesuchast o
conveyanuncondi ti
onalorder.I
fthebankerisorderedt opayupont he
conditi
on ofpay ee'
s signing t
he recei
pt,then the instr
umenti sa
conditi
onalorderandt husnotacheque.' Buti ftheor derregar
ding
recei
ptistooconst r
uedasaddr essedtothepay ee,theinstr
umentcan
bet r
eatedasacheque.
3.Si
gnat
ureoft
heDr
awer:
-Itmustbesi
gnedbyt
hemaker
.
4.Cer
tai
nSum ofMoney:
-Theamounti
nthechequemustbecer
tai
n.
5.Pay
eesMustbeCer
tai
n:-
Itmustbepay
abl
etospeci
fi
edper
son.
6.Onl
yMoney:
-Thepay
mentshoul
dbeofmoneyonl
y.
7.Pay
abl
eOnDemand:
-I
tmustbepay
abl
eondemand.
8.UponaBank:
-I
tisanor
derofadeposi
toronabank.
9.Thedat
ecolumn:Dat
ei st
hef i
rsti
tem t
obef
il
ledi
nbyacust
omer
.
Thedat
eshoul
dnotbeincomplet
e.

10.Stal
eCheques:(outofdate)
:Thedateona chequemaybea
cur
rentone,orananteoneorapostone.Achequewhichbear
s
dat
ebeforethedat
eofissue,i
ssaidt
obeant
e–dated.
t
h
Ex:Achequei ssuedon7 ofJul y,2015maybeart
hedateof1stj
uly
2015.
Chequeshoul
dbepr oducedbefor
et heexpiryoft
het
erm 3mont
hs.
Aft
er3monthschequewil
lbecomestalecheque.

11.Postdatedcheque:Achequewhichbearsadatesubsequenttot
he
dateofi
ssueissaidtobepostdatedcheque.
st
Ex:Ifachequedrawnon1 mar ch2015,bearst
hedateof15th Mar
ch
2015.i
tispostdatedcheque.

12.Payeecol
umn:Theter
m Payeedenotesthepersontowhom t
he
amountoft
hechequei
spay
abl
e.Payeemustbeacert
ainperson.

13.TheamountCol umn:Theamountoft hechequemustbecertai

nand
expressedbot hinwor dsandf i
gures.Theamounti sver
ycorrectl
yand
l
egiblywr i
tt
en.Ifi
tisnotdone,eit
herthechequewi l
lbedi
shonouredora
delaywillbecausedi nthepayment.
Theamountshoul dal waysbewr i
ttenclearl
ywithapen.Ift
hereisany
overwrit
ingoral t
erati
on,itshoul
dbeconf ir
medbyt hedrawerhimsel
f
withhisfullsi
gnature.

14. The si
gnature Col
umn: A banker usual
ly obt
ains speci
men
si
gnatur
esofcustomersatt
het i
meofopeningnewaccounts.Abanker
shoul
dalwayscomparethesignatur
eont
hechequewi t
ht hespeci
men
si
gnatur
e.

TYPESOFCHEQUES:

1.Bearerchequesoropencheques
2.Crossedcheques

1.Abear ercheque:
A bearercheque isone whi ch has no cr
ossi
ng and whi
ch can be
present
edbyt heholdert
othebankeruponwhom i ti
sdrawnandispaid
overthecounteroft
hebank.
Thischequei spayablebyt hedr aweebankov erthecount
ert othe
Bearerorpresent
erofthecheque.

ABearerchequecanbenegot iat
edorpasst oanotherpersonbymere
del
iv
ery.I
not herwor
ds,theholder(ort
heTransf
erer),whengiv
ingi
tto
anot
herpersonneednotendorsethecheque.
No ident
if
icat
ion i
sneeded when a bearerchequei spresent
ed f
or
encashment.However
,innormalbanki
ngpr act
ice,wher
etheamountof
thechequeissubst
ant
ial
,thei
denti
tyoftheencasherisi
nsi
stedon.

Abearerchequecanbecol
l
ect
edbyt
hebankf
ort
hecr
edi
tofany
one'
s
account
.

I
nbanki ngpracti
ce,theneedfortheencasher'
ssignatur
eont hebackof
thechequei smer elytoev i
dencet hattheencasherhasr ecei
v edthe
moneyf rom t
hebank.
Abear ercheque:
A bear ercheque isone whi ch has no cr
ossi
ng and whi ch can be
presentedbyt heholdertothebankeruponwhom i tisdrawnandi spaid
overthecount erofthebank.
Thischequei spay ablebyt hedr aweebankov erthecount ert othe
Bearerorpr esent
eroft hecheque.

ABearerchequecanbenegot iat
edorpasst oanotherpersonbymere
del
iv
ery.I
not herwor
ds,theholder(ort
heTransf
erer),whengiv
ingi
tto
anot
herpersonneednotendorsethecheque.

No ident
if
icat
ion i
sneeded when a bearerchequei spresent
ed f
or
encashment.However
,innormalbanki
ngpr act
ice,wher
etheamountof
thechequeissubst
ant
ial
,thei
denti
tyoftheencasherisi
nsi
stedon.

Abearerchequecanbecol
l
ect
edbyt
hebankf
ort
hecr
edi
tofany
one'
s
account
.

I
nbanki
ngpract
ice,t
heneedfortheencasher
'ssi
gnat
ureonthebackof
t
hechequeismer el
ytoevidencethattheencasherhasrecei
vedthe
moneyf
rom t
hebank.

WhatisanOr derCheque?
Thisisachequewher ebythepri
ntedwor
d" Bearer
"onthechequei
s
cancel
led.Thecancell
ationoftheword"Bearer
"automat
ical
l
ymakes
thechequean"order
"cheque.

Anor derchequecanbepai
dtot
henamedpay
eeacr
osst
hebank'
s
accountifsopresent
ed.
Identi
ficat
ionmustbeinsist
edonbythebankwhenencashingt
heorder
cheque f orthe pr
esenter.The I
D numberand the named pay
ee's
signaturewil
lbeaskedforonthebackoft
hecheque.

Achequedr
awnt
hus:

PayCash. ..orOr der(thebeareriscancelled)isnotachequeatal l

.
Hence,itmustnotbeencashedorpai d.TheActstatesthatifacheque
i
st o bemadepay ableto order
,thepay eemustbespeci f
ied wi
th
cert
ainty.
An or der cheque can be negot i
ated to another person by the
endorsementoft het r
ansfer
or.Themer esignatur
eofthet r
ansfer
orwil
l
besuffici
enttotr
ansf erornegoti
atet
hecheque.

Banks wil
lcoll
ectcheques made pay
abl
eto orderi
fdeposi
ted f
or
col
lect
ionbyanyper
sonotherthant
henamedpayee.

Anor derchequecanbeabear erchequei fthewor dsorbear erar enot

cancell
edout .
A crossedchequei sachequet hathasbeenmar kedt ospeci fyan
i
nstructi
onaboutt hewayi tistober edeemed.Acommoni nstr uct
ionis
tospecifythatitmustbedeposi t
eddi r
ectl
yintoanaccountwi thabank
andnoti mmedi atelycashedbyabankov erthecounter.Thef or matand
wordingv ar
iesbet weencount r
ies,butgenerall
ytwopar al
lellinesand/ or
thewor ds' AccountPay ee'orsimilarmaybepl acedeitherv er
ti
call
y
acrossthechequeori nt hetopl efthandcor ner.Byusi ngcr ossed
cheques,chequewr i
ter
scanef f
ecti
velyprotectthechequest heywr i
te
from bei
ngst ol
enandcashed.

Acr ossedchequei sachequet hatispayableonlythr

oughacol lecti
ng
banker andnotdi rectl
yatt hecount erofthebank.Cr ossingensures
securi
tytotheholderofthechequeasonl ythecoll
ecti
ngbankercr edit
s
theproceedstotheaccountoft hepay eeofthecheque.
Whent wopar al
l
eltransverseli
nes, wit
horwi t
houtanywor ds,ar
edr awn
generall
y,onthelefthandt opcor nerofthecheque.Acr ossedcheque
doesnotaf f
ectthenegotiabil
i
tyoft heinst
rument.

1.Generalcr
ossi
ng:
Secti
on123oftheActr
eferstogener
alcrossi
ng.
Whereachequebearsacrossi
tsf
acetwotraversel
ineswit
horwi t
hout
thewordsorthewords‘
notnegot
iabl
e,t
hechequeissaidtohav ebeen
crossedgeneral
ly
.Wher
eachequei
scrossedgeneral
l
y,t
hebankershal
l
notpayit
,otherwi
set
hantot
hebanker
”(Sect
ion126).

Gener al
ly,
chequesar ecrossedwhen
Therear etwotransv erseparall
elli
nes,markedacr ossit
sf aceor
Thechequebear sanabbr eviat
ion"&Co." betweent hetwopar all
elli
nes
or
Thechequebear st hewor ds"NotNegot i
able"betweent het wopar al
lel
l
inesor
Thechequebear sthewor ds"A/c.Payee"betweent hetwopar al
lelli
nes.
A cr ossed cheque can be made bear ercheque by cancel li
ng the
crossingandwr iti
ngt hatthecrossingiscancelledandaf f
ixi
ngt hefull
signatureofdrawer.

2.Specialcrossing:Secti
on124oft heActrefer
stoSpecialcr
ossi
ng.
Wher eachequebear sacr ossitsfaceinadditi
ontot henameoft he
bankereitherwi thorwi thoutthewor dsort hewords‘ notnegoti
abl e,
thent hechequei ssai dtohav ebeencr ossedspecial
ly.Theobjectof
specialcrossingist odirectthebankert opayt hechequeonlyifi tis
presentedthroughthepar ti
cularbankmentioned.
Whenapar t
icul
arbank' snamei swr i
tt
eni nbetweent hetwopar allel
l
inest hechequei ssaidtobespeci al
lycr
ossed.

I
naddit
iont othewordbank,t hewor ds"A/c.PayeeOnly"
,"Not
Negoti
abl
e"mayal sobewr i
tt
en.Thepay mentofsuchchequei snot
madeunlessthebanknamedi ncrossingispresenti
ngthecheque.The
eff
ectofspecialcr
ossi
ngi sthatthebankmakespay mentonlytothe
bankerwhose name i s wri
tten int he crossi
ng.Special
l
y crossed
chequesar
emor esafethanagener al
lycrossedcheques.

NotNegot i
ablecrossi
ng:
Thewor ds'notnegoti
able'canbeaddedt ogener al-cr
ossingaswel las
speci
al-
crossing and a crossing wit
ht hese wor dsi sknown as not
negoti
ablecrossi
ng.Theef fectofsuchacr ossingi sthatitremov esthe
mostimpor t
antcharacteri
sticofanegot i
ableinstr
ument, t
het ransf
eree
ofsuchacr ossedchequecannotgetabet t ertitl
et hant hatoft he
tr
ansfer
or(cannotbecomeahol derinduecour se)andcannotconv eya
bett
er tit
le to his own t ransfer
ee,but t he i nstr
ument r emains
tr
ansfer
able.
AccountPay eeCr ossingCheque:
Thiscr ossingcanbemadei nbot hgener alandspeci alcrossingby
addingt hewor ds' accountpay ee'or' A/C payeeonl y'
.Int hi
st ypeof
crossi
ng,t hecol l
ect i
ngbankeri ssupposedt ocredittheamountoft he
cheque t ot he accountof t he pay ee onl y.The cheque r emains
tr
ansferablebutt hecollect
ingbankerhasmor eliabil
i
tyifhecr edi
t st
he
chequepr oceedst osomeoneot herthant hepayeeandt heendor sement
i
nf avouroft hel astpay eeisprov edforged.Thus,t hecollecti
ngbanker
mustf ir
sti nv est
igatet hetit
leoft hel astendorseef r
om t heor igi
nal
payeenamedi nthecheque, beforecollecting.

Ot
herI
nst
rument
s

1.Banker ’sDr afts(DemandDr afts):

Banker ’
sdr aftisapay mentor derissuedbyoneof fi
ceofabankon
anotherof fi
ceoft hesamebank,f oracer t
ainsum ofmoneypay ablet o
orderon demand.Forr emi tti
ng moneyf rom one pl ace to anot her
,
banker si ssue demand dr afts on t heirbr anches att he palce of
destination.I ti
sissuedont her equestofacust omerwhohast omakea
guarant eedpay ment,thatisinci rcumst anceswher ethepay eewi shest o
becer taint hatthechequewi llbepai duponpr esent at
ion.
Banker ’
s drafts can,and shoul d be cr ossed wi t
hav iew t o
protectingt heinterestsoft hepar tiest heretov iz.thedr awer(issuing
branch) ,thedr awee(thepay ingbr anch)andt hepay ee.

2.DividendWar rants:Theprofitmadebyacompanydi videdamongi t

s
shareholder
saccor dingtotheirnumberofshar esiscalled‘di
vi
dend’.A
divi
dendwar rantisanor der
,issuedbyaj oi
ntstockcompanyanddr awn
on itsbanker sf orpaymentoft hespecifi
ed sum ofmoneyt othe
regi
steredholderofoneormor eofi t
ssharesordebentures.
InIndi
a,dividendwar r
antsar eissuedinconformit
ywi ththelegal
defi
niti
onofacheque.Hencedi vi
dendwar r
antsaretr
eatedascheques.

3.Travell
er’
scheque:Tr av
ell
er’
schequei samet hodwher ebyt r
av el
ers
takecurrencytoanot herplaceinI ndi
aorabr oadt oprovidef ort hei
r
expenses.Whenaper sonwant stot ravelwithoutt aki
ngt her iskof
carr
yingcashwithhi m,hemayav ai
l oft
hef aci
li
tyoftravel
er’
scheque.
Atravel
ler
’schequecanbeencashedatanyof f
iceoft hei ssuing
bankandatanyot herpl
acewi t
harrangement sviz.hotel
s,petrolpumps,
showrooms, depar tmentalstoreetc.
Tr avell
er’scheque is one of t he negotiabl
e i nstr
ument s. It
possessesal lcharacteri
sti
cfeaturesofacheque.
Holder,Hol derinDueCour seandHol derforv
alue
Holder:Sec. 8ofN. I.
Act1881def i
nes:Thehol drofapr omi ssor
ynot e,
bil
lofex changeorchequemeansanyper sonent i
tl
edinhi sownnamet o
the possessi on t hereofand t or eceive orrecovert he amountdue
ther
eonf r
om t hepar ti
esthereto.
Toahol der,heshoul dhavear i
ghttopossess.Aper soni npossession
ofani nstrumentwi thouthav i
ngar ighttopossesst hesamecannotbe
call
edt hehol der.

9.WHAT IS ENDORSEMENT? EXPLAI

N DI
FFERENT KI
NDS OF
ENDORSEMENT.
Anegot i
ableinstrumentpay ablet oor derisnegot iablebyt hehol derby
i
ndor sementand del iverythereof .Thus,t henegot iation ofanor der
i
nst r
umentr equir
estwof ormalit
iesv i
z,fi
rstt hehol dershoul di ndorseit
and t hen deliv
eri ttot heindor see.Unl esst het r
ansf erorsi gnshi s
i
ndor sementont hei nstrumentanddel iversi t
,thet ransf er
eedoesnot
becomeahol der.Wher eani nstrumentpay abletoor deri stransferred
wit
houti ndorsement,t het r
ansfer eeisnotent i
tl
edt ot her i
ght sofa
holderinduecour se,
andhecannotnegot i
atei tt
oat hirdpar y
.
Definiti
onofEndor sement
Sec.15ofNegot i
abl
eI nstr
ument sAct1881def i
nes:Whent he
makerorhol derofannegoti
abl einst
rumentsignst hesame,ot her
wi se
thanassuchmaker ,f
ort
hepur poseofnegotiat
ion,onet hebackorf ace
thereoforonasl i
pofpaperannexedt her
eto,orsosi gnsforthesame
purposeast ampedpaperi
ntendedt o becompl et
edasanegot iable
i
nstrument ,heissaidtoi
ndorsethesame, andiscalledtheendorser.
Endorsementi st he actofsi gning a cheque f orthe purpose of
tr
ansferringittosomebodyel se.UnderNegot i
ableInstr
ument sActit
meanst hewr i
ti
ngofonesnameont hebackoft hei nst
rumentorany
paperat tachedtoitwit
ht heintenti
onoft r
ansferr
ingtherightstheri
n.A
bearerchequecanbet ransferr
edbymer edeliver
ybutanor dercheque
i
st r
ansf erredbyendor sementanddel i
very
.Endor sementsar eusuall
y
madeont hebackofthecheque, thoughtheycanbemadeoni tsfaceas
well
.If,howev er
,nospacei sleftont hei
nstrument,itmaybemadeona
separat
epaperat tachedt oit.
Endor sementont hechequemustbemadei nproperfashion,otherwi
se
thebankwi l
lnotpayi t
.Theendor sermustsignhisnameexact l
yasi t
hasbeenwr it
tenont hecheque.Hemustsi gnhisnamewi ththesame
spelli
ngsasal readyappearont hecheque.Hemay ,i
fhe, l
i
kesputdown
thecor rectspelli
ngsafterhehassi gnedinthemanneralreadyappear i
ng
ont hecheque.Wher eachequei sendor sedonbehalfofacompany ,a
fi
rm orsomeot herinst
itut
ion,theper sonsigni
ngtheendor sementmust
sosi gnast omakei tcl
eart hathei ssodoi ngonbehalfoft hecompany
orthef irm andnotinhisper sonal capaci
ty.
Ki
ndsofendor
sement
s:
Endor sementi nbl ankandi nf ull-
endorsee
Iftheendor sersignshi snameonl y,theendorsementi ssaidt obe“ i
n
blank”,andi fheaddsadi rectiontopayt heamountment ionedint he
i
nst rumentt o,ortot heorderof ,aspecifi
edper son,theendor sementis
saidt obe“ inf ul
l
”,andt heper sonsospeci fi
edi scalledthe“endorsee”
oft heinstr
ument .
Impor tantkindsofendor sement saregivenbelow:
1.Bl ankorgener al endorsement :
Iftheendor sersignshi snameonl yanddoesnotspeci fyt
henameoft he
endor see,theendor sementi ssai dtobei nblankSec.16( 1).Theeffect
ofabl ankendor sementi st oconv erttheorderi nst
rumenti ntobearer
i
nst rument( Sec.54) ,whichmaybet r
ansferr
edmer el
ybydelivery.

2.Endorsementi
nf ul
lorspecialendorsement :
I
ft heendor
ser,i
nadditi
ontohi ssignature,alsoaddsadirect
iontopay
theamountmentionedintheinstrumentt o,ortotheor
derof,aspeci
fi
ed
persontheendor
sementissaidt obeinf ull
[Sec.16(1)
].

If
,forex ample,A,theholderofabi l
lofexchange,want stomakean
endor sementinful
ltoB,hewoul dwri
tethus:“PaytoBoror der
,SdA4.”
Aftersuchanendor sementiti
sonlytheendorsee,i
.e.
,B,whoisentit
led
tor eceiv
ethepay mentoft heinst
rumentandt ofurthernegot
iat
et he
i
nst rumentbyhisendorsement.

Ablankendor sementcaneasi l
ybeconv er
tedint
oanendor sementi
nfull
,
AccordingtoSection49,t
hehol derofanegoti
ablei
nst
rumentendorsed
i
n blankmay ,wi t
houtsigning his own name,bywr it
ing abovethe
endorser’ssi
gnatureadi
rectiont opaytoanyotherper
sonasendor see,
converttheendorsementinbl ankintoanendorsementi
nf ull
;andsi
nce
suchhol derdoesnotsi
gnhi msel fonthei
nstr
umenthedoesnott her
eby
i
ncurt
her
esponsi
bil
i
tyofanendor
ser
.

3.Parti
alEndorsement:
Secti
on56pr ovi
desthatanegoti
abl
einstrumentcannotbeendor sedfor
apar toftheamountappear i
ngtobedueont heinstr
ument .I
not her
words,aparti
alendorsementwhi
chtransfer
stherightstorecei
veonlya
partpaymentoftheamountdueonthei nstr
umentisinval
id.

Such an endorsementhas been declar

ed inval
id because i
twoul d
subjectthepri
orpart
iestoplur
ali
tyofact
ions(oneact i
onbyholderfor
partvalueandanotheracti
onbyendorseeforpartvalue)“andwil
lthus
causeinconveni
encetothem.

Moreover,itwoul
dalsoint
erferewitht
hefreecircul
ati
onofnegot iable
i
nstr
ument s.Itmaybenot edt hatanendorsementwhi chpur por
tst o
t
ransfertheinstr
umenttot woormor eendor sessepar at
ely
,andnot
j
oint
lyisalsotr
eatedaspar
tialendor
sementandhencewoul dbei nval
id.

Thus,whereAholdsabillf
orRs2,
000andendor
sesiti
nfav
ourofBfor
Rs1,000andinfavourofCfort
heremai
ningRs1,
000,t
heendor
sement
i
spartial
andinv
ali
d.

Sect
ion56,however
,furtherprovi
desthatwhereani
nstr
umenthasbeen
pai
dinpart,anot
etot hateffectma;beendorsedonthei
nst
rumentand
i
tmayt henbenegot
iatedf orthebal
ance.

Thus,ifintheaboveil
lust
rat
iontheaccept
orhasal
readypai
dRs1,000
toA,theholderofthebil
l,
Acant henmakeanendor
sementsaying“
Pay
B oror der
”Rs1, 000beingt heunpaidresi
dueofthebill
.”Suchan
endorsementwouldbev al
id.

4.Restri
cti
veendor
sement :
Stat
ing the ef
fectofendor sement,Sect i
on 50 provides t
hat“ t
he
endorsementofnegoti
ableinstr
umentf ol
lowedbydeliveryt
ransf
ersto
theendorseethepropert
yher ei
nwi t
ht herightoff
urthernegoti
ati
on.”
Howev er
,Secti
on50permitsrestr
ict
iveendorsement
.

Anendor sementwhich,byexpresswor ds,prohi

bit
stheendorseefrom
fur
thernegoti
ati
ngtheinstrumentorrestri
ctstheendorseetodealwit
h
hisinstrumentas di r
ected by the endor ser i
s call
ed ‘
rest
ri
cti
ve’
endorsement.
Theendorseeunderar estr
icti
veendorsementgetsalltherightsofan
endor
serexcepttheri
ghtoff urt
hernegoti
ati
on.I
not herwords,suchan
endor
semententitl
estheendor seetorecei
vethepay mentonduedat e
andsuethepart
iesforitbuthecannotfurt
hernegot
iatethei
nst r
ument.

Il
lustrations:
(a)B, theholderoft hebill
,makesanendorsementonthebil
lsaying“Pay
Conl y.”Itisar estrict
iveendorsementasCcannotnegot iat
et hebil
l
further.
(b)B, thehol derofthebill
,makesanindorsementonthebil
l
,saying“Pay
Cf ormyuseor“ PayCoror derf
ortheaccountofB.
”Inei
thercasethere
i
sar est ri
cti
veendor sementast heri
ghtoffurt
hernegot
iat
ionbyChas
beenexcl udedthereby .

Thepersonliabl
eont hehil
lmustpaybydrawi
ngachequeinthename
oftheholder(ortheendorser
)B.Ifhemakesthepaymentt
oConC’ s
ownaccount ,hewi l
lst
il
lbeliabl
etoB,t
heendorser
;HenceCcannot
endor
sethebi l
lfur
theri
nhisownname.

5.Conditi
onalendorsement :
Iftheendorserofanegot i
ableinstr
ument ,byexpr
esswor dsinthe
endorsement,makeshi sliabi
lit
y,dependenton the happeni
ng ofa
speci
fied event,although such ev ent may never happen,such
endorsementiscall
eda‘ condit
ional
’endorsement(
Sec.52).

Thel
awper mitsacondit
ionalendor
sementandther
efor
eitdoesnoti
n
anywayaffectthenegoti
abil
it
yoftheinst
rument
.Thus,endor
sement
s
canval
i
dlybemadei nthefol
lowingt
erms:

(
i)“
PayBoror
deronhi
smar
ri
age;
”

(
ii
)“PayBont
hear
ri
val
ofPear
lessshi
patBombay
.”

Inthecaseofacondi t
ionalendorsementt heliabi
li
tyoftheendorser
wouldar i
seonlyupont hehappeni ngoft heev entspeci
fi
ed.Butt he
endorseecansueotherpri
orparti
es,e.g.,
themaker ,
accept
or,etc.
,i
fthe
i
nstrumentisnotdulymetatmat uri
ty,eventhoughthespecif
iedevent
didnothappen.

6.Sansrecourseendorsement( Sec.52)
:
Whent heendorserexpressl
yexcludeshi
sownl i
abi
li
tyonthenegoti
able
i
nstrumenttot he endorsee orany subsequentholderin case of
dishonourofthe i
nstr
ument
,the endor
sementi
s known as ‘
sans
recourse’
endor
sement
.

Suchanendor sementi sgener al

l
ymadebyaddi ngthewords‘sans
recour
se’or‘withoutrecourse.
’Thus,“PayXorordersansr
ecour
se”or
“PayXwi thoutr ecour
set ome”or“ PayXoror derathisownri
sk”is
examplesofthist ypeofendorsement.

7.Facultati
veendorsement :
Whent heendor serexpressl
ygivesupsomeofhi sr i
ght
sundert he
negoti
able i nst
rument,t he endorsement is call
ed a ‘facult
ati
ve’
endorsement .Thus,“PayXoror der,not
iceofdishonourwaived”isa
facul
tativ
eendor sement.

Asar esul
tofsuchanendor sementtheendorseeisrel
iev
edofhi sdut
y
togiv
enot i
ceofdishonourtotheendorserandthelatt
erremainsli
abl
e
totheendorseeforthenon-
pay mentoftheinstr
ument,eventhoughno
not
iceofdishonourhasbeengiventohi
m.

10DEFINEBANKERAND CUSTOMER.DI
SCUSSTHEGENERALAND
SPECI
ALRELATI
ONSHI
PBETWEENBANKERANDCUSTOMER.
Ther elat
ionshipbetweenabankerandacust omerdependsont he
acti
vit
ies;product
sorser vi
cesprovidedbybankt oi t
scust omer
sor
avai
ledbyt hecustomer.Thusther el
ationshi
pbetweenabankerand
customeri st hetr
ansacti
onalrel
ati
onshi p.Bank’
sbusi nessdepends
much on t he str
ong bondage wit
ht he customer.“Trust”pl
ays an
i
mpor tantroleinbuildi
nghealt
hyr elati
onshipbetweenabankerand
customer. 
Def
ini
ti
onofaBanker
:

TheBanki
ngRegulat
ionsAct(BRAct
)1949doesnotdef
inet
het
erm
‘
banker
’butdef
ineswhatbanki
ngi
s? 

Asper  
Sec.5(b)oftheBRAct“ Banki
ng'meansaccepti
ng,forthe
purposeoflendingorinv
estment,ofdeposit
sofmoneyfrom thepubli
c
repayabl
eondemandorot her
wiseandwi thdrawabl
ebycheque,draf
t,
orderorother
wise."

Asper  
Sec.3 oft
heIndi
anNegot i
ableInstr
umentsAct1881,theword
“bankerincl
udes anyperson act
ing as bankerand anypostoff
ice
sav
ingsbank”
.

Accordi
ngt
oSec.2oftheBil
lofExchangeAct,
1882,
‘bankerincl
udesa
bodyofper
sons,
whet
herincor
poratedornotwhocar
ryont hebusiness
ofbanki
ng.
’
 

Sec. 5(
c)  ofBandki ngRegul ati
onAct ,1949def i
nes" banki ngcompany "
asacompanyt hatt ransactst hebusi nessofbanki ngi nI ndia.Si ncea
bankerorabanki ngcompanyunder t
akesbanki ngr elatedact i
v i
ti
eswe
cander i
v et hemeani ngofbankerorabanki ngcompanyf r
om Sec
5(b)asabodycor por atethat:
(a)Accept sdeposi tsf r
om publ i
c.
(b)Lendsor  
(c)I nvest st hemoneysocol l
ectedbywayofdeposi ts.
(d)Al l
owswi thdrawal sofdeposi tsondemandorbyanyot hermeans.
Accept ingdeposi tsf rom the‘publ i
c’ meanst hatabankaccept sdeposi ts
from any onewhoof f
ersmoneyf ort hepur pose.Unl essaper sonhasan
accountwi tht hebank,i tdoesnotacceptdeposi t.Fordeposi tingor
bor r
owi ngmoneyt her ehast obeanaccountr el
at i
onshi pwi tht hebank.
A bankcanr efuset oopenanaccountf orundesi rableper sons.I tis
banksr ightt oopenanaccount .Reser v eBankofI ndi ahasst i
pulat ed
cer t
ain nor ms  “
Know YourCust omer ”( KYC)gui del i
nes f oropeni ng
accountandbankshav et ostri
ctlyf oll
owt hem.
Inaddi ti
ont ot heact ivit
iesment ionedi nSec. 5(b)ofBRAct ,bankscan
alsocar ryoutact ivi
tiesment i
onedi nSec.6oft heAct . 
Cust omer
The t erm Cust omerhas notbeen def i
ned by any act .The wor d
‘
cust omer ’hasbeender i
vedf rom t hewor d‘custom’ ,whi chmeansa
‘
habi tort endency ’t o-do certaint hings inar egularora par ticular
manner ’
s. Int ermsofSec. 131ofNegot iableInst rumentAct ,whena
bankerr ecei vespay mentofacr ossedchequei ngoodf ai
thandwi thout
negligencef oracust omer ,thebankdoesnoti ncuranyl i
abi l
it
yt ot he
true owneroft he cheque byr eason onl yofhav ing recei ved such
pay ment .I tobv iously means t hatt o become a cust omeraccount
relati
onshi pi smust .Accountr elationshi pisacont r
act ualrelationshi p.

Iti
sgenerall
ybeli
evedthatanyindiv
idual
oranorganisat
ion,
which
conductsbankingtr
ansacti
onswi t
habank,isthecustomerofbank.
Howev er
,therearemanypersonswhodout il
izeser
vicesofbanks,but
donotmai ntai
nanyaccountwiththebank. 
Thusbankcust
omer
scanbecat
egor
izedi
ntof
ourbr
oadcat
egor
iesas
under
:

(a)Thosewhomai ntainaccountr el
ationshipwi thbanksi .
e.Exi sti
ng
cust omer s. 
(b)Thosewhohadaccountr el ationshi pwithbanki .
e.Former
Cust omer s 
(c)Thosewhodonotmai ntainanyaccountr elati
onshi pwitht hebank
butf requent ly 
visitbr anchofabankf orav ailingbanki ngfaci l
iti
essuchasf or
pur chasi nga 
draf t
, encashi ngacheque, etc.Techni callytheyar enotcust omer s,as
theydo 
notmai ntainanyaccountwi tht hebankbr anch.  
(d)Pr ospect ive/Pot enti
al cust omer s:Thosewhoi ntendtohav eaccount
relationshi p 
wi t
ht hebank.Aper sonwi l
lbedeemedt obea' cust omer'ev enifhehad
only  
handedov ertheaccountopeni ngf orm dul yf i
ll
edi nandsi gnedbyhi mto
thebank  andt hebankhasaccept edi tforopeni ngt heaccount ,even
thoughno  accounthasact uallybeenopenedbyt hebanki ni tsbooksor
recor d. 
Thet erm' cust omer 'i
susedonl ywi threspectt othebr anch,wher ethe
accounti smai ntai
ned.Hecannotbet r
eatedasa‘ customer 'forother
branchesoft hesamebank.Howev erwi t
ht hei mpl ementationof ’‘
Core
Banki ngSol ution’thecust omeri sthecust omeroft hebankandnotofa
par ti
cul arbr anchashecanoper atehisaccountf rom anybr anchoft he
bankandf rom any wher e.Int heev entofar isinganycauseofact i
on,the
cust omeri sr equir
edt oappr oacht hebr anchwi thwhi chithadopened
accountandnotwi thanyot herbr anch.  

Banker -
CustomerRelat
ionship:
Bankingisat r
ust
-basedrel
ationshi
p.Ther
earenumerouskindsof
rel
ati
onshipbetweenthebankandt hecustomer.Therel
ati
onship
betweenabankerandacust omerdependsonthetypeoftransact
ion.
Thust herel
ati
onshi
pisbasedoncont ract
,andoncert
aintermsand
conditi
ons. 

Theser
elat
ionshi
psconf
ercer
tai
nri
ght
sandobl
i
gat
ionsbot
hont
he
partoft hebankerandont hecust omer.Howev er,
theper sonal
rel
ationshipbet weent hebankandi tscustomer sist helonglast
ing
rel
ationship.Somebanksev ensayt hattheyhav egener at
ion-
to-
gener at
ionbanki ngrelati
onshipwiththeircustomer s.Thebanker
customerr el at
ionshi
pi sfi
ducial
relati
onship.Thet ermsandcondi ti
ons
governingt herelati
onshipisnotbel eakedbyt hebankert oat hi
rdpart
y. 
Classi f
icationofRel ati
onship:

Therel
ationshi
pbetweenabankandi tscustomerscanbebroadl
y
cat
egor
izedintoGener
alRel
ati
onshi
pandSpeci
alRel
ati
onshi
p.

I
fwel ookat Sec5(b)  ofBankingRegul ati
onAct ,wewoul dnoticethat
bank’sbusinesshov ersar oundaccept ingofdeposi t
sf ort
hepur poses
oflending.Thusther elati
onshipar i
singoutoft hesetwomai nactiv
iti
es
areknownasGener alRel ati
onship.I naddit
iont othesetwoact iv
iti
es
banksal soundertakeot heract i
vit
iesment i
onedi nSec. 6ofBanki ng
Regulati
onAct .Relationshiparisingoutoft heact ivi
ti
esment i
onedi n
Sec.6oft heacti
stermedasspeci alrel
ati
onship. 

Gener
alRel
ati
onshi
p:

Debt or-
Cr edit
or :
 Whena' customer 'opensanaccountwi thabank,he
fi
ll
si nandsi gnst heaccountopeni ngf or
m.Bysi gningt heform he
entersi nto an agr eement /contractwi t
ht he bank.When cust omer
deposi t
smoneyi n hisaccountt he bankbecomesa debt oroft he
customerand cust omera cr edi
tor.The money so deposi t
ed by
customerbecomesbank’ spr opertyandbankhasar ighttouset he
moneyasi tli
kes.Thebanki snotboundt oinfor
mt hedeposi t
ort he
mannerofut i
li
z ationoff undsdeposi t
edbyhi m.Bankdoesnotgi veany
secur i
tytot hedeposi t
ori.e.debt or
.Thebankhasbor rowedmoneyand
i
ti sonl ywhent hedeposi tordemands,bankerpay s.Bank’ spositi
oni s
quitedifferentfrom nor mal debtors. 
Bankerdoesnotpaymoneyoni t
sown,asbankeri snotr equi
redt o
repayt hedebtv oluntari
ly.Thedemandi st obemadeatt hebr anch
wher et heaccountex ist
sandi napr opermanneranddur i
ngwor ki
ng
daysandwor kinghour s.
Thedebt
orhast
ofol
l
owt
het
ermsandcondi
ti
onsofbanksai
dtohav
e
beenment ionedintheaccountopeni ngf orm.Thoughthetermsand
condit
ionsarenotment i
onedint heaccountopeni ngform,butthe
accountopeningform contai
nsadecl arati
onthatthet
ermsand
condit
ionshav ebeenreadandunder st oodorhasbeenexpl ai
ned.Inf
act
theter
msandcondi ti
onsarement ionedi nthepassbook,whichis
i
ssuedt othecustomeronlyaftertheaccounthasbeenopened.

Inthepastwhi l
eopeningaccountsomeoft hebankshadt hepr act
iceof
givi
ngapr i
ntedhandbillcontai
ningthet er
msandcondi t
ionsofaccount
alongwiththeaccountopeni ngform.Thi spracti
cehassi ncebeen
discont
inued.Forconvenienceandi nformationofpr ospect i
ve
customersaf ewbankshav euploadedt heaccountopeni ngf orm, ter
ms
andconditionsforopeningaccount ,r
atechar gei
nr espectofv ari
ous
servi
cesprov i
dedbythebanket c. ,
ont hei
rwebsi te.
 Whilei ssuing
DemandDr aft
,Mail/Telegraphi
cTr ansfer,
bankbecomesadebt orasit
ownsmoneyt othepay ee/benefici
ary.
2.Credit
or–Debtor:
 Lendi
ngmoneyi st hemosti mpor t
antactiv
iti
esofa
bank.The r esour
ces mobi l
ized by banks ar e util
ized f
orl ending
operati
ons.Customerwhobor rowsmoneyf rom bankownsmoneyt o
thebank.Inthecaseofanyl oan/advancesaccount ,thebankeri sthe
credi
torandthecustomeristhedebtor.Ther elat
ionshi
pi nt
hef i
rstcase
whenaper sondepositsmoneywi ththebankr everseswhenhebor rows
moneyf rom t
hebank.Bor r
owerexecut esdocument sandof fersecurit
y
tothebankbeforeutil
izi
ngthecredi
tfacil
it
y. 
Inaddit
iontoopeni ngofadeposi
t/
loanaccountbankspr ovi
devarietyof
serv
ices,whi ch makes t
he rel
ati
onship more wi de and compl ex.
Depending upon t he t
ype ofservi
ces render
ed and t he nature of
tr
ansaction,thebankeract
sasabai lee,t
rust
ee,pr
incipal
,agent,lessor,
custodi
anet c. 

3.
BankasaTr
ust
ee:

Asper
 Sec.3 
ofI
ndi
anTr
ustAct
,1882 

‘A" tr
ust
"isanobli
gati
onannexedtotheownershipofpr oper
ty,and
ari
singoutofaconfi
dencereposedi
nandaccept edbyt heowner,or
decl
aredandaccept
edbyhim,forthebenef
itofanother
,orofanother
andtheowner
.’Thust
rust
eei
sthehol
derofpr
oper
tyonbehal
fofa
benef
ici
ary
.

Asper Sec.15 ofthe‘Indi
anTr ustAct
,1882‘Atrusteei sboundtodeal
wit
hthet r
ust-propert
yascar efull
yasamanofor dinaryprudencewould
dealwithsuchpr opert
yi fitwer ehi
sown;and,i nt heabsenceofa
cont
racttot hecont r
ary,atrusteesodeal
ingisnotr esponsiblefort
he
l
oss,destructi
onordet eri
orati
onofthetr
ust-
property.
’At rust
eehasthe
ri
ghttorei
mbur sementofexpenses( Sec.
32ofIndianTr ustAct.
).

Incaseoft rustbankercust omerr el

ationshipisaspecialcontr
act.When
aper sonent rust
sv aluabl
ei t
emswi t
hanot herpersonwi t
hani ntent
ion
thatsuch i tems woul d be r et
urned on demand t othe keepert he
rel
ationshi
pbecomesofat r
usteeandt rusti
er.Customerskeepcer t
ain
valuablesorsecur i
ti
eswi t
ht hebankf orsafekeepingordeposit
scer t
ain
moneyf oraspeci f
icpur pose( Escrow account s)thebankeri nsuch
casesact sasat rustee.Bankschar gef eeforsafekeepingval
uables.

3.Bai
l
ee–Bai
lor
:

Sec. 148ofI ndianCont ractAct,1872,defi

nes"Bailment"
"bail
or"and
"bailee".
A" bailment "isthedeli
ver yofgoodsbyoneper sontoanotherf orsome
purpose,  uponacont ractt hatt
heyshall,
whent hepurposei s
accompl i
shed, bereturnedor  other
wisedisposedofaccor di
ngt othe
dir
ect ionsoft hepersondel i
veri
ngthem. Theper sondel
iveri
ngt he
goodsi scalledthe"bailor".Thepersontowhom t hey 
aredeliveredis
called, t
he" bail
ee".

Bankssecuretheiradvancesbyobt ai
ni ngtangiblesecur i
ti
es.I
nsome
casesphysical
possessionofsecur it
iesgoods( Pledge),val
uabl
es,
bondsetc.
,aretaken.Whi l
etakingphy sicalpossessionofsecur i
ti
esthe
bankbecomesbai leeandt hecustomerbai lor.Banksal sokeepsarti
cles,
val
uables,
securit
iesetc.,
ofitscustomer sinSafeCust odyandact sasa
Bail
ee.Asabaileet hebankisrequir
edt otakecareoft hegoodsbai l
ed. 

4.LessorandLessee:
 
Sec.105of‘TransferofpropertyAct1882’defineslease,Lessor ,lessee,
premium andr ent.Asperthesect i
on,“ Al
easeofi mmov ablepr operty
i
sat r
ansferofar i
ghttoenjoysuchpr oper
ty,madef oracertaint i
me,
expressorimpl i
ed, ori
nperpetuit
y,i
nconsiderationofapr i
cepai dor
promised,orofmoney ,ashareofcrops,serv
iceoranyot herthingof
value,t
ober enderedper i
odi
callyoronspecifi
edoccasi onstot he
tr
ansferorbythet ransf
eree,whoaccept st
het ransferonsucht er ms.” 

3.Def
ini
ti
onofLessor
,lessee,
premi
um andr
ent
 :
 
(1)Thet ransf eroriscal l
edt helessor ,
 
(2)Thet ransf ereeiscal ledt hel essee, 
(3)Thepr icei scal l
edt hepr emi um, and 
(4)Themoney ,shar e,
ser viceorot herthi
ngt obesor ender edi scalled
therent .”
 Pr ov i
dingsaf edeposi tlockersisasananci l
laryser v
ice
providedbybankst ocust omer s.Whileprov i
dingSaf eDeposi t
Vault/lockerf acil
it
yt otheircust omer sbankent ersintoanagr eement
witht hecust omer .Theagr eementi sknownas“ Memor andum ofl ett
ing”
andat t
ract sst ampdut y. 
Ther elationshi pbet weent hebankandt hecust omeri st hatofl essor
andl essee.Banksl ease( hi relockerstot heircust omer s)thei r
i
mmov ablepr opertytot hecust omerandgi vet hem ther i
ghtt oenj oy
suchpr oper tydur i
ngt hespeci fiedperiodi.e.duringtheof fice/banki ng
hoursandchar ger entals.Bankhast herighttobr eak-opent helockeri n
caset hel ockerhol derdef aul t
si npay mentofr ent .Banksdonotassume
anyliabi l
i
t yorr esponsi bil
ityincaseofanydamaget ot hecont entskept
i
nt hel ocker .Banksdonoti nsur ethecont entskepti nt hel ocker sby
customer s. 

5.AgentandPr
inci
pal
:

Sec.182 of‘TheIndianCont r
actAct,1872’ defi
nes“anagent”asa
personempl oy edtodoanyactf oranotherort orepresentanotheri
n
deali
ngswi ththirdpersons.Thepersonf orwhom suchacti sdoneor
whoi ssor epresentediscall
ed“thePrincipal”
.Thusanagenti saperson,
whoact sforandonbehal fofthepri
ncipal andundert hel
atter
’sexpr
ess
orimpl
iedaut
hori
tyandtheact
sdonewit
hinsuchauthori
tyar
ebindi
ng
onhispri
nci
paland,
thepri
nci
pali
sli
abl
etothepart
yf ort
heactsoft
he
agent
. 

Bankscol l
ectcheques,bills,andmakespay menttov ari
ousauthor i
ti
es
viz.
,r ent,t el
ephone bi l
ls,i nsur
ance pr emium et c.,on behal f of
customer s..Banksal soabi desbyt hestandinginst
ructi
onsgivenbyi t
s
customer s.Inallsuchcasesbankact sasanagentofi t
scustomer ,and
chargesf orthesesser vi
ces.AsperI ndi
ancont r
actActagenti sent i
tl
ed
tochar ges.Nochar gesar eleviedincollect
ionoflocalchequest hrough
clear
inghouse.Char gesarel evi
edinonlywhent hechequei sreturnedin
theclearinghouse. 

6.AsaCust odi an: Acust odiani saper sonwhoact sasacar etakerof

somet hing.Bankst akel egal responsi bil
it
yforacust omer ’ssecur i
ti
es.
Whi leopeni ngadmataccountbankbecomesacust odian. 
7.AsaGuar antor: Banksgi veguar anteeonbehal foft hei
rcust omer s
andent eri nt otheirshoes.Guar anteei sacontingentcont ract.Asper
sec31, ofI ndi ancont r
actActguar anteeisa"cont i
ngentcont ract".
Cont ingentcont racti sacont r
actt odoornott odosomet hing,ifsome
ev ent,col l
ateral tosuchcont ract ,
doesordoesnothappen.
Itwoul dt husbeobser vedt hatbankercust omerr elat
ionshipis
transact ional relati
onshi p.
 
Ter mi nat ionofr elationshi pbet weenabankerandacust omer :
Ther el at i
onshi pbet weenabankandacust omerceaseson:
(a)Thedeat h, i
nsol v ency ,
lunacyoft hecust omer .
(b)Thecust omercl osingt heaccounti .
e.Voluntarytermination
(c)Liqui dationoft hecompany
(d)Thecl osi ngoft heaccountbyt hebankaf t
ergi v
ingduenot ice.
(e)Thecompl etionoft hecont ractort hespecifictransaction.
Speci
alr
elat
ionshi
pbet
weenbankerandcust
omer
Buyopeni ng an accountwi t
ht hebankerther
ewi llbesomer ights
conferr
edandr esponsibi
l
iti
esorobli
gati
onsimposedt othebankerand
customer .Theserightsanddut i
esar
erecipr
ocalthebankersdut i
esar e
thecust omersr i
ghtsandt hebanker
sr i
ghtsarethecustomer sdut i
es.
Theser i
ght sandresponsibi
li
ti
esorduti
esarecall
edthespecialfeatures
ofrelat
ionshipbetweenbankerandcustomer .
Dut
iesofabanker
:

A'
Banker
'hascer
tai
ndut
iesv
is-
à-v
ishi
scust
omer
.Thesear
e:

(a)Dutytomai ntai
nsecr ecy/conf identi
ali
tyofcustomer s'
accounts. 
(b)Dutyt ohonourchequesdr awnbycust omer sontheiraccountsand
collectcheque, 
bil
lsonhi sbehalf. 
(c)Dutytopaybi ll
setc.,asperst andinginstr
ucti
onsoft hecustomer. 
(d)Dutyt oprovi
depr operser vi
ces.  
(e)Dutytoactaspert hedirectionsgi venbyt hecustomer.Ifdir
ecti
ons
arenot  
givent hebankerhast oactaccor di
ngt ohowhei sexpectedt oact.
 
(f)
Dut ytosubmi tperiodi
cal statement si.e.i
nfor
mingcust omersoft he
stateoft he 
account .
(g)Arti
cles/i
temskeptshoul dnotber eleasedtoat hir
dpartywithout
due 
authorizati
onbyt hecust omer  
Dut
ytomai
ntai
nsecr
ecy
:

Bankerhasadut ytomai ntainsecrecyofcustomer s'accounts.

Maintaini
ngsecrecyisnotonl yamor al dut
ybutbanki slegal
lyboundt o
keept heaff
air
soft hecustomersecr et.Theprinci
plebehindt hi
sdutyis
thatdiscl
osureaboutthedeal ingsofthecustomert oanyunaut hor
ized
personmayhar mt hereputationofcust omerandthebankmaybehel d
l
iable.Thedutyofmai nt
ainingsecrecydoesnotceasewi ththeclosing
ofaccountoront hedeathoft heaccountholder.

Asper 
Sec.13 
of“Banki
ngCompani
esAcqui
sit
ionandTr
ansf
erof
Under
taki
ngsAct1970”-

“Ever
ycor r
espondi ngnewbankshal lobserve,exceptasother
wise
requi
redbyl aw, t
hepr acticesandusagescust omar yamongbankers,
and,inparti
cular,i
tshal lnotdi vul
geanyinformat i
onrel
ati
ngtoort othe
affai
rsofit
sconst i
tuentsex ceptincircumstancesi nwhi
chitis,i
n
accordancewi thlaworpr acticesandusagescust omaryamongbanker s,
necessaryorappr opriatef orthecorrespondingnewbankt odivul
ge
suchinformation.”Mai ntainingsecrecyisimpliedtermsofthecontract
wit
hthecust
omerwhichbankent
ersi
ntowi
tht
hecust
omeratt
het
ime
ofopeni
nganaccount
.
Bankhasnotonl ytomai ntai
nsecr ecyoftransacti
ons,butsecrecyis
al
sotobemai ntai
nedinrespectofoperat
ionsthroughATM/debi tcards.
Bankhasalsotomaintai
nsecr ecyofuserIDpinswithduecaresot hatit
doesfal
li
nwr onghands.
 
Fai
lur
etomai
ntai
nsecr
ecy
:
Banki sliabl
et opaydamagest otheaccounthol derforl
ossofmoney
andr eputati
oni fitfai
l
si ni
tsdut ytomai ntai
nsecrecyanddi scloses
i
nformat ionrelatingtoacust omer'saccountorconductoft heaccount
toanyunaut horizedperson. 
Bankcanal sobel i
abl
et othethir
dpar tyifit
swrongfuldiscl
osur ehar
ms
theinterestoft hethir
d-party
.IfabankKnowi nglyfur
nisheswr ong
i
nformat ion.Ther ehasbeenami srepresentati
on Overestimationof
favourableopi nion 

Cir
cumstancesunderwhi
chbankercandi
scl
osei
nfor
mat
ionof
customer
'saccount
:

Abankcandiscl
osei
nformati
onregar
dingcustomer
'saccountt
oa
per
son(
s)underthef
oll
owingcir
cumstances.

(
a)Undercompulsi
onoflaw. 
(
b)Underbanki
ngpracti
ces. 
(
c)Forprot
ecti
ngnati
onalint
erest
. 
(
d)Forprot
ecti
ngbank’
sowni nter
est 
(
e)Underexpressori
mpl i
edconsentoft
hecust
omer
 

Di
scl
osur
eundercompul
sionofl
aw:

Banksdisclosei
nformati
ontov ar
iousauthori
ti
eswhobyvir
tueof
powersv estedi
nthem underprovi
sionsofvari
ousact
srequi
rebanksto
fur
nishinformat
ionaboutcustomer’saccount
.Theinf
ormati
oniscal
led
under:

(
i)
Secti
on4ofBanker'
sBookEv i
denceAct ,1891 
(
ii
)Sect
ion94(
3)ofCodeofCi v
ilProcedureAct,1908 
(
ii
i)
Secti
on45(B)ofReser
veBankofI ndiaAct,1934 
(
iv)
Secti
on26ofBankingRegul
ationAct,1949 
(
v)Secti
on36ofGi ftTaxAct ,
1958 
(
vi)
Secti
ons131, 133ofI ncomeTaxAct,1961 
(
vii
)Sect
ion29ofI ndustr
ialDevel
opmentBankofI
ndiaAct
,1964 
(
vii
i)
Section12ofForeignExchangeManagementAct,(
FEMA)1999 
(
ix)
Section12ofthePr eventi
onofMoneyLaunder
ingAct,
2002 

Banksar er
equiredtofurni
shonlythecall
edforinformat
ion(no
addit
ionali
nfor
mat i
oni stobefur
nished)onreceiptofwri
tt
enr equestof
thepersonwhoi svestedwitht
heaut hor
it
ytocal lf
orsuchinformati
on
underthesaidacts.Thecustomeriskeptinf
ormedaboutt hedi scl
osur
e
oftheinfor
mation.

Di
scl
osur
eunderbanki
ngpr
act
ices:
Inor dert oascer tainf i
nanci
alposi t
ionandcr editworthinessoft he
personbanksobt aininformat
ionf r
om ot herbankswi thwhi chtheyar e
maint aini
ngaccount s.Itisanest abli
shedpr act
iceamongbanker sand
i
mpl i
edconsentoft hecustomeri spr esumedt oexi st
.Theopi nionis
gi
veni nstri
ctestconf i
denceandwi thoutresponsibi
li
tyont hepar tofthe
bankf urni
shing such i nf
ormation.Cr edi
tinformation i
sf ur
nished in
codedt er
mst oot herbanksonI BAf ormatandwi thoutsi
gnat ur
es. 

2.
Dut
ytopr
ovi
depr
operaccount
s:
Banksareunderdutyboundtoprovi
deproperaccountstothecust
omer
ofallthe t
ransact
ions done byhim.Banki sr equi
red t
o submita
st
atementofaccount s/passbooktothecust omercontaini
ngallt
he
cr
edit
sanddebitsintheaccount.
 

3.
Dut
ytohonourcheques:
As'banki ng'meansaccept i
ngofdepositswit
hdrawabl
ebycheque, draf
t,
orderorot herwi
se,thebankerisdutyboundtohonourchequesi ssuedby
thecust omersont heiraccount
s. 
Sec.31ofNegot iableInstr
umentsAct,1881specif
iest
hel i
abil
i
tyof
draweeofcheque.AsperSec.31“ Thedraweeofachequehav i
ng
suffi
cientfundsoft hedrawerinhishandsproperl
yappl
icabletot he
paymentofsuchchequemustpayt hechequewhendulyr equi
redsot o
do,and,i
n.def
aul
tofsuchpayment,
mustcompensat
ethedr
awerf
or
anylossordamagecausedbysuchdef
aul
t.
” 

Theref
oreitisthedut
yofabankt
ohonourt
hechequesi
ssuedbyt
he
accountholderif
: 

Thechequehasbeenpr oper l
ydrawnandi si norderinall
respect
si .
e.i
t
i
spr operlydated, amounti nwor dsandf i
gureshav ebeenexpressed
properly,
isneitherst alenorpostdat ednormut i
latedandthesignature
ofaccount holdert all
ieswi t
ht hespecimenr ecor
dedwi ththebank.The
chequeshoul dbedr awnont hebr anchwheretheaccounti smaintai
ned.
(Duet oimplement ationoft echnologyandcor ebankingsoluti
ona
customercanpr esentchequesonanybr anchofabank.RBIhasadv i
sed
bankst oissue mul ticitycheques  toaccountholders.
) 
(a)Thereissuf fi
ci
entbal ancei ntheaccountandt hebalanceisproperl
y 
applicabl
ef orpay mentoft hecheque.  
(b)Thechequei spr esentedf orpay mentonawor ki
ngdayanddur ingthe
business 
hoursoft hebr anch.  
(
c)Endor
sement
sont
hechequear
eregul
arandpr
oper
.
 
(d)
Thepay
mentoft
hechequei
snotcount
ermandedbyt
hedr
awer
 
Dut
ytohonour
chequesceasesonr
ecei
ptof
:

(a)Stoppay menti nstructionsf rom theaccounthol der

. 
(b)Not i
ceaboutt hedeat hoft hedr awer .
 
(c)Agar nisheeor derat tachingt hebal anceintheaccountorani ncome-
tax 
attachmentor derr eceivedbyt hebanker . 
(d)Draweroft hechequebecomi nginsolventand/oralunati
catthet i
me
ofdr awing 
thecheque.  
Bankcanr efuset ohonourt hechequesi f:
Thereisinsuff
ici
ent1balance
i
nt heaccountt omakepay mentoft hecheque.  
Chequei ssueddoesnotper taint otheaccountonwhi chithasbeen
drawn.  
1.I
ft hechequei snoti nor der( postdat ed,stal
e,payment
count ermanded, amounti n 
wor dsandf i
guredi ffers,etc.) 
2.Thebalancesheldi
naccountareear
markedforsomespeci
fi
c
purposeandt he 
remaini
ngbal ancei
snotsuf
fi
cientt
ohonourthecheque.

Rightsofabanker:
Itisnott
hatthebankhasonlydut
iestowardsit
scust
omers,i
ttoohas
certai
nri
ghtsvi
s-à-
vishi
scustomers.Ther
ight
scanbroadl
ybe
classi
fi
edas: 

Ri
ghtofGeneralLi
en 
a)
RightofSet
-Off 
b)
RightofAppropr
iat
ion 
c)
Actasperthemandat eofcust
omer 
d)
RighttoChargeInt
erest
,Commissi
on,I
nci
dent
alChar
geset
c. 

Li
en:

Alienist her i
ghtofacr edit
orinpossessionofgoods, securit
iesorany
otherasset sbelongingtot hedebtortoretainthem unt
ilt
hedebti s
repai
d, providedthatthereisnocont ractexpressorimpli
ed, t
othe
contrary.Iti
sar ighttoretainpossessionofspecifi
cgoodsorsecur it
ies
orothermov ablesofwhi cht heownershipvestsinsomeot herperson
andt hepossessi oncanber etai
nedtil
ltheownerdischargest hedebtor
obli
gationt othepossessor .Thecreditor(bank)hastherighttomaintai
n
thesecur it
yoft hedebtorbutnott osellit
.Therearetwot ypesofli
en
viz.
 

1.
Par
ti
cul
arLi
enand 
2.
RightofGener
alLi
en 

(
a)Par
ti
cul
arLi
en:
A'parti
cularl
ien'gi
vestheri
ghtt
oretainpossessiononl yofthosegoods
i
nr espectofwhichthedueshavearisen.Iti
salsot ermedasor di
nary
l
ien.Ifthebankhasobtainedapart
icularsecur
ityforapar t
icul
ardebt,
t
hent hebanker '
sri
ghtgetsconv
ert
edi ntoaparticularl
i
en. 

(
b)Ri
ghtofGener
alLi
en:
Bankerhasar i
ghtofgener alli
enagainsthisbor rower.Generalli
en
confer
sbanksr i
ghti nrespectofallduesandnotf orapar t
icul
ardue.It
i
sast atutoryri
ghtoft hebankandi savail
abl
eev eninabsenceofan
agreementbuti tdoesnotconf ertherighttopledge.A 'generalli
en'
gi
vesther i
ghttoretainpossessi
onofanygoodsi nt helegalpossessi
on
ofthecredit
orunti
lthewhol eofthedebtduefrom thedebtorispaid.
Secti
on171ofI ndianCont r
actAct,1872conf er
stherightofgeneralli
en
tobanks.Aspert hesection“Bankers,factor
s,wharfi
ngers,at
torneysof
aHighCourtandpol icy-
brokersmay ,i
nt heabsenceofacont racttothe
contr
ary,
ret
ai n,
asasecur i
tyf
oragener albal
anceofaccountanygoods
bai
ledtothem;butnoot herpersonshav ear i
ghttoretai
n,asasecur it
y
forsuchbal ance,goodsbai ledtot hem,unl essthereisanexpr ess
contr
acttotheeffect.
”

Bankhasar i
ghtofl i
enonlywhengoods,securit
iesar er ecei
vedi
nt he
capacityasacreditor
.Whi l
egranti
ngadvancesbankst akedocument s.
Thesedocument sconferr i
ghttoconvertgenerallienasani mplied
pledge.Abanker’sl
ienismor et
hanageneralli
en,itisani mpli
edpl
edge
andhehast herighttosel
l t
hegoodsincaseofdef aultBankhasa'Right
ofSale'ofgoodsunderl ien.Banker
'sr
ightofli
eni snotbar r
edbyt he
LawofLi mit
ati
on. 
Exercisi
ngRightofLien:
Bankhastheri
ghtofl
ienongoodsandsecur
it
iesent
rust
edt
ohi
m
l
egall
yandstandi
nginthenameofthebor
rower.
 
Bankcanex er
ciseri
ghtofli
enont hesecuri
tiesinitspossessionforthe
duesoft hesamebor r
ower,
evenaf t
ertheloant akenagainstthat
parti
cularsecuri
tyhasbeenre-paid.
 Ri
ghtofliencanbeexer cisedon
bi
lls,cheques,promissor
ynotes,sharecer
tif
icates,bonds,debentur
es
etc. 

Wher
eri
ghtofl
iencannotbeexer
cised:
Bankcannotexer
ciserightofli
enongoodsr
ecei
vedforsaf
ecustody,
goodshel
dincapaci t
yasat rust
ee,
orasanagentoft
hecustomer,SDV,
orl
efti
nbankbymi st
ake .

Ri
ghtofset
-of
f:
Thebankerhast herighttosetofftheaccount sofitscustomer.Itisa
statut
oryr i
ghtavai
labletoabank,t osetof fadebtownedt ohim bya
credit
orfrom thecreditbal
ancesheldinotheraccountsofthebor rower.
Ther ightofset -
offcanbeexer cisedonlyi fthereisnoagr eement
expressori mpli
edt othecont r
ary
.Thisrightisappli
cableinrespectof
duest hataredue,arebecomi ngduei .
e.cert
ainandnotcont i
ngent.Itis
notappl i
cableonfuturedebts.I
tisappli
cableinrespectofdepositsthat
areduef orpayment.
Theri
ghtofsetof
fenabl
esbanktocombi
neallki
ndsofcr
edi
tanddebi
t
bal
ancesofacust
omerforar
ri
vi
ngatanetsum due.
 
Ther i
ghtisal
soav ai
labl
ef ordepositskepti notherbranchesoft he
samebank.Ther ightcanbeexer cisedafterdeat h,i
nsolvency
,and
dissol
uti
onofacompany ,aft
errecei
ptofagar nishee/at
tachmentorder
.Therighti
sal
soavail
ableforti
mebar reddebts.
Deposi t
shel dinthenameofaguar antorcannotbesetof ftot hedebit
balancei nbor r
owersaccountunt ilademandi smadet otheguar antor
andhi sliabil
it
ybecomescer t
ain.Bankscannotsetof fthecreditbal
ance
ofcust omer '
spersonalaccountforaj ointl
oanaccountofthecust omer
withanot herpersonunlessbotht hejointaccount
holdersarejoint
lyand
severallyli
able.Banksexerci
set heRightofsetof fonlyafterservinga
noticeont hecust
omeri nf
orminghi mt hatthebankisgoingt oexerci
se
ther i
ghtofset -
off
.

Aut
omat
icr
ightofsetof
f:
Depending on the situat
ion,someti
mes t he set of
ft akes pl
ace
automatical
l
y wi t
hout the permi
ssi
on from the customer.Int he
fol
l
owi ng event
st he setoffhappens automat
ical
l
yi .
e.wi t
houtthe
permissi
onf r
om thecustomer.
 
a)Ont
hedeat
hoft
hecust
omer
, 
b)Oncustomerbecominginsolvent
. 
c)Onrecei
ptofaGarnisheeorderoncustomer’
saccountbycour
t. 
d)Onrecei
ptofanoticeofassignmentofcredi
tbal
ancebythe
cust
omertothe 
banker. 
e)Onrecei
ptofnoti
ceofsecondchar geonthesecur
it
iesal
ready
char
gedtothe 
bank. 
Condi
ti
onswhi
leexer
cisi
ngr
ightofSet-Of
f:

a)Theaccountshoul dbeinthesolenameoft hecustomer. 

b)Theamountofdebt smustbecer tai
nandmeasur abl
e. 
c)Thereshouldnotbeanyagr eementt othecont r
ary 
d)Fundsshouldnotbehel dintrustaccounts 
e)Therightcannotbeexerci
sedi nrespectoffutureorconti
ngentdebt
s. 
f)
Thebankerhast heri
ghttoexercisethi
srightbeforeagarnisheeor
der
i
sr ecei
vedbyi t
. 

Ri
ghtofAppr
opr
iat
ion:
Iti
st heri
ghtofthecustomerstodir
ecthi
sbankeragai
nstwhichdebt
(whenmor ethanonedebti soutst
andi
ng)thepaymentmadebyhi m
shouldbeappropri
ated.I
ncasenosuchdir
ecti
onisgi
ven,t
hebankcan
exer
ciseitsri
ghtofappropri
ati
onandappl
yitinpaymentofanydebt.
Secti
on59,60and61ofI ndi
anContr
actAct
,1872l
aysdownt herul
esof
appropri
ati
on.
 

11. EXPLAI
N THE POWERS AND FUNCTI
ONS OF BANKI
NG
OMBUDSMAN.
An of fi
cialappoi nted t oi nvestigatei ndivi
dual’s compl aintagai nst
maladmi nist
rati
on especi al
lyt hatofpubl ic authoriti
es.The Banki ng
OmbudsmanSchemeenabl esanexpedi ti
ousandi nexpensivef orum to
bankcust omer sforr esolutionofcompl aintsrel
atingt ocertainser vi
ces
render ed bybanks.To ensur er edressalofgr ievances ofuser s of
banki ng services in an i nexpensi ve,expedi tious (speedy )and f ai
r
mannert hatwi llpr ov i
de i mpet us(mov ement )t oi mpr ov
e cust omer
servicesi nthebanki ngsect oronacont inuousbasi s.Tof acil
itatequick
andf air(non-di
scrimi natory)r edressalofgr i
evancest hroughuseofI T
systems,compr ehensi veandeasi l
yaccessi bledat abaseandenhanced
capabi li
ti
esofst affthr ought raini
ng.
Power
sandf
unct
ionsofbanki
ngombudsman
TheReser
veBankmayappoi
ntoneormor eofitsof
fi
cersinthe
rankofChi
efGener
alManagerorGeneralManagertobeknownas
Banki
ngOmbudsmentocar
ryoutt
hefuncti
onsent
rust
edtothem byor
undert
heScheme.Theappoi
ntmentofBanki
ngOmbudsmanundert
he
aboveClausemaybemadeforaperi
odnotexceedi
ngthr
eey
earsata
ti
me.
1)TheReser
veBankshal
lspeci
fyt
heter
ri
tor
iall
i
mit
st owhi
chthe
aut
hor
it
yofeachBanki
ngOmbudsmanappoint
edunderCl
ause4
oft
heSchemeshal
lext
end.
2)TheBanki ngOmbudsmanshal lrecei
veandconsi dercomplai
nts
rel
atingt
ot hedefi
cienci
esinbanki ngorotherser v
icesfi
l
edont he
groundsment i
onedi nclause8andf aci
li
tatet heirsati
sfact
ionor
sett
lementbyagr eementort hroughconci l
iationandmedi ati
on
between the bankconcer ned and the aggriev ed par
ti
es orby
passinganAwar dinaccordancewi tht
heScheme.
3)The Banking Ombudsman shal lexerci
se generalpowers of
superi
ntendence and cont
rolov er hi
s Of f
ice and shal
lbe
responsi
blefort
heconductofbusi
nessthereat
.
4)TheOf f
iceoft heBanki ngOmbudsmanshal ldraw upanannual
budgetf oritsel
fi n consul
tat
ion wi
th Reserve Bank and shal
l
exer
ciset hepowersofexpenditur
ewi t
hintheapprov edbudgeton
thel
inesofReser veBankofIndiaExpendi
tureRules,2005.
5)TheBanki ngOmbudsmanshal lsendt ot heGov er
nor,Reser ve
Bank,ar epor t
,ason30t hJuneev eryyear,containi
ngagener al
revi
ewoft heact i
vi
t i
esofhisOffi
ceduri
ngt hepr ecedi
ngf inancial
yearandshal lfurnishsuchotherinf
ormationast heReser veBank
maydi r
ectandt heReser veBankmay ,i
fitconsidersnecessar yin
thepubli
ci nterestsot odo,publ
ishthereportandt heinformat i
on
recei
vedfrom t heBanki ngOmbudsmani nsuchconsol idatedf or
m
orother
wi seasi tdeemsf it
.
PROCEDURE FOR REDRESSAL OF GRI
EVANCE GROUNDS OF
COMPLAINT
(1)Anyper sonmayf il
eacompl ai
ntwi t
ht heBanking Ombudsman
havi
ng j ur
isdict
ion on any one oft he f
oll
owi
ng gr ounds al
legi
ng
defi
ciencyinbankingincl
udi
ngint
ernetbanki
ngorotherservi
ces.
(a)non-pay
mentori nordi
nat
edel
ayi
nthepay
mentorcol
l
ect
ionof
cheques,dr
aft
s,bi
l
lsetc.
;
(
b)non-
accept
ance,wi
thoutsuf
fi
cientcause,ofsmal
ldenomi
nat
ion
notest enderedforanypur
pose,andf
orchar
gingofcommi
ssi
oni
n
respectthereof
;
(c)non-accept
ance,wi
thoutsuffi
cientcause,ofcoi
nst
ender
edandf
or
char
gingofcommi ssi
oninrespectthereof
;
(
d)non-
pay
mentordel
ayi
npay
mentofi
nwar
dremi
tt
ances;
(e)fai
lur
etoi
ssueordel
ayi
nissueofdr
aft
s,payor
der
sorbanker
s’
cheques;
(
f)non-
adher
encet
opr
escr
ibedwor
kinghour
s;
(g)fail
uret
oprovideordel
ayinpr
ovi
dingabanki
ngf
aci
li
ty(
othert
han
l
oansandadv ances)pr
omisedinwri
ti
ngbyabankorit
sdir
ectsel
li
ng
agents;
(h)del
ays,non-cr
edi
tofproceedstopart
ies'account
s,non-pay
mentof
deposi
tornon-obser
vanceoftheReser
veBankdi r
ecti
ves,
ifany,
appli
cabl
etorat
eofint
erestondeposi
tsi
nanysav
ings,
cur
rentorot
her
accountmai
ntai
nedwit
habank;
(i
)compl ai
ntsfrom Non-Resi
dentIndi
anshavi
ngaccountsinIndi
ai n
rel
ati
on t o thei
rr emit
tances fr
om abroad, deposi
ts and other
bankrel
atedmatter
s;
(
j)r
efusalt
oopendeposi
taccountswit
houtanyval
i
dreasonf
orr
efusal
;
(
k)l
evyingofchar
geswi
thoutadequat
epri
ornoti
cetot
hecust
omer;
(l
)non-adher
encebyt
hebankori
tssubsi
diar
iestotheinst
ruct
ionsof
Reser
veBankonATM/Debi
tcar
doper
ati
onsorcredi
tcardoperat
ions;
(m)non-di
sbursementordel
ayindi
sbursementofpensi
on(t
otheext
ent
thegri
evancecanbeat t
ri
butedt
ot heacti
onont hepartofthebank
concer
ned,butnotwit
hregardtoi
tsemployees)
;
(
n)refusalt
oacceptordel
ayinaccepti
ngpay
mentt
owar
dst
axes,as
r
equi
redbyReser
veBank/Gover
nment;
(o)ref
usalt
oi ssueordel
ayi
nissui
ng,orfai
luretoser
viceordel
ayi
n
serv
ici
ngorredempti
onofGov
ernmentsecuri
ti
es;
(p)for
cedclosur
eofdeposi
taccount
swi
thoutduenot
iceorwi
thout
suff
ici
entr
eason;
(
q)r
efusal
tocl
oseordel
ayi
ncl
osi
ngt
heaccount
s;
(
r)non-
adher
encet
othef
airpr
act
icescodeasadopt
edbyt
hebank;
(s)
non-
adher
encetotheprov
isi
onsoftheCodeofBank'
sCommit
ments
toCust
omersissuedbyBankingCodesandStandardsBoar
dofIndi
a
andasadopt
edbythebank;
(
t)non-
observ
ance ofReser
ve Bank gui
del
i
nes on engagementof
r
ecov
eryagent
sbybanks;
and
(
u)anyothermatt
errelati
ngtotheviol
ati
onofthedi r
ect
ivesi
ssuedby
t
heReser
v eBanki
nrelati
ontobanki
ngorotherser
vices.
(
2)Acomplai
ntonanyoneofthefol
lowinggroundsal
legi
ngdefi
ciency
i
nbanki
ngservi
cei
nrespectofl
oansandadv ancesmaybefil
edwi th
t
heBanki
ngOmbudsmanhavingj
uri
sdict
ion:
(
a)non-
obser
vanceofReser
veBankDi
rect
ivesoni
nter
estr
ates;
b)del aysi nsanct i
on,disbursementornon- observanceofpr escri
bed
ti
meschedul efordisposalofl oanappl i
cations;(c)non-accept anceof
appli
cat i
onf orloanswi thoutfurni
shingv ali
dr easonst ot heappl i
cant;
and( d)non- adherencet othepr ovi
sionsoft hefairpracticescodef or
l
ender sasadopt edbyt hebankorCodeofBank’ sCommi tmentt o
Customer s,asthecasemaybe;( e)non- observanceofReser v eBank
guideli
nesonengagementofr ecoveryagent sbybanks;and( f
)non-
observ anceofanyot herdir
ecti
onori nstructionoftheReser veBankas
maybespeci f
iedbytheReser veBankf orthispurposef rom timet otime.
(3)TheBanki ngOmbudsmanmayal sodealwi t
hsuchot hermat t
eras
maybespeci f
iedbytheReser veBankf rom timet oti
mei nt hi
sbehal f.
PROCEDUREFORFI
LINGCOMPLAI
NT
(1)Anyper sonwhohasagr ievanceagai nstabankonanyoneormor e
oft hegr oundsment ionedi nClause8oft heSchememay ,himselfor
throughhi saut hor
isedr epresent at
ive(otherthananadv ocate),makea
compl ai
nttot heBanki ngOmbudsmanwi thinwhosej uri
sdicti
ont he
branchorof f
iceoft hebankcompl ai
nedagai nstisl ocat
ed.3Pr ov
ided
thatacompl aintarisingoutoft heoper ati
onsofcr editcardsandot her
typesofser vi
ceswi thcentrali
zedoper at
ions,shal
lbef il
edbef orethe
Banki ng Ombudsman wi thin whose t erri
tori
aljurisdict
ion the bil
li
ng
addr essofthecust omeri slocated.
(2)(
a)Thecomplaintinwrit
ingshal
lbedulysi
gnedbythecompl ai
nant
orhi
sauthor
izedrepresent
ativ
eandshallbe,asfaraspossi
ble,inthe
form speci fi
edi nAnnexur e‘A’orasnearast heretoasci r
cumst ances
admi t
,st ati
ngcl early:(i
)thenameandt headdr essoft hecompl ainant ,
(i
i)t henameandaddr essoft hebr anchorof fi
ceoft hebankagai nst
whi cht hecompl ainti smade,( i
ii
)thef act sgivi
ngr i
set othecompl aint,
(i
v )thenat ureandex tentofthelosscausedt othecompl ainant,and( v
)
the r eli
efsoughtf or.(b)The compl ainantshal lfil
e along witht he
compl aint,copiesoft hedocument s,ifany ,whichhepr oposest or ely
uponandadecl ar
at i
ont hatthecompl ainti smai ntainabl
eundersub-
clause ( 3)oft hi scl ause.(c)A compl aintmade t hrough electronic
meansshal lal
sobeaccept edbyt heBanki ngOmbudsmanandapr i
nt
outofsuchcompl ai
ntshal lbet akenont her ecordoft heBanki ng
Ombudsman. ( d) The Banki ng Ombudsman shal l also ent ertain
compl aintscov eredbyt hisSchemer eceivedbyCent r
alGov ernmentor
Reser veBankandf orwardedt ohi
mf ordisposal .
(3)Nocompl ai
nttotheBankingOmbudsmanshal ll
ieunless:-(a)the
compl ai
nant had, befor
e maki ng a compl aint to the Banki ng
Ombudsman,madeawr i
tt
enrepresent
at i
ont ot hebankandt hebank
hadr ej
ectedthecomplai
ntort
hecompl ainanthadnotr eceivedanyr epl
y
withinaperiodofonemont haft
erthebankr eceivedhisrepresentati
on
ort hecompl ai
nanti
snotsatisf
iedwi t
ht her eplygiventohi m byt he
bank;
(b)thecompl ainti smadenotl at
erthanoney earaf terthecompl ainant
hasr ecei vedt her eplyoft hebankt ohi sr epresent ati
onor ,wher eno
replyi srecei ved, notl aterthanoney earandonemont hafterthedat eof
ther epr esent ationt ot hebank;( c)4t hecompl ainti snoti nr espectof
thesamecauseofact ionwhi chwasset t
ledordeal twi thonmer i
tsby
theBanki ngOmbudsmani nanypr evi
ouspr oceedi ngswhet herornot
received f rom t he same compl ai
nantoral ong wi th one ormor e
compl ainant soroneormor eofthepar t
iesconcer nedwi ththecauseof
acti
on; (
d)5t hecompl aintdoesnotper t
aint ot hesamecauseofact i
on,
forwhi chanypr oceedi ngsbef oreanycour t,tri
bunalorar bit
rat ororany
otherf or um i spendi ngoradecr eeorAwar doror derhasbeenpassed
byanysuchcour t,tribunal,arbi
tr
atororf orum;( e)t hecompl ainti snot
fri
volousorv ex atiousi nnat ur
e;and( f
)thecompl ainti smadebef oret he
expiryoft heper i
odofl imitat
ionprescri
bedundert heI ndianLi mitation
Act,1963f orsuchcl ai ms.
POWERTOCALLFORI NFORMATION:(1)Fort
hepurposeofcarryi
ng
outhisdutiesundert
hisScheme,aBanki
ngOmbudsmanmayr equi
re
the bank agai
nstwhom the compl
ainti
s made oranyotherbank
concer ned wi tht hecompl aintto pr ov i
deanyi nformat ionorf urnish
certifiedcopi esofanydocumentr elatingt othecompl aintwhi chi sori s
all
egedt obei nitspossessi on.Prov i
dedt hatintheev entoft hef ai
lure
ofabankt ocompl ywi thther equisitionwi thoutsuf fi
cientcause,t he
Banki ngOmbudsmanmay ,ifhedeemsf it
,draw thei nferencet hatt he
i
nf or mat i
oni fpr ov idedorcopi esiff urnishedwoul dbeunf avour ablet o
thebank.( 2)TheBanki ngOmbudsmanshal lmaintainconf ident i
alit
yof
anyi nformat ionordocumentt hatmaycomei ntohi sknowl edgeor
possessi oni nthecour seofdi scharginghi sdut i
esandshal lnotdi scl
ose
suchi nformat ionordocumentt oanyper sonexceptwi tht heconsentof
the per son f urnishi ng such i nf
ormat i
on ordocument .Pr ovided t hat
not hing int his cl ause shal lprev entt he Banki ng Ombudsman f rom
discl osingi nformat i
onordocumentf urnishedbyapar tyinacompl aint
tot heot herpar t yorpar t
iest ot heext entconsi deredbyhi m t obe
reasonabl yr equi red t o compl y wi th any l egalr equirementort he
princi pl
esofnat ur al just
iceandf airplayi nt hepr oceedings.
SETTLEMENTOFCOMPLAI NTBYAGREEMENT:( 1)Assoonasi tmay
bepr act
icabletodo,t heBankingOmbudsmanshal lsendacopyoft he
compl ai
ntt othebranchorof ficeofthebanknamedi nthecompl ai
nt,
underadv i
cet othenodalof fi
cerreferr
edt oinsub-clause(3)ofclause
15,and endeav ourt o promot e a sett
lementoft he compl
aintby
agreementbet weent hecompl ainantandt hebankt hroughconcil
iati
on
ormedi ation.(2)Fort hepur poseofpr omot ingaset t
lementoft he
compl ai
nt,theBankingOmbudsmanmayf oll
ow suchpr ocedur
eashe
mayconsi derjustandpr operandheshal lnotbeboundbyanyr ulesof
evi
dence.( 3)Theproceedingsbef oretheBankingOmbudsmanshal lbe
summar yinnat ur
e.
AWARD BY THE BANKI NG OMBUDSMAN ( 1)Ifa compl aintisnot
settl
edbyagr eementwi thi
naper iodofonemont hfrom thedat eof
receiptof t he compl ai
ntorsuch f urtherper i
od as t he Banki ng
Ombudsmanmayal l
owt hepar ti
es,hemay ,afteraffor
dingthepar ti
esa
reasonableoppor t
unitytopresenttheircase, passanAwar dorr ej
ectthe
compl aint
.( 2)TheBanki ngOmbudsmanshal ltakei ntoaccountt he
evidencepl acedbef orehim byt heparti
es,t hepr i
ncipl
esofbanki ngl aw
and pr acti
ce,di recti
ons,instructi
ons and gui deli
nes issued by t he
Reser veBankf rom timet ot i
meandsuchot herfactorswhi chinhi s
opinionar erelevantt othecompl aint.(3)Theawar dshallstatebriefl
y
ther easonsf orpassingt heawar d.(4)6TheAwar dpassedundersub-
clause( 1)shal lcontainthedirecti
on/s,ifany ,tot hebankf orspeci fi
c
perf
ormance ofi t
sobl i
gat i
onsand i n addi t
ion to orot herwi se,t he
amount ,ifany,tobepai dbyt hebankt ot hecompl ainantbywayof
compensat i
onf oranyl osssuf feredbyt hecompl ainant,ar isi
ngdi r
ect l
y
outoft heactoromi ssionoft hebank.( 5)Not wi thstandi ngany thing
contai
nedi nsub-clause( 4) ,t
heBanki ngOmbudsmanshal lnothav et he
powert opassanawar ddirecti
ngpay mentofanamountwhi chi smor e
than the act uall oss suf fer
ed by t he compl ainant as a di rect
consequenceoft heactofomi ssi onorcommi ssionoft hebank,ort en
l
akhr upeeswhi chev erisl ower.( 6)7Int hecaseofcompl aints,arising
outofcr edi
tcardoper ati
ons,t heBanki ngOmbudsmanmayal soawar d
compensat i
onnotex ceedingRs1l akht othecompl ainant ,takingi nto
accountt helossoft hecompl ainant
'stime,expensesi ncurredbyt he
complainant, harassment and ment al angui sh suf fer
ed by t he
complainant.

(7)Acopyoft heAwar dshal lbesentt othecompl ainantandthebank.

(8)8Anawar dshalllapseandbeofnoef f
ectunlesst hecomplainant
fur
nishestot hebankconcer nedwi t
hinaper i
odof30day sf r
om t
hedat e
ofreceiptofcopyoft heAwar d,aletterofacceptanceoft heAwardi n
ful
landf i
nalset t
lementofhi sclai
m.Pr ovidedthatnosuchaccept ance
maybef urnishedbyt hecompl ai
nantifhehasf i
ledanappealunder
sub.cl
ause( 1)ofclause14.( 9)9Thebankshal l
,unlessi thaspr
eferred
anappealundersub.cl ause(1)ofclause14, withi
nonemont hfr
om t he
dateofr eceiptbyi toft heacceptanceinwr i
ti
ngoft heAwardbyt he
complainantundersub- cl
ause(8),complywi ththeAwar dandinti
mat e
compliancetot heBanki ngOmbudsman.
REJECTI
ONOFTHECOMPLAI
NT:
TheBankingOmbudsmanmayr ej
ectacompl
aintatanyst
agei
fit
appear
stohimt
hatt
hecompl
aintmadei
s;
(a)notonthegroundsofcomplai
ntref
err
edtoinclause8orot
her
wise
notinaccor
dancewithsubcl
ause(3)ofcl
ause9;or
(b)beyondthepecuniar
yjur
isdi
cti
onofBanki
ngOmbudsmanpr
escr
ibed
underclause12(5)and12(6)or
(c)r
equi
ri
ngconsiderat
ionofelabor
atedocumentar
yandoralevidence
and the pr
oceedings befor
e t he Banki
ng Ombudsman ar e not
appr
opri
ateforadjudicat
ion ofsuch complai
nt;or(d)withoutany
suf
fi
cientcause;
or
(
e)t
hati
tisnotpur
suedbyt
hecompl
ainantwi
thr
easonabl
edi
l
igence;
or
(f
)intheopi
nionoftheBanki
ngOmbudsmant her
eisnol
ossordamage
orinconv
eni
encecausedtothecompl
ainant
.

12. EXPLAI
NTHEFEATURESOFSECURI
TISATI
ONACT,
2002.

Financiali
ndi scipl
inei sthehal l
mar kofIndianindustry.Theev er
-growing
NonPer f
or mingAsset s('NPA'), afineeuphemi sm coinedt odescr i
bethe
badl oans,pr ompt edt hepassi ngoft heRecov eri
esofDebt sduet o
Banks and Fi nanci alInstit
utions Act ,1993 wher ebya speci alDebt
Recov eryTr i
bunal( 'DRT')wassetupf orther ecoveryofNPA.Howev er,
thiscouldnotspeedupt her ecov eryononehandandont heot herthe
stri
ctci v
illaw r equi r
ement sr ender edalmostf rui
tl
esst heat t
achment
andf oreclosur eoft heasset sgi venassecur i
tyforthel oan.Further,t
he
balancesheet soft hebanksandf inanci
alinstit
uti
onswer eturningred
duet oheav ymandat oryprovisionsf orNPAs.

Reali
zingthatev eryfift
hbor rowerisadef aulter,t
heGov er
nmentwas
underpressur etomakeadequat eprovi
sionsf ortherecover
yoft he
l
oans and al so tof oreclose the secur
ity.The Secur i
ti
sati
on and
Reconstructi
onofFi nancialAssetsandEnforcementofSecur i
tyInter
est
Act,2002( '
theSecuriti
sationAct'
)aimst oachievethesetwinobjecti
ves
besi
despr ov i
dingforabr oadlegalframeworkf orassetsecuri
tisat
ion
andassetr econstr
uction.

Schemeoft
heAct

The Secur iti

sation Actcont ains 41 sect i
ons in 6 Chapt ers and a
Schedul e.Chapter1cont ains2sect i
onsdeal ingwitht heappl i
cabili
tyof
the Secur i
ti
sat i
on Actand def ini
tions ofv ari
ous t erms.Chapt er2
contains 10 sect i
ons pr ov i
ding forr egulati
on ofsecur it
isat
ion and
reconstructi
onoff i
nancialasset sofbanksandf inanci alinstit
uti
ons,
setti
ngupofsecur i
ti
sationandr econst ruct
ioncompani esandmat t
er s
rel
ated t hereto.Chapt er3 cont ains 9 sect ions pr ov idi
ng f ort he
enforcementofsecur ityi nterestand al li
ed and inci dent almat ters.
Chapt er4 cont ains7 sect i
onspr oviding fortheest abl i
shmentofa
CentralRegi str
y ,registration of secur i
ti
sati
on,r econst r
uction and
securityinterestt r
ansact ionsandmat t
ersr el
atedt her eto.Chapt er5
cont
ains4secti
onspr
ovidi
ngforof
fences,penalt
iesandpunishment
s.
Chapt
er6contai
ns10secti
onspr
ovi
dingforrout
inelegal
issues.

Sal
i
entf
eat
ures.

Thesal
i
entf
eat
uresoft
heSecur
it
isat
ionActar
easunder
:

 Incor porati
on of Speci alPur pose Vehi
cles viz.Securi
ti
sat
ion
CompanyandReconst ructi
oncompany .
 Secur iti
sationofFi nancialAssets.
 Fundi ngofsecur iti
sati
on.
 AssetReconst ructi
on.
 Enf orcingsecur it
yi nt
eresti.e.taki
ngovert heassetsgivenas
secur it
yf orthel oan.
 Est abli
shmentofCent ralRegistr
yforregulati
ngandr egi
ster
ing
secur it
isati
ont ransactions.
 Offences&Penal t
ies.
 Boi l
er-pl ateprov i
sions.
 Dilutionofpr ovi
sionsofSI CA.
 Exempt edt ransactions

I
ncor
por
ati
on&Regi
str
ati
onofSpeci
alPur
poseCompani
es

The Secur i
ti
sati
on Actpr oposes t o securi
ti
se and reconst
ructthe
fi
nancialassetsthrought
wospeci alpurposev ehi
clesv
iz.'
Securi
ti
sati
on
Company( '
SCO')'and'ReconstructionCompany( RCO)'
.SCO andRCO
oughtt obeacompanyi ncorporatedundert heCompani esAct,
1956
having securi
ti
sati
on and assetr econstruct
ion r
especti
velyas main
object
.

TheSecur iti
sat i
onActr equi
r escompul sor
yregistr
ati
onofSCOandRCO
undert heSecur i
ti
sationActbef orecommenci ngitsbusiness.Furthera
minimum f i
nanci alst abi
li
tyr equir
ementi salsopr ovi
dedbyr equiri
ng
SCOandRCOt opossessownedf undofRs.2cr oreorupt o15%oft he
tot
alf i
nancialasset sacqui redort obeacquired.TheRBIhast hepower
tospeci f
yt her ateofownedf undf r
om timetot i
me.Differentrat
escan
bepr escri
bedf ordi f
ferentcl assesofSCOandRCO.Exi stingSCOand
RCOar eal sor equiredt ogetr egist
eredundertheSecurit
isationAct.The
appli
cat i
onf orregistrati
onwi l
lhavetobemadet oRBI.

TheSCOorRCOwhi chhasobt
ainedt
heregist
rat
ioncer
ti
fi
cat
eundert
he
Secur
it
isat
ion Actshal
lbe a Publ
i
c Financi
alInst
it
uti
on wi
thi
nthe
meani
ngofSect
ion4Aoft
heCompani
esAct
,1956.

Besi
desit
'scor
ebusi
nessofsecur
it
isati
onandassetr
econst
ruct
iona
SCO/RCOmayperf
ormthef
oll
owingfuncti
ons:

 Acti
ng as recover
yagenton behal fofanybank orf inancial
i
nsti
tuti
on.
1
 Acti
ngasmanager  t
omanaget hesecuredasset
sthepossession
ofwhichhasbeent akenoverbythesecuredcr
edi
tor
.
 Acti
ngasr eceiv
eri fappoint
edbyanyCour torDebtRecov er y
Tri
bunal.

ASCOOorRCOO, whichi
scarryi
ngonanyot herbusinessothert
hanthat
ofsecuri
ti
sati
onorassetreconstruct
ionbefor
ecommencementoft he
Secur
it
isat
ionAct,hastodiscontinuesuchot herbusinesswithi
none
yearf
rom thecommencementoft heSecuri
ti
sationAct.

Secur
it
isat
ionoff
inanci
alAsset
s

Undert heSecur it
isat
ionActonl ybanksandf i
nancialinsti
tut
ionscan
securit
isetheirfi
nancialasset
spertaini
ngtoNPAswi thasecur iti
sati
on
company .Securit
isat
ion means,accor di
ng t
ot he Secur i
ti
sation Act,
acquisi
tion of financialassets by any securit
isati
on company or
reconstructi
oncompanyf r
om anyf inanci
alinst
ituti
onorbanks.The
necessar yfundsf orsuch acquisit
ion mayber aised fr
om 'qual i
fi
ed
3
i
nstit
utionalbuy ers('QIB'
),byissuing secur
ityreceipts repr
esent i
ng
undivi
dedi nter
estinsuchf i
nanci
alassetsorot
herwi se.

Fi
nanci
alasset
sar
easunder
:

 Aclaimt oanydebtorr eceivablesorpar tt

hereof,whethersecured
orunsecured.
 Anydebtorr eceivablessecur edby ,mortgageof ,orchargeon,
i
mmov ableproper t
y .
 Amor tgage,char ge, hypothecationorpledgeofmov abl
eproperty.
 Anyrightori nteresti nthesecur i
tywhetherful
lorpar tunderl
ying
suchdebtorr eceivables.
 Anybenef i
cialinterestinpr operty,whethermov abl
eori mmov able,
orinsuchdebt s,r eceivables,whet hersuchinterestisexisti
ng,
fut
ure,accruing,condi ti
onal orcont i
ngent.
 Anyfinancialassistance.
Themuch- neededl egalf ramewor kfort hesecur it
isati
onoff inanci al
asset
shasbeen madebyt heenact mentoft heSecur i
ti
sati
on Act .
Securi
tisati
onoff i
nancialasset sisaf i
nancialtoolf ort
helender st o
securi
ti
set heirfutur
ecashf l
owsf rom thesecur edassetsandt hust o
rel
easet heirfundsblockedi nthem.Int hehandsoft heSCOandRCO
thesecur edasset sbecome" merchandise",reali
sationofwhichgi ves
them theirreturn.Thisaspectbr i
ngsi nthemuch- neededexper ti
sei n
adept handl i
ng i nr ealisati
on of t he secur ed assets. The l egal
i
mpedi ment sofnor malci vill
aw proceduret oforeclosethemor tgaged
asset
s hav et hus been ef fecti
velyr emov ed by empower i
ng t he
enfor
cementoft hesecur edassets.

Secur i
tisat
ionoff inanci
alassetsmayt akesometimetofructi
fyasit
requiressoundaccount ingprinci
plesalsoforwhi
chstandardstobe
prescribed.Inot herwor dsthereshoul
dbeaccountingfr
amewor k,as
well,besideslegalframework.

Acqui
sit
ionofRi
ght
sandi
nter
est
sinf
inanci
alasset
s.

Thisi st he mai n partofsecuri

ti
sati
on.Sect ion 5 pr
ovi
des forthe
acquisit
ionofr ightsorinter
estsinf i
nancialassetsofanybankor
fi
nanciali nsti
tuti
onbySCO /RCO,not wit
hstandinganythi
ngcontr
ary
containedi nanyagr eementoranyotherlawf ortheti
mebeinginfor
ce,
i
neitheroft hefoll
owingmanner:

 Issuingadebent ur eorbondoranyot hersecuri

tyinthenat ur
eof
debent ure,asconsi derat
ion agreed upon bya SCO / RCO and
bank/ fi
nancialinstit
uti
on,incorporat
ing therei
nt he terms and
condi t
ionsofissue.
 Enteringi nt
oanagr eementwi t
hbank/ fi
nanci
alinsti
tut
ionf orthe
transferofsuchf inanci
alassetsonsucht er
msandcondi ti
onsas
maybeagr eedupon.

Uponacquiri
ngt hef
inancialassetsfrom thebank/fi
nanci
ali
nst
it
ution,
theSCO/RCOst epsint
ot heshoesoft helenderquatheborr
ower.The
Secur
it
isat
ionActhaspr ovidedf oral
lnecessaryri
ghtsandpowersf or
SCO/RCOtor eal
izet
hefinancialasset
sf r
om theborr
ower.

Fundi
ngofSecur
it
isat
ion.

TheSCO/RCO mayr ai
sethenecessar
yfunds,f
ort heacquisi
ti
onof
fi
nanci
alasset
s,f
rom theQI
B byissui
ngasecur i
tyrecei
pt.Secur
it
y
recei
pti
sex emptedfrom compul
sor
yregi
str
ati
onundertheRegi
str
ati
on
Act.Securit
yr eceipt
sissuedbyanySCO orRCO shallbe"secur
iti
es"
withi
nt he meani ng ofSecti
on 2(
h)(
ic)ofthe Secur
iti
es Cont
racts
(Regul
ation)Act,1956.

A Schemeofacqui si
ti
onhast obef or
mulatedf orev er
yacquisi
ti
on
detail
i
ngthereinthedescripti
onoff i
nancialassetsunderacquisi
ti
on,t
he
quantum ofinvestment,rateofreturnassuredetc.Furthersepar
ateand
di
stinctaccountshav etobemai ntainedinrespectofeachschemeof
acquisi
ti
on.Realizati
onsmadef r
om t hefi
nancialasset
shav etobeheld
andappl i
edt owar dsther edemptionofi nvestmentsandpay mentof
assuredretur
ns.

Intheeventofnon- r
eal
iz
ationoffi
nanci
alassets,t
heQI Bholdi
ngnot
l
esst han75% oft hetotalval
ueoft hesecuri
tyrecei
ptsissued,ar
e
enti
tl
edtocallameet i
ngofallQIBandpassresolut
ionandev er
ysuch
resol
uti
onisbindi
ngontheSCO/ RCO.

Asset
sReconst
ruct
ion

ASCOorRCOmay ,accor
dingt
otheguideli
nesprescr
ibedbyRBI
,car
ry
outassetr
econst
ructi
oninanyoneoft
hef ol
lowi
ngmanner s:

 Takingoverthemanagementofthebusinessoft heborrower.
 Changingthemanagementofthebusinessoft heborr
ower .
 Sel
ling orleasi
ng ofa partorwhol e oft he business ofthe
borrower.
 Rescheduli
ngofthepaymentscheduleofthedebt .
 Enforci
ngthesecuri
tyi
nter
est
.
 Enteri
ngintoset
tl
ementwitht
hebor r
owerf orthepaymentofdebt.

However
,theabovemeasur
esar
esubjectt
othepr
ovi
sionscont
ainedi
n
anyot
herlawfort
heti
mebeingi
nfor
ce.

Enf
orci
ng 
Secur
it
yInt
erest

Thesecondobj ecti
veoft heSecur it
isati
onActi stoprovi
def orthe
enforcementofsecurit
yi nteresti.
e.t aki
ngpossessi
onoft heassets
given assecuri
tyforthel oan.Section 13 oftheSecuri
ti
sati
on Act
contains el
abor
ate pr
ovisions fora l ender(r
efer
red t
o as '
secured
credi
tor'
)totakepossessionoft hesecur i
tygi
venbytheborrower.The
sum andsubstanceofthepr ovisi
onsar easunder
:
 TheLenderhast osendanot i
ceofdemand,gi vingdetai l
soft he
5
amountpay abl
eandt hesecur edassets intendedt obeenf orced
i
nt he eventofnon pay ment ,t othe def aul
ting bor rowert o
dischargehisli
abil
it
ies.
 Nobor rower,aft
erther eceiptoft hedemandnot ice,shalltr
ansfer
thesecur edasset sinwhat soevermannerwi thoutpr iorwr i
tten
consentf r
om thelender.
 TheBor r
owerhast odi scharget heli
abil
iti
eswi thin60day sfrom
thedateofr ecei
ptofnot i
ceofdemand.
 Intheev entofnonpay mentofdemandbyt hebor rower,thelender
mayt akeanyoneormor eoft hefoll
owingmeasur es:

o Taki ngpossessi onand/ormanagementoft hesecur ed

asset soft hebor rowerwi thar i
ghtt ot ransf ert hesameby
wayofl ease,assi gnmentorsal ef orr ealisingt hesecur ed
asset .
o Ap poi nt
inganyper sonasmanagert omanaget hesecur ed
asset st hepossessi onofwhi chhasbeent akenov er .
o As kinganyper son,whohasacqui redanyoft hesecur ed
asset sf rom t hebor rowerandowesmoneyt ot hebor rower ,
topaysomuchoft hemoneywhi chi ssuf ficientt opayt he
secur eddebt .
 Anyt ransf erofsecur ed asset s made byt he l endershal lbe
deemedt obemadebyt heownerofsuchsecur edasset .
 Ifthebor rowerpay sal ltheduest oget herwi thal lcost s,char ges
andex pensesi ncur redbyt hel enderbef orethedat ef ixedf ort he
saleoft hesecur edasset s,t hel endershal lnott ransf erorsel lthe
secur edasset s.
 Whent hear emor ethanonel enderorj ointf i
nanci ng, theappr ov al
oflender (
s)r epr esentingnotl esst han75%oft heamountduei s
requiredt ot akeanyst epst oenf orcet hesecur i
tyi nter estandsuch
appr oval i
sbi ndingonal lthel ender s.
 Int hecaseofacor por atebor r
owerunderl iqui dat iont hesal e
proceedsf rom t hesecur ed asset sshal lbedi st ri
but ed asper
Sect i
on529Aoft hecompani esAct ,1956.
 Int he ev entofl enderopt st or ealise hi s secur ityi nst ead of
rel
inqui shinghi ssecur ityandpr ovinghi sdebt ,mayr etai nthesal e
proceedsofhi ssecur edasset saf t
erdeposi ti
ngt hewor kmen' s
dueswi tht heLi quidator .
 Ifthesal epr oceedsoft hesecur edasset sar enotf ul l
ysat isfying
 thedebtdue, t
hel endermayf i
leacl aim bef oret heDRTorbeforea
compet entcour tfort herecoveryoft heshor t
fall
.
 Thel enderal so hasan opt ion to pr oceed agai nstanyoft he
guarant or sorsellt hepledgedasset swi t
houtt akinganymeasures
againstt heborrower .
 Thel endercan t aket he assistance oft heChi efMetropol
it
on
Magi st r
at eorDi st r
ictMagistrate,ast hecasemaybe,i nt aki
ng
possessi onofthesecur edasset sfrom t hebor rower.
 Ifanyper son,includingt hebor r
ower ,isaggr i
ev edbyanyoft he
measur esadopt edbyt helender ,hemaypr eferanappealt othe
DRTwi thin45day sbydeposi ti
ngat least75%oft heclai
m ofthe
l
ender .The deci sion oft he DRT i sf urt
herappeal abl
et o an
Appel lateTr i
bunal .
 Thel endercani niti
ateanypr oceedingst oenf or
cethesecurit
y
i
nterestunl esshi scl ai
m ofthef inanci alasseti smadewi thi
nthe
peri
odpr escri
bedundert heLimi t
ationAct ,
1963.

Est
abl
ishmentofaCent
ral
Regi
str
y

The f unct
ions relat
ing t o securi
tisati
on,assetr econstruct
ion and
creati
onofsecur i
tyinterestissoughtt obeadmi ni
steredandr egul
ated
byaCent ralRegistr
y.Br anchof f
icesoft heCent r
alRegi str
ymaybe
establ
ishedasandwhent heneedi sr equi
red.ACentralRegistr
arshal
l
headtheRegi st
ry.Thef uncti
onsoft heCentralRegi
stryareasunder:

 Particularsr elati
ngt osecur i
tisationofasset s,reconst ructi
onof
fi
nanci alasset sandcr eati
onofsecur it
yi nterestareent eredina
recordcal ledCent ralRegister
.
 Ther ecordscanbekepti nel ectronicf orm alsoi .
e.i nf loppi
es,
disketteset c.
 The par ti
cul ars of ev er
yt ransact i
on of secur it
isation,asset
reconst ructi
onorcr eati
onofsecur it
yinterestshal lbef iledwi t
hin
30day soft het r
ansactionbySCO,RCOort hel enderast hecase
maybe.
 Modi ficati
onsmadei nt hesecur it
yi nterestr egist
eredwi t
ht he
Regist ryaret obef i
ledwi t
hin30day sofsuchmodi fi
cat i
on.
 Satisfactionofsecur it
yi nter
esti sr equiredt obef i
ledwi t
ht he
Regist rywithin30day sofsat isfaction.
 Recor dsmai ntainedatt heCent r
alRegi stryareopent oi nspection
foranyper sononpay mentoft hepr escribedf ee.
Of
fences&Penal
ti
es

Fol
l
owi
ngar
etheof
fencespr
escr
ibedundert
heSecur
it
isat
ionAct
:

 Defaulti nf i
l
ing part
iculars oft ransact
ions relati
ng to asset
securit
isat
ion,asset r econstruction and cr eati
on of secur i
ty
i
nterest.
 Defaultinfi
li
ngparti
cularsofmodi fi
cation.
 Defaultingivi
ngint
imationofpar ticularssati
sfact
ion.
 Non-compl i
anceofRBIdi recti
vesbySCOandRCO.
 Contraventi
on,incl
uding at t
emptt o contraveneand abet t
ing in
contravent
ion,ofanyoft hepr ovisionsoft heSecur i
ti
sat
ionActor
anyrulesmadet hereunder.

Fol
l
owi
ngar
ethepenal
ti
espr
escr
ibedi
ntheSecur
it
isat
ionAct
:

 Fordef aultinf il
i
ngpar ti
cul
arsoft r
ansacti
onsment i
onedabov e,
everycompanyandev er
yoffi
ceroft hecompanyorev eryl
enderor
off
iceroft hel endershallbepuni shedwi thaf inewhichmay
extend to Rs. 5000/ -forev ery day dur i
ng which t he default
continues.
 Fornon- compl ianceofRBIdi recti
vesev erycompanyandev er
y
off
iceroft hecompanyshal lbepuni shedwi thaf i
newhi chmay
extendt oRs. 5,00,000/-
;andf orcont i
nuingoffenceanaddi ti
onal
fi
ne ofRs. 10,000/ -forev ery day dur i
ng whi ch the default
continues.
 Forcont raventi
onofanypr ov i
sionsoft heSecur i
tisati
onAct,the
punishmenti si mprisonmentf orat er
m whi chmayext endtoone
year,orwi t
haf ine,orwithboth.

OnlyaMetropol
it
anMagi st
rat
eorJudici
almagi
str
ateoftheFi
rstCl
ass
has powerst ot ake cogni
zance and t
ry an off
ence under t
he
Secur
it
isat
ionAct
.

Exempt
edt
ransact
ions

Thefoll
owingtransact
ionsar
eexempt
edf
rom t
hepr
ovi
sionsoft
he
Secur
it
isat
ionAct:

13. Li
en on anygoods,moneyorsecurit
iesgiven undert
he
Cont
ractAct
,1872.
14. Pl
edgeofmov abl
esundert
heCont
ractAct
,1872.
 15. Creat
ionofsecur i
tyonai rcraf
t.
16. Creat
ionofsecur i
tyinterestonv essel
.
17. Condit
ionalsal e,hi
re-purchaseorl easei nwhichnosecuri
ty
i
nter
estiscreated.
18. Right
sofunpai dsell
erundert heSal eofGoodsAct ,
1930.
19. Nonat tachablepropertiesundert hecivi
l Pr
ocedur
eCode.
20. Securi
tyi nt
erestonanamountl esst hanorequaltoRs.1
l
akh.
21. Securi
tyinterestcreatedonagr i
cultur
alland.
22. Amountdue i sl esst han 20% oft he pri
nci
palsum and
i
nter
estthereon.

13.WHATPRECAUTI
ONSSHOULD A BANKERTAKEI
N OPENI
NG A
NEW ACCOUNT?

The r elationshi p bet ween a bankerand hi s cust omerbegi ns wi t

h
openingofanaccountbyt hef ormeri nt henameoft hel at
ter.Thel awof
bankingv irtual l
yi st hel aw ofr elati
onshipbet weenabankerandhi s
customer .Itshoul dbenot edt hatthet erm" cust omer"isast atussy mbol
ofaper sonofhav inganaccounti nabank.Thi sstat
usofacust omeri s
generallyconf er r
edonaper sonwhohasanaccountwi thabank.
Therear ecer tainf ormal i
tiest obeobser vedandcondi t
ionstobef ulfi
ll
ed
before an accountcan be opened.I nf actopeni ng ofan account
amount st oent eringi ntoacont ract,viz.al egal l
ybindingofagr eement
betweent hecust omerandt hebanker .Toev er ycontracttheremustbe
atleastt wopar ti
es.I nopeni ngofaccountcust omerpr oposest ot he
bankert oopenanaccountandt hebankeraccept st hepr oposal .The
contractt husent eredi ntobet weent hecust omerandt hebankeri s
l
egallybi ndi ngonbot h.
Needf orTaki ngGener alPr ecaut ions
Abankershoul dbev erycar efuli nopeni ngdeposi taccount s.Whena
bankeraccept sdeposi t
s,hei ssai dt obor rowmoney .Heshoul dbev er
y
carefulthatheshoul dnotbeexpl oit
edbyt hef raudulentper sonel se,he
wil
lbehel dl iablei nf ut
ureandwi l
lbecompel ledtopaydamages.The
i
dent i
tyandi nt egrityofdeposi tormustbev erifi
edot herwiseitwi l
lput
bankeri ngr eatper il
.Assuch,bef oreopeni ngadeposi taccountt he
bankershoul dobser vecer taingener alprecaut ionsgivenbel ow.
Gener alPr ecaut i
ons
Thef oll
owi ngpr ecaut i
onsshoul dbet akenbyt hebankerbef oreopeni ng
abankaccount .
1)Appl i
cati
onont hePr escribedFor m
Ther equestf oropeni ngofasav i
ngsorcur r
entaccounti smadeont he
prescribed form of t he bank concer ned.Banks pr ovide separ ate
appli
cat i
on f orms f or openi ng sav i
ngs and cur rent account sf or
i
ndividuals,partnershi pf ir
msandcompani es.Theappl i
canti srequired
toment i
onhi sname,occupat ion,f ulladdr ess,specimensi gnatur
eand
thenameandsi gnat ur eofar ef eree.Heal sounder takest ocompl ywi th
thebank’ sr ulesi nf orcef rom t imet ot i
mef ort heconductoft he
account .Itmeanst hatt her ulespr evalentatt het i
meofopeni ngofan
accountmaybechangedormodi fiedbyt hebankerandsuchmodi fied
rul
esshal lbeaccept abl et ot hecust omer .
Gener all
yal lbankspr intt heappl icati
on f ormsf ordi fferentt y
peof
account sfordi f
ferentt ypesofper sons.Suchappl i
cat ionf ormscont ain
rul
es,t ermsofcondi ti
onoft heaccountt obeoper at edbyt heper son.
The appl i
cation form f oropeni ng a cur r entaccountcont ainsmany
conditionswhi ch ar e notnor mal lyf ound i n othercases.When t he
appli
cantsi gnst heappl i
cationf orm, i
tispr esumedt hathehasr eadt he
rul
esandaccept edthem.

2)Int r
oduct ionoft heAppl i
cant
Befor eopeni nganaccounti nthenameofani ntendi ngcust omer ,the
bankermustgett r
uei dentit
yoft hef ormeri nordert oensur ethathei sa
respect ableper son.Thebanker ,thus,r eservest her ightnott oopenan
accounti nt henameofaper sonwhoset r
uei dent ityhasnotbeen
establishedorwhoi sconsi deredt obeanundesi rabl eperson,e. g.,a
thi
ef ,robber ,smuggl er,etc.
Withav i
ewt ochecki ng'benami 'orfictit
ioust r
ansact ionsbanksr equires
toobt aini ntroduct i
oni nalltypesofaccount s.Nonewaccountshal lbe
openedwi thoutani ntroduction,gener all
yfrom ar espect ableper sonof
thatar eaoranaccounthol derofthatbanki .e.existi
ngcust omeroft hat
bank.Bank' sownst affmemberwhohasbeeni nser vicef orsomey ears
mayal soi ntroduceacust omerpr ovidedhei sper sonal lyknownt ot he
concer nedst affmember .
Howev eri ti sexpedi entt o notet hataccor dingt o RBI ’sext antKYC
i
nstr uctionsi ntroduct i
oni snotnecessar yasofnow,sobanksshoul d
notinsi stoni ntroduct i
onf oropeningbankaccount sofcust omer s.
3)IDpr oofandAddr essPr oof
Asi ntroduct i
oni snownotnecessar y, t
hebankermustobt aintheI Dand
addr esspr oofoft hecust omer .Thef ollowingar eal l
owedasameansof
such pr oof ;a passpor t,I denti
ty car d issued by a Gov ernment
Depar tment ,Post ali dent if
icat ion car d,ident ity car dissued by t he
empl oyer ,IncomeTaxPANCar det c.Asofnowl inkingofADHARCar d
witht hebankaccounti smandat or y,submi ssionofADHARCar dismor e
thanenoughf orsuchpr oof .
4)Speci menSi gnat ure
Theappl icanti srequi redt ogi vehi sspeci mensi gnat ureonapr escribed
form, gener allyacar df ort hepur poseofbank’ sr ecor d.Thesesi gnat ure-
cardsar epr eser vedbyt hebankerandt hesi gnat ureoft heaccount -
holderont hechequesi scompar edwi thhisspeci mensi gnature.I ft he
formerdi ffer sf rom t hel atter ,t hebankercanr ef uset o honourt he
cheque.The speci men si gnat ur es t hus pr ot ectt he bankeragai nst
forger y.Heshoul dbev erycar efuli ncompar ingt hesi gnatureoft he
cust omergi venonachequewi thhisspeci mensi gnature.Speci men
signat ureofev eryper sonofj ointaccounti sr equi red.
5)Phot ogr aphoft heAppl icant
Thedi rect ionsofR. B.I
.r equi ret hebankst oobt ainf rom ther espect ive
cust omer st oaf fixt heirpasspor tsizephot ogr aphonappl i
cati
onf or ms
atthet imeofopeni ngaccount s.Onephot ogr aphmayal sobeaf f
ixedt o
thesi gnat ur ecar d and onecopyt ot hepassbook.I nt hecaseof
deposi tsi nt henameofmi nor ,theguar dian’sphot ographcoul dbe
obtai ned.Foropeni ngofj ointaccountt hephot ogr aphofeachandev ery
personi nwhosej oi ntnamei ti st obeopened, wi l
l ber equi
red.
The phot ogr aphs hel pt o pr ev ent i mper sonat ion and al l
ow easy
i
dent i
ficat i
onofaccounthol der s.Bankshav ebeenadv isedt oobt ain
phot ogr aphsofal ltypesofdeposi torsi ncl
udi ngpur dahnashi nwomen.I f
acust omerhasgotmor et hanonedeposi taccount s,onlyonesetof
phot ogr aphneedbeobt ai
nedandsepar atephot ogr aphsshoul dnotbe
obtai nedf oreachcat egor yofdeposi t.Likewi sef reshphot ographsneed
notbeobt ai nedwhenanaddi tionalaccounti sdesi r
edt obeopenedby
theaccounthol der .
6)Compul sor yQuot i
ngofPAN/ GI RNumber
TheCent ral Boar dofDi rectTaxeshasmadequot ingofPANcompul sor y
,
effect i
v ef rom 1stNov ember , 1998.Nowev erynewappl i
cantshallquot e
hisPer manentAccountNumber( PAN)ort heGener alIndexRegi ster
(GIR)Numberi nal ldocument sper tainingt ot heopeni ngofanaccount
withabanki ngcompanyt owhi cht heBanki ngRegul ati
onAct ,1949
appl i
esi ncl udi nganybankorbanki nginst i
tutionr ef erredtoinSect ion51
oft heAct .
TheGI Rnumbershal lbequot edt il
lPANi sal lottedt ohi m.PANshal lbe
quot edatt het i
meofopeni ngoratt het imeofdeposi texceedi ngRs.
50,000.Theper sonwhohasnoPANorGI Rnumbermayf ilef orm 60or
For m 61ast hecasemaybe.Buti thasbeennot if
iedbyRBIr esour ces
thatf oropeni ngofaccounti nBankPANnumberoranycer tifi
cat efrom
IncomeTaxAut horit
yi snotnecessar y.
7)Mandat e
Mandat ei s an aut hor ityi n wr it
ing by whi ch t he accounthol der
empower sanot herper sont ooper ateont heaccountonhi sbehal f.A
mandat ei sgener all
yusedf ordel egat i
ng power st o oper at eont he
accountdur ing t he t empor ary absence oft he accounthol der.I n
mandat e,t her easonsf orgi v i
ngsuchmandat e,agr eementi fany ,the
name oft he aut hor i
zed per son,t he speci men si gnat ure ofsuch
aut hor izedper sonshal l ber ecor dedandpr eservedbyt hebanker .
8)Ver ificationofDocument s
Ifthenewpar tyhappenst obeacor por ate body ,itisessent ialthatt he
banker shoul d v erify some of t he i mpor tant document s l i
ke
memor andum ofassoci ation,ar ticlesofassoci ation, byel awset c.andi f
thenew accountbel ongst oapar t
ner shipf ir
m,hehast ocol lectt he
par tner shipdeedcopy ,r egistrationcer t
ifi
cat edul yobt ainedf rom t he
Regi st rarofFi rmset c.I not hercases,t hev eri
ficationofcer tainot her
document sl i
keTr ustDeeds,Pr obat e,Let t
erofAdmi nistrat ionet c,may
benecessar y .
9)Enqui ry(Int ervi
ew)
Att het imeofopeni ngofnewaccount s, i
tisal way sadv isabl et ohav ean
i
nt erv iewi nv ar i
ablywi t
ht heper spect i
v ecust omer ,soast o,obv i
atet he
chancesofper petrati
onofanyf raudatal at erstage.Thi senqui r
ywi llbe
helpf ult oagr eatext entt oassesst hei ntegrit
y,char act er ,capaci t
yof
i
ncomeet c.oft henewper son.
10)I ni ti
al Deposi t
s( Amount )
Aftert hef ulfill
mentofabov ef ormal i
tiest hebankeropensanaccounti n
thenameoft heappl i
cantwi thi nit
ialamount .Iti sessent ialt hatt he
appl icantdeposi t
ssomeamountatt het imeofopeni ngofaccount .The
quant ityofmi nimum amountwi l
ldependonsev eralf act or sl ikenat ure
ofaccountet c.
UnderSoci alSecur i
tySchemesopeni ngofSav i
ngBankAccounthas
beenal lowedonz erobal ancebasi s,i.e., withoutanyi nitial deposi t.
11)Accounti nCash
Itisacommonpr acticeamongbanker st oal l
owanewpar tyt oopenan
accountonl yi ncash.I tshoul dnotbest artedwi thacheque,whi ch
i
nv ol vesgr eat errisksont hepar toft hebanker .Thenewper sonshoul d
payt hemi nimum bal anceorgr eat eramountashewi sh.
12)Pay -i
nSl i
pBook, ChequeBookandPassBook
Whent hebankeri ssat isf i
edwi t
habov epr ecaut ionshewi llopenan
accounti nt henameoft hecust omerorcust omer sast hecasemaybe
andt hent hecust omeri ssuppl iedwi thapay in-sl
ipbook.Thepay -i
n-sli
p
i
sadocumentwhi chi susedf ordeposi t
ingcashorchequeorbi l
linto
theaccount .I thasacount erfoi lwhichi sr eturnedt othecust omerf or
maki ngnecessar yent ri
esi nhi sbooks.
Thecust omeri sal so suppl ied wi th a chequebookwhi ch normal ly
cont ains10t o20bl ankf or ms.Achequel eafi susedf ort hepur poseof
withdr awi ngmoney .Ifthecust omerdoesnotl i
ketohav eachequebook,
hecanmakeuseoft hewi t
hdr awalf ormf orwi thdrawi ngmoney .A
withdr awal form shoul dbeaccompani edbyt hepassbook.
Inaddi ti
ont ot heabov e,acust omeri sal sogi v
enapass- book,whi ch
reflect st he cust omer '
s accounti nt he banker ’sl edger .I tusual ly
cont ains t he r ules and r egul at i
onsoft he bankand t he termsand
condi tionsoft hedeposi t.Ev erycust omeri ssupposedt ohav er eadand
under stood t hecondi ti
ons.Thecust omershoul d compl ywi t
ht hem
underal lcircumst ances
13)Fr equentI nspect i
onofNewAccount s
Itist hedut yoft hebankert oinspectnewaccount sv er
yf r
equent l
y,their
credi ts and debi ts,t he t ransact ing par t
ies;t o av oid risks and
compl icat i
ons.
Byopeni nganaccountwi ththebanker ,acust omerent ersinto
relationshi pwi thabanker .Itshoul dbenot edt hatthespeci alfeatur
esof
thisr el ati
onshi pi mposesev er alobl igationsont hebanker .Heshoul d,
ther efor e,bev erycar ef uli n openi ng an accounti nt hename ofa
cust omer .Thoughanyper sonmayappl yf oropeni ngofanaccounti n
hisnamebutt hebankerr eser vest her i
ghtt odosoonbei ngsat i
sf i
ed
aboutt hei dent ityoft hecust omer .Thusabankert akest heabov e
discussedpr ecaut i
onsi nt hi sr egar d.

14.DEFINE‘HOLDER’
AND‘HOLDERI
NDUECOURSE’
.ARETHEREANY
DIFFERENCESBETWEENTHEM?
Theconceptofhol derandholderinduecour sei sv erycentraltoany
ki
ndofnegot iabl
ei nstr
ument.Everyi
nstrumenti niti
all
ybelongst othe
payeeandhei sentit
ledtoit
spossession.Thepay eecant ransferi
tto
anypersoni npay mentofhi sowndebt .Thi st r
ansf erisknownas
negoti
ation.An instrumentmaybe negot i
ated int wo way s.Ifthe
i
nstrumentispay abletobearer
,itmaybenegot iatedbysi mpledel i
ver
y
andper sontowhom i tisdeli
veredbecomest hehol der.Incaset he
i
nst r
umenti spayabl
et oorderitmaybenegot i
atedbyendorsement
coupledwi t
hdeli
veryandtheendorseebecomesthehol
der.Thereare
threecategori
esofholder
s,vi
z.hol
der,hol
deri
nduecourseandholder
forvalue.
Meani
ng,
def
ini
ti
onanddescr
ipt
ionof‘
Hol
der
'
Meaninganddef
ini
ti
on:Sect
ion8oft heNegot
iabl
eInst
rument
sAct
,
1881,
defi
nest
het
erm" hol
der
’asunder
:
"The‘hol
der’
ofapr
omissor
ynote,bil
lofexchangeorchequemeansany
personenti
tl
edi
nhisownnamet othepossessionthereofandt
orecei
ve
orrecovert
heamountduet
her
eonf rom t
hepar t
iestheret
o.
Wherethenote,bi
l
lorchequeislostordestr
oyed,it
shol
deri
sthe
per
sonsoenti
tl
edatthet
imeofsuchl
ossordest
ruct
ion.
"
‘
Holder’ofanegot
iableinstrumentmeansanyper sonenti
tl
edinhi
sown
namet ot hepossessionofi tandt orecei
veorr ecovertheamount
ther
eonf r
om t
hepar t
iesthereto.I
notherwords,hol
dermeansthepayee
orendorseeofabillofex change,chequeorpromissorynot
e,whoisin
thepossessi
onofit.
Essent
ial
s:I
nordertobecal
l
edahol
der
,aper
sonmustsat
isf
ythe
fol
lowi
ngcondi
ti
ons:
i
. Heshoul
dbeenti
tl
edi
nhi
sownnamet
othepossessi
onoft
he
i
nst
rument;
and
i
i
. Heshoul
dhavet
heri
ghttor
ecei
veorr
ecov
ert
heamountt
her
eon
f
rom t
hepar
ti
est
her
eto.
Tobecomeahol der,heshouldhav ear i
ghtt opossess.Aper soni n
possessi onofani nstrumentwithouthav ingar ighttopossesst hesame
cannotbecal ledtheholder.Athiefhavingadef act
opossessi oncannot
becal ledt heholder,becausehispossessi oniswr ongfulandhei snot
entitl
edt ot hepossessionoft henegot iableinst r
ument .Ifonedelivers
ani nstrumentt ohisser v
antforsaf ecust ody,hedoesnotbecomet he
holderbecausehei snotent i
tl
edt ot hepossessi oni nhisownname.
Holder, theref
ore,meansonl ya'dejurehol der'andnotmer el
yadef acto
holder'
.Thus, thepersonwhocl aimst obeahol dershoul dhav eacquired
the instrumenti nal awfulmanner .A per son who hasr ecei
ved an
i
nst rumentunderaf orgedorinvalidendor sementorbyf r
audcannotbe
ahol der.
Thedef i
nit
ionimpl i
estheholdershouldhav ear i
ghtofsuitont he
i
nstrumenti.e.eit
herheshouldbet hebeareroft heinstr
umentorhe
shouldhaveacqui r
editinthecapacit
yofpay ee/
endorsee,asthecase
maybe.Thehol derwil
lnothavegivenvalueforthebil
l,norbeableto
takeadvant
ageofv aluegi
venatanyearli
erstage.
Eveni faper sonlosesanegot iabl
einstr
ument,hestil
lconti
nuestobe
i
tshol der,i.e.heremai nsentit
ledtoit
spossession.Thusifsomebody
fi
ndsanegot i
abl
ei nst
rument,hedoesnott herebybecomet heholder
.
Si
mi lar
ly,ifanegot iabl
einstrumentisdestr
oyed,thepersonwhoi sthe
holderther eofatt hetimeoft hedestr
ucti
on,conti
nuestor emai
nt he
holdert hereof,andcont inuest ohavet heri
ghtsofahol derinthat
i
nst r
ucti
on.
Whenanegot i
abl
ei nstrumenti sor i
ginallymade, thepay eeistheholder
oft hesame.I ft
hepay eet r
ansfershisr ightst oanotherperson,thenthe
transf ereebecomest hehol deri nplaceoft hepayee.Int hecaseofa
bear eri nstrument,thet ransfereet owhom t henegot i
ableinstr
umenti s
deliver edisknownast he' bearer'ofthei nstrumentandsucht ransf
eree
(bear er)ist heholder.Int hecaseofanor derinst
rument ,t
heinstrument
i
st ransf erredbyanendor sementanddel i
v erytotheendorsee,insucha
caset he' endorsee'becomest hehol der.Thus,t het er
m holderwoul d
i
ncl ude:( i
)t hepay ee;( ii
)t hebear er( i.
e.t hetransfereeofabear er
i
nst rument )ortheendor see( i.
e.thetransf ereeofanor derinst
rument).
Ri
ght
sofaHol
der
:
Thehol
derofanegot
iabl
einst
rumenthasf
oll
owi
ngr
ight
s;
(1)Conversi
onofendor sementi nblanki ntoendor sementinf ul
l:
-The
holderofanegot i
abl
einstrumentindorsedi nblankmay ,wi
thoutsigning
hisownname,bywr i
ti
ngabov et
heendor ser'
ssignatureadirecti
ont o
payt oanyotherpersonasendor see,conv erttheendorsementi nblank
i
ntoanendor sementinfull;andthehol derdoesnott her
ebyincurt he
responsi
bil
it
yofanendor ser.
(2)Crossingaf t
erissue:
-Wher eachequeisuncrossed,theholdermay
crossitgener al
lyorspecial
l
y.Whereachequei scrossedgener al
ly,t
he
holdermaycr ossitspecial
ly.Whereachequei scrossedgener al
lyor
special
ly,thehol dermayaddt hewor ds'notnegot i
able'
.Wher ethe
chequeiscr ossedspecial
ly,t
hebankertowhom itiscrossedmayagai n
crossitspeciall
ytoanotherbanker
,hisagent
,forcol
lecti
on(Sec.125).
(3)Holder
'srightt odupli
cateofl ostbil
l:
-Wher
eabi llofexchangehas
beenlostbeforeitisov er
-due,t hepersonwhowast hehol derofitmay
applytothedr awert ogivehi m anot herbil
loft hesamet enor,givi
ng
securi
tytothedr awer,ifrequired,toindemnifyhim againstallpersons
whateveri
ncaset hebil
lal
legedt ohavebeenlostshallbefoundagai n.If
thedraweronr equestasaf oresaidr ef
usestogivesuchdupl i
catebill
,he
maybecompel ledtodoso( Sec.45-A).
(4)He may negoti
ate an i
nst
rumentt
oat
hir
d par
ty pr
ovi
ded i
ts
negot
iat
ioni
snotexpressl
ypr
ohi
bit
ed.
(
5)Hehasar
ightt
osuei
nhi
sownnameont
hei
nst
rument
.
(
6)Hehasar
ightt
opr
esenti
ttot
hemakerordr
awee.
(
7)Hehasar
ightt
ousei
nhi
sownname.
Meani
ng,
def
ini
ti
onanddescr
ipt
ionof‘
Hol
deri
nDueCour
se’
Meani nganddef i
niti
on:Ahol derinduecourseisonewhohol dst he
i
nstrumentf reef rom anydefectoft het
it
leofpr
iorpar
ti
es.Thepr opert
y
i
nanegot iablei nstrumentisacquiredbyanyonewhot akesitbonaf i
de
andf orvalue,not wit
hstandi
nganydef ectofti
tlein thepersonf r
om
whom het ooki t.Nowsuchaper sonwhot akesaninst
r ument"i
ngood
fai
thandf orv al ue"becomest hetrueowneroft hei
nst r
umentandi s
knownasa' holderi nduecourse'.
Accordi
ngtoSect ion9oft heNegot iableInst
rument sAct,1881," hol
der
i
nduecour se"meansanyper sonwhof orconsiderat
ionbecamet he
possessorofapr omissorynote,bi
llofexchangeorcheque, ifpayablet o
bearer
,orthepay eeorendor seether eof,i
fpayabletoor der,beforet he
amountment ionedi nitbecamepay able,andwithouthav ingsuf fi
cient
causetobel i
evet hatanydefectexist edinthetit
leoft heper sonf r
om
whom heder i
vedhi sti
tl
e."
Aholderi
nduecourseisi
napriv
ilegedpositi
onandgener
all
yhehasa
goodti
tl
eevent
houghtheti
tl
eofthetransf
erortohi
m maybedef
ect
ive.
Thedespoticbutnecessar ypri
nciplerel
ati
ngtonegoti
ableinstruments
i
sthat"aper sont akinganegot i
ableinstr
umentingoodf ait
handf or
val
ueobtainsav al
idt i
tl
ethoughhet akesfrom onewhohadnone" ,or
whowasmer elyathief.Whenaper sonrecei
vesanegoti
ableinstrument
asaholderinduecour se,hei
scapableofhav i
ngabetterti
tl
et hanthat
oft
hetransferor.
Thus,aholderinduecour seisaper sonwhohast akenanegotiable
i
nstrumentinhisownr ightforvalueandhasacqui r
editbeforet he
i
nstrumentbecamematureorpay ment,andwit
houtanynot
iceofdefect
i
nthet i
tl
eofthetr
ansf
erorfrom whom hetookthei
nstr
ument.
ConditionstobeSatisfi
edbyaPersont
obeaHolderinDueCour
se:In
ordert
obeent it
ledasa‘ hol
deri
nduecour
se’
,apersonmustpossess
thefol
lowingcondit
ions:
(i
)Consi
derat
ion:Itisnecessarythatapersonwhocl ai
mst obeahol der
i
nduecour semusthav eacquiredtheinstrumentforconsiderati
on.He
mustnothavet akenitasagift
.Itisalsoessenti
alt
hatt heconsiderat
ion
shoul
dbelawf ulandi tshoul
dnotbef or
biddenbyl aw,orfraudulentor
i
mmor al
oropposedt opubli
cpol i
cy.
A negot i
ablei nst
rumentcont ainsacont r
actand therefor
emustbe
supportedbyconsi der
ation.Aper sonwhot akesabi l
lornot ewi thout
considerati
oncannotenf orceit.Inthecaseofnegot i
ableinstrument s
considerati
oni salwayspr esumedt ohavebeengiven.Thepr esumpt ion
i
nsuchacasei sthatthei nst
rumentwasgi venforgoodconsi deration
andi fthedef endantintendst osetupt hedefencethatv al
uehasnot
beengi ven,t
hebur denofpr ovi
ngt hatl
iesonhim.Everyholdertherefore
i
spr esumedt obeahol derinduecour se.I
ftheholderhast akent he
i
nst r
umentf orconsi derati
on,t hepart
yl i
abl
ewi l
lnotbeper mitt
edt o
pleadanydef ectorwantofconsi der
ati
onatanyearli
erstage.
(i
i)Bef or
eMat uri
ty:Secti
on9oft heActr equiresthatt obeahol derin
duecour se,aper sonmustt aket henegot i
ablei nstrument" beforethe
amountdue t hereon became pay able"
.Forexampl ei fthe date of
matur i
tyofanegot i
ableinstrumentis1stMar ch,andaper sont akesthe
i
nstrumenton1stMar chort hereaft
er,hecannotbesai dtobeahol der
i
nduecour seashedi dnotr eceivethenegot i
ablei nstrumentbef or
eits
matur i
ty.Buti fapersont akessuchani nstrumentbef ore1stMar ch,he
hast akeni tbeforet heamountduet hereonhasbecomepay ableand
canbeahol derinduecour se.Oncet heinstrumentr eachesitsmat uri
ty,
i
thasexhaust editsli
feandi snomor enegot iable;noonecanbecome
i
tshol derinduecour se.
(i
ii
)Compl et
eandregulari
nstr
ument :Theinst
rumentmustbecomplet
e
andr egul
aronthefaceofitwhent hesamewasr ecei
vedbythehol
der.
And,'face'f
orthi
spurposeincludesbackal so.I
tisthedut
yofev er
y
personwhot akesanegoti
ableinstrumenttoexamineit
sfor
m,forifit
cont
ainsanymat
eri
aldef
ect
,hewi
l
lnotbecomeahol
deri
nduecour
se.
(i
v)Goodf aith:TheNegoti
ableInstrumentsAct ,1881doesnotuset he
ter
m' goodf ait
h'i
nitsSecti
on9,buti nsteadsay sthattobeahol derin
duecour se,aper son mustt aket henegot i
ablei nstr
ument“ wit
hout
havi
ngsuf fi
cientcausetobeli
ev ethatanydef ectexistedinthetit
leof
thepersonfrom whom heder i
vedhi sti
tl
e”.Thecaut ionrequi
resthathe
shoul
dacti ngoodf ai
thandwithreasonablecaut i
on.
Forgoodf aith,i
tisnecessar
yt hathemustbehonesti nhisbehalfthat
thei
nstrumentwhi chheistaki
ngi sbeingtr
ansferredbyapersonhav ing
agoodt it
le,andthathemustbeact i
ngwithduecar eandcauti
oni .
e.he
musthav e used reasonabl
e di l
igence t
o sat i
sfy hi
mselft hatt he
negot
iableinstrumenti
sf r
eefrom anydefecti
nt hetit
leoft
hetransferor
.
Therear et womethodsofascer taini
ngaperson'sgoodf ai
th,'
subjecti
ve'
and'obj ecti
ve'
.Insubject
ivetestt heCourthast oseet heholder
'sown
mindandt heonl
yquest i
onis" Didhet aketheinstr
umenthonest ly?
"I n
obj
ect i
vet hatwehav etogobey ondt hehol
der'
smi ndandseewhet her
heex ercisedasmuchcar ei
nt akingthesecuri
tyasar easonablycareful
person oughtt o have done.Subj ecti
vetestr equir
es 'honest
y 'and
obj
ect i
vet estr
equires'
duecareandcaut i
on'
.

Pri
vil
egesofaholderinduecour
se:Ahol
deri
nduecour
seenj
oyst
he
f
oll
owingpri
vi
legesundert
heAct:
1.Pri
v i
l
egeincaseofi nchoat
ei nstrument(Sec.
20):I
ncaseofi nchoate
stampedinstrument,iftheori
ginalpayeeort hehol
derfil
l
smor eamount
thanwasaut hori
sed,hecannotcl aimt hatamountoftheinstr
ument .But
aholderinduecour secancl ai
mt hef ul
lamountoft heinstr
umentso
enter
ed,providedthattheamountwhi chi smorethanthatauthorisedis
coveredbythestampaf fi
xedthereon.
2.Betterti
tl
et hanthatofthet ransferor(Sec.53):Aholdercangetno
bett
ert i
tl
ethant hatofhi
st ransferorbutahol derinduecoursei sina
pri
vil
egedposi t
ionthatheget sabet t
erti
tlethanthatofthetransfer
or.
Thismeanst hatanydefectinthet i
tleofthetransf
erorwil
lnotaffectt
he
ri
ghtsofahol derinduecourse.
Thus,onceaninstr
umentpassest hr
ought hehandsofaholderindue
course,
iti
spurgedofal
lthedefect
sandt heref
ore,
notonl
ytheholderin
duecourseispr
otect
edbutalsothesubsequentholder
sar
eprotected.
3.Li
abi
l
ityofpr
iorparti
es( Sec.36)
:Allpr
iorpar
ti
est oanegotiabl
e
i
nstr
umentareliabl
et her
eon to a hol
derin due cour
se unt
ilthe
i
nstr
umenti
sdul
ysatisf
ied.
4.Privi
l
egei ncaseofaf icti
tiousbill(Sec.42):Wherebotht hedrawer
andt hepayeeofabi llar
ef icti
tiouspersons,theholderinduecour se
hasthepr i
vi
legeofr ecoveri
ngt heamountoft hebi l
lfrom t
heacceptor
andtheaccept orcannotal l
egeasagai nsttheholderinduecoursethat
theotherpart
iestothebi l
lwer ef i
cti
ti
ousandt her
ebyt r
ytoescapef r
om
hisl
iabil
i
ty.
5.Pr i
vi
legeincaseofcondi ti
onaldel
iv
ery(Sec.43):Whereabi llora
noteisnegot iat
edtoahol derinduecourse,theot herpar
tiestothe
i
nstrumentcannotav oidtheirli
abi
li
tyonthegroundthatthedeliv
eryof
theinstrumentwasconditi
onal orf
oraspeci
alpurposee.g.ascollat
eral
securi
tyorf orsafe custodyand notwi ththe idea oftransfer
ri
ng
absolutelyt
heproper
tytherein.
6.Est
oppel
agai
nstdeny
ingor
igi
nal
val
i
dit
yoft
hei
nst
rument(
Sec.120)
:
Themakerofanot e,t
hedr
awerofabi
l
lorachequeandt
heaccept
orof
abil
lforhonouroft
he
drawercannot
,inasuitther
eonbyaholderi
nduecour
se,denyt
he
vali
dit
yoft
heinst
rumentasor
igi
nal
l
ymadeordr
awn.
7.Estoppelagainstdenyi
ngcapacit
yofpay eetoindorse(See.121):The
makerofanot eandacceptorofabi l
lpayabletoordercannot,inasuit
ther
eonbyahol derinduecourse,denythepayee'scapacit
yatt hedate
ofthenoteorbill,
toindor
sethesame.
8.Endorsernotpermitt
edtodenyt hecapaci
tyofpr
iorpar
ti
es(Sec.122)
:
Theendor serofaninstr
umentcannot ,
inasuitt
hereonbyasubsequent
holder
,denyt hesi
gnatureorcapacit
ytocontr
actofanypri
orpar
tytothe
i
nstrument .
9.Pr i
vil
egeincaseofi nstrument
sobt ainedbyunlawfulmeansorfor
unlawfulconsi der
ati
on (Sec.58) :The per son li
abl
et o pay on a
negotiabl
einstrumentcannotcont
endasagai nstaholderi
nduecourse
thathehadl ostit
,orthati twasobt ainedfrom hi
m bymeansofan
offenceorfraudorforanunlawfulconsiderati
on.
10.Everyholderisahol
deri
nduecourse(Sec.118)
:Thel
awpresumes
thateveryholderisahol
derinduecourse,t
houghthepr
esumpti
onis
r
ebut
tabl
e.
RightsofHol
deri
nDueCour
se:Thehol
deri
nduecour
sehasf
oll
owi
ng
ri
ghts;
(
1)Hehasar
ightt
ohol
dthei
nst
rument
.
(
2)Hemaynegot
iat
eit
.
(
3)Hei
sent
it
ledt
orecei
vei
tspay
ment
.
(
4)Heisent
it
ledtobeli
evethati
twasmade,accept
edordrawnbona
f
idebyt
hemaker,
accept
ororthedrawerast
hecasemaybe.
(5)Hecanmaint
ainasui
toni
tifdef
aul
tismadei
nmaki
ngi
tspay
ment
oriti
sdi
shonour
ed.
(
6)Heget sagoodtit
letothei
nst
rumentev
ent
hought
het
it
leoft
he
t
ransf
erormaybedef
ecti
ve.
(
7)Hecant
il
easui
t,agai
nstt
hepar
ti
esl
i
abl
etopay
,inhi
sownname.
(
8)Hegetsagoodti
tl
eeventhought
hei
nst
rumentwasor
igi
nal
l
yan
i
nchoat
est
ampedi
nst
rument
.‘
(9)A holderinduecourseto whom abil
lorapr omissorynot
ei s
negoti
atedgetsagoodti
tl
eoni tev
enasagai
nstsuchparti
esasplead
thatthedeliv
eryoftheinst
rumentwascondi
ti
onalorf oraspecifi
c
purposeonly
.
Di
ff
erencesbet
weenhol
derandhol
deri
nduecour
se
Obvi
ousl
yther
earecertai
ndif
fer
encesbet
weenhol
derandhol
deri
ndue
cour
sewhicharedi
scussedbel
ow.
(l
)Ahol dermaybecomethepossessororpay
eeofaninst
rumentev
en
wit
houtconsider
ati
on.Butahol
derinduecour sei
sonewhoacquires
possessionf
orconsi
der
ati
on.
(
2)Holderinduecoursegetsagoodti
tl
eeventhought
het i
tl
eoft
he
t
ransf
erorwasdefect
ivethet
it
leoft
hehol
dercaninnocasebebet
ter
t
hanthatofthet
ransf
eror
.
(3)A holderinduecour
seasagainstahol
der,mustbecomethe
possessor
/payeeoft
hei
nstr
umentbef
oret
heamountt
her
eonbecomes
payabl
e.
(4)Aholderinduecourseasagainstaholdermusthavebecomet he
payeeoftheinst
rumentingoodfaithi
.e.wit
houthavi
ngthesuff
ici
ent
causet
obelievet
hatanydef
ectexi
stedi
nt hetr
ansf
eror
'st
it
le.
Hol
derand hol deri n due cour se ar et he per son who ar ei n
possessi onandt or eceivepay mentundert hei nst
rument .Privi
l
egesofa
holderi nduecour sear easpeci alfeatureoft heAct .Itisthisspecial
pri
vilegeswhi chmai ntainsdi f
ferencebet weenahol derandahol deri n
duecour se.Ther ear ecer t
ainr i
ght swhi char eenjoy edbyahol deri
ndue
cour seonlyov erandabov ether i
ghtsoft hehol der .Sections8and9
defineahol derandhol deri nduecour ser espect i
v ely.Itisalsot obe
notedt hatthedef i
nit
ionsoft hebot handcer tai
nspeci alri
ghtsenj oy
ed
byt hehol deri nduecour seal sopoi ntsoutt hedi ff
erencebet weena
holderandhol derinduecour se.Sodi fferencebet weent hebothliesas
toconcept uali .
e.,def i
niti
onandnat ureoft hehol derandt heholderi n
duecour seandt hespeci al r
ightsenj oyedbyt hehol derinduecour se.All
thesepoi ntsofdi f
ferencear edi scussedabov eindet ail
.

SHORTNOTES

1.BANKI
NGAUTOMATI
ON:

Aut omationi st hecr eat i

onoft echnol ogyandi tsappl icationi nor derto
cont r
olandmoni tort hepr oduct ionanddel i
veryofv ariousgoodsand
serv i
ces.Itper f ormst askst hatwer epr eviouslyper for medbyhumans.
Aut omationi sbei ngusedi nanumberofar eassuchasmanuf actur i
ng,
transport,ut i
l
ities,def ence,f acili
ties,oper ationsandl ately,informat i
on
technology .Br anchaut omat ionist her ealt imeon- linebanki ngwher e
the transact i
on i s ent ered t hrough t erminalt ransact i
on i sr ecor ded;
verifi
edaut hent icated&cor respondi ngupdat eisdoneaut omat i
cally.
Feat uresofbr anchAut omat ion;
1.Theyar ei ndependentact i
v iti
esi nterl
inkedt of ormi ntegr atedsy stem.
2.Changescanbedoneatnot i
me.
3.Secur i
tycont roli
senf orcedt oensur edat aent ries,l edger s,pass-
Books, voucher s,&st atement scanbegener atedon- l
ine.
4.Si nglewi ndowser v i
cecanbepr ov i
ded.
5.EFT( electroni cfundt ransf er
)

1. Bank net
:i s payment networ
k establ
ishes by RBI on the
recommendat
ionofIy
erCommi tt
ee,l
aunchedduring1991.
Thi
ssyst
em
makesuse ofi nter ci
tyt runkv oice gr ade dat a.The cust omerscan
access t o Banknet f rom t heir pr emises wi th popul ar data
communi cati
on.I tal soenabl est ot r
ansf erdat atoRBI .accesst oSWI FT
(societyforwor l
dwi debanki nterf i
nanci al Telecommuni cati
on)
2.RABI NET:I s communi cation sy stem oper ating ov er BANKNET,
RBINETcl ientrunni ngper sonal comput eri scal l
edRBI NET.
3.I -NET:ownedbyDepar tmentofTel ecommuni cati
onsi saPacket
switchingPubl i
cDat aNetwor k(PSPDN)whi chwasopenedi ntheyear
1983. Thi s wor ks by t el
ephoni c connect ions t hrough whi ch
communi cati
on i s possi bl e acr oss maj or met ropolis & ot her
i
nternat i
onalnetwor k.
4.NI CENET:Nat ionalI nformat i
onCent reNet wor kapar tf r
om inter
net
servicest opromot ei nformat i
oncul turewhi chi sagov torgani
zati
on.
Thispr ovi
desmul tipleservicest ouserdepar tment s.
5.IBANet work(Indi anBanki ngAssoci ation) :
6.I ndian Financi alNet wor k( INFI NET) :i tissat ell
itebased net work
developmenti n banki ng technol ogy,r egar ding i ntr
a& i nterbanking
communi cati
onsy st em.

2.I
NTERNETBANKI
NG

Internetbanki ng hasmade l ife simplerf ormi l

li
onsand mi l
lionsof
peopl ear oundt hewor ld.Especi al
lyinIndia,wher eabankv isi
ti mpl ies
wai t
ingi nnev er -endingqueues,onl i
nebanki ngi sdef init
elyabl essing.
Onl i
nebanki nghasmadei tpossi bleforcust omer st odosi mpl et asks
l
ikeaccessi ngt heirsav ingsaccountany time, keept rackoft heiraccount
balance,getest atement s,paybi l
lsonline,shoponl i
ne,t ransf erf unds
andmuchmor ei nunderaf ewcl icksandwi t
hinamat terofmi nut es.
Internetbanki ng:Mostonl i
nepay ment sar edonev i
ai nternetbanki ng
opt i
on.I thasbecomeoneoft hemostconv enientpay mentmet hodsf or
transferringmoney .Mostbankshav ecreatedt heirownappst hatcanbe
downl oadedont hephoneandusedanyt i
me.Thr oughmobi ledev ices,
user scanmaket ransact i
onst hroughmobi leapps, netbanki ngf aci l
iti
es,
ori nternetf undt ransferser vicessuchasI MPS( Immedi atePay ment
Ser vi
ces) ,NEFT( NationalEl ectronicFundTr ansfer),andRTGS( Real-
timeGr ossSet tl
ement ).
Adv antages ofNetBanki ng I n an er a when al lofus ar e heav il
y
dependentont echnol ogy ,i
nternetbanki ngi snot hingshor tofasav oir
.
Ther ear esev eraladv antageswhi che- bankinghasov erconv entional
banki ng, whichr equiresonet ov i
sitthebankandst andi nqueues.Li st ed
belowar ej ustsomeoft hebenef itsofi nt ernetbanki ngwhi chmakeour
l
ifeeasi ereachday .
•Easy To Oper ate – Onl ine banki ng i sv ery simpl e and easy t o
under stand,may beeasi ert hanconv ent ionalbanki ngi nmanycases.
Oper at ionofanonl ineaccounti sr at hersi mpl eandeasyt ouse.
•Conv eni enceOfMaki ngPay ment s–I nternetbanki ngmakesi tqui te
conv eni entt ocar ryoutt ransact i
onalact i
viti
esl i
ket ransferoff unds,
pay mentofbi ll
s,et c.t hismeans,nol ongerhav ingt owai tinqueuesf or
bil
lpay ment sorhav i
ngt osaf elykeepr ecei ptsofbi l
lpay ment s,whi ch
areal soper i
shabl e.Al lr ecor dofpay ment sandbi ll
si sstoredonl ineon
youraccount .
•RoundTheCl ockAv ailabi l
ity–Anot heri ndisput abl eadv antageabout
onlinebanki ngi st hati ti sav ailabl er oundt hecl ock, throughoutt hey ear.
Youdon’ thav et oschedul eat imewheny oucancar r
youtbanki ng
activities,r egar dlessofi tbei ngaweekend,t imeoft hedayorev en
holiday s.
•Ti meSav ingandEf ficient–E- banki ngi nnotonl yf astbutal sohi ghl y
efficienti nl etti
ng y ou car ryoutt ransact i
onswi thin af ew mi nut es.
Transf eroff unds,accountopeni ng,bi llpay ment st akenomor et hana
fewmi nut est opr ocess, whi chhel pssav eal otoft i
me.
•Account sAct ivityTr acki ng–Anot herv er yimpor t
antbenef itpr ovided
bynetbanki ngi st hati tal l
owsy out ot racky ouraccountact ivit
yatal l
ti
mes.Youcankeepaney eony ouraccountt ransact ionsandbal anceat
allt i
mes. Any unaut hor i
zed t ransact ion or di scr epancy can be
i
mmedi at elyt r
ackedandr epor tedt ot hebanki mmedi at el
y,al
lowi ngy ou
tokeepy ourmoneysaf eatal ltimes.
Disadv ant agesofI nternetBanki ngOnl inebanki ngisaccompani edbya
fairsetofadv ant ages, butl ikeev ery t
hi ngel se, italsocomeswi t
hcer tain
disadv ant ages.Someoft het hingst ol ookoutf orincaseofnetbanki ng
areasf ol l
ows:
•MayBeCompl icat edForBegi nner sToUnder st and–Fort hosewhoar e
new t ot he wor ld ofbanki ng,onl ine banki ng may pose as sl i
ght
chal l
engei nt ermsofusage.Whi lesomebanksdopr ov i
dedemoson
theirwebsi t
esr egar dingt heuseofonl i
nebanki ng,ther ear emanybanks
whi chdon’ tdot hat .Int hel at tercase, ani nexper i
encedusermaybel eft
tof endf orhi m/ her .
•NoOnl i
neBanki ngWi thoutI nter netAccess–I nor dert ouseonl i
ne
banki ng,oneneedst ohav east ablei nternetconnect ivi
tyoraccess.
Wi thoutone,t hef acil
ityofonl inebanki ngi sofnouse.Al so,ifthebank
serv ersar edown,y ouwi llbeunabl et oaccessy ouraccountonl i
net o
carr
youttr ansactions.
•Transact i
onSecur i
ty–Oneoft hemainr easonswhichst i
llkeepalot
ofcustomer sf rom usingi nt
ernetbanki
ngi sthesafetyoft r
ansacti
ons.
Whileallmaj orand r ecognized bankswi llhaveapower fulsecuri
ty
encrypt
ioni nplace
forensuringt hesaf etyofcust omer’stransacti
ons,therehav ebeen
i
nstanceswher et r
ansactiondetailshavebeencompr omi sed.Thoughit
i
suncommon, butsti
llcanposeasamaj orthreat.

3.ONLI
NEBANKI
NG

Onl ineBanki ng,al soknownasnetbanki ng,e- bankingoronl i

nebanki ng,
i
st hef acil
itypr ov idedbybanksandf inanciali nsti
tutionswhi chal l
ows
cust omer st ousebanki ngser vicesv iainternet .Ther earescor esof
serv ices l i
ke onl i
ne moneyt ransf er,accountopeni ng,bi l
lpay ment ,
tracki ngaccountact ivit
y ,et
c.,whi char emadeav ail
abl et ocust omer s
wi t
ht hehel pofonl inebanki ng.Onl inebanki ngal soal l
owsbankst o
adv er ti
set heirpr oduct sandser vicesi namannert hati treachesout
mi l
lionsofcust omer s.Howev er,i n ordert o useonl i
nebanki ng,an
i
ndi v i
dualwi llrequi reaccesst ot hei nternet,whi chi sscar celyav ail
able
i
nr uralar eas.I nter netbanki ngcanal sobeaccessedv i
amobi l
ephones
whi chhav eadat a3G/ 4Gconnect ion.
ScopeofOnl i
neBanki ngSer vi
cesWi ththehel pofonl inebanki ng,there
are sev erali ndi spensabl e ser vices whi ch ar e made av ailabl
et o
cust omer s,wi thoutt hem hav ingt oper sonallyv i
sitthebank.Cust omer s
canper formf inanci alt ransactionsl i
ket ransferf undsonl ine,paybi lls,
appl yf orl oansandopenasav ingsaccountamongv ari
ousot herdebi t
cardt ransact ions.Undernon- financi altransact i
ons, cust omer scancar r
y
outsev eralact iv i
tieswhi chmayr equiregoi ngt ot hebankl i
keappl ying
foranew chequebook,get t i
ngaccountst at ement s,updat econt act
i
nf or mat ion,st art/ stoppay ment ,et c.

4.AUTOMATEDTELLERMACHI
NES(
ATM’
S)

Automat i
ctell
ermachi neshav etransformedt heconceptofbankingin
India.I
thasel i
mi nat
edt herequirementoft ost andinlongqueueand
fil
l
ingofformsf orrouti
nebankingt ransacti
on.Nowcust omersofbanks
canaccesst hei
rmoneywi t
ht hescratchofaATM E- banking
An automat ed tell
ermachi ne (ATM)i s an elect
roni
c computeri
sed
devicethatall
owsbankscust omer stodirect
lyuseasecur edmethodof
communi cat iont oaccesst hei rbankaccount s.Ent ryofAut omat edt eller
machi nes( ATM‟ s)haschangedt heof fi
ceat mospher eoft hebr anches
ofbanks.
Ther ei snoneedf oracust omert ov isi
tbr anchesf orthei rdayt oday
banki ng t ransact ion l ike cash deposi ts,cash wi thdrawal s,bal ance
enqui ry ,dr oppi ngchequeet c.El ectronicchannel shav eopenednew
av enuesf orbanks.
Internet banki ng ,mobi l
e banki ng,phone banki ng ar et he new
dev elopmenti nbanki ngi ndust ryandexpect edt or esultinmor eefficient
banki ng sy st em.Lat estadv ance banki ng t echnol ogybr oughtup by
privat eandf orei gnbankshav egr eatimpactonI ndianbanki ngsy stem.
ATM del iversmul tipl eser vices24x7, whichi smaj orcauseofmaki ngi ta
successi nt hehi st oryofbanki ngi ndust ry.I nf act,e- banki ngser vices
becamepr of itabl eand successf ulduet ov ariousser vicesdel iver ed
throughATM‟ s.ATM‟ shel pscust omer si nwi t
hdr awi ngcashatany time,
from any place.Al ongwi tht heseser vices,manymor eserv icesar eal so
prov ided by ATM‟ st hati ncl udes checki ng t hei raccountbal ances,
rechar gi ngpr epai dmobi l
ephonecr edit,transf erofmoney ,maki ngbi l
l
pay ment s.Thecust omeri sident ifi
edatATM byi nser t
ingapl asticcar d.
Faci l
itiespr ov i
dedt ot heATM cust omer s
1.Any ti
me,any wher eaccesst ocash,wi t
hdr awalofcashi sav ailabl e
24x7.
2.Tr ansf erofmoneyf rom oneaccountt oanot heraccounti spossi bl e
wi ththehel pofATM‟ s.
3.A cust omerwi t
ht he hel p ofATM‟ s can check hi s/herl ast
transact ionsandcur rentbal ance.I naddi tiont ot hese,ami nist atement
canal sobegener atedwi tht hehel pofATM‟ s.
4.Changeofper sonali dent ifi
cat i
onnumberofATM/ debitcar dcanbe
madewi thATM‟ s.
5.Chequebookr equestcanbemadebyt hecust omer sthroughATM‟ s.
6.Fi xeddeposi tscanbedonewi ththehel pofATM‟ s.
7.Ut il
itybi ll
scanbepai dbyt hecust omer swi t
ht hehel pofATM‟ s.
8.Cust omer scanpayt hei rcredi tcardbi l
l withATM‟ s.
9.Mobi l
escanber echar gedv iaATM‟ s.
10.Togett hel at estupdat esonmobi l
e,cust omer scanchanget hei r
mobi lenumbert hr oughATM‟ s.
11.Checkdr opf aci li
tycanal sobeusedbycust omer satATMs

5.CREDI
TCARDS
Itmeansanycar dpl ateorot hercreditdev iceexistingforthepur poseof
obtainingmoney ,proper ty,l
abourorser vi
ceoncr edi t
.Thet erm doesnot
i
ncl ude a not e,check,dr aft,money or derorot herl i
ke negot iable
i
nst rument .
Feat ur
es:
Cr editcardsof ferconsumer saneasywayt otrackexpenses,whi chi s
necessar yf orbot hmoni tori
ngper sonalexpendi turesandt het rackingof
wor k-r
elatedex pensesf ortaxati
onandr eimbur sementpur poses.Cr edi t
cardsar eaccept edi nl argerestabli
shment sinal mostal lcount r
ies,and
areav ailablewi t
hav ar
ietyofcr editlimits,repay mentar r
angement s.
Some hav e added per ks (such as i nsur ance pr otecti
on,r ewar ds
schemesi nwhi chpoi ntsearnedbypur chasinggoodswi ththecar dcan
ber edeemedf orf urthergoodsandser vi
cesorcashback) .
Consumer s'limi t
edl iabili
tySomecount r
ies,suchast heUni tedSt ates,
theUni tedKi ngdom, andFr ance,l
imi tt
heamountf orwhichaconsumer
canbehel dliabl ei nt heev entoff raudulentt r
ansact i
onswi t
hal ostor
stolencr editcar d.
Benef i
tsofCr edi tCar d
Thebenef itsobt ainedf r
om t heuseofcr editcar dsar ediscussedf rom
thepoi ntofv iew:
1.Cust omer
2.Sel l
er
3.Commer cial banks
4.Cent r
al bank
5.Gov ernment
6.Economy

Faci
li
ti
esandSer vi
ces:
Besi
despr oviding credit
,t hecreditcar d or gani
zation extendssome
addi
ti
onalfacili
tiestoat tr
actcust omers.Someoft hef acil
iti
esof fer
ed
bybanksaregi venbel ow:
- RiskCov erage:Dependi ngont het ypeofcar dissued,somebanks
ensuret hecar dhol dersaf i
xed per centageont hev alueofa
parti
cularsum f orcov er
ingtherisk.
- Emer gencyCashWi thdrawal:Banksal lowcar dholderst ocashup
toal i
mi tofATMs. 24hourSer vice:Ther evol
utionar yphone
bankingser vi
ceensur esthatthebanksext end24hourcust omer
servi
cet oassi stthecardholder,all
7day saweek.
- Tr av
elPr iv i
l
eges:Bankspr ovidet ravelassistancet ot hei
rcard
 holder sbyof feringawi der angeofser vi
cesl inkedt oai rl
ineand
hotel booki ngs, discount edhol idaypackages, carr ent alset c.
- Cr editLi neI ncrease:Tempor arycr edi tl i
nei spr ov idedbybanks
dependi ngont heabi l
ityoft hecar dhol dert opayt hebankbased
ont hecar dhol der ’
sf inanci alr esour cesandpastspendi ngand
pay mentpat terns.Thi scr editlinei si ncr easedusual l
yby25%f or3
mont hs.
- Pur chasePr otect i
on:Thi sf acili
typr ot ect st hepur chasesagai nst
damageorl osscausedduet of ireandt hef tatnoext racost .The
cardhol dercancl aimt hev alueoft hepr oductdamagedorl ost
from t heI nsur anceCompany .Thi spr ot ect ioni sav ail
abl ef ora
periodof90day sf rom t hedat eofpur chaseoft hepr oductusi ng
thecar d.
- Suppl ement ary Car ds:These car ds ar ei ssued t ot he f ami l
y
member sofcar dholder s.A car dhol derofanybankcanobt ain
suppl ement ar ycar dsatt hepr ev aili
ngcar df eef ort hei mmedi at e
fami lymember s.
- Hot elsDi scountFaci li
ty:Car dhol der scanobt ainmember shipi n
clubsatl eadi nghot elsataspeci alpr ivilege.Thef aci l
ityalsoear ns
scor epoi ntsonev eryr upeechar gedi .e.ev er yt imet hecar dhol der s
dineorst ayatt hehot el.
- Newsl et t
er s:Bi mont hlynewsl et tersof feringt hecar dhol dersan
excitingr angeofpr izes,speci aldi scount s,pr i
v i
legesf reeofcost .
Forex ampl e,compl iment arysubscr ipt i
on t o busi ness wor ld/
busi nesst odaymagazi nei ssentt oal lcar dhol der sofSBIcar d.
Thisi saccompani edbyacompendi um ofsel ectbusi nessar ti
cl es
andoppor tuni ti
est oappl yf orcer tainmut ual fundsusi ngt hecr edit
card.Ex clusi veof ferst hati ncludedi ni ngpr ogr amsatsel ect ed
restaur ant s,ahandpi ckedMai lor dermer chandi secat alogue,a
collect or’sser i
esofbooksandmagazi nesandmanymor ear esent
tocar dhol der sper i
odi callybysomebanks.
- Joi ntCr edi tCar dandATM Faci l
ity:For eignandI ndi anbanksal ike
hav ei nt roducedaj ointcr edi tcar dsot hatt hecar dhol dercan
accessper sonal (sav ings/ current )account swi tht hebankt hrough
theATMs.
Per sonalAcci dentI nsur ance:Cr editcar dissuer shav ei ntroduced
af ree insur ancecov ertot hecar dhol deragai nstl ossofl ife
duet oacci dent s.
- Lev er aged I nv estment Faci li
ty : Thi s f aci li
ty enabl es t he
cardhol der st osubscr ibet odesi gnat edequi tyordebent urei ssues
 inthepr imar ymar ketandschemesf l
oat edbymut ual funds
- Phot oCar dOpt ion:Cr editcar dsar enow bei ngi ssuedwi t
ht he
phot ogr aphsandsi gnat ureoft hecar dhol der sdi git allyimpr inted
ont hef rontoft hecar d.Thesecar dsof fereasi err ecogni tionand
extrasecur i
ty.
- Onl inePay ment :Cr edi tcar df aci li
tatesonl inepay mentofbi l
ls,
dues, andt omakepur chasessuchasbooks, rail andf li
ghtt icket s.
TypesofCr edi tCar ds
Credi
tcar dsnowar eofv arioust ypeswi thdi f f
er entf ees,i nterestr ates
andr ewar di ngPr ograms.Di fferentt ypesofcr edi tcar dsav ailableby
banksar ebr ieflydescr ibedbel ow.
- Standar dCr edi
tCar d:Thi si st hemostcommonl yused.Onei s
all
owedt ousemoneyupt oacer tainl i
mi t
.Theaccounthol derhas
tot opupt heamountoncet hel ev eloft hebal ancegoesdown.An
outst andi ngbal anceget sapenal tychar ge.
- Pr emi um Cr editCar d:Thi si sacar dwi thhi gherf ees.I ncent ives
areof fer edi nt hisov erandabov et hati nast andar dcar d.Cr edit
cardhol der sareof feredt ravel i
ncent ives, rewar dpoi nts, cashback
andot herr ewar dsont heuseoft hi scar d.
- Thisi sal socal ledt heRewar dCr editCar d.Someexampl esar e:
air
linesf r
equentf li
ercr edi tcar d, cashbackcr edi tcar d, automobi l
e
manuf act urers' r ewar ds cr edi t car d. Pl at inum and Gol d,
Mast er Car dandVi sacar df alli ntot hiscat egor y.Secur edCr edit
Car d:Peopl ewi thoutcr edi thi st or yorwi tht arnishedcr editcan
availt hiscar d.A secur itydeposi tisr equi r
edamount i
ngt ot he
sameast hecr editl imi t.Rev olvingbal ancei sr equi redaccor dingt o
the' buy ingandsel ling' done.
- Limi tedPur poseCr edi tCar d:Ther ei slimi tat i
ont oi tsuseandi st o
be used onl yf or par ticular appl i
cat ions.Thi si s used f or
establ i
shi ng smal lcr edi ts such as gas cr edi ts and cr edi tat
depar tment alstores.Mi nimal char gesar elev ied.
- Char geCr editCar d:Thi sr equi rest hecar dhol dert omakef ull
pay mentoft hebal anceev erymont handt her ef oret her eisnol i
mi t
tocr edi t.Becauseoft hespendi ngf lexibi l
ity,t hecar dhol deri s
expect edt ohav eahi gheri ncomel ev elandhi ghcr editscor e.
Penal tyi si ncurredi ff ul lpay mentoft hebal ancei snotdonei n
ti
me.
- Speci altyCr editCar d:Thi si susedf orbusi nesspur posesenabl i
ng
busi nessment okeept heirbusi nesst ransact ionssepar atelyi na
conv eni entway .Char gecar dsandst andar dcar dsar eav ailablef or
 thi
s. Also, student
s enrol
l
ed i n an accr
edi
ted 4-
year
col
lege/
univ
ersi
tycour
secanavai
lthi
sbenef
it
.

6.GARNI
SHEEORDER

Theconceptof' Garni
shment'hasbeeni ntr
oducedi ncivi
lprocedure
code by the amendmentAct ,1976 and isar emarkabl
e piece of
l
egislat
ion.Thisterm hasbeender i
vedfrom theFr enchwor d'gar
nir
'
whichmeanst owar nortoprepare.I
nsimplewordsthegarnisheeisthe
personwhoi sliabl
et opayadebtt oadebtt oj
udgmentdebt orort o
del
iveranymov ableproper
tyt ohim.BesidesJudgmentDebt orand
decreeHolder,Garni
sheeisat hi
rdpersoninwhosehandsdebtoft he
j
udgmentdebt oriskept.

Garni sheeOr derisanor derpassedbyanexecut ingcour tdirectingor

order i
ngagar nisheenott opaymoneyt ojudgmentdebt orsi ncet he
l
atteri sindebtedt ot hegarnisher(decreehol der).ItisanOr deroft he
cour tt oattachmoneyorGoodsbel ongingt othejudgmentdebt orint he
handsofat hir
dper son.Thet hir
dpar tyisknownas' Garni
shee' andt he
cour t'
sor derisknownasGar nisheeOr der.I
tisar emedyav ail
abl etot he
Decr eehol der.Thi sOrdermaybemadebyt heOr deroft hecour tt o
holder soff unds,i.e.athirdpar t
yt hatnopay ment shav et obemade
untilt hecour taut hori
zesthem.Thepur poseoft heOr derist opr otect
the int erestoft he Decree holder.Thi sis an Or derser v
ed upon a
garnisheer equiri
nghi m nott opayordel iv
ert hemoneyorpr oper t
yof
thedebt or(defendant )t
ohi m and/orrequiri
nghi mt oappeari nt hecour t
andanswert ot hesui toft heplainti
fftot heext entoft hel i
abili
tyt o
defendant .

Thepoweroft hecourtenshr i
nedunderRul e46At oissuecour tnoti
ce,i
s
discr
et i
onaryand t hecour tmayr efuse to passsuch Or derifitis
Inequitableandthecour tapprehendst hatitcancausepr ejudicetothe
garnishee,orthatthegroundsoft heapplicat
ionseekingthatr emedyis
notsuf fici
entoriftheaf fi
davitisfi
ledbydecr eeholderisf rivol
ousor
ambi guous,etc.Thediscr eti
on,howev er,mustbeexer ci
sedj udici
all
y.
Wher et hecourtfindsthatt hereisbonaf i
dedisputeagai nsttheclaim
andt hedi sput
eisnotfal seorf r
ivol
ous,itshouldnott akeact i
onunder
thisrul
e.

The ex
ecut
ing Cour
thas been gi
ven powert
orecov
eranyoft
he
amount soft hejudgmentdebt or, whi chisinthehandsofot her.Therule
of46Ar equiresanot icetobei ssuedt oagar ni
sheebef oreagar ni
shee
orderis passed agai nsthi m.I fsuch not ice i
s noti ssued and an
opportunit
yofhear ingisnotpr ov i
dedbyt hecour t
,theor derwoul dbe
nullandv oid.Intheey esofl aw,t hereisnoexi stenceofsuchanor der
andanyst ept akenpur suanttoorani nenforcementofsuchanor der
wouldal sobev oid.Theobj ectoft hisruleist orenderdebtduebyt he
debtorofthej udgmentdebt orav ailableinexecuti
ont othedecr eeholder
andnott odr ivehimt oasui t.Itappl i
est oadebt ,othert hanadebt
securedbyamor tgageoraChar ge, whichhasbeenat t
achedunderr ule
46.

Pri
ort ot hi
samendmenti n1976,t herewasnopr ovi
sionrel
ati
ngto
garni
sheeor derint hecodeofci vilpr
ocedur e,1908.Aft
erinser
ti
onof
thi
samendment ,a dir
ectprov i
sion wasadded t othecodeofci vi
l
Procedure,whichempower sthecour ttoi ssuesuchanor deronthe
appli
cati
ondul yfi
led.I
tisthediscreti
onarypoweroft hecourttoi
ssuea
garni
sheeor derandnotamandat oryprovi
sion.

Thecour thastousethi
spowerwi t
hcautiont hi
nkingproper
lyandafter
bei
ngensur edthatt
hecasei spr i
maf acieandt hatnoi nnocentis
harassed,other
wiset
hev er
ypur poseofthel egi
slati
onofprov i
dingthe
concernedremedyasdiscussedabov eshall
comet obeatast ake.

Garnisheepr oceedingspr ovi

det hesi mplestmet hodofenf orcement
wheret hej udgmentdebt orishi mselfthecr edi
torofa t hir
d party
.
Throughgar nisheepr oceedi
ngs,theobligati
onoft hethi
rdpartyt opay
moneyt othej udgmentdebt oristransfor
medi ntoanobligati
onoft he
thi
rdpar t
ytopayt hemoneydi r
ectl
yt oyou(asthejudgmentcreditor)
.
Garni
sheepr
oceedi
ngsi
smostcommonlyusedtoat
tachorfr
eezethe
sumsofmoneywhichbel
ongt
othej
udgmentdebt
orl
ocatedi
nhisbank
account
.
stati
ng,wherethegar ni
sheeisabankhav ingmorethanoneplaceof
business,thenameandaddr essofthebranchatwhi cht
hejudgment
debtor'
saccounti sbeli
evedt obeheldor ,ifi
tbethecase,thatthi
s
i
nf or
mat i
on(aboutthedebtor
'saccount
)isnotknowntoyou.
Agarni
sheeordermustatfir
stbeanor
dernisi
.Thati
s,anor
derdirected
tot
hegar ni
sheeinstr
uct
inghimtoshowcause( t
ogiveanyreasonst o
obj
ecttheappli
cati
on)whythedebtcl
aimedtobedueoraccruingfrom
hi
m tot he j
udgmentdebtorshoul
d notbe uti
l
ized to sat
isf
ythe
j
udgmentdebtandt
hecostsoft
hegarni
sheepr
oceedings.
Theordernisispecifi
est heti
meandpl aceforf
urt
herconsi
der
ati
onof
thematter
,andi nthemeant imeatt
achesthedebtcl
aimedtobedueor
accr
uingfr
om t hegarnisheetothej
udgmentdebtor,
orsomuchofitas
maybespecifiedintheor der
Unlesst hecour totherwisedir
ects,thegarnisheeorderni
simustbe
served(delivered)ont hegarni
sheebyhand,atl east15daysbefor et
he
dayappoi ntedt her
ebyf orthef
urtherconsi
derati
onofthematter
;andon
thejudgmentdebt or,atleast7day saft
ertheorderhasbeenserv edon
thegar nisheeandatl east7day sbef or
et hedayappointedf orthe
fur
therconsi derati
onoft hematter.
Asfr
om theser
viceoft hegar
nisheeorderni
sionthegarni
shee,t
he
or
derbi
ndsinhi
shandsanydebtspecifi
edintheor
derorsomuchofi t
asmaybesospecif
ied.
Wher e,onthef ur
therconsiderati
onoft hemat ter,thegarnisheedoes
notat t
endthecour thearingordoesnotdi sputethedebtdueorcl aimed
tobeduef rom himt ot hejudgmentdebt or,thecourtmaymakea
garni
shingor derabsol ut
e( f
inali
zedorder)againstthegarnishee.Upon
granti
ngoft hegar nisheeorderabsolute,thegar ni
sheeshoul dpayt he
amountspeci f
iedint hegarnisheeordertot hejudgmentcr editor.The
garni
sheeor derabsol utemaybeenf orcedinthesamemannerasany
otherorderforthepay mentofmoney .
Where,onf ur
therconsider
ati
onoft hemat t
er,t
hegarni
sheedi sputes
l
iabil
i
tyto payt hedebtdueorcl ai
medt o beduef r
om hi m tot he
j
udgmentdebt or
,thecourtmayhav et oexaminethequesti
onsati ssue
i
nor dert
odet er
minet heli
abil
i
tyofthegar ni
shee.I
fthegarnisheehas
paidyoutheamountspeci f
iedintherelev
antgarni
sheeorder,hewillbe
deemedtohav esett
ledhisdebttothejudgmentdebtor
.
7.DIFFERENCE BETWEEN CHEQUE AND BI
LL OF
EXCHANGE
Itshoul
dbeclearthatev
erychequei
sabil
lofexchange,
butever
ybillof
exchangeisnotnecessari
lyacheque.Themai npoint
sofdi f
fer
ence
betweenachequeandabi l
lofexchangeascanbei nfer
redfr
om t he
respect
ivedef
ini
ti
onsandareasunder:
Fol
l
owi
ngar
ethedi
ff
erencesbet
weenaCheque&Bi
l
lofExchange
1)I
tisal
way
sdr
awnonabank.
I
tmaybedr
awnonanyone,
incl
udi
ngabanker
2)I
tisal
way
spay
abl
eondemand.
I
tmaybepay
abl
eaf
teracer
tai
nper
iodorondemandoronsi
ght
.
3)I
tisal
way
sdr
awnonapr
int
edf
orm.
I
tneednotbedr
awnonapr
int
edf
orm
4)Thedr
awee(banker)neednotacceptacheque.Accordi
nglyt
her
e
i
snopri
vi
tyofcontr
actbetweenthepayeeandthebanker.
Accept
ancebyt
hedr
aweei
sessent
ial
.
5)I
tisal
wayssupposedt
obedr
awnagai
nstt
hef
undsi
nthehands
oft
hebanker
.
Ther
eisnosuchsupposi
ti
on.
6)Thel
i
abi
l
ityoft
hedr
awercont
inuesf
or3mont
hs.
Unr
easonabl
edel
ayi
nthepr
esent
ati
onwi
l
ldi
schar
get
hebi
l
l
7)I
tisf
reef
rom st
ampdut
y.
Thebi
l
lmustbest
ampedaccor
dingt
otheSt
ampsAct
8)I
tisnotdr
awni
nset
s.
For
eignbi
l
lsar
eal
way
sdr
awni
nset
s
9)I
tmaybecr
ossedt
oensur
esaf
ety
.
I
tisusual
l
ypr
otest
edandnot
edf
ordi
shonour
10) I
tisnotpr
otest
edornot
edondi
shonour
.
Not
iceofdi
shonourmustbesentt
ohol
dthepar
tyl
i
abl
e.
11) l
ncaseofdi
shonour
,not
iceofdi
shonourt
othedr
aweri
snot
essent
ial
.

12) St
atut
orypr
otect
ion gi
ven i
n Negot
iabl
eInst
rument
sAct
,
 1881appl
i
esonl
ytocheques.
St
atut
orypr
otect
ioni
snotav
ail
abl
eint
hecaseofbi
l
ls.
13) I
tmaybepay
abl
etobear
eral
so.
I
tcannotbemadepay
abl
etobear
er.
14) Ther
eisnoquest
ionofal
l
owi
nganyday
sofgr
ace.
Thr
ee days ofgr
ace per
iod i
s al
l
owed whi
l
e cal
cul
ati
ng t
he
matur
it
yperi
od
15) Thedrawermayrev
oketheauthor
it
ybyi nfor
mingt
hebank
ofcounter
mandthepay
ment,or‘
stoppaymentorder’
.
Thedr
awercannotr
evoket
heaut
hor
it
y.
16) Achequei
smat
uref
orpay
mentsi
ncet
hedat
eofi
ssue.
Abi
l
lbecomesmat
uref
orpay
mentaccor
dingt
omat
uri
tyr
ules
17) Dishonourofcheques forinsuff
ici
entfund const
it
utes a
penal
offenceunderspeci
fi
edci
rcumstances.(
Sect
ion138)
Di
shonourofbi
l
ldoesnotconst
it
utepenal
off
ence.
18) Paymentofchequei
sst
oppedbyt
hebanki
ncaseofdeat
h
andi
nsani
tyofdr
awer.
Thedeat
hofdr
awerofbi
l
lmakest
hehei
rsl
i
abl
eforpay
ment
19) Chequesmaybedr
awnpostdat
ed.
Bi
l
lscannotbedr
awnpostdat
ed
20) Ther
eisapr
ovi
si
onf
ort
runcat
edorcomput
eri
zedcheque.

Nosuchpr
ovi
sionsar
ether
eincaseofbi
l
lofexchange.
Chequesareat y
peofbil
lofexchangeandwer edevel
opedasawayt o
makepay mentswit
houtt
heneedt ocarrylar
geamountsofmoney.I
tis
a species ofbi
llofexchange,the defi
nit
ion i
mpli
es t
hata bi
llof
exchangewhichi
s:
(
a)Dr
awnonaspeci
fi
edbankeri
.e.
,dr
aweemustbeabanker
;and
 (b)Alwayspay abl
eondemandi sacheque.Thus,i fanybil
lof
exchangefulf
il
st hesetwocondi ti
onsthatwi l
lbecheque.Itis
ther
eforesai
dthatallchequesarebill
sofexchangebutallbi
ll
sof
exchangearenotcheques.Onlythosebil
l
swhi chful
fi
lsabovetwo
condit
ionswil
lbechequeot her
wisenot.

8.CUSTOMER’
SDUTI
ESTOWARDSHI
SBANKER
Byopeni ngofanaccountwi tht hebanker,t
herewi llbesomer ights
conferredendr esponsibi
l
iti
es( duties)i
mposedont hecustomer.The
customerhasr ight
sanddut iest oo.Ther
ear enospeci f
icstat
utory
provi
sionsinanyActbutcust omer shavesuchright
sanddut i
esbyt he
rel
ationshi
pbetweent hebankerandcust omerwhi cht heyhave.The
obli
gationsofcustomermaybesummar i
sedasfoll
ows:
➢ Acustomer,
whohasacurrentordeposi
taccountowesonl
ytwor
eal
dut
iest
owardsbanker
,namel
y:
1.Tor
epayt
heov
erdr
awi
ngs
Banker sgeneral
lyallowoverdraftbycust
omer smaintai
ningsatisfact
ory
currentaccounttomeett heircasualr
equir
ement.Nobankerl i
ket hatthe
reputationofhisv al
uabl
ecl i
entisdamagedonaccountofdi shonourof
cheque.Ofcour se, whil
eallowingtheoverdr
aftthebankerkeepi nmi nd
thecr editworthiness,marketr eput
ati
onet c.
,oft hecustomer .Now
bankshav eintr
oducedcr editcardprovi
siontot hecustomer,theov er
drawingsbecomemi ni
mum.I tisthedutyofthecustomertor epaysuch
overdr awings.
2.Topaychar
gesoft
hebank
Acust omeri
sboundt opayallreasonablechar
geswhichthebankerhas
i
ncurredbyprovidi
ngfacil
it
iestot hecustomer.Byri
ghtofcustomer,a
bankerisent
it
ledtolevyi
ncidentalchargesoncurr
entaccount
sandt hi
s
pract
iceissowellest
abli
shedthati twouldbel
egal
lyenfor
ceabl
e.
Abankerhasar i
ghtt obef air
lyandadequat elycompensatedf orthe
serv
iceswhi chher enderstohiscustomer.Abankermakesav ai
lableto
hiscustomer sdi versi
fiedservi
ceslikeissueofdemanddr aft
,locker
faci
li
ty,t
raveler
’scheques,MI CRcheques,cr editcar
ds,ATM faci
lityetc.
Reasonablechar gesoft hesefaci
li
ti
esmaybeadequat el
ypaidfor.
➢ Besi
destheabovedut
ies,
thefol
lowi
ngdut i
eshav
ebeeni
mposedon
t
hecustomerbyCourt
sinvar
iousdeci
sions.
1.Tocommuni
cat
eori
nfor
mfact
s
Itisthebindi
ngdut yoft hecustomert hathemustcommuni cat
et he
bankerast oforger
yofhi ssignatur
eont hechequeormi ssingofhi s
chequebookorpassbooket c.Thecustomershoul dimmedi atelynot i
fy
thebankifhediscoversthatanotherpersonhasf or
gedhi ssignaturet o
chequesdrawnonhi saccount;f
ailur
etodosowi l
lpreventthecust omer
from cont
endingthatthechequesar eforgeri
es,andthatthebankmay
notdebitthem tohisaccountifitpayst hem i
ngoodf ait
handwi thout
negli
gence.
InGr eenwoodv .Mar
tinsBankLt d.,[(
1933)AC51] ,theCour theldthat
theper sonwaspr ecl
udedf rom makingsuchacl ai
mi nrespectofallthe
chequesbyhi sownf ailur
et onotifythebankoft heoriginalf
orgeri
es.
Thishadi nducedthebankt obelievethatt
heywer egenui necheques
signedbyhi m; andsohadpr ev
entedthebankf r
om pursuingtheremedy
i
twoul dhav ehadofsui ngthepersonwhof orgedchequesf orfr
aud.
2.Dut
yofr
easonabl
ecar
eindr
awi
ngcheques
Thecust omer'
sot herself
-regardingdutyistodraw chequesonhi s
accountinawaywhi chdoesnotf aci
li
tat
etheal
ter
nati
onoftheamount,
fai
luretodosot hi
swi l
lenti
tlethecustomer'
sbanktodebithi
saccount
fortheamountf orwhichthechequeappear stohavebeendr awn,i
fit
payst hatamountonpr esentati
onoft hechequeanddoessoi ngood
fai
thandwi t
houtnegli
gence.
InYoungv .Gr ote[
(1827)4Bi ng253]thecust omerlef
tagapwhi l
e
writ
ingtheamounti nfiguresandinwor dsandt heCourthel
dthatthe
customercaused,oratleastprovi
dedtheoccasionforhi
sownloss,and
hecouldnotr el
yont henor malrul
ethatthealt
erati
onofachequeina
materi
alpart
iculari
nval
idatedit,sothathisbankerhadnomandatet o
payitatal
l.
3.Nott
odr
awchequeswi
thoutsuf
fi
cientf
und
Thecust omeronhispartundert
akestodrawchequeswi thi
nthebalance
availableto him.In caset hebalanceisnotsuf fi
cientto meett he
drawi ngs,itis expect
ed from a customert o make some ki nd of
arrangementt omeethi scheques.Intheabsenceofanyar r
angement,
the bankeri sj usti
fi
ed inr et
urni
ng the cheques att he costand
consequencesoft
hecust
omer
.
Dishonourofchequesf orwantofsuffi
cientfundhasnowbeenmadean
offenceunderSect ion138oft heNegot iabl
eInstr
ument sAct
,1881,
w.e.f 1. 4.1989 by Negot i
able Instruments ( Amendment and
MiscellaneousProvi
sions)Act1988.Nowi tisconsi
deredascommi t
ti
ng
anof fenceofcr i
minalnatur
eandi spunishedwi thi
mpr i
sonmentfora
term whi chmayex t
endt otwoy ear
s,orwi thfi
newhi chmayextendto
twicetheamountoft hecheque,orwithbot h.
Rightsanddut i
esaret het wophasesofsamecoi n,asthecustomer
availcert
ainri
ghtsagainstt hebankerhemustal soowesomedut i
es
towar dst
hebanker.Toconcl udebotht hebankerandcustomerhaveto
obser vet
heirr
ightstowar dseachot herforthepurposesofsmoot hl
y
runningofabankinginsti
tuti
on.
9.NOTI
NGANDPROTEST
Thepr ov i
sionsr elati
ngt o‘Not ing’and‘Protest’arei nfactconnect edto
thedi shonourofanegot iablei nstr
ument.AsperSect i
on93oft he
Negot iableI nstrument s Act ,1881,when a pr omi ssorynot e,bi l
lof
exchangeorchequei sdishonour edbynon- accept anceornon- payment ,
thehol dert hereof ,orsomepar tyther
etowhor emai nli
abl et hereon,
mustgi venot i
cet hatthei nstrumenthasbeensodi shonour edtoal l
otherpar ti
eswhom t hehol derseekst omakesev erall
yliablet hereon,
andt osomeoneofsev eralpar ti
eswhom heseekst omakej ointl
yliabl
e
thereon.Butnonot iceofdi shonourneedbegi vent ot hepar tywhohas
himsel fdishonour edthebi ll,noteorcheque,t hati s,maker ,accept oror
banker. Theef fectoff ail
uret ogivenoticeisser iousf orthehol der.He
cannotsuet hepar t
ytowhom not i
cehasnotbeengi venorwhohasnot
receivednot icef r
om anyot herpar t
y.Thedr awerorendor serwhohas
notr ecei vednot icei sdischar gednotonl yont hebi llbutal soont he
consider ation.
Notingandpr ot
estconsti
tut
eanauthent
icproofofsuchdi shonour
whichhastobeobt ai
nedbythehol
der
.Thepr
ov i
sionsper
tai
ningt othe
samearediscussedbelow.
Not
ing
Noti
ng i
st he aut
henti
c and offi
cialproofofpr esent
mentoft he
i
nstr
umentanditsdi
shonourther
eaft
er.Thequest
ionofnotingdoesnot
ar
iseinthecaseofdi shonourofchequesbecauset hebank,while,
ref
usingthepayment,retur
nst hechequealongwithaslipwhi
chshows
thereasonsforthedishonourandt hesli
pitsel
fservesasanaut
henti
c
evi
denceofthef actofdishonour.Thequestionofnoti
ngari
sesonl
yin
thecaseofdishonourofabilloranote,t
houghitisnotcompul
sor
y.
AccordingtoSection99oft heNegoti
abl
eInst
rumentsAct,1881,whena
promissorynoteorabi l
lofexchangehasbeendi shonouredbynon-
acceptanceorbynon- pay ment,thehol
dermay,ifhesodesi recause
suchdi shonourtobenot edbyaNot aryPubl
icupont heinstr
ument,or
uponapaperat tachedthereto,orpar
tl
yuponeach.
Forthi
spur pose,thehol
dertakesthei nstr
umentt ot henotar
ypubli
c.
Thenotarythenmakesaf ormaldemandf oracceptanceorforpayment
uponthemakerordr aweeoracceptorandonhi srefusalt
odosohe
notesthesameont hebil
lornote.Notingthusmeanst herecor
dingof
thefactofdi shonouront hedishonouredi nst
rumentoronapaper
att
achedtheretofort
hepurposeofevidence.
➢ Not
ingmusthowev
ercont
aint
hef
oll
owi
ngpar
ti
cul
ars;
(
i) t
hef
actofdi
shonour
(
ii
) t
hedat
eofdi
shonour
(
ii
i) t
her
easons,
ifany
,assi
gnedf
orsuchdi
shonor
(
iv) i
ft he i
nst
rumenthas notbeen expressl
ydishonour
ed,t
he
r
easonwhythehol
dert
reatsi
tasdishonoured,
and
(
v) t
henot
ary
'schar
ges.

Pr
otest
Protesti
saformalcert
if
icateofdi
shonouri
ssuedbythenot
arypubl
icto
theholderofadi
shonour edbil
lornot
e.Iti
sissuedbythenot
aryatthe
requestoft
heholder
.Iti
sbasedonnot i
ng.
Section100oft heNegoti
ableInst
rument sAct,1881,provi
desthatwhen
apr omi ssorynot eorbil
lofexchangehasbeendi shonouredbynon-
accept anceornon- payment,thehol dermay ,wi
thi
nr easonablet i
me,
causesuchdi shonourtobenot edandcer ti
fi
edbyanot ar
ypublic.Such
certi
ficateiscalledaprotest.Theadv antageofnotingorpr ot
est i
ngis
thatitaffordsauthent
icandsatisf
actoryev i
denceofdishonour.
➢ Pr
otestf
orbet
tersecur
it
y
AsperSect i
on100( Para2)oft heNegotiabl
eInstrument sAct,1881,
whent heaccept orofabi llofexchangehasbecomei nsol
vent,orhis
credithasbeenpubl icl
yimpeached,bef orethemat urit
yoft hebill
,the
holdermay ,wit
hinar easonablet i
me,causeanot arypubl i
ctodemand
bettersecuri
tyoft heaccept or,andoni tsbeingref usedmay ,witha
reasonableti
me, causesuchf actstobenotedandcer tif
iedasaforesai
d.
Suchcer t
if
icat
eiscal l
edapr otestforbet
tersecur
it
y.
➢ Cont
ent
sofPr
otest
AsperSecti
on101oft
heNegot
iabl
eInstr
ument
sAct
,1881,
apr
otestf
or
bet
tersecur
it
yhast
ocont
aint
hefoll
owing:
a)ei
thertheinst
rumenti
tsel
f,oral
i
ter
alt
ranscr
ipt
ionoft
hei
nst
rument
andofeveryt
hingwri
tt
enorprint
edt
her
eupon;
b)thenameoftheper
sonf
orwhom andagai
nstwhom t
hei
nst
rument
hasbeenpr
otest
ed;
c)ast atementt
hatpaymentoraccept
ance,orbett
ersecur
it
y,asthe
casemaybe,hasbeendemandedofsuchper sonbyt henot
arypubl
ic,
thetermsofhisanswer
,ifany
,orastat
ementthathegavenoanswers
orthathecoul
dnotbefound;
d)whenthenot eorbi
l
lhasbeendishonour
ed,theplaceandtimeof
di
shonour
,and,whenbett
ersecur
it
yhasbeenr efused,t
heplaceand
ti
meofrefusal
;
e)t
hesubscr
ipt
ionoft
henot
arypubl
i
cmaki
ngt
hepr
otest
;
f
)intheeventofanacceptanceforhonourorofapaymentf
orhonour
,
t
henameoft hepersonbywhom,oft hepersonf
orwhom,andt he
manneri
nwhich,suchacceptanceorpay
mentwasoffer
edandef
fect
ed.
Anot ar
ypubl i
cmaymaket hedemandmentionedinclause(
c)ofthis
sect
ioneitheri
nper sonorbyhi
sclerkor,
wer
eauthori
zedbyagreement
orusage,byregist
eredlet
ter
.Conclusi
on
Theadv antageofbot hnotingandprotest
ingist hattheseconst i
tute
pri
maf aciegoodev idenceintheCourt
,ofthef actthatt
hei nst
rument
hasbeendi shonoured.TheCourti
sboundt orecognizeapr ot
est.Butit
maynotr ecogni
zet henoti
ng.Theref
ore,i
tisadv isabl
et hatbotht he
noti
ngandpr otest
ingshouldbedonesimult
aneously.
10 PRI
ORI
TYSECTORADVANCES
NationalCr editCounci lmeet ing heldi n July1968 emphasi zed that
commer cialbanksshoul di ncreaset heirinvolvementi nthef i
nancingof
pri
or i
ty sect ors, v i
z., agr iculture and smal l scal e i ndustri
es.
National i
zat ionofbanksusher edi nnew concepti nbank’ sl endingand
addedadi mensi onofsoci albanki ngt obusi nessofl endingbybanks.
Ini
tiall
yt her ewasnospeci fict argetfixedinr espectofpr i
oritysector
l
endi ng.I nther ecommendat i
onsoft heWor kingGr oupont heModal it
ies
ofI mpl ement ation ofPr iori
tySect orLendi ng and t he Twent yPoi nt
Economi cPr ogrammebyBanks,al lcommer cialbankswer eadv i
sedt o
achievet het argetofpr iorit
ysect orlendingat40per centofaggr egate
bankadv ancesby1985.Sub- tar getswer ealsospeci fi
edf orlendingt o
agricultureandt heweakersect ionswi t
hinthepr i
oritysector.Sincethen,
therehav ebeensev eralchangesi nthescopeofpr i
ori
tysect orlending
andt het argetsandsub- target sappl i
cabletov ari
ousbankgr oups.The
guidelineswer er evi
sedbyRBIf rom timet otimei nt hisregard.Meani ng
Priori
tySectorLendi ngi sanimpor tantrol
egivenbyt heReserveBankof
India(RBI)tot hebanksf orpr ovi
dingaspeci f
iedpor t
ionoft hebank
l
endi ngtofewspeci fi
csect orsli
keagr i
cult
ureandalli
edactiv
iti
es,mi
cro
andsmal lenterprises,poorpeopl ef orhousi
ng,studentsforeducat
ion
andot herlow incomegr oupsandweakersect ions.
.Thisisessenti
all
y
meantf oranal lr ounddev elopmentoft heeconomyasopposedt o
focusingonlyont hef inancialsect
or .
Cat
egor
iesunderpr
ior
it
ysect
or;
(
i) Agr
icul
tur
e
(
ii
) Mi
croandSmal
lEnt
erpr
ises
(
ii
i) Educat
ion
(
iv) Housi
ng
(
v) Expor
tCr
edi
t
(
vi) Ot
her
sDescr
ipt
ionoft
heCat
egor
iesunderPr
ior
it
ySect
or
Thebroadcat
egori
esofpr
ior
it
ysect
orf
oral
lschedul
edcommer
cial
banksar
easunder
:
(
i)Agr
icul
tur
eandAl
l
iedAct
ivi
ti
es(
Dir
ectandI
ndi
rectf
inance)
Dir
ectfinancetoagricult
ureshallincludeshort,medi um andlongterm
l
oansgi ven foragri
culture and all
ied act
ivi
tiesdi r
ectlytoindivi
dual
far
mers,Sel f
-Hel
pGr oups( SHGs)orJoi ntLiabili
tyGr oups(JLGs)of
i
ndivi
dualf armer
s wi t
houtl imitand t o others( such as corporat
e,
part
nershipfirms and insti
tuti
ons)up t o Rs. 20 l
akh,f ortaki
ng up
agri
cul
ture/al
li
edacti
v i
ti
es.
Indi
rectfi
nancetoagr
icul
tur
eshal
lincludeloansgi v
enf
oragr
icul
tur
e
andalli
edacti
vi
ti
esasspeci
fi
edi
nSectionI,appended.
Thi
sdisti
nct
ionbetweendi
rectandindir
ectagr
icul
tur
eisdispensedwith.
I
nstead,
thelendi
ngtoagri
cult
uresectorhasbeenre-
defi
nedtoinclude
(
i) Farm Credi
t( which wil
lincl
ude shor
tter
m cr
op l
oans and
medium/l
ong-
ter
m credi
ttof
armers)
(
ii
)Agr
icul
tur
eInf
rast
ruct
ureand
(
ii
) Anci
l
lar
yAct
ivi
ti
es.
- Smal
lScal
eIndust
ri
es(
Dir
ectandI
ndi
rectFi
nance)
Directfi
nancet osmallscaleindust
ri
es( SSI
)shal
lincludeal
lloansgiv
en
to SSIuni t
s whi ch are engaged i n manufacture,processi
ng or
preservati
onofgoodsandwhosei nvest
mentinpl antandmachi nery
(ori
ginalcost)excl
udinglandandbui ldi
ngdoesnotexceedt heamount s
specifi
edinSect i
onI,appended.
I
ndi
rectf i
nancet oSSIshalli
ncl
udefinancetoanyper sonpr ov
iding
i
nputst o ormar ket
ing t
he out
putofar ti
sans,vi
ll
age and cottage
i
ndustr
ies,hand-
loomsandtocooper
ati
vesofproducer
sinthissector.
- Smal
lBusi
ness/
Ser
viceEnt
erpr
ises
Itshalli
ncludesmal lbusiness,ret
ailt
rade,
professi
onal&sel f-employed
persons,smal lr oad & wat ert r
ansportoperator
s and ot herser vi
ce
enterpri
sesaspert hedefinit
iongiveninSect
ionIandot herenter
pr i
ses
thatar e engaged in providi
ng orr ender
ing ofservices,and whose
i
nv estmenti n equipmentdoes notexceed t he amountspeci f
ied in
SectionI,appended.
(
iv)Mi
croCr
edi
t
Prov
isi
onofcredi
tandot herf
inanci
alser
vicesandproductsofver
y
smallamount
snotexceedingRs.50,000perborr
owertot hepoori
n
rur
al,semi-
urbanandurbanareas,ei
therdi
rect
lyorthr
oughagr oup
mechanism,forenabl
ingthem toimprovethei
rli
vi
ngstandar
ds,wil
l
consti
tut
emicrocr
edit
.
(
v)Educat
ionl
oans
Educati
onloansincludeloansandadv ancesgr
ant
edtoonl
yindi
vi
duals
f
oreducationalpur
posesupt oRs.10lakhforst
udi
esi
nIndi
aandRs.20
l
akhf orst
udiesabroad,anddonoti ncl
udethosegr
ant
edtoi
nsti
tut
ions;
(
vi)Housi
ngl
oans
Loansupt oRs.28lakhi nmet r
opoli
tanciti
eswher epopul
ationisabove
10lakhandRs.20Lakhatot hercentersf orconstr
uct
ion/purchaseofa
dwelli
nguni tperfamil
ypr ovidedtotalcostoft heunitinmet ropol
it
an
centr
esandatot hercent resdoesnotexceedRs.35LacsandRs.25
Lacs respecti
vely
.( excluding loans granted bybanks t ot hei
rown
employ ees)and loansgi ven f orrepai
rst ot hedamaged housesof
i
ndividualsupt oRs.5l akhi nmet ropol
itancent r
esandRs.2Lakhat
othercentres.
(2)I nv
estmentsbybanksi nsecuriti
sedasset s,repr
esenti
ngl oanst o
agricul
ture(dir
ectorindirect),smallscal
ei ndustr
ies(di
rectorindir
ect)
and housi ng,shallbe el i
giblefor classifi
cati
on under respective
categories ofpr i
ori
ty sector( di
rectori ndi
rect)depending on t he
under l
yi
ng assets,provided t hesecurit
ised assetsareor i
ginated by
banksandf i
nanci
alinstitut
ionsandf ul
fil
ltheReser veBankofI ndia
guideli
nesonsecur i
ti
sation.
(
3)UnderWeakerSect
ions
Pr
ior
it
ysectorloanstothefol
l
owi
ngbor
rower
sar
econsi
der
edunder
WeakerSect
ionscat
egor
y:-
(
a)Smal
landmar
ginal
far
mer
s;
(b)Ar
ti
sans,vi
l
lageandcott
agei
ndust
ri
eswher
eindi
vi
dualcr
edi
tli
mit
s
donotexceedRs.50000;
(
c)Benefi
ciari
esofSwarnaj
ayant
iGram Swar
ozgarYoj
ana(
SGSY)
,now
Nat
ional
Rur alLi
vel
i
hoodMissi
on(NRLM);
(
d)Schedul
edCast
esandSchedul
edTr
ibes;
(
e)Benef
ici
ari
esofDi
ff
erent
ial
Rat
eofI
nter
est(
DRI
)Scheme;
(
f)Benef
ici
ari
esunderSwar
naJay
ant
iShahar
iRozgarYoj
ana(
SJSRY)
;
(g) Benef
ici
ari
es under t
he Scheme f
or Rehabi
l
itat
ion of Manual
Scavenger
s(SRMS);
(
h)Loanst
oSel
fHel
pGr
oups;
(
i)Loanst
odi
str
essedf
armer
sindebt
edt
onon-
inst
it
uti
onal
lender
s;
(j
)Loanstodist
ressedpersonsotherthanfar
mer snotexceedi
ngRs.
50,
000perbor
rowertoprepaythei
rdebttonon-
inst
it
uti
onal
lender
s;
(k)Loans t
oindi
vi
dualwomen benef
ici
ari
es up t
o Rs.50,
000 per
borr
ower.
(
l)Accounthol
der
sunderPr
adhanMant
riJanDhanYoj
ana(
PMJDY)
(
4)Renewabl
eenergysect
orhasal
sobeenaddedt
opr
ior
it
ysect
or
l
endi
ngi
ntheyear2015.
Thepr i
oritysect oradv anceshadunder gonesev er
alchanges,si nce
then,severalnew ar easand sect orshav ebei ng broughtwi t
hint he
purvi
ew oft hissect or.Thev ariousst udiesshowst hatprior
itysector
advancesofal lthebanki nggroupsar eincreasing.Inspi t
eofincreasing
advances,Indianbankshav enotachi evedsomet argetsfi
xedbyt heRBI.
Lendingtopr ior
itysect orcreatesmanypr oblemsf ortheIndianbanks
l
ikelowpr ofit
abili
ty,highNPAs,t r
ansact i
oncostet c.Itisaneedoft he
hourtofindoutsol uti
onsf orthesepr oblemsot herwiseprogressoft he
I
ndianbankswi llcease.Ifthepr operpr i
oritysect oradvancesar egiven
theywil
lbehel pful i
nreducingthepov er
tylev el
.

SOLVEANYTWOOFTHEFOLLOWI
NGPROBLEMS:
1.
‘A’signsaninst
rumentasfoll
ows:Ipr
omi
set
opay‘
S’oror
der
Rs.
50,
000.I
sitaval
i
dpromissor
ynote?
Sol
uti
on:
1.The given problem i s based on pr omissor
y note.Gener all
ya
pr
omissorynoteisapl ai
nanddi rectacknowledgementinwriti
ng,topay
asum speci
fiedatthet i
met herei
nlimitedtothepersonther
ei nnamed
orsuf
fici
entl
yindicated,ortohi sor derort obearer
.Section4oft he
Negot
iabl
eInstrument sActstates:“Apr omi
ssorynoteisani nstr
ument
i
n wri
ting (
notbei ng a bank-note ora cur r
encynote)containi
ng an
uncondi
ti
onalundert
aki
ngsignedbythemaker
,topaycert
ainsum of
moneyonlyto,ort
otheorderof,
acer
tai
nper
son,ort
othebeareroft
he
i
nstrument
”.
2.Apromi ssorynotetobev al
idmustf ul
fi
llcert
ainconditi
onsaccordi
ng
tothedefi
niti
onpr ovi
ded.Soletseewhethert hegiveninst
rumentfulf
il
ls
theseconditi
onsbyanalysingtheessenti
alsofapr omissorynot
e.
-Theinst
rumentmustbeinwrit
ing;i
nthegi
vencase‘
A’hassi
gnedan
i
nst
rumentconnot
esi
tisi
nwrit
ing.
-I
tmustcontai
nanexpresspr
omisetopayt
houghtheword‘
promi
se’
is
notmandat
ory.I
nthegi
vencaseanexpr
esspromi
seispr
esent
.
-Itmustbeuncondi
ti
onal
.No condi
ti
oni
slai
ddowni
nthegi
ven
i
nst
rument
.
-Theinstr
umentmustbepay abl
einmoneyandmoneyonl
yandmoney
mustbecer t
ain.Theinstr
umenthasbeenmadetopaymoneyandthe
amountiscert
aini.
e.,
Rs.50000.
-Par t
iesmustbecer
tain.Ther
earetwopar
ti
estopr
omissorynot
evi
z.,
themakerandthepayee.Inthegi
vencase‘
A’i
sthemakerand‘S’
ist
he
payee.
-I
tmustbesi
gnedbyt
hemaker
.Thesai
dinst
rumenthassi
gnedby‘
A’.
-I tmustbe not ed thatformali
ti
es regar
ding number ,place,date,
consi
derat
ionetc.thoughusual
lyfoundgivenint
hepr omissorynotebut
arenotessent
ialinlaw.Anundatedinst
rumentwillbetreatedashaving
beenmadeont hedat eofitsdeliv
ery
.Howev eri tmustbepr operl
y
stamped.
3.Secti
on4fur
therpr
ovi
descertai
nexampl
esofv
ali
daswel
lasi
nval
i
d
promissor
ynot
es.Her
eIl
lust
rat
ion
(
a)i stobeconsi
der
edwhi chisrel
evanttot
hegiv
encase.I
treads:
“
Il
lustr
ati
ons:
-Asi
gnsinst
rument
sinthefol
l
owi
ngter
ms:
(
a)“
Ipr
omi
set
opayBoror
derRs.
500”
.
Thel astparagraphofSecti
on4states,“Theinstr
umentsmarked(a)and
(b)arepr omissorynot
es….”4.Thegiveninstrumentsi
gnedby‘A’fulf
il
ls
allthenecessar yconditi
onsofav ali
dpr omissor
ynot e.Moreoverit
resembl esexactlytothei l
l
ustr
ati
on( a)givenundert hedefi
nit
ionof
pr
omissor
ynoteunderSect
ion4.5.Toconcl
udetheinst
rumentsi
gned
by‘
A’i
sav al
i
dpromissor
ynotepayabl
eto‘
S’orhi
sorder.
2.Acust omerhasacreditbalanceofRs.2,
080i
nhiscurrent
account.Thr
eeChequesofRs. 1,
000,Rs.
500andRs.1,
200
aresimult
aneousl
ypresentedforpayment
.Asabankerhow
wil
lyouactinthi
ssit
uation?Decide.
Sol
uti
on:
1.Bankeracceptsthedeposit
sfrom t
hecustomerwithanobli
gati
onto
repayi
ttohim bywayofhonour i
ngthechequesdrawnuponthebanker.
Thebankeri sunderast at
utor
yobli
gati
ont ohonourhiscustomer'
s
cheques because iti
sr ecogni
sed i
n Secti
on 31 ofthe Negot
iabl
e
Inst
rumentsAct,1881.
2.Thust hebankershoul duser easonabl ecar eanddi li
gencei npay i
nga
cheque,soast oabst ai
nf rom anyact i
onl i
kelyt odamagehi scust omer '
s
credi
t.Ifthepayingbankerwr ongfullydi shonour sacheque,hewi l
lbe
askedtopayheav ydamages.Att hesamet i
me, ifhemakespay mentsin
ahur r
y,evenwhent herei snosuf f
icientbal ance,thebankerwi l
lnotbe
all
owedt odebitthecust omer '
saccount .Ifhedoesso,i twillamountt o
sancti
oning ofov erdraftwithoutpr i
orar rangement .Lat eron,t he
customercancl aimi tasapr ecedentandcompelt hebankert opay
chequesev enint heabsenceofsuf fi
cientbal ance.Hisposi ti
oni svery
precari
ousand hei si nbet weent hedev iland deep sea.3.I nthis
backgroundletusconsi derthedut yofabankeri nthegi vensi t
uati
on.
Beforedecidi
ngt hedut y,wehav et oanal y
zecer t
ainpr i
nciplesinthis
regardwhichareasf ollows:
-Thebankeri sunderanobl i
gati
ontopayhiscustomer'
schequesifthe
l
atter'
saccountshowssuf f
ici
entcr
editbalance.I
fthef undsavai
labl
e
arenotsuf fi
cienttohonouracheque,t hepay i
ngbankeri sj
ust
ifi
edin
retur
ning it
.So,bef orehonour i
ng a cheque,hemustcheckup t he
presentstateofhi scust omer'saccount.Forthispurpose,hemust
comput ethebalanceintheaccountofhiscustomer.
-I n comput i
ng the bal
ance,the previous arr
angement,ifany,f or
overdraf
tshoul dbetakenintoaccount.Forcomput i
ngthebalance,a
bankermaycombi netheaccountsofthesamecust omer,i
fhehasmor e
than two,af tergivi
ng due notice t
ot he cust
omer.Undercer tain
cir
cumst ances,abanker,
inordertoprotectthecustomer
,maycombi ne
theaccount sandpayacheque.--Themi nimum bal
ancerequi
rementt o
bemai nt
ainedinacur rentaccountorsav i
ngsaccounti sdeemedas
avail
ablef orhonouring the cheques.Thatamountshoul d notbe
regardedasf rozenbyt hebanker.Ifthemi ni
mum balanceisr educed
belowt heprescri
bedamount ,t
hebankershoul dhonourt
hechequeand
maychar geani nci
dentalchar
gefrom thecustomerfort
hisdefault
.
-I nthe case ofcurrentaccount,anynumberofcheques maybe
present
edf orpaymentonasi ngl
eday.Thebankergenerall
yfol
l
owst he
rul
eofmaki ngpaymentoft hechequesi nt hechr
onologi
calorderof
thei
rrecei
pt.Itmeansthatthechequefi
rstrecei
vedbythebankeronan
accountwil
l bepai
dfir
st,andsoon.
-The ser
ialnumberoft he cheque ort
he dat
eofi
tsi
ssue i
snot
si
gni
fi
cantfort
hispur
pose.
-I
fthebankerrecei
vemorethanonechequesi
multaneousl
yforpayment
butthefundsavail
abl
eintheaccountoft
hedrawerisi
nsuff
ici
enttopay
allofthem,hemaydi shonourallthechequesasconst it
uti
ng one
demand.
-Int hesamecasei fbalancei
snotsuffi
cienttopayal loft
hem thanin
suchcase, i
npract
ice,
thebankergiv
esfir
stprior
it
yt othetaxaut
horit
ies.
Laterachequef orabiggeramounti spai
d.Ifbotht hechequesar eof
equal amounts,
thebankerisfr
eetohonouranyoft hem.
4.I nt he giv
en case the t
otalavail
abl
e balance i
nt he customer’
s
accounti sRs.2,
080,andthet ot
alamountoft hreechequespr esent
ed
forpay mentsimult
aneousl
yisRs. 2,
700.Accordi
nglythebal anceisnot
suffi
cienttopayallthr
eecheques.Thust hebankerint hiscasehast o
functi
onasf oll
owsintheli
ghtofabovediscussedpri
nciples.
a)Among t he pr
esent
ed cheques,i
fany cheque bel
ongs tot
ax
aut
hori
ti
esthanf i
rstpr
ior
it
ymustbegi v
entot hat
,eventhought
he
amountisl
owest.
b)Ift
hereisnochequepayabl
etotaxaut hor
it
ies,
thechequef
orbi
gger
amounthastobepaidfi
rstv
iz.
,ofRs.
1,200.
c)Wi t
hr espectt or emai
ning t
wo cheques the pr
incipleis,ifthe
customer’
sbal anceissuffi
cientt
ohonourl owestamountcheque,t he
bankermusthonoursuchcheque.Accor dinglythechequef orRs.500
hast obehonor edatthesecondinst
ance.(Sednaoui
ZasiffaNahas&Co.
Ltd.v.AngloAust r
ali
anBank,1909)d)Consequent l
yt hechequef or
Rs.1,
200,will
bedi shonour
ed.
3.ACUSTOMEROFACORPORATI ONBANKAPPROACHESANOTHER
BRANCH OFTHESAMEBANKFORLOAN FACI LITYAGAI
NSTFIXED
DEPOSITRECEI
PTOFRS.
5,00,
000/
-ISSUEDINHISFAVOUR.WHETHER
HISREQUESTFORLOANCANBECONSI DERED?DECI
DE.
Sol
uti
on:
1.Thebankersafeguar
dshi sint
erestsbygrant i
ngloansandadvances
onthesecurit
yoft angibl
easset s,i.
e.,alargev ari
etyofgoodsand
commodit
ies,document s and immov abl
e pr oper
ty.Secti
on 5(
4)of
Banki
ngRegulati
onActsay sthatsecuredl
oansandadv ancesmeans;a
l
oanoradvancemadeont hesecurit
yofassets.
2.Whenmoneydeposi t
edbyacustomerisnotrepay
ableondemand
andispay ableontheexpi
ryofaspeci
fi
edperiodfrom t
hedateof
deposi
tsuchadepositi
scal
leda‘
Fi
xedDeposi
t’
.Thebankerev
idences
adepositbyissui
nga
r
eceiptknownas‘FixedDeposi
tRecei
pt(
FDR)’
.I
nter
esti
spai
datr
egul
ar
i
nter
v al
sataspecif
iedrat
eonsuchdeposit
s.
3.Af terknowi ngt heset ermst hequest i
onf orconsiderati
onundert he
givenpr oblem is,whet hert heloancanbegr ant
edagai nsttheFDRf or
Rs.5,00,000.?4.Theansweri syes,Banksusual lypermitcustomerst o
borrowagai nsttheFDR.Thi ssecur
it
yi scertainl
ythemostv al
uabl
e,as
themoneyr epresentedbyt herecei
ptisalreadywi t
ht hebankandt here
i
sno pr obl
em ofv al
uationorenqui ringt het i
tl
e,ort hepr obl
em of
storageandcost sassoci atedwi t
hstorage.
5.Howev
erf
oll
owi
ngpr
ecaut
ionsshoul
dbet
akeni
nthi
sregar
d:
(i
)Thebankershoul
dgr antt
headv
anceonl
ytot
heper
soni
nwhose
namethemoneyisdeposit
ed.
(i
i)Bankershoul
dnotadv anceagainstfixeddepositrecei
ptsofother
banks.Thisisbecauset hebankerwhohasr eceiv
edt hedeposi
twi l
l
hav eagenerall
ienov ersuchmoni es.Ev enifthelendingbankgi
v es
noticet
othebank,whi chhasr ecei
vedthedeposi t
,thelatt
ermayev en
refuset
oregi
sterthel
ieninfavourofthelendingbank.
(
ii
i) I
f,t
hedeposi
tisi
njoi
ntnamest
her
equestf
orl
oanmustcome
f
rom al
loft
hem.
(
iv) (
iv)Whent
hedeposi
trecei
pti
stakenassecur
it
y,t
hebanker
 shouldensurethatallthedeposi t
orsdul
ydischar
gei tont he
backoft heinst
rument ,aft
eraffi
xingtheappropr
iaterevenue
stamp.Inadditi
ontot his,t
hebankershouldobtai
nal et
terof
appropr
iati
onwhi chaut hor
izesthebankertoappr opr
iat
et he
amountoft hedepositonmat ur
ityorearl
i
ertowardsthel oan
amount.
(
v) Aftergrant
ingtheadvance,t
hebankermustnotehi
slieni
nthe
f
ixeddepositregist
ert
oav oi
dpaymentbymistakeandthel
ien,
mustalsobenot edontherecei
pti
tsel
f.
(
vi) Advanceshouldpref
erabl
ynotbemadeagai nstfixeddeposi
t
r
ecei
ptinthenameofami nor
,unlessadeclarat
ionistaken
f
rom guar
dian,
thatl
oanwillbeutil
i
zedforbenef
itoftheminor.
(
vii
) Wher ethemoneyi sbeingadvancedagai
nstt
hef i
xeddeposit
recei
ptissuedbyanotherbr
anch,t
heFDRdulydi
schargedmust
besentt othebranch,wher
esuchmoneyi sdeposit
ed,fort
he
foll
owingpurposes:
(
a)Tov
eri
fyt
hespeci
mensi
gnat
ureoft
hedeposi
tor
(b)Toensur
ethatnopr
iorl
i
enexi
stsont
hef
ixeddeposi
t
r
ecei
pt
(c)Tomarkli
enontheFDRandt
heFDRr
egi
ster
,inf
avourof
branchadv
anci
ngmoney
.

(
vii
i
)Amargi
nofnotlesst han25percenti
stobemai
ntai
nedby
bankswhi
l
egr
anti
ngagai
nstanydeposi
t.
6.Int hegi
vencasethecust omeri
sapproachi
ngforl
oanfacil
i
tyagainst
FDRi ssuedi
nhisnameandi nt
hesamebankbuti ndif
fer
entbranch.In
thelightofpr
inci
plesdiscussedabov
et hebankermayr i
ght
lyconsider
the customer’
sr equestf or l
oan observi
ng the above menti
oned
precauti
ons.

-
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
-