Q: Elaborately discuss about the special types of bank customers.

Ans:
MINOR
The Indian contract act, 1872 provides that a minor is not capable of entering into a valid
contract. Therefore, an agreement made with a minor is void, except a contract for supply of
necessaries for which the property is liable. Banks have to exercise extra precautions while
performing business dealings with minors. Bankers may open savings, fixed and recurring
accounts in the name of minor. However, they should be restricted from opening current account.
This is so that overdraft facility can be availed by current account holders but a minor doesn’t
have any personal liability. Minors are permitted to open savings account in any of the following
ways:
i) In his/her own name;
ii) In the joint names of the minor and his/her guardian;
iii) In the name of the guardian.

LUNATICS
Section 12 of Indian Contract Act, 1872 provides that for entering into a valid contract a
person must be capable of understanding the purpose of a contract and capable of forming a
rational judgment as to its effect upon his interests. Therefore, it is necessary that a person should
be of sound mind while entering into a contract. The law provides that any person of unsound
mind is not competent to enter into a valid contract. In case an existing customer is declared
insane and banker receives notice about it, all operations on the account must be suspended until
banker receives a proof of customer’s recovery. However, a banker can honour the cheques
received before getting the notice of customer’s lunacy.

MARRIED WOMAN
A married woman is competent to enter into a valid contract and is not subject to any
legal disability. According to Indian Contract Act, a married woman can enter into contracts,
acquire and sell property and lend or borrow money. The banker, therefore, open account in the
name of married women and can allow her to operate in a manner she likes. The banker can open
any types of account in the name of a married woman. She can be allowed to take avail the
overdraft facility. Banker should note that the married woman has estate in her own name while
overdraft facility is given.

EXECUTORS AND ADMINISTRATORS

The banker needs to verifying the legal document called the ‘Letter of probate’ incase of
executor and the ‘Letter of Administration ‘in case of Administrator should be verified by the
banker. These are the documents through which manner of operating the accounts of the
deceased are illustrated. Where two or more persons are appointed to conduct the affairs of the
property of a deceased, the banker is needed to obtain clear mandate signed by all of them laying
down the manner in the account of the deceased will be operated.

TRUSTEE
A trust is usually formed by means of Trust Deed. It contains the names of trustee, vested
power of trustee in administering the trust property and other terms and conditions. Banker
should note that trustee is not competent to delegate their vested power unless trust deed contains
such clause. It is, therefore, necessary on the part of the banker to read thoroughly the provisions
of Trust deed. This will enable bakers to get acquainted with the powers and functions of trustee.

ILLITERATE PERSONS
An illiterate person is not declared as incompetent to enter into a contract. Banker is free
to open and operate accounts in the name of illiterate persons. On opening and operating
accounts in the name of an illiterate person, a banker must undertake additional precautionary
measures. The left hand thumb impression a illiterate bank customer must be obtained in the
application form and specimen signature sheet in the presence of an authorised bank official.
Such person should be instructed not use cheque facility or ATM facility. Instead, they should be
asked to visit the bank personally and use the withdrawal form for every withdrawal.

CUSTOMER’S ATTORNEY
Some times the customer of a Bank may authorise other person to deal with the bank on
his behalf. Such conferred power is called Power of Attorney. Power of Attorney may be
conferred in two ways: general and special. In case of general power of attorney the incumbent is
authorised to act on behalf of the grantor in all matters concerning his business. Similarly, the
authority of power of attorney may also be restricted to some activities like sale or purchase of
property etc., called general power of attorney. The banker is required to obtain a copy registered
document duly issued by Registrar of Documents or attested by a notary public. The document
must be duly stamped and signed.

JOINT ACCOUNT
Joint account is that type of account which can be operated by two or more persons
jointly. Such accounts may be jointly operated by all the persons or one or two persons acting for
all. Bankers run greater risk when dealing with joint accounts holders. The bank account should
be opened only if the application form is signed by all the persons intending to open it. Bankers
need to collect detailed personal information about all the holders.

3.9.9: PARTNERSHIP FIRM

While opening account in the name of a partnership firm, the banker has to see that the
bank account is opened in the name of the firm but not in the individual name of any partner. The
application used for opening the bank account must be signed by all the partners along with their
specimen signatures for future reference. Besides a copy of duly signed mandate required to be
obtained from the firm to ensure the followings:
a. Names of the partners who are authorised to draw cheques;
b. Names of the partners who are entitled to borrow money on behalf of the firm;
c. Names of the partners who have the power to overdraw, endorse, make or
accept bills of exchange or promissory notes; and
d. Names of the partners who have the power to mortgage, or sell any property
belonging to the firm.
JOINT STOCK COMPANY
A joint stock company is an artificial person with perpetual succession brought into
existence under the provision of law. Bankers have to undertake some precautionary measures
when dealing with company. It is important on the part of the banker to see that bank account is
opened in the name of the company but not in the name of any individual. The banker should
obtain the copies of principal documents of a company. Such documents envisage its
constitution, powers and objectives, rules and regulations etc. Banker should, carefully verify
that the borrowing power of the company does not exceed the stipulated limit in any situation.
NON-TRADING INSTITUTIONS
Clubs, schools, colleges, religious places, charitable institutions, hospitals are the non-
trading institutions. Their activities also include financial transactions and, therefore, may open
account with a bank. Non-trading institutions come under the purview of Society Registration
Act, 1860. The banker must note that a non-registered society is not empowered to enter into a
valid contract and, therefore, can’t be sued. Incorporation is essential for an institution to sue or
be sued. Memorandum of Association or Articles of Association and the Constitution or Charter
contains the rules and regulations or by-laws of the society. A copy of this document should be
acquired by the banker to get well-versed with the powers and functions of the persons operating
the bank account.

JOINT HINDU FAMILY

A Joint Hindu business refers to ancestral business of joint family, the ownership of
which passes to members according to Hindu Law. The Hindu law defines rules and customs
regarding transfer of interest in the property among family members and relatives. The Joint
Hindu Family Business is managed by the eldest male member of the family or karta. The Hindu
Law defines that the Karta has the implied authority to take loans, execute necessary documents
and pledge the family property for securing loans. No other member of the family has such
implied authority. Banker should remember that borrowing of money by Karta is subjected to
certain limitation. The loan should be taken by the Karta to meet the needs of the usual business
of the family but not for any speculative purpose.