GB Intermediate PDF

STUDY MATERIAL ON
GENERAL BANKING
FOR NCC BANK LIMITED
Module: General Banking (Intermediate Level)
January 30, 2020
Bangladesh Institute of Bank Management [BIBM]

Dhaka, Bangladesh
Study Material on “GB (Intermediate)” for NCC Bank Limited 1

Study Material on “General Banking” for NCC Bank Limited
Chapter 1: Introduction
1.1 Background
1.2 Specific Objectives of the Manual
1.3 Methodology of Preparing the Manual
1.4 Coverage and Limitation of the Report
1.5 Organization of the Manual
Chapter Two: General Banking -Bangladesh Context

2.1 Evolution of Banking
2.2 Deposit Products
2.3 General Banking Activities
Chapter 3: Banker Customer Relationship

3.1 Understanding Banker Customer relationship
3.1.1 Contractual Relationship
3.1.2 Special Relationship
3.2 Termination of Banker–Customer Relationship
Questions and answer indications
Chapter 4: Laws and Regulations Related to General Banking (Relevant Sections and
Issues)
4.1 The Bank Companies Act, 1991: Relevant Provisions
4.2 The Contract Act, 1872: Relevant Provisions
4.3 The Partnership Act, 1932: Relevant Provisions
4.4 The Companies Act, 1994 (with amendments): Relevant Provisions
4.5 Negotiable Instrument Act, 1881: Relevant Provisions
4.6 Major Features of the Money Laundering Prevention Act, 2012
4.7 Anti-terrorism Act, 2009: Relevant Provisions
4.8 The Bankers' Books Evidence Act, 1891: Relevant Provisions
4.9 Guidelines for Customer Services and Complaint Management: An Overview

Chapter 5: Opening and Operations of Bank Deposit Accounts
5.1 Bank Deposits: Demand and Time Deposits
5.2 Current Deposit
5.3 Savings Deposit
5.4 Short Notice Deposit (SND)
5.5 Fixed Deposit Receipt (FDR)
5.6 Recurring Deposits
5.7 Deposit Products of NCC Bank Limited
5.8 Deposit Accounts
5.9 Requirements for Opening of Various Types of Deposit Accounts
5.10 Some Important Issues of Various Types of Account Operations
Chapter 6: Negotiable Instruments

6.1 Origin and applicability
6.2 Features of Negotiable instruments
6.3 Essential Elements of Promissory Note
6.4 Essential Elements of Bill of Exchange
6.5 Comparison between Promissory Notes & Bill of Exchange
6.6 Cheque
6.7 Comparison between Cheque & Bill of Exchange
Chapter 7: Clearing and Collection of Instruments: BACH, BACPS

7.1 Clearing
7.2 BACH
7.3 Responsibility of Presenting Bank
7.4 Presenting Banks Due Diligence
7.5 Suitable Risk Management Techniques
7.6 Operational Due Diligence
7.7 Responsibility of Paying Bank as regards settlement
7.8 Paying Bank’s Due Diligence
7.9 Processing at PBM (Participating Bank Module)
7.10 BACPS Threats
7.11 Value Date Clearing
7.12 Same Day Clearing
7.13 Real Time Gross Settlement (RTGS)
Chapter 8: Modes of Remittance including Wire Transfer

8.1 Mode of Remittance
8.2 Payment Order (PO)
8.3 Bangladesh Electronic Funds Transfer Network (BEFTN)
Chapter 9: Customer Service and Complaint Management

9.1 Customer Service and Complaint Management
9.2 Why Customer Service Management?
9.3 Complaint Management
Chapter 10: Cash and Volt Management

10.1 Cash Management/ATM Management
10.2 ATM Cash Management
10.3 Cash Management Constitutes
10.4 Measures for Safe keeping of Cash
10.5 Cash Limit
10.6 Important Terms as per “Notes Refund Regulation –2012”
Chapter 11: Bank Locker: Sizes, Opening a locker, Rent, Safety, Alternatives
11.1 Bank Locker and its Facilities
11.2 Reasons to Use a Safe Deposit Locker
11.3 Locker Facility
11.4 Rental of Locker
11.5 Controls over Access to Locker
11.6 Collection of Rental Dues
11.7 Loss of Key by the Renter
11.8 Keys of Locker Handling
11.9 Un-let and Surrendered Locker Keys
11.10 Nomination for Return of Articles kept in Safe Custody with the Bank
Chapter 12: Fraud, Forgeries & Malpractices Related to General Banking

12.1 Fraud
12.2 Forgery
12.3 Malpractice
Chapter 13: Risk Management and Capacity Development

13.1 Risks Associated with General Banking
13.2 Operational Risk
13.3 Challenges of Managing Operational Risks
13.4 Examples of some other risks in banks
13.5 Importance of Risk Management in General Banking
13.6 Business Continuity Plan (BCP)
13.7 Human Capital
13.8 Training Needs Assessments (TNA)
13.9 Designing Training Programs
Chapter 14: Leadership and Managerial Skills in Banking

14.1 Leadership in Banks
14.2 Qualities of a Banking Leader
14.3 Three Most Important Skills for a Leader
14.4 Qualities of a Good Branch Manager
14.5 Expectation Management of Employees
14.6 Performance Evaluation
14.8 Motivating Bank Employees
14.9 Work Stress
14.10 Work Stress in the Banking Sector
14.11 Changing the Attitude of Bank Employees
14.12 Employee Grievance
14.13 Handling Employee Grievances
Reference
List of Abbreviation
ACH Automated Clearing House
AAA Automated Accounting Advice
AOF Account Opening Form
ATM Automated Teller Machine
BACH Bangladesh Automated Clearing House
BAMLCO Branch Anti Money Laundering Compliance Officer
BEFTN Bangladesh Electronic Funds Transfer Network
BFIU Bangladesh Financial Intelligence Unit
BIN Business Identification Number
BRPD Banking Regulations and Policy Division
CAMLCO Chief Anti Money Laundering Compliance Officer
CBS Core Banking Solution
CD Current Deposit
CHIPS Clearing House Interbank Payment System
CRM Customer Relationship Management
CRR Cash Reserve Ratio
CSR Corporate Social Responsibility
CTX Corporate Trade Exchange
CTR Cash Transaction Report
CIE Customer Initiated Entry
CRM Customer Relationship Management
DNSB Deferred Net Settlement Batches
EFT Electronic Funds Transfer
FDR Fixed Deposit Receipt
GB General Banking
GOB Government of Bangladesh
IBCA Inter Branch Credit Advice
IBDA Inter Branch Debit Advice
KYC Know Your Customer
LD Local Draft
MISD Monthly Income Deposit Account
MSDS Monthly Savings Deposit Account
MICR Magnetic Ink Character Recognition
NI Negotiable Instrument
OBU Offshore Banking Unit
PA Power of Attorney
RB Receiving Bank
RJSC Registrar of Joint Stock Company
RTGS Real Time Gross Settlement
SB Schedule Banks
SB Savings Bank Account
SLR Statutory Liquidity Requirement
SSC Specimen Signature Card
STR Suspicious Transaction Report
TDR Term Deposit Receipt
TIN Tax Identification Number
TT Telegraphic Transfer
TP Transaction Profile

TRAINING MANUAL ON GENERAL BANKING FOR NCC BANK LIMITED
CHAPTER 1
Introduction

1.1 Background
In the economic development of a country banks play a pivotal role. In the banking system
the role of the commercial banks cannot be under emphasized due to its significant
contribution. Banks mobilizes the small and scattered savings of the people and make
available for investment in productive enterprises. Mobilization of deposit is made by the
banks by opening different deposit account and introducing new and innovative savings
scheme with attractive interest /profit facilities as per prevailing situation and competitive
atmosphere. Commercial banks in Bangladesh economy are to face an increasing competition
for their business in coming days, like any other emerging market economies. Their business
is no longer remaining easy as they earlier. Bank provides security to the deposits of the
general public and organization on one hand and pays interest on such deposits on the other
and encourage saving. Without such activity banks do not able to design liability products
which are the main instrument for revenue generation. That is why the General Banking
department is the vital part for financial institution. It is linked with all other department.
The world of banking and finance is changing very fast and banks are also transforming
themselves with the focus on knowledge. It is observed that in many cases the knowledge
base of our bank employees are not that much rich as is expected. Therefore, there is a need
for today’s bank employees to keep themselves updated with a new set of skills and
knowledge. Banks and technology are evolving so rapidly that bank employees must
continually seek new skills that enable them not only to respond to change, but also to build
competence in handling various queries raised by customers as well. Since general banking
holds the major part of overall banking activities, emphasis should have been given more on
the issues related to general banking.
The continuous changes which are taking place in the economic and financial surroundings of
the country, the areas needing special attention for improvement in the capacities for ensuring
that the banks attract quality management and service, protecting and building up their
deposit base, growing their capability for creating products in different areas of operation,
strengthening their ability to manage different areas of general banking, and enhancing their
ability for providing services as per customer needs.
A crucial challenge of general banking, malpractices that take the form of irregularities or
non-compliance of procedures and fraudulent activities like bank fraud, money laundering
became a great concern for the banks. The common view that the main risk within general
banking is fraud, forgery, Money laundering etc. The malpractices could be particularly
detrimental for banks that are widely perceived to be more fragile than other non-financial
organizations. As a measure to handle the challenges of malpractices and especially frauds,
relevant legislative measures have been made and stringent compliance requirements
increased tremendously. However, avoidance of the procedures and compliance requirements
in general banking could prove to be very challenging for banks. Thus all associated risks of
general banking must receive adequate attention of the policy makers of the bank. Especially,
senior management must possess knowledge and skills on risk management and capacity
development in general banking.
In the context of Bangladesh, general banking is the major component which comprising of
the management of deposits (i.e., current deposit, savings deposit, short notice deposit, fixed
deposit, and recurring deposit), cash, honor cheques, clearing of cheques, customer services,
locker facilities and other ancillary services of the bank. General Banking Department is
considered as the direct customer service center. It is the starting point of all the banking
operations. Moreover, it opens new account, remits fund, takes deposit, issues bank draft and
pay order, issues debit and credit cards etc.
Besides ensuring satisfaction of the customers, the efficiency level of the bankers in general
banking with due compliance of the laws and procedures is also very crucial. As such,
capacity development of all concerned officials of the banks is also matter to be considered
for handling general banking challenges effectively.
More specifically, banks must have specialized people having adequate knowledge base and
skills to facilitate general banking effectively with a view to maximize profit for the banks. A
group of mid-level bankers must also have adequate knowledge and skills to guide desk level
bank officials.. Such skills are clearly connected with minimizing risks in general banking
and establishing or improving credibility of a bank. In such a circumstance, a customized
information manual for the service providing bankers could serve to a great extent.
1.2 Specific Objectives of the Manual

With this background in mind, the general banking manual targets to create and enhance
knowledge and skills amongst the employees of NCC Bank Limited. The specific objectives
of the manual are: one, to offer relevant detailed information on the products and procedures
of general banking operations of banks; two, to offer pertinent data on the products and
procedures of general banking operations of banks with special reference to the NCC Bank
limited; three, to provide information on the status and changes in domestic laws and
regulations to general banking operations in Bangladesh; and four, to draw attention on

challenges on the part of the bank officials for improving effectiveness of general banking by
the NCC Bank Limited.
1.3 Methodology of Preparing the Manual

Both primary and secondary data were collected to prepare the manual. Domestic set of laws
and relevant circulars related to general banking operations of the Central Bank were
summarized. To gather primary data, a questionnaire survey was conducted to have
information on the products and their nature of NCC Bank Limited. A number of general
banking experts were consulted in the process of formulation of the manual. The manual is
prepared keeping in mind the knowledge and skill requirements of relatively mid-level bank
executives (Senior Principal Officers to Senior Assistant Vice President) of the NCC Bank
Limited.
1.4 Coverage and Limitation of the Report

Broad areas of the manual are general banking activities of banks. Widely used general
banking related issues are covered in the guide. The mid-level manual especially focus on
procedural, operational and relevant general banking aspects in a detailed summarized way so
that the target group may understand the conceptual issues as well as procedures and
operations of general banking easily and can be able to discharge their services efficiently.
Moreover, a good number of questions have also been incorporated in this manual indicating
answer of the related chapters.
1.5 Organization of the Manual

The manual is organized under fourteen chapters: after an introductory chapter with the
objectives and methodological issues, chapter 2 deals with the general banking operations in
Bangladesh context. Chapter 3 depicts banker customer relationship including general and
special relationship. Relevant sections of different laws related to general banking are placed
in Chapter 4 while chapter 5 illuminates the opening & operational procedures of different
bank deposit accounts and some other important issues relevant with various types of account
operation. Chapter 6 is about Negotiable Instruments that mainly includes different types of
negotiable instruments, their features and comparisons to some extent. Clearing and
Collection of Instruments: BACH, BACPS are having been discussed in chapter 7. Chapter 8
deals with modes of remittance while chapter 9 explains customer service and complaint
management. Cash and vault managements, measures for safekeeping of cash are have been
discussed in chapter 10 and 11 is about bank locker and the operational procedures. Chapter
12 describes fraud, forgeries and malpractices related to general banking. Risk management
and capacity development is placed in chapter 13 while chapter 14 gives light on leadership
and managerial skills in banking.

CHAPTER 2
General Banking -Bangladesh Context

2.1 Evolution of Banking
The idea of banks began as long ago as 1,800 BC in Babylon. In those days, moneylenders
made loans to people. In Greece and Rome, banks made loans and accepted deposits.
However banking began to revive again in the 12th and 13th centuries in the Italian towns of
Florence and Genoa.
The banking profession, in the strictest sense of the word, was first carried on by the
goldsmiths in medieval Europe. Since, it was the business of the goldsmiths to deal with
valuable commodities; they would build strong vaults to protect their inventory from theft.
The residents of the town wanted to rent the goldsmiths secure vault in order to keep their
money safe. The goldsmiths hence started taking deposits and this was in a way that gave
birth to modern banking.
After a period of time, the goldsmiths realized that the deposits are usually far in excess of
the withdrawals. This meant that if 100 gold coins were deposited with the goldsmiths,
statistically only 10 of them would be withdrawn at any given time. Therefore, the goldsmiths
started lending out the money that they had held as deposits even though it did not belong to
them. This gave birth to the second major function of modern banking i.e. lending money.
Taking deposits and giving away loans together changed the nature of the goldsmith’s
business to money lending. Gradually, this would further evolve and become banking.
The next eras saw money lending transform into banking. Taking deposits and giving away
loans out of the deposits was now the usual business of these institutions that are now called
banks. Also, the depositors did not have to pay a fee to the bankers to safeguard their gold in
their secure vaults. Instead they received compensation in the form of interest to keep their
excess gold with the bankers. This was the era of unregulated banks. Banking during this era
was entrepreneurial in nature. Therefore, anyone who wanted could set up a bank and enter
this business. No licenses were required and there had been no regulation. This era continued
till the 16th hundred. By then banking had become a big business and some of the famous
bankers like the Medici family and the Rothschild family were considered to be more
powerful than kings.
As banking evolved over time, people realized that carrying large amounts of gold over long
distances was unsafe as well as inconvenient. The radius of trade and commerce began to
spread far and wide and carrying money over long distances became necessary. This
necessity gave birth to bank notes. Private Banks would issue private bank notes. The notes
were nothing but a receipt for the gold that had been deposited at the bank and could be
withdrawn if the receipt was presented. Some of these notes were bearer notes i.e. the gold
would be paid out to whoever brought in the note to the banks. This was the beginning of
what we today refer to as fiat money.
The era of unregulated banking can also be considered to be the era of unscrupulous banking.
In order to bring an order to this chaos and prevent the honest banks from losing business,
central banks came into existence. Central banks were banks created by special charter of the
government. They would act as a banker to the government. Also, they would be responsible
for the proper functioning of the other banks within their domain. This is when licenses
became a requirement for banking business. However, Central banks are largely a 20th
Century concept. Many countries did not have a Central Bank till the late 1890’s.
Technology has touched every aspect of our lives in the recent years and banking has been no
exception. Huge strides made by information technology have allowed banks to provide
better levels of service to their customers at drastically lower costs. The deployment of
technology has also changed the channels via which customers interact with their banks.
After the Liberation War and the eventual independence of Bangladesh, the Government of
Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central
bank of the country, naming it as Bangladesh Bank. This reorganization was executed
through Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence
retroactively from 16 December, 1971.
2.2 Deposit Products

Deposits are the essence of the financial system and can be epitomized as the blood
circulating in the human body. Banking system is an important part of the financial system
which helps in bridging the gap between the deficit sector and surplus sector through
financial intermediation. It provides the system through which savers deposit their money for
the borrowers to borrow those thus translating idle resources into productive capital. Deposit
mobilization is therefore one of the important functions of a conventional banking system to
satisfy the requirements of a banking business. Continuous and adequate deposit mobilization
would ensure that banks shall be able to sustain their business of lending and investing, and
thereby generating profit for themselves.
Different types of deposits have different features having different and divergent costs
implications. Strategies of deposit mobilization therefore undergo changes from time to time.
Although it is difficult to ascertain a deposit mix as optimal or ideal, due to the changing
dynamics of an economy, the banks continue to envisage and monitor such changes in
deposit structure so as to reduce their costs and maximize their returns. Deposit mobilization
is a continuous function by which banks assure that sum total of deposits is adequate to
compensate the withdrawals made by depositors. Usually, banks attempt to keep the deposits
level high by certain percentage above the lending and investments demand calculated on the
basis of past performance to ensure that they have adequate funds to meet all liquidity
requirements including the withdrawals on demand. A perceptive banker would also like to
maintain just enough cash in the chest as idle cash does not create profit, and only adds to the
costs. In an effort to mobilize deposits in an economy, banks develop various forms of
products that can be enjoyed by the clients. The products are offered through the branches
and the alternative delivery channels like ATM’s, Mobile Banking, Agent Banking, Call
center, Internet Banking to its customers. The most important deposit products are those that
make it easier for clients to turn small amounts of money into useful lump sums. These are
typically provided by banks in the form of savings accounts and the varieties thereof.
2.3 General Banking Activities

General Banking Department is considered as the direct customer service center. It is the
starting point of all the banking operation. It opens new accounts, remits funds, honor cheque,
receive deposits, helps in withdrawals and payment, issues Cheque book, Stop payment of
cheques, Issue of DDs and banker's cheque/pay order, Safe deposit lockers, Acceptance of
clearing cheques, Deliverables, such as cheque books, debit cards, PINs and passwords,
Acceptance of queries and complaints, Standing instructions etc.
In another sense, banking operations involves the practices and procedures that a bank uses to
ensure that customers' transactions are completed accurately and appropriately. The
primary responsibility of the general banking officer is to meet high standards of external and
internal customer service by ensuring process standardization, timely service, initiating
customer-centric culture and strong operational controls in accordance with the standards of
service quality of the bank.
Despite the emergence of several other delivery channels external to the bank, branch
banking still remains resourceful and effective in its utility. This might be due to the
advantage of the location of branches enjoyed by the customer. Also, in the current state of
development, the alternate channels have limited service capabilities which make a branch an
extremely useful service and delivery outlet. A branch is capable of handling diverse
requirements of a customer in addition to projecting the human feeling arising out of the
personal relationship with the branch officials.

CHAPTER 3
Banker Customer Relationship

3.1 Understanding Banker Customer relationship
Relationship between banks and their clients is fiduciary one. It is based on trust and bank
has to carry out their duties to the customer in utmost good faith and due diligence. Bank’s
supreme responsibility lies in protecting customers deposit and secrecy about customers.
Banks shall be impartial and non-discriminatory in their dealings with the customers. Any
favor or indulgence to any one client or group of client will be considered violation of
fiduciary relationship. Basically, a banker-customer relationship starts with the opening of an
account with the bank. Bank accounts are opened basically in relation to Contract Act, 1872.
The relationship between bank and customer is of two types: General and Special.
3.1.1 Contractual Relationship

In fact, the relationship between banker and customer is contractual in nature. Since bank
offers the variety of services to the customer, the relationship between the bank and the
customer vary according to the type of service rendered by the bank. It may be as-
Debtor and Creditor: When a banker receives deposits from a customer, he is technically
said to borrow money from the customer. So, he is acting as a debtor who is bound to return
the money on demand to his creditor namely his customer. But in the cases of a loan, cash
credit and overdraft, the banker becomes a creditor and the customer assumes the role of a
debtor.
Principal and Agent: When the banker collects cheques, bills, dividend warrants, pays
insurance premium, subscriptions etc. on behalf of his customer then the agent – principal
relationship exists between a banker and his customer. The bank acts as the agent and
customer the principal.
Trustee and beneficiary: When a banker accepts items like securities or documents for safe
custody of the customers, the relation between the banker and customer is a Trustee and the
Beneficiary. The bank is the Trustee and the customer is the beneficiary. A banker becomes a
trustee only under certain circumstances, for example, when a cheque is given for collection,
till the proceeds are collected, he holds the cheque as a trustee.
Bailor and Bailee: Bailment refers to delivery of goods by one person to another for some
purpose under a condition that the goods to be returned to depositor when the purpose is
accomplished or otherwise disposed of according to the directions of the person while
delivering the goods. The person delivering the goods is known as bailor and the person to
whom goods are delivered is called bailee. A banker becomes a bailee when he receives gold

ornaments and important documents for safe custody. A banker does not allow any interest
on these articles.
Lessor and Lessee: When a customer hires a safe deposit locker from the bank, the relation
between the bank and the customer is lessor and lessee. The bank is the lessor and the hirer of
safe deposit locker is the lessee (tenant). It is only the customer who has to pay rent for the
lockers.
3.1.2 Special Relationship

Apart from general features of relationship, there exist some special features that arise due to
the following legal obligations:
Statutory obligation to honor cheque: When a customer opens an account there arises a
contractual relationship between the banker and the customer by virtue of which the banker
undertakes an obligation to honor his customers’ cheques. This obligation is a statutory
obligation under section 31 of N. I. Act.
However, this statutory obligation is not absolute. The statutory obligation to honor cheque is
limited in the following ways:
a) Proper drawing of the cheque
b) The availability of the money in the account of the customer
c) Proper application of the funds
d) Reasonable time for collection
e) Existence of legal bar
Overriding the obligation: When a banker overrides his statutory obligation and dishonors a
cheque on reasonable ground, the banker is justified in doing so. However, if he dishonors a
cheque by mistake, it amounts to a wrongful dishonor and the bank is liable to compensate
the customer for any loss or damage caused to him.
A banker’s duty to maintain secrecy of customer’s accounts: When a person opens an

account in a bank he is entitled to a reasonable assurance that information regarding the
account remains a matter of knowledge only between the banker and account holder. This is
so because; it is one of the principal duties of the banker to maintain complete secrecy of the
status of his customer's account. This obligation of the bank to maintain secrecy continues
even after the customer's account is closed. If the banker makes an unwarranted disclosure of
the status of account of his customer, he becomes liable to compensate the customer.
However, the bank's obligation of keeping the secrecy of the status of the customer's account
is qualified and not absolute. There are certain circumstances in which the banker is entitled
or required to make disclosures about a customer's account which are as follows:
a) Legal Binding (under compulsion of law)
b) Consent of the customer
c) Banker’s own interest
e) Garnishee order
 Besides, the bank is entitled to charge its customers reasonable commission for services
rendered to them, and to charge interest on loans made to them, except where special
arrangements have been made;
 A bank can exercise a lien over any of its customers’ securities that are in its possession,
other than those deposited for safe custody, for any money owing to it;
 A bank must give reasonable notice to its customer, before closing an account, which is
maintained in credit;
 The bank is to render statements of account to its customer periodically or upon request;
 A bank has no obligations to third parties, arising out of the duty to pay its customer’s
cheques;
 A bank is to collect cheques and other normal banking instruments for its customer and to
credit the amounts collected to his account;
 A bank should exercise proper care and skill in carrying out any business it has agreed to
transact for its customer.
Rights of a Banker
Right of lien: Lien signifies the right of a person, who has possession of the goods to another,
to retain such possession until a debt due to that person has been discharged.
Lien is the right of one person to retain goods and securities in his possession belonging to
another until certain legal debts due to the person retaining the goods are satisfied. In other
words, it is the right of the creditor to retain the goods and securities in his possession,
belonging to a debtor, until the debt due is paid. Lien does not give a power of sale but only
to retain the property. Lien may be either a particular lien or general lien.
A particular lien confers a right to retain the goods in respect of a particular debt involved in
connection with a particular transaction. Particular lien is that lien which confers the right to
retain that particular commodity in respect of which the particular debt arose. Such debts
usually arise from service rendered or laborer or money spent on the goods on which the right

it’s to be exercise. For example, a radio repairer has a particular lien on the radio repaired. A
laundry owner has this right on the clothes washed by him for realization of washing charges.
a particular lien is given by law to bailers, agents, pledges, carriers, railways, ship-owners,
port trust authorities, and unpaid sellers etc.
A general lien confers a right to retain goods not only in respect of debts incurred in
connection with a particular transaction but also in respect of any general balance arising out
of the general dealing between the two parties. As per Contract Act a banker has a general
lien on cash, cheques, bill of exchange and securities deposited with him in his character of a
banker for any money due to him as banker. Since it extends to all transactions and thus it is
more extensive than that of a particular lien. General lien may be conferred upon by an
agreement to that effect or by custom and usage or by the provisions of any statute. The right
of general lien is specially given by law to-
o bankers
o solicitors
o brokers
o wharfingers and
o warehouse-keepers
There is a principle that a particular lien defeats a general lien, and therefore, where a banker
has a particular lien, he cannot also claim a general lien. A banker has a general lien on cash,
cheque, bill of exchange and securities deposited with him in his character of a banker for
any money due to him as a banker.
When General Lien is not applicable

Safe custody articles : When a customer deposits securities, ornaments and other valuables
for safe custody with a banker, the latter is required to act as a trustee/bailee and, therefore,
cannot exercise right of lien on those articles. The same argument holds good for the items
deposited by the customer in a safe deposit locker. However, while accepting the article, if
the banker has entered into a special agreement with the customer to the effect that in case of
any amount falling due to the bank, the bank may exercise right of lien on the articles so
delivered to the Bank, it would be possible for the bank to exercise the general lien.
Documents/money deposited for specific purpose: If the customer deposits documents/money
with the bank for a specific purpose, the banker cannot exercise his lien over the
document/money.

Securities/valuables left through oversight at the bank's premises: A banker cannot
exercise the right of lien over such securities or premises as they have not come to the bank's
possession during the ordinary course of banking business.
Immature debts: The banker cannot exercise the right when the debt has not yet matured.
Stolen goods: If the customer has stolen the goods from the real owner, the banker cannot
extend the lien on such goods for the debt due from the customer.
Banker’s lien is generally described as an implied pledge. It means that a lien not only gives
a right to retain the goods but also gives a right to sell the securities and goods of the
customer after giving a reasonable notice to him. This right of sale is normally available only
in the case of pledge. That is why a banker’s lien is regarded as an implied pledge. As a
general rule, the right of lien does not give the person exercising the right, any power or right
to sell or dispose of the securities retained. But in case of a bank, it is otherwise. A Banker’s
lien is more than a general lien. It is an implied pledge and the banker has a right to sell the
property after reasonable notice, provide the property comes into his hands in the ordinary
course of his business.
Section 171 of the contract act lays down that a banker’s lien can be applied if:
1. The property is in the hands of the banker in the capacity of his customer’s bankers;
2. The instruments of the money or goods with the banker are not for a specific purpose
inconsistent with the lien;
3. The possession of the instruments has been obtained lawfully as a banker;
4. There exists no implied or expressed agreement contrary to the lien.
5. The banker has a general lien over the goods pledged and is entitled to combine several
accounts of customers into one realization account and in absence of any special
agreement to the contrary banker has a right to exercise lien on the goods pledged in one
account for a balance due on another account.
The banker only acquires a lien over pledged goods for the recovery of his dues and has a
right, after notice to the debtor, to sell those goods to reimburse himself. It is only where such
a sale is actually held that the debtor can claim an adjustment of the sale proceeds of the
goods against the amount claimed by the bank. The banker’s general lien will not extend to
securities deposited with him for a specific purpose inconsistent with the lien. Hence, the
following situations are not covered by banker’s lien.

1. It does not extend to securities which do not belong to the customer if the banker is aware
of it.
2. Articles or goods deposited by the owner for safe custody.
3. Securities or valuables lying in safe deposit locker.
4. Securities deposited for sale, collection of interest, dividend etc. Though he will not be
able to exercise his right of lien on Government promissory Notes and shares, but he is
entitled to do so for any interest earned and the dividend collected.
5. A banker has no lien on its fully paid-up shares but on partly-paid shares.
6. A banker has no lien on insurance policy pledged as a security for a loan as soon as the
debt is repaid.
7. Where a banker discounts a bill, he has no lien on the current account balance of the said
account of his customer.
8. Conveyance of land is not subject to this lien but title deeds left without a memorandum
of deposit are subject to such lien.
9. Fixed deposit deposited for collection of interest from another bank. In the case, interest
collected will fall under his right of lie
10. Securities deposited upon a particular trust.
11. Any security left in the banker’s hands to cover a proposed advance which is
subsequently declined.
12. A banker cannot forfeit share in satisfaction of debt due by a shareholder.
13. A bank does not have lien over the credit balance lying in a customer’s account. The
banker’s right in such case is a right of “set-off”.
A banker gets the right of lien by virtue of law. As a measure of caution, a bank sometimes
requires a customer to give a letter of lien enabling him to regard as security for an advance,
present or future, granted to the customer. This letter also authorizes the bank to sell the
securities are given for a special purpose. Usually, bankers take a combined letter of lien and
set-off for exercising both the rights.
Right to claim incidental charges

The bank may claim the incidental charges on unremunerated accounts. These incidental
charges take the form of ‘service charges’, ‘processing charges’, appraisal charges’, penal
charges’, handling /collection charges’ and so on.

Right of Set-off
A banker, like other creditors, possesses the right of set-off, which enables him to combine
two accounts in the name of the same customer and adjust the debit balance in one account
with the credit balance in the other. This right to combine two accounts is known as the right
of set-off.
It is in effect, the combining of accounts of the debtors and creditors, to arrive at the met
balance payable to one or the other .The right of set off is a statutory right and can also arise
out of an agreement between parties. Salient features of Set off are as under:
a) Both debts must be for certain sums. A debt accruing due cannot be set off against the
debt already due.
b) The banker cannot set off the credit balance in the account of guarantor till the liability of
the guarantor is determined.
c) The credit balance in the current account cannot be set off against a contingent liability of
a bill discounted but not yet due.
d) A banker cannot set off a debt due to him upon a loan account repayable on demand or at
a specified date against a credit balance in the current account until the demand is made
or due date arrives.
e) The parties must be mutually indebted in the same right.
f) The credit balance in the partners account can be set off against the debit balance of a
partnership account since the liability of the partner is joint and several.
g) Right of set off is exercisable between two firms , which have separate names but are
composed of same set off is exercisable between two firms, which have separate names
but are composed of same set of partners.
h) The credit balance in the personal account of a sole proprietor can be set off against the
debit balance of the sole proprietary concern and vice versa.
i) When the right set off is available to the bank, lien right cannot apply. These two different
rights cannot be exercised simultaneously at the same time.
Automatic Right of Set-off arises in the following cases:
- Death, insanity or insolvency of the customer,
- On the insolvency of a partner or a firm or on the winding up of a company
- On the receipt of a garnishee order of the banker can exercise right of set-off and surrender
only the surplus to the judgment –debtor,
- On receiving notice of assignment of a customer’s credit balance,
- On receiving notice of second mortgage over the security charged to the bank.
Right of Appropriation
Banker has an implied right to charge a reasonable commission for its service and interest
upon loans. Banker need not seek out the creditor to make the payment. It is the creditor who
should demand payment.
Customer’s Obligations to his Bank

 The customer is under the duty to exercise reasonable care when drawing his cheques, to
help prevent fraud or forgery;
 The customer must observe due care when he requires payment either from the counter
of the bank or through ATM or by any other means;
 Before drawing the cheques, the customer must ensure that, there has been sufficient
balance in his account to meet it;
 A customer must pay reasonable interest and commission and other charges for banking
services and this is implied when he/she opens an account.
3.2 Termination of Banker–Customer Relationship

As long as there is some sort of a deposit account, the relationship would continue. The
relationship would be terminated on the following happenings:
 Customer’s Request
 Unclaimed Deposit Account
 Death of customer
 Insanity of the customer
 Insolvency of the customer
 Undesirable customer
 Attachment order issued by the income Tax authorities
 On receipt of Garnishee Order

1. Define banker customer relationship.
2. State in brief the general relationship that exists between banker and customer.
3. State in brief the special relationship that exists between banker and customer.
4. What is banker’s lien?
5. When General Lien is not applicable?
6. State and explain the banker’s obligation to honour the cheques.
7. What risks does the banker have to face in the case of wrongful dishonor of a cheque?
8. Under what circumstances a banker is obliged to disclose the status of his customer.
9. How a banker customer relationship can be terminated.

CHAPTER 4
Laws and Regulations Related to General Banking
(Relevant Sections of the different Act.)

4.1 The Bank Companies Act, 1991(with Amendment 2013): Relevant Provisions
Some Important Sections of the Act
Section – 5: Definition of different terminologies/concept
a. “Company” means any company which may be wounded up in accordance with
regulation of the Companies Act, 1994.
d. “Bank Company” means any company which serves financial transactions
(Banking Business in Bangladesh) including all new banks and specialized banks.
e. “Banking business” means accepting, in order to lend or invest, of deposits of
money from the public which will be paid on demand or otherwise and will be withdrawal by
cheque, draft, order or otherwise.
Section - 5 (GaGa) as amended in 2013: “Defaulting Borrower” means borrower person or
institution or company, any advance, loan or other financial facilities granted in whose favour
or in favour of whose interest-concerned institution or any part thereof or any interest or
profit therein has been overdue according to the definition notified by the Bangladesh Bank
and been followed by 6 (six) months.
Explanation: To fulfill the objective of this section, unless any person or, in some cases,
institution or company is director of another institution or holds more than 20% of the shares
of such institution or is guarantor.
Section -10: Disposal of non-banking assets
(1) Notwithstanding anything contained in section 7, no banking company shall hold any
immovable property howsoever acquired, except such as is required for its own use, for any
period exceeding 7 years from the acquisition thereof or from the commencement of this Act,
whichever is later.
(2) Notwithstanding anything contained in subsection (1), the Bangladesh Bank may extend
the period mentioned in subsection (1) by a period not exceeding 5 years where it is satisfied
that such extension would be in the interest of the depositors of the banking company.
(3) For the purpose of this section, property a substantial portion of which is used by a
banking company for its own genuine requirements shall be deemed to be property for its
own use.
Section- 12. Restrictions on removal of records and documents. -No banking company
shall remove from its head-office or any of its branches, whether they are at the time being
functioning or not, any of its records or documents relating to its business to a place outside

Bangladesh, without the prior permission in writing of the Bangladesh Bank.
Explanation. - In this section-
a) the term "records" means any electronically or otherwise preserved ledger, day-book, cash
book, account book and all other books used in the business of a banking company; and
b) the term "document" means any electronically or otherwise preserved voucher, cheque,
bill, pay order, security for an advance and any other document supporting entries in the
books of, or claims by or against, a banking company.
Section - 14 (Ka) as amended in 2013: Restriction on Acquisition of Shares of Bank, etc.
1. The Shares of a Bank Company shall not be controlled centrally by any individual,
company or members of the same family and any individual, company or members of
a family shall not acquire more than 10% shares of a Bank Company individually,
jointly or in both ways.
2. If requested by a Bank Company, a purchaser, at the time of purchase of shares of a
Bank Company, shall submit a declaration to the effect that he has not bought the
shares as a nominated person of others than or in pseudo name and has not also
purchased any shares in pseudo name in the past.
Section - 14(kha) as amended in 2013: Holding of Significant Shares

1. No individual or institution or company individually or jointly with others shall
directly or indirectly, be holder of significant shares of a Bank Company without prior
approval of Bangladesh Bank.
2. For obtaining prior approval as mentioned at sub-section-1, application is to be made
in prescribed form of Bangladesh Bank and information sought by Bangladesh Bank are to be
furnished in the form.
Explanation:
‘Holder of significant shares’ shall mean holding of more than 5% shareholding of ownership
interest of a Bank Company by any individual or institution or company individually or
jointly with others directly or indirectly.
Section - 15 (Kha)(4) as amended in 2013: Appointment of Adviser, Managing Director

or CEO
Every Banking Company, other than specialized Banks, shall have to obtain approval from
Bangladesh Bank before appointment or posting of any of its Director, Managing Director or
Chief Executive Officer and such appointed Officers shall not be dismissed, discharged or
removed from his position without obtaining prior approval of Bangladesh Bank.

Section - 15 (5) as amended in 2013: Appointment of Directors
Bangladesh Bank, subject to fulfillment of Sub-section-6, shall accord approval in respect of
appointment of any Director and Managing Director or Chief Executive Officer.
Section - 15 (Kha) (6) as amended in 2013: Appointment of Directors (Cont’d.)

No person shall be eligible to be appointed as a Director, Managing Director or Chief
Executive Officer of a Bank Company unless-
a) He has at least 10 (ten) years of Managerial or Business or Professional experience.
b) He was not awarded punishment for any criminal offence and associated with any
fraud-forgery, financial crime or any other illegitimate activities.
c) There is no an adverse observation or comments in respect of him in the
judgment/order of any civil or criminal court of law.
d) He has not been punished for violation of rules, regulations or code of conduct of any
regulatory institution relating to financial sector.
e) He was not associated with any company or institution, registration or licence of
which has been cancelled or which has been wound-up.
f) He becomes defaulter or fails in repayment of credit facilities availed in his own name
or in the name of the institutions in which he has interests.
g) He was not declared bankrupt by any court of law.

The proposed Director, Managing Director or Chief Executive Officer of a Bank Company
shall declare in prescribed form of Bangladesh Bank to the effect that he is not ineligible to
become a Director as per regulations of sub-section-6.
Provided however, that in case of appointment of the nominated person, the Bank Company
shall forward the signed declaration letter to Bangladesh Bank.

The regulations of sub-section-6 shall be in addition to other acts in vogue in this respect.

Notwithstanding anything contained in any other law now in vogue or in the Memorandum or
Articles of Association of a Bank Company, after elapse of 01 (one) year from the date of
effectiveness of this Act, there shall in aggregate be not more than 20 (twenty) Directors
including 03 (three) Independent Directors in a Bank Company.

Provided however, that the number of Independent Directors shall be at least 02 (two) in a
Bank Company which has less than 20 (twenty) Directors.
Also provided that approval of Bangladesh Securities & Exchange Commission shall have to
be obtained before appointment of Independent Directors.
Further provided that appointment of Independent Directors as per regulations of this sub-
section shall have to be ensured within 03 (three) years from the date of effectiveness of this
Act.
Explanation: Under this sub-section, Independent Director shall mean any person who is
independent of a Bank Company’s Management and shareholders and who shall provide his
opinion only in the interest of the Bank Company and who has no past, present or future real
or apparent interest in the Bank or with any person associated with the Bank.

Articles of Association of a Bank Company, not more than 02 (two) members of the same
family shall at the same time be in the position of Directors of a Bank Company after elapse
of 01( one) year from the date of effectiveness of this Act.

For the purpose of this section, if any Director of a Bank Company is required to retire then
the Directors themselves shall decide who is to retire from the position of Director, otherwise
the same shall be determined by lottery held in a Meeting of the Board of Directors.

No Bank Company shall have any Director who is not eligible to fulfill the fit and proper
tests/conditions of becoming a Bank Director as set by Bangladesh Bank.
Explanation: For the purpose of this section, family member shall mean husband or wife,
father, mother, son, daughter, brother, sister and all persons who are dependent on the
concerned person.
Section - 15 (Ka ka) as amended in 2013: Restriction on Tenures and Terms of

Directors
1. Notwithstanding anything contained in any other law now in vogue or in the
Memorandum or Articles of Association of a Bank Company, the highest tenure of the

position of Director of a Bank Company shall be 03 (three) years from the date of
effectiveness of this Act.
Provided however, that no other Director except the Managing Director or the Chief
Executive Officer of a Bank Company, by whatever name called, shall hold the position of
Director in a Bank Company for more than 02 (two) consecutive terms.
2. According to Sub-section-1, if a Director of a Bank Company remains in Office for
consecutive 02 (two) terms then he shall not be eligible for re-election in the position of
Director of the said Bank Company until elapse of 03 (three) years from the date of
conclusion of the 2nd term.
Explanation:
For the purpose of this section, part of a term shall be treated as 01 (one) full term.
Section - 15 (Kha) as amended in 2013: Role of the Board of Directors

1. The Board of Directors of a Bank Company shall be responsible for policy
formulation and implementation, risk management, internal control, internal audit and its
compliance.
2. Every Bank Company shall constitute an Audit Committee comprising those
Directors who are not members of its Executive Committee.
3. Every Bank Company shall constitute a Risk Management Committee comprising the
members of its Board of Directors.
Section - 15 (Ga) as amended in 2013: Internal Audit & Control

1. The Board of Directors shall ensure an effective Internal Audit & Control System in
the Bank Company. The Internal Audit Functions shall be independent of the Bank
Management and its report shall have to be placed before the Audit Committee of the Board.
2. The Internal Auditors shall have liberty to consult with the Management of the Bank
to carry out their functions and shall be able to collect data or files from the Management for
the purpose of Audit.
3. Persons engaged in conducting Internal Audit shall not at the same time be eligible to
get involved in any contract of the Bank Company or shall not represent the Bank Company.
Section - 17 (Kha) (7) as amended in 2013: Vacancy in the Position of Director

Under Sub-section-1, if a Director of a Bank Company receives any notice, he or she will not
be able to transfer the shares standing in his or her own name of the Bank Company until
repayment of all dues of the concerned Bank or Financial Institution.
Section - 17 (Kha) (8) as amended in 2013: Vacancy in the Position of Director (Cont’d.)
No question can be raised in any court of law or tribunal other than the court of law
constituted under section-3 of the Company Act-1994 (Act No. 18 of 1994) in respect of any
action, order or decision taken under this section.
Section - 23 (Ka) as amended in 2013: Restriction on Appointment of Common

Directors
Articles of Association of a Bank Company, if a person is a Director of a Bank Company, he
shall not, at the same time, remain as a Director in another Bank Company or Financial
Institution. However, he will be able to remain as a Director in any Insurance Company
maximum for 02 (two) terms following the date of effectiveness of this Act.
Section - 23 (Kha) (ee) as amended in 2013: Restriction on Appointment of Common
Directors (Cont’d.)
Articles of Association of a Bank Company, without the permission of Bangladesh Bank,
there shall not be any Director in a Bank Company, who has been appointed as Director in
another Bank Company.
Section - 25 (1) as amended in 2013: Cash Reserve

Every banking company, not being a scheduled bank, shall maintain by way of cash reserve
in Bangladesh in cash with Bangladesh Bank or its agent-bank not less than rate determined
by Bangladesh Bank time to time of its time and demand liabilities:
Provided that the Bangladesh Bank may, in any special case, change, by notification in the
official gazette and subject to the conditions stipulated therein in this behalf, the requirements
relating to the cash reserve will repeal, on prior approval by the Government, such
requirements.
Explanation: For the purposes of this section, “liability” shall not include the paid-up capital
or the cash reserves or the credit balance in the profit and loss account of the banking
company or the amount of any loan from the Bangladesh Bank.

Section - 26 (Ka) as amended in 2013: Holding Shares of Another Companies by a Bank
Company
1. Subject to the provisions of Section 26 of the Act, a Bank Company, in case of
holding of shares of another Companies, shall not hold shares of more than the following
ceiling:
(ka) the market value of shares held is 5% of some total of the Bank Company’s paid-up
capital, share premium, statutory reserve and retained earnings.
(kha) 10% of paid-up capital of the company.
Provided however, that the shares held under sub-section (ka) and (kha) above shall not
exceed 10% of paid-up capital.
Further provided that within 03 (three) years from the date of effectiveness of this Act, every
Bank Company shall reconstitute its capital market portfolio in such a manner that the total
market value of shares, corporate bonds, debentures, mutual funds and other capital market
instruments held by it and the credit facilities sanctioned in favour of own subsidiary
company or companies or any other company or companies directly or indirectly engaged in
capital market operations and subscriptions paid to any fund constituted for investment in the
capital market shall not in aggregate exceed 25% of the sum total of the Bank Company’s
paid-up capital, share premium, statutory reserve and retained earnings.
2. Notwithstanding anything contained in Sub-section-1, if the Managing Director or

Manager of a Bank Company is engaged in the Management of the Company or has any
interest in the Company, the concerned Managing Director or Manager shall not hold any
share in that Company after the term of 01 (one) year from the date of effectiveness of this
Act.
3. In case of violation of regulations of Sub-section-1 by a Bank Company, a fine not

exceeding Tk.20.00 lac shall be imposed on the Bank Company by Bangladesh Bank
and in case of continuation of such violation, an additional fine not exceeding Tk.50,
000/- for each day shall be imposed after the 1st day of such violation.
Section – 27 as amended in 2013: Restriction on Allowing of Loans and Advances.

1. No Bank Company shall-
(ka) grant any loan, advance , guarantee or any other financial facility against the security of
its own shares.

(kha) Sanction any loan or advance in favour of any of its Directors other than ‘secured loan
or advance’ or any loan, advance, guarantee or any other financial facility other than ‘secured
loan or advance’ on the basis of the guarantee of any of its Directors.
(ga) Sanction any loan or advance in favour of the following persons or institutions without
security or sanction any loan or advance on the basis of guarantee of the following persons or
institutions:
(i) any of the members of the family of any of its directors;
(ii) any interested institution or private company in which the Bank Company or any of
its directors or any member of the family of any directors is a director, proprietor or partner;
(iii) Any public limited company which is in any way regulated by the Bank Company
itself or any of the directors or any member of the family of any of its directors or the shares
held by these persons give them opportunity to at least 20% of the voting rights.
2. No Bank Company, in the following cases, without the approval of the majority of
its Directors except the concerned Director shall grant any loan, advance, guarantee or any
other financial facility –
(i) To any of its Directors or;
(ii) Any person, commercial institution or company in which any of the Directors of the
said Bank Company has interest as partner, Director or Guarantor.
Explanation:
In this section, Director means the Director’s wife, husband, father, mother, son, daughter,
brother, sister and other persons dependent on the Director.
Section – 40 as amended in 2013: Submission of Reports

The Accounts, Balance Sheet and Report and Auditors’ Report as approved by the Board of
Directors or by the shareholders in the General Meeting of the Company, as the case may be,
as mentioned in section-38 shall be published in the prescribed manner and 03 (three) copies
thereof shall be submitted to Bangladesh Bank within 02 (two) months from the date of
conclusion of the period to which they relate.
Provided however, that the Bangladesh Bank may increase the said time limit for submission
of Reports by not more than 02 (two) months.
Amendment of section 109 of Act No.14 of 1991.- After sub-section (8) of section 109 of
the said Act the following sub-sections (9) and (10) shall be inserted, namely:-
"(9) If anybody has committed an offence punishable in accordance with the provisions of
sub-section (3), (4), (5), (6) and (7), the Bangladesh Bank may give him opportunity to show

cause why the Bangladesh Bank should not proceed against him and punish him with a fine
and the Bangladesh Bank may, if it is not satisfied with his explanation or if he has not
furnished an explanation, punish him with a fine of any amount which does not exceed the
highest amount fixed by the said bank. (10) If, within fourteen days after the imposition of a
fine under sub-section (9), the person concerned has paid the fine, no further legal proceeding
for the offence committed by him under the sub-sections referred to in the said sub-section
shall be taken against him; but if he fails to pay the fine within such period, the Bangladesh
Bank shall file at a court a suit against the person concerned for the offence committed by
him."
22. Restrictions on the payment of dividends.- (1) No banking company except new and
special banks shall pay any dividend on its shares, unless-
a) all its capitalized expenses including preliminary expenses, organization expenses,
commission for share selling and brokerage, losses and other items have been completely
written off, or
b) it manages to preserve constantly six per cent of its temporary and demand deposits as
discharged and reserved capital.
(2) Notwithstanding anything to the contrary contained in subsection (1) or in the Companies
Act, any banking company may pay dividends on its shares without writing off under the
following circumstances:
a) in any case where the depreciation of its investments in approved securities has not
actually been capitalized or otherwise accounted for as a loss,
b) in any case where adequate provision for the depreciation in the value of its investments in
shares, debentures or bonds (other than approved securities) has been made to the satisfaction
of the auditor of the banking company,
c) in any case where adequate provision for bad debts has been made to the satisfaction of the
auditor of the banking company.
Section -24: Reserve Fund
To transfer 20% of the profit to the Reserve Fund as long as the accumulated Reserve Fund is
below its paid-up capital.
Section-28: Restrictions on the respite of loans.- (1) No banking company shall, without
the previous approval of the Bangladesh Bank, grant respite of loans taken from it by any of
the following persons or institutions,-

a) any of its directors, and his family members;
b) a commercial institution or company in which any director of the banking company is
interested as landowner, co-director, managing agent; and
c) any such person in which any director of the banking company is interested as partner or
landowner.
(2) Any respite of loans in disregard of the provisions of subsection (1) shall be illegal, and
whoever is responsible for such a respite shall be punishable with imprisonment for no more
than three years or a fine of no more than thirty thousand Takas or both.
Section-29: Power of the Bangladesh Bank to control the giving of advances.- (1)
Whenever the Bangladesh Bank is satisfied that it is necessary or expedient so to do, it may
determine the policy in relation to advances to be followed by banking companies generally
or by any banking company in particular and when the policy has been so determined, all
banking companies or the banking company concerned shall be bound to follow the policy so
determined.
(2) Without prejudice to the generality of the power vested in the Bangladesh Bank under
subsection (1), the Bangladesh Bank may give directions, strictly to be complied with, to
banking companies either generally or to any banking company or group of banking
companies in particular with regard to the following items,-
a) the upper limit of the loan to be given;

b) the ratio to be maintained between the total amount of an advance and loans of little
amount or of other kind;
c) the purposes for which advances may or may not be given;
d) the upper limit of advances to be given to any banking company or any group of banking
companies or person or assembly of persons;
e) the limit of interests on secured advances and advances; and
f) the rate of interest to be charged on advances.
(3) Whenever a banking company fails to comply with any direction referring to a subject
mentioned in clause (a) and (b) of subsection (1), the Bangladesh Bank may order that
banking company to deposit at the Bangladesh Bank such amount of money as the latter may
determine; and the said banking company shall be bound to comply with such directions on
such conditions as the Bangladesh Bank may determine:

Provided that the Bangladesh Bank may not order the said banking company to deposit any
amount exceeding the amount in regard of which the said failure did happen.
(4) The Bangladesh Bank may at any definite time, by an order in written form, release the
money or part of the money deposited at the Bangladesh Bank under subsection (3) to the
depositing banking company on or without any condition.
Section-30: Jurisdiction of Courts regarding interest rates. - Notwithstanding any Act for
the time being in force, no transaction between a banking company and any of its debtors
shall be triable by a Court on the mere ground of excessiveness of the interest rate taken by
the banking company.
Section -31: License of Banking Companies
No banking company shall carry out banking business in Bangladesh without obtaining a
license from Bangladesh Bank.
Section-38: Accounts and balance sheet.- (1) At the expiration of each financial year every
banking company incorporated inside or outside Bangladesh shall, in respect of all business
transacted by it and through its branches within that year, prepare a balance sheet and profit
and loss account as well as a financial report as on the last working day of the year in the
forms set out in the first schedule or as near thereto as possible.
(2) The balance sheet, profit and loss account and financial report of any banking company-
a) shall be signed in the case of a banking company incorporated in

Bangladesh, by its managing director or its principal officer and where there
are more than three directors of the banking company, by at least three of
those directors, and where there are not more than three directors, by all of
them;
b) shall be signed in the case of a banking company incorporated outside
Bangladesh, by the manager or agent of the principal office of the company in
Bangladesh and by another officer next in seniority to the manager or agent.
(3) Notwithstanding that the forms relating to the submitting of a balance sheet, profit and
loss account and financial report of a banking company differ from the form E of the Third
Schedule of the Companies Act, the provisions of that Act shall, in the case of submitting
such balance sheet, profit and loss account and financial report, be applicable to the extent
they are consistent with the provisions of this Act.
(4) The Bangladesh Bank may amend the forms set out in the First Schedule:

Section-39: Audit. - (1) The profit and loss account and financial report of a banking
company shall be audited in accordance with the balance sheet prepared under section 38 by
a person qualified under the Bangladesh Chartered Accountants Order, 1973 (P.O. No. 2 of
1973), or any other law for the time being in force to be an auditor of companies and
approved by the Bangladesh Bank to be qualified to audit a banking company.
(2) The auditor referred to in subsection (1) shall have the powers and duties of, and shall be
subject to the obligations and penalties imposed on, auditors of companies by Section 145 of
the Companies Act.
(3) In addition to the matters which under the aforesaid Act the auditor is required to state in
his report, he shall also state-
a) whether or not the financial standing and the profits and losses of the company in
the period concerned are truly reflected in the financial report;
b) whether or not the financial report has been correctly prepared in accordance with
the usual accounting methods;
c) whether or not the financial report has been made in accordance with the current
rules and laws and the regulations issued by the Bangladesh Bank with regard to
accounts;
d) whether or not sufficient provisions have been made for such advances and property
assets as are doubtful;
e) whether or not the financial report, on discussion with professional accountants
from Bangladesh, has been approved as being in accordance with the regulations for
accounts issued by the Bangladesh Bank;
f) whether or not the reports and accounts obtained from the branch offices of a
banking company have been duly kept and consolidated;
g) whether or not the information and explanations required by the auditor have been
found to be satisfactory;
h) any other matter which the auditor considers should be brought to the notice of the
shareholders of the company;
(4) Where an auditor discharging his duty as auditor of a banking company is satisfied to the
effect that-
a) any provision of this Act has been seriously transgressed or a serious

irregularity has occurred in fulfilling those provisions;

b) there has occurred a criminal offence of fraught or dishonesty;
c) on account of losses the capital has fallen under eighty five per cent;
d) the payment of the creditors demands is no longer guaranteed or any other
serious irregularity has occurred; or
e) there exists any doubt as to the sufficiency of the company's assets to meet the
demands of the creditors;
he shall without any delay inform the Bangladesh Bank on those subjects.
39A. Special Audit.- (1) If the Bangladesh Bank, on consideration of an audit report
under section 39 or an inspection report under section 44 or on the basis of an report
received in any other way, has sufficient reason to be satisfied that it is necessary to
audit the activities of, or any special part of the activities of, any banking company, it
may cause a special audit of the activities of, or any part of the activities of, such
banking company by any person referred to in sub-section (1) of section 39.
(2) During a special audit under sub-section (1), the banking company concerned shall
render such assistance to the auditor as may be required.";
Section -44: The Bangladesh Bank shall conduct inspection of any banking company by one
or more of its officers and it shall supply to the banking company a copy of its report on such
inspection.
Section-46: Power of the Bangladesh Bank to remove a director etc. of a banking

company.- (1) Where the Bangladesh Bank is satisfied that it is necessary to remove a
chairman or director or principal executive officer, by whatever name he be called, of a
banking company in order to prevent its affairs being conducted in a manner prejudicial to
the interests of the banking company or its depositors or to secure in the public interest the
proper management of the banking company, it may, after committing its reasons to writing,
issue direction that such chairman, director or principal executive officer be removed from
his office.
(2) Before issuing a direction under subsection (1), the person affected shall be given
reasonable opportunity to make a representation: Provided that, notwithstanding anything
contained in subsection (2), where the Bangladesh Bank is of the opinion that a delay arising
from giving such opportunity will be prejudicial to the public interest or to the interest of the
banking company or its depositors, it may at any time, when or after giving the
abovementioned opportunity or while deciding on a representation made under that
subsection, give, by a direction in written form, order that-

a) the said chairman or director or principal executive officer shall, from the date on which
the direction in writing comes into effect, cease to act as chairman, director or principal
officer or cease to take any part in the management of the company in any manner, directly or
indirectly; and b) whoever is temporarily appointed for this purpose by the Bangladesh Bank
shall act as chairman or, as the case may be, director or principal executive officer.
(3) Where a chairman or director or principal executive officer of a banking company has
been removed under subsection (1), he shall not be reinstated as chairman or, as the case may
be, director or principal executive officer, and he shall not, for the term of the direction which
shall not exceed three years, be connected with or take part in any manner, directly or
indirectly, in the management of that banking company or any other banking company. (4)
Chairmen, directors or principal executive officers appointed under subsection (2) shall-
a) subject to the conditions determined in their letter of appointment, occupy that position for
the period, not exceeding one year, determined by the Bangladesh Bank and in dependence of
the Bangladesh Bank being satisfied or not; and
b) not be responsible, financially or otherwise, for anything carried out in accomplishment of
the duties of their offices.
(5) No person removed under subsection (1) may claim any compensation on account of thus
having been removed.
(6) Nothing contained in this section shall apply to any chairman, director or principal
executive officer, by whatever name he be called, chosen or appointed by the Government.
Section-47: Power of the Bangladesh Bank to dismiss the Board of Directors of a

banking company.- (1) Where the Bangladesh Bank is satisfied-
a) that the Board of Directors of a banking company, by whatever name it be called, conducts
its affairs in a manner detrimental or prejudicial to the interest of the banking company or its
depositors; or
b) that, for any or all of the reasons mentioned in subsection (1) of section 46, it is necessary
to dismiss that Board of Directors, it may, after committing its reasons to writing, dismiss that
Board of Directors by a direction; and the direction to dismiss that Board shall come into
effect from such date and be in force for such period as is mentioned therein.

(2) The Bangladesh Bank may extend, from time to time, the period of a direction issued
under subsection (1), provided that the total period shall not exceed two years, all extensions
included.
(3) A Board of Directors being dismissed, the person appointed in this behalf from time to
time by the Bangladesh Bank shall have all the powers and functions, and accomplish all the
duties of the Board.
(4) The provisions of subsection (2), (3), (4) and (5) of section 46 including their necessary
modifications shall be applicable to a direction issued under this section.
Section-48: Restrictions.- (1) No person other than the Governor of the Bangladesh Bank
shall issue a direction under section 46 or 47:
Provided that the Governor shall issue the above mentioned direction on the basis of a report
of the permanent committee established in this behalf.
(2) Whoever has been affected by a direction from the Governor of the Bangladesh Bank
under section 46 or 47 may appeal to the Board of Directors of the Bangladesh Bank and
whatever that Board decides thereupon shall be final.
(3) It shall not be possible to raise any question before any Court, Tribunal or any other
authority with regard to any measure taken, direction issued or decision made under this
section or section 46 or 47, nor shall it be possible to raise any question before any Court,
Tribunal or any other authority against such measure, direction or decision.
Section -57: Punishment for certain activities relating to Bank Companies
If anybody makes obstruction from entering or leaving any banking company within office
hours or works in any manner planned to lower the confidence of the depositors regarding the
banking company, he shall be punishable with imprisonment of maximum two years or with
penalty of taka twenty thousand or with both.
Section-103: Choice for the payment of deposited money-
(1) Where an individual has, or several persons have jointly deposited money with a
banking company in his or in their name, that individual depositor may separately or,
as the case may be, the group of depositors may jointly, in the way prescribed, choose
a person to which, in the case of the death of the individual depositor or of all of the
joint depositors, the deposited money shall be given:

Provided that the said individual depositor or the said group of depositors may at any time
cancel their choice and choose, in the way prescribed, another person.
(2) The person chosen under sub-section (1) being a minor, the individual depositor or the
joint depositors may, in the prescribed way, direct who shall, in the case of the death
of the individual depositors or of the joint depositors, receive the money during the
period of minority of the chosen person.
(3) Notwithstanding anything contained in any Act for the time being in force or in any
will or any kind of document regarding the allotment of properties, the person chosen
under sub-section (1) or directed under sub-section (2) shall, after the death of the
individual depositor or as the case may be, of all of the joint depositors, attain all the
rights the individual depositor or the joint depositors had on that deposit, and every
other person shall be deprived of those rights.
(4) Where a banking company has made payments in accordance with this section, all its
obligations in respect of the deposit concerned shall be deemed fulfilled:
Provided that no right or claim that any person may have or make against the person to whom
the deposited money has been paid under this section shall be prejudicial to the provision of
this subsection.
Section-104: Unacceptability of claims of other persons on deposits - Notices of claims on

deposits by persons other than those in the name of which the deposits are kept with the
banking company shall not be acceptable for that company, nor shall that company be bound
to take measures in accordance with any such notice:
Provided that nothing contained in this subsection shall be prejudicial to the authority of any
court having jurisdiction on the said deposits; and the company shall give adequate
importance to any decree, order, certificate or any other such document the court may submit.
Section-105: Choice for giving back safe kept articles.-
(1) Any person having deposited for safekeeping articles with a banking company may,
in the way prescribed, choose a person to which, after his death, the said articles, as
long as they are deposited, shall be given:
Provided that the depositor may at any time cancel his choice and choose, in the way
prescribed, another person.

(2) The person chosen under sub-section (1) being a minor, the depositor may, in the way
prescribed, direct who shall, in the case of his death, receive the said articles during
the period of minority of the chosen person.
(3) Before giving back the deposited articles to any person chosen or directed under sub-
section (1) or (2), the banking company which has taken the deposit shall, in the way
prescribed from time to time by the Bangladesh Bank, prepare a list containing
descriptions of those articles, take the signature of the said person and send a copy
thereof to him.
(4) Notwithstanding anything contained in any Act for the time being in force or in any
will or any other kind of document regarding the allotment of properties, the person
chosen under sub-section (1) or directed under sub-section (2) shall, after the death of
the depositor, attain all the rights the depositor had on that deposit, and every other
person shall be deprived of those rights.
(5) Where a banking company has in accordance with the provisions of this section given
back the articles deposited with it for safekeeping, all its obligations in respect of that
deposit shall be deemed fulfilled:
the articles have been given back under this section shall be prejudicial to the provision of
this subsection.
Section-106: Unacceptability of claims of other persons on articles deposited for

safekeeping.-Notices of claims by persons other than those in the name of which articles
have been deposited for safekeeping with the banking company shall not be acceptable for
that company, nor shall that company be bound to take measures in accordance with any such
notice:
Provided that nothing contained in this subsection shall be prejudicial to the authority of any
court having jurisdiction on the said articles; and the company shall give due weight to any
decree, order, certificate or any other such document the court may submit.
Section-107: Giving back of articles deposited in lockers
(1) Where a person has separately rented a locker in the safety vaults or in any other
place of a banking company, the said company shall, in the case of his death, permit

the person chosen by him in advance to open, after his death, as long as the locker is
rented, the locker and to take the bonds back from it.
(2) Where two or more persons have rented a locker of a banking company jointly and
where the rent agreement contains a provision to the effect that the locker is to use
by the joint signature of two or more renters, those renters by the signature of whom
the locker is to be used may, in the case of the death of one or more renters, choose
one or more persons so that the company may give another person, in place of the
deceased ones, the opportunity to open, together with the living renters, the locker
and to take back the articles deposited therein.
(3) The choices under sub-section (1) or (2) are to be made in the ways prescribed.
(4) Before giving back the articles deposited in a locker to any chosen person or, as the
case may be, to any jointly chosen person and the living renters, the banking
company shall, in the way prescribed from time to time by the Bangladesh Bank,
prepare a list containing descriptions of the articles deposited in the locker, take the
signature of the said persons and send them a copy thereof.
(5) Where a banking company has in accordance with the provisions of this section
given back articles deposited in its lockers, all its obligations in respect of the
deposited articles concerned shall be deemed fulfilled:
any article has been given back under this section shall be prejudicial to the provision of this
subsection.
(6) No suit, complaint nor any other kind of legal proceeding shall be filed or
commenced against a banking company, if any article has been damaged, or appears
to have been damaged by reason of the banking company having consented in
accordance with the provisions of sub-section (1) or sub-section (2) the locker to be
opened and the articles deposited therein to be taken out of it.
Section-108: Unacceptability of claims of other persons on articles deposited in lockers.-

Notices of claims on articles deposited in lockers by persons other than those in the name of
which the articles have been deposited in the lockers of the banking company shall not be

acceptable for that company, nor shall that company be bound to take measure in accordance
with any such notice:
Provided that nothing contained in this section shall be prejudicial to the authority of any
court having jurisdiction on the said articles and the company shall give adequate importance
to any decree, order, certificate or any other such document the court may submit.
4.2 The Contract Act, 1872: Some Important Sections and Issues
The law of contract is the most important part of commercial law because every commercial
transaction starts from an agreement between two or more persons.
The Contract Act occupies the most important place in the Commercial Law. Without
contract Act, it would have been difficult to carry on trade or any other business activity and
in employment law. It is not only the business community which is concerned with the
Contract Act, but it affects everybody. The objective of the Contract Act is to ensure that the
rights and obligations arising out of a contract are honored and that legal remedies are made
available to those who are affected. It is a legislation governing the contractual relationship
between two or more parties - individuals, companies, governments. It deals with all aspects
of contracts, such as formation, performance, enforceability of contracts, indemnities and
guarantees, bailment and pledge and agency, among others. The person who is competent to
enter into contract, may open a Bank account.
Definition of Contract: “An Agreement enforceable by law is contract (Sec. 2h). An

agreement comes into an existence whenever one or more persons promise to one or others,
to do or not to do something. ‘Every promise and every set of promises, forming the
consideration for each other, is an agreement’- Sec. 2(e). Some agreements cannot be
enforced through the courts of law, e.g., an agreement to play cards or to go to a cinema. An
agreement, which can be enforced through the courts of law, is called a contract.
Combining two aforesaid sections, we can opine that “Contract is an agreement between two
of more parties which is supported by consideration and enforceable by law”.
The essential elements of a contract
1. Proposal / Offer and Acceptance 2. Free consent
3. Intention to create Legal Relationship 4. Legality of the object
5. Lawful consideration 6. Certainty
7. Capacity of parties 8. Possibility of performance

9. Writing, Registration and Legal formalities
Competent to Contract (Sec. 11): “Every person is competent to contract who is of the age
of majority according to the law to which he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he is subject.”
“Every person domiciled in Bangladesh shall be deemed to have attained majority when he
shall have completed the age of 18 years”. Section 3(i) of Majority Act, 1875)
“If in case of a minor, domiciled in Bangladesh, before he has completed the age of 18 years,
a guardian of his person or property or both, he has been appointed by a court or the
superintendence of his property is assumed by a court of wards then he shall be deemed to
have attained majority when he shall have completed the age of 21 years. (Section 3(ii) of
Majority Act, 1875)
Section 12: “A person is said to be of sound mind for the purpose of making a contract if, at
the time when he makes it, he is capable of understanding it and of forming a rational
judgment as to its effect upon his interests.”
“A person who is usually of unsound mind, but occasionally of sound mind, may make a
contract when he is of sound mind”.
“A person, who is usually of sound mind, but occasionally of unsound mind, may not make a
contract when he is of unsound mind”.
Example:
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during
those intervals.
(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the
terms of a contract or form a rational judgment as to its effect on his interests, cannot contract
whilst such delirium or drunkenness lasts.
"Consent” defined
13. Two or more persons are said to consent when they agree upon the same thing in the
same sense.
"Free consent" defined

14. Consent is said to be free when it is not caused by-
(1) Coercion, as defined in section 15, or
(2) Undue influence, as defined in section 16,or

(3) Fraud, as defined in section 17, or
(4) Misrepresentation, as defined in section 18, or
(5) Mistake, subject to the provisions of sections 20, 21 and 22.
Consent is said to be so caused when it would not have been given but for the existence of
such coercion, undue influence, fraud, misrepresentation or mistake.
"Coercion" defined
1. "Coercion" is the committing, or threatening to commit, any act forbidden by the
Penal Code or the unlawful detaining or threatening to detain, any property, to the
prejudice of any person whatever, with the intention of causing any person to enter
into an agreement.
Explanation - It is immaterial whether the Penal Code is or is not in force in the place where
the coercion is employed.
Illustrations
A, on board an English ship on the high seas, causes B to enter into an agreement by an act
amounting to criminal intimidation under the Penal Code.
A afterwards sues B for breach of contract at Chittagong.
A has employed coercion, although his act is not an offence by the law of England, and
although section 506 of the Penal Code was not in force at the time when or place where the
act was done.
"Undue influence" defined
16.(1) A contract is said to be induced by "undue influence" where the relations subsisting
between the parties are such that one of the parties is in a position to dominate the will of the
other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is
deemed to be in a position to dominate the will of another-
(a) Where he holds a real or apparent authority over the other or where he stands in a
fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distr
(3) Where a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue influence
shall lie upon the person in a position to dominate the will of the other.
Illustrations
(a) A having advanced money to his son, B, during his minority, upon B's coming of age
obtains, by misuse of parental influence, a bond from B for a greater amount than the sum
due in respect of the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced, by B's influence over him as his medical
attendant, to agree to pay B an unreasonable sum for his professional services. B employs
undue influence.
(c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms
which appear to be unconscionable. It lies on B to prove that the contract was not induced by
undue influence.
(d) A applies to a banker for a loan at a time when there is stringency in the money market.
The banker declines to make the loan except at an unusually high rate of interest. A accepts
the loan on these terms. This is a transaction in the ordinary course of business, and the
contract is not induced by undue influence.
"Fraud" defined
17. "Fraud" means and includes any of the following acts committed by a party to a contract,
or with his connivance, or by his agent, with intent to deceive another party thereto or his
agent, or to induce him to enter into the contract:-
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be
true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation – Mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that, regard being had to
them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself,
equivalent to speech.
Illustrations
(a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B
about the horse's unsoundness. This is not fraud in A.

(b) B is A's daughter and has just come of age. Here, the relation between the parties would
make it A's duty to tell B if the horse is unsound.
(c) B says to A-"If you do not deny it, I shall assume that the horse is sound." A says nothing.
Here, A's silence is equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has private information of a change in
prices which would affect B's willingness to proceed with the contract. A is not bound to
inform B.
"Misrepresentation" defined
18. “Misrepresentation" means and includes–
(1) the positive assertion, in a manner not warranted by the information of the person making
it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the person
committing it, or any one claiming under him, by misleading another to his prejudice or to the
prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement to make a mistake as to the
substance of the thing which is the subject of the agreement.
Mistake
Mistake may be defined as a erroneous belief concerning something consent cannot be said to
be “Free” when an agreement is entered into under a mistake. An agreement is valid as a
contract only when the parties agree upon the same thing in the same sense.
Classification of Contract: Contract can be classified based on:
 The Method of Formation of a Contract
 The Time of Performance
 The Parties of the Contract
 Legality or Validity of the Contract
1. The Method of Formation of a Contract: Based on the formation method a contract can
further be classified as:
Express Contract: This is expressed in words, spoken or written.
Implied Contract: Understood from the acts, the conduct of the parties and /or the course of
dealing between them.
Quasi Contract: Which are not contracts strictly, though the parties act as if there is a
contract.

2. The Time of Performance: When time is considered, a contract can be:
Executed Contract: The parties perform their obligations immediately, i.e., as soon as the
contract is formed.
Executory Contract: Obligations are to be performed at a later time.
3. The Parties of the Contract: Upon consideration of the number of parties of a contract,
contract can be:
Bilateral Contracts: There must be at least two parties to the contract. Therefore all contracts
are bilateral or multilateral.
Unilateral Contracts: One party has to fulfill his obligations whereas the other party has
already performed his obligations.
4. Legality or Validity of the contract: By recognizing the legal impact or validity,
contract is classifies as:
a) Valid Contract
b) Void Contract
c) Voidable Contract (Sec. 2i)
d) Illegal Contract
e) Unenforceable Contract
Types of Agreement
Valid agreement: An agreement which fulfills all the essential elements of a contract. , and
which is enforceable through the courts.
Void agreement: a void agreement has no legal effect. It confers no rights on any person and
creates no obligations. ‘An agreement not enforceable by law is said to be void’.- sec.2(g).
Example- An agreement made by a minor.
Voidable agreement: ‘An agreement which is enforceable by law at the option of one or
more of the parties thereto, but not at the option of the other or others, is a voidable
contract.’-Sec.2 (I). A voidable agreement can be avoided. Until it is avoided, it is a good
contract. Example- Contracts brought about by coercion, undue influence, misrepresentation
etc.
 X coerces Y into entering into a contract for the sale of Y’s house to X. This contract
can be avoided by Y.
 X cannot enforce the contract. But Y, if he so desires, can enforce it against X.

Unenforceable agreement: Agreements which cannot be enforced in a court of law one or
both of the parties, because of some technical defect, e.g., want of registration or non-
payment of the requisite stamp duty.
Illegal Agreement: An illegal agreement is one which is against a law in force. Example- an
agreement to commit murder, robbery or cheating.
Lawful Acceptance (Sec. 7)

 Absolute and unqualified
 Conditional acceptance
 Must be expressed in some usual or reasonable manner
 Mental acceptance or un-communicated assent
 Time of Acceptance
 When Acceptance is complete
 Before offer
Communication (Sec. 4)
Proposal: When it comes to the knowledge of the person to whom it is made.
Acceptance: As against the proposer, when it put in the course of transmission to him, so as
to be out of the power of the acceptor. As against the acceptor, when it comes to the
knowledge of proposer.
Revocation: As against the person who makes it, when it is put into a course of transmission
to the person to whom it is made, so as to be out of the power of the person who makes it as
against the person to whom it is made, when it comes to his knowledge.
Lawful Consideration: Consideration is an essential element in a contract. It is essential for
the validity of a contract. A promise without consideration is a gratuitous undertaking and
cannot create a legal obligation. Lawful consideration can be: past, present and future
consideration
Consideration-Exceptions (Sec. 25)

a) Natural Love & Affection: by a written & registered document, natural love and
affection, near relation to each other
b) Voluntary Compensation
c) Time-barred debt
d) Agency
e) Completed gift

Void Agreements
An agreement not enforceable by law is said to be void. A void agreement has no legal effect.
It confers no rights on any person and creates no obligations. An Agreement can be void
because of mistake, lack of consideration, want of capacity etc.
Revocation
A proposal may be revoked at any time before the communication of its acceptance is
completed as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is
completed as against the acceptor, but not afterwards.
Termination of Contract
1. By performance of the promise of all parties
2. By mutual consent canceling the agreement or substituting a new agreement in place
of the old
3. Subsequent impossibility of performance
4. By operation of law – death, insolvency, or merger
5. By lapse of time
6. By material alteration without the consent of the other party
7. By beach made by one party
Remedies of Breach of Contract

a) Free from obligation
b) Suit for damages
c) Specific performance
d) Injunction
Contract of indemnity and Guarantee (Sec-124-147)

Generally loans and advances are made against tangible securities. When a customer has no
tangible security to offer or when the security offered is inadequate, a guarantee is demanded
by the banker.
Contract of indemnity (Sec-124)
A contract by which one party promises to save the other from loss caused to him by the
conduct of the promisor himself, or by the conduct of any other person, is called a "contract
of indemnity“.
Contract of guarantee (Sec-126)

A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a
third person in case of his default.
The person who gives the guarantee is called the "surety": the person in respect of whose
default the guarantee is given is called the "principal debtor", and the person to whom the
guarantee is given is called the "creditor“.
The essential feature of a contract of guarantee:
 The guarantor is liable when the principal debtor fails to repay the debt. The liability
of the principal debtor is primary and that of guarantor is secondary.
 A guarantee may be either oral or written. Banks, however, do not accept oral
guarantees. The contract must be in writing and should satisfy all legal requirements
as to signature, stamp duty etc.
 A guarantee may be either (a) specific guarantee or (b) a continuing guarantee. A
specific guarantee covers a single transaction. It comes to an end when the specific
promise is fulfilled.
 The continuing guarantee is applicable to a series of transactions. The surety can fix
up a limit on his liability as to time or amount of guarantee when the guarantee is a
continuing one. For example, X enters into cash credit arrangement with Modern bank
for a credit limit of Tk.50, 000/-. Y stands as guarantor for this amount for a period of
one year. Under this arrangement, X can undertake any number of transactions subject
to the amount and time specified.
 The party must be competent to enter into contract.
 Minor’s guarantee is not allowed but if any major gives guarantee in favor of minor,
the guarantor becomes principal debtor.
 Credit worthiness of the guarantor is to be considered before obtaining guarantee.
 As per contract, the guarantee must be supported by lawful consideration.
 The contract must be entered into with free consent.
 A guarantee obtained under misrepresentation, fraud and undue influence is void able.
A contract of indemnity
A contract of indemnity is defined as ‘a contract by which one party promises to save the
other from the loss caused to him by the conduct of the promise himself or by the conduct of
any other person. The person who makes such promise is called the ‘indemnifier’ and the
other person is called the ‘indemnified’ or ‘beneficiary’. For example, X who has lost a fixed
deposit receipt issued by modern bank may claim the amount by furnishing an indemnity

bond. By this act, X promises to reimburse the bank any loss that may be caused to it for
paying the amount without the receipt.
Bailment (sec-148)
A "bailment" is the delivery of goods by one person to another for some purpose, upon a
contract that they shall, when the purpose is accomplished, be returned or otherwise disposed
of according to the directions of the person delivering them. The person delivering the goods
is called the "bailor". The person to whom they are delivered is called the "bailee".
Pledge (Sec-172)
The bailment of goods as security for payment of a debt or performance of a promise is called
"pledge". The bailor is in this case called the "pawnor". The bailee is called the "pawnee“.
Agency (Sec-182-238)
An "agent" is a person employed to do any act for another or to represent another in dealings
with third persons. (Sec- 182)
The person for whom such act is done, or who is so represented, is called the "principal“.
Who may employ agent (Sec-183). Any person who is of the age of majority according to the
law to which he is subject, and who is of sound mind, may employ an agent.
Sec-191: A "sub-agent" is a person employed by, and acting under the control of, the original
agent in the business of the agency.
4.3 The Partnership Act, 1932: Important Sections and Issues
Until 30 September, 1932 the partnership businesses of the Indian subcontinent were
controlled according to the Contract Act of 1872. But due the expansion of business and
trade, a separate Partnership Act was enacted which was effective from 0ctober 1, 1932. It
was accepted as it was in 1947 in the then East Pakistan and after liberation it was effective
and enforceable in Bangladesh from March 26, 1971.
Definition of Partnership
According to the Partnership Act, “Partnership is the relationship between persons who have
agreed to share the profits of a business carried on by all or any one of them acting for all”.
The basic elements of partnership are plurality of members, contractual relationship, and
objective of legal business, share profit and losses of the business, mutual operation,
confidence and trust. Definition of "partnership", "partner", "firm" and "firm name”.
Classes of Partnerships
a) Partnership At Will
b) Particular Partnership

"Partnership" is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all. Persons who have entered into
partnership with one another are called individually "partners" and collectively "a firm", and
the name under which their business is carried on is called the "firm name".
Partnership at will: Where no provision is made by contact between the partners for the
duration of their partnership, or for the determination of their partnership, the partnership is
"partnership at will".
Particular partnership: A person may become a partner with another person in particular
adventures or undertakings.
General duties of partners
Partners are bound to carry on the business of the firm to the greatest common advantage, to
the just and faithful to each other, and to render true accounts and full information of all
things affecting the firm to any partner or his legal representative.
Duty to indemnify for loss caused by fraud
Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of
the business of the firm.
Determination of rights and duties of partners by contract between the partners (1)
Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm
may be determined by contract between the partners, and such contract may be express or
may be implied by a course of dealing. Such contract may be varied by consent of all the
partners, and such consent may be express or may be implied by a course of dealing.
The conduct of the business
Subject to contract between the partners- (a) every partner has a right to take part in the
conduct of the business; (b) every partner is bound to attend diligently to his duties in the
conduct of the business; (c) any difference arising as to ordinary matters connected with the
business may be decided by a majority of the partners, and every partner shall have the right
to express his opinion before the matter is decided, but no change may be made in the nature
of the business without the consent of all the partners; and (d) every partner has a right to
have access to and to inspect and copy any of the books of the firm.
Mutual rights and liabilities

Subject to contract between the partners- (a) a partner is not entitled to receive remuneration
for taking part in the conduct of the business; (b) the partners are entitled to share equally in
the profits earned, and shall contribute equally to the losses sustained by the firm; (c) where a

partner is entitled to interest on the capital subscribed by him such interest shall be payable
only out of profits; (d) a partner making, for the purposes of the business, any payment or
advance beyond the amount of capital he has agreed to subscribe, is entitled to interest
thereon at the rate of six percent, per annum; (e) the firm shall indemnify a partner in respect
of payments made and liabilities incurred by him- (i) in the ordinary and proper conduct of
the business, and (ii) in doing such act, in an emergency, for the purpose of protecting the
firm from loss, as would be done by a person of ordinary prudence, in his own case, under
similar circumstances; and (f) a partner shall indemnify the firm for any loss caused to it by
his wilful neglect in the conduct of the business of the firm.
The property of the firm

Subject to contract between the partners, the property of the firm includes all property and
rights and interests in property originally brought into the stock of the firm, or acquired, by
purchase or otherwise, by or for the firm, or for the purposes and in the course of the business
of the firm, and includes also the goodwill of the business. Unless the contrary intention
appears, property and rights and interests in property acquired with money belonging to the
firm are deemed to have been acquired for the firm.
Application of the property of the firm

Subject to contract between the partners, the property of the firm shall be held and used by
the partners exclusively for the purposes of the business.
Who can be or cannot be partners
a) Any person who has the capacity of contract can be a partner
b) Minor cannot be a partner
c) Person of unsound mind cannot be a partner
d) A company cannot be a partner
e) An alien enemy cannot enter into a contract of partnership.
Creation of Partnership
A partnership is brought into existence through agreement or contract (oral / written / written
and registered) between persons who agree to become partners in a business. The deed
(written agreement) is known as the articles of partnership. This generally contains the
following particulars:
a) Name and address of the firm
b) Nature, scope, objective and duration of the business
c) Management and operational guidelines of the business

d) Keeping of accounts and its examination
e) Authority for signing cheque (s) etc.
f) Provision as to death or retirement of a partner.
g) Keeping and examination of accounts
h) Capital structure and profit and loss sharing ratio
Registration of a Partnership Business

Registration is only a concrete and reliable evidence of the existence of a partnership.
Registration does not create partnership. Contract between partners create partnership. The
Partnership Act does not make registration compulsory. But when a firm is registered, the
partners cannot deny the partnership to avoid liability. Thus, it affords protection to persons
dealing with the firm. An unregistered firm may suffer from certain disadvantages.
Formalities of Registration
The statement must be signed and verified by all the partners or by their agents specially
authorized on this behalf.
When the registrar is satisfied that the above provisions have been complied with, he shall
record an entry of the statement in a register, called the Register of Firms and shall file the
statement and this will amount to registration of the firm. Alteration in any of the above
particulars has to be recorded.
A partnership firm must apply to the Registrar of firms for registration. The application for
registration should be accompanied by the prescribed fee and it should contain a statement of
the following particulars:
a. The name and address of the firm
b. The place(s) of business of the firm
c. Joining date of each partner in the firm with their full name and addresses, and
d. Duration of the firm
Effect of non-registration
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be
instituted in any Court by or on behalf of any person suing as a partner in a firm against the
firm or any person alleged to be or to have been a partner in the firm unless the firm is
registered and the person suing is or has been shown in the Register of Firms as a partner in
the firm.

(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on
behalf of a firm against any third party unless the firm is registered and the persons suing are
or have been shown in the Register of Firms as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other
proceeding to enforce a right arising from a contract, but shall not effect- (a) the enforcement
of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any
right or power to realize the property of a dissolved firm, or (b) the powers of an official
assignee, receiver or Court under the 5[ Insolvency (Dacca) Act, 1909, or the] Insolvency
Act, 1920, to realize the property of an insolvent partner.
Right and Obligation of the Partners: The Partnership Act lays down two general rules
regarding the conduct of the partners to one another:
a. Utmost good faith
b. Indemnity
Besides, the following rules are laid down in the Act regarding the relationship between
the partners as regards the management of the business and their mutual rights and
liabilities.
a. Rules regarding the conduct of the business
b. Mutual rights and Liabilities
Personal profits earned by partners
c. The property of the firm
d. Continuance of pre-existing term
Rights of the Partner: The important rights of partners are summarized below:
a. Conduct of business
b. Can express opinion
c. Access, inspection, copy
d. Equality of profits
e. Interest on capital
f. Interest on advance
g. To get indemnity
h. Application of property of firm
i. Partner's authority
j. Powers in an emergency
k. Reconstitution

l. Dissolution
m. Right to carrying on a competing business
n. Right to share profits after retirement
o. Unlimited Liability
The important duties/liabilities of partners are summarized below:
a. Justice, faithfulness, true accounts, full information
b. To pay indemnity
c. To act diligently or with reasonable care
d. No remuneration
e. Equality of losses
f. To pay indemnity for willful neglect
g. No private benefit.
h. Unlimited liability
Duration and Reconstitution of a Partnership Firm
Reconstitution of a Firm:
A partnership firm is said to be reconstituted when any of the following changes occurs
a. Introduction of a new member
b. Retirement of a partner
c. Expulsion of a partner
d. Insolvency of a partner
e. Death of a partner
Introduction of a partner
(1) Subject to contract between the partners and to the provisions of section 30, no person
shall be introduced as a partner into a firm without the consent of all the existing partners. (2)
Subject to the provisions of section 30, a person who is introduced as a partner into a firm
does not thereby become liable for any act of the firm done before he become a partner.
Retirement of a partner
(1) A partner may retire- (a) with the consent of all the other partners, (b) in accordance with
an express agreement by the partners, or (c) where the partnership is at will, by giving notice
in writing to all the other partners of his intention to retire.
(2) A retiring partner may de discharged from any liability to any third party for acts of the
firm done before his retirement by an agreement made by him with such third party and the
partners of the reconstituted firm, and such agreement may be implied by a course of dealing

between such third party and the reconstituted firm after he had knowledge of the retirement.
(3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to
be liable as partners to third parties for any act done by any of them which would have been
an act of the firm if done before the retirement, until public notice is given of the retirement:
Provided that a retired partner is not liable to any third party who deals with the firm without
knowing that he was a partner. (4) Notice under sub-section (3) may be given by the retired
partner or by any partner of the reconstituted firm.
Expulsion of a partner
(1) A partner may not be expelled from a firm by any majority of the partners, save in the
exercise in good faith of powers conferred by contract between the partners. (2) The
provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an expelled as if he
were retired partner.
Insolvency of a partner
(1) Where a partner in a firm is adjudicated an insolvent he ceases to be a partner on the date
on which the order of adjudication is made, whether or not the firm is thereby dissolved. (2)
Where under a contract between the partners the firm is not dissolved by the adjudication of a
partner as an insolvent, the estate of a partner so adjudicated is not liable for any act of the
firm and the firm is not liable for any act of the insolvent, done after the date on which the
order of adjudication is made.
Liability of estate of deceased partner

Where under a contract between the partners the firm is not dissolved by the death of a
partner, the estate of a deceased partner is not liable for any act of the firm done after his
death.
Rights of outgoing partner to carry on competing business

(1) An outgoing partner may carry on a business competing with that of the firm and he may
advertise such business, but, subject to contract to the contrary, he may not- (a) use the firm
name, (b) represent himself as carrying on the business of the firm, or (c) solicit the custom
of persons who were dealing with the firm before he ceased to be a partner. Agreements in
restraint of trade (2) A partner may make an agreement with his partners that on ceasing to be
a partner he will not carry on any business similar to that of the firm within a specified period

or within specified local limits; and, notwithstanding anything contained in section 27 of the
Contract Act, 1872, such agreement shall be valid if the restrictions imposed are reasonable.
Right of outgoing partner in certain cases to share subsequent profits
Where any member of a firm has died or otherwise ceased to be a partner, and the surviving
or continuing partners carry on the business of the firm with the property of the firm without
any final settlement of accounts as between them and the outgoing partner or his estate, then,
in the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the
option of himself or his representatives to such share of the profits made since he ceased to be
a partner as may be attributable to the use of his share of the property of the firm or to interest
at the rate of six per cent. per annum on the amount of his share in the property of the firm:
Provided that where by contract between the partners an option is given to surviving or
continuing partners to purchase the interest of a deceased or outgoing partner, and that option
is duly exercised, the estate of the deceased partner or the outgoing partner or his estate as the
case may be, is not entitled to any further or other share of profits; but if any partner
assuming to act in exercise of the option does not in all material respects comply with the
terms thereof, he is liable to account under the foregoing provisions of this section.
Revocation of continuing guarantee by change in firm

A continuing guarantee given to a firm, or to a third party in respect of the transactions of a
firm, is, in the absence of agreement to the contrary, revoked as to future transactions from
the date of any change in the constitution of the firm.
Dissolution of a Firm: A firm is dissolved in the following ways:

a. Dissolution by agreement of partners
b. Compulsory Dissolution
c. Dissolution on the happening of certain contingencies
d. Dissolution by notice
e. Dissolution by court
Dissolution of a firm
The dissolution of partnership between all the partners of a firm is called the "dissolution of
the firm".

Dissolution by agreement
A firm may be dissolved with the consent of all the partners or in accordance with a contract
between the partners
Compulsory dissolution
A firm is dissolved- (a) by the adjudication of all the partners or of all the partners but one as
insolvent, or (b) by the happening of any event which makes it unlawful for the business of
the firm to be carried on or for the partners to carry it on in partnership: Provided that, where
more than one separate adventure or undertaking is carried on by the firm, the illegality of
one or more shall not of itself cause the dissolution of the firm in respect of its lawful
adventures and undertakings.
Dissolution on the happening of certain contingencies

Subject to contract between the partners a firm is dissolved- (a) if constituted for a fixed term,
by the expiry of that term; (b) if constituted to carry out one or more adventures or
undertakings, by the completion thereof; (c) by the death of a partner; and (d) by the
adjudication of a partner as an insolvent.
Dissolution by notice
(1) Where the partnership is at will, the firm may be of partnership at will dissolved by any
partner giving notice in writing to all the other partners of his intention to dissolve the firm.
(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution
or, if no date is so mentioned, as from the date of the communication of the notice.
Dissolution by the Court
At the suit of a partner, the Court may dissolve a firm on any of the following grounds,
namely:- (a) that a partner has become of unsound mind, in which case the suit may be
brought as well by the next friend of the partner who has become of unsound mind as by any
other partner; (b) that a partner, other than the partner suing, has become in any way
permanently incapable of performing his duties as partner; (c) that a partner, other than the
partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the
business, regard being had to the nature of the business; (d) that a partner, other than the
partner suing, wilfully or persistently commits breach of agreements relating to the
management of the affairs of the firm or the conduct of its business, or otherwise so conducts
himself in matters relating to the business that it is not reasonably practicable for the other
partners to carry on the business in partnership with him; (e) that a partner, other than the

partner suing, has in any way transferred the whole of his interest in the firm to a third party,
or has allowed his share to be charged under the provisions of rule 49 of Order XXI of the
First Schedule to the Code of Civil Procedure, 1908, or has allowed it to be sold in the
recovery of arrears of land-revenue or of any dues recoverable as arrears of land-revenue due
by the partner; (f) that the business of the firm cannot be carried on save at a loss; or (g) on
any other ground which renders it just and equitable that the firm should be dissolved.
Mode of settlement of accounts between partners

In settling the accounts of a firm after dissolution, the following rules shall, subject to
agreement by the partners, be observed:- (a) Losses, including deficiencies of capital, shall be
paid first out of profits, next out of capital, and, lastly if necessary, by the partners
individually in the proportions in which they were entitled to share profits, (b) The assets of
the firm, including any sums contributed by the partners to make up deficiencies of capital,
shall be applied in the −following manner and order: (i) in paying the debts of the firm to
third parties; (ii) in paying to each partner rateably what is due to him from the firm for
advances as distinguished from capital; (iii) in paying to each partner rateably what in due to
him on account of capital; and (iv) the residue, if any, shall be divided among the partners in
the proportions in which they were entitled to share profits.
Minor as a Partner – Special Guidelines
According to the Section 30 of The Partnership Act defines that a minor cannot be a partner
of any kind of business. So, a minor cannot become a partner in a firm. But with the consent
of all the partners, for the time being he may be admitted to the benefits of partnership. Such
a minor has a right to such share of the property and of the profits of the firm as may be
agreed upon, and he may have access to and inspect and copy any of the accounts of the firm.
But such a minor is not entitled to sue the partners for an account or payment of his share of
the property or profits of the firm, except when he severs his connection with the firm. Such a
minor is not personally liable for the liabilities of the firm but his share in the business is
liable for such liabilities.
4.4 The Companies Act, 1994 (with amendments): Important Sections and Issues
The Companies Act 1994 has been enacted by the parliament on 11 September, 1994 and
gazette on 12 September, 1994. This Act is basically originated from the companies Act,
1913, which was adopted in Bangladesh in 1971. The Companies Act 1994 is divided into 11
parts (total 404 sections) and 12 schedules.

Defining Company
"Company means a company formed and registered under this Act or an existing company".
[Sec. 2 (1) (C), the Companies Act, 1994.]
"A Company is a voluntary association or organizations of many persons who contribute
money or money's worth to a common stock and employs it in some trade or business and
who share the profit or loss arising there from."-- Justice Lindley.
Common Characteristics of a Company
a. Artificial Entity- It is regarded by law as a single person. It has a legal personality.
b. Voluntary Organization- Formed by the choice and consent of the members.
c. Perpetual succession- the death or insolvency of a shareholder does not affect its
existence.
d. Creation of law- a company comes into existence only after registration under the Act.
e. Common seal- a company must have a common seal.
f. Division of capital- a company must have a capital. Otherwise it cannot work.
g. Limited liability- Liabilities of shareholder are usually limited.
h. Separation of ownership from control
i. Democratic control
j. Transferability of shares- the shareholder of a company can transfer its share and the
transferee becomes member of the company.
k. Number of members.
Types of Companies
There are two types of companies a) Public and b) Private.
a) Private Company: A Private company is one which, by its articles, (a) restricts the
right of the members to transfer their shares, if any; (b) limits the number of its
members (not counting its employees) to 50; and (c) prohibits any invitation to the
public to subscribe for any shares in, or debentures of, the company. —Sec.2 (1) (g).
Where two or more persons hold one or more shares in a company jointly, they shall, for
the purposes of this definition, be treated as a single member.
b) Public Company: All companies other than private companies are called public
companies. —Sec 2(1) (r). Public companies may be classified into three types:
a. Companies Limited by Shares
b. Companies Limited by Guarantee and
c. Unlimited Companies

Difference between Public Ltd. Company and Private Ltd. Company
The difference between public and private limited company are depicted in the following
table.
Public Limited Company Private Limited Company
Minimum number of member is 7 and the Minimum number of members is 2 and
maximum number is unlimited. maximum 50.
At least 3 directors. At least 2 directors.
Can issue IPO Can not issue IPO
Statutory meeting and report is mandatory. It is not required.
An audit firm must audit financial statement. It is not mandatory.
Its financial statement is open for public It is not open for public disclosure.
disclosure.
It has no restriction in transferring of shares. It restricts transfer of shares.
Certificate of commencement is required to start Certificate of incorporation is sufficient
business operation. to start business operation.
Formation of a Company
a. Verification Company Name to the registrar of the Joint Stock Companies.
b. When verified, the Memorandum of Association (M/A) and Articles of Association
(A/A) must be prepared and submitted to the Registrar of the Joint Stock Companies
along with the application form.
Contents of Memorandum of Association

a. Name of the Company
b. Address of the registered office
c. Objects of the Company
d. Limited Liability
e. Share Capital Amount and Number of Shares
f. Each subscriber of the MoA shall take at least one share
g. Each subscriber shall write opposite to his name the number of share he takes.
Contents of Articles of Association:

a. Provisions for Regulating the Affairs of the Company Share/ General Meeting/ Power
of Directors /Accounts/Audit.
b. In case of public Limited Company, a duly signed list of persons has to be consented
as directors of the company with their consent.
c. Declaring that all the requirements of the Act have been complied with.
Types of Shares of a Public Limited Company

a. Ordinary Share / Equity Share
b. Preference Share
c. Cumulative and Non-Cumulative preference
d. Participating and Non-participating preference share
e. Redeemable and Irredeemable preference share
f. Convertible and non-convertible preference share
Ordinary Share / Equity Share: Ordinary shares represent the ownership position in a
company. The holders of ordinary shares, called shareholders or stakeholders are the legal
owners of the company. Ordinary shares are the source of permanent capital since they do not
have a maturity date. For capital contributed by shareholders by purchasing ordinary shares,
they are entitled for dividends. The amount or rate of dividend is not fixed; the company’s
board of directors decides it.
An ordinary share is, therefore, known as a variable income security. Being the owners of the
company, shareholders bear the risk of ownership; they are entitled to dividends after the
income claims of others have been satisfied. Similarly, when the company is wound up, they
can exercise their claims on assets after the claims of other suppliers of capital have been
met. An ordinary shareholder has got the voting rights.
Preference Share: It is a senor security as compared to ordinary share. It has a prior claim on
the company’s income in the sense that the company must first pay preference dividend
before paying ordinary dividend. It also has a prior claim on the company’s assets in the
event of liquidation. Thus in terms of risk, preference share is less risky than ordinary share.
Reference shareholders generally do not have voting rights and they cannot participate in the
extra ordinary profits earned by the company. The dividend rate is fixed in the case of
preference shares, and preference dividends are not tax deductible.
Cumulative and Non-Cumulative preference share – The preference dividend rate is
expressed as a percentage of the per value. The amount of preference dividend will thus be
equal to the dividend rate multiplied by the per value. Most preference shares carry a
cumulative dividend feature, requiring that all past unpaid preference dividend be paid before
any ordinary dividends are paid. Preference dividends could be omitted or passed without the
cumulative feature. Preference shareholders do not have power to force company to pay
dividends; no-payment of preference dividend also does not result insolvency. Since
preference shares do not have the dividend enforcement power, the cumulative feature is
necessary to protect the rights of preference shareholders.
Participating and Non-participating preference share- a company can issue preference
share with voting rights called participative preference shares. Preference shares may in some
cases have participation feature, which entitles preference shareholders to participate in
extraordinary profit earned by the company.
Redeemable and Irredeemable preference share- Redeemable preference share has a
specified maturity. Irredeemable preference shares do not have a maturity date. A company
may provide for extra dividend to preference shareholders equal to the amount of ordinary
dividend that is in excess of the regular preference dividend.
Convertible and non-convertible preference share- A convertible preference share allows

preference shareholders to convert their preference shares, fully or partly, into ordinary shares
at a specified price during a given period of time.
Meetings
- Annual General Meeting
- Statutory Meeting
- Extraordinary General Meeting
Winding-up
-By the Court
-Voluntary or
-Subject to Supervision of Court
Company wound up by the court

• If the company has by special resolution resolved that the company be wound up by
the court or
• If default is made in filing the statutory report or in holding the statutory meeting or
• If the company does not commence its business within a year from its incorporation
or suspends its business for a whole year or

• If the number of members is reduced in the case of a private company below 2 or in
the case of any other company below 7 or
• If the company is unable to pay its debt or
• If the court is of opinion that it is just and equitable that the company should be
wound up.
Voluntary winding-up:
• Any time specified in the AOA passes out
• Special Resolution
• Extra ordinary resolution
Creditor’s Voluntary winding –up:
• Meeting of the creditors
• Appointment of the Liquidator
• Appointment of the committee of inspection
Penalty for false statement. -- Whoever in any return, report, certificate balance-sheet or
other documents, required by or for the purposes of any of the provisions of this Act,
willfully makes a statement false in any material particular, knowing it to be false, shall be
punishable with imprisonment of either description for a term which may extend to five
years, and shall also be liable to fine.
Penalty for wrongful withholding of property.-- Any director, managing agent, manager or
other officer or employee of a company who wrongfully obtains possession of any property
of a company, or having any such property in his possession wrongfully withholds it or
willfully applies it to purposes other than those expressed or directed in the articles and
authorized by this Act, shall on the complaint of the company or a creditor or contributory
there-of, be punishable with fine not exceeding five thousand taka, and may be ordered by the
Court trying the offence to deliver of or refund within a time to be fixed by the Court any
such property improperly obtained or wrongfully with- held or willfully misapplied, or in
default to suffer imprisonment for a period not exceeding two years.
Penalty for misapplication of securities by employers.--(1) All moneys of securities
deposited with a company by its employees in pursuance of their contracts of service, with
the company shall be kept or deposited by the company in a special account to be opened by
the company for this purpose in a scheduled bank as defined in the Bangladesh Bank Order,
1972 (P.O No. 127 of 1972) and no portion thereof shall be utilized by the company except
for the purposes agreed to in the contract of service.
4.5 Negotiable Instrument Act, 1881
The Negotiable Instrument Act derived from The English Common Law in the Year 1881
and came into effect from March 01, 1882. It contains 17 Chapters and 141 Sections. This
Act has been enacted in our country vide P.O. No. 127 of 1972. Since its inception several
amendments have been made to this Act. The Negotiable Instruments Act, 1881 governs all
transactions in relation to the negotiable instruments drawn, endorsed, transferred and
realized in Bangladesh.
According to sec-13 of Negotiable Instrument Act 1881, “Negotiable Instrument” means a
promissory note, bill of exchange or cheque payable either to order or to bearer. So, it may be
said that, documents of a certain type, used in commercial transactions and monetary
dealings, are called Negotiable Instruments.
Sec.4-Promissory Note:
A 'Promissory Note' is an instrument in writing (not being a bank note or a currency note)
containing an unconditional undertaking, signed by the maker, to pay on demand or at a fixed
or determinable future time a certain sum of money only to, or to the order of, a certain
person, or to the bearer of the instrument.
The person who makes the promise to pay is called the maker. He is the debtor and must sign
the instrument. The person who gets the money (the creditor) is called Payee.
Sec.5- bill of exchange:
A 'bill of exchange' is an instrument in writing containing an unconditional order, signed by
the maker, directing a certain person to pay on demand or at a fixed determinable future time
a certain sum of money only to, or to the order of a certain person or to the bearer of the
instrument”.
It is observed from the above definition that a bill of exchange contains an order from the
creditor to the debtor, to pay a certain sum, to a certain person, either on demand or after a
certain period. The person who draws the bill is called the ‘drawer’ and the person on whom
it is drawn, is called the ‘drawee’ or ‘acceptor’ and the person to whom the amount is ayable
is called the ‘payee’.
Sec.6-Cheque:
A 'Cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand. There are three parties involved in a cheque. These are- drawer,

drawee and payee. Account holder or the customer of the bank is the drawer, while the bank
upon whom the customer is placing an order or instruction is called the drawee and the payee
is the person or the institution to whom the money is to be paid i.e the ultimate beneficiary.
A cheque is of two types- open cheque and cross cheque. Open cheque may be of bearer
cheque or order cheque. Cross cheque is of two types- general crossing and special crossing.
The significance of open cheque is that it may be paid over the counter. If the cheque is a
crossed one payment of such cheque cannot be made over the counter, rather it should have
been paid through the account of the payee concerned.
Sec.8- Holder:
The holder of a promissory note, bill of exchange or cheque means the payee or endorsee
who is in possession of it or the bearer thereof but does not include a beneficial owner
claiming through a benamdar. The person legally entitled to receive the money due on the
instrument is called the holder.
Essential requisites of a Holder:

Payee or endorsee of the instrument, and
1. in possession of it,
2. or a person who is bearer thereof.
Sec.9- Holder in due course:

'Holder in due course' means any person who for consideration becomes the possessor of a
promissory note, bill of exchange or cheque if payable to bearer or the payee or endorsee
thereof, if payable to order, before it became overdue, without notice that the title of the
person from whom he derived his own title was defective.
Sec.10- Payment in due course:

Payment in due course means payment in accordance with the apparent tenor of the
instrument in good faith and without negligence to any person in possession thereof
under circumstances, which do not afford a reasonable ground for believing that he is
not entitled to receive payment of the amount therein mentioned.
[ Sec.29B-Forged or unauthorized signature:
An instrument having forged signature of the drawer or the persons required for it not treated
as instrument under this Act and will remain inoperative, since nobody is entitled to have title
of those instruments.
Sec.89-Payment of instrument on which alteration is not apparent:

Where a promissory note, bill of exchange or cheque has been materially altered but does not
appear to have been so altered, or where a cheque is presented for payment which does not at
the time of presentation appear to be crossed or to have had a crossing which has been
obliterated, payment thereof by a person or banker liable to pay, and paying the same
according to the apparent tenor thereof at the time of payment and otherwise in due course,
shall discharge such person or banker from all liability thereon; and such payment shall not
be questioned by reasoned of the instrument having been altered or the cheque crossed.
Sec.122A-Revocation of banker's authority:

The banker can legally return a valid cheque without payment under the following
conditions:
 countermand of payment;
 notice of the customer's death;
 notice of adjudication of the customer as an insolvent.
4. 6 Money Laundering Prevention Act, 2012 (Important sections and some issues)
It is the process by which proceeds from a criminal activity are disguised to conceal their
illicit origins. Basically, money laundering involves the proceeds of criminally derived
property rather than the property itself. Money launderers send illicit funds through legal
channels in order to conceal their criminal origins.
Money Laundering means:
As per stipulations contained in Section 2 (V) of the Money Laundering Prevention Act, 2012
(Act No.05 of 2012) in Bangladesh “Money Laundering” means:
(i) Knowingly moving, converting, or transferring proceeds of crime or property involved in
an offence for the following purposes:-
1. Concealing or disguising the illicit nature, source, location, ownership or control of
the proceeds of crime; or
2. Assisting any person involved in the commission of the predicate offence to evade the
legal consequences of such offence;
(ii) Smuggling money or property earned through legal or illegal means to a foreign country;
(iii) Knowingly transferring or remitting the proceeds of crime to a foreign country or
remitting or bringing them into Bangladesh from a foreign country with the intention of
hiding or disguising its illegal source; or
(iv) Concluding or attempting to conclude financial transactions in such a manner so as to
reporting.

Reporting organization means the following organizations:
i) Banks
ii) Financial Institutions
iii) Insurer
iv) Money Changer
v) Any company or institution which remits or transfers money or money value
vi) Any other Institution carrying out its business with the approval of Bangladesh Bank.
vii) (1) Stock dealer and stock broker(2) Portfolio manager and merchant banker (3)
Securities custodian (4) Asset Manager
Viii) (1) Non-profit organization (2) Non-government organization (3) Cooperative society
ix) Real estate developer
(x) Dealer in precious metals or stones
(xi) Trust and company service provider
(xii) Lawyer, notary, other legal professional and accountant
(xiii) Any other institution which Bangladesh Bank may, from time to time, notify with the
approval of the Government
Suspicious transaction means such transaction:

i. which deviates from usual transaction;
ii. of which there is ground to suspect that ,
(1) the property is the proceeds of an offence
(2) it is financing to any terrorist activity , a terrorist group or an individual terrorist
iii. Which is for the purposes of this Act, any other transaction or attempt of transaction
delineated in the instructions issued by Bangladesh Bank from time to time.
Property means:
i. any type of tangible, intangible, movable immovable property or
ii. cash, any deed or legal instruments of any form including electronic or digital form giving
evidence of title or evidence of interest related to title in the property which is located within
or outside the country.
Predicate Offence means: The offences mentioned below, by committing which within or
outside the country, the money or property derived from is laundered or attempt to be
laundered namely:-
i. corruption and bribery;
ii. Counterfeiting currency;

iii. Counterfeiting deed and documents;
iv. Extortion;
v. fraud;
vi. Forgery;
vii. Illegal trade of firearms;
viii. Illegal trade in narcotic drugs, psychotropic substances and substance causing
intoxication;
ix. Illegal trade in stolen and other goods;
x. kidnapping, illegal restrain and hostage taking;
xi. Murder, grievous physical injury;
xii. Trafficking of women and children;
xiii. Black marketing
xiv. Smuggling of domestic and foreign currency;
xv. Theft or robbery or dacoity or piracy or hijacking of aircraft;
xvi. Human trafficking;
xvii. Dowry;
xviii. Smuggling and offences related to customers and excise duties;
xix. Tax related offences;
xx. Infringement of intellectual property rights;
xxi. Terrorism or financing in terrorism terrorist activities;
xxii. Adulteration or the manufacture of goods through infringement of title;
xxiii. Offence relating to the environment
xxiv. Sexual exploitation
xxv. insider trading and market manipulation using price sensitive information relating to the
capital market in share transactions before it is published for general information to take
advantage of the market and attempting to manipulate the market for personal or institutional
gain;
xxvi. Organized crime and participation in organized criminal groups;
xxvii. Racketeering; and
xxviii. Any other offence declared as predicate offence by Bangladesh Bank, with the
approval of the Government, by notification in the official Gazette for the purpose of this act.
Why we must combat Money Laundering?
 Devastating for the economy, security, and social consequences

 Diminish govt. tax
 Distorts asset and commodity prices and leads to misallocation of resources
 Transfer of economic power from the market, government, and citizens to criminals.
 Degradation of social value
 Erodes confidence of financial institution
 Evasion of tax
(1) For the purpose of this Act Money laundering shall be deemed to be an offence.
(2) Any person who commits or abets or conspires to commit the offence of money
laundering shall be punished with imprisonment for a term of at least 4(four) years but
not exceeding 12(twelve) years in addition to that a fine equivalent to the twice of the
value of the property involved in the offence or taka 10(ten) lacks, whichever is
greater.
(3) In addition to any fine or punishment, the court may pass an order to forfeit the
property of the convicted person in favor of the State which directly or indirectly
involved in or related with money laundering or any predicate offence
(4) Any entity which commits an offence under this section shall be punished with a fine
of not less than twice of the value of the property or taka 20(twenty) lacks, whichever
is greater and in addition to this the registration of the said entity shall be liable to be
cancelled.
(5) It shall not be a prerequisite to charge or punish fro money laundering to be convicted
or sentenced for any predicate offence.
Punishment for violation of an order for freezing or attachment: Any person who
violates a freezing or attachment order issued under this Act shall be punished with
imprisonment for a term not exceeding 3(three) years or with a fine equivalent to the value of
the property subject to freeze or attachment or with both.
Punishment for divulging information:
(1) No person shall, with an ill motive divulge any information relating to the
investigation or any other related information to any person, organization or news
media
(2) Any person, institution or agent empowered under this Act shall refrain from using or
divulging any information collected, received, retrieved or known by the person,
institution or agent during the course of employment or appointment or after the

expiry of any contract of service or appointment for any purpose other than the
purposes of this Act
(3) Any person who contravenes the provisions of sub-section (1) and (2) shall be
punished with imprisonment for a term not exceeding 2(two) years or a fine not
exceeding taka 50(fifty) thousand or with both.
Punishment for obstruction or non-co-operation in investigation, failure to submit
report or obstruction in the supply of information:
(1) Any person who under this Act- (a) obstructs or declines to cooperate with any
investigation officer for carrying out the investigation or (b) declines to supply
information or submit a report being requested without any reasonable ground; shall
be deemed to have committed an offence under this Act.
(2) Any person who is convicted under sub-section (1) shall be punished with
imprisonment for a term not exceeding 1(one) year or with a fine not exceeding taka
25(twenty five) thousand or with both.
Providing False Information to Banks / Financial Institutions:
1. No person shall knowing provide false information in any manner regarding the
source of fund or self-identity or the identity of an account holder or the beneficiary
or nominee of an account
2. Any person who violates the provision of sub-section (1) shall be punished with
imprisonment for a term not exceeding 3(three) years or a fine not exceeding taka
50(fifty) thousand or with both.
Investigation, Prosecution etc.:
Under this Act,
i. Notwithstanding anything contained in any other law, the offence under this Act shall
be considered as the scheduled offences under the Anti-Corruption Commission Act,
2004(Act No. V of 2004) and shall be investigated by the Anti-Corruption Commission
or any officer of the Commission empowered by it in this behalf or any officer of any
other investigation agency authorized by the Anti-Corruption Commission.
ii. The offence under this Act shall be tried by a special judge appointed under section 3 of
the Criminal Law Amendment Act, 1958(Act No. XL of 1958)
iii. For the purpose of the investigation and identification of property of an accused person,
the Anti-Corruption Commission may, besides this Act also exercise the powers vested
in it under the Anti-Corruption Commission Act, 2004 9Act No. V of 2004) and an
officer of any other investigating agency authorized by the Anti-Corruption
Commission may, besides this Act also exercise the powers vested in it under any other
law.
Offence committed by company, etc.:
1. If any offence under this Act committed by a company, every proprietor, director,
manager, secretary, or other Officer or representative who is directly involved with
the offence shall be deemed to be guilty of such offence: Provided that if any person
as aforesaid is not able to prove that such offence has been committed without his
knowledge or he has used due diligence to prevent such offence, Explanation:- In this
section-
a. “Company” means any statutory body, partnership concern, association,
commercial organization or organization formed with one or more than one
person;
b. “Director” means any partner or member of the Board of Directors, by
whatever name it is called.
2. Registration of any company, if found engaged in money laundering activity either
directly or indirectly, shall be liable to be cancelled
Protection against proceedings undertaken in good faith: No suit, prosecution either civil
or criminal or other legal proceedings shall lie against government or any government
officials or any reporting organizations if any person is affected or likely to be affected due to
the proceedings done in good faith under this Act.
Responsibility of Reporting Organizations in Preventing Money Laundering:
1. For the purpose of preventing and identifying money laundering reporting
organizations shall –
a. Keep, during the operation of accounts, the correct and full information of
identification of its clients and
b. In case of closed account of any client, keep previous records of transactions
of such account for at least five years from the date of closure.
c. Provide, from time to time, the records kept under clause (a) and (b) to
Bangladesh Bank time to time on demand from Bangladesh Bank.
d. Inform proactively and immediately Bangladesh Bank, facts on suspicious /
unusual / doubtful or transactions likely to be related to money laundering.
2. If any reporting organizations violate the directions mentioned in sub-section (1)
Bangladesh Bank shall take the following actions:

a. Bangladesh Bank may impose a fine of not less than Taka fifty thousand and
such fine may extend to Taka Twenty Five Lac upon the defaulting reporting
organizations.
b. Bangladesh Bank may cancel the registration of the company or cancel the
license in addition to the fine mentioned in sub-section (a) .The Bangladesh
Bank shall inform the permit or license authority of the reporting
organizations regarding their failure to keep and furnish information under
sub-section (1) so that the concerned authority may, in accordance with the
relevant law or rule or regulation framed there under, take necessary action
against the concerned reporting organizations for their failure or negligence.
3. Bangladesh Bank will collect the penalty money imposed under subsection (2) in its
self-determined manner and shall deposit the collected money into the government
treasury.
Senior Management Commitment
The most important element of a successful anti-money-laundering program is the
commitment of senior management, including the Chief Executive Officer and the Board of
Directors, to the development and enforcement of the anti-money-laundering objectives
which can deter criminals from using their facilities for money laundering, thus ensuring that
they comply with their obligations under the law.
Senior management must send the signal that the corporate culture is as concerned about its
reputation as it is about profits, marketing, and customer service. As part of its antimoney
laundering policy the Bank will communicate clearly to all employees on an annual basis a
statement from the Chief Executive Officer that clearly sets forth its policy against money
laundering and any activity which facilitates money laundering or the funding of terrorist or
criminal activities. Such a statement should evidence the strong commitment of the Bank and
its Senior Management to comply with all laws and regulations designed to combat money
laundering. The statement of compliance policy is:
 That all employees of the Bank are required to comply with applicable laws and
regulations and corporate ethical standards.
 That all activities carried on by the Bank must comply with applicable governing laws
and regulations.
 That complying with rules and regulations is the responsibility of each individual in
the Bank in the normal course of their assignments. It is the responsibility of the

individual to become familiar with the rules and regulations that relate to his or her
assignment. Ignorance of the rules and regulations is no excuse for non-compliance.
 That the statement should direct Officials to a compliance Officer or other
knowledgeable individuals when there is a question regarding compliance matters.
 That a certification that Official will be held accountable for carrying out their
compliance responsibilities.
Branch Managers Obligations:

The Branch Managers shall be primarily responsible for the prevention of Money
Laundering. They shall effectively reciprocate for the development, implementation,
maintenance and monitoring of procedures and controls that meet the requirements of Bank
Policy, Bank Standards and Rules and regulations under Money Laundering Prevention Act,
2012.
Monitoring:
A ‘Central Compliance Unit’ shall be setup at Head Office to ensure implementation of
Prevention of Money Laundering Act as well as Bangladesh Bank’s directives where one
Senior Executive will be posted as Convener. At bank branches, separate cell should be setup
under direct control and supervision of Branch Manager for prevention of possible money
laundering as per guidelines issued by Bangladesh Bank from time to time under intimation
to Head Office ‘Central Compliance Unit’.
Development of Software Profile System:

In order to facilitate detection of money laundering, Bank should develop Software
incorporating parameters for generating KYC profile & TP. The IT Division will develop
automated systems and processes for classifying customers on the basis of the risk matrix
provided by Bangladesh Bank under new KYC Profile & TP for monitoring transactions with
the transaction profile provided by the customers. These new systems will improve our ability
to detect unusual transactions, help the authorities to identify and respond to new money
laundering techniques.
Branch Managers Certifications:

Each Branch Manager shall certify that he/she maintains customer profiling applying due
diligence KYC. The Branch Manager will further certify that all Officers and Members of the
Officials of the Branch are aware of Money Laundering Prevention Act, 2012, Bank
standards of best practice, Bangladesh Bank Circulars/ Guidelines and Head Office Circulars/

Instructions issued from time to time and necessary care taken for following them
meticulously. The Branch Manager will also certify that he/she and his/her members of the
Officials have read and understood the ‘Guidelines on Prevention of Money Laundering’
issued from Head Office and standards of best practice with ‘Know Your Customer (KYC)
procedures.
Identification and Verification of Customers Account

A meaningful anti-money laundering compliance program of the Bank should include
identification and verification of customers at account opening. Accordingly, the Branch
must ensure to:
 Verify the identity of any person seeking to open an account to the extent reasonable
and practicable;
 Maintain records of the information used to verify a person’s identity, including
name, address and other identifying information; and
 Consult lists of known or suspected terrorists or terrorist organizations provided to
the financial institution by the regulators/government agency to determine whether a
person seeking to open an account appears on any such list. The following options
are recommended for a branch to consider in developing customer identification
process:
Customer Identification:
Branch should not keep anonymous accounts or accounts in obviously fictitious names: they
should be required (by Law, by regulations, by agreements between supervisory authorities
and Banks or by self-regulatory agreements among Banks) to identify, on the basis of an
Official or other reliable identifying document, and record the identity of their clients, either
occasional or usual, when establishing business relations or conducting transactions (in
particular opening of accounts, entering into fiduciary transactions, renting of lockers,
performing large cash transactions).
In order to fulfill identification requirements concerning legal entities, branch should, when
necessary, take measures:
 To verify the legal existence and structure of the customer by obtaining either from a
public register or from the customer or both, proof of incorporation, including
information concerning the customer’s name, legal form, address, directors and
provisions regulating the power to bind the entity.

 To verify that any person purporting to act on behalf of the customer is so authorized
and identify that person.
 No account should be opened without satisfactory identification and proper
introduction. In fact before account opening an experienced officer should interview
the customer to assess his need for opening an account, selection of a particular Bank
or Branch, his business, employment etc.
 Customer residence (permanent and present) or place of business to be carefully
considered. If it is not in the area served by the bank or branch, then customer’s
opening an account at that location may need some questioning.
 Thanking the customer for opening the account and the introducer for introducing the
account by sending letters to verify address should be done without fail.
 The source of funds used to open the account shall be known and commensurate with
the account opener’s details.
 For large accounts, asking the customer for a prior bank reference may be prudent.
Bank may write a letter to the Bank asking about the customer.
Customer Profiling:
i. Obtaining and document the customer’s basic background information.
ii. Try to use this information to evaluate the appropriateness and reasonableness of the
customer’s
iii. Determine the source of the customer’s funds transaction activity.
KYC Profile should disclose:

i. The customer’s expected transaction trends (monthly or annually),
ii. The source of wealth and
iii. Net income
KYC Profile should be upgraded/ updated by:

i. Regular reviews of transaction activity and balance fluctuation reports;
ii. Newspapers and magazine articles, financial statements, brochures, industry activities
relating to the customer;
iii. Periodical discussions with the client relating to their business activities including
future plan of the business for the next 12 months.
Bank should focus on:

 High risk customers;

 Source of significant funds; and
 Transactions which are inconsistent with the transaction profile.
 Client borrowing should be monitored in the course of business by the responsible
Officer of advances department to ascertain repayments or settlement of loans or loan
draw down is in line with the client business activities.
 Monitor Funds Transfer activities to track Money Laundering:
 Sending or receiving frequent or large volume of Swift/Telegraphic transfers to and
from domestic and offshore institutions.
 Depositing funds into several accounts, usually in amounts below the banks track
able threshold, and then consolidating into a master account and transferring them
outside of the country.
 Instructing the bank to transfer funds abroad and to expect an equal incoming Swift
/Telegraphic transfer from other sources.
 Regularly depositing or withdrawing large amounts by Swift/Telegraphic transfers to,
from, or through countries that are known sources of narcotics or whose bank secrecy
laws facilitate the laundering of money.
 Receiving Swift/Telegraphic transfers and immediately purchasing monetary
instruments prepared for payment to a third party.
Tracking of Large – Value Funds Transfers:

To curtail money laundering activities, the branch should focus on the identification and
documentation of currency based transactions. It is recommended to provide complete
information about the parties to a funds transfer. The information could include, to the extent
practical, complete originator and beneficiary information for payment orders sent through all
funds transfers systems. Branch should include the following information, to the extent
possible, in the text of every payment order:
- Name, address and account number of the applicant;
- The beneficiary’s name, address and account number, if available.
Monitor activity not consistent with the Customer’s Business:

 Corporate account(s) where deposits or withdrawals are primarily in cash rather than
cheques.

 A customer who operates a retail business and does not make substantial drawings
against cheque deposited. This may indicate that the customer has another source of
cash.
 Accounts with a large volume of deposits in demand Draft, Pay Order and/or
Swift/Telegraphic transfer, when the nature of the account holders business does not
justify such activity.
 Accounts that show frequent large cash transactions for a business that generally does
not deal in large amounts of cash.
 Retail deposits of numerous cheques but rare withdrawals for daily operations.
 An account that sends and receives Swift/Telegraphic transfer without an apparent
business reason or when inconsistent with the customers’ business or history.
Monitor unusual characteristics or activities in the customer’s account:

 An account holder or customer that has frequent deposits of large amounts of cash
deposit.
 Client or in-house company accounts, such as trust accounts, escrow accounts, etc.
that show substantial cash deposits. - An account opened in the name of a Money
Exchanger that receives Swift/Telegraphic transfers and/or structured deposits.
 A customer who purchase a number of Demand Draft, Pay Orders or Travelers
Cheques for large amounts just under a specified threshold or without apparent
reason.
Record Keeping: Branch should maintain all necessary records on transactions, both
domestic and international as per Bangladesh Bank Circular in force, to enable them to
comply swiftly with information requests from the competent authorities. Such records must
be sufficient to permit construction of individual transactions (including the amounts and
types of currency involved if any) so as to provide, if necessary, evidence for prosecution for
criminal behavior. Branch should keep records on customer identification (e.g. copies or
records of official identification documents like National ID Cards, Passports, Identity Cards,
Driving Licenses or Other Documents acceptable to the Bank), account files and business
correspondence for minimum 5 (five) years even after the account is closed. These
documents should be available to domestic competent authorities in the context of relevant
criminal prosecutions and investigations.

Guideline on Know Your Customer (KYC) Procedures
A KYC policy tailored to the bank’s operation:
 Helps detect suspicious activity in a timely manner,
 Promotes compliance with all banking laws,
 Promotes safe and sound banking practices,
 Minimize the risk that the bank will be used for illicit activities,
 Reduces the risk of government seizure and forfeiture of a customer’s loan collateral
when the customer is involved in criminal activity, and
 Protects the banks reputation. Generally, a branch should never establish a
relationship with a customer until it knows the customers true identity. If a potential
customer is unwilling to provide the necessary information, the relationship should
be reconsidered. However, the unwilling customer shall be impressed upon by the
branch manager to provide such information. If the bank has established a customer
relationship, it should be alert for any unusual business transactions.
Before opening an account due diligence is required to be performed on all prospective

clients. This process should be completed by fulfilling the documentation requirements
(Account Application, Bank References, Source of funds and Identification for example) and
also a „Know Your Customer‟ (KYC) profile which is used to record a client’s source of
wealth, expected transaction activity at it’s most basic level.
Once the identification procedures have been completed and the client relationship is
established, Branch should monitor the conduct of the relationship/account to ensure that it is
consistent with the nature of business stated when the relationship/account was opened.
Branch do this firstly by their Officer being diligent, reporting suspicious transactions
undertaken by the customer, updating the client’s KYC profile for any significant changes in
their lifestyle (e.g., change of employment status, increase in net worth) and by monitoring
the transaction activity over the client’s account on a periodic basis.
KYC profile must contain the basic information about the customer like, Name, Address,
Tel/Fax Numbers, line of business, Annual sales. If the customer is a Public Figure, the
account is to be treated as High Risk Account.
The KYC Profile information will also include the observations of the Officer of the Branch
when they visit the customer’s business place like, the business place is owned or rented, the

type of clients visited, by what method is the client paid (cheque or cash). The Officer will
record his observations and sign the KYC Profile form.
In the case of high net worth Accounts, the information will include net worth of the
customer, source of funds etc. Branch should complete the profile form for high net worth
customers falling under the following criterion:
a. New Customers whose initial deposit is more than Tk. 50 Lacs (initial means within
one month of A/c opening)
b. Existing customers whose total AUM (Asset under Management) grow to> Tk. 50
Lacs for 3 consecutive months.
The KYC Profile leads to Risk Classification of the Account as High/Low Risk.
Risk categorization – Based on Activity/KYC Profile:

When opening accounts, the concerned Officer must assess the risk that the accounts could be
used for “money laundering”, and must classify the accounts as either High Risk or Low
Risk. The risk assessment may be made using the KYC Profile Form given in which
following seven risk categories are scored using a scale of 1 to 5 where scale 4-5 denotes
High Risk, 3-Medium Risk and 1-2 Low Risk:
 Occupation or nature of customer’s business
 Net worth /sales turnover of the customer
 Mode of opening the account
 Expected value of monthly transactions
 Expected number of monthly transactions
 Expected value of monthly cash transactions
 Expected number of monthly cash transactions
The risk scoring of less than 14 indicates low risk and 14 or more than 14 would indicate high
risk. The risk assessment scores are to be documented in the KYC Profile Form. However,
management may judgmentally override this automatic risk assessment to “Low Risk” if it
believes that there are appropriate mitigators to the risk. This override decision must be
documented (reasons why) and approved by the Branch Manager, and Branch AML
Compliance Officer. Officer’s assessment or customer Provided KYC Profile Risk
Classification Frequency of Monitoring and Review guidelines on Prevention of Money

Laundering KYC Profiles and Transaction Profiles must be updated and re-approved at least
annually for “High Risk” accounts (as defined above). There is no requirement for periodic
updating of profiles for “Low Risk” transactional accounts. These should, of course, be
updated if and when an account is reclassified to “High Risk”, or as needed in the event of
investigations of suspicious transactions or other concern.
If a person deposits or withdraws money from an account which is maintained with other
branch through on line banking the branch must obtain details of depositor/ withdrawer on
reverse side of the deposit slip/cheque/instrument.
Transaction Monitoring Process:

Appropriate monitoring program for the activities and transactions routed through the
customer’s account should be instituted. Depending on the type and nature of the account,
Branch may fix/set a specific threshold covering the following account activities to identify
the client activities that do not appear commensurate with the client’s business activities.
 Large Cash transactions including cash deposits & withdrawals on any particular day.
 Large volume credit turnover or month-end credit balance of the same threshold.
 Remittance monitoring.
Branch is to monitor on an ongoing basis the relevant activities in the course of the business
relationship. The nature of this monitoring will depend on the nature of the business. The
purpose of this monitoring is for Branch to be vigilant for any significant changes or
inconsistencies in the pattern of transactions. Inconsistency is measured against the stated
original purpose of the accounts i.e. the declared Transaction Profile (TP) of the Customer.
Possible areas to monitor are:
a. Transaction type
b. Frequency
c. Unusually large amounts
d. Geographical origin/destination
e. Changes in account signatories
Suspicious Activity Reporting Process:

Branch should record in-writing all internal procedures so that, in the event of a suspicious
activity being discovered, all Officers are aware of the reporting chain and the procedures to
follow. Such procedures should be periodically updated to reflect any regulatory changes.

Branch should ensure that Officer will report all suspicious activities to their BAMLCO, and
that any such report be considered in light of all other relevant information by the BAMLCO,
or by another designated person, for the purpose of determining whether or not the
information or other matter contained in the report does give rise to a knowledge or
suspicion.
Where Officer continues to encounter suspicious activities on an account, which they have
previously reported to the BAMLCO, they should continue to make reports to the BAMLCO
whenever a further suspicious transaction occurs, and the BAMLCO Should determine
whether a disclosure in accordance with the regulations is appropriate.
All reports of suspicious activities must reach the CAMLCO at Head Office and only the
CAMLCO should have the authority to determine whether a disclosure in accordance with
the regulation is appropriate. However the Manager can be permitted to add his comments in
the suspicious report indicating any evidence as to why he/she believes the suspicion is not
justified.
Cash Transaction Report (CTR):

As per Bangladesh Bank directives branch will submit Cash Transaction Report (CTR) for
deposit & withdrawal of Cash amounting to Tk. 10.00 lac & above in customers’ accounts in
a particular day to the Anti-Money Laundering Department, Head Office within 7th of the
following month. Deposit Tk. 10.00 Lac & above in a Government Account Cash
Transaction Report (CTR) not to be submitted but withdrawal of 10.00 Lac & above to be
reported.
Structuring of Cash Transaction:

As per Money Laundering Prevention Act, 2012 structuring is an offence. If a customer intent
to conduct such transaction to avoid reporting requirement is called structuring. Branch
officials should vigilant to detect structuring.
Quarterly Report to be submitted to the CEO/Board:

As per Bangladesh Bank directives CAMLCO will submit report to the CEO/Board in
connection with steps taken by CCU, progress of its implementation and details suggestive
report in this regard on Quarterly basis.
4.7 Anti-terrorism Act, 2009: Relevant issues of the Act.

Terrorist financing provides funds for terrorist activity. The main objective of terrorist
activity is to intimidate a population or compel a government to do something by killing,
seriously harming or endangering one or more persons; causing substantial property damage
that is likely to seriously harm one or more persons; or seriously interfering with or
disrupting essential services, facilities or systems. To the prevention of certain terrorist
activities, this law was first enacted in 2009 and was amended twice, in 2012 & 2013.
Some important sections are elaborated bellow:

1: Short title, extent and commencement:
Title: Antiterrorism Act, 2009.
2: Extent: To whole of Bangladesh and applies also to persons on ships and aircrafts register
in Bangladesh, whenever they may be.
3: (Modification of ATA, 2009, Section-2)
Here some relevant terms such as “offence”, “arms”, “court”, "Convention“, “imprisonment”,
“Penal Code”, “foreigner”, “explosive substance”, “terrorist person”, “reporting agency”,
“public security” etc. have been defined.
4: Extra-territorial application: (Modification of ATA, 2009, Section-5)

(1) If any person or entity commits an offence within Bangladesh from outside of
Bangladesh which, if committed inside of Bangladesh by the same person or entity, would
have been punishable under this Act, the said offence shall be deemed to have been
committed in Bangladesh and the provisions of this Act shall apply to the said person or
entity and the offence.
(2) If any person or entity from Bangladesh commits an offence outside of
Bangladesh, which if committed within Bangladesh by the said person or entity would have
been punishable under this Act, the offence shall be deemed to have been committed in
Bangladesh and the provisions of this Act shall apply to the said person or entity and the
offence.
(3) If any person commits an offence in any foreign country and then take shelter in
Bangladesh which, if committed in Bangladesh, would have been punishable under this Act,
the said offence shall be deemed to have been committed in Bangladesh and the provisions of
this Act shall apply to the said person if he cannot be extradited to a foreign State having
jurisdiction over the said offence

5: (Terrorist activities) (Replacement of Section 6 of ATA 2009)
1) If any person, entity or foreigner do the following activities, the person, entity or
foreigner shall be deemed to have committed the offence of “terrorist activities”;
a. for the purposes of threatening the unity, integration, public security or sovereignty of
Bangladesh by creating panic among the public or a section of the public with a view
to compelling the Government or any entity or any person to do any act or preventing
them from doing any act
Offence Punishment
i) kills, causes grievous hurt to, confines 2a. death or imprisonment for life and in
or kidnaps any person or attempts to do addition a fine may also be imposed
the same
ii) conspires, abets or instigates any 2b. if the offence is not punishable with death,
person to kill, injure seriously, confine or be punished with (imprisonment for life or
kidnap any person; rigorous imprisonment for a term not exceeding
14 years but not less than 4 years, and with fine)
iii) damages or tries to damage the 2c. rigorous imprisonment for a term not
property of any other person, entity or the exceeding 14 years but not less than 4 years,
Republic; and with fine;
iv) conspires or abets or instigates to 2d. imprisonment for life or rigorous
damage the property of any other person, imprisonment for a term not exceeding 14 years
entity or the Republic; but not less than 4 years, and with fine
v) uses or keeps in possession any 2e. imprisonment for life or rigorous
explosive substance, inflammable imprisonment for a term not exceeding 14 years
substance and arms for the purposes of but not less than 4 years, and with fine.
sub-clauses (i), (ii), (iii) or (iv);
6: Offence of Terrorist Financing. (Replacement of Section 7 of ATA 2009)

(1) If any person or entity willfully provides, receives, collects or makes arrangements for
money, service or any other property, whether from legitimate or illegitimate source,
by any means, directly or indirectly, with the intention that, it would, in full or in part,
be used-
a) to carry out terrorist activity;

b) by a terrorist person or entity for any purpose, or is in the knowledge that it may be
used by a terrorist person or entity; the said person or entity shall be deemed to
have committed the offence of terrorist financing.
14: Powers of Bangladesh Bank (Replacement of Section 15 of ATA 2009)
(1) BB may take necessary steps to prevent and identify any transaction carried out by
any reporting agency (RA) with intent to commit an offence under this Act and for
this purpose it shall have the following powers and authority, namely.
(a) to call for a report relating to any suspicious transaction from any RA, analyze or
review the same and to collect additional information relating thereto for the purpose of
analyzing or reviewing the same and maintain record or database of them and, as the case
may be, provide with the said information or report to the police or other concerned law
enforcement agencies for taking necessary actions;
(b) if there is reasonable ground to suspect that a transaction is connected to terrorist
activities,
- to issue a written order to the respective RA to suspend or freeze transactions of that
relevant account
• For suspension of transaction and freezing of an account as maintained by a RA, the
BFIU shall follow the following procedure
(i) Suspension or freezing order shall contain as much detail as possible about the
account or transaction and customer;
(ii) The BFIU may suspend debit, credit or both transaction or any transaction of
an account;
(iii) Every suspension or freeze order shall continue for a period of 30 days only and
the BFIU may issue additional 6 months orders on same ground against the same account or
transaction as it deems fit and proper;
(iv) The BFIU may issue different suspension or freeze order on different ground
against the same account or transaction.
(v) The RA shall consult with the BFIU before any transaction in the account that was
under suspension or freeze order to confirm about the expiration of suspension or freeze
order or further instruction from the BFIU;
(vi) Suspension order shall mean that no debit will be allowed except maintenance
fees and excise duty deducted from that account, if not mentioned otherwise.
Credit may be allowed with proper due diligence if it is not mentioned otherwise in the
suspension order;
(vii) During the continuance of the freeze order no debit or credit shall be allowed in
the account without prior written instruction from the BFIU.
RA shall after receiving the freeze order, immediately inform the BFIU as to the balance and
linked accounts
(viii) In case of false positive, the BFIU shall have the authority to withdraw
the suspension or freeze order, if the order was issued on its own motion after reviewing the
application and supporting documents submitted by the aggrieved person or entity;
(ix) the BFIU shall consult with requesting Government agency before withdrawal of
a suspension or freeze order based on a false positive, where the order was issued on the basis
of a request made by other Government agency;
Unfreezing:
(1) Upon request made by any person or entity, the BFIU may allow to unfreeze or
withdraw the funds and other financial assets or economic resources of individual or entity
with the same or similar name as listed or suspected individual or entity (i.e. a false positive),
provided that the BFIU determines that the individual or entity is not the actual listed or
suspected individual or entity.
(2) For false positive, burden of proof shall lie upon the person or entity
concerned that they are not directly or indirectly involved in the commission of any criminal
offence as alleged.
(3) To protect the right of a bonafide third party and to confirm the identity as to false
positive, the BFIU shall have the authority to seek information or documents from the person
or entity concerned, as may be required.
(4) To protect the right of a bonafide third party and to confirm the identity as to false
positive, CID) of Bangladesh Police or other law enforcing agency shall provide information
or documents upon request of the BFIU.
(c) to monitor and supervise the activities of the reporting agencies;
(d) to give directions to the reporting agencies to take preventive steps to prevent
financing of terrorist activities and proliferation of weapons of mass destructions
(e) to monitor the compliance of the reporting agencies and to carry out on-site
inspection of the reporting agencies for carrying out any purpose of this Act;

(f) to provide training to the officers and employees of the reporting agencies for the
purpose of identification of suspicious transactions and prevention of financing of terrorist
activities.
(2) BB, on identification of a RA or any of its customers as being involved in a
suspicious transaction connected to financing of terrorist activities, shall inform the
same to the police or the appropriate law enforcement agency and provide all
necessary cooperation to facilitate their inquiries and investigations into the matter.
(3) If the offence is committed in another country or the trial of an offence is pending in
another country, BB shall take steps to seize the accounts of any person or entity upon
request of the foreign state or pursuant to any international, regional or bilateral
agreement, United Nations conventions ratified by the Government of Bangladesh or
respective resolutions adopted by the United Nations Security Council.
(4) The fund seized under sub-section (3) shall be subject to disposal by the concerned
court or pursuant to the concerned agreements, conventions or resolutions adopted by
the United Nations Security Council.
(5) The power and responsibilities of BB under the provisions of this Act shall be
exercised by BFIU, and
o if BFIU requests to provide with any information under this Act, all the governmental,
semi- governmental or autonomous bodies, or any other relevant institutions or
organizations shall, on such request or, as the case may be, spontaneously provide it
with such information.
o BFIU shall, on request or, as the cases may be, spontaneously provide the financial
intelligence units of other countries or any other similar foreign counterparts with any
information relating to terrorist activities or financing of terrorist activities.
(7) For the interest of investigation relating to financing of terrorist activities, the law
enforcement agencies shall have the right to access any document or file of any bank under
the following conditions:
(a) According to an order passed by a competent court or special tribunal; or
(b) With the approval of the BB
(8) If any RA fails to comply with the directions issued by BB under this section or
knowingly provides any wrong or false information or statement, the said RA shall be
liable to pay a fine, determined and directed by BB, not exceeding taka 25 lac, and
BB may suspend the registration or license with intent to stop operation of the said agency or
any of its branches, service centers, booths or agents within Bangladesh or, as the case may
be, shall inform the registering or licensing authority about the subject matter to take
appropriate action against the agency.
(9) If any RA fails to pay or does not pay any fine imposed by BB according to sub-
section (8), BB may recover the amount from the RA by debiting its accounts
maintained in any other bank or financial institution or in BB and in case of any
unrealized or unpaid amount, BB may, if necessary, apply before the concerned court
for recovery.
15. Duties of reporting agency– (Replacement of Section 16 of ATA 2009)

1. Every reporting agency shall take necessary measures, with appropriate caution
and responsibility, to prevent and identify financial transactions through them which
is connected to any offence under this Act and if any suspicious transaction is
identified, the agency shall spontaneously report it to the Bangladesh Bank without
any delay.
2. The Board of Directors, or in the absence of the Board of Directors, the Chief
Executive Officer, by whatever name called, of each reporting organization shall
approve and issue directions regarding the duties of its officers, and shall ascertain
whether the directions issued by Bangladesh Bank under section 15, which are
applicable to the reporting agency, have been complied with or not.
3. If any reporting agency fails to comply with the provision under sub-section (1) the
said reporting agency shall be liable to pay a fine determined and directed by
Bangladesh Bank not exceeding taka 25 (twenty five) lac and Bangladesh Bank
may suspend the registration or license with intent to stop operation of the said agency
or any of its branches, service centers, booths or agents within Bangladesh or, as the
case may be, shall inform the registering or licensing authority about the subject
matter to take appropriate action against the agency.
4. If the Board of Directors, or in the absence of the Board of Directors, the
Chief Executive Officer, by whatever name called, of any reporting organization
fails to comply with the provision under sub-section (2) the chairman of the Board of
Directors, or the Chief Executive Officer, as the case may be, shall be liable to pay a
fine determined and directed by Bangladesh Bank not exceeding taka 25
(twenty five) lac and Bangladesh Bank may remove the said person from his
position, as the case may be, shall inform the competent authority about the
subject matter to take appropriate action against the person.

5. If any reporting agency fails to pay or does not pay any fine imposed by
Bangladesh Ban k according to subsection (3) or if the chairman of the Board of
Directors, or the Chief Executive Officer, whatever they may be called, fails to pay
or does not pay any fine imposed by Bangladesh Bank according to sub -
section (4), Bangladesh Bank may recover the amount from the reporting agency or
from the account of the respective person by debiting any account maintained in
any bank or financial institution or Bangladesh Bank and in case of any
unrealized or unpaid amount, Bangladesh Bank may, if necessary, apply before the
concerned court for recovery.
4.8 The Bankers' Book Evidence Act, 1891: Relevant Provisions

The important piece of legislation which is made for Bankers alone in this country is the
Bankers' Books Evidence Act-1891. It is a special Act giving certain privileges to Banks as
regards the mode of proving of entries in their books and the production thereof in Courts of
Law.
The Law of evidence requires that the existence, condition or contents of a document can be
proved before a court only by producing the original document. So long as the original
document is available a copy cannot be produced. One of such exception is when the original
is a document of which a certified copy is permitted by any law. The Bankers' Books
Evidence Act is one of the provisions of the law which allows the production of certified
copy of document.
Section - 2 (3):
"bankers' books" include ledgers, day-books, cash-books, account-books and all other books
used in the ordinary business of a bank.
(4) "legal proceeding" means any proceeding or inquiry in which evidence is or may be
given, and includes an arbitration:
(8) "certified copy" means a copy of any entry in the books of a bank together with a
certificate written at the foot of such copy that it is a true copy of such entry, that such entry
is contained in one of the ordinary books of the bank and was made in the usual and ordinary
course of business, and that such book is still in the custody of the bank, such certificate

being dated and subscribed by the principal accountant or manager of the bank with his name
and official title.
[
Section- 4: Subject to the provisions of this Act, a certified copy of any entry in a banker's
book shall in all legal proceedings be received as prima facie evidence of the existence of
such entry, and shall be admitted as evidence of the matters, transactions and accounts therein
recorded in every case where, and to the same extent as, the original entry itself is now by
law admissible, but not further or otherwise.
4.9 Guidelines for Customer Services and Complaint Management: An Overview

Financial institutions are the most important channel for providing financial services to the
customers. Among the financial institutions banks play a predominant role. Hence, banks
need to cater the needs of their customers by the way of providing excellent customer
services. This is particularly significant with the rapid expansion of banking network within
the country where customer’s expectations for service are rapidly increasing. The quality of
customer service has come under tremendous pressure due to not handling customers'
questions and complaints in a systematic and timely manner and interacting with customers
through face-to-face meeting or any communication channel. Banks are trying to address all
the issues because at the end of the day customer satisfaction is the key to any organization.
For this reason banks need to manage customers’ expectations as there is ample scope of
retaining them. Therefore, from the central bank a guideline has initiated on June 2014 to
maintain minimum standards of customer service that shall be expected to be achieved by
complaint cells of any banking company /financial institutions. It is structured and focused on
the aspects of customer service quality, customer awareness program and complaint
management system.
Customer Services
Customer service should be projected as a priority objective of a bank along with its
profitability, growth and social responsibility. Therefore, the top management of each
bank/FI should have direct involvement with customer service quality.
Institutional Framework: A separate framework for customer services and complaint

management will be there. With a view to improving and strengthening the corporate
governance structure of the bank/FI, each bank/FI shall constitute Customer Service &
Complaints Management Cells. At the head office/country office level this cell will be named
as Central Customer Service & Complaints Management Cell (CCS&CMC). It will be
constituted under the direct supervision of the Managing Director or the Chief Executive
Officer (CEO)/Country Manager of the bank. This cell will be exclusively for dealing with
the complaints & customer Service related matters. The number of personnel of this cell will
be determined by the Managing Authority of the bank and the personnel of this cell will have
adequate power to settle the disputes with due diligence.
Under the CCS&CMC there will be the Zonal Customer Service & Complaints Management
Cell (ZCS&CMC). Herein also it may be mentioned that the existing Zonal Complaint
Cells in the zonal offices of the Banks/FIs will be renamed as the Zonal Customer
Service & Complaints Management Cells (ZCS&CMC). The size of the ZCS&CMC (the
number of man-power and category of dignitaries) will be determined by the zonal head of
the bank/FI. Under the ZCS&CMC there will be Branch Level Customer Service &
Complaints Management Desk (BLCS&CMD).The number of personnel will be
determined by the branch manager taking into consideration the number of customers as
well as the number of employees of the branch. In the case of very limited or short man-
power of the branch, at least one official must be deployed in the BLCS&CMD.
The Functions of CCS & CMC: The functions of CCS & CMC will fall under two categories
namely policy related functions and operational functions. The Cell shall play the policy
related roles in developing the standard of customer services of the bank which includes-
 Establishment of some basic institutional approach or ethical principles regarding customer
services in the bank.
 Issuance of necessary customer- service- related policy for general management of the
customer services in the branches.
 Formulation of Code of Conduct for bank officials (As per para-2.07).
 Formulation of Service Standard and Customer Charter in each bank. (As per para-2.08 &
2.09)
 Promulgation of customer awareness program (As per para-2.11).
 Arrangement of quarterly meeting to review customer services, systematic deficiencies and
take corrective measures thereon.
 The Cell shall submit a brief half yearly report to the board stating the status of
complaints received, resolved and outstanding with suggestions for improvement of
quality service or products.
The operational functions will deal with how the complaints are being received managed-

 To deal with the complaints received directly from customers, Zonal Customer
Service & Complaints Management Cell (ZCS & CMC)/ Branch Level Customer Service
& Complaints Management Desk (BLCS & CMD).
 To monitor the overall activities and performances of the ZCS & CMC.
 To maintain liaison and respond duly and timely to the letters of Bangladesh Bank. If the
complaints are related to other divisions, CCS & CMC will take the responsibility to
communicate with the relevant divisions, collect information and give reply to
Bangladesh Bank.
 To put forward the proposals to the Managing Authority for modification or
formulation of new policy related to the customer service.
 To comply with and implement the directions/instructions of Bangladesh Bank.
 To maintain a register of complaints, received either from the customers directly or from
the zonal and branch offices. (As per para- 3.02)
 To submit the monthly/quarterly statement containing the number of complaints received,
resolved and outstanding to Bangladesh Bank through Web Portal.
The Functions of ZCS & CMC: The functions of zonal customer service and complaint
management cell are mainly to monitor and supervise the complaint from customers directly
and branches.
 To deal with the complaints received directly from customers and from Branch Level
Customer Service & Complaints Management Desk (BLCS & CMD).
 To monitor the activities of the Branch Level Customer Service & Complaints
Management Desk (BLCS & CMD).
 To maintain liaison with the CCS & CMC and respond to any query of that cell.
 To maintain a register of the complaints, received from customers directly or
through Branch Level Customer Service & Complaints Management Desk (BLCS &
CMD).
 To submit report monthly/quarterly (by tenth of the next month/quarter ended) to the
CCS & CMC showing the status of complaints received, in the prescribed format.
 To arrange a quarterly meeting (by fifteenth of the next month of the quarter ended) with
BLCS & CMD employees for discussing the progress and problems of customer services
and complaints management at the branch level.

The Functions of BLCS& CMD: The functions of branch level customer service and
complaint management cell works with the complaint directly received from customers.
 Branch Level Customer Service & Complaints Management Desk (BLCS&CMD) shall
deal with all the complaints directly received from the customers either in written
form or over telephone. It will also give patient hearing to those customers who
physically appear before the desk with complaints.
 The BLCS&CMD shall also give reply to the customer-service-related queries of the
customers.
 The BLCS&CMD shall maintain two separate registers to record the written and
telephonic complaints. Then it will take action on the complaints received on priority
basis.
 The BLCS&CMD shall prepare a monthly/quarterly statement or report in prescribed
format showing the number of complaints received, resolved and outstanding and
send it to the ZCS &CMC within fifth of the next month/the quarter ended.
 The BLCS&CMD may refer any complex complaint to the ZCS & CMC for
further suggestion or resolution. The BLCS&CMD will keep correspondences with
ZCS&CMC for this purpose.
Institutional Approaches to Customer Services: As banks are dealing with money better
service as well as trustworthiness is very essential for the profitability of the bank. The
achievement of these two factors mainly depends on the institutional approach, ethics and
core principles which are possessed and exercised by the bank. So, banks should establish
some corporate principles, ethics, culture, moral standards and collective attitudes for
customer services. The strict exercise of these will result in the administrative success as well
as the credibility of the bank to the customers.
The fundamental ethics and principles that bank officials should follow while dealing with
customers' are furnished below:
SL No Core principles/ Details of approach
ethics
1 Accountability and Responsibility of each employee
engaged in customer service should be designed clearly
Accountability
and specifically. Bank/FI official should provide service to
their customers with a sense of urgency and commitment.
2 Transparency There should be transparency in all terms & conditions and

information relating to all banking products and services
provided by the bank/FI to the customers.
3 Equity and Bank/FI officials must exhibit their honesty, integrity,
integrity loyalty, impartiality to their customers. The officials
dedicated to customer services should avoid conflict of
interest.
4 Compliance Bank/FI officials must comply with their relevant rules
&regulations, policies and BB's instructions while
rendering services to the customers.
5 Safety and security Banks/FIs should ensure safety and security in
operating system and dealings of their banking products
and services.
6 Bank/FI officials should maintain privacy and
confidentiality of the banking transactions of their
Privacy and
customers with some exception such as disclosure under
confidentiality
compulsion of law, public interest, bank's interest
customer's consent etc.
Policy for General Management of the branches: Banking system should be oriented
towards providing better customer service. Therefore, bank officials should periodically study
their system and its impact on customer service. Bank should also have a Management
approved policy for general management of the branches which may include the following
aspects:
 Providing customers with booklets containing all details of services and facilities
available at bank branches in Bengali and English.
 Displaying indicator boards at all service counters in both English and Bengali. c)
Surprise inspection and survey of customer services.
 Reviewing and improving existing security system in branches and ATM booths. e)
Providing enquiry counters at big branches.
 Training of staff in line with customer service orientation.
 Developing banking products or services keeping view to suitability and
appropriateness for general customers.
 Annual survey on customer satisfaction and grievances resolution.

Code of Conduct: Generally Code of conduct is a set of rules for employees' personal
behavioral pattern, official decorum, dress code, environmental and disciplinary arrangement
for staff, stakeholders and stock holders in the banking premises set forth by bank. The
purpose of the code of conduct is to create a sense of oneness among a group of employees,
customers and guests in spite of individual differences, an ethical development of corporate
culture to express a unique form of behave, attitudes and pattern of greeting customers with
professionalism, knowledge and attention. The aim of the code of conduct is also to develop a
common perspective towards the mission & vision of the company by satisfying its
customers with proper, unique banking services for all. A Code of Conduct acts as an internal
watchdog and memorandum of the basic requirements of appropriate professionalism within
the organizational culture. Exercising code of conduct helps to make customers happy and
improve long term banker-customer relationship.
So each and every bank needs to formulate the basic code of conduct for the employees and it
will be applied in five essential areas (5Ps) as listed below:
 People - The team, employees of the Bank, who serve the customers.
 Premises - The location, outlets, from which bankers serve and communicate with
customers and colleagues.
 Papers - The documents, electronic or printed, which are used to provide and receive
information.
 Processes -The operation processes that enable bankers to delight customers.
 Practices - The way or customs' through which bankers interact with customers.
The formulated code of conduct must cover the following topics:
1. Behavioral pattern- Banks/FIs shall set forth some basic behavioral standard or
indicators for all employees, especially for the officials concerned with Customer
Services and Complaints management. Behavioral pattern includes the standard in
speaking, listening, greetings that will exhibit loyalty, modesty, impartiality and
proactive attitude in providing service and that will not show obscene or abusive
language, materials or messages in any way.
2. Disciplinary arrangement- Banks/FIs shall make some rules and arrangements
which will help to keep customer service point neat, clean, comfortable and
disciplined. There should be sitting arrangement, waiting lounge, drinking water,
smoking or non-smoking zone, line or array at customer service point and counter for

customers etc.
Standard behavioral pattern and indicators at customer service point of view are that bank/FI
authority should strive to motivate their employees to expose standard behavior while
delivering their service to customers over the telephone, cell phone or face-to-face. Some
examples are given below:
1. Use basic courtesies such as always try to say “Please” and “Thank you” while
conversing with the customers.
2. Address customers properly such as Mr. or Ms. and surname of customer may
acceptable. Never use casual terms of endearment such as “honey”, “yeah”, “huh”, or
“dear.”
3. Treat others as you would like to be treated in the same situation.
4. Never show emotional impression or expression
5. Be positive, pleasant, courteous and cheerful with a good impression.
6. Never interrupt interactions with a customer to take a break, lunch or any lame excuse
etc.
7. Avoid any rubbish or junk word to the customers.
8. Never disparage or criticize another employee or customers.
9. Do not react negatively when someone approaches any help.
10. Do not take anything personally.
11. Avoid technical terminology with all customers
12. Assume everything (remark, comment or any approach) positively and take the
best theme or idea , even if the customer actually meant the comment in a negative
manner, he or she will see that you sincerely want to help them and then their
attitude will change.
13. Present a professional approach and appearance by practicing good personal
hygiene and dressing appropriately in the work place.
14. Be a bank employee, not just a department employee as the customers see us as “the
bankers” - they do not see individual departments or divisions.
Service Standards: Service standard is a guideline showing the timeline or time frame,
initiating level and disposal level of banking service at the customer service point or counter
in the bank premise. It will control the dedicated official to render services in time and
efficiently through proper channel. The lack of clear service standards also increases the
chance of inconsistent and irregular service. Each employee and each department will choose

the level of service they wish to deliver. Customer should be informed of Service Standard of
the bank so that they can assume or plan in advance the required timeline to obtain services.
Hence bank shall -
 Formulate their Service Standard considering relevant factors such as number of
employees, customers, environment, customers' requirement, availability of logistic
support etc. Bank should follow it strictly. It must be kept in mind that standard of each
service should be set in such a manner as it would be achievable, reasonable and
measurable.
 Ensure the compliance of the Service Standard time to time.
Customer Charter: Customer Charter is a general statement of commitments for

providing banking services and necessary information to customers. This may be in the
form of written document, banner, poster, leaflets etc. that exhibit the names of
banking products and services available in the bank. It also contains road maps or
indicators for the customers to get services in the bank premises. For example, the
indications of Information desk, Customer Relationship Desk, Remittance Desk, Credit
Desk etc. may be displayed in the charter for the customers for tracing the service
points easily. The Charter will also include a list of customers’ rights & obligations to
Banks/FIs. The main objective of the “Customer Charter” is to make the customers
conscious about their general rights, obligations, grievance approach process and thereby
help customers taking their own decision. Copies of the Customer Charter should be
available on request to all customers at all branches, Customer-Service-Points and at
bank's web site. All Banks/FIs shall-
 prepare and preserve their "Customer Charter" in their respective branches and
exhibit in their premises.
 inform, publish or display customers' rights & obligations as well as Bankers' rights
& obligations through their web site, leaflets, notice boards , posters or in any other
communication channels.
Customers’ Rights/Bankers’ Obligations: Banks/FIs shall allow their customers to obtain

the following rights at least, i e, Banks/FIs shall carry out the following obligations to their
customers:
A. Disclosure of Current Interest Rates
Prior to signing the contract with the consumers for both interest-bearing deposits and
loans, Banks & FIs shall-

 inform the customers of the term of the fixed deposit or loan;
 inform the customers of the charges, if any, and consequences of pre matured
termination of a fixed deposit or loan;
 inform the customers whether the interest rate is fixed or variable;
 inform the basis and frequency on which interest payments or deductions are to be
made;
 explain the method used to calculate interest of each product;
 disclose prominently the total amount of income that the customers shall receive on the
fixed deposits; and
 disclose the total cost of credit with break up, if any.
B. Disclosure of latest Schedule of Charges, Fee, Commission etc.

As financial service provider Banks/FIs shall, for all charges and fees to be levied at the time
of service rendered or on request,
 provide the customers with a schedule of charges, fees, commissions payable for the
products or services that the customers have chosen;
 display prominently their standard fees and charges at all branches,
 inform the customers of any additional charges or expenses that the customers have to
pay, such as searching fees to retrieve available past records etc.
C. Notice of Changes to Terms and Conditions: The terms and conditions provided by
banks/FIs shall highlight to a consumer the fees, charges, penalties, relevant interest rates and
any other consumer liabilities or obligations in the use of the financial products or services.
Banks/FIs shall ensure that a consumer is notified-
 at least thirty days in advance before implementing any changes to the terms
and conditions, fees or charges, discontinuation of services or relocation of premises of
the financial services provider.
 immediately of any changes in interest rates regarding the product or service.
D. Value Added Services: Banks/FIs must take written consent from their
customers for any value added services, such as, internet banking, SMS banking, ATM
services etc. and inform the customers of the terms and conditions along with the charges,
levied for that.

E. Guarantor: Prior to a person acting as a guarantor, banks/FIs shall in writing:
 advise the person of the quantum and nature of his or her potential liabilities; and
 advise the person to seek independent legal advice before acting as a personal
guarantor.
F. Disclosure of other facts, such as-

 Buying and selling rates of foreign currencies
 Financial statement, financial performance indicators etc.
 Banking hours and holiday notices
 Operating cycle or road map of services (indicators showing desk Number, floor
number, room number etc.).
Displaying the Contact Details of the Officials of Customer Services and Complaint
Management Cells:
With a view to making the complaint lodgment easier banks/FIs shall
 display the contact details including names, complete address, telephone number,
fax number, email address, etc. of the officials of CCS&CMC, ZCS&CMC and
BLCS&CMD in the prominent place of the branches.
 display on their web-sites the contact details including names, complete address,
telephone number, fax number, email address, etc. of the officials of CCS&CMC and
ZCS&CMC.
Customer Awareness Program: Now a days it has been observed that financial scams,
financial frauds & forgeries, financial crisis, financial corruptions and customer
harassment have been incurring frequently in financial sector with the development of
E-banking (E- banking generally refers to the provision of banking products and services
through electronic channels such as the personal computer, through land phone and mobile
phone connections, or through automated teller machines - ATMs, Point of Sales etc.). The
primary reasons behind these are identified as the information gap as well as the
communication gap between customers & bankers and the lack of awareness & financial
education of customers. In such a situation customer awareness is a key defense against
fraud, forgery and identity theft and security breach.
That’s why bank/FI should take attempt to make customers aware of and to make educated

for financial literacy with a view to strengthening customers’ knowledge and experience and
thereby to reduce fraud, forgery and harassment. Customer Awareness and Education
Program for customers can be arranged for providing customers with the knowledge
and understanding of the wide range of banking products and services. Thus, the customers
will be aware and conscious of their own rights and responsibilities, safety measure
thereof independently. Besides, bank shall continue monitoring off- line risks as well
as online threats such as hacking, phishing, identity theft etc. and reviewing security
procedures day to day.
As a part of Customer Awareness Program bank/FI shall perform the activities as
stated below:
A. Banks/FIs shall publish or declare customers alert and precautionary message,
guidelines etc. on their products and services time to time through brochures,
leaflets and advertisement in communication channels on the following topics.
 Customer alert and precautionary message on general banking.
 Customer alert and precautionary message on Internet banking
 Customer alert and precautionary message on loan and advances.
 Customer alert and precautionary message on local and foreign remittances etc.
B. Banks/FIs shall arrange meeting, seminar, workshop or any other non-formal
programs periodically to convey their awareness message and alert tips to the
customers relating to their own banking products and services.
C. Banks/FIs shall also train up their customer-service-related officials to enhance their
efficiency, skill, knowledge, tact, technique for excellent customer services.
Tips for customers' alert as examples:

A. General Banking Issues
 Read the terms and conditions of each product and services carefully: Customers
have to read and understand the terms and conditions of an agreement/contract for any
loan or investment related product prior to signing any related documents.
 Responsibilities of a guarantor: Customers have to understand the
responsibilities and obligations of a guarantor. Guarantors are legally bound to
make repayment if the borrower fails to settle the loan.
 Disclosure of financial information: Customer should not disclose their financial
information such as account number, credit card number, password and other
personal particulars to third parties either via telephone, e-mails or any links in

websites.
 Transactions at ATM booth: Customer should not allow third parties to make
transactions at ATM machines on behalf of customer, even to those whom customers
know such as spouse, son or daughter, personal assistant etc.
 Credit card transactions: Customers should use Credit Cards as a payment
instrument and utilization should be within customers’ means. Customers should also
verify the amount deducted after each credit card transaction and make sure the card
returned belongs to customer.
 Submission of documents: Customers should be cautious themselves before
submitting photocopies of their identification card or passport to third parties, other
than to financial institutions or lawyers acting on your behalf.
 Internet banking facilities: Customer should be alert not to be deceived in
opening an internet banking account in order to win prizes or inheritance from an
unknown party. This could be a scam if one has already done so. In such cases the
customers should contact and report to bank and to the police immediately for their
further action, also keep Bank informed.
 Memory cache function: Customer should make sure that customers have
logged-out properly after using the internet banking and clear the memory cache
after completing the transactions.
B. Internet Banking Security Issues

Customers should
 not to share or give out own access ID, user name, passwords, or security challenge
questions & answers
 not to use same personal information as own access ID, user name & password in all
cases
 create difficult or uncommon passwords that include letters & numbers and upper &
lowercase letters combined.
 change own password frequently
 avoid using public computers to access your internet banking.
 not provide any personal information to web sites that do not use encryption or other
secure methods of protection.
 ensure that computer is equipped with up to date anti-virus so.

1. Define contract?
2. What are the essential elements of a contract?
3. Define contract of guarantee and contract of indemnity.
4. Define partnership.
5. Mention the right and obligation of the partners.
6. Define a company and its common characteristics.
7. State the different types of companies.
8. Differentiate between Public and Private Limited Company.
9. State the contents of memorandum and articles of association.
10. Mention different types of shares of a public limited company.
11. What is material alteration?
12. Under what circumstances a banker can legally refuse a valid cheque?
13. What is the liability of a drawee.
14. Define money laundering as per MLP Act 2012.
15. What does that mean the reporting organization under MLP Act 2012?
16. State the responsibilities of the reporting organization in prevention of money
laundering.
17. Define and explain KYC and TP.
18. What is cash transaction reporting?

CHAPTER 5
Opening and Operations of Bank Deposit Accounts

5.1 Bank Deposits
Most of the commercial banks compete strongly with one another in tapping the savings of
the public by means of offering different kinds of deposits. Every bank has already
introduced several deposit schemes to attract deposits from various customers group. The
management of each bank is aware of the situation and it has already started diversifying
sources of funds to reduce the dependency on funds from other banks. Many banks are
opening branches all across the country to reduce dependence on urban deposits. Meanwhile,
a number of banks have built up its alternative channel infrastructure to offer the full suite of
ATM’s, POS, Internet Banking, Call center, SMS Banking for its customers.
Deposits usually are in the form of Current deposits, Savings deposits, Fixed Deposits, Short
Notice Deposits and Recurring Deposits. Deposits are often called the lifeblood of
commercial bank. Banks are called custodians of public money and mobilization of the
deposits from the public is one of the most important functions of the commercial banks.
Traditionally banks in Bangladesh have two types of deposits, namely Demand Deposits and,
Time Deposits.
Demand Deposit: All Current Deposits and a small portion of savings Deposit (9%) are
termed as demand deposit. Such deposits are withdraw able on demand.
Time/Term Deposit: Time deposits are repayable on maturity and usually interest bearing.
Time deposits may be of:
a) Fixed Deposits
b) Short Notice Deposits
c) Recurring Deposits
d) Large portion of Saving Deposits (91%)
The period of the deposit and rate of interest applicable to the deposits are matters to be
agreed between the depositor and the bank under the terms of the deposit.
5.2 Current Deposit

A Current account is generally opened by business people for their convenience. Big
customers as Individual business man, Group of persons, Joint Stock Companies, Public
authorities, Non-trading Companies, Trustees, Banks, and Corporations etc. generally open
this account. Money can be deposited and withdrawn at any time without restriction. Current
account holders are to keep a minimum balance in their account for charging incidental and
others if any, in case of need at the time of half and annual closing.

Usually the bank sends a statement of account to the customers every month.As these
deposits are repayable on demand, the banker required to keep a large cash reserve. This may
be one of the reasons why a banker does not pay any interest on current deposit account.
However, some banks are allowing low rate of interest in such accounts for attracting their
customers now a days.
5.3 Savings Deposit
This deposit is intended primarily for small scale savers. The main objective of this deposit
account is to encourage savings habit among people. The number of withdrawals is generally
restricted. Rules in this regard may vary from bank to bank. Heavy withdrawals are permitted
only against prior notice. A minimum balance is required to be maintained at all times.
Interest generally allowed on this deposit account subject to fulfillment of the terms and
conditions. Interest is allowed at the rate specified by the bank on minimum monthly
balances and on monthly product basis. Cheque book is issued to the account holder.
Appointment of nominee is compulsory. Interest is credited to the account every six months
(Generally in June and December).
5.4 Short Notice Deposit (SND)
Generally, these accounts are opened who wants liquidity and some return simultaneously on
their deposits and withdraw able by short notice. No interest is payable if withdrawal is made
without prior notice. Interest is payable on daily product basis. Interest is lower and suitable
for corporations. Cheque books are issued (at present).
5.5 Fixed Deposit Receipt (FDR)
FDR are the deposits which are occupied against acknowledgement receipt. Usually longer
the period, the higher the rate of interest is paid. The fixing of the period enables the banker
to invest money and to employ it in his business without having to keep a reserve.
5.6 Recurring Deposits
Deposit pension Scheme/Monthly Savings Scheme/Contributory Savings Scheme etc. are
opened by the fixed income/salaried people intended to save money with a bank monthly, so
that they can get back their savings with interest/profit thereon after a few years. One can
take benefit at a time on maturity.
5.7 Deposit Products of NCC Bank Limited
Different liability products of the bank along with their features, schedule of charges etc., are
described below:

Special Notice Deposit (SND)
STD is renamed as SND as per Bangladesh Bank Instruction.

Nature : 100% Time Deposit. Account holder can withdraw their deposits with prior notice to
the Bank.
Target : Any businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate
Group
bodies, Joint stock companies etc.
SND account may be opened in the name of Corporate Bodies, Joint Stock Companies
and also in the name of Adult individual or jointly who is/are mentally sound.
Current Deposit (CD)
Nature : 100% Demand Deposit. Account holder can withdraw their deposits frequently without
any limit.
Target : Any businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate
Group bodies etc.
CD account may be opened in the name of Firm, Corporate Bodies, Joint Stock
Companies and also in the name of Adult individual or jointly who is/are mentally
sound.
Savings Bank Deposit (SB)
Nature : Hybrid.10% is Demand and 90% is time Deposit. Account holder can withdraw their
deposits twice in a week up to a certain limit.
Target : Any Individual.
Group Savings Bank account may be opened in the name of Adult individual or jointly who
is/are mentally sound. It also be open in the name of illiterate persons and minor after
observing/completion of necessary formalities. In some cases SB Account may be open
in the name of Club, Society or similar Institution.
Conditions
 In case of Savings Bank A/c the depositor(s) may withdraw money from the account twice in a
week and may withdraw money up to 25% of the balance without notice but withdrawal money
exceeding 25%, 07(seven) days prior notice is required. If the depositor persistently withdraws
more than twice in a week or a sum exceeding 25% of the balance in the account without notice,

the depositor will not get interest for that month.
 If the balance is turn down below Tk.500 at any day of a particular month then he will not be
entitled of interest for that month.
 Considering the deposited amount of the first 6th date of each month, interest will be paid on the
minimum balance of the said month as per prescribed rate on June and December of each year.
Customer Benefits of SB/CD/SND Account
Wide network of Branches (121 Branches all over Utility payment service
Bangladesh)
MICR Cheque-book facility Debit card facilities
Opportunity to apply for - safe deposit locker facility Online banking service
Transfer of fund from one branch to another branch by Collection of cheques through Clearing.
DD/TT/MT
Collect foreign remittance in both T.C. & Taka draft SMS Banking facilities
Required documents (CD/SND/SB)
Individual account/Joint accounts

 Photographs of the applicant(S)
 Photograph(s) of nominee
 Copy of Photo ID-NID/DL/Passport
 Proof of address-Copy of utility bills/Physical verification etc
Partnership account
 Letter of partnership
 Partnership deed
Company account
 Certified true copy of Certificate of Incorporation or equivalent, details of the

registered office, and place of business;
 Certified true copy of the Memorandum and Articles of Association, or by- laws of
the client.
 Copy of the board resolution to open the account relationship and the empowering
authority for those who will operate any accounts;
 List of directors.

For Public Limited Company
 Certified true copy of Certificate of commencement
The above documents are mainly common documents. Additional documents

is required when and where is applicable.
SDS (Special Deposit Scheme)
Tenor : 01 and 03(Three) years.

Nature : 100% Term Deposit. Account holder can withdraw their deposit (Principal
amount) after expiry of maturity of deposit.
Target Group : Any individual person, businessman, firm, Limited Companies, Local
Bodies, Corporation, Corporate bodies etc.
Loan facility : In case Lending against pledge of SDS Receipt, interest have to be charged
against loan outstanding. This interest rate is fixed and applicable in all cases
without further consideration.
Payment of first : The duration of time between deposit and payment of first dividend/Interest
dividend/interest must be minimum 30(Thirty) days.
Mode of payment of : Encashment may be made by PO, DD or transferring to Account. No cash
monthly dividend payment will be allowed.
Premature encashment
Before 01(one) year After 01(one) year After 02(Tw0)

but before 02(two) year but before
years 03(three) years
Depositor will not be entitled to get monthly dividend Prevailing Interest Prevailing Interest
/ interest, so amount of dividend /interest paid earlier Rate of SB A/C Rate of SB
shall have to be adjusted from the net amount payable. A/C+0.5%
Fixed Deposit Receipt(FDR)
Tenor : 1 month, 3 months,06 months, 12 Month, 2 Year, 3 Year

Nature : 100% Time Deposit. Account holder can withdraw their deposits after
expiry of maturity of FDR A/C.
Corporate Deposit All concerned are requested to obtain permission from the EVP,

Treasury Division, HO, before booking/renewal of corporate deposit
for tk. 1.00 crore and above.
Target Group : Any individual person, businessman, firm, Limited Companies, Local
Bodies, Corporation, Corporate bodies etc.
Pre
Loan facility : In case of lending against lien of FDR account, interest at the rate of
3% above has to be charged outstanding. This interest rate is and
applicable in all cases without further consideration.
SSS (Special Savings Scheme) & DPS
Tenor : SSS-5 to 8 years and DPS-3 to 8 years

Nature : 100% Term Deposit. Account holder can withdraw their deposit
after expiry of maturity of deposit.
Target Group : Any individual person.
Loan facility : Loan may be allowed 80% of the deposited amount after 03 years.
Interest will be charged 3% above of the said SSS rate.
Penalty for failure to deposit : @2% per month per installment.(On due installment)
installment in due time
For issuance of duplicate
deposit book : Tk.100 for each book.
IETD (Instant Earning Term Deposit)
Period : 01 year(Fixed)
Nature : 100% Term Deposit. Account holder can withdraw their deposits after expiry
of maturity of Deposit.
Amount : Tk.1.00 lac and above but multiple of Tk.1.00 lac.
Rate of Interest : Existing rate of 12 months FDR – 1%
Payment of : Interest to be paid to the customer account after deducting necessary
interest charges/levies etc. at time of accepting deposit. For the purpose customer will
have to open/maintain account relationship with the branch.
Target Group : Retired personnel, housewives, widow and wage earners
Loan facility : Loan may be allowed against lien of the receipt upto 75 % of the face value,
interest at the rate of 3% above has to be charged outstanding.

Death of account : Due money shall be paid to nominee/legal heairs.
holder
Post mature : No auto renewal or no extra benefit for post mature encashment.
encashment
Before 06 months After expiry of 06 months

No interest on the deposited amount but interest Interest will paid at existing STD rate and
already paid at the time of opening account will interest already paid at the time of opening
be realized/deducted from the principal amount. account will be realized/deducted from the
principal amount.
Money Double Program

Tenor of the : 8 years 6 month that will make the Principal amount Double on Maturity
product (As per Instruction circular No.703/2016 dated Jan 2016 effect from1st Feb
2016)
Nature : 100% Term Deposit. Account holder can withdraw their deposits after
expiry of maturity of Deposit.
Amount : Tk.1.00 lac(minimum) and its multiple.
Condition : Single Transaction will not over 50 lac but any individual can open more than
one MDP A/C.
Rate of Interest : Interest to be kept in provision A/c until maturity. Interest to be paid/credited
into the A/c only at maturity.
Loan facility : Loan may be allowed against MDP receipt up to 80% of the Face value at an
interest rate of 16.50% p.a. following other rules and regulations applicable
for SOD(FO)
Before 01(one) year No interest will be paid

After 01(one) year but before 02(two) years Prevailing Interest rate of SB A/c
After 02(Two) years but before 03(three) years Prevailing Interest Rate of SB A/c +0.50%
After 03(Three) years Prevailing Interest Rate of FDR for 02 years.
Note : No auto renewal and no extra benefit for Post Mature Encashment.
NCC Bank Youngster Account

Nature : It is basically a Savings Account for school and high school going
students of Bangladesh with added values and benefits.
Age : Any Bangladeshi student enrolled in an enlisted school or high
school with Bangladeshi government within the age of 18 years.
Authentication : Photographs of account holder and parents/legal guardian is attested
by school authority.
Opening deposit : Initial deposit not less than BDT 100.
Account : Zero balance not allowed.
continuation
balance
Minimum deposit : Not less than BDT 50 and maximum any amount.
Annual service : Free
charge
Withdrawal : Any number of withdrawal and fund transfer is allowed.
frequency
Cheque : Joint signature of account holder and either of any parents or legal
endorsement guardian is mandatory.
Student A/C to : Account holder can continue it until attaining 18 years. After 18
regular SB A/C years account holder may apply for regular savings account with
closer of NCCB Youngster Account.
Nomination of legal : Guardians name and signature must be attested by both of the
guardian parents on BDT 150 non judicial stamp and notarized.
Nominee : Mandatory and selected by both of the parents or legal guardian.
Eligibility : Any Bangladeshi student enrolled in an enlist school or high school
with Bangladeshi Government within the age of 18 years can open
the account at his/her name with Parents or the legal guardian’s
written consent by putting signature at account opening form.
NCC Bank Youngster Moneyplant Scheme
Nature : It is basically a recurring deposit account for school and high school going
students of Bangladesh with added values and benefits.
Age : Any Bangladeshi student enrolled in an enlisted school or high school

with Bangladeshi government within the age of 18 years but on maturity
date the age of the applicant must below 18 years.
Authentication : Photographs of account holder and parents/legal guardian is attested by
school authority.
Rate of interest : Average rate is 10% p.a. Interest will be calculated as regular as SSS
effective from 01.12.2015
Installment size : Minimum monthly installment is BDT 250 and Maximum is BDT 10,000.
Maximum : One can open maximum 05 YMS of different or same installment amount
number of in account holder’s name or in joint name with account holder’s sibling’s
account name provided sibling must know how to write his/her own name.
Maturity tenure : 05/8/10 years but the maturity period shall not exceed up to the age of 18
years of account holder.
Penalty for : 2% of the installment size or minimum Tk.10
default
installment
Premature : Before 06 months-No interest will be paid.
encashment After 01 year bur before 05 years- existing savings rate.
Nomination of : Guardians name and signature must be attested by both of the parents on
legal guardian BDT 150 non judicial stamp and notarized.
Transfer of : Respective youngster account. But after completion of 18 years of the
matured value account holder, matured value shall be transferred according to the written
instruction of the account holder along with both parents/Legal guardian.
Eligibility : Must be NCCB Youngster account Holder with written consent from both
the parents/Legal guardian but on maturity the age of the applicant must
be below 18 years.
NCC Bank Youngster Maximus Account
Nature : 100% Term Deposit. It is basically a fixed deposit account for school and
high school going students of Bangladesh with added values and benefits.
Age : Any Bangladeshi student enrolled in an enlisted school or high school with
Bangladeshi government within the age of 18 years but on maturity date the
age of the applicant must below 18 years.

Maximum : 05 (but total amount must not Cross BDT 1,000,000.00) different account are
number of allowed at a single name or in joint name with account holder’s sibling’s
account name provided sibling must know how to write his/her own name.
Maturity tenure : Minimum 3 years but the maturity period shall not exceed up to the age of 18
years of account holder.
Premature : Before 06 months-Existing NCCB savings rate
encashment After 06 months bur before 1 year-2% above on existing savings rate
Nomination of : Guardians name and signature must be attested by both of the parents on
legal guardian BDT 150 non judicial stamp and notarized.
Transfer of : Respective youngster account. But after completion of 18 years of the
matured value account holder, matured value shall be transferred according to the written
instruction of the account holder along with both parents/Legal guardian.
Eligibility : Must be NCCB Youngster account Holder with written consent from both the
parents/Legal guardian but on maturity the age of the applicant must be below
18 years.
Documents required opening any youngster account
 School Attested Photograph of Applicant and both the parents,

 School Enrolment Proof,
 Both the parents attested photograph of Nominee,
 Copy of Birth certificate of the applicant
 National ID Card/ Passport/Driving License of both the parents or legal guardian.
 Birth registration certificate of the nominee.
Wage Earners Welfare Deposit Pension Scheme(WEWDPS)
Tenor : 5 years
Nature : 100% Term Deposit. Account holder can withdraw their deposits
after expiry of maturity at lump sum or monthly pension for further 10
years.
Monthly installment should be paid through foreign remittance.
Eligibility : Expatriate Bangladeshi can open this account in his own name or in
the name of his nominate person/spouse
Penalty for default : @1% per month per installment. (On due installment).Account will be

installment closed if 06 installments is overdue.
In case of death of : Nominee/Heirs will be entitled for the amount. In that case applicable
account holder interest will be existing savings rate +1%.If the account holder is died
during the pension period then nominee/heirs will be entitled for the
pension.
Before 01(one) year After 01(one) year but After 03(Three) years
before 03(three) years
Depositor will not be Prevailing Interest Rate Prevailing Interest Rate of SB A/C+1%
entitled to get interest. of SB A/C
Required documents
Attested photocopy of passport and work permit.
Note: The features of other new deposit products of NCC bank limited are placed in
Annexure – 1, 2, 3 and 4.
5.8 Deposit Accounts

A banker should be very careful in opening deposit accounts. When a banker accepts
deposits, technically speaking, he is said to borrow money. As a borrower he should
safeguard his position so as to avoid untoward happenings. Banker should remember that
account opening is the gateway of any sort of fraud and forgeries and also money laundering.
As such, before opening a deposit account, the banker should observe certain general
precautions.
Formalities to Open Account with the Bank

The actual formalities will differ depending on the type of the customer. Certain formalities
are common to all. These are:
 The banker must ensure that the customer is competent to contract.
 The banker should obtain an account opening form, which should be filled in all
respects by the account holder including Account Opening Forms as prescribed by
UCBL duly filled in, Specimen Signature Card, KYC, Expected Transaction Profile
(ETP) Form, Customer’s Risk Assessment Form, Leaflet on Anti-Money Laundering,

and Requisition for issuance of Cheque Book and Guideline for Account Opening (i.e.
Checklist).SBS I, II, III forms are also required to be filled in.
 Interview of a prospective customer location but no circumstances provide him / her
any account opening form until fully satisfied.
 No deposit account is to be opened without the authority of the manager/authorized
person. He/she must be satisfied himself/herself of the respectability of the depositor (s)
at the time of opening/approving the account.
 To affix customer’s passport size photographs on the application forms at the time of
opening an accounts. This is to prevent impersonation and for easy identification.
 The banker should also obtain his/her specimen signature for verification in future of
his signature in cheques, etc. signed by him/her.
 Know Your Customer (KYC) guidelines provided by the Bangladesh bank are to be
required.
 Expected Transaction Profile (ETP) related to the Account Opening Form shall be duly
filled-up by the applicant (s) for the assessment of risks.
 While opening an account with the bank the intended customer however should not
have any legal bar.
 Personal Indemnity of the applicant(s)/Beneficial Owner/Operators to be established by
the documents (Like NID, valid Passport etc.) as per Bangladesh Banks’ guidelines to
be obtained. Also to check whether the customer is a PEPs or Influential person and in
such case to ensure due diligence or enhanced due diligence if required.
Proof of Address
Recent a) Electricity Bill; b) Gas bill; c) Telephone bill; d) WASA Bill; e) Copy of life
Insurance Policy; f) Bank statement/ Credit card; g) Certificate of Employer; h) Current
Lease Agreement, if any; i) TIN/ BIN Certificate; j) Certificate issued by the Principal of
reputed School / College and from the University Authority with photograph duly attested
(Applicable for the employees / Student of that institution); k) Holding Tax Receipt (from the
City Corporation/ Municipality); l) Pension Book / Retirement Benefit Certificate.
The information obtained should demonstrate that a person of that name exists at the address
given and that the applicant is that person. Emphasis to be given on the following points:
i. Proof of address must match to any of the address (i.e. Residence address, permanent
address or office address) stated in the A/C opening form.

ii. For joint A/Cs all parties must provide respective proof of documents. However, in
following instances, husband’s or father’s proof of identity and residence would
suffice;
iii. When wife is a housewife, opening of account with her husband to be insisted upon.
iv. In case of dependent son/daughter, opening of account with his/her father to be
insisted upon.
 Specimen Signature Card
 Photographs of the nominee (s) if any to be identified by the account holder
 Other necessary documents depending on the nature of the customer.
 Nominee (s): As per section 103 of The Bank Company Act, 1991, Depositor of
respective account may nominate his/her chosen person for having the payment of
deposited money after his/her death. In case of nomination, photograph, relation with
the depositor, age and signature of nominee are to be duly attested by the applicant
(s).
It is to be remembered, in addition to proof of identify, verification of the address of the
customer is very important. The prevailing system is that as soon as the account is opened, a
letter of thanks is sent to the account holder as well as to the introducer to their address as
mentioned in the account opening form.
Operating Instructions
a) Clear instructions should be obtained regarding operations of the account in writing
and for repayment of the balance in the event of the death of any of the joint account
holders.
b) Operational instructions such as Either or Survivor, Jointly, Any one to operate,
Secretary to Sign with any / one of the Directors etc. should be clearly stated,
preferably in red ink at the top of the Account Opening Form and in the FCUBS.
Introduction to an Account
a) All CD, SB and SND accounts must be suitably introduced acceptable to the bank. It
is essential to make enquiry about the respectability of a prospective customer. In this
case, the bank has an obligation to act “in good faith and without negligence” at all
times and in all its activities. Any carelessness in obtaining a proper introduction
constitutes “negligence” and can lead to a host of complications with regulators and in
a court of law..

b) Staff member should be made fully aware of their responsibility in acting as an
introducer.
c) Introduction from Savings Bank account holders for Current Deposit Account shall
not normally be allowed. But Savings Accounts holder having satisfactory
transaction, may introduce all kinds of accounts.
d) The signature of the introducer should be verified on the spot by the authorized officer
under his signature written across the rubber stamp “Signature Verified” affixed in
close proximity to the introducer’s signature.
e) When a new account is opened the introducer should preferably be present in person.
f) Branches should take care to ensure that in the process of making inquiries, they do
not discourage genuine customers or genuine business from being booked. Discretion,
therefore, is of utmost importance along with vigilance.
FATCA compliant: FATCA stands for the Foreign Account Tax Compliance Act. It is a
new piece of legislation to help counter tax evasion in the US.
On an annual basis, banks and other financial organizations will be required to report
information on financial accounts held directly or indirectly by US persons.
Each and every bank should be fully FATCA compliant and as such they will have to collect
supplementary account opening form comprising the information provided by such customers
while opening an account with the bank.
To comply with FATCA, banks will:
 Conduct a review of new and existing customers to identify those that are reportable
under FATCA
 Classify business customers according to the FATCA legislation (for example, as US
persons, foreign financial institutions or non-financial foreign entities)
 Report information to the IRS or local tax authority on all accounts held directly or
indirectly by US persons
 Report information about customers who do not provide the required documentation.
Correspondences with Account Holder
a) All correspondence from the bank is to be addressed to the first named account holder
appearing in the title of the account.
b) For individual accounts the corresponding address shall be the address where the
person resides. In exceptional cases, the clients may provide an alternative address for

correspondence in which case the appropriate section should also be completed.
His/her permanent address shall also be recorded.
c) The client’s telephone / fax / internet/Email number of both residence and office shall
be recorded with the Bank so that they may be contacted in case of need.
d) For business account, the business address will be the correspondence address.
e) After the formalities are over, the banker should issue a MICR cheque book, debit
card to the customer, indicating his/her account number. Customers can be supplied
with Pay-in Slip books for making deposits.
5.9 Requirements for Opening of Various Types of Deposit Accounts
All the essential features of a valid contract must be present when a banker opens an account.
Every person can open an account with the bank who is competent to contract as per Contract
Act, 1872. To become competent s/he should be of adult, possess sound mind and is not
disqualified from contracting by any law.
Individual Accounts
Personal and Joint Account
a. Bank’s prescribed Account Opening Form and Specimen signature card to be signed
in front of Account Opening Officer.
b. Account to be introduced by the existing client, satisfactorily maintaining relationship
and introducer’s signature on application form and signature card to be verified by an
authorized officer of the bank with his / her signature and office stamp with PA No. /
Employee No.
c. Two recent passport size colored photographs of the A/C holder duly attested by the
introducer to be obtained and attestation to be verified by the bank’s authorized
official. It is to be noted that attestation of photograph other than introducer(s) is not
acceptable for this purpose.
d. In case of Joint A/C operational instructions are to be confirmed with the signature of
applicants jointly.
e. In case of nomination, photograph and signature of nominee are to be duly attested by
the applicant(s).
f. The word ‘MINOR’ to be put boldly after the title of the account in case of MINOR
Account. In this case branch should obtain Birth Certificate of the Minor.
g. Expected Transaction Profile (ETP) related to the Account Opening Form shall be
duly filled-up by the applicant(s) for the assessment of risks.

h. As regards genuineness of the document/papers provided by the customer may be
verified from the under noted concerned authorities if necessary:
List of documents Issuing Authority

Current Valid Passport Passport Office
Up-to-date TIN Certificate Tax Authority
Bangladesh Road Transport
Valid Driving License
Authority (BRTA)
Office of Election Commission
Voter ID Card
(EC)
Armed Forces ID Card Employer or their delegate
A Bangladeshi Employer ID Card bearing the
Employer
photograph and signature of applicant
A certificate from any local government organs such
as Union Council Chairman, Ward Commission etc. UP Chairman / Ward
(In this case the certifier should attest applicants’ Commissioner
photograph along with signature).
Trade License with photograph can be accepted for
Local Govt. Authority
individual’s identification
Besides above mentioned documents any documents showing photograph, signature and
address (present & permanent) of the customer issued from a dependable authority or any
respectable person (Manager/ Sub-Manager) are acceptable.
All the photocopies must be verified with the original and to be attested by the Manager/ Sub-
Manager of the branch. It is to be noted that attestation by the outsider other than Manager/
Sub-Manager shall not be allowed / entertained.
Particular care should be taken in accepting document, which can be easily forged, or which
can be easily obtained using false identities.
Apart from proof of identity branch must also obtain proof of address to confirm if
customer’s address is genuine. Although this verification is partly done through “Thanks
letter” but it is not enough. However, one or more of the following document to be obtained
to verify the address.

Corporate Accounts / Business Accounts
Proprietorship Business Account
i. The personal identity of the proprietor of the firm to be established by any of the
documents as mentioned in individual or joint customer category.
ii. Bank’s prescribed Account Opening Form and Specimen signature card to be signed
iii. Account to be introduced by the existing satisfactorily conducted Current Account
holder and introducer’s signature on application from and signature card to be verified
by an authorized officer of the Branch with his/her signature and office stamp with
employee No.
iv. Two Passport size photograph of the proprietor duly attested by the introducer and
attestation to be verified by the Bank’s officer.
v. Copy of valid Trade License issued by the local Govt. Authority (City Corporation,
Pourashova, Union Parishod etc.).
vi. Permission from Bangladesh Bank to be obtained in case of Buying House, indenting
or other specific business where Bangladesh Bank and other relevant authority’s
permission is necessary.
vii. Up-to-date Income Tax Clearance (TIN) Certificate issued by Income Tax Authority
to be obtained.
viii. Proof of address
Partnership Business
a. The personal identity of partners of the firm to be established by any of the documents
as mentioned in individual or joint customer category.
b. Bank’s prescribed Account Opening Form and Specimen signature card to be signed
c. Certified copy of Partnership Deed/Agreement.
d. List of the Partnership with Address.
e. Extract of resolution of the partners meeting mentioning the opening of account with
f. UCBL and signatories thereof.
g. Copy of valid Trade License.
h. Two recent colored photographs of each signatory/partner to be obtained.
i. Introducer’s signature in the A/C opening form and at the back of the photograph (s)
of

j. Account holder(s) to be verified.
k. Evidence of the trading address of the business or partnership shall be confirmed.
l. A copy of financials (audited where applicable) shall be obtained.
Company
a) Registrar of Joint Stock Companies and Firms Certified copy of the Memorandum
and
Article of Association of the Company.
b) Registrar of Joint Stock Companies and Firms Certified copy of Certificate of
Incorporation and or Certificate of Commencement as applicable.
c) Extract of the Board resolution, which intended to open the A/C relationship and the
empowering authority for those who will operate account with specimen signature.
d) List of the Directors (Form-XII) certified by RJSC.
e) Certificate of Membership from trade body e.g. Chamber of Commerce and Industry,
etc.
f) Two recent colored photographs of all the signatories duly attested by the Chairman
or
g) Company Secretary or any valued customer having Current Account.
h) Copy of valid Trade License.
i) Copy of Export/ Import License where the company is engaged in international trade.
j) The personal identity of all the Directors to be established by any of the document as
k) Mentioned in individual / joint customer category.
l) Personal Net worth Statement of each director of the company.
m) Updated TIN Certificate of the Company as well as each director and operator of the
account.
n) Audited financial statements for latest 3(three) years and in case of a newly
constituted company its projected financial statements are required.
o) Copy of latest Annual Returns submitted to the RJSC by the company.
p) Copy of Tenancy Agreement to be attested by the Chairman or Company Secretary
where Registered Office of the company is located at a rented building.
q) Any deed / agreement that to be obtained must be supported by the Memorandum and
Articles of Association of the Company.
Special Types of Accounts and their Operational Procedures

Apart from Individual and Joint A/Cs, Proprietorship A/C, Partnership account and Company
/ Corporate accounts there are some other special types of accounts also. While opening these
accounts required documents and their modus operandi are as under:
Club/Societies/NGO/Educational Institute/Association
a. Copy of the Constitution / Bye-laws / Deed registered with the competent registration
authority of Government of Bangladesh (GOB) to be obtained.
b. Copy of the Registration Certificate issued in favor of the Organization by competent
registration authority of GOB.
c. Extract of the resolution, which intended to open the A/C relationship and the
empowering authority for those who will operate account with specimen signature attested by
the President/ Executive Director/ Head of the Educational Institution.
d. Audited financial statements for latest 3(three) years but in case of a newly constituted
organization its projected financial statements (if any).
e. Copy of latest Annual Returns submitted to GOB authority by the organization.
f. The personal identity of all the Members of Executive Committee to be established by
any of the document as mentioned in individual / joint customer category.
g. Two recent colored photographs of all the signatories duly attested by the President/
Executive Director/ Head of the Educational Institution or any valued customer having
Current Account.
h. The personal identity of all key persons of the organization to be established by any of the
document as mentioned in individual / joint customer category.
i. Copy of Tenancy Agreement to be attested by the President/ Executive Director/ Head of
the Educational Institution where Registered Office of the organization located at a rented
building.
Account of Executors and Administrators
Executors and administrators are persons who are appointed to conduct the affairs of a person
after his/her death. A person to whom the execution of a will is entrusted by the deceased
(testator) is called the executor of the will. The executor has to obtain the confirmation of the
will from the court in the form of a letter of probate. If a person dies without leaving a will
(intestate), the court appoints a person to look after the property under a letter of
administration. The persons appointed to wind up and distribute a Deceased’s Estate are
called Personal Representatives. Personal Representatives appointed by the Court are called
Administrators.

Both the executor and the administrator perform the same duties, i.e., to realize the assets of
the deceased and to pay off his/her debts. The executor is appointed by the will. His powers
and authority are vested therein. He/she has to act according to the directions given in the
will, but he/she is required to obtain a probate (official confirmation of the will) from the
court.
The administrator is appointed by the court through a letter of administration and is directed,
in the absence of the will, to settle the affairs according to the provision of the law. The
administrator derives his power from the letter of administration. This letter may give
full/limited power to deal with the estate.
On the death of a customer, the banker must stop payments from his account. The executor
should be permitted to operate the account of the deceased after he has obtained the probate
from the court. The administrator is authorized to do so after securing the letter of
administration. The banker should examine these documents before the appointed person is
permitted to operate the account. The banker should take the following precautions while
dealing with the executors and administrators:
An account in the name of an executor / administrator is opened in the following style and the
balance in the account of the deceased is transferred to such account:
‘ABC executors (or administrators) to the estate of XYZ deceased.’
In case two or more persons are appointed as executors or administrators, they shall have
joint interest in the estate of the deceased. This is not divisible.
The banker should be very cautious in conducting the account of executors / administrators so
as to prevent them from misappropriating the funds of the deceased.
Executors Account
While opening such account the following papers /documents are to be obtained and the
formalities to be performed:
a. Duly filled and signed Account Opening Form, KYC & TP to be obtained. Bank’s
prescribed Account Opening Form and Specimen signature card to be signed in front
of Account Opening Officer.
b. Branches should not open the accounts of Executors without prior permission from
the Head Office.

c. Identity of Executors to be ensured.
d. The Account Opening Form should be signed by all the Executors, to whom probate
has been granted by a competent Court if there is more than one Executor.
e. While opening the account, certified copy of the probate for scrutiny the
name and address of executors to be obtained by the bank and an attested copy thereof
should be retained with the Account Opening form. Also establish the identity of the
Executor(s).
f. While opening the account, clear instructions to determine which of the Executors is
authorized to operate on the account should be obtained under the signatures of all the
Executors if there is more than one Executor.
g. The Executors should neither be allowed to transfer funds from the account of the
Estate to their personal accounts nor should they be allowed to borrow from the bank
in their personal names against securities belonging to the Estate Account.
h. These Accounts must be carefully monitored, as personal representatives and
executors may only exercise their powers for a limited period of time.
i. After death/ retirement /lunacy new executors will be appointed as per probate.
j. Executor cannot delegate his power to third party.
Administrators Account
While opening such account the following papers /documents are to be obtained and the
formalities to be performed:
a. Duly filled and signed Account Opening Form, KYC & TP to be obtained. Bank’s
prescribed Account Opening Form and Specimen signature card to be signed in front
of Account Opening Officer.
b. Branches should not open the accounts of Administrator(s) without prior permission
from the Head Office.
c. Identity of Administrator(s) to be ensured.
d. The Account Opening Form should be signed by all the Administrators, to whom
letter of administration has been granted by a competent Court if there is more than
one Administrator.
e. While opening the account, certified copy of the letter of administration for scrutiny
the name and address of administrators to be obtained by the bank and an attested
copy thereof should be retained with the Account Opening form. Also establish the
identity of the administrator(s).

f. While opening the account, clear instructions to determine which of the administrators
is authorized to operate on the account should be obtained under the signatures of all
the Administrators if there is more than one administrator.
g. The Administrators should neither be allowed to transfer funds from the account of
the Estate to their personal accounts nor should they be allowed to borrow from the
bank in their personal names against securities belonging to the Estate Account.
h. These Accounts must be carefully monitored, as personal representatives and
administrators may only exercise their powers for a limited period of time.
i. After death/ retirement /lunacy new administrators will be appointed as per letter of
administration.
j. Administrator cannot delegate his power to third party.
k. When an administrator becomes insolvent or lunatic his appointment stands
terminated. A new Administrator is appointed under fresh letter of Administration. On
the death of administrator Court will appoint the new one.
Trust Account
A ‘Trust’ is an obligation annexed to the ownership of property, arising out of confidence
reposed in a person / group of persons and accepted by him / them for the benefit of another
or of another and the owner. The person who reposes or declares confidence is called the
author of the trust. The person who accepts the confidence is called the trustee. The person
for whose benefit the confidence is accepted is called the beneficiary. The subject matter of
the trust is called the trust property or Trust Money. The beneficial interest of the beneficiary
is his right against the trustees as owner of the trust property. The instrument by which the
trust is created is called the Trust Deed. While opening an account in the names of persons in
their capacity as trustees the banker should take the following precautions:
a) The banker should thoroughly examine the Trust Deed appointing the applicants as
the trustees. The Trust Deed contains the names of the trustees, power vested in them
for administering the trust property and other terms and conditions.
b) The trustees are authorized to act jointly and are not competent to delegate their
powers unless the Trust Deed authorizes them to do so.
c) The banker should examine the trust deed to ascertain the powers and functions of the
trustees.
d) In case of two or more trustees, the banker should ask for clear instruction regarding
the person or persons who shall operate the account.

e) In the absence of such instruction all the trustees must sign the cheques, etc., because
the estate is placed under their joint charge.
f) If one or more of the trustees dies or retires, the authority vested in the remaining
trustees depends upon the provisions of the Trust Deed.
g) When all the trustees are dead, new trustees may be appointed by the court.
h) The insolvency of a trustee does not affect the Trust property and the creditor of the
trustee cannot recover their claims from such property.
i) The banker should take all possible precautions to safeguard the interest of the
beneficiaries of a trust, failing which he shall be liable to compensate the latter for any
fraud on the part of the trustee.
j) The trustees may borrow money from the banker and pledge or mortgage the Trust
property only if the Trust Deed specifically confers such power on them.
The banker should, therefore, grant loans to the trustee after thorough examination of
the borrowing powers as given in the Trust Deed.
Papers to be required to open Trust Account
1. Trust Deed copy for scrutiny of the rules regarding the opening and operation of deposit
account.
2. Resolution for opening account by Trustee Board stating Bank’s name.
3. List of Trustees & signed Mandate.
4. Resolution regarding operation of account.
5. Account opening Form (AOF), Specimen signature card (SSC), Cheque Requisition Form
properly filled in.
Special Features of Trust Account
1. Trustee can open the account in the name of the trust or in the name of the Trustees.
2. Trust property to be controlled for the benefit of the beneficiary.
3. Violation of Trust Deed/Rules by the Trustees is called Breach of trust.
4. A/C will be operated as per delegation laid down in the trust Deed.
5. No Trustee can delegate his power to 3rd party.
Accounts of Minors
Since a contract with a minor is void, no account in the name of a minor shall be opened. An
account may be opened in the name of a minor jointly with parent or guardian. The account
must be marked as “Minor Account.”
The following terms & conditions shall be followed in maintaining & operating a minor
account:
a) The date of birth of the minor and the date when s/he attains majority will be recorded
on the Account opening Form and Account Opening Register.
b) Before authorizing a legal guardian to open an account in the name of a minor, the
appointment order issued by Court in his/her name should be examined, and a copy
thereof to be retained with the Account Opening Form.
c) No overdraft should be allowed on a minor’s account.
d) Where a natural / legal guardian operates a minor’s account, this account should be
closed on the minor’s attaining majority. The outstanding balance should be
transferred to a new account to be operated upon by the erstwhile minor as per a fresh
mandate under his authority. Verification of his signature should be obtained from the
natural / legal guardian.
Students Account / School Banking

As a part of broadening and deepening of financial inclusion, school banking for students
under age of 18 was initiated in 2010. Since then, banks have been providing banking
services to school students through savings accounts and deposit schemes for promoting
savings behaviour among students, oriented them with banking literacy and modern banking
technology. According to guidelines of school banking issued in October 2013, any school
student of 6-18 years age may open a school banking account in any scheduled bank through
parents or legal guardian by depositing Taka 100. There is no service charge against these
accounts.
Account of Illiterate Persons
a. Accounts of illiterate persons may be opened on proper introduction. Such persons
will put their thumb impression on the Account opening form (Advice of New A/c),
specimen signature card etc. in presence of the Manager /Sub-Manager and the
Introducer who will attest the thumb impression mentioning his Current Account
Number.
b. Two copies of passport size photographs of the Account holder should be obtained
duly attested by the introducer and admitted by the Authorized officer of the Branch,
one of which should be kept attached with the specimen signature card.
c. A letter of undertaking shall be obtained from the Account holder to the effect that he
will not operate on the a/c unless he personally comes to the bank and put his thumb
impression on the cheques in presence of the Bank Manager/Sub-Manager who will
attest the same on verifying the photograph of the depositor on Bank’s record.

d. The Manager/Sub-Manager should record a Certificate to this effect on the back of
the cheque. Precautionary measures should be taken to see that no cheque bearing
thumb impression and presented through clearing is paid by the branch.
Account of Local Authorities/Municipal Corporations, etc.
a. The accounts of any government or semi government organizations or a local body
may be opened on obtaining the copy of the status or any other law by which the body
was created and is governed.
b. Such accounts should not be opened or allowed to be operated in contravention of the
provisions of that statute or law.
c. Along with a certified copy of the statute, the following documents are required to
open such an account:
i. Account Opening Form
ii. Specimen Signature Card
iii. Mandate, which will authorize the person(s), to operate the Account.
No Frill Account
Financial inclusion is currently considered one of the most effective tools for ensuring
financial and social stability especially in developing countries. It promotes access to
appropriate financial services or products at affordable cost. BB has taken various initiatives
to bring the huge number of financially excluded people under the financial services. It
included directives to banks for opening No-Frill Accounts (NFAs) for farmers, freedom
fighters, beneficiaries under social security program, small life insurance policy holders,
hardcore poor beneficiary workers, banking for minors, school banking and banking for
working/street children.
As a part of broadening and deepening of financial inclusion, school banking for students
under age of 18 was initiated in 2010. Since then, banks have been providing banking
services to school students through savings accounts and deposit schemes for promoting
savings behaviour among students, oriented them with banking literacy and modern banking
technology. According to guidelines of school banking issued in October 2013, any school
student of 6-18 years age may open a school banking account in any scheduled bank through
parents or legal guardian by depositing Taka 100. There is no service charge against these
accounts.
Banking for Working/Street Children.
In order to include the extremely excluded children into the formal financial services, BB
introduced banking for working/street children in March 2014. These accounts can be opened
through any enlisted NGO as custodial account by depositing Taka 10. Concerned NGO will
be fully responsible for the operation of the accounts and the well-being of the account holder
children. This activity has started in 31 May 2014 and seven banks have signed bi-lateral
agreement with different registered NGOs for offering this service as of end June 2014
5.10 Some Important Issues of Various Types of Account Operations

Insolvency of Joint Account Holder: The insolvency of the joint account holders terminates
the joint relationship. In such an event, all operations on the joint account should be stopped
unless fresh instructions are received from the remaining solvent account holders, duly signed
by them jointly with the official assignee of the insolvent account holder.
Insanity of Joint Account Holder: Insanity of a joint account holder has the same effect on
the account as insolvency. The balance in the account is held to the order of remaining
account holders jointly with the receiver of the insane account holder.
Dispute between Joint Account Holders: It is always advisable to have a clear instruction
from the joint account holder duly signed by them while opening the account to avoid any
complicacy in making payment that may arise as a future dispute by any one of the joint
account holder.
Mandate: A mandate is an authority given by the account holder in favor of a third person to
do certain acts on his behalf. This is issued by an account holder with a direction to his/her
banker authorizing the person to operate the account on his behalf. The following are the
salient points of mandate:
1. The customer is to inform the bank that he has authorized a person (mandatory) to
operate the account on his behalf.
2. The signatures of the mandatory are to be obtained in the mandate letter and to be
ensured that those are verified by the customer.
3. The mandate is issued for a short and temporary period.
4. Mandate is not accepted from institutions. However, in such case a power of attorney
will be required.
5. In case of joint account holders, all customers must sign the mandate irrespective of
operational instructions, while in case of partnership firm all partners should sign the
mandate-letter.
6. Mandate comes to an end on death, insanity, insolvency or bankrupt of the account
holder.

7. Mandate can be withdrawn at any time by the account holder.
Power of Attorney: It is a document executed by one person called donor or principal in

favor of another person called done or agent to act on behalf of the former strictly as per
authority given in the document.
Power of Attorney is of two types-
i. Specific i.e. power given for a specific purpose
ii. General i.e. general authority to operate on behalf of the donor for a length of time.
Power of Attorney, when presented to the branch, should be scrutinized on the following
points:
a) It is regular (i.e. that it is operated exactly within the specific objects laid down).
b) It is still in force.
c) It is definite and not conditional or provisional.
d) The identity of the attorney is verified.
e) It is not restricted by such conditions as “during my absence” or during the period of
my inability to attend”. These restrictions are not acceptable and such a power of
Attorney should not be witnessed.
f) It is stamped in accordance with the provisions of the Stamp Act applicable in the
area of operation.
g) It covers the purpose for which it is tendered, especially with regard to the opening of
the account and the borrowing powers. The authority embodied in a Power of
Attorney must be rigidly interpreted.
Where the identity of the executants is not known, his signature should be attached by a
Notary Public, or the matter referred to the Regional Office for further action.
Cancellation of Power of Attorney: The Power of attorney is cancelled / terminated under

the following circumstances:
a) When the Principal is notified as insane, insolvent or deceased.
b) When the notice of cancellation of Power of Attorney is received from the Principal.
c) At the expiry of the period it covers.
d) On completion of the purpose for which it was drawn up.
Dormant Account: Current Accounts in which no customer generated transaction, either

deposit or withdrawal takes place for a period of one year and in case of Savings Account if
no customer generated transaction, either deposit or withdrawal takes place for a period of

two years should be treated as “DORMANT” The first withdrawal from such account
should be allowed with prior permission from the Manager / Sub-Manager only when the
account holder personally approaches for the purpose and after being properly satisfied about
the identity of the account holder. The account should be retransferred as regular Account
and then operation is to be allowed.
a) All accounts should be periodically reviewed. Current Accounts with no operations
during the past one year and Savings Account with no operations during the past two
years should be considered “DORMANT”. Head Office may however determine the
period after an account without any operation should be considered as dormant.
b) Branches will take dormant account list from the system and closely follow up for
avoiding any fraudulent transaction.
c) While transferring inoperative accounts to the Dormant Account, the word “Dormant”
should also be written on the relative account Opening Form and Specimen Signature
Card.
Account not to be classified as Dormant: Accounts of Proprietorships, Partnerships, Limited

Companies, Local Authorities, and Government Bodies should not be transferred to Dormant
Account Ledger. If such accounts become inoperative, even effort should be made to revive
them. Inoperative Accounts in the following cases should not be classified as dormant
accounts:
a) Where the account is attached under a garnishee order
b) Where operations on an account are stopped between the death of the account holder
and grant of legal representation.
c) Where the account holder maintains two accounts say one in local and other in foreign
currency and if one of those becomes inoperative, still then these will not be treated as
dormant account.
Precautions: All operations in Dormant Accounts whether debits or credits, irrespective of

the amounts, should be jointly supervised by two Authorized Officer of the branch.
a) Requests of the following nature received from the account holder should not be
complied with in the ordinary course of business unless the Manager has thoroughly
satisfied himself as to the genuineness of the request:
i. Transfer of funds from the Dormant Account to any other account in the same
branch.

ii. Transfer of the Dormant Account to another branch of the bank or to any other
Bank.
iii. Closure of the account.
iv. Change of original address.
v. Issue of fresh cheque books.
vi. Change in mode of operation of the account.
vii. Any change in the constitution of the account.
viii. Introduction of a fresh account by a Dormant Account holder.
b) The Manager should check all Dormant Accounts and action of follow up once in a
month to ensure against unauthorized operations.
c) Dormant Accounts should be periodically balanced along with other deposit accounts.
Reactivating Dormant Accounts
a) Normal operations are not expected in Dormant Accounts. If a cheque is presented for
payment in a Dormant Account it should invariably be referred to the Manager / Authorized
Officer of the account branch, who should satisfy himself as to the genuineness of the
drawing.
b) Customer may request to account opening branch for activation of his/her dormant
account at first for verifying the genuineness and completion of certain formalities
Unclaimed Account: Current account laying in “In operative Current accounts” for more
than 10 years will be transferred to “Unclaimed Deposit Account” maintained in the savings
account ledger on 21th June each year. Savings bank account laying in “In operative savings
accounts” for more than 10 years will be transferred to “Unclaimed Deposit Account”
maintained in the savings account ledger on 21th June each year.
According to guidelines released by Bangladesh Bank in 13 Sep-2018 unclaimed bank

deposits would be transferred to the government account if no demand is received for refund
of the inoperative deposit for 12 years. Deposits and assets at banks not claimed by anyone
for 10 years are considered unclaimed. Banks will have to submit the unclaimed fund and
asset to the central bank first and two years later the BB will transfer those to the government
account. Before submitting the fund and assets to the BB, commercial banks will have to
send a registered letter through the post office to the client's address mentioned in their
accounts. Clients will have to be given three months to reply to the letter. If clients do not
give any feedback, banks will have to submit such funds and assets to the central bank in

April of every calendar year. After transferring the funds and assets to the BB, banks will
have to publish advertisements in at least two newspapers once every three months for a year.
If anyone comes up with a claim after the transfer to the central bank, the banks will have to
submit the clients' applications along with required documents. No claim would be accepted
after 12 years.
Note: As regards unclaimed deposits relevant circulars in relation to maintenance of
unclaimed deposit account of the bank which is also stipulated in section 35 of the bank
company act 1991 (amendment up to 2013) to be followed which is placed in annexure-5.
Deceased Account: As soon as any authenticated information is received by the bank as to

the death of a constituents, the operations of the concerned account is to be stopped
immediately. Since then the account would have been termed as deceased account.
Death of Individual
a) The death of an account holder terminates the contractual relationship between
him/her and the Bank.
b) Cheques presented after receipt of the notice of death of an account holder should be
returned with the remark “Drawer Deceased”.
c) All Mandate Letters and Powers of Attorney executed by Deceased are made void, on
receipt of notice of his/her death.
d) The Bank may receive a formal notice of the account holder’s death but if, in the
meantime, an announcement of the account holder’s death appears in the newspaper
and/or information is received from any other reliable source; it should be considered
sufficient notice.
e) If the death of an account holder is notified by a relative, he/she should be advised to
produce a death certificate issued by a competent authority.
f) A notation “Deceased A/C” should be prominently made on top of the AOF and on
the Specimen signature Card, indicating the source of information and the date of
death. Branches will change the status of the relative account in the FCUBS records
i.e. stop account.
g) The authorized Officer will check the report on the “Status of Accounts” to establish
whether information about the death of the account holder has been recorded and all
types of transactions are stopped. He will then initial the report.
h) The balance to the credit of the deceased account should not be paid against any will
left by the deceased, unless it is probated.
i) The account of the deceased account holder should not be operated upon or the
balance transferred to any other branch under the instructions of any executor or
administrator, or any claimant, until all the formalities have been complied with and
Head Office permission is obtained.
j) The balance to the credit of the deceased account holder to be paid against a probate
or Letter of Administration or Succession Certificate and if the Bank is satisfied about
bonafideness of the claimant. A small balance, as stipulated by head Office, can
however be paid to the immediate heir of the deceased against a stamped Letter of
Indemnity Form signed by him and two sureties approved by the Bank. If possible,
the person giving surety should be bank account holders. In such cases, a Letter of
Administration or Succession Certificate need not be insisted on.
k) On receipt of Probate / Letter of Administration / Succession Certificate, or any other
legal representation issued by competent court, the document shall be examined by
the Manager or responsible Officer to ensure that bears the correct name and account
number of the Deceased Account Holder (and the balance due to him).
l) The original document along with the death certificate should be retained in the
relative Account File. If the original document is needed by the legal heirs for
production elsewhere, a Photostat or a certified copy should be retained in the account
File.
m) The particulars of the probate / letter of administration / Succession Certificate should
be recorded in red ink on the Account Opening Form and Specimen Signature card of
the Deceased Account Holder and shall be recorded in computer.
n) The bank must check the genuineness of the probate/Letter of
Administration/Succession Certificate or any legal representation with the Issuing
Authority.
o) On completing the formalities, the balance should be paid by issuing Payment
Order(s) in favor of the Beneficiaries, and the account closed by affixing the
“Account Closed” stamp on the AOF and SS Card and by applying the appropriate
code for closing the account in the computer records.
p) Legal Representation issued outside the country may not be effective. In such case,
the Beneficiaries should be advised to obtain a Probate from a competent Court on the
strength of the representation obtained outside the country.
q) Where a Succession Certificate, Probate or a Letter of Administration is issued in the
names of legal heirs, discharge is necessary as per instructions, while paying the
balance. Pay Order(s) for the last balance in the account should be issued in the
name(s) as per instructions contained thereon.
r) When the balance of the deceased’s account is transferred into a new account in the
name(s) of the personal representative(s), full details must be recorded on the final
withdrawal and cross-reference must also be made on the initial credit voucher to the
new account. A copy of the Probate or Letter of Administration must be retained in
the Account File.
Death of a Joint Account Holder
1. In the event of death of any of the joint account holders, the survivor or survivors shall be
requested to close the old account and open a fresh account if the balance is payable to
survivors.
2. After the death of any of the joint account holders, all further operations on a joint
account with a debit balance shall be stopped, and the overdraft facilities withdrawn,
unless a fresh account is opened by the Surviving Account Holders. Fresh Charge
Documents are completed and the continuance of the borrowing facility is approved at the
appropriate level.
3. Branches should observe the following procedure on the notice of death of Joint Account
Holder when there is a credit balance in the account:
The date of receipt of notice of death and source of information should be recorded on:
i. The Account Opening Form
ii. The Specimen signature Card
iii. The Computer
The branches will change the status of the account in MISYS (Software) records i.e. Stop
Payment.
• Cheques drawn by the Deceased Joint Account Holders and presented after notice of
death should be returned unpaid with the reason “Drawer Deceased”.
• On receipt of the death certificate, its particulars should be recorded on the Account
Opening Form and the Specimen Signature Card under the initials of an Authorized
Officer against the name of the Deceased Joint Holder.
• The survivors should be requested to close the existing account and open a new
account.

• Pending the opening of a new account, cheques drawn by Surviving Joint Account
Holders in accordance with the original operating instructions and presented to the
Bank may be paid. No overdraft shall be allowed on the original account.
• A written authority should be obtained from the survivors, when opening a new
account, to debit all outstanding cheques to the new account.
• If the original instructions do not cover the payment of the balance to the “Survivors”
all operations on the joint account should be stopped. Each withdrawal in this case
will be allowed under the joint signature of all survivors and the Legal Representative
of the deceased account holder, once appointed.
• If the bank is served with an order issued at the request of the Legal Representative of
the deceased joint account holder prohibiting the payment of the balance of the
account, immediate reference should be made to the Head Office. No operations on
the account should be allowed after the order is served.
• To avoid future complicacy, the branch shall take Clear Instructions regarding
account operations and release of funds in case of death of any of the Joint Account
Holders.
Death of a Sole Proprietor

a) In the event of death of the Proprietor, all operations on the account shall be stopped.
Branches will change the status of the account in the MISYS records and stop the
account. Cheques presented after notice of death of the sole proprietor should be
returned with the reason “Drawer Deceased”. The Authorized Officer should check
the Account File Update Report to verify that the change in account status has been
correctly recorded. The Account Opening Form and Specimen Signature card shall be
marked with “Drawer Deceased”.
b) Outstanding balance in the account will be repaid as per the procedure followed for
repayment of balance in the account of deceased individual Account Holder.
Death of Partner
a) The death of a partner dissolves the partnership, the surviving partners can,
notwithstanding the dissolution; continue the business of the firm for the purpose of
winding up.

b) The surviving partners will be advised to close the old account and open a fresh
account. A fresh account opening form, together with a mandate from the surviving
partners will be obtained regarding operations on the new account.
c) During the period the death of a partner and the opening of a fresh account by the
surviving partner’s branches should follow the following procedure if the Partnership
Account shows a credit balance:
i. The date of receipt of notice of death should be noted on the Account Opening
Form, Specimen Signature Cards, MISYS and Ledger Card.
ii. Cheques signed by the Deceased Partner and presented after receipt of notice
of death should be returned with the remark “Mandate Terminated”.
iii. The Death Certificate is to be obtained and filed in the Account File.
iv. The surviving partners may be allowed to operate the account for a brief period
of winding up and provided the account shows a “Credit” balance.
v. Cheques drawn by the Surviving Partners should be signed in accordance with
the original operating instructions.
vi. A written authority signed by the surviving partners, as per the original
operating instructions, should be obtained to honor outstanding cheques in the
account. The outstanding cheques however, should not bear the signature of
the deceased partner.
d) If, at the time of death of one of the partners, a Firm is indebted to the bank, the
existing account should be stopped. This is necessary to keep the estate of the
deceased partner liable for the debt due to the Bank. The debit balance should not be
transferred to another account, nor the existing account closed.
e) Fresh drawing, if any, may be allowed on a new account opened in the name of the
Firm to the extent of unutilized drawing limit.
f) Immediately after the death of a Partner, the advance account must be reviewed and
fresh sanction at the appropriate level should be obtained. The outstanding balance in
the old account should be transferred to the new account, if approved by Head Office.
Application of Interest in Deceased Accounts: As per Bangladesh Bank BCD Circular # 18

dated 27th May 1984, the Scheduled Banks are advised to follow the following Guidelines in
connection with application of interest on Deposit and Loan account of the Deceased.

Savings Bank Account: Interest on the balance of Savings Bank Accounts will be paid up to
the date of withdrawal / closing of the accounts as admissible under Savings Bank Accounts
rules, irrespective of the date of expiry of the depositor.
Term Deposit Accounts

i. Premature encashment: In such cases deposit should be deemed to have been made
up to the date of withdrawal and not up to the date of death. Interest should be paid
and recovery of penal interest made in accordance with prevalent instructions
regarding premature encashment.
ii. Encashment at Maturity: Interest should be paid up to the date of Maturity at the rate
applicable for the relevant TDR.
iii. Encashment beyond Maturity: Interest up to the period of maturity should be paid at
the rate applicable for the relevant TDR. Interest for the period beyond the date of
Maturity up to the date of withdrawal should be paid at the rate applicable for the
Savings Bank Accounts with checking facility.
Payment to the Heirs of the Deceased
a) In case of death of Account Holder, his/her heirs shall inform the bank immediately in
writing or by electronic media.
b) In support of their application they will submit death certificate or any other evidence
of death.
c) Information about the deceased may have from the newspaper.
d) The message received either verbal or in writing, the bank shall take the fact into
account and proper instruction “Drawer Deceased” shall be marked in the FCUBS by
the authorized Officer.
e) The heirs shall apply to the bank for balance certificate of the Deceased for submitting
to the court in support of their Succession Certificate.
f) After getting Succession Certificate the heirs shall apply to the bank for releasing the
money in their favor as per court order along with other supporting documents. The
branch will keep photocopy duly attested by an authorized officer after seeing the
original.
g) The branch shall check the genuinity of the Succession Certificate from the office of
the issuing Authority.
h) The heirs of the deceased in an affidavit or through Notary Public will inform their
identity to the bank and that they are the legal heirs and they will indemnify the Bank

for any loss or damage that may arise in future as well as confirm the individual in
whose favor the payment is to be released as per Court Order.
i) Any client acceptable to the bank will identify the Heirs of the Deceased and may
stand guarantee or sign an indemnity Bond to compensate the Bank for any loss or
damage that may arise in future.
j) Before releasing payments to the heirs in case of complicated issues, the branch shall
obviously refer the same for the Head Office approval and/or Legal Opinion.
k) Payment must be made through Payment Order. No matter, how small the amount
involved the branch shall in no way make cash payment to the Beneficiaries.
l) In case the Nominee is selected by the deceased before his death, the Bank shall act
accordingly.
m) Any event of confusion or suspicion, the matter must be dealt with caution and the
Head Office and/or Legal Advisors should be informed immediately.
n) The procedures shall be applicable in case of credit balance held against all types of
Deposit Accounts.
Documents Required: The following are the documents needed while releasing the fund to
the heirs of the Deceased Account Holder. Depending upon the circumstances the branches
will advise the heirs to submit the relevant documents are required by the bank.
a) The Death Certificate issued by the Hospital Authority.
b) The Death Certificate issued by the Police Station.
c) The Certificate issued by the Chairman of Union Council or Ward Commissioner with
or without citing the name of the successors.
d) Death Certificate issued by any other competent Authority.
e) Graveyard Certificate.
f) Succession Certificate issued by the Court (The authenticity of the same shall be
verified from the concerned Office).
g) Selection of Payee out of present heirs by the Court.
h) Passport of the successors or any other proof their respective identity.
i) Affidavit or Notary Public submitted by the heirs.
j) Marriage certificate issued from Marriage Register’s Office (in case of spouse).
k) Indemnity from the successors or Guarantee from third party.
l) The payment order may be issued in favor of the payee(s) mentioning the name of
his/her/their deceased husband/wife or father as applicable.
m) Others, if any.
Closing and Transfer of Account
Closing of Accounts
Account holder may close his/her account in any time giving application to the branch
manager along with the unused leaves of the Cheque Book issued in their name. On receipt of
the application the signature of the account-holder shall be verified by the respective officer,
and the number of unused Cheque Leaves shall be noted thereon. The application shall then
be sent to the Ledger-Keeper, who shall write thereon the balance of the account and initial it.
Before the account is closed the Manager shall approve the application and closing charge to
be debited to the account. After debiting the incidental charges to the account, the account-
holder, may draw the remaining balance from his account. If the account is closed due to
recovery of half yearly Bank charges, the account-holder shall be advised accordingly by
letter with a request to return the unused cheque leaves to the Bank.
The Account Closed stamp shall be affixed on the Ledger Folio, Account Opening Form and
Specimen Signature Cards with account closed date. The Officer shall check the application,
the Account Opening Form, Specimen Signature Cards, entries made in the account opened
and closed Register, and Reference Book, and sign over the Account Closed stamp and initial
the application and the register.
The advice shall be handed over to the account-holder or shall be sent to him through
Dispatch Department. The application shall be pasted with the Account Opening Form and
the Specimen Signature Cards shall be kept separately under lock and key. The unused
Cheque leaves shall be destroyed in the presence of an Officer.
Transfer of Accounts to Branches
In case of transfer of accounts which exist at Branches the following precautions shall be
taken.
a) The request of the account-holder desiring the transfer of the account shall be taken in
writing in banks prescribed form indicating reasons for the transfer of account, address
at which he is to be contacted by the transferee Branch. Before the account is
transferred, the unutilized cheque Book shall be returned by the account-holder to the
transferring Branch with the letter.
b) On receipt of the letter from the party his/her signature shall be verified on the letter
from specimen signature Recorded with the Branch.
c) Then the letter shall be sent to the Ledger-Keeper for writing the balance of the account
on the letter under his initials.
d) Then the approval of the Manager to transfer the account shall be taken.
e) Fresh introduction shall be obtained if there is even the slightest difference in the
signature of the introducer with the signature recorded with the Branch. If the account is
introduced by an officer of the Branch, a fresh introduction shall be obtained from an
account-holder of the Branch. If the account-holder is not known to any other account-
holder of the Branch, Branch Manager shall ensure that the account-holder is well
known to the introducer.
f) Manager will also ensure that the Account Opening Form has been checked thoroughly,
by the authorized officer and admitting the signature of the account-holder on the
account opening form, verifying the signature of the account-holder from the specimen
signature card, verifying the signature of the introducer in the account opening form
authorized officer has put his signature by pencil on the account opening form. After
full satisfaction manager will give the permission to transfer the account and will sign
the forwarding letter (bank prescribed form), for the transfer of the account.
g) In case of transfer of account from one branch to another branch the final balance shall
be remitted to the transferee branch by a Mail Transfer. Until Mail Transfer is
introduced in our Bank, balance shall be transferred by Inter Branch Credit Advice
under Test Signal worked out without the code for serial number. The Mail Transfer
shall be tested regardless of the amount and the Test Number shall be given on the Mail
Transfer Advice.
h) In case, where unused Cheque Books are not surrendered by the party, the transferee
branch shall be advised on the Mail Transfer Advice to collect the same from the
account-holder.
i) Entries shall be made in the Account Opened/Closed Register and the Reference Book,
j) The Account Opening Form and the Specimen Signature Card along with the
application shall be sent to the Ledger-Keeper. The Ledger-Keeper shall close the
account by drawing two parallel lines below the debit and credit columns, after posting
the Debit Voucher prepared for transferring the entire balance to the transferee Branch.
The summations of debit and credit columns shall be taken out and written between the
two parallel lines. The stamp bearing. ”Account transferred to Branch” Then, Initial,
Date (Officer) shall be affixed on the folio.
k) The Account Opening Form shall be attached with the copy of the advice meant for the
transferee Branch and send them to dispatch Department.
l) No newly opened account shall be transferred rather party should be requested to close,
the account. However, such account may be transferred on the following consideration:
a) The party is well known.
b) The introducer is well known.
Precautionary Measures to be taken by the Transferee Branches

The transferee Branch shall acknowledge to the transferring branch the covering letter,
account opening set and IBCA by letter if the amount is above Tk. 5000/-(five thousand)
only.
i) That the forwarding letter has been signed by the Manager in case of medium and small
branches, and in case of big branches by the Department Officer. ii) The Account Opening
Form is properly introduced. iii) The signatures of the Officers: a) signing the covering letter.
b) Admitting the signature on the account opening set. c) Verifying the signature of the
introducer. d) Signing the IBCA are in accordance with their signatures in Specimen
Signature Book. The following entries shall be passed:-Debit: Head Office Account (Branch
concerned).Credit: M. T. Payable. Debit: M. T. Payable. Credit: Parties Account. The account
shall be opened in accordance with the procedure outlined for opening accounts.
Note: A detailed list stating the list of files and documents along with the time limit for
maintenance of bank records are placed in annexure-6 for compliance. Moreover, an
instruction circular letter of the bank regarding procurement of fresh and renewal of corporate
deposits is also placed in annexure-7.

1. Define Demand deposit and Time/Term deposit.
2. Why do business people prefer a current account?
3. Differentiate between Fixed deposit account and Recurring account.
4. Who can open an account with the bank?
5. Discuss the procedure of opening of a joint account.

6. Discuss the procedure of opening of a partnership account.
7. Discuss the procedure of opening of a company account.
8. Discuss the procedure of opening a trust account.
9. What is Mandate?
10. What is Power of Attorney?
11. Under what circumstances Power of Attorney may be cancelled?
12. What is garnishee order?
13. Write down the types of garnishee order?
14. What are the banker’s responsibilities under garnishee order?

CHAPTER 6
Negotiable Instruments

6.1 Negotiable Instruments: Origin and Applicability
The Negotiable Instrument Act derived from The English Common Law in the Year 1881
and came into effect from March 01, 1882. It contains 17 Chapters and 141 Sections. This
Act has been enacted in our country vide P.O. No. 127 of 1972. Since its inception several
amendments have been made to this Act. The Negotiable Instruments Act, 1881 governs all
transactions in relation to the negotiable instruments drawn, endorsed, transferred and
realized in Bangladesh.
The Negotiable Instrument Act-1881 is the legislative enactment of the law relating to the
negotiable instruments which are in common use in monetary transactions. The act regulates
the issue and negotiation of the various classes of negotiable Instruments which the bankers
commonly deal.
6.2 Features of Negotiable Instruments
Therefore to identify negotiable instruments the characteristics of negotiable instruments

under N.I. Act, 1881 are clarified as follows:
a) The instruments like money are transferable from hand to hand by way of negotiation.
b) The instruments like money are transferable from hand to hand for value and are used
for settlement of debt.
c) The transferee's title is not affected due to transferor's defective title if the transferee
can prove himself as holder in due course.
d) The title of the Holder in due course does not affect for defective title of his prior
holders due to fraud, forgery etc.
e) The Holder in due course is entitled to sue in his own name against all the prior
parties to realize proceeds of the instruments.
6.3 Essential Elements of Promissory Note

a) The instrument must be in writing.
b) The instrument must be signed by the maker of it.
c) The instrument must contain a promise to pay. The promise to pay must be expressed.
It cannot be implied or inferred. A mere acknowledge of indebtedness is not enough.
d) The maker of the instrument must be certain and definite.
e) A promissory note must be stamped according to the stamp act.
f) The sum of money to be paid must be certain.
g) The payment must be in the legal tender money of the country.
h) The money must be payable to a definite person or according to his order.

i) The promissory note may be payable on demand or after a certain definite period of
time.
6.4 Essential Elements of a bill of exchange
a. The instrument must be in writing.
a. The instrument must be signed by the by the drawer.
b. The instrument must contain an order to pay, which is to be expressed and
unconditional.
c. The drawer, drawee and the payee must be certain and definite individuals.
d. The amount of money to be paid must be certain.
e. The payment must be in the legal tender money of the country.
f. The money must be payable to a definite person or according to his order.
g. A bill of exchange must be properly stamped.
h. The bill may be made payable on demand or after a definite period of time.
6.5 Comparison between Promissory Notes & Bill of Exchange

Number of parties: In a promissory note there are two parties- the maker and the payee. In a
bill of exchange there are three parties- the drawer, the drawee and the payee.
Promise and order: In a promissory note there is a promise to pay. In a bill of exchange
there is an order to pay.
Acceptance: A promissory note is signed by the person liable to pay; therefore, no
acceptance is necessary. A bill of exchange, except in certain cases, requires to be accepted
by the drawee before it is binding upon him.
Liability: The maker of a promissory note is primarily liable on the instrument. The drawer
of a bill is liable only when the drawee does not accept the instrument or pay the money due.
Relationship: In a promissory note the maker stands in an immediate relationship to the
payee. In a bill of exchange a drawer stands in immediate relationship with the acceptor and
not to the payee.
Notice: In case of non-payment or non-acceptance of a bill, notice must be given to all
persons liable to pay. This is called the notice of dishonour. In case of a promissory note,
notice of dishonour to the maker is not necessary.
Protest: In case of dishonour , a foreign bill must be protested if such a protest is necessary
according to the law of the place where it is drawn. In case of dishonour of a promissory note,
protest is not necessary.

6.6 Cheque
A 'Cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand. A cheque is a document of great importance in the business
world. It can pass from one hand to another easily and so it has become a popular mode of
payment. A cheque is the most commercial and safe method of money transaction because
the transfer cost is very low and also the possibility of loss is minimum.
Features of Cheque
a. The instrument must be in writing.
b. The instrument must be signed by the drawer.
c. The instrument must contain an order to pay, which is to be expressed and
unconditional.
d. The amount of money to be paid must be certain.
e. The payment must be legal tender money.
f. A cheque may be payable to bearer or to order but in either case must be payable on
demand.
Date of Cheque
Undated Cheque: Undated cheques are not honoured in practice since the drawee bank
would be unable to know if it is stale. However, in terms of section 20 of the N.I. Act.
(Inchoate Stamped Instrument) a holder of an un-date cheques may fill up the date. But the
drawee bank does not have any such authority.
Post- dated Cheque: A cheque which bears of future date is called a Post- dated Cheque.
The drawee bank will not pay a postdated cheque till the date thereon arrives. The risks
involved in payment of post-dated cheque before the due date are the possibility of the
cheque being countermanded, possibility of wrongful dishonour to a subsequent cheque
issued by the customer, and occurrence of customer's death, bankruptcy etc., before the date
of the cheque. But post-dated cheque does not affect the rights of a holder. It can be valid by
negotiated between the actual date of issue & the date it bears. A holder, however, may not be
able to sue or a postdated cheque before its date.
Stale Cheque: It is the practice in our country not to honour cheques presents for payment
after the expiry of six calendar months from their dates. Such cheques are considered 'Stale'
or ‘out of date'. This practice is born out of banker's customer relationship and does not have
any legal sanction behind it. Sometimes, it is found that cheque contain a note that it should
be presented for payment within a specified period, say, three months (Govt. Cheque). There

is no legal objection for making such instruction on the face of the cheque and the instruction
so made is binding upon the drawee bank.
Parties to a Cheque:
a) The account holder who orders the bank to pay money from his account is called the
drawer of the cheque.
b) In a cheque, the drawer writes the name of the person to whom money is to be paid.
The person so stated is called the payee of the cheque.
c) In a cheque, the bank which is ordered to pay money from the depositor's account is
called the drawee of a Cheque.
6.7 Comparison between Cheque & Bill of Exchange

a) Often confusion arises between the differences between a cheque and a bill of exchange.
This arises from the attempt, in the N.I. Act defining a cheque through the medium of a
bill of exchange. As per the definition of the Act every cheque has to be bill of exchange.
However, the converse is not true that is every Bill of Exchange is not necessarily a
cheque. The essential differences between the two instruments are:
b) Drawee: A Cheque is always drawn on a banker, whereas bill of exchange need not
necessarily be drawn on a banker.
c) Payability: A Cheque is always payable on demand whereas, a Bill of Exchange may be
payable on demand or may be payable on a future date. If a bill is payable on a future
date, it is called a usance bill.
d) Maturity: A usance Bill of Exchange has to be accepted and while calculating the date of
maturity of the usance bill of exchange, three days of grace are given. A cheque is always
payable on demand. Hence grace period is not allowed in the case of cheque, since it is
payable on demand and acceptance is not required.
e) Crossing: Cheques can be crossed, a bill of exchange cannot be crossed.
f) Notice of Dishonour: When a cheque is dishonoured no notice of dishonour need be
given to the drawer. When a Bill of Exchange is dishonoured notice of dishonour is to be
given to the drawer and the other parties entitled to receive such notice. In some cases it
may be necessary to have such dishonoured bills noted and protested.
Crossing of Cheque and their Significance

Crossing may be of two types:
a. General crossing
b. Special crossing

General Crossing: As per Section-123 of N.I Act, 1881 provides- Where a cheque bears
across its face an addition of the words “and company” or any abbreviation thereof, between
two parallel transverse lines, or of two parallel transverse lines simply either with or without
the words ‘not negotiable’, that addition shall be deemed a crossing and the cheque shall be
deemed to be crossed generally.
Special Crossing : As per Section-124 of N.I Act, 1881 provides- Where a cheque across its
face an addition of the name of a banker, either with or without the words ‘ not negotiable’
that addition shall be deemed a crossing and the cheque shall be deemed to be crossed
specially, and to be crossed to that banker.
Significance of General and Special Crossing: Where a cheque is crossed generally, the
banker on whom it is drawn shall not pay it otherwise than to a banker. Where a cheque is
crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the
banker to whom it is crossed or his agent for collection. (Section-126).
Sec.3C-Bearer:
Bearer means a person who by negotiation comes into possession of a negotiable instrument,
which is payable to bearer.
When the word printed on the cheque or bearer is struck through then it turns into an order
cheque.
Sec.14-Negotiation:
When a promissory note, bill of exchange or cheque is transferred to any person, so as to
constitute that person the holder thereof, the instrument is said to be negotiated.
Who can cross a cheque?
Drawer: The drawer can make general or special crossing on a cheque at the time of drawing
or issuing it (Section- 77.1) of B.E. Act, 1882.
Holder: Where a cheque is uncrossed, the holder may cross it generally or specially. Where a
cheque is crossed generally, the holder may cross it specially. Where a cheque is crossed
generally or specially, the holder may add the words “not negotiable”. (Section-125). It may
be mentioned that a holder can be either payee or endorsee.
Banker: Where a cheque is crossed specially, the banker to whom it is crossed may again
cross it especially to another banker, his agent, for collection. When an uncrossed cheque, or
a cheque crossed generally, is sent to a banker for collection, he may cross it especially to
himself. (Section- 125)

Cancellation of Crossing: Only the drawer of the cheque can cancel a crossing.
Double Crossing: Where a cheque bears two separate special crossing, it is said to have been
double crossed. Where a cheque is crossed specially to more than one banker, except when
crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse
payment thereof. (Section-127).
‘Not Negotiable’ Crossing: The crossing of a cheque ‘not negotiable’, however, does not
render the instrument non-transferable. It only deprives the instrument of the incident of
negotiability. If the holder has good title, he can still transfer it with good title; but if the
transferor has a defective title, his transferee is affected by such defects and he cannot claim
the rights of a holder in due course. (Section- 130).
Account Payee Crossing: Section-123A provides: where a cheque crossed generally bears
across its face an addition of the words ‘account payee’ between two parallel transverse lines
constituting the general crossing, the cheque, besides being crossed generally, is said to be
crossed ‘account payee’. When a cheque is crossed ‘account payee’-
a) It shall cease to be negotiable; and
b) It shall be the duty of the banker, in collecting payment of cheque to credit the
proceeds thereof only to the account of the payee named in the cheque.
Sec. 15- Endorsement
Section 15 of N.I. Act, 1881: When the maker or holder of a negotiable instrument signs the
same, otherwise than as such maker, for the purpose of negotiation, on the back or face on a
slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to
be completed as a negotiable instrument, he is said to endorse the same, and is called the”
The person who indorses is called ‘endorser’ and the person in favour of whom the
endorsement is made is called ‘endorsee’.
Sec.48- Negotiation by Endorsement: A promissory note, bill of exchange or cheque
payable to order is negotiable by the holder by endorsement and delivery thereof.
Who can indorse and negotiate?
Every sole maker, drawer, payee or endorser all of several joint makers, drawers, payees or
endorsees of a negotiable instrument, may endorse and negotiate. Provided he is holder
thereof,
Legal provisions regarding Endorsements: The following provisions are continued in the
act as regards endorsement:

Effect of Endorsements: The endorsement of a negotiable instrument followed by delivery
transfers to the endorsee the property therein with the right of further negotiation (Sec. 50).
Thus the endorsee acquires property or interest in the instrument as its holder.
Who can endorse? “Every sole maker, drawer, payee or endorsee or all of several joint
makers, drawers, payees or endorsee, of a negotiable instrument may endorse and negotiate
the same." (Section51). These in case of the instrument is held jointly by number of persons,
endorsement by all of them is essential. One cannot represent the other.
Rules regarding endorsement
1. A regular endorsement implies signature of the holder of the negotiable instrument
himself or his duly authorized agent on its face or back for the purpose of negotiation.
2. The payee must sign his name in the exact spelling as appearing on the instrument.
3. Endorsements in pencil or by a rubber stamp are usually not accepted.
4. Endorsements need not contain the complimentary prefixes or suffixes.
5. Endorsements do not require any particular form of words. However, it must contain
an order to pay.
6. In the case of married women, the name of her husband must also be mentioned in
the endorsement.
7. An illiterate person can make a valid endorsement by putting his left hand thumb
impression in the presence of certain other persons who should sign it as witnesses
and whose addresses should also be given.
8. In case of joint stock companies, associations etc., the endorsement should be made
by persons who are duly authorized to sign on behalf of these institutions.
9. Endorsement by a stranger to a negotiable instrument, i.e., by a person other than the
holder, maker or the person to whose order the bill is payable, shall not be valid. Such
a person is known as a ‘Backer’.
10. Endorsement shall be presumed to have been made in the order in which they appear
on the instrument proved to the contrary.
11. An express promise in writing to indorse a bill is not an endorsement. Assignment of
a note by a separate writing is also not an endorsement.
12. Endorsement must be completed by delivery of the instrument.
Kinds of Endorsements
According to the N.I. Act. Endorsements are of the following kinds:
Endorsement in Blank: If the endorser signs his name only, the endorsement is said to be ' in
blank' (Sec. 16). The endorser does not specify the name of endorsee with the effect that an
instrument endorsed in blank becomes payable to the bearer even though originally payable
to order (Sec. 54) and no further endorsement is required for its negotiation. For example if a
cheque is payable to 'X' or order and X merely signs on its back, such endorsement is called
endorsement in blank.
Endorsement in Full: If in addition to his signature , the endorser adds a direction to pay the
amount mentioned in the instrument to, or to the order of, a specified person, the endorsement
is said to be ' in full' ( Sec. 16). If in the above illustration X adds the words "Pay to Y” or
“Pay to Y or order" such endorsement is called endorsement in full. An endorsement in blank
may be converted into an endorsement in full. The holder of a negotiable instrument endorsed
in blank may, without signing his own name, by writing the above endorser's signature a
direction to pay to any other person converted the endorsement in blank into an "endorsement
in full"; the holder does not thereby incur any responsibility of an endorser (Sec. 49).
According to Sec. 55" if a negotiable instrument, after having been endorsed in blank, is
endorsed in full, the amount of it cannot be claimed from the endorser in full, except by the
person to whom it has been endorsed in full or by one who derives title through such person."
Conditional Endorsement: If the endorser of a negotiable instrument, by express words in
the endorsement makes his liability, or the right of the endorsee to receive the amount due
thereon, dependent on the happening of a specified event, although such event may never
happen, such endorsement is called a conditional endorsement (Sec. 52).Conditional
endorsements do not make the instruments nontransferable. However, such endorsements are
generally not found.
Restrictive Endorsement: Sec. 50 permits restrictive endorsements which take away the
negotiability of such instruments. "The endorsement may by express words, restrict or
execute the right to negotiate or may nearly constitute the endorsee an agents to endorse the
instrument or to receive its contents for the endorser for some other specified person." Such
an endorsement prohibits further endorsement and is called restrictive endorsements e.g. (a)
Pay the contents to C only, (b) pay C or order for the account of B etc. The negotiability of
the instrument is not restricted by the omission of the word, or order (Sec. 51).
Sans Recourse Endorsement: An endorser of a negotiable instrument may, by express words
in the endorsement, exclude his liability thereon (Sec. 52). For example, if R endorses a
cheque as follows:-
i. Pay to 'X' or order at his own risk,
ii. Pay to 'X' without recourse to me.

She/He will not be liable to X or any of the subsequent endorsees if the bank dishonors the
cheque subsequently. They may sue any party prior to such endorser. But if an endorser who
so excludes his liability afterwards becomes the holder of the instrument, all intermediate
endorsers are liable to him.
Facultative Endorsement: The endorsee must give notice of dishonor of the instrument to
the endorser, but the later may waive this duty of the endorsee by writing in the endorsement
“Notice of Dishonor waived". The endorser remains liable to the endorsee for the non-
payment of the instrument.
Liability of the Endorser: As per Sec. 35 of N.I. Act " In the absence of a contract to the
contrary, the endorser of a Negotiable Instruments by endorsing it, engages that in due
presentment it shall be accepted and paid according to its tenor and that if it be dishonored he
will compensate the holder or subsequent indorse who is compelled to pay it for any loss or
damage caused to him by such dishonor. Every endorser after dishonor is liable as upon an
instrument payable on demand."
Circumstances for Dishonor of Cheques
When a cheque is drawn properly and there is a sufficient fund in the customer account, to
honor the cheque is the primary obligation of a bank. At the time of account opening, bank
receives deposits from his customer on the footing that drawing against such deposits will be
allowed on demand. So, without satisfactory reason, to dishonor cheque may be treated as
breach of contract by the bank in the eye of law. In addition to this, section 31 of N.I. Act
1881 says, " The drawee of a cheque having sufficient funds of the drawer in his hands
properly applicable to the payment of such cheque must pay the cheque when duly required
so to do, and in default of such payment, must compensate the drawer for any loss or damage
caused by such default". In spite of all these, it is not always unlawful for a bank to dishonor
cheque and there are circumstances when a banker is entitled in dishonoring the customer's
cheque. Circumstances under which, cheques are returned are detailed here under:
Insufficient Fund: This is used when the funds in the customer's account are insufficient to
meet the cheque, which has been presented to the banker. Word such as "No effect", "No
fund" and "Not sufficient" convey the same meaning as "Insufficient Fund". In this
connection it will be better to note that if the amount of cheque presented for payment,
exceeds credit balance/drawing power/ over draft limit of the account holder, inquiry should
be made into the various departments of the branch to know the position of any available
credits to be released for the account before returning the cheque.

Amount in figure and word differ: This answer is given when a banker wants to return the
cheque on the ground that the amount stated in words differ from that given in figure.
Although section 18 of N.I. Act. Says “If the amount under taken or order to be paid is stated
differently in figure and words, the amount stated in words shall be the amount undertaken or
ordered to be paid", yet we are in practice to return such a cheque.
Cheque is undated / postdated / stale: Cheque should not be undated or postdated (where it
is payable at a future date) or stale (where the date of the cheque is later than six months) on
the date of its presentation. Undated, postdated and stale cheque shall be returned unpaid.
Drawer's Signature differs/requires: If the drawer's signature on the cheque differs with the
specimen signature, the banker must return the cheque with the reason “Drawer’s signature
differs" otherwise banker may be landed in great difficulties. Where cheque is drawn with
facsimile signature or without signature, the same shall be returned stating “Drawer’s
signature requires".
Payment stopped by the Drawer: While the payment of a cheque is countermanded by the
drawer and such cheque is presented for payment the same should be returned under the
aforesaid reason. "Payment countermanded by the Drawer" or "Order not to pay" bears the
same meaning as "Payment stopped by the Drawer". It is noted that the words "Payment
Stopped" may be written on the face of the cheque while returning the same to avoid
subsequent oversight.
Crossed cheque must be presented through bank: In section 126 N.I. Act 1881 it is clearly
stated that where a cheque is crossed generally or specially the banker on whom it is drawn
shall not pay it, otherwise than to the banker to whom it is crossed, or his agent for collection.
In case any customer presents crossed cheque over the counter for cash payment the same
shall be returned with the above reason. Here it is noted that cash payment against crossed
cheque may be made to a banker.
Other Specific Reasons
Cheque is torn: Sometimes the cheque may be torned and pieces pasted together, when it is
presented to the paying banker. Such a mutilated cheque should be returned. However, it may
be paid if the mutilation is guaranteed by collecting banker.
Alternation in date / figure / words require drawer's full signature: Date, figure and
words are the material parts of the cheque. Any material alteration of a negotiable instrument
renders the same null and void. So, unless the alteration in any material part of a cheque is
authenticated by the drawer's signature in full as per specimen recorded in the bank, cheque

shall be returned unpaid. Whenever, the amount of the cheque is altered from small to large,
it is better to request the customer to draw a fresh cheque in lieu of authentication.
Collecting bank's endorsement require: Cheque crossed "A/C payee" as well as cheque
crossed generally but payable to the order of the payee is required to be endorsed by the
collecting banker. In case of cheque payable to the second payee, the collecting banker must
confirm the endorsement of the first payee. Collecting bank must confirm the endorsement of
the first payee.
Payee’s endorsement irregular /illegible: Where transferring of the title to the cheque is
necessary; it must be suitably endorsed by the payee. Without endorsement or with irregular /
illegible endorsement of the payee, cheque will not be honoured. It can be returned stating the
reason as above. To satisfy the purpose of the negotiation, proper endorsement on the cheque
is a must.
Payees discharge required: In the course of bank business, there are some instruments like
TDR/FDR, TTR etc., which invariably require discharge of the payee for payment. Without
proper discharge the instrument shall not be honoured. The same will be returned with the
above objection.
"A/C Payee Only", cheque should be collected only through payee's A/C:
When a cheque is crossed “A/C payee only" it shall cease to be negotiable and it shall be the
duty of the banker collecting payment of the cheque to credit the proceeds thereof only to the
account of the payee named in the cheque. And as such, if a cheque crossed “A/c payee only"
is negotiated either by delivery or by endorsement; it must be returned with the objection
accordingly.
Causes such as Refer to Drawer, Not arranged for, Effects not yet cleared, please present
again etc. should not be given by banker while return the cheque. The cause of cheque return
should be specific and clear. (Ref: BRPD Circular Letter No. 01 dated 26.11.96, BRPD
Circular Letter No. 14 dated 05.11.97 and BRPD Letter Reference No. BRPD (P) 717/2002-
1020 dated 12.12.2002).
Apart from all those, there are so many reasons for which cheques may be returned. Such as
for insanity, insolvency or death of the customer, cheque may be returned. Cheque is also
returned while the credit balance of the account is assigned by the account holder or is
attached by the order of the court. However, before refusing a cheque on any ground, we
should be very careful, as we would be running great risks if the step taken by us were to
prove to be erroneous and unlawful.

Payment in due Course (Section 10): Payment in due course means payment in accordance
with the apparent tenor of the instrument in good faith and without negligence to any person
in possession thereof under circumstances, which do not afford a reasonable ground for
believing that he is not entitled to receive payment of the amount therein mentioned.
If the payment is made in due course the drawee of the cheque (the Banker) is discharged
from all liabilities that may arise from making the payment.
Holder in due course: It means any person who for consideration becomes the possessor of
a promissory note, bill of exchange or cheque if payable to bearer or the payee or endorsee
thereof, if payable to order, before it became overdue, without notice that the title of the
person from whom he derived his own title was defective.
Essential conditions to constitute a 'Holder in due course':
 Who receives an instrument in a good faith and without negligence
 Who has paid value for the same
 Who has received the instrument before its maturity
 who is in possession of the instrument as a bearer or payee or endorsee
For all legal purposes, the title of the holder in due course is superior to that of the true
owner.
Rights and privileges of a holder in due course:
 He obtains a better title to the instrument than that of a true owner.
 The defective title of the previous endorsers (if any) will not adversely affect his
rights.
 He can pass on a better title to others, since, once the instrument passes through his
hands, it is purged of all defects.
 Until the instrument is finally discharged, every party to that instrument is liable to
him.
 Even the drawer of a negotiable instrument cannot claim invalidity of the instrument
against him.
 His claim cannot be denied on the ground that the payee has no capacity to endorse.
Forged Signature: A banker is expected to know the customer's signature, since a specimen
is expected to be available with him for purposes of comparison. The banker is not duty-
bound to honour any cheque which bears a signature not conforming to the specimen on
record. If the signature is forged then no statutory protection is available to him under Section
85 of the N.I. Act. Even if the forgery is a clever imitation of the original it does not offer

him any protection, as a forged signature does not constitute an authority to debit the
customer account and part with his funds. If the signature was forged there was never any
mandate from the customer's at all to the banker and payment of such instruments would be
negligence under the N.I. Act. Therefore, the banker has no defense even if the forgery is a
clever one and not easily detectable.
A cheque with the drawer's signature forged is a mere nullity i.e. having no legal force. Just
as it is the duty of the banker to report to his customer if a cheque is presented to him and
dishonored on the ground of the forgery of the drawer's signature, the customer has the
corresponding duty to inform his banker if the former comes to know that his signature has
been forged on cheques to his banker. If he fails to inform the banker until such time as the
latter's chances of recovery from the culprit has been materially prejudiced, the customer will
be precluded from disputing the genuineness of the signature and claiming the amount from
the bank.
Issuance of Cheque Book
a) At the time of opening an account, the first cheque book should be issued to an account
holder on the basis of first requisition slip signed by him, obtaining approval from the
Branch Manager / Sub-Manager or an Authorized Officer. All subsequent cheque books
should be issued against Cheque Book Requisition Slips from the cheque book previously
issued. It is noted that no request for cheque issuance over Telephone and Fax will be
accepted.
b) Before issuing the new cheque book, the branch should consider the following. But it
should be kept in mind that it is just a guide for issuing a cheque book and not to harass
the ordinary clients.
i. A satisfactory average balance is maintained.
ii. The account is not inoperative / dormant
iii. The account is neither undesirable nor non-remunerative and is
satisfactorily conducted.
iv. Cheque book issued earlier have been fully utilized.
v. Cheques are not frequently returned for want of funds.
vi. Payment of cheques is not frequently stopped.
vii. Letter of thanks is received by the customer & returned
acknowledgement copy to branch in case of new account opened.

c) A fresh cheque book should be issued to the account holder once the Branch Manager /
Authorized Officer is satisfied about the conduct of the account, and has verified the
signature of the Account Holder.
d) If a cheque book is requested against a letter signed by the account holder without
production of the Requisition slip from a previous cheque book, care should be exercised
to establish the genuineness of this request, particularly when the address of the account
holder has recently been changed.
e) The branch seal and the account number of the client shall be printed / written on each
cheque leaf and requisition slip.
f) The name and the account number should be entered in the Cheque Book Issued Register
against the relative cheque book series. The Client or his representative shall
acknowledge the receipt and initialed by the Desk Officer.
g) The Cheque Book Requisition slip and cheque book issued register should be signed by
the Authorized Officer and each leaf shall be initialed by a Dealing Officer.
h) Cheque book required to be sent by post should be dispatched under “Registered
Acknowledgement” cover or by dependable courier service.
i) Cheque book delivered to the account holder at the counter should be acknowledged by
them overleaf on the requisition slip.
j) An account holder may send a written authority to deliver a cheque book to his authorized
representative. In that case signature of bearer must be attested by the account holder.
Authorized person’s signature to be obtained in cheque book issue register and
authorization letter will be stitched with cheque book requisition slip in voucher bundle.
k) After issue of the cheque books, the details of cheque numbers issued should be entered /
recorded in computer program.
l) The entries made in the computer shall be checked and signed by the Authorized Officer.
m) All requisition slips against which cheque books have been issued, should be counter
checked with the cheque book issue Register, stitched with the other vouchers at the end
of business each day, and will hand over to the officer in charge of vouchers for safe
custody.
n) For issue and delivery of subsequent cheque book the issuing officer must tally with
cheque book register; previous issuance date, serial number of cheque leaves with the
help of FCUBS.

Specially Printed Cheque Books
a) In special cases the Bank may agree to have cheques designed to the specifications of
valued account holders.
b) All requests for specially printed cheque books from customers should be approved
by the Branch Manager in consultation with the Head Office who would determine
the quantity of such cheque books. Head Office will arrange to print such cheques and
will also review for continuation of this facility each year or before a further stock of
cheque books is printed whichever is earlier.
c) On deciding to print the name of the account holder on checks, sufficient number of
cheque books should be handed over to the approved printer with the correct name
and style of the account holder.
d) Considering the bulk consumption of the cheques by a Branch, Head Office may
consider to print the cheques in the name of a particular Branch.
Loss or Destruction of Cheque Book or Cheque Leaf
a) In case of Loss or destruction of any Cheque Book containing unused Cheque leaf,
the Client shall inform the Bank immediately. The client shall confirm the matter with
a written request later on.
b) The Branch after getting the intimation over telephone or written application shall
make Stop Payment of those cheques immediately by giving relevant command in the
FCUBS.
c) The stop payment of these checks shall be checked by the Branch Manager / Sub-
Manager.
d) The loss or destruction of any Cheque Book shall be entered in the Stop Payment
Register.
Cancellation of Cheque Book
a) A cheque book can be cancelled for various causes. In which case the unused cheque
book should be cancelled immediately after consultation with Manager / Sub-
Manager. In other case efforts shall be made to collect all unused cheques and Cheque
Requisition Slips from the account holders when they intend to close accounts.
b) All unused Cheques shall be returned only to the Officer In-charge of the Department,
who shall note down the distinctive number of such cheques on the letter delivered by
the Party to close his account and incase of error.

c) In case of error & return of unused cheque book where cheques were entered into
System, should be stopped as per stop payment procedures. Stop payment of unused
cheques into the FCUBS is to be made as per laid down policy of working in EBA.
d) The Particulars of the closed account, with the unused Cheques returned by the Party,
shall be recorded in Account Closing Register.
e) The unused Cheques and Requisition Slips returned by a party shall be destroyed by
the Officer In-charge / Manager / Sub-Manager on the same day and a note to that
effect shall be made in the Account Closing Register & Cheque Book Issue Register.
Paying Banker
a) A Banker on whom a cheque is drawn should pay the cheque when it is presented for
payment.
b) This obligation has been imposed on him by sec. 31 of the N.I Act, 1881.
c) A banker is bound to honour his customer’s cheque, to the extent of the funds
available and the existence of no legal bar to payment.
d) Again, for making payment the cheque must be in order and it must be duly presented
for payment at the branch where the account is kept.
e) The paying banker should use reasonable care and diligence in paying a cheque, so as
to abstain from any action likely to damage his customer’s credit.
f) If the paying banker wrongfully dishonors a cheque, he will be asked to pay heavy
damages.
Collecting Banker
A collecting banker is one who undertakes to collect the amount of a cheque for his customer
from the paying banker.
Status of a Collecting Banker
While collecting his customers’ cheques, a banker acts either:
o as a holder for value; or
o as an agent to the customer.
A collecting banker is regarded as holder for value

1. if the cheque is purchased and its value is paid before collection;
2. if the customer is allowed to draw the amount of cheque before collection;
3. if the cheque is expressly paid in to reduce the amount of an overdraft enjoyed by the
customer before it is collected;

4. if agreed between the banker and the customer that the customer may draw the
amount of the cheque before collection.
Rights of a Holder for Value
A collecting banker acting as a holder for value enjoys the rights as holder in due course.
Agent to the customer
 A bank may undertake to collect a cheque as an agent to the holder thereof.
 The collecting banker incurs a fiduciary responsibility to account for and pay the
money to his principal.
 Thus, the collecting banker credits the customer’s account with the amount of the
cheque after the amount is actually realized from the drawee-bank.
Duties of a Collecting Banker
Due care and diligence: The collecting banker should exercise due care and diligence in
collection of cheques entrusted to it for collection by its customers;
Presentment within reasonable time: The collecting banker must present the cheque for
collection within reasonable time. The banker must not delay in presenting the cheque , if
there is no reasonable ground ;
Crediting the proceeds to the customer’s account: When the cheque is realized, the bank
must pay the proceeds to the customer by crediting his account without delay;
Notice of dishonour: In case the cheque is dishonoured, the collectingbanker must serve
notice of dishonour to the customer without delay, failing which, the banker will be liable
held to the customer for any loss or damage that the customer might have suffered on account
of such failure;
Statutory protection
Section -131 of N.I. Act provides protection to a collecting banker entrusted with the
collection of cheque
Section -131: Statutory protection
‘A banker who has in good faith and without negligence received payment for a customer of
a cheque crossed generally or specially to himself shall not , in case the title to the cheque
proves defective, incur any liability to the true owner of the cheque by reason only of having
received such payment.’
Statutory protection-
 Thus, the collecting banker may enjoy the statutory protection if it fulfills the following
conditions:

o receives payment for customer only;
o receives payment of the crossed cheque;
o Acts in good faith and without negligence.
 It should be carefully noted that the protection is only available to the collecting banker
o When it acts as a mere agent to the principal ie. customer and not in the capacity
of holder for value;
o that the collection must involve the crossed cheque
o That the collection has been done in good faith and without negligence.
Customer
 A person who has an account with the bank.
Good Faith
 Good faith is the doing of that which a reasonable man under all circumstances of the
particular case in which he is acting, would do without malafide intension or absence of
any suspicion which a reasonable man under these circumstances would afford.
Negligence
 Negligence is the doing of that which a reasonable man under all circumstances of the
particular case in which he is acting, would not do, or the failure to do something, which a
reasonable man under these circumstances would do.
Gross Negligence
 Negligence which reflects a complete carelessness in doing a job.
 Banker cannot escape from liability on the ground of gross negligence.
Examples of negligence
 opening of account without introduction,
 absence of correct and complete identification information about the customer,
 not verifying correctness of endorsements,
 no proper enquiry in doubtful cases,
 failure to take note of ‘not negotiable’ crossing,
 Collection of ‘A/C Payee’ crossed cheque for person other then the payee mentioned in
the instrument, etc.

Questions
1. Define Negotiable Instruments and its essential features.
2. Distinguish between Promissory Note and that of a bill of exchange.
3. State in brief in circumstances in dishonoring of a cheque.
4. Define ‘Holder’ and ‘Holder in Due Course’.
5. Write in short about the responsibilities of a paying and collecting banker.

CHAPTER 7
Clearing and Collection of Instruments: BACH, BACPS

7.1 Clearing
Clearing is the process of collection of proceeds of instruments of different banks by a
collecting bank through some systematic procedures with the involvement of Central Bank.
7.2 BACH
“BACH” (Bangladesh Automated Clearing House) means the overall system and facility that
supports the Exchange and settlement of payment items between Participating Banks and the
Bangladesh Bank. The components of BACH are -
BACPS- Bangladesh Automated Cheque Processing System “BACPS” means a facility that
clears cheques and approved payment items for Bank companies.
BEFTN- Bangladesh Electronic Fund Transfer Network The Bangladesh Electronic Funds
Transfer Network (BEFTN) will operate as a processing and delivery centre providing for the
distribution and settlement of electronic credit and debit instruments among all participating
banks.
MICR-Magnetic ink character recognition, or MICR, is a character recognition technology
used primarily by the banking industry to facilitate the processing and clearance of cheques
and other documents.
Introduction of MICR Cheque
Front View Instrument No. (7 digit)
Routing No. (9 digit)
Ins.A/c No. (13 digit)
Instrument Type (2 digit)
Rear View Payee’s A/C no.& Phone No Clearing
Stamp Endorsement & Sign Endorsement line print
7.3 Responsibility of Presenting Bank

1. Comply with the BACPS rules.
2. Certifies that presented item is a copy of the original instrument.
3. Prima facie genuineness of the cheque be verified with
i) Due diligence and ordinary care.
ii) Genuineness of the cheque leaf,
iii) Material alteration of payee name, amount or date.

iv) Verification by UV detector
4. Instruments, Image & data preserve for 6 years.
5. Original cheque available for inspection within 7 calendar days.
6. If failed, it will result in non-payment of the instrument.
7. Credit to customer A/C on settlement date or internal rules of the bank.
8. Central Bank holding the Bank’s Settlement A/C to credit on house date.
9. Indemnify the BB processing/settling for the item for any loss or expense.
10. Reconciliation.
7.4 Presenting Banks Due Diligence

1. Verify the prima facie genuineness of the cheque
2. To be truncated
3. Attempt to detect any fraud, forgery or tampering
4. Enforce KYC norms in letter and spirit.
5. Observe all precautions which a prudent banker takes,
6. To check the apparent tenor of the instrument,
7. Physical feels of the instrument,
8. Tampering visible to the naked eye with reasonable care, etc.
7.5 Suitable Risk Management Techniques

For enhanced attention banks may employ suitable risk management techniques like-
1. Scrutiny of high value transactions,
2. Limit based checking by officials,
3. New accounts alerts, etc.
7.6 Operational Due Diligence

1. Sorting of Instruments
2. Stamping
3. Capture of images and data
4. Reject repair and balancing
5. DIN (document identification no.) endorsement
6. Re-presented cheques
7. Validation
8. Master table synchronization
9. Image quality checking

10. Handling IQA failure
11. Frequency of submission
12. Submitting electronic data and images
13. Alternative delivery media
14. Submitting items to The Bureau Service
15. Electronic File Acceptance or not Acceptance 16. Internal Control
7.7 Responsibility of Paying Bank as regards settlement

1. Comply with the applicable BACPS rules
2. Agrees to process the item in accordance with these Rules.
3. Authorizes the Bangladesh Bank to charge the amount of a payment item to the Paying
Bank’s Settlement Account on the Settlement Date
4. Indemnify the Bangladesh Bank for any loss or expense incurred as a result of a breach of
the foregoing agreements or of any action taken by the Bangladesh.
5. The agreements, authorization and indemnity do not limit any other agreement,
authorization or indemnity not inconsistent with these Rules.
6. Return an approved payment item to the Bangladesh Bank by the deadline in the BACPS
schedule.
7. Taking Positive Pay Instruction from cheque issuer.
7.8 Paying Bank’s Due Diligence

1. Transmission of Posting File
2. Digital Certificate Verification of CHM
3. Payment Processing:
a. Signature verification
b. Account balance verification
c. Verification of endorsement
d. Positive Pay instruction
e. Restriction to account by customer or other legal authority
f. Stop payment verification
g. Verification of date
h. Matching amount and figure
i. verification of data entry error
j. Other prudent practice

4. Returned of Cheque
Items that fail paying bank approval and are therefore not to be honoured and are required to
be returned to the BACPS in electronic format.
5. Request for paper
The paying bank may, request a physical instrument from the presenting bank; if it believes
that the item is not genuine or has questions about its validity.
6. Internal Control
In addition to the inward instruments drawn on branches of a bank, the reports generated by
the Clearing House would contain the summary position of the total number of instruments
and the total value thereof.
7.9 Processing at PBM (Participating Bank Module)

The BACPS Participating Bank Module (PBM) provides cheque envelope validation and
provides an interface for sending and receiving cheque envelopes from and to BACPS.
For Outward Clearing
1. Duplication Checking
a. Destination Routing Number
b. Origin Routing Number
c. File Creation Date
d. File Creation Time
e. File ID Modifier
2. Receiving Outward Presentment
3. Image Quality Analysis and Failure Handling
4. Item Processing
5. Session Attachment
6. Use of PKI
7. Reconciliation of Outward Presentment
For Inward Clearing
1. Receipt of Inward Data/Images
2. Validation, Authentication and Acknowledgement
3. Control Mechanism
4. Generation of Posting File Eligible Instruments for BACPS
Type of Instruments MICR CODE No.
1. Savings Bank Account Cheque 10

2. Current Account Cheque 11
3. Refund Warrant 18
4. Banker’s Cheque 12
5. Pay Order 19
6. Cash Credit Account Cheque 13
7. Govt. Cheque 31,32
8. Dividend Warrant 14
9. Credit Card Cheque 20
10. Demand Draft 15
11. Foreign Taka Demand Draft 23
12. Gift Cheque 16
13. Fractional Dividend Warrant 15
14. Interest Warrant 17
7.10 BACPS Threats

The whole system is highly secured but some fraudulent attempts have found misusing the
BACPS system:
Reasons behind fraudulent attempt
a. Material alternation in amount both numeric and word figure
b. Material alternation in instrument no.
c. Material alternation in MICR encoded line
d. Material alternation in MICR line
e. Duplicate print
Protective measures
a. Verifying by UV detector before present
b. Instrument print with erasable UV ink
c. Positive pay Instruction
d. New account alert
e. KYC update and monitoring Example
7.13 Return Reason Codes

Re-represent able (R)
Code Reason
Non Re-presentable (N)
01 Insufficient fund R
02 Amount in figure and word differs N
03 Stale Cheque N
04 Post dated Cheque R
05 Drawers signature differs N
06 Payment stopped by drawer N
07 Item represented too often N
08 Incomplete or missing endorsement R

09 Forged endorsement N
10 Material alteration – payee name N
11 Material alteration - amount N
12 Material alteration - date N
13 Material alteration – multiple fields N
14 Forged or unauthorized signature N
15 Missing signature R
16 Missing corporate stamp R
17 Incorrect amount R
18 Item sent to the wrong bank R
19 Image does not meet usability standards R
20 Piggyback image R
21 IQA failure R
22 Account unavailable (closed, frozen, invalid etc.) N
23 Present with the physical document R
24 Item missing advice R
25 Duplicate item – previously paid N
26 Incorrect Payee N
27 High value item presented to an ineligible branch N
7.11 Value Date Clearing

a) When an outward clearing instrument is posted in the system, the amount lay at the
account as un-cleared balance.
b) Based on type of clearing, the instrument has a maturity date i.e. date when the instrument
is supposed to honor through clearing house.
c) If the instrument is not return by the drawee Bank, on the maturity date the instrument
amount is accumulated with available balance at the account level as cleared fund after
running Value date clearing process in the system.
7.12 Same Day Clearing
Bangladesh Bank, Dhaka introduced another clearing house named “Same Day Clearing” for
quick clearing large amount instruments. This clearing house deals with instruments drawn
on Branches of different Banks and for the instrument amount Tk. 5.00 lac and above.
As regards clearing house timing for presenting instrument the detailed guidelines of NCCBL
is to be followed.
Bangladesh Electronic Funds Transfer Network (BEFTN)
The Bangladesh Electronic Funds Transfer Network (BEFTN) will operate as a processing
and delivery center providing for the distribution and settlement of electronic credit and debit
instruments among all participating banks. This Network will operate in a real‐time batch
processing mode. All payment transactions will be calculated into a single multilateral netting

figure for each individual bank. Final settlement will take place using accounts that are
maintained with Bangladesh Bank.
Participants in BEFTN: The EFT Network is a multilateral electronic clearing system in
which electronic payment instructions will be exchanged among Scheduled Banks. The
system involves transmitting, reconciling and calculating the net position of each individual
participant at the end of each processing cycle. The participants involved are:
(a) Originator.
(b) Originating Bank (OB)
(c) Bangladesh Electronic Funds Transfer Network (EFT Operator)
(d) Receiving Bank (RB)
(e) Receiver
(f) Correspondent Bank
a) Originator: The Originator is the entity that agrees to initiate EFT entries into the network
according to an arrangement with a receiver. The originator is usually a company,
government agency or an individual directing a transfer of funds to or from a consumer’s or a
company’s account. The originator executes an EFT fund transfer entry through an
Originating Bank (OB).
b) Originating Bank (OB): The originating bank is the bank which receives payment
instructions from its client (the originator) and forwards the entry to the BEFTN. A bank may
participate in the EFT system as a receiving bank without acting as an originating bank;
however, if a Bank chooses to originate EFT entries, it must also agree to act as a receiving
bank.
c) Bangladesh Electronic Funds Transfer Network (BEFTN): BEFTN is the central
clearing facility, operated by Bangladesh Bank that receives entries from OBs, distributes the
entries to appropriate RBs, and facilitates the settlement functions for the participating
banking institutions
d) Receiving Bank (RB): The receiving bank is the bank that will receive EFT entries from
BEFTN and post the entries to the account of its depositors (Receivers).
e) Receiver: A receiver is a person/organization who has authorized an Originator to transmit
an EFT entry to the account of the receiver maintained with the Receiving Bank (RB).
f) Correspondent Bank: In some cases an Originator, Originating Bank or Receiving Bank
may choose to use the services of a Correspondent Bank for all or part of the process of
handling EFT entries.

A Correspondent Bank’s function can include, but is not limited to, the creation of EFT files
on behalf of the Originator or acting on behalf of an OB or RB, respectively.
All Correspondent Banks must be approved by Bangladesh Bank before a bank enters into an
agreement with the Correspondent Bank. Authorization A written arrangement with the
originating company signed by an employee or customer to allow payments processed
through the EFT Network to be deposited in or withdrawn from his or her account at a bank.
Authorization can also be a written agreement that defines the terms, conditions and legal
relationship between Originator and Receiver.
EFT Entries
A) EFT Credits
a. Inward Foreign remittances
b. Domestic remittances
c. Payroll private and government
d. Dividends/Interest/Refunds of IPO
e. Business to business payments (B2B)
f. Government tax payments
g. Government vendor payments
h. Customer‐initiated transactions
B) EFT Debits
a. Utility bill payments
b. Equal Monthly Installments (EMI)
c. Government tax payments
d. Government license fees
e. Insurance premium
f. Mortgage payments
g. Club/Association subscriptions
Consumer vs. Corporate Payments: EFT transactions are typically categorized as either
consumer payments, Government payments or commercial payments. These transactions are
defined in accordance with the relationship of parties involved in the transaction and the type
of receiver account.
Consumer payments that could be made via the EFT network include credit applications
such as payroll, dividend, interest and annuity payments and so on. Consumer EFT debit
applications include the collection of utility bills, insurance premiums, loan installments and
other recurring obligations.
Corporate EFT applications include cash collection and disbursement, corporate trade
payments, government, tax payments etc. Cash collection and disbursement allows
companies to achieve efficiency in cash management through intra‐company transfer of
funds. Corporate trade payments enable corporations to exchange both data and funds with
trading partners, facilitating an automated process of updating their accounts receivable and
accounts payable systems.
Payment Application
I. Consumer Applications
CIE- Customer Initiated Entry: Customer initiated entries are limited to credit applications
where the consumer initiates the transfer of funds to a company or person for payment of
funds owed to that company or person, typical example of these entries are utility bill and
other Internet banking product payments.
PPD- Prearranged Payment and Deposit Entry Direct Deposit: Direct deposit is a credit
application that transfers funds into a consumer’s account at the receiving bank. The funds
being deposited can represent a variety of products such as payroll, remittances, interest,
pension, dividends and/or refunds, etc.
Preauthorized Bill Payment: A preauthorized payment is a debit application. Companies
with existing relationship with the customers may participate in the EFT through the
electronic transfer (direct debit) of bill payment entries. Through standing authorizations, the
consumer grants the company authority to initiate periodic charges to his or her account as
bills become due. This concept is especially applicable in situations where the recurring bills
are regular and do not vary in amount such as insurance premiums, loan installments, etc.
Standing authorization may also used for bills where the amount does vary, such as utility
payments.
II. Corporate Applications
CCD- Corporate Credit or Debit: This application can be either a credit or a debit
application where funds are either distributed or consolidated between corporate entities or
government entities. This application can serve as a stand‐alone fund transfer between
corporate or government entities, or it can support a limited disclosure of information when
the funds are being transferred between organizations (i.e. sister concerns) under the same
group.
CTX‐ Corporate Trade Exchange: This application supports the transfer of funds (debit or
credit) within a trading partner relationship in which business payment remittance

information is sent with the funds transfer. The payment‐related information is placed in
multiple addenda records in a format agreed to by the parties and BEFTN.
III. Other Applications

AAA– Automated Accounting Advice: This SEC Code represents an optional service to be
provided by BEFTN that identifies automated accounting advices of EFT accounting
information in machine‐readable format to facilitate the automation of accounting
information for Participating Banks.
Settlement: Settlement is the actual transfer of the funds between participating banks to
complete the payment instruction of an EFT entry. The transactions processed by the BEFTN
will affect the accounts of the concerned banks maintaining accounts with BB at the end of
each processing cycle.
Legal Framework
1) The EFT process operates from beginning to end through a series of legal agreements.
2) BEFTN Rules and Procedures
Other laws/regulations that have a direct bearing on EFT operation are listed as under:
a. Bangladesh Bank Order, 1972 (Amended 2003)
b. The Banks Companies Act, 1991
c. Money Laundering Prevention Act, 2012
d. Anti - Terrorism Act 2009
e. Information and Communication Technology Act, 2006.
f. The Bankruptcy Act, 1997
g. Guidelines for Foreign Exchange Transaction, Volume 1 & 2.
h. The Bangladesh Telecommunication Act, 2001.
i. Bangladesh Payment and Settlement Systems Regulations, 2009 (amendment 2013)
7.13 Real Time Gross Settlement (RTGS)

An RTGS system is a gross settlement system of money or securities in which both
processing and final settlement of funds transfer instructions can take place continuously (i.e.,
in real time). It will enable instant settlement of high value local currency transactions as well
as government securities and foreign currency based transactions. As it is a gross settlement
system, transfers are settled individually, i.e., without netting debits against credits. An RTGS
system can thus be characterized as a fund transfer system that is able to provide continuous
intraday finality for individual transfers. In RTGS or large-value funds transfer system, the
transmission and processing of payment messages are typically automated or electronic,
while settlement takes place in central bank funds. Along with these individual interbank
transactions all other Deferred Net Settlement Batches (DNSB) such as BACPS, BEFTN or
NPSB will settle their net position through RTGS system, RTGS in turn will be linked to
Bangladesh Bank core banking solution.
Note: As regards of operational activities BACH, BEFTN and RTGS, NCCBL guide lines
should be followed.
Note: An instruction circular of the bank regarding the implementation of upgraded version
of Bangladesh Automated Clearing House is placed in annexure- 8 for compliance.

1. Define BACH.
2. Define BACPS.
3. What do you mean by BEFTN?
4. State the responsibilities of presenting bank under BACH.
5. What are the responsibilities of paying bank as regard settlement of Payment under
BACH.
6. What is same day clearing?
7. Write down the credit entries of EFT.
8. What is consumers payments?
9. Write down the debit entries of EFT.
10. Define RTGS.

CHAPTER 8
Modes of Remittance including Wire Transfer

8.1 Mode of Remittance
Although Demand Draft (DD), Telegraphic Transfer (TT) and Mail Transfer are considered
as mode of remittance, but with the passage of time and innovations in banking technology,
most of the banks having online banking practicing only PO/LD as mode of remittance.
However, some banks are also using Payment Order for local payments only.
Demand Draft (DD), Pay Order (PO), Pay Slip, Telegraphic transfer (TT), Mail transfer (MT)
are issued by the Remittance Department. DD, TT, and MT are issued for effecting
remittance from one place to another at the request of the customer.DD is required to be
carried or mailed by the customer/applicant himself or herself to the destination while for
MT, an MT advice is mailed to the concerned branch by the particular bank as per request of
the applicant. So, it takes time to credit the amount against DD and MT to the particular
account of the payee branch. Therefore, to effect remittance at the quickest possible time, TT
is issued by the branch if customer agrees to that, because, the charge is higher for issuance
of TT. Now a day, DD, TT and MT are issued at the request of the account holders of the
particular branch only to avoid any fraudulent transaction.
For issuance of DD, TT, MT and PO applicant is required to fill up prescribed application
form and is required to make payment of charges and commission as per norms.
8.2 Payment Order (PO)

A pay order is an order drawn by a bank upon itself to make payment of the amount
mentioned therein to the named payee. The pay order carries the primary liability of the
issuing bank for payment and must make its payment to the payee or some other person
named by the payee. The pay order cannot be cancelled or its payment stopped without the
consent of the beneficiary.
Demand draft is issued by one branch of the bank on another whereas pay order is issued by
and drawn on the same branch of the bank. Collection and payment of demand drafts are
given statutory protection under section 85(A) and 131 (A) of N.I Act. Respectively; such
protections are not available to pay orders.
8.3 Bangladesh Electronic Funds Transfer Network (BEFTN)

The Bangladesh Electronic Funds Transfer Network (BEFTN) will operate as a processing
and delivery center providing for the distribution and settlement of electronic credit and debit

instruments among all participating banks. This Network will operate in a real‐time batch
processing mode. All payment transactions will be calculated into a single multilateral netting
figure for each individual bank. Final settlement will take place using accounts that are
maintained with Bangladesh Bank. Detailed procedures of BEFTN may be consulted in
chapter titled “Clearing and Collection of Instruments: BACH, BACPS”
Note: An instruction circular letter of the bank regarding cash incentive assistance for inward
remittances of Bangladeshi expatriates living in abroad are placed in annexure-9.

1. What is inward bills for collection?
2. What is outward bills for collection?
3. Define remittance and their modes.
4. State different modes of remittance in brief.
5. Define Payment Order.
6. Write down the procedures of issuing Payment Order.

CHAPTER 9
Customer Service and Complaint Management

9.1 Customer Service and Complaint Management
Customer Service is the service provided by all types of companies-including manufacturers,
IT companies, and service companies. It is the service provided in support of a company’s
core products. It can occur on site, over the phone, via the internet. Customer service is an
important factor in attracting and retaining customers. That’s why an organization must have
to know what service customers are expecting.
A customer defines good customer service as how she/he perceives that an organization has
delighted her/him, by exceeding to meet her/his needs. Good customer service is all about
bringing customers back. And about sending them away happy i.e. happy enough to pass
positive feedback about your business along to others, who may then try the product or
service you offer for themselves and in their turn become repeat customers.
Good customer service is the lifeblood of any business. For example, if you're a good
salesperson, you can sell anything to anyone once. But it will be your approach to customer
service that determines whether or not you’ll ever be able to sell that person anything else.
The essence of good customer service is forming a relationship with customers. A
relationship that individual customer feels that he would like to pursue.
If you truly want to have good customer service, all you have to do is to ensure that you can
manage customer service properly. Customer Service Management is a process representing
the way a customer wants to interact with your financial institution and, for your institution,
offers an effective way to differentiate and manage your customer centric business.
9.2 Why Customer Service Management?

The environment under which you are doing business is so much competitive. In this
competitive situation to earn long term sustainability all you need to do is provide customer
service that exceeds your customers' expectations and outshines your competitors' customer
service as all banks provide very similar products and services. Also pricing differentiation/
affordability varies little for the average customer and the cash in your bank vault is little
different from that of the bank’s next door.
In this circumstances what will differentiate your bank? Probably the only differentiating
factor is excellent customer service i.e. service that makes your customer feel special, that
makes him or her want to come back and do more business with your company, and
recommend your business to his or her friends.

If you take all the different aspects of a commoditized world then everything is pretty similar:
similar products, similar people, similar technology and similar pricing. The differences are
the way you are providing the service, and the customer’s perception/feelings associated with
a bank, all of which are delivered through the customer experience. It’s the customer
experience that differentiates a company. However, there are challenges in delivering
superior customer experience. One of the notable one is customer service management
culture. For promoting the culture banks need to focus on:
 Interpersonal communication of employees
 Dealing with customer objections: complaints as opportunities
9.3 Complaint Management

Complaint is a spoken or written dissatisfaction brought to the attention of the authority. For
handling customer complaint financial institutions need to ask few questions such as-
 What is going on : assure the customer that you can help and then listen carefully
 What caused the problem: identify the root cause.
 What can I do: thanks to fix thing. Rectify the situation.
 What can I say: restore the relationship. Follow up to make sure customer is now
satisfied.
 What need to be done: fix any practices or procedures so that the problem doesn’t
occur again.
However, there may be some tough customers. Handling them rightly depends on your
professionalism. In this regard, bank employees need to realize that they cannot control
anyone else's behavior. They have control only over their own actions. But they can influence
how customers respond to them to some degree.
Questions
1. State the importance of customer service management.
2. What is complaint? How financial institutions can handle it?

CHAPTER 10
Cash and Volt Management

10.1 Cash Management
Cash is a most important, liquid and risky asset of a bank. The main functions of the cash
department are related to receiving and payment of cash. Functions of cash department at
branch level are very much important. Excess/short of cash leads to a branch in a risky
position. Another risky position is transportation of cash and other valuables. So, officials
responsible for dealing in cash and cash departmental functions should be very much careful,
vigilant and prudent in both receiving and payment of cash over the counter. In determining
quantity to be maintained as cash is very important function at branch level. If cash keeps in
hand larger than actual needs, branch loses interest on that excess portion. On the other hand,
if cash falls short of requirement, branch may find in an embarrassing position. No doubt,
officers at branch level are responsible for maintaining overall cash management and other
related activities thereto. They also play a vital role in management of cash. Cash
management is very important from the following points of view:
i) Safety and Security
ii) Proper utilization
iii) Customers Service Development
10.2 ATM Cash management: Today cash is still king, and in a society that is on the go,
consumers rely heavily on ATMs for fast convenient access to cash when they want it. To
meet customers’ cash needs, banking financial institutions like yours have invested in and
rely heavily on an ATM network to meet the cash demands of your customers.
In order to meet these demands, a premier service provider is needed, one who will properly
maintain the network and guarantee the most efficient operating manner and maximum up
time.
10.3 Cash Management Constitutes

1. Receipt of Cash
2. Payment of Cash
3. Balancing of Cash Receiving Register
4. Balancing of Cash Payment Register
5. Writing and Checking of Cash Balance Book
6. Checking / Closing of Cash and writing of Cash Position Memo
7. Safe Custody of Cash (after transaction) over night
8. Vault Register
9. Cash-in-safe, Cash-on-Counter and Cash-in-Transit Limit
10. Cash Enclosure
11. Safety / Security of Strong Room during Transaction hours
12. Maintaining vault limit
13. Security Measure of Cash-in-Transit
14. Rotation of Cash Officers’ Duty
15. Surprise Verification of Cash
16. Recording Denomination of Note(s) / Coin(s)
17. Packing / Banding of Currency Notes
Receipt of Cash: Cash can be received for depositing any customer’s accounts with any of
NCCBL Branches and to internal General Ledger of receiving Branch. For inter-Branch
accounts crediting against cash, receiving Branch need not issue any Inter-Branch advice to
the account Branch or pass any inter-Branch account entry. Cash teller will receive service
charge over the counter for receiving cash against customers’ accounts of inter-city Branches
as per operation circular issued by head office time to time. (AS per prevailing circular). As
customer can deposit cash in any Branch of NCCBL in the country, it should be cautious to
take deposit as guided by Managing Core Risk in Banking for Money Laundering. Branch
should take deposit at least comparing with account holder’s transaction profile. In case of
remittance cash teller should ask for remittance teller whether proper KYC was done for
remitter.
Cash Receipts against Accounts
Receiving cash teller should follow the steps and checking points mentioned below:
a) The deposit slip shall be filled-in and signed by the client for depositing cash to the cash
counter. Count themby cash counting machine & later manually the notes/coins.
Simultaneously it should also be ensured that no forged/defective/built-in notes are
accepted.
b) The cash receiving officer shall count the cash and compare total with amount shown in
the deposit slip both words & figures.
c) If the amount still differs, return the cash to the depositor for him to recount and correct
the amount in the Deposit Slip where necessary duly authenticated. Note: In such a
situation, it is preferable to obtain a fresh Deposit slip where possible.
d) The cash receiving officer shall write the denominations at the back of the deposit slip
and record the total in the tellers’ cash proof sheet.

e) The cash receiving officer must be confirmed about the account number deposited the
amount and the name of the account holder thereof. The cash receiving officer shall sign
and affix a “CASH RECEIVED” seal on the deposit slip and on the counterfoil after
confirming name and account number.
f) Teller shall pass entry into EQUATION using EBA…module and affix “POSTED” seal
along with transaction number and initial. (IT operational guideline should be followed)
g) In case of beyond teller limit deposit slip should be sent to authorizer and authorizer will
sign on the deposit slip as well as authorized the transaction. Always inform the Head
Teller as well as Branch Manager, if there are unusually large amount of deposit in the
context of Anti-Money Laundering Act.
h) In case of cash receipt in Credit Vouchers originated from other departments, the same
shall be signed by two authorized officers before depositing the same with the cash
receiving counter.
i) In case of cash receiving against inter-city account, cash teller must receive service
charge as well VAT as per schedule of charges from the customer over the counter and
pass income voucher & VAT received voucher by the cash teller using module as
prescribed by IT operations.
j) Cash teller can balance his/her physical cash position with system drawer’s position at
free time of the day. At the end of day teller must generate batch journal report and cross
check with cash receiving vouchers.
Cash Receipt against Remittance
a) To receive cash against remittance cash teller will take similar precautions as noted
earlier.
b) Cash teller should not directly process any remittance transactions. In that case, cash
teller will receive cash for remittance amount and charges and deposit to parking AL
(IDT). Transaction of remittance will be made by debiting that particular account AL
(IDT), as:
c) For transaction into Equation please follow IT laid down procedure in the IT
operations Guidelines.
d) After completing transactions (cash received), pass the copy of voucher to remittance
department for remittance transaction.

Payment of Cash
Cheques:Payment of cheques should have been made as per the relevant provisions of
Negotiable Instrument Act, 1881. (Such as Sec.10, 30 and 122A). However, while making
payment of a cheque the teller should follow the detailed instructions of the branch operations
manual.
Payment of Cheques to other Banks across the Counter: Branches should carefully
examine requests from other Banks for payment of cheques across the counter. Branches
should not pay cash against cheques so presented. Payment of such cheques should invariably
be made by issuing a Banker’s cheque in favor of the collecting Bank, provided the original
cheque is properly drawn and in order, bears the crossing of the collecting Bank, and there
are sufficient funds in the account on which it is drawn.
Payment Procedure: Paying cash teller should follow the steps and check points mentioned
below. Before making payment of instruments like cheques, Drafts, Payment Orders, FDRS,
Pay Slips, Debit Cash Vouchers etc. necessary precautions should be undertaken:
a. On receipt of the cheque on the counter if the apparent tenor of the instruments seems
to be all right.
b. While making the posting the cash teller must confirm the points mentioned above.
He will check balance of the customer accounts as well as availability of fund in
internal AL in case of expense, remittance etc, give posting of the cheque and put a
seal “POSTED” on the face of the instrument and write the transaction number and
initial.
c. After confirming the Proper Posting in the Computer the cash teller cancel the
instrument for payment by crossing out the instrument and giving initial on it by red
ink.
d. Where the amount in the instrument exceeds individual cancellation limit the same
will be presented for “SECOND CANCELLATION”.
e. The presenter shall put his / her second signature at the back of the instrument like
that of his first one put at the time of presentment.
f. The Cash Officer shall count the cash for payment and the denominations are written
at the back of the instrument and paid to the presenter.
g. The stamp “CASH PAID” is affixed on the face of the instrument and signed by the
paying Cash Officer.
h. Paid instruments are kept with the Paying Cash Officer for ultimate hand over to the
Accounts Department after checking with the Cash Payment Sheet.
i. In case of instruments like Drafts, Payment Orders, FDRS, Debit Cash Vouchers etc.
one cancellation shall be done by the Officer of the respective originating / concerned
department.
j. The Debit Cash voucher especially the expenditure vouchers shall be signed by two
Authorized Officers including one signature of the Manager.
k. At the close of Banking hour the amount entered into the Cash Payment Sheet totaled.
The total is written in words and figure.
l. The officer shall check the payment entries and the instruments to ascertain the
correct payment has been made and release the instrument from the Cash Payment
instruments by his initial against each entry at the end of day with batch journal
report.
m. The Paid instrument shall then be sent to the FCD for archival.
n. Cash may be paid in different way based on account to debit. Given below are
different options of cash payment.
Balancing, Checking and Safe Custody of Cash:
a) At the close of Banking hour the individual Receiving and Paying Cash Officers shall
total their respective Teller’s Cash Proof Sheet and tally the same with their respective
balance held by the Cash Officers.
b) The total figure of all Cash Receiving and Payment Registers shall enter into the Cash
Balance Book. The Cash Position Memo is prepared in duplicate.
c) All the totals of individual book is written in words and figures and duly signed by the
Cash Officer and countersigned by the Head Teller.
d) The closing balance of Cash Balance Book shall be written in both words and figures.
The Register shall be signed by the Head teller, Joint Custodian and GB In-charge.
e) The Cash Balance Book is checked with the closing figures of the preceding day of the
Book and closing figures of Teller Cash Proof.
f) After the Balance Book is written and signed by the Head Teller, Joint Custodian and GB
In-charge shall physically verify the cash and shut the Safe Door by two sets of keys by
two Officers. The first key of the first key hole and second key of the second key hole
shall be held by Head Teller, the second key of the first key hole and the first key of the
second key hole shall be held by GB in Charge or vice versa.
g) The entries of denomination of notes and coins in the Cash Balance Book is compared
with the denominations of notes and coins counted and recorded on the face of cash
denomination slip.
h) The Cash Position memo is sent to the Financial Control Department. The FCD
acknowledges the receipts of the same on the duplicate copy of the memo and filed in the
“Cash Position Memo” file.
i) The Vault Register shall be maintained properly. Every time when the cash is taken in or
out from the Vault the same should be recorded denomination wise. The Closing Balance
of the Vault Register must be tallied with the Cash Balance Book and both the book shall
be signed by Head Teller and GB In-charge/Sub- Manager/Manager.
j) The cash kept in the counter and vault shall not exceed the insurance limit. The Branches
shall always remit the excess cash over the insurance limit to the designated
Branch/Bank.
Excess of Cash & Shortage of Cash
Excess of Cash
a) In the cash department excess cash may be received sometimes by mistake either from the
bank’s side or from the client’s side.
b) Before declaring any cash as “Excess” the following steps shall be undertaken:
i) Excess cash may be found due to displace or lost of cash receiving voucher (Pay-in-Slip)
before entering into cash receive Register.
ii) Sometimes really excess cash is received against particular transaction.
iii) Especially in rush hours in most busy days this sort of situation may arise.
iv) Wrong entry in Cash Payment Register as well as System.
v) Customer may be paid less than the amount written on the debit voucher (Cheque or any
other instruments).
vi) Some deposits are received but no voucher was passed or voucher is under process for
submitting to Cash Department.
Shortage of Cash
a) Shortage of cash may arise due to:
i) Less amount received by the cashier against particular amount
ii) Excess payment made to the client
iii) Making payment to anybody against non-receipt of debit voucher
iv) Making wrong entry in the Receive or Payment Register
b) The Cash Officer concerned shall be responsible for cash shortage and the same shall be
recovered from him / her.

Mutilated, Soiled Etc. CurrencyNotes: In such cases treatment would have been made as
per the ‘Note Refund Regulations-2012’. Moreover the following instructions should also be
followed as per NCCBL operations manual.
a) All soiled and mutilated currency notes should be sorted out and retained separately. At
the end of the day these notes should be strapped and handed over to the Head Teller
alongwith other cash.
b) As per Bangladesh Bank Circular no. Paripatra no. Ka: 860 / 23 (Policy) – 87 dated
03.08.1987 and Ehisa: 23/ (Policy) / 95 – 65 dated 11.03.1995 all banks have to receive
burnt/soil/defective notes and give exchange on the counter except some categories of
notes which needs Bangladesh Bank prior permission before exchange
c) Different types of notes:
(a) Legal Tender Note (b) Mismatched Note (c) Altered Note (d) Half Note (e) Mutilated
Note (f) Obliterated note (g) Charred note (h) Forged note (i) Damp note (j) Built up note (k)
Counterfeit note
Except number 1(a), the other types of notes are not eligible for exchange in the bank’s
counter. For further details the above two circulars may be consulted.
Exchange of Defective, Mutilated Currency etc. Currency Notes
a) The branches should meticulously follow the instructions of Bangladesh Bank in
connection with payment of exchange value of defective and mutilated / torn notes over
the counter. Mutilated currency notes should be examined carefully to see that these are
not counterfeit notes
b) The notes which should be withdrawn from circulation shall be separately bundled and
paste with paper at the back and put branch seal and sent it to Principal / Main / Feeding
Branch.
c) The Principal / Main / Feeding Branch shall put a seal “Defective Notes” on the face of
the note and signed by an Authorized Officer and make bundle of 100 of each category of
notes and send it to Bangladesh Bank. Bangladesh Bank will receive the same on the
counter and credit the bank’s account.
d) They will fix up a date and the safe shall be opened for counting. Bangladesh Bank will
receive the notes and credit our account. In case of return of any notes against which no
exchange was paid shall be taken back by Principal / Main / Feeding Branch and debit the
concerned branch from which it receives the value.
e) Transactions in system will be as like as inter branch transfer transactions.

f) The notes received from the client which are not acceptable for paying of exchange value
at the counter, the bank shall receive the notes and get an application filled in by the client
and send the filled in Application form to Bangladesh Bank. They will give you a date of
decision on the notes. Branch will give a receipt to the client mentioning serial number of
notes, denomination and total amount etc.
g) On collection of the proceeds branch will pay off the client.
h) The Branches shall meticulously follow the above two circulars of Bangladesh Bank
regarding handling of defective notes.
Cash Handling and Packing
a) Learning to handle cash properly is a fundamental part of the Teller’s training. The
emphasis is on accuracy rather than on speed. Speed will come naturally with practice.
When a Teller is assigned to a counter, s/he will be given a certain amount of currency
and coin with which to operate. S/he will be solely responsible for this money.
b) As cash is accumulated by taking in deposits, it should be packaged by the Teller.
Packaging is done by placing note packing slip on each packet consisting of 100 pieces.
Packages prepared by a Teller should be identified by putting his/her initials on the
packing slip after affixing a Branch round rubber stamp.
10.4 Measures for Safe keeping of Cash

Safe keeping of Cash
1. Construction of strong room
2. Strong room door
Locking: The twelve bolt are secured by two independent high grade dual control
unpickable special key locks. These locks have ten levers each and provided with stainless
steel keys in duplicate.
Fire Protection: The door is lined with 55mm layer of non-conducting, fire resisting
material.
Automatic Relocking Device: It comes into operation if a lock is dislodged by explosives or
attacked by other means. The door remains firmly closed no matter what the nature of the
attack may be.
3. Safe/Volt: Cash must be kept in iron Safe. The safe must be fire and burglar resistant.
Size of the safe will be selected as per need of the branch. Several vaults may be used as
per necessity but size of the vault must be the specified size either small or big.

4. Maintenance of safe keys and strong room keys. Banker should be very particular about
his key. They should handle the keys of the strong room strictly as per instruction laid
down in the Branch Operations Manual.
10.5 Cash Limit

Cash Counter Limit: The Cash Counter Limit means the cash which can remain in the
counter during the transaction period and this limit should be maintained.
Cash Transit Limit: Cash Transit Limit means the cash which can be carried by a branch
from one place to another if necessary and this limit should be maintained.
Safe Limit: Cash Safe Limit means the cash which can remain in the Safe of a branch over
night and this limit should be maintained.
Enhancement of limit: Enhancement off all types of cash limits can be made with the prior
approval of the competent authority of the Bank.
In no case cash should be transported beyond insurance limit. Cash handling within Branch is
also a risky matter; the teller should retain cash in counter within counter limit. In every case
while cash exceeded counter limit of insurance teller should transfer the cash into vault for
safe custody.
Proper Utilization of Cash
Steps should be taken for proper utilization of cash in general.
Step-1: Scrutiny of Cash
Reissue Notes: Notes should be sorted and only reissue notes should remain in the regular
cash.
Non-issue Notes: Non-issue notes should be sorted out from the regular cash & should be
made ready for exchange.
Rejected Notes: Rejected notes must not remain in the bundle of regular cash. These notes
are-(a) Built up notes (b) Mismatched notes (c) Claimed sealed notes (over 12 months) (d)
Forge notes.
Step-2: Binding Cash
Stitching & binding of notes: 1-50 Taka Notes will not be stitched & should be bound with
thread only.
To stick packing slip & putting seal in the bundle of notes: Packing slip will be stuck on
the note packet & Seal and signature should to put on the seal.
Daily Balancing of Cash

Entry of Cash Balance Book: When all these books are balanced, checked and signed, the
cash balance book is written and agreed with cash in hand. The book is checked and signed
by the cashier. Before writing the cash balance book, cashier should maintain a handbook
(kachha register) where rough cash balance has been written with denomination like cash
balance book.
Preparation of Cash position Memo: After cash balance book is written, the Cash Position
Memo is written in duplicate. The memo is checked and signed by the cashier.
Preparation of Cash position Memo: Cash & cash like assets must be checked by the
Manager.
Remittance of excess cash: Excess cash should be remitted duly before keeping the cash in
the Volt. If it is not remitted, our Bank can not invest the money in the Money Market as Call
Loan and on the other hand branch will lose Head Office interest.
Putting the cash in the Safe: After checking and balancing of cash manager should put the
cash in the Safe. Manager must make sure that the cash is all right.
10.6 Some Important Terms as per “Notes Refund Regulation –2012”

a) "Altered Note" means a note in which an alteration has been made in the number,
signature or value or in any other respect;
b) "Appellate Authority" means and includes the Currency Officer or the Officer
equivalent to currency officer of an Office of Bangladesh Bank authorized by the Head
Office to dispose of appeals for reconsideration received in the Office in respect of the
cases rejected by the "Prescribed Officer" of the said Office. The Appellate Authority will
have the same power as prescribed in these Regulations for the Prescribed Officer;
c) "Bank" means the Bangladesh Bank constituted by the Bangladesh Bank Order - 1972
(President's Order No. 127 of 1972);
d) "Charred Note" means a note which is burnt or having sign of burn partially or wholly;
e) "Damp Note" means a note which is wet partly or fully, or so weak that the note(s) can
be easily broken or torn when counted or handled;
f) "Deformed and Decomposed Note" means a note which has been deformed or
disfigured or vitiated or decomposed by anyway or by writing with ink or other materials
on the note(s);
g) ''Essential Features'' means the features, including security features, which are necessary
for the identification of a note, namely-

(i) the name of the issuing authority in Bangla and/or English, that is; Bank or Government
of Bangladesh, as the case may be;
(ii) the guarantee clause in Bangla and/or in English;
(iii)the signature; and
(iv) the water-mark of Tiger head/ National Flower Shapla (Water lily)/ Portrait of the father
of the nation Bangabandhu Sheikh MujiburRahman, Logo of Bangladesh Bank and the
denomination of the note, as the case may be.
Explanation: For the purposes of this clause, 2
The security features of a note, for deciding the genuineness or otherwise, include,
(i) paper quality;
(ii) size and shape of numbers;
(iii) security thread;
(iv) intaglio printing;
(v) latent image in vertical band;
(vi) electrotype watermark (in watermark window);
(vii) micro lettering;
(viii) fluorescence (number panels and central band);
(ix) optically variable ink; and
(x) any other security feature that may be introduced by the Bank.
(xi) the essential features of a note have been enumerated with a view to help the prescribed
officer to establish the genuineness or otherwise of a mutilated note;
h) "Half Note" means half of a note which has been divided vertically or horizontally
through or near the centre. A note formed by joining one half, which is identifiable, to
another half, which is not identifiable as belonging to the note to which first mentioned
half belongs , will not be accepted as a single note but will be treated as two half notes;
i) "Mismatched note" means a note formed by joining a half note of one note to a half note
of another note.
j) "Mutilated note" means a note of which a portion is missing or a note which is composed
of pieces, provided that the note presented is clearly more than half a note in area and
that if the note is composed of pieces of a note joined together, each piece is, in the
opinion of Prescribed Officer, identifiable as the part of the same note.
k) "Note" means a note of the Bangladesh Bank issued by the Bank and a currency note of
the Government of the People's Republic of Bangladesh issued by the Government.

l) "Number" includes the letter (s) and number (s) denoting the series to which the note
belongs;
m) "Obliterated Note" means a note, not being a mutilated or altered or mismatched note,
which has become or has been rendered fully or partially undecipherable; 3
n) "Office of Issue" means the Issue Department of the Bank situated at Dhaka.
o) "Prescribed Officer" means and includes the Deputy General Manager/Joint Manager or
equivalent officer of the Office of Issue and other offices of Bangladesh Bank, designated
by the concerned office.
General provisions in relation to all claims
(i) No claim in respect of a note alleged to have been lost, stolen or wholly destroyed shall be
entertained.
(ii) No claim in respect of a note, shall be entertained by the Prescribed Officer unless such a
note is identified as a genuine note.
(iii) No claim in respect of a note which has been deliberately cut, torn, defaced, altered or
dealt with in any other manner, not necessarily by the claimants, enabling the use of the
same for making of a false claim under these regulations or otherwise to defraud the
Bank or the public shall be entertained.
(iv) No claim in respect of a note, which carries any extrinsic words or visible representations
intended to convey or capable of conveying any message of a political or religious
character or furthering the interest of any person or entity shall be entertained.
(v) If the Prescribed Officer is satisfied that a mutilated note presented before him is one
which appears to have been cancelled at any office of Bangladesh Bank or the claim is
one which appears to have already been paid under these regulations, he shall , after
making enquiries under regulation 6 of these regulations reject the claim on such note.
(vi) If any information called for by the Prescribed Officer or the Bank, as the case may be,
is not furnished by a claimant within a period of three months from the date of receipt of
the notice or letter asking for the information, the claim shall be rejected.
Note: As regards effective cash management relevant circulars/guidelines provided by the

bank are placed in Annexure-10, 11, 12, 13 and 14.

1. Define cash management.
2. What are the constituents of cash management?
3. State the procedure of handling excess of cash.
4. State the procedure of handling shortage of cash.
5. State the measures for safe keeping of cash.
6. Define sate limit of cash.
7. Define ‘Charred’ Note.
8. What is ‘Damp Note’?
9. What is mismatch Note?

CHAPTER 11
Bank Locker: Sizes, Opening a locker, Rent, Safety, Alternatives

11.1 Bank Locker and its Facilities
A locker is a small, usually narrow storage compartment to store valuables like jewelry,
important documents and other precious items for a period of time. Bank lockers are
relatively safe and secured as it is guarded heavily otherwise there is a risk of these valuables
being stolen from residential or office premises. Moreover, lockers have solid iron doors or
concrete walls around it. Therefore, customers usually open a locker or safe deposit vault to
put their valuables in it. However, they will use the locker only for the purpose of deposit of
documents, jewelry or other valuables permissible as per law. Any explosive or destructive
in nature or harmful items should not be deposited.
The relationship of the bank and the locker holder is that of a lessor and a lessee where the
small compartment is bank’s asset and bank is leasing it to the customer. In simple words, the
relationship is that of an owner and a tenant. Each customer is charged an annual fee for
holding the locker with the bank. The bank will ensure corporate insurance coverage of
valuables kept in the lockers according to category of sizes up to certain limit.
11.2 Reasons to Use a Safe Deposit Locker

Customer’s items are protected from fire, flood or other natural disasters at home: Natural
disasters can destroy much more than the house itself. They destroy memories like
photographs, jewelry, birth certificates, and other important records. Customer can keep his
most valued possessions, copies of his important papers, and even Customer’s photographs in
digital form in a safe deposit locker away from the house.
Customer’s items are protected from theft at home: Customer’s valuables can’t be stolen if
they are not in home. A safe deposit locker is a great way to give customer that extra peace
of mind - just in case the home is ever burglarized.
Customer’s items are protected from being lost or misplaced: If customer is the type to
misplace papers and other items, he might benefit from using a safe deposit locker instead of
trying to keep things organized at home.
Customer’s family members will know where to find important papers: If customer has a
copy of some important papers (like his will or insurance papers) in a safe deposit locker,
customer’s family members will be able to retrieve those items if he, personally, cannot.
11.3 Locker Facility
The facility is extended only to the valued clients maintaining account in the Branch of the
Bank, who agree to abide by the set rules and regulations governing the use and operations of
the locker. Following general guidelines should be complied by the Branch.
a) No information about the renting of Lockers, mode of operation or visits made by Lessee
/ Renters must not be divulged except with the clear consent of the Lessee / Renters and
or when compelled by Law.
b) The specimen signature cards and all other books and records in the vault should be kept
under lock and key outside business hours.
c) A torch / Electric charger / Candles should be kept ready for use in the vault in case of
electricity failure unless an alternative generator IPS is already installed in the Branch.
d) It is desirable that staff posted to the Locker is adequately senior to understand the
responsibility attached to the work involved and that they are rotated periodically.
e) Branch staff should not rent a locker jointly with persons other than the members of his /
her family. When a locker is let out to the Manager with or without his family members
he should report this to Head Office, other officers should report to the Branch Manager.
f) There must always be adequate arrangements for guarding the vault. The Branch must
ensure that the security alarm is properly operated and serviced.
g) Wherever legal issues are involved, e.g. in the event of death of the Lessee / Renter,
issuance of prohibitory orders etc. legal requirements and practice must be followed.
Branches are advised to obtain specific advice from Legal Advisors and take appropriate
action as per Head Office guidelines.
h) The Bank may also forcibly open any locker with prior approval of Head Office after
giving due notice to the lessee, if the locker rent/any other charges due to the Bank
remains unpaid for a period of two years or if the Bank terminates the lease and the key is
not surrendered to the Bank, after the expiry of 6 months from the date of mailing the
notice of termination. Such forcible opening of a locker should be done in the presence of
a Magistrate and an inventory of the contents therein shall be made in his presence which
should be signed by the authorized officer of the Branch and duly counter-signed by the
Magistrate with date. In case of forcible opening due to default in payment of annual
rental, the matter should be referred to Head Office prior to forcible opening.
11.4 Rental of Locker

a) For hiring a locker, the customer shall properly fill up and sign a prescribed application
form.
b) The Desk Officer shall communicate the terms and conditions under which Lockers are
rented.

c) An authority letter as per prescribed form authorizing the Bank to recover the annual rent
in respect of the locker hired by debit to the customer’s a/c should be obtained from the
customer. The signature of the customer on such authority letter should be duly verified
by an authorized officer from the specimen signature card on record.
d) Prepare specimen signature card Memorandum of Agreement / Locker Application form
and obtain two passport / stamp size photographs and other pertinent documentation for
each.
e) The signature of the applicant shall be verified from his Savings or Current account
maintained with the Branch.
f) Get the Forms signed by the customer where necessary and have signature verified from
the savings or current account maintained by the customer.
g) In case of hiring a locker in joint names, specific instructions should be obtained as to the
mode of operation and access to the locker duly signed by all the joint lessees.
h) Obtain Form of Access for operating the locker in case of Company, Association, Club,
Society etc.
i) Locker should not be leased out to Minors, Blinds, illiterate persons, insolvents or
lunatics.
j) The contents kept in the locker need not be known to the Bank and the Branch should not
at any time take any cognigence of the locker. An undertaking should be obtained from
the lessee to the effect that no inflammable, combustible, perishable, illegal or dangerous
goods are and/or will be kept in the locker.
k) The Bank reserves the right to terminate the lease of a locker and require the client to
vacate and surrender the key thereof at any time, by a notice mailed to the Lessee at the
last known address on Bank’s record. The unexpired portion of the rent paid for use of the
locker, may be refunded to the Lessee.
l) Before leasing out the locker and handing over the key to the customer, ensure that the
lessee has completed the Contract card, signed the same and deposited the first year’s rent
along with security money in advance.
m) Hand over the key along with a tag mentioning the locker number and key number.
n) Have customer accompany custodian into the Locker and in his presence test the keys in
lock to ascertain that it is operative and the inside of the Locker is in good condition.
o) Complete entries in the Locker in the vault records and initialed by the Manager:
i Locker Register
ii Due date diary
p) File the agreements serially in a file cabinet by locker number wise inside the vault.
q) File signature card locker number wise inside the vault.
r) Raise voucher crediting “Income A/c – Rent – Lockers GL –“ for the total receivables in
respect of Locker rented during the day.
s) Have vouchers checked and initialed / signed by designated officer.
11.5 Controls over Access to Locker

a) A Locker Register as per prescribed format should be maintained for each leased out
locker where all the required particulars should be properly entered under proper
authentication. Separate Folio should be allotted for each locker. The date of each
operation/access to the locker should be chronologically recorded in the prescribed
Register duly authenticated.
b) Complete the relevant columns in the Locker Register and take the signature of the
Leasee / Renter in appropriate column.
c) Verify signature and authority of access in the locker.
d) When the locker is operated by the client, an authorized officer should remain present
nearby.
e) Record time of entry and departure in Locker Register.
f) The hired out locker should not be allowed to be left unlocked at any time. Soon after
each operation, an authorized officer of the Bank should examine the locker to ensure that
the same has been properly locked and that no article is left behind inadvertently by the
client.
11.6 Collection of Rental Dues

a) Annual rentals/other charges of a Locker are payable in advance. Locker charges are to be
realized as per rates prescribed by Head Office from time to time. The Security money is
refundable only on vacating the Locker and surrender of the key by the client.
b) Check the Due Date Diary (in advance of due date) for accounts falling due one month
ahead, when standing order arrangements are not used. Due Date Diary should be referred
to on a daily basis.
c) Before initiating vouchers, check the account of the Leasee / Renter to ensure that
sufficient balance is available for the rent to be deducted in case of standing order
arrangement. The rent received shall be recorded in the Locker Register.

d) If payment is not received by maturity date, keep note on due date diary and dispatch
overdue notice. Upon receipt of payment, delete previous note.
e) If payment is not received, make appropriate notation on each time subsequent notices are
mailed and place a red tag / notification to the specimen signature card to enable the
concerned officer to follow up with the Leasee / Renter when s/he calls at the Locker
requiring access.
11.7 Loss of Key by the Renter

a) If a key is lost, the lessee should notify the Branch without delay. When the key of a
locker is lost, the lock must be broken to open the locker in the presence of the Lessee
under advice to Head Office, the cost of which must be borne by the Lessee.
b) Obtain written confirmation regarding the loss, duly signed by the Renter on form. Note
the loss of key on the specimen signature card and verify the signature of the renter.
Obtain form duly signed by all the Renters authorizing the Bank to drill open the Locker
together with the requisite amount for drilling charges and Bank charges.
c) Confirmation in writing should be obtained in the case of a ”Key reported lost” being
found by the Renter himself, that the Key has been found and instructions to the Bank to
cancel the note of the loss of the key, should be taken from the Renter.
d) Obtain confirmation from the Renter(s) that the locker is drilled open by the Engineer in
his / their presence. Renter will sign a letter confirming that the locker was opened in
his/their presence and everything found inside was taken by the Renter.
e) Request the Engineer to install a new Locker in accordance with Manufacturer’s
specification after the Locker is drilled open. The new key of the locker shall be handed
over to the renter duly acknowledged in the locker Register and on form.
11.8 Keys of Locker Handling

a) Two keys are used for operating a locker, - one of which is delivered to the hirer for
keeping under his custody, while the other known as Master key, is retained by the
Branch under the custody of Manager/Sub-Manager during the day and kept in an iron
safe in the vault over night. For opening a locker the Master key is used in conjunction
with the Customer’s key.
b) The duplicate Master key of the locker should be kept under a sealed box for safe custody
with another Branch (preferably with main Branch) of the Bank in the area and where
there is no other Branch of the Bank in that place, with another Bank of the locality.
c) The key cabinet holding the keys of unused lockers must be kept inside the vault and kept
locked under dual control by the Locker Officer and another authorized officer, even
during working hours.
11.9 Un-let and Surrendered Locker Keys

a) The Locker Officer should count the keys of Un-let Lockers in the key cabinet at the end
of each day to verify that the number of keys agrees with the number of un-let lockers.
Any discrepancy must be reconciled immediately
b) At the time of surrender of a locker the client must sign the Final Access Slip. The inside
space of the locker should be examined in presence of the client and recorded on the
History Card duly authenticated. Surrendered key should be immediately deposited in the
key safe and surrender clauses on the Contract Card shall be signed by the client. The
card then be stamped with a “CANCELLED” stamp duly authenticated and placed in the
closed file with all other relevant papers.
c) Locker custodian will follow the under mentioned procedures while customers
surrendered locker:
i) Follow the procedures as prescribed .
ii) After removal of contents of customer out of Locker receive key from customer and
relock the vacant Locker.
iii) Customer will sign the release portion appended to the License.
iv) Place key in ‘Surrendered Key Box’.
v) Withdraw record and agreement from files.
vi) Remove signature card from current cards.
vii) Staple original agreement to signature card and record card, mark “Surrendered” and
place in the Surrendered file.
viii) Make appropriate entry in Locker Register
d) Custodians of the surrendered keys and locks will follow the under noted procedures:
i) At convenient intervals remove contents from “Surrendered Key Box”
ii) Confirm that each key is supported by the relevant documentation.
iii) Ensure that the number of keys agrees with the number of lockers shown in the
Locker Register as having been surrendered and awaiting change of locks.
iv) File documentation in “Closed” file.
v) From the supply of spare locks, change locks on surrendered lockers.
vi) Place the removed locks and keys in the cabinet.
vii) Place the keys to each of the replacement locks in envelops, seal and deliver to the
custodians of the unrented lockers who will initial in the record of the Lockers as
evidence of receipt.
viii) Initial record of Lockers to signify that locks has been changed.
ix) Raise new record for those lockers on which locks have been changed and hand over
to safe deposit locker custodian.
x) A remark “Surrendered” should be made in the appropriate places in the Locker
Register and Due Date Diary preferably by means of a rubber stamp
11.10 Nomination for Return of Articles kept in Safe Custody with the Bank
a) As per Section 105 of the Bank Company Act, 1991, the Leasee / Renter of a Locker may
nominate a person to whom in the event of the death of the person leaving the article in
the safe custody, such articles may be returned by the Bank. The nomination may be
cancelled by the Leasee / Renter at any time.
b) As per Section 107 of the Bank Company Act, 1991, the Leasee / Renter may nominate a
person to whom the contents of the safety lockers held with the Bank shall be released in
the event of the death of the person.
c) In the event of death of the hirer, the contents of the locker should be delivered only to
the legal heirs of the deceased client on production of a valid Succession Certificate from
a Court of Law after obtaining legal opinion from Legal Adviser/Retainer where
nomination was not made by the renter.

1. Define bank locker.
2. What are the reasons to use a safe deposit locker?
3. Discuss about locker facilities provided by the bank.
4. How controls over access to locker is made?
5. How to maintain locker keys?
6. How to manage un-let surrendered locker keys?
7. Discuss about the nominations for return of articles kept in locker.

CHAPTER 12
Fraud, Forgeries & Malpractices Related to General Banking

12.1 Frauds
Fraud means ‘the successful practice of deception or artifice with the intention of cheating or
injuring another. Ordinarily fraud involves willful misrepresentation, the deliberate
concealment of a material fact for the purpose of inducing another person to do or to refrain
from doing something to his detriment, or the failure to disclose a material fact. A false
representation by means of a statement or conduct made knowingly or recklessly in order to
gain a material advantage. Fraud means and includes any of the following acts committed by
a party to a contract, or with his connivance or by his agent, with intent to deceive another
party thereto or his agent, or to induce him to enter into the contract:
(1) The suggestion as to a fact, of that which is not true, by one who does not believe it to
be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent"
In criminal law, fraud is deliberate dishonesty and an element in many crimes, such as
cheating and obtaining by false pretences.
12.2 Forgery
Forgery means the offence of making a “false statement” in order that it may be accepted as
genuine, thereby causing harm to others. Forgery is the act of making or alteration of any
document with the intention of prejudicing another person. An inferior substitute imitating an
original, giving a false impression of truth or authenticity. Forge means make or write in
fraudulent imitation, act of forging, forged documents.
12.3 Malpractice
Following matters are treated as malpractices:
 Careless, Illegal or unacceptable behavior by somebody in professional or official
position.
 Improper or unethical conduct by the holder of an official or professional position.
 May be negligence, dishonest, misconduct and also serious procedural lapses with
malafide intentions and causing loss to the bank.
 The act or an instance of improper practice in Banks is now wide spread. It is said that the
fraud and forgery in banks is the resultant of malpractice.

Negligence
Following matters are treated as negligence:
 Carelessness amounting to the culpable or blameworthy breach of a duty; failure to do
something that a reasonable man (i.e. an average responsible citizen) would do, or doing
something that a reasonable man would not do.
 A lapse or omission in meeting an obligation;
- default or neglect to act
- delinquency /failing in duty
- dereliction
Causes of Malpractices, Frauds and Irregularities
 Negligence
 Malafide intention
 Willful deviation from banking laws and practices
 Degradation of overall moral and ethical values and spreading of corruption in all spheres
of society and absence of social condemnation against corruption.
 Disproportionately low pay structure of bank officials.
 Unhealthy trade union activities of the employees creating undue pressure on the
management in the matters of administration as well as financial decisions.
 Management inefficiency to withstand pressure
 Procedural lapses / bottlenecks.
 Lacking of knowledge about Banking laws & practices, bank manual, circulars and
instructions.
 Lacking of proper supervision over the fraud prone areas.
 Loose and ineffective administration and control over the employees
 Absence of periodical rotation of work among the staffs & officers.
 Unethical exercise of delegation of power.
 Influence, Biasness, prejudices and personal interest.
 Negligence of employees to their duties and responsibilities.
 Concealment of facts
 Breach of trust
 Ignorance about bank practice
 Lacking of knowledge about job procedures
 Breaking chain of command.

Who commits Malpractice, Fraud and Forgeries?
1. Bank employees themselves acting singly or jointly
2. Bank employees in collusion with outsiders
3. Outsiders having knowledge about the loopholes in banking system.
How to prevent fraud and forgery?
 Transparency in Transactions
 Maintaining Accountability
 Establishing Ethical standard
 Corporate governance
 Effective Internal Auditing
 Strengthening Managerial supervision
 Daily checking of tellers
 Segregation of duties
 Internal Disciplinary Actions
 Dual control over assets and other security documents
 An effective, efficient and functional internal checks and control system by banks;
 Banks to adopt an accounting system which is sound in principles and effective in
practice;
 Security measures to be adopted by banks should be visible and effective to show that the
chances of fraudsters being caught are high;
 Banks should centralize their financial data to reduce the risk of authorization access;
 Monitoring of fraudsters by law enforcing agencies
 Prosecution of fraudsters by law enforcing agencies
 Effective prevention of Money Laundering
 Following Basel principles
o Customer Identification
o Compliance with laws
o Cooperation with law-enforcing agencies
o Adherence to the Statement
 Banks should adopt appropriate general personal policies geared towards rewarding
performance and stiff punishment meted out to poor and negligent performance to serve
as a deterrent to others.

 Banks are to render reports on fraud cases and other fraud related matters to the
appropriate authority on regular basis.
Frauds in Deposit Accounts- The Modus operandi are:

 Opening of bogus accounts by forging the signature of the introducer and collecting,
through such accounts, stolen / forged / fraudulently altered cheques / bank drafts.
 Withdrawals through cheques /withdrawal slips carrying forged signature of the account
holder. This may be done both by the employees of the bank and the outsiders which
include the customers.
 Forged alterations of the instruments. This may also be done both by the employees of the
bank and the outsiders which include the customers.
 Unauthorized withdrawals by the staff member followed by the destruction of the
instruments.
 Obtaining cheque book fraudulently and using it for withdrawals under forged signatures.
 Replacement of specimen signature cards with a forged one, followed by subsequent
withdrawals on forged signatures, and then placing the genuine specimen signature card
in its original place.
 Interpolation of a fraudulent credit entry and subsequent withdrawals.
 Acceptance of forged introduction followed by a chain of introductions based on or
derived from the original forgery.
 Generally, the profile of a fraudulent employee in this context is that he is usually
efficient, obliging in nature, popular with customers and fellow employees, enjoys the
confidence of his superiors and rarely avails of leave
 Alterations in the entries and balances in the ledgers after they are checked and making
subsequent withdrawals. This too is also possible by the employees of the bank if IT
security is not safe.
 Misappropriation of moneys taken from clients for depositing in their account. Having
faith on the staff members many a customers handover their money to them for deposit to
their respective accounts, which in fact is not deposited and eaten away.
 Withdrawing money from dormant account. There is a procedure with the bank that after
lapse of determined time in case the account remains dead or inoperative, the balance is
transferred to dormant account.

 Tempering amount(s) of cheque(s) withdrawal slip(s) originating from illiterate/ semi-
literate account-holders
 Lack of necessary supporting papers for opening Deposit Account.
 Special instruction/standing instruction given by account holder but not incorporated in
the ledger.
 Cutting/overwriting/erasing not being authenticated by authorized officer.
 Not keeping “Specimen signature Card boxes” in the safe custody.
 Pre-Advice system not being followed in case of corporation /Govt. Account.
 In passing of large amount Cheque “Double supervision” not regularly is being done by
authorized officer.
 Precaution not being taken while issue of cheque book to the account holder.
 In crediting of large amount in any form of deposit “Double Supervision” not regularly
being done by authorized officer.
 Precaution not being taken in cases of frequent “Bouncing of cheques” in a particular
account “Outward Collection”.
 Precaution not being taken incase of frequent Returning of cheques in a particular
accounts “Inward Collection”.
 Payment of “Late Cheque” without complying set rules in the Book of instruction
(manual).
 Non-compliance of special instruction in case of operation “Joint account”.
 Account Opening Forms file “Guard File” not being maintained under joint custody.
 Stop payment “Care Slip” not being marked in Ledger.
 Lost cheque caution not being marked in Ledger.
 Cheques are paid ignoring special crossing.
 “Statements of Accounts / Pass Book” not regularly issued to customers.
Lockers and safe deposit vaults

Lockers-safe deposit vaults are leased out to customers for keeping their valuables, securities
etc. therein and some rent prescribed by the bank charged on annual basis in advance.
The master-key remains with the banker, i.e. either the Branch-In charge or the Accountant.
The individual key of the locker is handed over to the customer against his
acknowledgement.

No one can singly open the locker. The banker first applies the master-key and only then the
customer can open the locker by applying his key.
The contents kept in the locker are known only to the customer. No one else is expected to
know them.
Frauds under this head take place because;
 the signature of customer is forged. Sometimes a forged-authority-letter purported to have
been signed by the customer is brought.
 under the bank rules either “Password” from the customer is not obtained and noted in the
signature card or this rule in practice is not adhered to. The access to the vault is allowed
even without ascertaining the “Pass-Word”.
 locks are not changed when a locker is surrendered or ex-changed. Sometimes by
inadvertence the customer leaves the locker unlocked or else leaves some valuable item in
the locker-room. The dishonest employees take such valuable with them.
Cash shortages
 Cash shortages; generally arise due to carelessness on the part of joint custodians of keys
or the cashier. Direct involvements of these functionaries in pilfering the cash, short-
counting etc. have been found from time to time. This happens mainly because of the
following:
 The cash officers often do not lock their cubicle securely. Even when they sit in their
cubicle some customer or staff-member not connected with cash profile chit-chats with
him. It is not ensured by the cash officer/teller that the cubicle is locked even when they
leave it for a moment. While working it should remain locked from inside.
 Currency-notes remain often exposed to public gaze, despite bank’s instructions
prohibiting the same.
 The cash officer/teller does not adhere to the rule as to directing enquiries to the enquiry
counter when approached by a customer. They often, themselves indulge in lengthy talks,
thereby allowing attention of customers towards cash. Frauds under this head can be
minimized by:
 adhering to and strictly following the prescribed rules and procedures of the bank.
 Rotating the duties of staff-members at regular determined intervals.
 Keeping a vigil on the staff.
 Keeping the master-key under joint custody.

 In the internal-duty-arrangements, both receiving and paying cash officers /tellers are
allotted duty to also receive cheques and other instruments from the customers. A cash
officer should not be allotted any duty except directly linked with cash.
 Alarm bells, though a must under bank’s rules are often found out of order.
 There is lack of proper security in and outside the strong room or currency-chests.
 Outsiders should not be permitted to enter the cash department.
 Proper custody of the keys of the vaults containing treasure is very important. The
principle of dual control and instructions regarding custody of keys should be strictly
observed.
 Access to vaults should be confined only to authorized personnel. Joint custodians should
keep a watch not only on each other, but also on third persons who happen to come inside
the vault. Particular care should be taken in examining cash and other valuables at the
time of their removal from the vaults.
 Apart from removal of above it should be ensured that the cash officers /tellers are rotated
frequently and a vigil is kept on them and their activities. There can be application of any
type of modus-operandi to misappropriate the cash, which always remains a great
temptation.
Malpractices in Cash Department
 Receiving cash without counting of notes by cash officer/teller.
 Stitching and binding of notes not done as per book of instruction (manual).
 Do not use ‘notes Packing Slip’ incase of preparing bundles of notes.
 Do not put signature after counting/recounting with date on ‘Notes Packing Slip.’
 ‘Safe limit/counter limit/Transit limit are not maintained and incase of exceeding the limit
there being no proper justification.
 Cash receiving record like Date, Signature of the related person/persons with proper
rubber stamp seal are not maintained
 Cash related Registers, Scroll, Token, Receiving teller, paying teller, tally books not
properly maintained.
 Cash related registers not being properly checked and authenticated by authorized officer.
 Scrutiny of daily Cash being done by unauthorized Officer.
 Do not properly scrutinize daily balance of Prize Bond, Petty Cash, Stamp on hand, Safe
Deposit etc. while closing daily cash.

 Vault Keys are not being properly entered in to "Key Register" and keys are frequently
being maintained by unauthorized person.
 Cash is being taken out temporarily against holding of irregular cheque or Debit Cash
voucher.
 Keeping huge amount "Mutilated Notes" with till money.
 Mutilated Notes are not being regularly changed from Central bank as authorized.
 Non-compliance of guidelines for Cash Remittance as per Book of Instruction (Manual)
and H.O Circulars.
 Cash Transaction with "Bankers Account" being done by unauthorized person
&Reconciliation of Bankers Account not regularly done.
 Checking of Daily Vouchers.
Precautionary measures for preventing fraud and forgeries in cash Department

To prevent fraud and forgery in cash department the following malpractice should be
avoided:
1) Receiving cash without counting of Notes.
2) Stitching and binding of Notes as per instruction.
3) “Notes Packing Slip” not stuck incase of preparing bundles of Notes.
4) Put signature and date without counting/recounting on “Notes Packing Slip”.
5) Note being maintained “Safe limit, Counter limit, Transit Limit”.
6) Cash related “Security Dating Stamp” of branch not being properly maintained.
7) “Cash Position Memo”, “Cash Balance Book” not being neatly written.
8) Cash related Register-Scroll, Token, Receiving, Tally Books not being properly
maintained.
9) Cash related Registers not being properly checked and authenticated by authorized
officer.
10) Scrutiny of daily Cash being done by unauthorized officer.
11) Do not properly scrutinize daily balance of Prize Bond, Petty Cash, Stamp on hand, Safe
Deposit etc while close daily cash.
12) Vault Keys are not being properly entered in to “Key Register” & Keys are frequently
being maintained by unauthorized person.
13) Cash is being taken out temporarily against holding of irregular cheque or Debit Cash
voucher.

14) Keeping huge amount “Mutilated Notes” with till money.
15) Mutilated Notes are not being regularly changed from Bangladesh/Sonaly Bank.
16) Mutilated Notes are not being presented over Bangladesh Bank as per “The Notes Refund
Regulations, 2012”.
17) Cash is taken out by keeping number of piece short in the bundles of different
denominations.
Remittance- Frauds
Different modes of remittances, viz., bank drafts, telegraphic transfers, mail transfers, etc.,
have been used to commit frauds in the following ways:
Alteration of a draft for a petty amount into a substantial sum in a clever manner and
realizing it through clearing; the drawee branch paying it ex-advice without a proper follow-
up.Encashment of stolen drafts bearing material alterations, e.g., obliteration of a crossing,
etc. Fraudulent transmission of mail transfers after forging the drawing official’s signature for
credit of fictitious account opened in advance.
IT related malpractices
Improper input system
Program manipulation
Transactions manipulations
Cyber thefts
Stolen payment cards
Duplication of card information etc.
Foreign Exchange Malpractices
Over invoicing & under invoicing. As may happened in case of recent Bismillah group Scam.
Accommodation bill fraud.As we may have seen in case of recent Hallmark Scam.
Intention of Fraudsters
Money Laundering
Obscure illegal movement of fund using trade finance
Obtain money/ property, by deception
ATM fraud
 Fraudulent Transfers/withdrawals
 Presentation of forged cheques
 Suppression of customer deposit

 Granting of unauthorized credits
 Armed robbery
 Outright theft
 Misappropriation of assets and falsification of records
 Cash pilfering
 Illegal computer fraud transfer
 Incomplete documentation of newly opened accounts
 Under utilization of set rules and policies
 Inflated purchase/contract prices
 Bribery
 Manipulations of customers accounts
 Diversion of funds from suspense and dormant accounts
 Issuance of fictitious loans
Fraud through Instruments: Cheque
Cheque fraud has been one of the largest challenges faced by banks and financial institutions.
Its number has been steadily increasing at an alarming rate. More and more criminals defraud
their victims, including the banks, financial institutions or businesses that issue and accept
cheque, and the customer, either the account holder or the recipient.
In most cases, cheque fraud begins with the fraudsters stealing a genuine cheque before they
alter some or even all the information on the cheque to their own benefits.
Forms of Cheque Frauds
 Cheque Washing
 Common Methods
 Others
Cheque Washing
Cheque washing is a crime conducted by fraudsters by erasing all information, except the
signature, on a cheque, either printed or written, with chemicals and other high performance
erasers. The information is rewritten to the benefits of the criminal.
Common Methods
a. Use of Genuine Cheque Leaves
Fraudsters tend to abuse genuine cheque leaves, most probably those from other areas that
have not implemented clearing automation system, i.e. no MICR characters encoded on
cheques.

b. Change of information
Fraudsters may change all information, except the signature, on the genuine cheque with false
information so that they can abuse the cheques for their own benefits. Otherwise, they may
alter, for example the customer’s account information on the cheque to victim’s account
information.
Others
Counterfeit - A fake cheque that has been completely reproduced or copied to resemble a
legitimate or authentic cheque.
Altered - An unauthorized change to an original and legitimate cheque, such as the payee,
sum payable, and date or cheque number. The alterations are made prior to being presented
for negotiation.
Forged Drawer/Maker– The payer signature on the front of the cheque is not the legitimate
signature (forged) of the account owner/signing officer.
Some examples of cheque fraud
Altered Cheques: Altered cheques are a common fraud that occurs after a legitimate maker
creates a valid cheque to pay a debt. A criminal then takes the good cheque and uses
chemicals or other means to erase the amount or the name of the payee, so that new
information can be entered. The new information can be added by typewriter, in handwriting,
or with a laser printer or cheque imprinter, whichever seems most appropriate to the cheque.
Example 1:A customer draws a cheque for Tk 1,00,000/- . The criminal (Payee) writes “4”
instead of “1” and takes Payment from bank.
Counterfeit Cheques: Counterfeit cheques are presented based on fraudulent identification
or are false cheques drawn on valid accounts.
Example 1:A bank employee identifies an accounts that maintain large balances, steals a
genuine cheque, counterfeits the cheque and place to bank in several times.
Dormant Account Fraud: Frauds are based on cheques being written against dormant
accounts.
Example 1:Dormant account frauds can be successful when the employees of banks are
involved. Technically the employee of the bank may received a cheque from a customer of
dormant account and involved in fraud.
Note: Detailed guidelines regarding prevention of fraud and forgeries given by the bank
authority for strict compliance are placed in anexure-15.
1. Define Fraud
2. Define forgery
3. What are the main causes of malpractices?
4. What are the remedies of malpractices?
5. How malpractices are occurred in cash department?
6. What are the common methods of cheques frauds?

CHAPTER 13
Risk Management and Capacity Development

13.1 Risks Associated with General Banking
Every business organization involves some risk. Without risk possibly there being no
business. In Banking business there is also a good number of risks. The bank exists to take on
the risks of its customer base. Risk is the uncertainties of happening the expected result.
Bank’s primary expertise stems from their ability both to measure and manage risk exposure
on their own behalf and on behalf of their clients. As such in all levels of bank officials must
have a clear understanding about the related risks and their mitigation tools in general
banking operations.
Objective of risk management is to identify and analyze risks and manage their
consequences. Basel II Accord, the standards of Risk Management as guided by the Bank for
International Settlements (BIS) and particularly Basel Committee on Banking Supervision
(BCBS), has been applied by bank regulators across the world. Bangladesh Bank also issued
guidelines which forms the basis of risk management of the banks in Bangladesh.
The guidelines require that the banks adopt enhanced policies and procedures of risk
management. Risk management strategy should base on a clear understanding of various
risks, disciplined risk assessment, measurement procedures and continuous monitoring. It
should also focus on improving its risk management systems not only to ensure compliance
with regulatory requirements but also to ensure better risk-adjusted return and optimal capital
utilization keeping in mind of the business objectives
13.2 Operational risk

Operational risk is defined as the risk of unexpected losses due to physical catastrophe,
technical failure and human error in the operation of a bank, including fraud, failure of
management, internal process errors and unforeseeable external events. It is clear that
operational risk differs from other risks in that it is typically not directly taken in return for
an expected reward, but exists in the natural course of corporate activity, and that this affects
the risk management process. At the same time, failure to properly manage operational risk
can result in a misstatement of a bank's risk profile and expose the bank to significant losses.
Operational risk can be subdivided into two components: operational strategic risk and
operational failure risk. It is also defined as internal operational risk. Operational strategic
risk arises from environmental factors such as a new competitor that changes the business
paradigm, a major political and regulatory regime change, and other factors that are generally
outside the control of the bank. It also arises from a major new strategic initiative, such as
getting into a new line of business or redoing how current business is to be done in the future.
It is also defined as external operational risk. Operational failure risk arises from the potential
for failure in the course of operating the business. A firm uses people, process, and
technology to achieve business plans, and any one of these factors may experience a failure
of some kind. Accordingly, operational failure risk is the risk that exists within the business
unit caused by the failure of people, process or Technology.
Identifying, measuring, monitoring and controlling various type of risks are vital for ensuring
the health of a bank as well as the whole financial systems. Various operation risks are
created due to the following reasons:
 Increasing use of automated technology
 Growing importance of IT integration and Shared services across financial institutions
and entities
 Necessity of reducing earnings volatility and achieving cost efficiencies
 Increasing customer needs
 Sifting from vanilla type products to technology based products which are creating
more complexity in product and product development
 Evolving outsourcing arrangements and increasing dependency
 Increasing focus by regulators on legal, fraud and compliance issues.
Internal control and compliance division is responsible for monitoring the transactions of the
branches as per guidelines and to develop a compliance culture. The division has to be
adequately manned to monitor the operational risks in banking transactions. They monitor
required to be of both offsite and onsite.
13.3 Challenges of Managing Operational Risk

 Rising Costs of Compliance: Development of an Operational Risk Management
model as part of a regulatory and economic capital framework is complex and takes
time. There is a general agreement that the major ORM challenge is escalating cost of
compliance.
 Access to Appropriate Information and Reporting: Effective management of
operational risk requires diverse information from a variety of sources-including, for
example, risk reports, risk and control profiles, operational risk incidents, key risk
indicators, risk heat maps, and rules and definitions for regulatory capital and
economic capital reporting.

 Development of Loss Databases: A well-structured operational risk framework
requires development of business-line databases to capture loss events attributable to
various categories of operational risk. Basel II specifically requires a minimum of
three years of data for initial implementation and ultimately five years for the
Advanced Measurement Approaches (AMA). The need for historical data (including
external data) has been a cause for concern for many enterprises.
 Lack of Systematic Measurement of Operational Risk: Many enterprises hold that
their institutions are measuring operational risk. However, very few of them have
been able to complete the Basel II quantification requirements, or yet to formalize the
measurement process around the Basel II framework.
 Tone at the Top: Effective risk management program starts with “The Tone at the
Top”- driven by the top management and adhered by the bottom line. However, if
bank’s top leaders perceive operational risk management solely as a regulatory
mandate, rather than as an important means of enhancing competitiveness and
performance, they may tend to be less supportive of such efforts. Management and the
board must understand the importance of operational risk, demonstrate their support
for its management, and designate an appropriate managing entity and framework -
one that is part of the bank’s overall corporate governance framework.
13.4 Examples of some other risks in banks:

Legal Risk: The risk of the unexpected application of a law or regulation, usually resulting a
loss. Legal Risks are categorized as under:
 Compliance with legislation: The risk that the management fails to implement
legislative or regulatory requirements.
 Contracts: The risk that arises due to contractual failure.
 Litigation risk: Risk associated with existing and potential litigation due to procedural
lapses.
Fraud Risk: Risk arises due to improper personal gain or loss of assets through deliberate
misrepresentation, deceit or deception. Fraud Risk arises due to the following cases:
1. Financial Instruments
2. Fraudulent Financial Reporting
3. Misappropriation of Assets
4. Assets gain for fraudulent or illegal activities

5. Other misconduct
Money Laundering Risk: Money Laundering means properties acquired or earned directly
or indirectly through illegal means or illegal transfer, conversion and concealment of
location. Bangladesh Bank through BRPD Circular No. 17 dated October 07, 2003 advised
the scheduled commercial banks operating in the country to put in place effective risk
management system which includes Money Laundering Risk Management among others.
The bank has to update Anti Money Laundering Guidelines, which should include Senior
Management commitment to the anti-money laundering program.
The Management should also evolve such a culture for the bank so that all the employees
strictly adhere to each and every provision of Money Laundering Prevention Act 2012 and
Anti-Terrorism Act-2009 with amendment of 2013. All employees of the Bank, irrespective
of the position they hold, are accountable to the top management and regulatory body for
their activities which might directly or indirectly relate to money laundering. For effective
management of money laundering, all employees of the bank should follow the Money
Laundering Prevention Act, 2012 and the detailed guidelines of the bank as well.
Note: As regards combating money laundering and terrorist financing of the commercial
banks, a circular number 19 dated September 17, 2017 of BFIU are placed in annexure-16 for
compliance.
Process Risk: It is the risk which arises due to lack of knowledge, inefficiency, violations of
circular /instruction or using of obsolescence existing procedures.
Compliance Risk: Compliance risk arises due to failure to comply with any or all of the
applicable laws, regulations, code of conduct, regulatory standards and usual good principles
and practices.
Ethical Risk: Ethical Risk arises because of not having distinction between right and wrong,
good and bad, just and unjust, virtues and vice and also lack of having morality, dishonesty
and also making discrimination in their banking activities.
System Risk: This risk arises due to loss of use or functionality of information systems or the
integrity of data.
Reputation Risk: Reputation risk comes from negative public opinion. This risk may leads
to litigation, financial loss, or a decline in customer base for the institution.
Internal Control and Compliance (ICC) Risk: Internal Control and Compliance is a
management process designed to achieve effectiveness and efficiency of operations, reliable
financial reporting and compliance with laws and regulations. A robust Internal Control and

Compliance System of the bank will help to mitigate the possible risks that may arise in
general banking. Management Committee (MANCOM) of the bank are expected to review
the overall effectiveness of internal control system.
Strategic Risk: Strategic risk arising from adverse business decisions, improper
implementation of decisions, or lack of responsiveness to industry changes.
Detection Risk: The risk that the auditor will not detect a material misstatement that exists in
the financial statements. Detection risk can be controlled by the auditor through the scope of
the audit procedures performed.
Cultural Risk: There are many misunderstandings that can occur in business transactions
negotiated among different domestic areas and cross border countries in distant time zones,
with different languages, varying cultural practices and dissimilar ethical values.
Management Risk: The risks associated with ineffective, destructive or underperforming
management of the organization.
Communication Risk: Communication risk arises due to the failure of internal/external
communications or relationship management processes.
Documentation Risk: It is the risk which created a probability of loss that a legal agreement
may turn out to be incomplete, insufficient or otherwise unenforceable.
Competence risk: Competence risk is the risk which arises due to insufficient training,
skills, experience and knowledge which cause to the inability of the employee to perform
their job efficiently and effectively.
13.5 Importance of Risk Management in General Banking

Establishing sound risk management is the responsibility of banks’ management. An effective
risk management system requires identifying, measuring and limiting risks involved in
general banking which depends on appropriate internal control and compliance procedures of
the bank. Effective risk management helps to derive the following benefits:
1. Increases overall productivity of the bank
2. Balance cost effectiveness
3. Increase profitability
4. Improve service quality
5. Maintain reputation
6. Retain Brand Value
7. Improve earning quality
8. Increase customer base
9. Increase knowledge base
10. Increase efficiency and confidence level of the employees
13.6 Business Continuity Plan (BCO)

Critical services or products are those that must be delivered to ensure survival, avoid causing
injury, and meet legal or other obligations of an organization. Business Continuity Plan is a
proactive plan process that ensures critical services or products are delivered during a
disruption.
A Business Continuity Plan includes:
 Plans, measures and arrangements to ensure the continuous delivery of critical
services and products, which permits the organization to recover its facility, data and
assets.
 Identification of necessary resources to support business continuity, including
personnel, information, equipment, financial allocations, legal counsel, infrastructure
protection and accommodations.
Having a BCP enhances an organization's image with employees, shareholders and customers
by demonstrating a proactive attitude. Additional benefits include improvement in overall
organizational efficiency and identifying the relationship of assets and human and financial
resources to critical services and deliverables.
Importance of Business continuity plan (BCP)
Every organization is at risk from potential disasters that include:
 Natural disasters such as tornadoes, floods, blizzards, earthquakes and fire
 Accidents
 Sabotage
 Power and energy disruptions
 Communications, transportation, safety and service sector failure
 Environmental disasters such as pollution and hazardous materials spills
 Cyber-attacks and hacker activity.
Creating and maintaining a BCP helps ensure that an institution has the resources and
information needed to deal with these emergencies.
Creating a business continuity plan: A BCP typically includes five sections:
1. BCP Governance
2. Business Impact Analysis (BIA)
3. Plans, measures, and arrangements for business continuity
4. Readiness procedures
5. Quality assurance techniques (exercises, maintenance and auditing)
Establish control
A BCP contains a governance structure often in the form of a committee that will ensure
senior management commitments and define senior management roles and responsibilities.
The BCP senior management committee is responsible for the oversight, initiation, planning,
approval, testing and audit of the BCP. It also implements the BCP, coordinates activities,
oversees the creation of continuity plans and reviews the results of quality assurance
activities.
Monitoring and Reporting Mechanism
The overall management of the general banking operations needs to be monitored on an
ongoing basis for effectiveness of the bank. Monitoring of key risks should be the part of the
daily activities of the bank as well as periodic evaluations by the business lines and internal
audit.
Reporting of the activities is one of the important issues of risk management. It may be
treated as the mirror of the organization as to the fact what actually happening in the activities
that are being carried out by the bank. Accuracy of the report is a vital one, as because
decisions are expected to be made based on reliable, dependable and correctness of the facts.
In general banking operations, monitoring and proper reporting by the line business is quite
significant to prevent any operational loss. The higher authority as well as the MANCOM is
supposed to be very vigilant in this regard also.
13.7 Human Capital

The Bank will have a performance-driven rewarding work culture; where employees are
treated with respect and receive widened opportunities to realize their diverse Learning &
development opportunities. Bank should continuously thrive to transform Human Resources
to Human Capital through appropriate learning and development initiatives in every aspects
of the work area. HR Division regularly should under taken effectively designed general
banking related training programs targeting the right group of employees through proper
training need assessment. Effectively designed program will provide ample opportunities to
acquire necessary knowledge, skills, attitude and on-the-job-experience of the bank which
will ultimately help to increase the capacity development of the bank employees.
The Bank has to acknowledge that Succession Planning and Management is vital to the
continued success of the Bank. So, the Bank continuously should assess organizational,
divisional and team capability gaps to identify, develop and retain the successors in a timely
manner to meet the demands of the future. To ensure a proper performance evaluation and
rate the employees based on their comparative performance, the line Management is guided
by the Human Resources Division. This performance appraisal system is considered as
crucial for the Bank as this is a very important tool to identify and distinguish the performers
and non-performers. Bank should believe that a well- executed performance appraisal system
can help to reward the deserving employees, as well as help to ensure further development
program for the rest. The comprehensive performance management also includes an
assessment of employees' functional and leadership competencies. This appraisal process will
help to identify the competency gap and training needs of employees in general banking.
13.8 Training Needs Assessments (TNA)

Training is an act of improving knowledge and skill of an employee for doing a particular job
which leads to improve organization’s effectiveness and also plays an important role in
developing a productive work force. It is intended to build on individual knowledge, skills
and attitudes to meet present or future work requirements. In other words, Employee training
refers to programs that provide workers with information, new skills, or professional
development opportunities Today, business environment and intense global competition have
made it essential for organizations to constantly train their human resources. In order to
design training programs which are strategic to business needs, training needs must be
identified systematically and theoretically with the use of the appropriate tools.
A training needs analysis is intended to assess an organization’s training needs. The root of
the training needs assessment (TNA) is the gap analysis. This is an assessment of the gap
between the knowledge, skills and attitudes that the people in the organization currently
possess and knowledge, skills and attitudes that they require to meet the organization’s
objectives. Therefore, assessment of training needs is made before training solutions are
budgeted, designed and delivered
13.9 Designing Training Programs

The Training Need Analysis is a significant first step in the successful designing and
implementation of training programs. Conducting systematic needs assessment can
significantly impact the overall effectiveness and quality of training programs. The identified
training objectives form the basis for the design and development of training methods,

identification of techniques and criteria for measuring and evaluating effectiveness of training
programs.
Questions
1. Why risk management is important in general banking?
2. Identify the risks involved in general banking.
3. Outline the challenges of managing operational risks in banks.
4. What is business continuity plan? Why it is important in banks?
5. Define human capital. How TNA helps in promoting human capital?

CHAPTER 14
Leadership and Managerial Skills in Banking

14.1 Leadership in Banks
Leadership is a process by which a person influences others to accomplish an objective and
directs the organization in a way that makes it more cohesive and coherent. A process
whereby an individual influences a group of individuals to achieve a common goal.
Leadership is the process of influencing and supporting others to work enthusiastically
toward achieving objectives. It is the critical factor that helps an individual or a group
identify its goals and then motivates and assists in achieving the stated goals. The three
important elements in the definition are:
• Influence/support
• Voluntary effort
• Goal achievement
Leadership and managerial skills are very significant in banking. Therefore, bank should be
very thoughtful in this issue. Banks need bank officials with sound leadership and
managerial skills, to run their branches/departments efficiently and to achieve the ultimate
objective of bank. Banks also need to give more emphasis on various soft skills for their
senior bank employees such as leadership, team building, motivation etc.
Good leaders are made, not born. If you have the desire and willpower, you can become an
effective leader. Good leaders develop through a never ending process of self-study,
education, training, and experience. This guide can help you through the journey.
12.2 Qualities of a Banking Leader

Ability to inspire and motivate others: Leaders should have a vision of the future that
should be vivid and convincing and that motivates bank employees. A good leader should be
able to help the team members, inspire them, and guide them to achieve the ultimate
objective of the bank.
High Integrity and Honesty: Great leaders are honest and transparent, and have high
integrity-they do what they say they are going to do, and they walk their talk.
Problem Solving and Analyzing Skills: These are analytical and creative skills of a leader.
Which particular skills are needed in a particular situation depending on the problem?
Therefore, good leaders should have sound problem solving and analyzing skills.
Drives for Results: Great leaders have a higher level of determination and drive than most
anyone else, and they can be counted on to get things done.

Communicates powerfully and effectively: Great leaders are able to communicate
efficiently with the followers in a variety of ways. Such as one-on-one conversations, team
meetings, email messages, phone or Skype calls or any other such medium.
Builds Relationships: A bank business is built on a solid foundation of relationships and
trust. Therefore, good banking leader should possess strong relationship skills.
Displays Technical or Professional Expertise: Good leaders have to have some specific
skill, such as selling, accounting, computing etc. The best leaders build on their technical
and professional skills over time, becoming valuable experts in their field and skilled at
leading their team.
Displays a Strategic Perspective: Great leaders have a long-term vision of the future. They
can be tactical when necessary; they are able to maintain the strategic outlook necessary to
guide their businesses to the best future possible.
Develops others: The best leaders set aside time to develop their work force. They look for
the most promising employees, and provide them with the training they need to become their
bank's next generation of great leaders.
14.3 Three Most Important Skills for a Leader

Technical skill refers to a person’s knowledge in some technical areas. Examples are the
skills learned by accountants, engineers, doctors, chemists.
Human skill is the ability to work effectively with people and to build teamwork.
Conceptual skill is the ability to think in terms of models, framework, and broad
relationship such as long-range plan.
14.4 Qualities of a Good Branch Manager: A good manager is expected to possess the
following qualities:
A branch manager is responsible for all of the functions of a branch office, like deposit
collecting, approving loans, marketing the branch, building a rapport with the community in
order to attract business and assisting customers with account problems. A branch manager is
also responsible for making sure that the branch's goals and objectives are met in a timely
manner.
A branch manager should also possess strong sales, people-management and customer-
service skills, because a branch manager's responsibilities include developing and
maintaining a good relationship with customers and employees. Essential qualities of a good
bank manager are as follows:
Good Communication: This is the main and prerequisite skill of a good bank manager. In all
kind of management tasks the first and most common thing we do is communicating our
needs, expectations and opinions to other people.
Good Organization: This is the second most important skill, Good communication skills
indicate able to make schedule, organize and follow future plan. It also involves
understanding the rules and processes in the bank and among customers, and predicting what
will happen and when.
Team building: A good bank manager should keep his/her team sealed. As banking is
teamwork, so bank manager should have strong team management skills. A healthy and
successful team relies on trust to large extent. If a manager systematically builds trust, the
team will feel more appreciated and committed.
Leadership: A good bank manager has to solve them and prove his/her commitment to the
team goals. It’s also his/her responsibility to define goals together with his/her team and
assign the responsibility to team members in a clear manner.
Dealing with changes: Banking sector has changed a lot in recent times. So, ability to adjust
with the change is a crucial quality of a bank manager. The true manager should be flexible
and adaptable and able to react quickly when facing any obstacles.
Domain knowledge: A good manager has to understand what kind of process he/she is
managing. How his/her team members are working. What kind of tasks they perform. This
skill is not as important as the others but without it, in some cases, the team and the manager
will never work at full capacity, using the whole potential due to lack of mutual
understanding. Moreover they should also possess the following qualities as well:
Dependability, being self-motivated, Respect for leaders and co-workers, a positive attitude,
Adaptability, problem-solving skills, experience, knowledge, time management, reliability,
Delegation etc.
14.5 Expectation Management of Employees

Often HR professionals and the management team face the challenging situation of
mismatched employee expectations. This happens when your employees’ expectations don’t
match the reality of what the corporate philosophy, ideology and culture are. Sure, the
challenge is more prevalent with startups and smaller companies where the weaker employer
brand can sometimes mislead or misinform employees.

Often it’s not the company’s fault, however, one’s talent, holds high expectations from the
organization. Unfortunately, it happens often and the consequences of failing to manage
employee expectations can be severely damaging for the company’s image and brand. It
tarnishes its ability to attract more talent and may even impact its business. It also costs the
company valuable resources to find the right people only to have them realize that the
company isn’t the right fit for them and ultimately the outcome is an inflated turnover rate
that weighs heavy on the company’s resources (time, money and effort) and a demotivated
workforce. Techniques to manage employee expectations may be as follows:
1. Define the role of each employee.

2. Create supervisor-employee boundaries
3. Connect employees with the company culture
4. Remind the employee flexibility is a privilege
Employers value employees who come to work on time and take responsibility for their
actions and behaviors. In addition, employers know that dependable and responsible
employees value their job, job expectations, and their performance level. Employers
want employees who demonstrate dependability. Managers like
dependable employees because they set and maintain clear expectations. Employers
want employees who are self–motivated. While the role of every manager is to motivate their
employees, they appreciate and seek ones that create their own motivation.

The fundamental goal of performance management is to promote and improve employee
effectiveness. It is a continuous process where managers and employees work together to
plan, monitor and review an employee's work objectives or goals and his or her overall
contribution to the organization. Performance evaluation serves a number of purposes in
organizations. Management uses evaluations for general human resources decisions.
Evaluations provide input into important decisions such as promotions, transfers and
terminations. Evaluations identify training and development needs. They pinpoint employee
skills and competencies that are currently inadequate but for which programs can be
developed to remedy.

The Performance Evaluation is the assessment of the employee’s job performance against the
benchmark previously set for the categories such as output, leadership, teamwork, versatility,
supervision, etc.
14.7 Employee Motivation

Motivation aims to create a working environment and to develop policies and practices that
will provide for higher levels of performance from employees. Leadership is the process of
influencing and supporting others to work enthusiastically toward achieving objectives.
Intrinsic Motivation: Intrinsic motivation can arise from the self-generated factors that
influence people’s behavior. It can take the form of motivation by the work itself when
individuals feel that their work is important, interesting and challenging and provides them
with a reasonable degree of autonomy (freedom to act), opportunities to achieve and advance,
and scope to use and develop their skills and abilities. Such as pride in one’s work, a feeling
of accomplishment, or being part of a team. No external rewards are required to incite the
intrinsically motivated person into action. The reward is the behavior itself.
Extrinsic Motivation: Extrinsic motivation occurs when things are done to or for people to
motivate them. These include rewards, such as, incentives, increased pay, praise or
promotion. punishments, such as disciplinary action, withholding pay, or criticism. Extrinsic
motivators can have an immediate and powerful effect, but will not necessarily last long.
14.8 Motivating Bank Employees

Instilling motivation isn't easy, but it's necessary if we want our employees to grow and stay
satisfied with their jobs. That being said, there isn't any single strategy that can magically
motivate all employees at once and keep them motivated throughout their employment.
Everyone is unique, with unique values and ideas, and if we want to be successful in instilling
company-wide motivation, so multiple motivational strategies may be needed to motivate
different bank employees. Some motivational techniques are as follows:
Individual Attention Matters: Teamwork is an important element of a bank. Team work not
only makes the employee feel recognized and appreciated, but also reinforces the positive
behavior for the entire workforce. If someone is underperforming, take him/her aside for
some personal coaching or one-on-one talks that can help that employee work through his/her
problems.

Advancement Opportunities: People tend to feel stifled when their job becomes repetitive
or stagnant. Going too long in the same position, with no changes or hope for change, will
eventually demotivate even the most ambitious employees.
Leaders Set the Example: As followers follow the leader so leader should set good example
for the organization. As a leader within the organization, people are going to look to set an
example for the rest of the group.
Environmental Motivators: Work environment significantly affect employee performance.
So, a good leader should ensure good working environment in his/her organization. Thus, a
bank branch manager needs to ensure a better working environment in his/her bank branch.
Socialization: Socialization makes people motivated in the workplace. So, banks should
consider socialization significantly to improve employee motivation in the workplace. Thus,
banks can arrange spouse gathering, cultural programs, sports etc. for better employee
socialization.
Transparency: Creating an environment of transparency is very important for employee
motivation. That's because transparency builds trust among the employees. Therefore, bank
should create a transparent environment, within the organization to enhance employee
motivation level.
14.9 Work Stress

Stress is a state of mental tension and worry caused by problems in our life, work, etc.:
something that causes strong feelings of worry or anxiety: physical force or pressure. Stress
is the body's reaction to a change that requires a physical, mental or emotional adjustment or
response. The signs of stress can include sleeplessness and pains and sometimes physical
symptoms of anxiety about going to work. What is more, people who are chronically stressed
are no fun to work with. They may be irritable, miserable, lacking in energy and
commitment, self-absorbed. They may find it hard to concentrate on any one task and cannot
be relied on to do their share.
14.10 Work Stress in the Banking Sector

Workplace stress is becoming more and more concerning, specially certain sectors as the
banking industry where the levels of stress are now a major issue for the employees and the
organizations. Bank employees cannot afford the time to relax and "wind down" when they
are faced with work variety, discrimination, favoritism, delegation and conflicting tasks.

Strategies to Overcome Job Stress in the Banking
 These following strategies are aimed to banks in order to manage stress in the banking
sector:
 Organize a Stress Management Program that focuses on different categories of
employees at all hierarchical levels.
 Introduce more job oriented training programs, which improve employee’s skill and their
confidence to work effectively.
 Encourage open channel of communication to deal work related stress.
 Provide counseling on work related and personnel problems and support from a team of
welfare health and counseling staff.
 Design an attractive system of reward and recognition of good work.
 Justified work load is a vital factor to reduce job stress, excessive work or work outside
one’s capability certainly increases job stress.
 Responsibility for people: liable for well-being of employees, their training and
development.
 Proper feedback is very important in every organization. Lack of feedback about
performance of employee, lack of rewards and performance appraisal by managers may
increase job stress.
 Technological change: keeping the pace of technological change in information
processing field.
 Proper organization structure and environment are also significant to reduce job stress.
Poor working conditions, undefined structure of workplace and line of authority may
enhance job stress.
14.11 Changing the Attitude of Bank Employees

Now-a-days, service quality has received vital attention because of its obvious relationship
with costs, financial performance, customer satisfaction, and customer retention. To ensure
better customer service in banks at first banks should try to change the attitude of the bank
employees. Bank employees should always show positive attitude in their job. In changing
the attitude of the employees the following strategies may be followed:

Acknowledge concerns. Organization should not gloss over complaints. If appropriate,
acknowledge the other person’s point of view and provide clarification on any
misunderstandings.
Be part of the solution. Instead of allowing employees to present only problems, encourage
them to propose solutions. Ask them to offer at least one resolution to any complaint.
Encourage humor. Humor can diffuse tension and ease stress. But humor should be positive
and lighthearted, and should never occur at the expense of others.
Make time for others. Have an open-door policy and be approachable. This encourages
employees to be open and upfront about problems and concerns.
Watch body language. Smile, establish eye contact, listen attentively, and nod in
encouragement are essential in the organization. Employees should avoid body language
that's perceived as negative.
Suggest privacy, if appropriate. If a major setback or crisis occurs at work for an employee,
encourage the person to take a few minutes to be alone. That way, the individual can work
through strong emotions and avoid scenes or actions that he or she may later regret.
Praise, praise, praise. When successes occur, share them with others and praise those who
made them happen. Recognizing achievements makes everyone feel good.
Develop team work: Teamwork has become an integral part of the modern workplace. No
longer are companies sticking to the old-fashioned hierarchical structure. They realize that
their staff can be more productive when they work together.
14.12 Employee Grievance

A grievance is any dissatisfaction or feeling of injustice having connection with one’s
employment situation which is brought to the attention of management. A grievance is any
dissatisfaction that adversely affects organizational relations and productivity. Grievance may
be any genuine or imaginary feeling of dissatisfaction or injustice which an employee
experiences about his/her job and its nature, about the management policies and procedures.
It must be expressed by the employee and brought to the notice of the management and the
organization. The following may be the reasons of employee grievances:
a. Improper working conditions such as strict production standards, unsafe workplace,
bad relation with managers, etc.
b. Irrational management policies such as overtime, transfers, demotions, inappropriate
salary structure, etc.
c. Violation of organizational rules and practices
14.13 Handling Employee Grievances
It is important that employers deal with grievances reasonably and promptly. Good grievance
management can improve employee relationships, improve communication and avoid
problems escalating. Without effective grievance procedures, difficult situations may escalate
– potentially The manager should immediately identify all grievances and must take
appropriate steps to eliminate the causes of such grievances so that the employees remain
loyal and committed to their work. Effective grievance management is an essential part of
personnel management. The managers should adopt the following approach to manage
grievance effectively-
Quick action- As soon as the grievance arises, it should be identified and resolved. Training
must be given to the managers to effectively and timely manage a grievance. This will lower
the detrimental effects of grievance on the employees and their performance.
Acknowledging grievance- The manager must acknowledge the grievance put forward by the
employee as manifestation of true and real feelings of the employees. Acknowledgement by
the manager implies that the manager is eager to look into the complaint impartially and
without any bias. This will create a conducive work environment with instances of grievance
reduced.
Gathering facts- The managers should gather appropriate and sufficient facts explaining the
grievance’s nature. A record of such facts must be maintained so that these can be used in
later stage of grievance redressal.
Examining the causes of grievance- The actual cause of grievance should be identified.
Accordingly remedial actions should be taken to prevent repetition of the grievance.
Decisioning- After identifying the causes of grievance, alternative course of actions should
be thought of to manage the grievance. The effect of each course of action on the existing and
future management policies and procedure should be analyzed and accordingly decision
should be taken by the manager.
Execution and review- The manager should execute the decision quickly, ignoring the fact,
that it may or may not hurt the employees concerned. After implementing the decision, a
follow-up must be there to ensure that the grievance has been resolved completely and
adequately.
One-on-one meeting: Sometimes, an open forum may be ideal for some employees, others
shrink back at the idea of talking out loud in front of others, especially when it’s a grievance.
For employees who aren’t so open, an opportunity to talk one-on-one with a manager or HR
manager can be the perfect opportunity.
Formal Employee Survey: Sometimes typing is better than speaking. It makes sense that
employees may be more comfortable submitting responses electronically than in person since
we live in a very digital age. They tweet instead of calling, post statuses instead of chatting at
the water cooler and now, they can take an electronic survey instead of opening up in person.
Exit interview: When employees leave on good terms or because they feel their grievances
are irreconcilable. It’s very likely that they have plenty to say and will be more open than
those still employed. As a result, organization may conduct exit interview to know the actual
reason of employee exit.
Decision Communication: Once a decision is made, there should be no time wasted in
communicating the resolution. The action taken might not be agreeable to all employees, but
they have to understand the stand of the management. The course of action to be taken must
be clear in the minds of all those concerned.
Maintain a good grievance policy: Grievance policies determine the actions to be taken. It is
important in coming up with solutions which should be fair to all those involved. Having well
documented policies makes it easier to handle grievances, as the policies provide a
framework which will be followed in settling disputes.
Questions
1. State the qualities of a good leader.
2. Mention the qualities of a good branch manager.
3. Define employee motivation. How it helps in increasing the productivity of the bank.
4. How to handle employee grievances in bank?

REFERENCE
Bangladesh Gazette Dated July 06, 2000
Bangladesh Gazette Dated September12, 1994
Banking Law and Practice by S.N. MAHESHWARI.
Banking Theory, Law and Practice by E. Gordon and K. Nataranjan
BB (2014). “Guidelines for Customer Services and Complaint Management”, Financial
Integrity & Customer Services Department.
BIBM reading materials.
Commercial law by A.K. SEN &J.K.MITRA
Gordon, E. and Natarajan, K. (2013). Banking: Theory, Law and Practice, Himalaya
Publishing House Private Limited, Mumbai, India.
http://www.businessdictionary.com
IIBF (2007). Principles of Banking, Macmillan India Ltd.
Iyengar, G.Vijayaragavan (2007). Introduction to Banking, Excel Books, New Delhi, India.
K. Shafiqur (2013), General Banking: Practice & Law of Banking, First Edition, Centre for
Research on Banking & Human Resource Development, Dhaka-1216
K.C. Shekhar (2004), Banking Theory and Practice, 21st Edition, Vikas Publishing house Pvt
Ltd.
Pond, K.,(2000), The Value of the Banker-customer Relationship, Published by
Loughborough University Banking Centre
Principles of Banking, Indian Institute of Banking & Finance, Macmillan.
Reading Materials of BIBM on Theory of Banking.
The Anti-Terrorism Act, 2009
The Banker’s Books Evidence Act, 1891
The Banking Companies Act, 1991
The Companies Act, 1994
The Contract Act, 1872
The Money Laundering Prevention Act, 2012
The Negotiable Instrument Act, 1881 (Act XXVI OF 1881)
The Partnership Act, 1932

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STUDY MATERIAL ON

Module: General Banking (Intermediate Level)

January 30, 2020

Bangladesh Institute of Bank Management [BIBM]

Study Material on “GB (Intermediate)” for NCC Bank Limited 1

Chapter Two: General Banking -Bangladesh Context

Chapter 3: Banker Customer Relationship

Study Material on “GB (Intermediate)” for NCC Bank Limited 2

Chapter 6: Negotiable Instruments

Chapter 7: Clearing and Collection of Instruments: BACH, BACPS

Chapter 8: Modes of Remittance including Wire Transfer

Chapter 9: Customer Service and Complaint Management

Chapter 10: Cash and Volt Management

Chapter 12: Fraud, Forgeries & Malpractices Related to General Banking

Chapter 13: Risk Management and Capacity Development

Chapter 14: Leadership and Managerial Skills in Banking

Study Material on “GB (Intermediate)” for NCC Bank Limited 7

Study Material on “GB (Intermediate)” for NCC Bank Limited 8

1.2 Specific Objectives of the Manual

Study Material on “GB (Intermediate)” for NCC Bank Limited 10

1.3 Methodology of Preparing the Manual

1.4 Coverage and Limitation of the Report

1.5 Organization of the Manual

Study Material on “GB (Intermediate)” for NCC Bank Limited 12

Study Material on “GB (Intermediate)” for NCC Bank Limited 13

2.2 Deposit Products

2.3 General Banking Activities

Study Material on “GB (Intermediate)” for NCC Bank Limited 16

Study Material on “GB (Intermediate)” for NCC Bank Limited 17

3.1.1 Contractual Relationship

Study Material on “GB (Intermediate)” for NCC Bank Limited 18

3.1.2 Special Relationship

A banker’s duty to maintain secrecy of customer’s accounts: When a person opens an

Study Material on “GB (Intermediate)” for NCC Bank Limited 20

When General Lien is not applicable

Study Material on “GB (Intermediate)” for NCC Bank Limited 21

Study Material on “GB (Intermediate)” for NCC Bank Limited 22

Right to claim incidental charges

Study Material on “GB (Intermediate)” for NCC Bank Limited 23

Customer’s Obligations to his Bank

3.2 Termination of Banker–Customer Relationship

Study Material on “GB (Intermediate)” for NCC Bank Limited 25

Study Material on “GB (Intermediate)” for NCC Bank Limited 26

Study Material on “GB (Intermediate)” for NCC Bank Limited 27

Study Material on “GB (Intermediate)” for NCC Bank Limited 28

Section - 14(kha) as amended in 2013: Holding of Significant Shares

Section - 15 (Kha)(4) as amended in 2013: Appointment of Adviser, Managing Director

Study Material on “GB (Intermediate)” for NCC Bank Limited 29

Section - 15 (Kha) (6) as amended in 2013: Appointment of Directors (Cont’d.)

Section - 15 (Kha) (7) as amended in 2013: Appointment of Directors (Cont’d.)

Section - 15 (Kha) (8) as amended in 2013: Appointment of Directors (Cont’d.)

Section - 15 (Kha) (9) as amended in 2013: Appointment of Directors (Cont’d.)

Study Material on “GB (Intermediate)” for NCC Bank Limited 30

Section - 15 (Kha) (10) as amended in 2013: Appointment of Directors (Cont’d.)

Section - 15 (Kha) (11) as amended in 2013: Appointment of Directors (Cont’d.)

Section - 15 (Kha) (12) as amended in 2013: Appointment of Directors (Cont’d.)

Section - 15 (Ka ka) as amended in 2013: Restriction on Tenures and Terms of

Study Material on “GB (Intermediate)” for NCC Bank Limited 31

Section - 15 (Kha) as amended in 2013: Role of the Board of Directors

Section - 15 (Ga) as amended in 2013: Internal Audit & Control

Section - 17 (Kha) (7) as amended in 2013: Vacancy in the Position of Director

Study Material on “GB (Intermediate)” for NCC Bank Limited 32

Section - 23 (Ka) as amended in 2013: Restriction on Appointment of Common