Negotiable Instrument Act

Negotiable Instrument Act

• According to Section 13 (a) of the Act, “Negotiable instrument means a

promissory note, bill of exchange or cheque payable either to order or to bearer,
whether the word “order” or “ bearer” appear on the instrument or not.”

• Negotiable instrument means a written document which creates a right in

favour of some person and which is freely transferable. Although the Act
mentions only these three instruments, Such as a promissory note, a bill of
exchange and cheque.
Types of Negotiable Instrument

• Negotiable instruments recognized by statute are:

• Promissory notes

• Bills of exchange

• Cheques
Promissory notes

• A promissory note is an instrument in writing (note being a bank-note

or a currency note) containing an unconditional undertaking, signed by
the maker, to pay a certain sum of money to or to the order of a certain
person, or to the bearer of the instruments.
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 a certain sum of money only to, or to the order of a certain person
or to the bearer of the instrument.

• A bill of exchange, therefore, is a written acknowledgement of the

debt, written by the creditor and accepted by the debtor.
• If A sells goods to B on credit basis for Rs. 1000 and draws a bill on B.
If B accepts the bill, then it becomes the liability for B to pay the
agreed sum within the stipulated time.
CHEQUE

• A cheque is bill of exchange with two more qualifications, namely, (i) it is always

drawn on a specified banker, and (ii) it is always payable on demand.

Consequently, all cheque are bill of exchange, but all bills are not cheque.

• A cheque must satisfy all the requirements of a bill of exchange; that is, it must be

signed by the drawer, and must contain an unconditional order on a specified

banker to pay a certain sum of money to or to the order of a certain person or to

the bearer of the cheque..

Parties to cheque

• Drawer : He is the person who draws / author the cheque, i.e., the

depositor of money in the bank.

• Drawee: It is the drawer’s banker on whom the cheque has been drawn.

• Payee: He is the person who is entitled to receive the payment of the

cheque.
• MICR Cheques ( Magnetic Ink Character Recognition)

• This means that cheque contains a white patch at the bottom in which
numbers are given in magnetic form which represents not only the number
of the cheque but also the code number of branch and bank.

• To facilitate mechanical sorting the code line contains the following

numbers
• The first 6 numbers signify the cheque number.
• The second 3 numbers signify the city code.
• The third 3 numbers signify the bank code.
• The fourth 3 numbers signify the branch code of the bank.
• IFSC code is used by electronic payment system applications such as real-time
gross settlement (RTGS), NEFT and Centralised Funds Management System
(CFMS).

• This code is mandatory for fund transfers from one bank account to another. Every
bank branch will have a unique code and no two branches (even of the same bank)
will ever be the same.

• In an IFSC code, the first 4 digits of the IFSC represent the bank and last 6
characters represent the branch. The 5th character is zero.
 Types of Cheques

• OPEN CHEQUE - It is an uncrossed cheque which is payable at counter of the bank. It can be

Bearer Cheque or Order Cheque .

• BEARER CHEQUE -  When a cheque is payable to a person whose name appears on the

cheque or to the bearer i.e. to the person who presents the cheque to the bank for encashment, is

called bearer cheque. It can be transferred by mere delivery and do not need endorsement.

• ORDER CHEQUE - When a cheque is payable to person named in the cheque or to his order, is

called Order Cheque. When the word Bearer is cancelled , the cheque becomes the order cheque.

It can be transferred only by endorsement and delivery.

• CROSSED CHEQUE 
It is the cheque on which two parallel transverse lines are drawn across the top left ,
with or without the word
(i) ' & Co.'
(ii) Not Negotiable
(iii) A/c Payee

• It can not be encashed at the counter of the bank , can only be credited to the

account of the payee.

(C) STALE CHEQUE - The validity of cheque is for three months. It cheque is not presented within

the three months, it got expired and becomes the Stale Cheque or Out-dated cheque. Earlier the

validity of cheque was for six months, it has been reduced to three months, with effect from April 1,
• ANTE- DATED CHEQUE - A cheque contains the date on which it is drawn. If it bears a prior
date or back date, it is called Ante-Dated cheque. Bank will honour this cheque until it exceed the
three months, i.e. stale period of cheque.

• (E) POST-DATED CHEQUE - If the cheque bears the date later than the date on which it is
drawn, is called Post-Dated Cheque. This cheque can not be honoured before the date written on
it.

• (F) MULTILATED CHEQUE - A cheque which is torn into pieces is called Multilated cheque.
Crossing on Chq
• Crossing of Cheques means to draw two lines transverse parallel on left hand corner of the cheque.

It directs the bank to deposit the money directly into the account and not to be pay cash at the bank

counter.
MODES OF CROSSING

• GENERAL CROSSING - When a cheque bears two transverse parallel lines at the left hand of

its top corner. Words such as 'and company' or any other abbreviation (such as & co.) may be

written between these two parallel lines, either with or without words 'not negotiable', is called

General Crossing. 

Effect - Payment can be paid through bank account only, and should not be made at counter of

paying bank.
• (2) SPECIAL CROSSING - When a cheque bears the name of the bank in between the two parallel lines,

with or without the words 'not negotiable' is called Special Crossing.

Effect - The bank will pay to the banker whose name is written in between the crossing lines.

(3) RESTRICTIVE CROSSING / ACCOUNT PAYEE CROSSING -  In this, crossing of cheques is

done by writing Account Payee or Account Payee only in between the crossing lines.

Effect - Payment will be credited to the account of payee named in the cheque.

• DOUBLE CROSSING - When a cheque bears two special crossing, is called Double Crossing. In this

second bank act as agent of the first collecting banker. It is made when the banker in whose favour the

cheque is crossed does not have branch where the cheque is paid.
Features of a Cheque
• It is an instrument in writing.

• A cheque is to be drawn only on the branch in which the customer is

maintaining an account.

• Before drawing a cheque, the customer must have sufficient funds in his
account or else, the cheque will be dishonoured.

• A cheque is an order by the customer on the bank and so the cheque must
be very clear in the instructions given to the banker.
• As the cheque is meant for payment of money, the amount mentioned in the

cheque should be specific and it should be written both in words and

figures. If there is any difference in the amount written in words and

figures, the cheque will be dishonoured.

• A cheque is payable either to order or bearer. An order cheque is one which

is payable only to a specific person or to whom so ever he orders.

• Signature is an important aspect in a cheque. A cheque should be signed by the
customer and the signature in the cheque should be as per the specimen signature
given by the account holder at the time of opening the account

• Date appearing on the cheque is a date on which the cheque is said to have been
issued. A banker will make payment on a cheque either on the date of the cheque
or subsequently but not before the date. A post-dated cheque will never be
honoured by the bank.
Clearing System
 CTS
• The full form of CTS is Cheque Truncation System.  RBI has decided to launch
this system and all banks across India are required to follow RBI guidelines in this
regard.  As per RBI guidelines, now all banks have to issue cheques conforming to
the CTS 2010 standards with uniform features.

• Under the CTS system, the physical movement of cheques between banks will be
eliminated.  

•  Now under CTS, instead of physical movement of the cheque, an electronic

image of the cheque will be transmitted to the drawee branch / bank.    The
presenting bank will  retains the physical cheque.    Along with the electronic
image, certain key relevant information is also transmitted, such as date of
CTS

• The new process is being adopted to reduce the scope of frauds as the new
standardized cheques will have number of security features.   The system will also
help in speed clearance of chequess and thus customers will be able to get faster
credit to their accounts. 
 CTS
• (a) Cheque printer details: This is printed on the extreme left hand side of the cheque.  The printer details
along with the words ‘CTS-2010’ is mentioned along the area where you tear off the leaf from the cheque book.

• (b) Rupee symbol: The new symbol of the Indian rupee is printed beside the area where the amount in figures
needs to be written.

• (c) Details of the bank and its logo: The bank details and its logo are printed on the face of the cheque.
However, it is printed in invisible ink.

• (d) Signature space indicator: The words ‘please sign above’ are mentioned indicating the space where you
will need to sign the cheque.

• (e) VOID pantograph: This is a wavelike design, which is visible to the naked eye and seen below the area
where the account number is printed.

• The benchmark prescriptions are collectively known as "CTS-2010 standard".  Indian Banks Association
(IBA) and National Payments Corporation of India (NPCI) are co-ordinating with the banks on
Benefits of CTS:
(i) CTS speeds up the process of collection of cheques,
(ii) Reduces the scope for clearing-related frauds or loss of instruments in transit, 
(iii) Lowers the cost of collection of cheques, 
(iv) Removes reconciliation-related and logistics-related problems, 
(v) Reduces the time of clearing cycle – that is faster processing of cheques and payment
in favour of the customer,
(vi) Reduces scope for frauds inherent in paper instruments,

Thus, as you can see CTS increases efficiency of the entire system.
Payments Settlement System: NEFT / RTGS/
IMPS
• India currently has various methods to transfer money online such as digital wallets,
UPI, and more. However, the most commonly used online fund transfer method has
been:
• National Electronic Funds Transfer (NEFT)
• Real-Time Gross Settlement (RTGS)

• Immediate Mobile Payment Service (IMPS)

• While NEFT and RTGS were introduced by RBI (Reserve Bank of India), IMPS was
introduced by National Payments Corporation of India (NPCI).
NEFT

• National Electronic Funds Transfer (NEFT) is a payment system that

facilitates one-to-one funds transfer.

• Using NEFT, people can electronically transfer money from any bank branch
to a person holding an account with any other bank branch, which is
participating in the payment system.

• Fund transfers through the NEFT system do not occur in real-time basis and
the fund transfer settles in 23 half-hourly batches.
RTGS

• Real-Time Gross Settlement (RTGS) is another payment system in

which the money is credited in the beneficiary’s account in real-
time and on a gross basis. The RTGS system is primarily meant for
large value transactions that require and receive immediate clearing.
IMPS

• Immediate Mobile Payment Services(IMPS) is a real-time instant inter-bank

funds transfer system managed by National payment corporation of India.

• NEFT, RTGS and IMPS payment systems were introduced to offer

convenience and flexibility to the account holders.

• To use these online fund transfer services, the remitter must have the basic
bank account details of the beneficiary. The bank account details include the
beneficiary’s name and bank’s IFSC.
UPI

• Unified Payments Interface (UPI) is an instant real-time 

payment system developed by National Payments Corporation of India
 facilitating inter-bank transactions.

• The interface is regulated by the Reserve Bank of India and works by

instantly transferring funds between two bank accounts on a 
mobile platform.
• Unified Payments Interface is a real time inter bank payment system that allows sending

or requesting money. Any UPI client app may be used and multiple bank accounts may

be linked to single app. Money can be sent or requested with the following methods:

• Virtual Payment Address (VPA) or UPI ID: Send or request money from/to bank account

mapped using VPA.

• Mobile number: Send or request money from/to the bank account mapped using mobile number.

• Account number & IFSC: Send money to the bank account.

• Aadhaar: Send money to the bank account mapped using Aadhaar number.

• QR code: Send money by QR code which has enclosed VPA, Account number and IFSC or Mobile

number.
UPI Platforms
• Airtel
• BHIM
• Google Pay
• Jio Pay
• Phone Pe
• PayTM and many more
 E - Banking
 E-Banking or Electronic Banking is a major innovation in
the field of Banking.
 Information revolution led to the evolution of internet , which
lead to E-Commerce continued by evolution of E- Banking.
 History Of E-Banking

 E-Banking History dates back to 1980s.

 The term online became popular in the late '80s and referred to the
use of a terminal, keyboard and monitor to access the banking
system using a phone line
 Stanford federal credit union was the first who offer online internet
banking services to all of its members in 1994.
 Later on snapped up by other banks like
Well Fargo, Chase Manhattan and Security First Bank.
 What Is an E-Bank?

 Traditional banking business assumes:

Customer desk at bank’s building
Office hours from 10.00 am to 6.00 pm

 Customers have:
Their job during the day Collision!
Family or other activities after the job

What can we do about it?

 What Is an E-Bank?
 Logical answer is to use e-channels:
Internet
Mobile network
Automated telephone
ATM network
SMS messaging
Multipurpose information kiosks

 E-channels enable financial transactions from anywhere

and allow non-stop working time.
 E-BANKING
 Modern banking is virtual banking.
 Virtual Banking means a customer cannot see the bank but
with the help of technology he can conduct the banking
activities anywhere in the world.
 The major types of virtual banking services includes:
1. Automated Teller Machines (ATMs)
2. Smart Cards
3. Phone banking
4. Internet banking
Automated Teller Machines (ATMs)

 ATMs are widely used electronic channels in banking.

 It is a computer controlled device at which the customers
can make withdrawals, check balance without involving any
individuals.
 To use this system customers are given a plastic card which
contains the customer’s name & account no.
 Customer is given a pin number. Whenever he wants to use
it
he needs to enter pin number.
 Mostly ATMs are near to branches but nowadays ATMs are
available at places like malls, theaters, stations etc.
 Smart Cards

 It is a chip based card (micro chip containing monetary value)

 When a transaction is made using the card, the value is debited &
balances comes down.
 It is used for making purchases without the need of any pin.
 It is a powerful card which carries out functions of ATM card ,
Credit Card , Debit Card.
Tele-banking
 It means banking over phone.
 Mainly used for marketing banking services.
 A customer can do entire Non-Cash related
banking over phone anywhere at anytime
 With fall in mobile phone rates mobile banking
will emerge as one of the most cost effective
delivery channel.
Internet Banking
 It has helped in banking at the click of a
mouse.
Advantages of E-Banking
 Round the clock banking
 User friendly
 Low cost
 Portable banking
 Quality banking
 Speed banking
Limitations of E-Banking
 Start-up cost
 Training & maintenance
 Security
 Legal issues
 Online Banking Frauds

 While online banking has been around for

many years, Since the beginning of the year
2004, reports of fraud cases nearly explode.
 Phishing
 The "Phishing" scheme involves using fake emails and/or
fake websites. Criminals send emails that appear to be
from the customer's bank that direct customers to a fake
website.
 Typically, a phishing email will ask an online banking
customer to follow a link in order to update personal bank
account details. If the link is followed, the victim downloads
a program which captures his or her banking login details
and sends them to a third party
Spyware is generally considered to be software that is secretly installed
on a computer and takes things from it without the permission or
knowledge of the user. Spyware may take personal information,
business information, bandwidth; or processing capacity and secretly
gives it to someone else.
Trojan horse

"Trojan Horse" scheme unfolds when malicious software (malware)

embeds to a consumer's computer without the consumer being aware
of it. Trojans often come in links or as attachments from unknown
email senders. After installation the software detects when a person
accesses online banking sites and records the username and password
to transmit to the offender
Card Skimming

 Skimming is a more advanced version of an identity theft.

Fraudsters illegally copy the information from the magnetic
strip on the back of your plastic card without interfering
with the legitimate payment transaction.
ATM Skimming

• Fraudsters can attach false casings and PIN pad overlay devices onto genuine
existing ATMs, or they can attach a camouflaged skimming device onto a card
reader entry used in tandem with a concealed camera to capture and record PIN
entry details

Hacking

• Hacking includes gaining illegal entry into a PC system. Nowadays, the hacking of
IP addresses is very universal as it permits the hackers to imagine a fake online
character and carry out illegal dealings exclusive of using his factual individuality
CRM for Banks

• With integrated banking customer relationship management (CRM)

software, you can use technology to manage your customer
relationships.

• CRM for banks can help your financial institution capture customer
data so you can track, view and analyze interactions across the entire
customer lifecycle, even when they are prospects.
• Customer Contact Management: Manage user interactions by
enabling notes, email syncing appointment setting, reminders,
transactional channel and analysis and more

• Case Management & Workflow: Record and track customer inquiries,

resolve complaints and receive real-time notifications

• Relationship Management: Distinguish between customers, prospects

and affiliates by tracking individual and business relational information
through automated visual mapping from core banking data
• Campaign Management: Create messaging and monitor performance
of marketing campaigns and batch communications from start to finish

• Sales & Referral Tracking: Connect your marketing efforts straight

to new revenue for your bank by quickly directing opportunities and
referrals to the appropriate staff member or group, maximizing the
potential of a sale
 OBJECTIVES OF CRM

 Increase In Customer
Service

 Increase Efficiency

 Lowering Marketing Cost

 Aiding The Department

 IMPORTANCE OF CRM
 Predicting customer needs
 Grouping customers
 Acquiring new customers
 Cost effective
 Handy details
 Customer satisfaction
 Customer loyalty
 FUTURE OF
CRM
 Retention rate

 Increased sales

 Reduced costs

 Significant role
 Technology

 Customer
Information

 Interactive

 Customer individuality
CRM in BOB
• https://bobcrm.bankofbaroda.co.in/onlinecomplaint/frmMain.aspx?
source=WEBSITE&sid=&id=