Opening Accounts of Various Types of Customers

vijayjrajpura@kalupurbank.
com, 1
vijay_rajpura@yahoo.co.in
UNIT -16
OPENING ACCOUNTS OF
VARIOUS TYPES OF
CUSTOMERS
vijayjrajpura@kalupurbank.com, 2
Individual
 The account can be opened in the name of
an individual or in the name of two or more
individuals.
 The person or all of them should be of age of
majority, sound mind and should not be un-
discharged insolvent/s and not disqualified
from contracting by any to which he is
subject.
JOINT ACCOUNT HOLDERS
 A joint account is an account opened by two
or more persons.
 A/c opening form should be signed by all the
account holders
 Instructions for operating the account may be
any one of the following
 Either or survivor
 Both jointly
 Former or survivor
 In the absence of any instruction, jointly
signatures of all a/c holders
JOINT ACCOUNT HOLDERS
 Modification or revocation in operational
instructions should be signed by all the
account holder.
 Any one of them can stop the payment of a
cheque issued by any other joint account
holder.
 The instructions for operations in the account
will stand revoked in case of insanity,
insolvency, death of any of the joint holders
and operations in the account will be
stopped.
Rules for claim of account
 On the death of any of the joint account
holders, the survivors are entitled to the
whole amount
 Nomination can be entertained for payments
of balance in the case of death of all the joint
account holders.
 when an account is held by a (Hindu)
husband jointly with his wife. the wife cannot
be paid the balance on the death of the
husband but it is to be pass on to the legal
heirs of the husband, including the wife who
is the survivor.
MINOR ACCOUNTS
 As per the Indian Contract Act, a 'minor' is a
person who has-not completed eighteen years of
age.
 As per Indian Majority Act, if a guardian is
appointed by a court before a person completes 18
years or his property if left under the care of the
guardian, the person becomes a major after the
completion of 21 years.
 Sec 26 of the N.I.Act provides that a minor may
draw, endorse, deliver and negotiate a negotiable
instrument and as such, a minor can draw a cheque.
MINOR ACCOUNTS
A savings bank account may be opened in
the single name of a minor and may be
operated upon by minor, if he/she has
completed the age of 10 years and is able to
read and write subject to certain conditions
attached to such accounts.
The minor should be literate.
MINOR ACCOUNTS
 A savings bank account may be opened in the
name of minor jointly with his/her natural
guardian i.e. father or mother.
 No overdraft is allowed in minor’s account.
 Two minor’s cannot open a joint account
 On attaining majority, the erstwhile minor should

confirm the balance in his/her account and if the
account is operated by the natural guardian /
guardian, fresh specimen signature of erstwhile
minor duly verified by the natural guardian would
be obtained and kept on record for all
operational purposes.
HINDU UNDIVIDED FAMILY (HUF)
HUF comes into being because of a particular concept under Hindu
Law whereby all the members of the family reside together jointly,
carry on a business activity jointly and hold the property jointly and
therefore, it is termed as Hindu Undivided Family
 In a HUF, the business is inheritable.
 The members of the family are called coparceners and eldest male
person is the manager or the Karta.
 When an account is opened in the name of a HUF, all the adult
members have to sign even though the Karta would operate the
account.
 Coparceners are liable to the extent of their share in the family
property and no personal liability
 While opening the account and on the cheque issued, the use of the
word HUF is essential along with the name of the unit.
 Withdrawal of one of the coparceners does not put the existence of
the firm jeopardy.
PARTNERSHIP FIRM
Rules for Opening of a Firm’s account : The banker should very
carefully examine the Partnership Deed, which is the charter of the
firm, to acquaint himself with the constitution and the business of the
firm.
1. Number of Partners.
 The banker should see that the number of partners does not exceed
the statutory limit.
 The minimum number of partners in a firm must be two, excluding a
minor partner, who is not competent to enter into a contract. A minor
may be admitted into the partnership with the consent of all other
partners but he shall not be liable for the losses or debts for the
firm. The banker should note the date when the minor partner will
attain majority so that a fresh partnership letter signed by him and
partners is obtained by the banker.
2. Title of the firm's Account.
3. The Partnership Letter or Mandate.
 Partnership letter should be signed by all the major partners, stating
the nature of business, names and address of all partners along
with operative instructions as to who will operate the account.
Partnership Firm
 In case of any internal dispute among
partners, if any of them gives notice of
stoppage of operation, then the account
would only be operative by all partners
jointly.
 Partners are mutual agents and can bind the
firm by their acts.
 Addition into Partnership:
 If old a/c in credit, the a/c can be continued
 If old a/c in debit, the old a/c should be closed and
new a/c should be open to avoid Clayton’s Rule.
 Death of a partner: If a partner dies, the firm
stands dissolved automatically, if an agreement to
the contrary does not exist. It means that the firm
is not dissolved on the death of a partner if the
partnership deed specifically provides for this.
 The deceased partner's heirs cannot succeed him
as partners. They can demand the share of the
deceased in the firm from the surviving partners,
or they may be admitted as new partners by the
existing partners.
 If the firm dissolved close the a/c to avoid
operation of the Clayton;s Rule
Death of a partner
 If the firm does not stand dissolved, it is
reconstituted by the surviving partners with or
without the admission of a new partner. The
banker should open a new account in the name of
the reconstituted firm and obtain a fresh mandate
and undertaking from the partners.
 In any case the cheques drawn by the deceased
partner should not be honoured by the banker
without confirmation from the surviving partners.
Retirement of a partner.
 When a partner retires, his liability ceases in respect of all
transaction undertaken subsequent to the date of his
retirement.
 But if the banker is not informed, he continues to be liable
for the transactions of the firm even after the date of his
retirement.
 The retiring partner should give a public notice for this
purpose to terminate his liability to the third parties.
 If the bank a/c of the firm shows a debit balance, the
banker must close the a/c of the firm, to avoid Clayton’s
Rule.
 If an a/c shows a credit balance, the banker need not
close it but the cheques drawn by the retiring partner
should be honoured after securing confirmation from other
partners.
 On the opening of a new a/c or on the continuance of the
existing a/c , a fresh mandate should be taken from the
partners of the new firm.
Insolvency of a partner. In case of insolvency of
a partner, the partnership comes to an end, if an
agreement to the contrary does not exist.
 The insolvent partner ceases to be a partner with
effect from the date he is declared as insolvent and he
shall not be liable to the firm for any of its transactions
thereafter.
 The insolvent partner does not remain competent to
operate the firm's account.
 The solvent partner can operate the account for
winding up the affairs of the firm.
 The banker should honour the cheques drawn by the
insolvent partner before his adjudication only after
getting confirmation from the solvent partners.
 Bankers usually close the account of the firm and
open a new account in the name of the reconstituted
firm to determine the liability of the insolvent partner
and avoid Clayton's rule.
Limited Liability Partnership (LLP)
The LLP will be an alternative corporate business vehicle that
would give the benefits of limited liability but would allow its
members the flexibility of organising their internal structure
as a partnership based on an agreement
Main Features
 LLP is a separate legal entity separate from its partners
and it can own assets in its name, sue and be sued.
 LLP can also take actions like mergers amalgamations.
Similarly there are provisions for winding up and
dissolution.
 An intending unlimited liability partnership firm seeking to
convert itself into a LLP is required to apply to the Registrar
as per form 17 which should be accompanied by written
consent from all creditors.
 Perpetual succession (death of partner does not affect the
LLP) vijayjrajpura@kalupurbank.com, 17
Main Features of LLP
 One partner is not responsible or liable for another
partner's misconduct or negligence except in certain
cases.
 Liability of the partners is limited to the extent of his
contribution in the LLP. No exposure of personal assets
of the partner, except in cases of fraud.
 Minimum 2 Designated Partners have to be there who are
individuals and at least one of them should be resident in
India. There is no limit on maximum no. of partners.
Partners can be resident individuals, a company or an
LLP.
 An LLP will be under obligation to maintain annual
accounts reflecting true and fair view of its state of affairs
 ROC shall be having jurisdiction over the incorporation of
LLP.
LIMITED COMPANY
 Company is a legal entity and can open accounts in

the same way as any other person. There are three
types of Limited Companies :
 Public ltd
 Private ltd.
 Government Companies
Note: While opening current accounts of customers,

banks have to ensure that the customer does not
enjoy any credit facility with another Bank.
TRUSTS
A trust is an obligation annexed to the ownership of a

property, arising out of confidence reposed in and
accepted by the person for the benefit of another or
of another 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 instrument by which the trust is created is called
the “Trust Deed.”
 Trustee(s) cannot delegate his/her powers, unless
specifically authorised by the trust deed.
Executor and Administrator :
The account should be opened strictly in
accordance with the Probate or a Letter of
Succession or Letter of Administration or the
Administrator General’s Certificate issued by
a competent court or authority.
* Probate means “A copy of will certified under
the seal of a court of competent jurisdiction
with grant of administration of the estate of
testator’.”
COOPERATIVE SOCIETIES
 Cooperative societies can also open bank

accounts with public/ private banks other than
cooperative banks.
 Resolution to open a bank account with the
signatures of three persons, viz.,
president/secretary/ treasurer out of these
three, signatures of the president and one of
the others are essential.
GOVERNMENT AND PUBLIC
BODIES
 Banks should obtain a copy of the letter of
authority issued by the competent authority
for opening the account.
 Main functions of banks is paying, receiving,
collecting and remitting money on behalf of
the government departments.
Nomination Facility
Nomination should be made by the depositor or
all the depositors in the prescribed format.
 Form DA -1 for making nominations by the
depositors,DA1.pdf
 Form DA- 2 for cancellation of the said
nominations to be made by the depositors,
da2.pdf
 Form DA- 3 for variations of the said
nominations to be made by the depositors.
da3.pdf
 DEATH CLAIM.pdf
Opening of Accounts Based
on AADHAAR CARD
 Letter issued by the Unique Identification
Authority of India (UIDAI) containing details of
name, address and Aadhaar number may be
accepted as an “Officially Vaild Document” for
opening an account
 Information containing demographic details
and Photographs made available from UIDAI
as a result of e- KYC process may be
accepted as an “Officially Vaild Document” for
opening an account.
Deregulation of Savings Bank
Interest Rates
 Interest rate was deregulated with effective
from October 25,2011.
 Payments of interest on Savings Bank
accounts by banks is calculated on a daily
product basis with effect from April 1, 2010.
 Thank You

Opening Accounts of Various Types of Customers

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Opening Accounts of Various Types of Customers

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vijayjrajpura@kalupurbank.

 Two minor’s cannot open a joint account

 On attaining majority, the erstwhile minor should

 Company is a legal entity and can open accounts in

Note: While opening current accounts of customers,

A trust is an obligation annexed to the ownership of a

 Cooperative societies can also open bank

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