Banking -Special Type Sof Customers

8/4/2019 Banking -Special Type Sof Customers

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Spécial Types of

Customers



Introduction

Conditions to be Satisfied

a) Any person who is legally competent to enter

into contract

b) Any person who applies to the banker in

proper manner

c) Any person who accepts the terms andconditions lay down by the banker



• Minor

• Pardanashin Woman

•

Illiterate person• Lunatic(unsound person)

• Trustees

• Executors and Administrators• Customers Attorneys

• Joint account

• HUF

• Partnership firm

• Joint stock companies



• Accounts of local government/authorities

• Accounts of Non-Residents Indian



Minor:

• Less than 18 years of age

• Less than 21 years of age if court appoints any

guardian for his property

•

Indian Contract Act 1872-a minor is in competent toenter in to a contract, if made is absolutely void

Guardianship of Minor

1. Natural guardian

2. Testamentary guardian

3. Guardian appointed by court



Precautions to be taken by the

Bankers while opening Minor’s

account• The bank may open a saving bank account in the

name of a minor, in the following ways;

In the name of a minor ,or minors(jointaccount),but a guardian operates the account

Minor him self can operate the account ,if he has

attained the age of 12 years

• Banker should record the date of birth and on

attaining the age of 18 close the minors account and

open a new account in the name of major and

transfer the balance



• In case of the death of the minor

• No risk if the account has a credit balance

• Loans and advances to minor on the guarantee

of a third party

• Draw cheques and bills, if dishonored cannot

file a case

• Minor can be admitted to partnership as a

partner for profits



Pardanashin woman:

• A pardanashin woman is one ,who observes

complete privacy as per the custom or usage of

their own community. Eg; Muslim girls

• A contract entered by such girls is not a valid

,because she observes complete privacy.

• Generally the Banker refuse to open account in

such cases.



Illiterate person:

• He/she shall personally affix his/her thumb

impression in the presence of the bank official

or submit photograph attested by the

magistrate.

• Withdraw money- He/she shall affix thumb

impression on the cheques in the presence of

the bank officials.

• Such persons cannot issue cheques or endorse

cheque.



Lunatic(Unsound Person):

• Contract Act 1872-Unsound person is notcompetent to enter in to a valid contract.

• If made, such contract is void, except those

contracts at the time of soundness.• The banker must suspend the person’s account

as soon as he receives the official information

regarding his unsoundness, till he proved hissanity.

• Banker shall be held liable for such void

contracts



Trustees :

• A trustee is a person who manage the assets

and the properties of another person for the

benefits of the person(beneficiary)mentioned

in the ‘Trust Deed’.

• The person for whom the trust is formed is

known as Beneficiary.



Precautions By Banker

•

The ‘Trust Deed’ to be examined (Name/s,power, trust property)

• In case of two or more trustees-banker should

know which trustee is operating the accountsand signing the cheques. If the trust is fail to

do that, banker will consider all.

•

Death/Retirement of the trustee-if any onedie/retire, rest will carry on .when all are dead,

suspend the account until court will appoint

new one.



• Insolvency of the trustees-not affect the trust

property or trust bank account .if any payment

to the personal creditors of the trustees, bankershall be held liable.

• Precautions to safeguard the trust amount

in the interest of the Beneficiary. • Loans to trust-only if the ‘Trust Deed’

permits such borrowings.



Executors and Administers

• Appointed to realize the assets and repay the debts of the

dead / deceased person.

• When the person is appointed by ‘will’ by a testator for

the purpose is known as executor.

• Get probate from the court after the death of the testatorfor acting as a executor.

• In the absence of ‘will’, by the deceased person, the court

will appoints a person for setting the affairs according tothe law is known as administrator.

• Get letter of administration before acting as

administrator



Bank precautions when an executor/administrator is

appointed.

• Freeze the account on the death of the customer

• Close the account and transfer the balance to a new

account after getting the probate or letter of

administration as the case may be.

• Examine the power of the executors andadministrators in operating the accounts.

• If more than one, any one or all of them can operate

by submitting a letter with signature of all.• Should not permit to transfer the funds to the

personal accounts of the executor/administrator

• No personal loans permitted.

• Death of the executor/administrator



Customers Attorneys

• Person who is appointed by the customer(principal) to

act on behalf of him as an agent.

• Should be written and registered with registrar of

documents or attested by a notary public.

•

General or special attorneysPrecautions by Banker when the customer

open an account in the name of his attorney:

•

Examine the power of attorney• Should collect a copy of the registered or attested

written document

• Examine the type of attorney



• Should not allow overdrafts/borrowings, if not

allowed in the document• Customer can remove the authority of his attorney

by giving a public notice.

• After the removal, any withdrawal by attorney will be

the liability of the banker.

• Power of attorney will be automatically terminated in

the event of the death, insolvency, insanity of the

principal.



Joint Account

When two or more persons jointly open an

account with the banker is known as joint

account.Precautions By Banker:

• Sign the application by all applicant who are

intended to open the joint account.• Instructions from the joint account holders regarding

the operations of the account .

• Appointment of agent/attorney by joint account

holder



• If not specify the operator of the account,honour only

those cheques signed by all joint account holders.

• Loans or overdrafts on the joint and individual

liabilities.

• Death of one of the joint account holder

• Insolvency of the one or more of the joint accountholders.



Joint Hindu Family

Many generations living under the same roof. The

joint family status being the result of birth.

Steps taken by Banker:

• ‘Kartha’ is operating the account for the family

business.

• Loan documents should be signed and executed by all

the adult male members in the family

• If the loan is not given for the family business, the

coparceners will not be held liable.



• Coparceners liability is limited to their interest in the

joint property.

• If any minor coparcener, the

guardian(father/mother)should sign the documents.



Partnership Firm

• Definition according to partnership Act of 1932.

• Partnership Deed

Steps taken By Banker:

• Carefully examine the ‘partnership Deed’(nature of

business, capital by partners, number of partners,

partner who will operate the account etc..).

•Account in the name of firm as per the partnershipdeed not in individual name.

• Open an account by receiving the application form

from any partner signed by all.



• Submit a partnership letter signed by all, should

include the name of the partner who operate the account.If name is not mentioned, honour the cheque that are

signed by all.

• Authority of operating partner can be revoked by any

partner by giving notice to the bank

• Death/retirement/insolvency/admission of the partner-

close the account and open a new account in the name of

the reconstituted firm• Operating partner cannot appoint another person to

operate the account without the consent of all in writing.

• Transfer of funds from firms account to partner/s

account – Bank will be liable.



Joint Stock Companies

• Artificial person with perpetual succession.

• Registered under Companies Act of 1956.

• Separate legal entity from its members.

• All power to enter in to a valid contract

Conditions to be fulfilled and steps taken by Banker:

• Verification of documents

Certificate of incorporation and commencement

AOA

MOA



• The banker carefully examine these documents in order

to know ;

The powers of the directors

Procedure adopted for borrowing and its limit, etc..

• Banker should obtain the copy of the resolution passed

by the BOD with regard to opening bank account.• Loans only up to the limits mentioned in the MOA.

• Loans and advances only through authorized persons.

•

Transfer of fund to directors personal account.

Accounts of Local



Accounts of Local

Government/Authorities•

Includes Corporations, Municipalities, District board,taluk boards, etc…

• Accounts of the local authorities are desirable by the

banks

Precautions By Banker:

• The relevant statute under which the local authority is

created has to be understood by the banker .

• Banker should know the provisions regarding theoperation of the accounts which is mentioned in the

statute.

• Has to ascertain the office bearers to operate the

account.



• Account in the name of local authority only.

• Borrowing power, securities, and the extent to which

the local authority can borrow have to verify in the

statute.



Accounts of Non-Residents Indian • Banks in India operate various types of deposit

accounts for NRI’s both in Indian Rupee and Foreigncurrencies.

Two Types Of Accounts:

1. Rupee Accounts

2. Foreign currency accounts

1. Rupee Accounts – There are two types of accounts

which can be opened in the name of NRI;

a) Ordinary Non-Resident Rupee Accounts:

Just like any other bank a/c

Local fund mobilized by NRI

Do not qualify for remittance out side India



b) Non-Resident (External) A/c:

NRI’s open accounts in any of the leading commercial

banks in India

Any interest or capital earned in these accounts will be

transferred in foreign currency as per the current

exchange rates.

Investment in government securities, mutual funds-UTIetc..

Foreigners are not allowed to open these kind of a/c’s

2. Foreign Currency Accounts Unit of account is foreign currency.

Exchange rate guaranteed by the banker

This scheme is for deposit of money for a period of 1-3

years

Banking -Special Type Sof Customers

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