Introduction-Origin, Evolution of Banking Institutions

Evolution of Banking Institutions

Types & functions of banks; Commercial banks – PSBs & Pvt. Sector-
Indian & Foreign; RRBs; Cooperative Banks-State cooperative, District
Cooperative, Primary Credit Societies; Development Banks- country
level/State level, Land Development Banks
District Cooperative, Primary Credit Societies; Development Banks-
country level/State level, Land Development Banks

District Cooperative, Primary Credit Societies;.

Development Banks- country level/State level
Reserve Bank of India & its main functions; Other Apex
Banking Institutions like IDBI, SIDBI, NABARD, EXIM BANK,
NHB. & their role

Reserve Bank of India & its main functions

IDBI, SIDBI, NABARD, EXIM BANK, NHB. & their role
Types of relationship between Bank & Customers –
debtor & creditor, as trustee, as agent; Obligations of a
banker under different circumstances; Rights of a
Banker;
Types of Deposit Accounts of the customer- FD, SA, RD, CA-basics only;

Opening & closing of accounts, Single, Joint, Nominations;

FD

A fixed deposit (FD) is a financial instrument provided by banks or

NBFCs which provides investors a higher rate of interest than a regular
savings account, until the given maturity date. It may or may not require
the creation of a separate account.

SA

Savings account is an interest-bearing deposit account held at

a bank or other financial institution that provides a modest interest
rate. ... They also may charge fees unless you maintain a certain average
monthly balance in the account

RD
Recurring Deposit is a special kind of Term Deposit offered by banks in
India which help people with regular incomes todeposit a fixed amount
every month into their Recurring Deposit account and earn interest at
the rate applicable to Fixed Deposits. ... Minimum Period of RD is 6
months and maximum is 10 years.

MINOR ACCOUNTS

Savings /fixed / recurring bank deposit account can be opened by

a minor of any age through his/her natural or legally appointed
guardian. ... They can also decide, in their own discretion, as to what
minimum documents are required for opening of accounts by minors.

CA

Current account, also known as financial account is a type of deposit

account maintained by individuals who carry out significantly higher
number of transactions with banks on a regular basis. It is created by the
bank on request of the applicant and is made available for frequent or
immediate access. Current accounts relate to liquid deposits and it offers
a broad range of customized options to aid financial dealings. Current
accounts also allows to make payments to creditors through the cheque
facility offered by the bank. Generally, current accounts do not provide
interests and requires a higher minimum balance when compared
to savings account. However, the greatest advantage of current bank
account is that, account holders can easily avail overdraft facility up to
an agreed limit..

Opening & closing of accounts, Single, Joint, Nominations;

Opening & closing of accounts

Opening of Bank account.

1. Decide what kind of account you need

Choose a savings account if you’re looking for a place to save money
over a short period of time, but still keep it readily accessible. Choose
a chequing account to keep money that you plan to use for day-to-day
spending or to pay bills over the short term. You’ll earn less interest than
with a savings account.

2. Look for an account with the services you’ll use most

In particular, think about how you’re likely to put money in and take it
out:

 branch – make deposits and withdrawals using a teller or ATM

 debit card – buy something or get cash at a store
 cheques – pay bills
 direct debit – pay bills automatically from your account each month
 direct deposit – have your pay put into your account
 Internet or telephone banking – for a range of transactions

3. Shop around to compare rates and fees

Understand the service fees you can be charged before you open an
account. Look for accounts that charge the lowest fees for the services
you need. And compare interest rates. They will vary across financial
institutions.

4. Choose a financial institution and location

Choose one that has branches or bank machines located close to where
you live or work.

5. Open your account

You’ll have to give personal information such as your address, date of
birth, social insurance number, job title and phone numbers when you
complete the account application. You’ll also need to show 2 pieces
of acceptable identification. One of them must be from the government.
Then make your first deposit.

CLOSING OF BANK ACCOUNT

1.Open your new account before you close the old one
This ensures you won’t miss any deposits or payments.
2. Change your bank details for any direct deposits
If your pay is deposited directly into your account, give your employer
your new account information. Inform the government of your account
change if you get government benefits or payments (including income
tax refunds) deposited automatically into your account.

3. Change your bank details for any pre-authorized debits

If you pay bills by pre-authorized debits (PADs), make sure everyone
you pay has your new account information. Ask your bank if it can do
this for you. You may be charged an NSF (not sufficient funds) fee each
time a PAD is taken out of your old account and there’s not enough
money to cover it.

4. Stop writing cheques on your old chequing account

Make a list of any cheques that haven’t been cashed. Then wait until
they clear before closing your account.

5. Monitor your accounts carefully

Make sure that everything has been switched over and is running
smoothly in your new account. Also confirm that the cheques you wrote
on your old account have all been cashed. You can do this by looking at
statements or accessing your account online.

6. Close your old account

Call the financial institution and tell them you are planning to close your
account. Find out how long it will take to close, and if there will be a fee.
If there’s any money in the account, you can either withdraw it or move
it to your new account.

Single, Joint, Nominations;

A joint account is a bank account shared by two or more

individuals. Any individual who is a member of the joint
account can withdraw from the account and deposit to it.
Usually, joint accounts are shared between close relatives or
business partners.
Nomination is the right conferred upon the holder of a bank account to
appoint one or more persons who will be entitled to receive monies
upon the death of the account holder. In the event of death of an account
or locker holder, the bank can release the account proceeds or contents
to the nominee without insisting upon a succession certificate, letter of
administration or court order.

Remittance Services to Customers by demand drafts, pay orders

/Banker cheque, NEFT, RTGS, UPI app, SWIFT; safe deposit vault /
lockers, safe custody of articles, standing instructions – legal issues;
credit cards, debit cards, Travellers’ cheque/cards

However, the electronic payment systems like ECS, EFT, RTGS, etc. work on the
basis of a series of bi-lateral agreements made specifically for each one of them
which are of contractual nature between the participant and the manager of the
systems. The process of netting of payables and receivables is adopted by all
payment systems except RTGS where the settlement is on gross basis. Existing legal
structure does not explicitly cover ‘netting’ and ‘finality of settlement’. Some
countries have legislated ‘netting’ and ‘finality of settlement’ and also built
regulatory structures either within the central banks or by way of establishing quasi-
judicial institutions to oversee payment systems.

Netting entails offsetting the value of multiple positions or payments due to be

exchanged between two or more parties. It can be used to determine which party is
owed remuneration in a multiparty agreement. Netting is a general concept that has
a number of more specific uses, specifically in financial markets

Settlement finality is a conceptual construct often used in statutory, regulatory, and

contractual literature. Finality of settlement ensures that transactions made over
payment networks will, at some point, be complete and not subject to reversal even
if the parties to the transaction go bankrupt or fail.

Negotiable Instruments - definition, essential features,

Kinds, Holder & holder in due course
Negotiable Instruments - Essential Features
Negotiable instruments - Kinds, Holder & holder in due
course
Endorsement- meaning, kinds, legal implications, Negotiation,
Crossing of cheques, Payment of cheques-in order or otherwise,
dishonour, Statutory protection, Payment in due course
Negotiation, Crossing of cheques, Payment of cheques-in order
or otherwise, dishonour, Statutory protection, Payment in due
course

Negotiations
Crossing of cheques, Payment of cheques-in order or otherwise,
dishonour, Statutory protection, Payment in due course

Crossing of cheques
Payment of cheques-in order or otherwise, dishonour,
Statutory protection, Payment in due course
Collection of cheques-statutory protection of collecting bank;
Liability of collecting bank, duties of collecting bank
Dishonor Of Negotiable Instruments, steps to be taken,
Modes of giving notice, Noting & protesting
STEPS TO BE TAKEN
Noting & protesting
Protesting (Sec.100) According to Sec.100, “when the promissory note or
bill of exchange has been dishonoured by non- acceptance or non-
payment, the holder may, within a reasonable time, cause such dishonor
to be noted and certified by a notary public. Such certificate is called
a protest

Capacity of parties-minors, legal representative; liability

of parties-drawer of bill & cheque, liability of maker of
note & acceptor of bill
Capacity of parties-minors
Section 26 in The Negotiable Instruments Act, 1881
26. Capacity to make, etc., promissory notes, etc.—Every person capable
of contracting, according to the law to which he is subject, may bind
himself and be bound by the making, drawing, acceptance,
endorsement, delivery and negotiation of a promissory note, bill of
exchange or cheque.
(Minor) —A minor may draw, indorse, deliver and negotiate such
instruments so as to bind all parties except himself. Nothing herein
contained shall be deemed to empower a corporation to make, indorse
or accept such instruments except in cases in which, under the law for
the time being in force, they are so empowered.

legal representative
Section 57 in The Negotiable Instruments Act, 1881
57. Legal representative cannot by delivery only
negotiate instrument indorsed by deceased.—The legal
representative of a deceased person cannot negotiate by
delivery only a promissory note, bill of exchange or
cheque payable to order and indorsed by the deceased
but not delivered

liability of parties-drawer of bill & cheque, liability

of maker of note & acceptor of bill

Liability of Parties – Cheque

The provisions relating to the liability of parties to negotiable instruments

are under section 30 to 32 and 35 to 42 of the Negotiable Instrument Act,
1881.

The Liability of parties is as follows:

1. Liability of Drawer (Section 30)

Drawer means a person who signs a cheque or a bill of exchange ordering

his or her bank to pay the amount to the payee.

In case of dishonor of cheque or bill of exchange by the drawee or the

acceptor, the drawer of such cheque or bill of exchange needs to
compensate the holder such amount. But, the drawer needs to receive due
notice of dishonor.

So, the nature of the drawer’s liability on drawing a bill is:

(i) On due presentation:- It should be accepted and paid accordingly.

(ii) In the case of dishonor:- Drawer needs to compensate the holder such
amount, only when he receives a notice of dishonor by the drawee.

2. Liability of the Drawee of Cheque (Section 31)

The person who draws a cheque i.e drawer having sufficient funds of the
drawer in his hands properly applicable to the payment of such cheque
must pay the cheque when duly required to do so and, or in default of
such payment, he shall compensate the drawer for any loss or damage
caused by such default.

The drawee of a cheque will always be a banker. As a cheque is a bill of

exchange, drawn on a specified banker by the drawer, the banker is bound
to pay the cheque of the drawer, i.e., the customer. For the following
conditions are need to be satisfied:

(i) Sufficient amount of funds to the credit of customer’s account should

be there with the banker.

(ii) Such funds are required to be properly applied against the payment of
such cheque, e.g., the funds are not under any kind of lien etc.
(iii) The cheque is duly required to be paid, during banking hours and on
or after the date on which it is made payable.

If the banker unjustifiably refuses to honor the cheque of its customer, it

shall be liable for damages.

3. Liability of Acceptor of Bill and Maker of Note (Section 32)

As per section 32 of negotiable instrument act, in the absence of a contract

to the contrary, the maker of a promissory note and the acceptor before
maturity of a bill of exchange are under the liability to pay the amount
thereof at maturity.

They need to pay the amount according to the apparent tenor of the note
or acceptance respectively. The acceptor of a bill of exchange at or after
maturity is liable to pay the amount thereof to the holder on demand.

The liability of the acceptor of a bill or the maker of a note is absolute and
unconditional but is subject to a contract to the contrary and may be
excluded or modified by a collateral agreement.

4. Liability of Endorser (Section 35)

An endorser is the one who endorses and delivers a negotiable

instrument before maturity. Every endorser has a liability to the parties
that are subsequent to him.

Also, he is bound thereby to every subsequent holder in case of dishonor

of the instrument by the drawee, acceptor or maker, to compensate such
holder of any loss or damage caused to him by such dishonor. However,
he is to compensate only after the fulfillment of the following conditions:

(i) There is no contract to the contrary

(ii) The Endorser has not expressly excluded, limited or made conditional
his own liability

(iii)And, such endorser shall receive due notice of dishonor

7. Liability of Acceptor when Endorsement is Forged (Section 41)

An acceptor of a bill of exchange who had already endorsed the bill is not
relieved from liability even if such endorsement is forged. This is so even
if he knew or had reason to believe that the endorsement was forged
when he accepted the bill.

8. Acceptor’s Liability when Bill is drawn in a Fictitious Name

An acceptor of a bill of exchange who draws a bill in a fictitious name,

payable to the drawer’s order will be liable to pay any holder in due
course. He or she will not be relieved from such liability by reason that
such name is fictitious.

Instruments obtained by unlawful means

Section 58 in The Negotiable Instruments Act, 1881

58. Instrument obtained by unlawful means or for unlawful
consideration.—When a negotiable instrument has been lost, or has been
obtained from any maker, acceptor or holder thereof by means of an
offence or fraud, or for an unlawful consideration, no possessor or
indorsee who claims through the person who found or so obtained the
instrument is entitled to receive the amount due thereon from such
maker, acceptor or holder, or from any party prior to such holder, unless
such possessor or indorsee is, or some person through whom he claims
was, a holder thereof in due course.

Basics of Banking Regulation Act

Consumer Protection Act
The Banking Ombudsman Scheme