CUSTOMERS AND ACCOUNT HOLDER

Customer of bank is a person who is maintaining an account in his own name of

in whose name the deposits is maintained.

The customer is a person who has an account with bank and continuously avails
himself of banking facilities.

Definition of customer:

 According to Sir John Paget, Customer is a person

i. Who has account in the bank

ii. Who enjoys services rendered by bank

Bank do not have special customer as such, but have some special procedure
to treat some kind customer. Those who are distinguish from other types of
ordinary customer by some features, so they are called as special types of
customers.

Types of Customers

During the opening of Accounts, the Banker Deals With Different Types of
Customers. The banker should take care himself with various laws governing
different types of customers. Bank has various types of customers among them
some customers are special for their special procedures.

The customers can be classified as follows:

 1) Individual Account Holder ( Individual Human Being)
2) Non- Individual/ Institutional Account Holder ( For Business, Company
the Accounts are opened)

Special Types of Customers:

Bank do not have special customer as such, but have some special procedure to
treat their some kind customer. Those who are distinguish from other types of
ordinary customer by some features, so they are called as special types of
customer.

Special types of customers are those who suffer from certain legal restrictions on
account of which the banker is required to take certain special precautions at the
time of opening and operating their account.

 Minor: A person who has not attended 18 years of age is known as minor.
Minor cannot open account individually, if he want to open account he has
to take consent of parent or guardian
• Lunatics: Lunatics is a person with unsound mind (mental disturb/ mental).
Who cannot make rational decision while entering intro contract. So while
making contract with lunatics, bank should take proper care and should ask
medical certificate from particular person. And bank should also ask
guarantor.
• Illiterates Persons: Illiterates person who cannot read or write. Bank
requires right hand thumb impression of customer instead of sign.
 • Married women: A married women can open account in the bank with the
documents. In the case of debt taken by a married woman, her husband shall
not be liable except cases where she borrows money for the necessities of
her life or her household.
• Joint Account: A joint account is one which is opened jointly by any two or
more persons.
• Sole Proprietorship: It is an account in the names of a business owned by
one individual who is proprietor.
• Partnership Firm: A firm account should always be opened in the name of
the firm and not in the name of the individual partner because a partner does
not have authority to open a bank account on behalf of the firm in his own
name.
• Joint stock Company: A joint stock company is an artificial person and it
has separate legal entity. So a bank account can be open. AA Joint Stock
Company may be either being a private limited or a public limited company.
• Clubs, Associations, Societies, Trusts: These all nonprofit organization.
And this should register.

Procedure and practice in opening accounts with Minors, joint account

holders, joint stock companies and Clubs and association

A banker deals with different types of customers like individuals, partnerships

firms, companies, cooperative societies etc. while opening and in conduct of
accounts of these persons, take banker has to comply with the law applicable to
each of them.
There are certain types of depositors or borrowers, which are different from
individuals and proprietors accounts requiring some care and attention not only
while opening such accounts but even after.

MINOR:
A minor is a person who has not completed 18 years of age. Any contract entered
by minor is void and is not enforceable by law. This prevents minor to acquire
property, dispose property or enter into any type of agreement. Guardian means a
person having the care of the person of a minor or of his property or both person or
property.
Guardian may be categorized into following three types:
 Natural Guardian
 Testamentary Guardian ( Appointed by will)
 Legal Guardian ( appointed by court)

Procedure involved in opening account with Minor

Minors above the age of ten years to open and operate deposit accounts, subject to
certain conditions attached to such accounts. Opening of minor’s accounts needs
completion of certain formalities that is introduction from an existing account
holder or identification, identity, age and residence proof, and ID card from the
school etc.

1) Only SB account is advisable: minor is not liable to repay the debt.

2) Guardian: banker should always ask guardianship of the minor. Mother or
father can act as guardian, if parent if not there court will decide. And banker
should ask Specimen signature of guardian along with Date of Birth of Minor
 because after the major banker should cancel the guardianship account and
minor should open account as major in his name.
3) Minor as joint account holder
 Age of discretion ( discretion age is 12 years)
 Ensure minor is able to read and write ( should know one regional
language)
 Allow to operate the account only when it is in credit
 Two minors cannot open a joint account
4) Don’t allow for overdraft: banker should not give any loan, credit facility to
the minor because minor is not liable to pay the debt.
5) If overdraft is allowed: ensure it is for basic necessaries (only basic needs) of
minor and also ensure sufficient property available. So that banker can recover
the amount.
6) Minor as partner: can be admitted for benefits only. He doesn't liable to pay
the loss of the partnership business. So banker should take care while opening
partnership account.
7) Minor as Guarantor: should not be allowed. And minor is not eligible to act as
guarantor.

JOINT ACCOUNT HOLDER

A Joint account is an account opened in the names of two or more parsons, who are
not partners, trustees, executors, administrators. These persons may be husband
and wife, father and son, friends.

While opening the account, an account opening form should be signed by all the
account holders. Instruction for operating the account may be one of the following:
 a) Either or survivor
b) Both jointly
c) Former or survivor

In the absence of any instruction for operating the account, the operation will be by
all the account holders jointly.

Procedure involved in opening a joint account

1) It is in the interest of banker to ensure that the joint account is opened in the
names of adult members competent to enter into contracts.
2) He should open the joint account only when the application for opening the
joint account is signed by all the persons interested in the joint account.
3) He should ascertain the style or title under which the account is to be
opened. ( name of joint account should be confirm by writing the form along
with account- SB a/c, current a/c, RD a/c)
4) The banker should bear in the mind that the joint account holders can
delegate the authority to operate the joint account to any of them or even to
an outsider. ( who will look after the account- provision for outsider for
operating outsider)
5) The banker should get the clear instructions, in writing, signed by all thee
joint account holders, regarding the person or persons who are authorized to
operate the account.

6) Banker should also get clear instructions in writing as to how the credit
balance in the joint account is to be disposed of in the event of death of any
of joint account holders.
 7) Power to over draw or take any other advances on joint account ( banker
should verify whether authorized person have the right to withdraw the
money)

8) The banker should not allow the person who is authorized to operate the
account, to withdrew the safe custody deposits belong to all of joint account
holders unless clear instructions to do so are given.

9) On the revocation of authority given to operate the account. (Any partner

can cancel the authorized person and also bank should not allow authorized
person to do the transactions in the bank)

JOINT STOCK COMPANY

• A Joint stock company is constituted under Companies Act.

• Company is an artificial person with perpetual succession
• It is a voluntary association of persons formed for some common purpose
with capital divisible into parts known as share
• The company can have own assets.
Company is a legal entity and can open accounts in the same way as any other
person.

Types of Companies
1. Public Company: It has to have a minimum of 7 members and a maximum
of unlimited members, with a minimum paid up capital of Rs 5 Lakh of the
Companies Act.
2. Private Company: It has to have a minimum of 2 members and maximum
of 200 with paid up share capital of Rs 1 Lakh.
 3. Government Company: Where 51% of the shares are held by the
government. ( Oil and natural gas corporation (ONGC)

Documents obtained by bank to open the account

• Certificate of Incorporation: The Registrar of Joint Stock Companies

issues this certificate. It is the conclusive proof that all the requirements
under the Companies Act have been complied with.
• Certificate of Commencement of Business: This certificate is essential in
the case of public limited companies. A public limited company cannot
borrow until this certificate is obtained.
• Memorandum of Association: The memorandum of association contains
name and address of the registered office of the company, name and
addresses of the directors, objectives and powers of the company

Rules for opening account and operations:

a) Certified copies of Memorandum of Association and Articles of

Association and certificate of Incorporation
b) Names of directors of the company as stated in the articles
c) For Public Ltd Company, a copy of certificate of Commencement of
business issued by Registrar of companies
d) Copy of resolution appointing the bank as company’s bank and names of
the person authorized to operate the account.
e) The specimen signature of all authorized officials who would operate
account.
f) Copies of the balance sheet in case of existing companies.
 g) The company should ensure that authorizes its employee to collect cash
payments
h) In order to avoid frauds and operational difficulties , there should be a
minimum three persons at a time, to operate the account

CLUBS AND ASSOCIATION

• Accounts of Clubs, Associations and Societies are constituted and governed
under the bye-laws of the respective entity. Bye laws are the local law made
by an organization.
• Societies and clubs are nonprofit making organizations and represent a
group of persons.
• These Institutions normally incorporated under Cooperative Societies Act.
• These get the status of a legal entity only after their incorporation and can be
registered under Societies Registration Act 1860
• Every state in India has its own Cooperative society Act

Rules for opening and operating accounts

a) Banker should examine the registration certificate of the club and satisfy
himself that the club is properly registered.
b) In case the club is not registered, the banker should obtain a declaration to
the affect from the club.
c) Banker should obtain list of managing committee members and copy of the
resolution of the managing committee of club, authorizing the opening of an
account with the bank.
d) Banker should obtain the duly attested specimen signature of the office
bearers of the club who are authorized to operate the account.
e) Should submit the copy of bye laws of the club and ascertain the borrowing
power of the club.
f) Banker should see that no money of the club goes to personal account of any
office bearers of club
g) On the receipt of notice of death or resignation of any authorized office
bearers of club, the banker should stop the operations on the account of the
club until banker receives a copy of resolution from club appointing another
person.