Presidency

College

NIRF – Top 100

Ranked College

Banking Operation &Management

Reaccredited by
INTRODUCTION Chapter-1
NAAC with A+

Presidency
Group
Presidency College
Hebbal – Kempapura, Bengaluru – 560024
www.presidencycollege.ac.in
 Banker and Customer Relationship
Presidency
College
Primary Relationship
In case of Saving Account / Current Account/ Fixed
NIRF – Top 100 Deposit – Customer deposit their surplus amount of
Ranked College
money with bank. In other words, depositor lend money
to bank and bank repay it on demand as per contract of
deposit. In this case, Customer is creditor of bank and
bank is debtor.
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 Banker and Customer Relationship
Presidency
College
Primary Relationship
In Case of Loan Account – Bank not only accept deposit
NIRF – Top 100 but also lend money further at an agreed rate of interest
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to their customer for various business purpose,
education, housing, vehicle purchase etc. and customer
repay it on due date. In this case, Banker Customer
Relationship is of creditor and debtor because the
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customer owes money to the banker.

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 Banker and Customer Relationship
Presidency
College
Banking Debts Differs from Ordinary
Commercial Debt
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Ranked College • The creditor must demand payment
In the case of ordinary commercial debt, the debtor
pays the amount on the specified date or earlier or
whenever demanded by the creditors as per the terms
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of the contract.
But in case of the deposit in the bank, the debtor is
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not required to repay the amount on his own account.
It is essential that the
depositor must make a demand for the payment of the
deposit in the proper manner
.
 Banker and Customer Relationship
Presidency
College
• Proper place and time of demand
• A commercial bank may have a number of
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branches but the depositor demanded the
repayment of his deposit must be made at the
name of the same branches with which he entered
into a relationship.
Reaccredited by • Otherwise, the banker is not bound to honor his
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commitment. It is also essential that the demand
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must be made during banking hours as a working
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of the bank.
 Banker and Customer Relationship
Presidency
College
• Demand must be made in a proper
manner
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• According to the statutory definition of banking, a
deposit is withdrawn able by check, draft, and
order.
Otherwise;
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NAAC with A+ • It means that the demand for the refund of money
deposit must be made through cheque or order as
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the common wage amongst the banker in a proper
manner whereas in case of the commercial bank
there are no such obligations.
 Banker and Customer Relationship
Presidency
College
Relationship of Agent and Principal
Banker becomes agent of the customer (Principal) by
rendering following services to customer –
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Ranked College • Bank Collects cheque, bills or promissory note,
dividends etc. on behalf of customer.
• Make Insurance Premium Payments, Phone Bill, Gas
Bills, Tax Payments as per mandate.
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NAAC with A+ • Buy or sell securities on behalf of customer
• In such cases,  relation between bank acts as an agent
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and customer is principal.
 Banker and Customer Relationship
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College
Relationship of Licensor (Lessor) and Licensee
(Lessee)
When customer avail safe deposit locker facility from
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Ranked College bank, relation between banker and customer is Licensor
and Licensee | Lessor-Lessee.  Bank is Licensor (Lessor)
and Customer who hirer the locker is Licensee (Lessee).

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 Banker and Customer Relationship
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College
Relationship of Bailer and Bailee
When Customer deliver goods to bank for purpose
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returned to depositor when purpose is completed. In
this case, Customer becomes bailor and bank
becomes bailee. The process is known as Bailment.
Example of Bailment is – Articles, Securities and
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relationship between banker and customer is Bailee
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Group and Bailor.
 Banker and Customer Relationship
Presidency
College
Relationship of Pledger and Pledgee
Sometimes, bank pledges certain assets or security to
secure the loan for payment of debt in case of default by
NIRF – Top 100
Ranked College customer. In this case, customer becomes the pledger
and bank becomes pledgee. Under this agreement, asset
or security will remain with the bank until a customer
repays the debt. The position of the goods will be
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 Banker and Customer Relationship
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College
Relationship of Hypothecator and Hypothecatee
When banker hypothecates certain movables or
immovable assets or property of a customer for securing
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Ranked College the loan amount extended to customer. In this case,
customer becomes the Hypothcator and Banker
becomes Hypothecatee. The position of the goods will be
retained by the customer.
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 Banker and Customer Relationship
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College
Relationship of Trustee and Beneficiary
A trustee hold the assets, property  for the beneficiary
and profit so earned belongs to beneficiary. Suppose,
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Ranked College customer deposits securities or valuables with the bank
for safe custody, banker becomes a trustee of his
customer. The customer is the beneficiary so the
ownership remains with the customer.
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 Banker and Customer Relationship
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College
Relationship of Assignor and Assignee
An Assignor is a customer who transfers his property
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the loan availed from bank. Example are transfer of
LIC Policies, NSC, Shares etc in the name of lender
bank to secure the loan. The bank on whose name
security or property rights are transferred is called
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can get the security reassigned in his name.
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Group Here, Banker Customer Relation ship becomes
Assignee and Assignor.
 Banker and Customer Relationship
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College
Mortgagee and Mortgagor
A mortgage is the transfer of an interest in
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specific immoveable property for the purpose of
securing the payment of money advanced or to
be advanced by way of loan, an existing or future
debt. The transferor is called a mortgagor, the
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be retained by the customer.
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 Rights and Duties of Banker and Customer
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College
Rights of a Banker
1. Right to charge interest
Every bank in India has the right to charge interest on the loans and
NIRF – Top 100 advances sanctioned to customers. Interest is usually charged monthly,
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quarterly, semi annually or annually.
2. Right to levy commission and service charges
Along with interest, banks also have the right to levy a commission and
service charges for the services rendered. The service rendered by the
bank might be SMS notification service, retail banking and so on. Banks
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NAAC with A+ can also debit these charges from the customer's bank account.
3. Right of Lien
Presidency Another important right enjoyed by banks is the Right of Lien. Banks
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have the right to keep goods and securities belonging to the debtor as
a security, until the loan is repaid by the debtor. Banks have only the
right to maintain the security of the debtor and not to sell. Lien can be
classified into particular lien and general lien.  
 Rights and Duties of Banker and Customer
Presidency
College
Rights of a Banker
4. The Right of Set-off
The banker has the right to set off customer accounts. Banks can merge
NIRF – Top 100 a couple of accounts which are in the name of the customer and set off
Ranked College the debit balance in one account with the credit balance in the other,
provided the funds belong to the customer.
5. Right of Appropriation
Let us consider that a customer has taken many loans from the bank and
he deposits some money in the bank without any instructions. If that
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amount is not sufficient to discharge all loans, the bank has the right to
appropriate the amount deposited to any loan. But the customer should
be informed on the same.
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Group 6. Right to Close the Account
If the customer’s account is not properly maintained, banks have all the
right to close the account by sending a notice to the customer. Bankers
have no right to close the account, without sending a written notice.
 Rights and Duties of Banker and Customer
Presidency
College
• Duties of customers to banks
• 1. It is the duty of customers to present the cheque and other negotiable
instruments only during the business hours of the bank.
• 2. In the case of any disagreement in the bank statement, customers should inform
NIRF – Top 100 the bank.
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• 3. Whenever photographs of customers are required by the bank, it should be
submitted.
• 4. It is the duty of the customer to present the instrument of credit within the due
time from the date of issue.
• 5. The cheque should be filled by customers very carefully.
Reaccredited by • 6. If the cheque book is lost or stolen, it is the duty of the customers to inform the
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• 7. If the customer notices any forgery in the amount of the cheque, he/she should
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inform it to the bank immediately.
Group • 8. Customers should provide proper information in the Know Your Customer (KYC)
form.
• 9. Customers should make the repayment of all the dues on time.
• 10. It is the duty of the customers to read the MITC ( Most Important Terms and
Conditions)
 Obligations of Bankers
Presidency
College
1 Obligation of the banker to honour the cheques.
It is the duty of the bank to honour the cheques of its
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customers up to the amount standing to the credit of
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the customer’s account. The bank is liable to pay the
compensation to the customer, if it wrongfully refuses
to honour the cheque.
Conditions:
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NAAC with A+ • Sufficient funds should be maintained by customer.
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• Funds must be properly applicable.
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• Cheques must be properly drawn up.
• Presented within time(90 days).
• No legal bar preventing the payment of cheques.
 Obligations of Bankers
Presidency
College
2 Obligation of the banker to follow
instructions.
NIRF – Top 100 It is the duty of the bank to follow the instructions given by
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the customers. If the customer has not given any instructions,
the bank should act as per rules and regulations.
3 Obligation of the banker to maintain proper
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Banks should maintain all details of transactions made by

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4 Obligation of the Banker to give notice

before closing the account.
 Obligations of Bankers
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College
5 Obligation of Banker to maintain secrecy
Bankers should not disclose personal information given
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Some circumstances to disclose:
• Before law, Income tax dept. orders.
• Banks permit such disclosure.
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 DIFFERENT TYPE OF CUSTOMERS
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College
1. Individual accounts
a) Single account
NIRF – Top 100 b) Joint account
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c) Minor Account
d) Illiterate Person
e) Blind Person
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g) Insane person (unsound mind)
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h) Insolvent Person
 DIFFERENT TYPE OF CUSTOMERS
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College
2. Hindu Undivided Family (HUF)
3. Proprietorship Firm
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4. Partnership Firm
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5. Limited Liability Partnership (LLP)
6. Companies
a) Private Ltd. Company
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b) Public Ltd. Company
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c) Government Company
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d) One person Company
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8. Trust
9. Club & Society
 ACCOUNTS OF SINGLE INDIVIDUALS
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College
• This is purely a personal account in the name of an
individual and is normally operated upon by the
account holder himself.
NIRF – Top 100
Ranked College • He may authorize another person to operate the
account by giving him Mandate or Power of
Attorney.
• In order to avoid legal complications that may arise
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desirable to obtain proper nomination.
Presidency • Individual should be major, i.e. of 18 years of age.
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• Should be of sound mind.
 JOINT ACCOUNT OF INDIVIDUALS
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College
• Joint account of more than one individuals is opened
for
operational convenience or to avoid legal
NIRF – Top 100
Ranked College complications
upon death of one of the joint account holders.
• Clear & unambiguous instructions regarding
operation
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opening of account.
Presidency • Addition/deletion of any name, material alteration,
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Closure of account & operational instructions in the
joint account can be changed by all the account holders
jointly.
 MINOR ACCOUNTS
Presidency
College
• A minor is a person below the age of 18 years.
• Normally, accounts of minors should be opened and
operated upon by the natural guardian, by mother or
NIRF – Top 100
Ranked College Legal guardian appointed by the Court.
• RBI has allowed the Hindu mother to open and operate
deposit accounts in the name of the minor child without
insisting upon the consent letter from the father in some
specified case.
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NAAC with A+ • Account can be opened in the joint name of the minor
and the guardian.
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• Two literate minors (from the same family) can also
open a joint account.
• Banks normally allow a literate minor over the age of 10
years and above to operate a deposit account.
 MINOR ACCOUNTS
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College
• No Current Account should be opened.
• No loan is given to minor.
• Minor can not make a nomination in self operated minor
NIRF – Top 100
Ranked College accounts.
• Facilities available of debit card , pass book,
cheque books for minors.
• According to Section 26 of NI Act, a minor can draw,
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endorse or negotiate a cheque or a bill but he can not
be held liable on such cheques or bill.
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• Minor can be admitted to the benefits of partnership
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with the consent of other partners but can not be made
liable for the losses.
 ILLITERATE PERSONS
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College
• Illiterate person is a person who cannot read or write.
• Such persons are competent to enter in to a valid contract.
• We used thumb impression for entering into an agreement.
NIRF – Top 100 • Normally, Left Hand Thumb impression (LHT) of male & Right
Ranked College Hand
Thumb impression (RHT) of female to be obtained.
• Thumb impression must be authenticated by bank official.
• Photographs for identification.
• While opening account and providing loans, evidence to be created
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• Two witnesses required for nomination.
Presidency • Joint account of two illiterates after observing usual safeguards.
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• Normally no cheque book facility is provided to illiterate persons.
However, to meet periodic repayment of retail loans, utility bills
etc. we will consider issuing of cheque book
 BLIND PERSONS ACCOUNT
Presidency
College
• Blind Persons can operate the account in bank.
• Signature of Thumb impression of blind person in the
A/c opening form to be witnessed by a person who
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Ranked College should certify that contents of the A/c opening form
were explained to the blind person in his presence.
• The sign may be authorised by bank officer and a
witness known to both the bank and the blind person.
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• He should always visit the branch for cash withdrawal.
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• As per all banking facilities including net banking, ATM,
Cheque Book, Locker facility, loans to be offered to
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Group visually challenged customers without discrimination.
 PARDANASHIN WOMAN
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Pardanashin woman is a lady who remains in
complete seclusion & does not transact any
business with people other than her own family
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Ranked College members.
Normally no current account is opened.
Her signature to be attested by her husband in
case of married woman & by natural guardian in
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Her photo and signature is attested by husband or
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by natural guardian.
Generally, banks should discourage to open
accounts in her name as her identity can not be
ascertained.
 INSANE OR LUNATIC PERSON
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College
As per provisions of Indian Lunacy Act, 1912 insane
or lunatic means a person who is of unsound mind.
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As per Indian Contract Act (S. 11) a person of
unsound mind is not capable of entering into a valid
contract.

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Hence Accounts of insane persons can not be opened.
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 INSOLVENT PERSON
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College
liabilities in full or fails to pay his debts, he is
known as insolvent.
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• Insolvents account should not be opened nor
money should be advanced to un discharged
insolvent.
• The operation in the account of a person
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account can be operated by official receiver.
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 TRUST
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College
• Trusts are governed by the Indian Trust Act, 1882.
• Trust may be public charitable trust or private trust
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( for benefit of private individuals).
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• Trusts managed by trustees.
• Original Trust Deed to be examined before opening
A/c.
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• A/c opening form to be signed by all trustees.
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• Certificate of Registration under Public Trust Act to
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be examined & copy to be kept on record.
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• When Trust Deed is silent about operation of the
account, A/c should be operated upon by all the
trustees jointly.
 DOCUMENTS TO BE OBTAINED
FROM TRUST
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College
1. KYC Official Valid Documents of all trustees;
2. Certify copy of Trust Deed;
3. In case of public trust, a copy of the registration and
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4. An undertaking from the trust on appropriate adhesive
stamp paper to indemnity the bank against proceeds,
actionable claims etc.
5. PAN & TAN of Trust
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7. Resolution for opening of accounts
8. Photograph of trustees.
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 CLUBS & SOCIETIES
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College
• Society & Clubs are non profit making organisations
and represents a group of persons.
• These are normally incorporated under Cooperative
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Ranked College Society Act. Clubs can be registered under Society
Act
1860, or Company Act 1956.
• These gets the status of a legal entity only after their
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• These are governed by rules & regulations (bye laws).
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• Certified true copy of resolution.
• Cheques favouring society, club, association not to be
collected in individual A/Cs of office bearers or
employees.
 DOCUMENTS TO BE OBTAINED FROM
CLUB & SOCIETY
Presidency
College
1. KYC Official Valid Documents of all authorised
persons
2. Copy of Registration certificate after verifying it
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Ranked College with original.
3. Certify copy of rules & regulations (Bye-laws);
4. PAN of CLUB & SOCIETY;
5. PAN of all authorised persons;
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 HINDU UNDIVIDED FAMILY (HUF)
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College
• ‘Hindu Undivided Family’ otherwise known as ‘Joint
• Hindu Family’ property, business or estate is ancestral
and its common possession, enjoyment ownership is
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• As per Hindu law, the Hindus, Sikhs & Jains can for
HUF.
• Creation of Hindu Law under which all major members
of the family get right by birth in the ancestral property
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• PAN of HUF required, if not at least Karta should have
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PAN.
Group • HUF property is managed by senior most major
male member called ‘Manager’ or ‘Karta’. Upon
death of Karta, next senior male coparcener
becomes Karta.
 HINDU UNDIVIDED FAMILY (HUF)
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College
• Joint owner of HUF are known as coparceners.
• It consists of one common living ancestor and his
all male & female (female from Sept. 2005)
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Ranked College descendents up to 3 generation next to him.
• HUF A/c is operated upon by Karta.
• Joint Hindu Family Letter (CD-115) to be signed by
• Karta & all the coparceners.
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 HINDU UNDIVIDED FAMILY (HUF)
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College
• Karta has authority to borrow money for the
family
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necessities & for ancestral family business.
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• In law, each coparcener’s liability is limited to his
own interest in the joint property. Hence, Bank
insists that security documents are signed by all
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coparceners.
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• Death of coparcener does not dissolve HUF.
• However, it is advisable to obtain fresh card with
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fresh CD-115 letter on death, or insolvency of

karta or any other coparcener.
 DOCUMENTS TO BE OBTAINED
FROM HUF
Presidency
College
1. KYC Official Valid Documents of
Karta.
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Ranked College
2. KYC Official Valid Documents of all
Coparcener.
3. PAN of HUF & PAN of Karta;
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4. Photograph;
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5. Joint Hindu Family Letter (CD-115).
 COMPANY ACCOUNTS
Presidency
College
• Company Act 2013, recognise Company is a legal
person with perpetual entity & is distinct from it’s
members.
NIRF – Top 100
Ranked College • Companies as per the Companies Act 1956 are
required to registered under act.
Types of companies in India:
1. Private Limited Company
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NAAC with A+ 2. Public Limited Company
3. Government Company
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Group 4. One Person Company
 PRIVATE LIMITED COMPANY
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College
Members:
• Min. – 2 members
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Ranked College • Max. - 200 members.
Shares are not offered to public.
Transfer of shares is restricted. (Closely
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No of Directors:
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Group • Min- 02
• Max - no ceiling
• Minimum Paid-up Capital - Rs. 1,00,000/-
 PUBLIC LIMITED COMPANY
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College
• Shares are offered to the public & are listed on
stock exchange.
• Members –Min. 7 & Max – No limit
NIRF – Top 100
Ranked College • Directors – Min 3 & Max. no limit (Cent.
Govt. permission required for more than 15)
• Certificate of commencement of business is must to
do any type of business.
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NAAC with A+ • Minimum paid-up capital of Rs. 5,00,000/-.

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 GOVERNMENT COMPANY
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College
• “Government company” means any company in
which not less than fifty one per cent. Of the paid-
up share capital is held by the Central Government,
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Ranked College or by any State Government or Governments, or
partly by the Central Government and partly by one
or more State Governments, and includes a
company which is a subsidiary company of such a
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Government company.
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 DOCUMENTS TO BE OBTAINED FROM
LIMITED COMPANY
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College
1. A copy of latest balance sheet of the company
2. List of present directors
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3. Board Resolution
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4. Company common Seal
5. Certificate of Incorporation
6. Certificate of commencement of business (not
required for private limited company)
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7. Memorandum of Association
8. Article of Association.
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 IMPORTANT DOCUMENTS OF LIMITED COMPANY
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College
1. Certificate of Incorporation : Issued by Registrar of
Companies. It is conclusive proof for incorporation of the
company & compliance of all formalities by promoters.
NIRF – Top 100 2. Certificate of commencement of business : Certificate of
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commencement of business is not required by Private Ltd.
Co. as it’s shares are closely held & it can commence business
on it’s incorporation.
3.Memorandum of Association – Company’s fundamental &
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capital, Objectives of the company, Liability of share holders.
4.Article of Association – Regulations controlling internal
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Group management of the company. Rights & powers of the
Directors, rules about conduct of company meetings &
business, Procedure for borrowing & limit on borrowing etc.
 IMPORTANT DOCUMENTS OF LIMITED COMPANY
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College
4 Copy of Board Resolution– Certified copy of Board
Resolution authorizing to borrow from the Bank with
details of limit, security etc., Persons who are authorized
NIRF – Top 100
Ranked College to sign the security documents & operate the Bank
Account, persons in whose presence Seal of the company
will be affixed to the security documents.
5 Company common Seal- Common seal of
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documents.
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