Accounts of customersAccounts of customers Prudential regulation M1,M2 &M5 provide Prudential regulation M1,M2 &M5 provide

guide lines & procedures for theguide lines & procedures for the opening of opening of bank account.bank account.

Banker should obtain introduction & Banker should obtain introduction & references from responsible persons references from responsible persons

regardingregarding 4.4. IdentityIdentity5.5. IntegrityIntegrity

6.6. Reliability Of proposed customerReliability Of proposed customer

Accounts of customersAccounts of customers

Introduction and preliminary investigationIntroduction and preliminary investigationPreliminary investigation will help the banker in following waysPreliminary investigation will help the banker in following ways Avoid fraudAvoid fraud Unintended over draftUnintended over draft Negligence (sec.131 Negotiable instrument act 1881)Negligence (sec.131 Negotiable instrument act 1881) Complete informationComplete information

Specimen signature Specimen signature

Vernacular FormVernacular Form; indemnity whereby customer relive the ; indemnity whereby customer relive the banker of any responsibility in of diversification of signaturebanker of any responsibility in of diversification of signature

Illiterate personIlliterate person;; photographs- 03photographs- 03 Right & left hand thumb impressionsRight & left hand thumb impressions In person presence is essentialIn person presence is essential

Accounts of customersAccounts of customers

Minor’s accountMinor’s account if a competent person entered into if a competent person entered into

contract on behalf of minor , it is valid contract on behalf of minor , it is valid contract (Bombay High Court, 1925)contract (Bombay High Court, 1925)

Sec.68 Contact Act 1872, minor is not Sec.68 Contact Act 1872, minor is not personally liable for loans/ liabilitiespersonally liable for loans/ liabilities

Minor can open & operate Saving or Term Minor can open & operate Saving or Term Deposit accounts without facility of over Deposit accounts without facility of over draft draft

Accounts of customersAccounts of customers

Issues in personal accountsIssues in personal accounts Death of customer---- sec.122-A N I act 1881Death of customer---- sec.122-A N I act 1881 bank can not make payment after the death of customer bank can not make payment after the death of customer rumors are not reliable, notice of death may be actual rumors are not reliable, notice of death may be actual

or constructiveor constructive withdrawals from the deceased should be immediately withdrawals from the deceased should be immediately

stopped while credit into account should be allowedstopped while credit into account should be allowed Credit balance up to RS 1,00,000 may be paid to heirs Credit balance up to RS 1,00,000 may be paid to heirs

by Zonal/Head office after getting indemnity by Zonal/Head office after getting indemnity More than RS 1,00,000 can be released after More than RS 1,00,000 can be released after

succession certificate from competent court succession certificate from competent court

Accounts of customersAccounts of customers

Lunacy of customerLunacy of customer

Sec.11 contract act 1872 – debarred Sec.11 contract act 1872 – debarred persons of unsound mind to entered into persons of unsound mind to entered into contract contract

Manger in Lunacy is appointed by Manger in Lunacy is appointed by competent court under Lunacy Act 1912competent court under Lunacy Act 1912

Accounts of customersAccounts of customers

Insolvency of customerInsolvency of customer

sec.122-A negotiable instrument act 1881 sec.122-A negotiable instrument act 1881

Authorizes bank to determine payment of Authorizes bank to determine payment of cheques with regard to insolvency cheques with regard to insolvency proceedings proceedings

with the adjudication of customer as with the adjudication of customer as bankrupt his property vest into official bankrupt his property vest into official assignee assignee

Accounts of customersAccounts of customers

Doctrine of relation back Doctrine of relation back

bankruptcy relates back to the act ofbankruptcy relates back to the act of bankruptcy on which receiving order is bankruptcy on which receiving order is made against the bankruptmade against the bankrupt

Official assignee claims all property Official assignee claims all property belonging to insolvent on the date of first belonging to insolvent on the date of first available act of insolvency , during three available act of insolvency , during three months immediately preceding the petition months immediately preceding the petition

Accounts of customersAccounts of customers

Joint accounts--- accounts of two or more Joint accounts--- accounts of two or more personspersons

mandate of joint account; who will operate mandate of joint account; who will operate the accountthe account

bank can not pay to one of several joint bank can not pay to one of several joint account holder without consent of others account holder without consent of others

Accounts of customersAccounts of customers

Stop-payment in a joint account; Stop-payment in a joint account; anyone joint account holder can stop anyone joint account holder can stop

payment of cheque drawn by other payment of cheque drawn by other account holder (s) account holder (s)

Removal of stop payment order must be Removal of stop payment order must be signed by all joint account holders signed by all joint account holders

Death, bankruptcy or insanity of either or Death, bankruptcy or insanity of either or any of joint account holder will revoke the any of joint account holder will revoke the existing mandate existing mandate

Accounts of customersAccounts of customers

Survivorship ; course of operation on an account Survivorship ; course of operation on an account death of joint account holder causes two issues death of joint account holder causes two issues 3.3. Relationship of banker &customer Relationship of banker &customer 4.4. Relationship of parties to accountRelationship of parties to account

Law of Devolution Law of Devolution 6.6. Survivor (s) entitled to whole amount Survivor (s) entitled to whole amount 7.7. Account holders are indebted jointly , estate of Account holders are indebted jointly , estate of

deceased joint account holder will be free from liabilitydeceased joint account holder will be free from liability8.8. Account holders are indebted jointly & severally , Account holders are indebted jointly & severally ,

banker can claim against estate of deceased account banker can claim against estate of deceased account holder up to liability of debt due at the time of death holder up to liability of debt due at the time of death

Accounts of customersAccounts of customers

Joint account of Husband & Wife Joint account of Husband & Wife mandate of the account will help to operate account mandate of the account will help to operate account incase of death of spouse intention for opening of incase of death of spouse intention for opening of

account is importantaccount is important bankruptcy of joint account holder bankruptcy of joint account holder

5.5. Operation on account should be stopped immediately Operation on account should be stopped immediately 6.6. Instructions from solvent account holders & official Instructions from solvent account holders & official

assignee must be taken assignee must be taken 7.7. Clayton’s rule will apply ; withdrawals will be the Clayton’s rule will apply ; withdrawals will be the

responsibility of solvent account holder & while credit responsibility of solvent account holder & while credit entries will reduce liabilities of insolvent estate entries will reduce liabilities of insolvent estate

Accounts of customersAccounts of customers

Safe custody items in joint account Safe custody items in joint account

mandate of account will help to withdrawal mandate of account will help to withdrawal of such securities of such securities

Survivors are not eligible to receive the Survivors are not eligible to receive the securities securities