Lecture Retail and merchant banking – Lecture 25

After studying this chapter you will be able to understand: Features of a cheque, types of cheques, anted – dated cheque, stale cheque, mutilated cheque, parties to a negotiable instruments, holder in due course, banker and customer,...

Revise Lecture 25

• Features of a Cheque

Features of a Cheque

• Some important features of a cheque are given below;

1. A cheque must be in writing and duly

signed by the drawer

2. It contains an unconditional order

3. It is issued on a specified banker only

• Types of Cheques

• Anted – dated Cheque

• Stale Cheque

• After expiry of that period, no payment will

be made and it is then called a stale

cheque

• Find out from your nearest bank the

validity period of a cheque

Cheques

• Post-dated Cheque

• Parties to a Negotiable Instruments

Negotiable Instrument

Negotiable Instrument

Holder in Due Course

Holder in due course means any person

who for consideration becomes the

possessor of a promissory note, bill of

exchange or cheque payable to bearer or the payee or endorser thereof if payable to order, before the amount mentioned therein becomes payable and without sufficient

cause to believe that any defect existed in the title of the person from whom he

received the title

Negotiable Instrument

Holder in Due Course

The definition specifies that:

1. The holder has to possess the instrument

in due course and before the date of

maturity

2. The consideration must be legal and

adequate

3. There should be sufficient cause to

believe that he possessed the instrument

in good faith and with reasonable care

Negotiable Instrument

Holder in Due Course

4 The holder should not become the holder

in due course even if he received the

instrument without any suspicion or

knowledge about such defects

5 Notice of any defect in the title

subsequent to the date of acquisition should not affect the rights of the holder in due

course

Lecture 26

• Banker and

Customer

Banker and Customer

The Banker

• The role of a banker is one filled with

multiple duties and responsibilities

• There are different types of bankers and each one is unique in his own way

• Some of these individuals work for large corporate conglomerates while others

work for small town financial institutions

Banker and Customer

• The duties concerning saving, loans,

taxes, investment and securities are all

within the job realm of a banker

Banker and Customer

• The Banker

He will provide financial assistance to the client in accordance with their needs

Banker and Customer

Banker and Customer

The Customer

• In banking, a customer is someone who makes use of or receive the services of

the bank

• The word customer historically derives

‘custom’ meaning habbit, so a customer was someone who frequented a particular shop, who made it a habbit to purchase

goods there

Banker and Customer

Duties of a Customer

All banks carry out the customer’s

instructions in a business-like manner

In return, the customer has special duties of cooperation and other duties of care

A customer is bound to the following;

Banker and Customer

Banker and Customer

• Duties of a Customer

4 Use of forms

5 Express notification of any special instruction

6 Notification of time limits and dates

7 Complaints to be made immediately

8 Checking of confirmation of the bank

9 Liability arising from neglect of duty

Banker and Customer

• Banker’s obligation to protect

customer secrecy

Banker and Customer

• The obligation of a banker to observe

secrecy relating to affairs of his customers

is an implied term of the contract between

a banker and his customer

• A banker would not divulge to third

persons, without the consent of the

customer, express or implied, either the

state of the customer’s account or any of his transactions with the bank

Banker and Customer

interest and commission

Banker and Customer

Banker’s right to charge interest and

commission

• The bank generates its profits from the

differential between the level of interest it pays for deposits and other sources of

funds, and the level of interest it charges

in its lending activities

• All banks at any time and form time to time are entitled to charge the rate of interest

on loan either by express agreement or

right of custom or usage of trade

Banker and Customer

Banker’s right to charge interest and

commission

• They also entitled to charge compound

interest and commission for services

rendered to the customer

• In the absence of an express agreement

or without due notice, a bank is not

allowed to debit charges at any date other than the customary dates

• Banker’s Right to Lien

Banker’s Right to Lien

• A lien is the right of a creditor in

possession of goods, securities or any

other assets belonging to the debtor to

retain them until the debt is repaid,

provided that there is no contract express

or implied, to the contrary

Banker’s Right to Lien

• Lien is, in its primary sense, a right in one man to retain that which is in his

possession belonging to another until

certain demands of the person in

possession are satisfied

• In its primary sense, it is given by law and not by contract

Banker’s Right to Lien

• A banker’s lien on negotiable securities

has been judicially defined as ‘ an implied pledge’

• A banker has, in the absence of

agreement to the contrary, a lien on all

bills received from a customer in the

ordinary course of banking business in

respect of any balance that may be due from such customer

• Banker’s right of set-off

Banker’s right of set-off

• The of right of set-off is also known as the right of combination of accounts

• A bank has a right to set-off a debt owing

to a customer against a debt due from

him

• ‘A legal set-off is where there are mutual

debts between the plaintiff and the

defendant, or if either party sue or be sued

as executor or administrator, one debt may

be set against the other’

Banker’s right of set-off

• From a commercial standpoint, a right of set-off is a form of security (right) for a

lender

• It is an attractive security because its

realization does not involve the sale of an asset to a third party

• A set-off must be in the form of a cross

claim for a liquidated amount, and it can

be pleaded only in respect of a liquidated claim

• Deposit Account

Deposit Account

• The main banking activities consist of

acceptance of deposit from the public for the purpose of lending to businessmen

and others who may seek loans

• Actually, the money deposited in any bank

is mostly the saving of the people

• Money may be needed in future for

various purposes such as medical

treatment, marriages and for other events

Deposit Account

• So people keep their savings with

someone where it will both be safe and

earn a return

• A bank is a such place where money once deposited remains safe and also earns

profit

• Types of deposit account

Types of deposit account

• Bank deposits serve different purposes for different people

• Some people cannot save regularly, they deposit money in the bank only when they have extra income

• Some, mostly businessmen, deposit all

their income from sales in a bank account and pay all business expenses out of the deposits

Types of deposit account

• Keeping in view these differences, banks offer the people the facility of opening

different types of deposit accounts to suit their purpose and convenience

Types of deposit account

• Accordingly, bank deposit accounts may

be classified as;

1. Savings bank account

2. Current deposit account

3. Fixed deposit account

4. Recurring deposit account

5. Salary account

• Withdrawal from deposit account

Withdrawal from deposit account

• Customer deposit his savings for use in

future

• The need for money may arise any time

So customer should know how to get back your money from the bank

Withdrawal from deposit account

Money can be withdrawn by using;

1. Withdrawal form

2. Cheque

3. ATM card