Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
DECLARATION
SIGN OF STUDENT.
3
CERTIFICATE
INDEX
ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
• This contract will be valid one only when both the parties are
competent to enter into contracts.
• Since the banker has to deal with different kinds of persons with
different legal status, he ought to be very careful about the
competency of the customers.
• Any carelessness on his part may land him in troubles.
• Hence, different kinds of customers need different treatments at
the hands of the banker.
• A few special types of customers and their treatment have been
discussed in the following chapters.
Ch – 1
Definition Of Banking
Definition Of A Customer
Law does not define the term ‘customer’ of a bank. Ordinarily, a person
who has an account in a bank is considered its customer. Banking
experts and the legal judgments in the past, however, used to qualify
this statement by laying emphasis on the period for which such account
had actually been maintained with the bank.
In Sir John Paget’s view “to constitute a customer there must be some
recognizable course or habit of dealing in the nature of regular banking
9
CH - 2
On the other hand if for example the customer were illiterate or blind
which is a bankers special type of customer the procedure to be
followed by Standard Chartered Bank would be as follows:
1. The Bank may at its sole discretion, open deposit accounts, not
being Current Accounts, in the name of an illiterate person.
Subject to such terms and documents that the Bank may
prescribe from time to time.
2. The account of such person may be opened provided he/she calls
on the Bank personally along with a witness known to both the
depositor and the Bank, and after due completion of KYC
requirements.
3. No cheque book facility is provided for such Savings Bank
Account therefore at the time of withdrawal/ repayment of
deposit amount and/or interest, the account holder should affix
his / her thumb impression or mark in the presence of the
authorized Bank officer who would verify the identity of the
person.
4. The Bank may explain the need for proper care and safe keeping
of the statement given to the account holder. The Bank official
may explain the terms and conditions governing the account to
the illiterate / blind person prior to opening the account.
13
Ch – 3
THE MINOR CUSTOMER
Banker’s Duty
As it has been mentioned earlier, a minor at times may try to exploit the
above privileges and hence, a banker should be very careful while
dealing with him. He must observe the following precautions:
1. Saving account and not Current Account – The banker may
open a saving bank account (and not a current account) in the
name of a minor, in any of the following ways:
(a) In the name of the minor, to be operated upon by the
natural guardian of the minor or the guardian appointed by
the Court. Such account can also be opened in the joint
16
any person may become an agent; but no person who is not of the
age of majority and of sound mind can be appointed as an agent,
so as to be responsible to his principal.” Thus a minor agent
cannot be held responsible to the third parties in respect of the
acts of his minor agent. Therefore, all his dealings with the
banker will be valid and binding on his principal. The banker
should obtain written authority of the principal specifying the
power and the extent of authority entrusted to the agent in this
regard and should see that the minor-agent does not deal beyond
such delegated powers.
Documentation of Parent/Guardian
Applicants must satisfy the following documentation requirements
1. Identity proof
2. Proof of communication address
3. Self cheque (if the applicants are not visiting the branch for
opening account)
4. Proof of date of birth of the minor
Ch – 4
The husband shall not be liable for the debts taken by his wife in any
other circumstances. The creditor may in that case recover his debt out
of the personal assets of the married woman. While granting a loan to a
married woman, the banker should, therefore, examine her own assets
and ensure that the same are sufficient to cover the amount of the loan.
Pardanashin Woman
Banker’s Duty
25
Ch – 5
A LUNATIC
26
Banker’s Duty
Ch – 6
Ch – 7
CUSTOMER’S ATTORNEY
A customer may appoint an attorney to deal with his bank account. The
power of attorney is a general notice and an authority for this purpose.
It is different from an ordinary mandate authorizing a person to operate
his bank account.
The power of attorney may be special or general. In the former case the
person so authorized gets powers in regard to certain matters only, e.g.,
sale or purchase of property, etc. In case of the general power of
attorney, the grantor of such power authorizes the other person
generally, to act on his behalf in al matters concerning business.
Banker’s Duty
While opening an account in the name of an Attorney for a person the
banker should take the following precautions:
1. Duly Stamped And Registered – The power of attorney should
be duly stamped and registered with the Registrar of documents
or attested by a Notary Public. The banker must retain with him
its attested copy for his own record.
2. Period Of Power Of Attorney – The power of attorney must be
in force at the time of opening the account. The power of
attorney may be granted for a specific period or for a particular
purpose. The banker should ensure that such specific period has
not expired or the specific purpose not fulfilled at the time of
opening the account. The period for which authority has been
31
Ch – 8
The mandate must include the name or names of the persons who are
authorized to operate the joint account and must specify the extent to
which they are authorized to take advance or to pledge the securities,
etc. in the absence of such instructions, the banker should honour only
those cheques which bear the signature of all the persons in whose
names the account stands.
3. Appointment Of Attorney – The joint account-holder, who is
authorized to operate joint account, himself alone cannot appoint
an agent or attorney to operate the account an his behalf. Such
attorney or agent may be appointed with the consent of all joint
account-holders.
their several liability also. But in case of joint liability only, a suit
may be filed against all of them jointly and if any of them dies,
his legal heir will not be liable for the same.
7. Revocation – The authority to operate the account can be
revoked by any of the persons giving such authority. It is
automatically revoked if any of the joint account-holders dies,
becomes bankrupt or of unsound mind. The banker must stop
payment in such cases.
8. Securities – The banker should be given clear instructions
regarding the withdrawal of securities on the joint account and
the power conferred upon the person operating the account to
pledge the securities. In case the shares are in the joint names, all
such persons must sign the transfer form.
9. Alterations – A joint account may be operated by either of the
joint account-holders. But if a cheque is drawn and signed by one
of them, any alterations therein should also be done by the same
person and not the other one. The alterations should bear the
signature of the drawer.
10.Balance Payable – The person opening a joint account are also
required to give a mandate, in the application form itself,
specifying the person to whom the balance in the account shall
be payable to –
Thus in the event of death of any one or more of the joint account-
holders, the balance becomes payable to the survivor without reference
to the representatives of the deceased person or persons. Generally, the
banker asks the surviving account-holders to withdraw the balance in
the joint account and deposits it in a new account opened in the names
of the surviving joint account-holders. The banker should not honour
the cheques drawn by the deceased joint account-holders before his
death obtaining instructions from the surviving joint account-holders.
36
“In respect of a joint account opened in the bank, the law seems to be
settled that on the death of one, there is a resulting trust in favour of his
heirs and legal representatives, unless there are special facts and
circumstances to show contrary intension.” The High Court further held
37
that “if from the facts and circumstances of the case it could be held
that the intension was to make the survivor the owner of the amount
lying in the account, then he and not the heirs would be entitled to
recover the amount. If the facts and circumstances of the case do not
establish and such intension, although the holder of the joint account
may be authorized to withdraw legal representatives of the deceased
joint holder. The bank may be discharged by payment to the survivor.
But the survivor may in the absence of an intension to make him the
owner, be accountable to the heirs of the deceased joint holder.”
About the rule of the banks that on the death of one, the account would
be converted into a single account to be operated by the survivor, the
High Court observed that such provisions were designed only to
regulate easy operation of accounts and payments of money to the
survivor. The provisions did not touch the rights inter se among the
depositors of the rights of inheritance.
Facility Of Nomination
The Banking Laws (Amendment) Act, 1983, has inserted a new section
45 ZA, which provides for the facility of nomination by depositors.
Such facility shall also be available in case of joint account. In such
cases, all the joint-depositors together may nominate, in the prescribed
manner, one person to whom in the event of death of al the depositors,
the amount of deposit may be returned by the banking company. Such
nominee shall become entitled to all the rights of the depositors in
38
Insolvency
In case of insolvency of one or more of the joint account-holders, the
mandate jointly given by them to the banker ceases to operate. The
banker should, therefore, stop payment from the account to determine
the liability of the insolvent person. Payment from the joint account
may be made on the instructions jointly signed by the solvent account-
holders as well as the Official Receiver of the insolvent one. Preferably,
a new account should be opened to record all receipts and payments
after the declaration of insolvency.
39
Ch – 9
Bankers Duty
1. Karta – The family business and its assets are managed by
the eldest male member as the karta. According to the law, the
karta has an implied authority to take loan, execute necessary
documents and pledge the securities on behalf of the family
for the purpose of the business of the family. However, to be
on the safe side, the loan documents should be executed by all
the adult members of the family or with their consent by the
head of the family in his capacity as its karta or manager.
2. Power of Karta – The power of the karta to borrow money
on the security of the family property is subject to one
limitation, i.e., the loan is taken for the purpose necessary for
or beneficial to the family. He can take a loan and pledge the
property of the family for the purpose of meeting the needs of
the usual business of the family and not for any speculative
business or for starting a new business. Other coparceners will
40
not be liable for a loan contracted for a purpose other than that
in the interest of the family business. The principles of a law
which govern borrowing by the karta of a joint Hindu family
were clearly enunciated by the Rajasthan High Court as
follows:
Ch – 10
Bankers Duty
1. Number Of Partners – The banker should very carefully
examine the Partnership Deed, which is the charter of the firm, to
acquaint himself with the constitution and business of the firm.
The banker should see that the number of partners does not
exceed the statutory limit. According to section 11 of the
42
done to carry on, in the usual way, business of the kind carried on b the
firms binds the firm”. This authority of a partner is called the implied
authority. Every partner is liable both individually and jointly with
other partners for all the acts of the firm or the instruments executed
provided the same are done –
(a) In the name of the firm; and
(b) In connection with the business carried on by the firm.
The High Court observed that from the very definition of partnership
itself it follows tat there is implied mutual agency to each of the
partners of a registered firm. When an amount was borrowed by a
partner on behalf of the partnership firm, that act of his was binding on
the firm as well as on the members of he firm. Similarly, when a
promissory note is executed on behalf of a firm b its managing partner,
and the money is utilized for the purpose of the firm, every partner is
liable for the debt incurred.
It is to be noted that while one of the partners can bind the firm for the
debts incurred by him on behalf of the firm, it is not necessary that
documents for the debt are signed by all the partners. Signature of only
one partner will be sufficient. However, as a precautionary measure,
banks take the signatures of all the partners on loan documents.
legal result follows from the mere change in the collocation of the
words. But it is inevitable as difference are produced in law by the
change in the collocation (position or arrangement) of the words.” The
pronote in question was thus not binding on the firm.
The general principle of law, the High Court held, is that every one of
the partners in a mercantile firm is liable upon a bill drawn by a partner
in the recognized trading name of the firm for a transaction incidental
to the business of the firm, although the particular partner’s name does
not appear on the face of the instrument and although he is a sleeping
and secret partner. Partners are mutual agents and can bind the firm by
their acts. Even in the absence of an indication under the signature that
a person was singing as a partner, it may be possible to infer a liability
on the firm provided it is found on the face of the instrument that the
borrower is the firm and not he individual partner who signed the
instrument. A person merely describing himself as a partner cannot
bind the firm. There must be some indication in the instrument to show
that he was signing on behalf of the firm.
their respective firms, the concerned two partners could not bind any
other partner of the firm or the firms themselves for the purpose of
repayment of the dues of the bank. The signatories to the surety bonds
were held personally liable to repay.
It is evident from section 19(1) of the Indian Partnership Act, 1932, that
a partner may justifiably do all that he is expected to do for carrying on
the business of the firm in the usual way. It implied that a partner, who
is not prohibited from managing the affairs of the firm, possesses the
power to borrow money on behalf of the firm for the purpose to borrow
money on behalf of the firm for the purpose of carrying on the firm’s
business. Such a debt shall be binding on the firm and all the partners
shall be liable to pay the same. But if the powers of a partner are
limited by the partnership deed or if he is not permitted to manage the
affairs of the firm, he does not possess the power to borrow money on
behalf of the firm.
But if the partners sign the loan documents in both of their capacities,
i.e., individually as well as jointly, the creditors of the firm can recover
their debt simultaneously from the assets of the firm and the partners.
The banker should, therefore, insist that the partners of the firm sign the
documents in both the capacities, i.e., individually as well as jointly.
This will enable the banker to recover the amount from individual
48
assets of the partners and also to exercise his right to set-off against the
credit balance in their personal accounts with him. It is usual practice of
a banker to seek a declaration to this effect from all the partners at the
time of opening an account. The joint and several liability of the
partners continues until –
(a) All the debts of the firm are discharged, or
(b) The constitution of the firm changes due to death,
retirement or insolvency of a partner and the banker is
informed thereabout.
Death Of A Partner
If the firm stands dissolved on the death of a partner, the banker must
close the firm’s account immediately on receipt of the intimation about
the partner’s death. This is important if the firm’s account shows a debit
balance at the time of a partner’s death because the latter’s estate would
be liable to pay the debts incurred by the firm before his death. Hence
to determine the liability of the deceased partner, the banker should
close e account of the firm soon after the death of a partner. If he
defaults in doing so, the rule in Clayton’s case will apply.
49
When a partner retires, his liability towards the banker or any other
third party ceases in respect of all transaction undertaken subsequent to
the date of his retirement. But if the banker is not informed about his
retirement, the retiring partner continues to be liable for the transaction
of the firm even after the date of his retirement. The retiring partner
should give a public notice for this purpose to terminate his liability to
the third parties.
Insolvency Of A Partner
Ch – 11
The Division Bench of the High Court concerned with the proposition
of law that “when an agent borrows money for a principal without the
authority of the principal and if the principal takes benefit of the money
so borrowed or when the money so borrowed has gone into the coffers
of the principal, the law implies a promise to repay” this principle
applies to the joint stock companies as well. It was, therefore, held that
the company cannot repudiate its liability to repay.
a) The banker should ascertain that the company borrows only for
the purpose mentioned in its Memorandum of Association and
within the limits, if any, specified therein.
b) A certified copy of the resolution of the Board of Directors
passed under Section 292 should be obtained by the banker for
his own record.
c) The Board of Directors should also pass a resolution certifying
that the company’s borrowings, including the proposed
borrowing, are within the limit specified by the Companies Act,
or are within the limit specified by the Companies Act, or the
limit sanctioned by the shareholders at the general meeting.
56
The company must file the prescribed particulars of the charge together
with the instrument, if any, by which the charge is created or a verified
57
copy thereof within the prescribed time. Failure to get the charge
registered will render the charge void against the liquidator and any
creditor of the company, so far as any security on the company’s
property is conferred by the charge. This implies that if a charge which
is required to be registered under Section 125 is not registered it does
not mean that the transaction itself becomes void or the debt is not
recoverable. The non-registration of the charge shall have the effect that
the security created by it becomes void as against the liquidator and/or
other creditors. In other words, such debt becomes an unsecured one
when a liquidator is appointed and such security is made available to
meet the claims of all unsecured creditors.
The banker should ensure that the charge over the assets of the
company created in his favour is duly registered with the Registrar of
Joint Stock Companies within the prescribed period. Though the
company is not under any legal obligation to register such charge, the
registration of the charge safeguards the interests of the creditors
58
The Official Receiver gets title to the property of the insolvent with
effect from the date on which an act of insolvency takes place. This is
called the ‘Doctrine of Relation Back’. According to this doctrine the
dealing of the insolvent from the date of the Act of Insolvency will not
be valid and all such property sold or transferred shall vest in the
Official receiver. The banker should, therefore, make inquiry to avoid a
situation.
60
Ch – 12
CASE STUDY
ABOUT HSBC
HSBC's origins in India date back to 1853, when the Mercantile Bank
of India was established in Mumbai. The Bank has since, steadily
grown in reach and service offerings, keeping pace with the evolving
banking and financial needs of its customers.
Commercial Banking
The Hong Kong and Shanghai Banking Corporation Limited
(HSBC)
Personal banking
HSBC offers a wide range of personal financial services, including
personal lending and deposit products, through its branch network in
Ahmedabad, Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon,
Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana, Mumbai, New Delhi,
Noida, Pune, Thane, Trivandrum and Visakhapatnam. Also offered
branch-wide are international Gold and Classic credit cards from VISA
and MasterCard and debit cards from Visa. Customers have access to
24-hour banking services through an extensive network of automated
teller machines (ATMs), an integrated Call Centre, and internet banking
- online@hsbc .
Non Resident Indian banking
HSBC's Non Resident Indian Banking (NRI) centres located in Asia-
Pacific, the Middle East, Europe and North America, together with
HSBC's offices worldwide, provide the international Indian Diaspora
access to a range of products and services. These include NRI related
investment (both international and domestic), transactional and deposit
products, together with a full range of personal and private banking
products in India and overseas. Internet banking also provides easy
access to HSBC's services.
Financial planning services
Services include investment and custodian management and access to
64
Technology
The HSBC Group develops and applies advanced technology to the
efficient and convenient delivery of banking and related financial
services. In India, the Group provides:
Asset management
HSBC Asset Management (India) Private Limited offers mutual
funds to its customers. With the Group's global fund management
expertise and investment capabilities, it is able to deliver quality
products to meet customers' investment objectives.
Global Resourcing
HSBC Electronic Data Processing (India) Private Limited,
through its offices in Hyderabad, Bangalore and Visakhapatnam
provides data processing / customer service facilities for the HSBC
Group's overseas operations.
Insurance
HSBC Insurance Brokers (India) Private Limited is licensed by
the Insurance Regulatory Development Authority (IRDA) to operate
as a composite insurance broking company, which will function as a
direct and a reinsurance broker.
Data processing
HSBC Operations and Processing Enterprise (India) Private
Limited, through two centres in Mumbai and Chennai, provides
operational processing services for HSBC offices in India.
Primary dealership
HSBC Primary Dealership (India) Private Limited has been
authorised by the Reserve Bank of India to act as a primary dealer in
the government securities market.
Private equity
HSBC Private Equity Management (Mauritius) Limited, a
subsidiary of HSBC Private Equity (Asia) Limited in Hong Kong,
67
Audit Service
HSBC Professional Services (India) Private Limited provides
internal audit services to the HSBC Group's internal audit units
worldwide, with particular emphasis on the IT, Treasury, Asset
Management, Private Banking and Insurance functions
Investment banking
HSBC Securities and Capital Markets (India) Private Limited
has two main business lines. Its Institutional and proprietary broking
business is based in Mumbai and, has seats on two of India's premier
stock exchanges, the Bombay Stock Exchange and the National
Stock Exchange. It deals in Indian securities for both Indian and
international institutions and for select retail clients and is backed by
an extensive research team. The Corporate Finance and Advisory
business, with offices in Mumbai and New Delhi, offers a full range
of integrated investment banking services in India and
internationally.
Software development
HSBC Software Development (India) Private Limited has
established a software centre in Pune to develop solutions for
HSBC's Group offices worldwide.
Division Of Customers
The customers of HSBC bank can be divided into Retail customers and
Institutional customers. In the retail category the customer who’s
relation with the bank 1 to 25 lakhs is known as Power Vantage
Customer. The customer whose relation with the bank is above 25
lakhs is known as Premier Customer. In the Institutional category
customers are Small Enterprises (SME), Medium Enterprises
(MME) and Large Customers.
Power Vantage
68
Premier
Eligibility
HSBC Premier is available to both resident and non-resident
individuals at a minimum average quarterly relationship balance of Rs.
25,00,000.
For resident Indians individuals, this relationship balance includes a
combination of deposits or investments and loans, of which:
69
Benefits
• Relationship Management – The customer will enjoy access to
a dedicated HSBC Premier Relationship Manager who will be
the customer’s single-point contact with the bank. All the
banking needs will be anticipated, understood and
comprehensively addressed by the HSBC premier relationship
manager, who will manage the financial portfolio by offering
customized solution, liaising with different departments and
securing the best financial terms for the customer.
• Investment Services – The Financial Consultant is committed to
understanding every banking need that the customer may have
and has one objective – to harness the financial strength of the
HSBC Group to provide the best solutions to meet the needs of
the customers. If required, the financial consultant will provide
specialist advice on the investment portfolio and offer valuable
recommendations on wealth creation and management.
• Broking Services – Broking services made available through
HSBC Securities India Holding Limited bring the convenience of
executing the customer’s buying and selling transactions.
• Exclusive HSBC Premier Centres – As an HSBC Premier
Customer, he can access dedicated HSBC Premier centers around
the world, designed with the needs in mind. Whether he needs
cash in foreign country or mere respite from a hectic day, the
service centers provide an exclusive, confidential and
comfortable environment, where he can conduct his banking
transactions.
• Special Account For Children – Avail of the benefits of
HSBC’s GenNext account (exclusive account for children of
HSBC Premier customers), which offers the child a range of
benefits that include zero balance savings accounts, Systematic
70
Investment Plan and a Debit card (for minors over the age of 16
years.)
• HSBC Premier Debit card – This premium debit card gives the
customer access to over 6,70,000 HSBC and VISA/PLUS
ATM’s across the world. It also allows the customer to make
purchase transactions at 10 million merchant establishments
worldwide. With the HSBC premier debit card, he can have
access to unlimited free cash withdrawal and balance enquiry
transactions at over 6,000 non-HSBC VISA ATM’s in India.
• High Cash Withdrawals – The premier customer can withdraw
up to or equivalent to Rs. 1,00,000 per day from any
HSBC/VISA ATM in the world.
• HSBC Premier Master Card Credit Card – This premium
credit card comes with a pre-approved credit limit of at least Rs.
2,00,000. It also provides access to all HSBC Group ATM’s as
well as the Master Card ‘Cirrus’ network of ATMs in India.
• Home Banking – The customer can enjoy home banking
services, which include the physical delivery of cash (for amount
up to Rs. 2,00,000) and receipt or delivery of cheques, drafts,
etc., via special courier.
• No-bounce Cheque Protection – The customer can avail of No-
bounce cheque protection of up to Rs. 1,00,000 on any HSBC
Premier cheque the customer issue.
• Safe Deposit Locker Service – The bank gives the customer
preference for provision of a locker.
• Consolidated statements – With a consolidated statement of the
customers account/s, he can get a snapshot of his portfolio with
the bank.
• Write-in tax Advisory Service – The customer can write to the
banks tax advisory for guidance on personal tax-related matters,
free of charge.
• HSBC Premier Global Services – As an HSBC premier
customer he can have access to a wide a range of special
services, 24 hours a day, 365 days a year, anywhere in the world.
In addition, he can enjoy a range of other services, available to
him around the world. For instance, he can:
a. Exchange foreign currency, free of commission at any
branch of HSBC that handles foreign currency exchange.
71
APPENDIX
Q. Which customer you think will provide you the highest source of
income?
A. This again depends. A Corporate may have an account with us for
Rs. 75 Lakhs and a Married Woman may have an account for Rs. 80
Lakhs and visa-versa. So its not that a particular segment of customer
may be a higher source of income.
Q. How have seen HSBC grow up since the past 5 years and how do
you see it growing in the next 5 years?
A. If you talk of 5 years prior, it was a service bank. Its custom was
proving services. It used to receive income mainly from treasury
operations. Now new avenue have opened. HSBC is involved in Fee
based income i.e., selling products of the third party. Products have
increased and also new sources of income have increased considerably.
And talking about the next 5 years, you will surely see HSBC rising
75
higher and higher in all aspects relating to services, customer care, etc.
HSBC will deliver great service and achieve newer heights and will be
the top most bank globally.
BIBLOGRAPHY
Books
1.Banking Law And Practice – P. N. Varshney
2.Banking Theory And Practice – Gordon Natarajan
Websites
1.www.google.com
2.www.icicibank.com
3.www.standardchartered.com
4.www.hsbc.com
5.www.wekipedia.com
77