BANKING(3)

TYPES OF ACCOUNT IN BANKING SECTORS

1. BANKING & PRACTICE DONE BY S.BHUVANESVARI M.A.,

2. UNIT- III Types of A/c

3. FIXED DEPOSIT A/c The deposits with the bank for a fixed period which is specified, at the time of making the deposit. Such deposits are therefore, called Fixed Deposits or Term Deposits. For ex: if a person intends to utilise his money for any purpose after a few years, he may deposit it for 3 or 5 years, whereas if his purpose is to meet some urgent need in the near future, the fixed deposit may be made for 6 or 9 months. As the date of repayment of a fixed deposit is determined in advance, the banker need not keep more cash reserves against it and can utilise such amount more profitably. The banker, therefore offers higher rate of interest. Loans are available in FD Fixed Deposit Receipt must be surrendered for its repayment. So fixed deposit receipt is very important for repayment. Types of A/c Fixed deposit A/c Saving A/c Recurring deposit A/c Current A/c

4. SPECIMEN OF FIXED DEPOSIT RECEIPT DEPOSIT RECEIPT Indian Bank (Regd. Office : ADU Street, chennai) No. VK178790 Date:----------------------------- RECEIVED from _______________________________________________ ______________________________________________________________________ the sum of Rupees ______________________________________________________ as a deposit bearing interest at the rate of __________________________________ per cent per annum payable after___________________________________________ days/months from ______________________________________________________ Rs._______________ Manger signature___________ Accountant________________ NOT TRANSFERABLE Due on and interest ceases from

5. MEMORANDUM The Fixed Deposit Receipt duly discharged should be surrendered at the time of payment or renewal of deposit. To prevent loss of interest, the receipt intended for renewal should be sent on the due date. 2. The Fixed Deposit Receipt is not transferable by endorsement. In the absence of special instructions, the amount of the Deposit Receipt can be paid only to the depositor in person. Payment to any third party must be authorised by the depositor through a letter which should accompany the Fixed Deposit Receipt duly discharged. Rate of interest overleaf is subject to Reserve bank’s directives issued from time to time. Received payment/Please renew for------- ------------------------------------------ months/years. Signature of the Depositor___________________ PAYMENT OF INTEREST _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Date Half-year ended sign of Offficial Amount SPECIMEN OF THE BACK SIDE OF FIXED DEPOSIT RECEIPT

6. Loss of Fixed Deposit Receipt sometimes the depositors report to the bank the loss or theft of a fixed deposit receipt and request it to issue a duplicate one. A fixed deposit receipt is not transferable not negotiable one. Any other person, therefore, cannot claim payment of the amount covered by the Receipt. However, customers request the banker for the issue of a duplicate one because banks stipulate that the Receipt duly discharge must be surrendered for its repayment. The banker should take the following steps in this regard A letter signed by the depositor/depositors informing the banker about the loss of the receipt and requesting it to issue a duplicate one, should be obtained A duly stamped letter of Indemnity must be obtained from the depositor/depositors to safeguard its own interest, in case the original receipt is also presented for repayment. A note to this effect should be made in the Fixed Deposit Ledger for future guidance SAVINGS BANK ACCOUNTS A saving bank account is meant for the people of the lower and middle classes who wish to save a part of their current incomes to meet their future needs and also intend to earn an income from their savings. The banks, therefore impose certain restrictions on the Savings bank account and also offer a reasonable rate of interest. Credit card facilities & low rate of interest also offer in saving A/c. Overdraft is not allow in saving A/c

7. Opening a New A/c Procedure for opening a new A/c : By opening an account with the banker, a customer enters into relationship with a banker. Banker very careful in opening an account in the name of a customer. Though any person may apply for opening of an account in his name but the banker reserves the right to do so being satisfied about the identity of the customer. Application on the prescribed Form Introduction of the Applicant proper introduction specimen Signature The applicant is required to mention his name, full address (Ration card) , specimen signature , Recent photo, occupation. After the above formalities are over, the banker opens an account in the of applicant. The banker, thereafter provided the customer with (1) a Pay-in-Slip Book (2) a Cheque Book and (3) a Pass Book and he is thus authorised to operate the account. Risks in Opening Accounts Without Proper Introduction: The applicant must be properly introduced to the banker. If the latter opens an account without Proper introduction or shows carelessness in this regard cases of fraud or misrepresentation may occur frequently.

8. The risks in opening A/c without proper introduction in such cases are as follows: The banker cannot avail of the statutory protection. Risk in case of overdrafts. Risk in case of undischarged insolvent. Risk in case of issue of bogus cheques. RECURRING DEPOSIT ACCOUNTS A depositor opening a recurring deposit account is required to deposit an amount chosen by him , generally a multiple of Rs. 5 or 10, in his account every month for a period selected by him. The period of recurring deposit varies from bank to bank. Banks open such accounts for periods ranging from 1 to 10years. CURRENT ACCOUNTS A current account is a running and active account which may be operated upon any number of times during a working day. There is no restriction on the number and the amount of withdrawals from a current account. Overdraft facilities are given in case of current accounts only. A current account carries certain privileges which are not given to a savings ban k account, e.g, Third party cheques and cheques with endorsements may be deposited in the current account for collection and credit The loan and advances granted by the banks to their customers are not given in the form of cash but through the current accounts. Current accounts thus earn interest on all types of advances granted by the banker. A current account is meant for the convenience of his customers, who are relieved of the task of handling cash themselves and to take the risk inherent therein. Thus the primary object of a current account differs from the object of other deposit accounts which are meant to solicit the savings of the people.

9. Special types of customer Minor Married woman Pardanashin woman Illiterate persons Lunatics MINOR: According to Section 6 of the Hindu Minority and Guardianship Act,1956 in case of a minor boy his father and after him the mother shall be the natural guardian. In the name of the minor A/c to be operated upon by the Natural guardian of the minor or the guardian appointed by the court . MARRIED WOMAN: A married woman is competent to enter into a valid contract. The banker may therefore, open an account in the name of married woman. In case of a debt taken by a married woman, her husband shall not be liable for the debts taken by his wife in any other circumstance. 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. PRADANASHIN WOMAN: Any contract entered into by her might have been subject to undue influence and The same might not have been made with her free will and with full understanding of what the contract actually means. Thus a contract entered into by a pradanashin woman is not a contract free

10. from all defects. The banker should, therefore take due precaution in opening an account in the name of a pardanashin woman. As the identity of such a woman cannot be ascertained, the banker generally refuses to open an account in her name. ILLITERATE PERSONS: Illiterate persons cannot sign their names and hence the bankers take their thumb impressions as a substitute for signature, and also a copy of their recent photograph. The application form and the photograph should be attested by an approved witness. For withdrawing money, he must be affix his thumb impression for the purpose of identification. LUNATICS: According to the Indian Contract Act, 1872, a person of unsound mind is not competent to enter into a valid contract. A contract entered into by a person of unsound mind is a void contract . If a person is usually of unsound mind but occasionally of sound mind, he may make a contract when he is of sound mind . Similarly, if a person is usually of sound mind but occasionally of Unsound mind, he cannot enter into a valid contract when he is of unsound mind .

11. MINOR A person who has not completed 18years of age is a minor . If a guardian of his person or property is appointed by the court before he completes 18years, he remain minor till he completes his 21years. The banker may open a savings bank account(and not a current account) in the name of a minor, in any of the following ways: 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 names of two or more minors to be operated upon by the guardian. In the name of the minor, to be operated upon by himself, if he has attained the age of 12years. Two such minors can jointly open such an account , to be operated upon by them jointly. In case the minor dies , the balance in the account is permitted to be withdrawn by the guardian and in case of joint account the balance will be held at the absolute disposal of the guardian. The bank records the date of birth of the minor as given by the minor or his/her guardian. On the attainment of majority , the account of the minor in the name of the guardian should be closed and the balance paid to the minor(then major) or to transferred to a new account in his/her own name . A minor can be admitted to the benefit of partnership with the consent of all the partners but he will not be liable for the losses or debts of the firm. Within six months after he attains majority he should repudiate his liability as partner otherwise he will be held liable as a partner of the firm from the date he was admitted to the benefit of the partnership.

12. Legal provisions regarding Guardianship of a Minor: a natural guardian, or a testamentary guardian or a guardian appointed by the court. Natural Guardian: According to Section 6 of the Hindu Minority and Guardianship Act, 1956, in case of a minor boy or an unmarried girl, his/her father and after him the mother shall be the natural guardian. In case of a married girl (minor), her husband shall be the natural guardian. The terms father of mother does not include step-father or step mother. Testamentary Guardian: A Hindu father, who is entitled to act as the natural guardian of his minor legitimate children may by will, appoint a guardian for any of them in respect of the minor’s person or property. Such guardian acts after the death of the father or the mother. Guardian appointed by Court: A guardian may be appointed by the Court under the Guardians and Wards Act, 1890, but the court shall not be authorised to appoint or declare a guardian of the person of a minor, if his father is alive and is not, in the opinion of the court, unfit to be guardian of the person of the minor.

13. CLOSING OF A BANK ACCOUNT The relationship between a banker and his customer is a contractual one and continues as long as both of them so desire. The relationship may be terminated by either of them by giving notice of his intention to the other party. Moreover, the banker is bound to suspend payment out of the customer’s account under the compulsions of law. If a customer directs the banker in writing to close his account , the banker is bound to comply with such direction. The latter need not ask the any reasons. The account must be closed with immediate. On receipt of a Garnishee Order from the court , the banker is bound to suspend payment from the account of the customer. If the order prohibits the payment of a specified sum from the account, the Banker may honour the cheques out of the remainder amount. When the banker has received a notice of assignment of the credit balance in the account of a customer to a third party , the banker is bound to pay the same amount to the said third party.

14. On receipt of the notice of death of a customer , the banker must stop the operation of his account because the authority of the customer terminates as he dies. If a banker receives a notice regarding the insanity of his customer, he is bound to stop payments from his account. In case of default by the customer to close the account, the banker should close the account and send the money by draft to the customer. He will not be liable for dishonouring cheques presented for Subsequently. If an account remains unoperated for a very long period , the banker may request the customer to withdraw the money. Such step is taken on the presumption that the customer no longer needs the account. If the customer could not be traced after reasonable effort, the banker usually transfers the balance to an “Unclaimed Deposit Account” and the account is closed.

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