ATM-Mobile Banking-Garnishee Order-Bank Rate-Lien

Bankers Of the Article

 

ATM-Mobile Banking-Garnishee Order-Bank Rate-Lien

 

worldbanks.news

worldbanks.news

 

 

ATM

 
ATMs  are electronic machines, which are operated by a customer himself to  deposit or to withdraw cash from bank. For using an ATM, a customer has  to obtain an ATM card from his bank. The ATM card is a plastic card,  which is magnetically coded. It can be easily read by the machine.   To  operate an ATM card, the customer has to inset the card in the machine.  He has to enter the pass word (number). If the authentication or pass  word (number) is correct, the ATM permits a customer to make entries for  withdrawal or for deposit. On completion of the transaction, the  customer’s card is ejected from the ATM.    

 

 

Advantages of Automated Teller Machines (ATMs)

 
  1. ATM provides 24 hours service: ATMs provide service round the clock.  The customer can withdraw cash upto a certain a limit during any time of  the day or night.
 
  1. ATM gives convenience to bank’s  customers: ATMs provide convenience to the customers. Now-a-days, ATMs  are located at convenient places, such as at the air ports, railway  stations, etc. and not necessarily at the Bank’s premises. It is to be  noted that ATMs are installed off-site. (away from bank premises) as  well as on site (installed within bank’s premises). ATMs provide  mobility in banking services for withdrawal.
 
  1. ATM reduces the workload of bank’s staff: ATMs reduce the work pressure on bank’s staff and avoids queues in bank premises.
 
  1. ATM provide service without any error: ATMs provide service without  error. The customer can obtain exact amount. There is no human error as  far as ATMs are concerned.
 
  1. ATM is very beneficial  for travellers: ATMs are of great help to travellers. They need not  carry large amount of cash with them. They can withdraw cash from any  city or state, across the country and even from outside the country with  the help of ATM.
 
  1. ATM may give customers new  currency notes: The customer also gets brand new currency notes from  ATMs. In other words, customers do not get soiled notes from ATMs.
 
  1. ATM provides privacy in banking transactions: Most of all, ATMs provide privacy in banking transactions of the customer.
 

 

Mobile Banking

 
Mobile  banking (also known as M-Banking, mbanking) is a term used for  performing balance checks, account transactions, payments, credit  applications and other banking transactions through a mobile device such  as a mobile phone or Personal Digital Assistant (PDA).   Mobile  banking and Mobile payments are often, incorrectly, used  interchangeably. The two terms are differentiated by their service  provider-to-consumer relationship; financial institution-to-consumer  versus commercial institution-to-consumer for mobile banking and  payments, respectively. Mobile Banking involves using mobile devices  gain to access financial services. Mobile payments on the other hand may  be defined as the use of mobile devices to pay for goods or services  either at the point of purchase or remotely.Bill payment is not  considered a form of mobile payment because it does not occur in real  time.  

 

 

Bank Rate

 
Bank rate is the  official minimum are at which the central bank discounts approved bills  of exchange or advance loans against approved securities to the  commercial bansk and the discount houses. Broadly speaking the bank rate  is the lending rate of the central bank. When the bank rate is raised,  the market rate of interest tends to rise. This discourages new loans  and puts pressure on debtors to repay their existing loans. Thus a rise  in the bank rate leads to contraction of credit.  

 

 

What are the instruments that fall under the purview of Negotiable instrument Act, 1881?

 
According to the Negotiable Instruments Act, 1881 there are three types of negotiable instruments i.e.,   (a) Promissory note, (b) Bill of exchange and (c) Cheque.   (a) Promissory Note: A ‘Promissory Note’ is an instrument in writing containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or the order of certain person, or to the bearer of the instrument (Section 4 of NI Act).   (b) Bill of exchange: According to Section 5 of NI Act, a bill of Exchange is “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to order of, a certain person or to the bearer of the instrument”.   (c) Cheque: A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand (Section 6 of NI Act).
 
A cheque is a bill of exchange which is always (i) Drawn on a banker specified therein and (ii) Payable on demand.   Define Negotiable instrument according to the Negotiable instrument Act, 1881.   According to section 13 of the Negotiable Instruments Act, 1881, “a Negotiable Instruments means a promissory note, bill of exchange, or cheque, payable either to order or to bearer whether the words ‘order’ or ‘bearer’ appear on the instrument or not.”   According to section 14 of the Negotiable Instruments Act, 1881, “when a promissory note, bill of exchange, or cheque is transferred to any person so as to constitute that person the holder thereof, the instrument is said to be negotiated”.  

 

Define Negotiable instrument according to the Negotiable instrument Act, 1881.

 
According to section 13 of the Negotiable Instruments Act, 1881, “a Negotiable Instruments means a promissory note, bill of exchange, or cheque, payable either to order or to bearer whether the words ‘order’ or ‘bearer’ appear on the instrument or not.”   According to section 14 of the Negotiable Instruments Act, 1881, “when a promissory note, bill of exchange, or cheque is transferred to any person so as to constitute that person the holder thereof, the instrument is said to be negotiated”.

 

Bridge financing

 
Bridge financing is a method of financing, used to maintain liquidity while waiting for an anticipated and reasonably expected inflow of cash. Bridge financing is commonly used when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of an asset.   For example, when selling a house, the owner may not receive the cash for 90 days, but has already purchased a new home and must pay for it in 30 days. Bridge financing covers the 60 day gap in cash flows.   Another type of bridge financing is used by companies before their initial public offering, to obtain necessary cash for the maintenance of operations. These funds are usually supplied by the investment bank underwriting the new issue. As payment, the company acquiring the bridge financing will give a number of stock at a discount of the issue price to the underwriters that equally offsets the loan. This financing is, in essence, a forwarded payment for the future sales of the new issue.  
 
 
Bridge financing may also be provided by banks underwriting an offering of bonds. If the banks are unsuccessful in selling a company’s bonds to qualified institutional buyers, they are typically required to buy the bonds from the issuing company themselves, on terms much less favorable than if they had been successful in finding institutional buyers and acting as pure intermediaries.   There are 2 types of bridging finance. (a) Closed bridging and (b) Open Bridging. (a) Closed bridging finance is where you have a date for the exit of the bridging finance and are sure that the bridging finance can be repaid on that date. This is less risky for the lender and thus the interest rates charged are lower. (b) Open bridging is higher risk for the lender. This is where the borrower does not have an exact date for the bridging finance exit and may be looking for a buyer of the property or land.

 

Stale Cheque

 
A cheque, after 6 months from its date of issue is regarded as ‘Stale’ and  such a cheque is not paid by a bank. Stale cheques are also called ‘out  of date’ cheque. A cheque should be encashed as soon as possible.  

 

Post-dated Cheque

 
A  cheque bearing a future date is called post-dated cheque. A bank can  not pay cheque before date of cheque. Post dated cheque is not paid by  a bank.  

 

Ante-dated Cheque

 
A  cheque bears a date earlier to the date on which the cheque is drawn.  For example, a cheque drawn on January 15 bearing date January 10 is an  ante-dated cheque. Bank generally pay an ante-dated cheque.  

 

Clearing House

 
Clearing  house is an arrangement of the member banks which settle their  inter-bank claims/ liabilities due to transfer of deposits by the  customers from one bank to another. Banker’s clearing house is a  common place usually located at the Central Bank or any other designated  bank where officials of different banks settle their inter-bank claims  daily through their accounts maintained by the Central Bank. This  happens because each bank receives many cheques, drafts etc. drawn on  other banks. Collection of those by sending officials to those bank is  costly. So clearing/settling mutual claims and debts is done through  clearing. In absence of Bangladesh Bank, Sonali Bank acts as the  clearing house in our country.    

 

GARNISHEE ORDER

 
A  garnishee order is an order of a court asking the banker to stop either  absolutely or partially the usual operation in the account of a  particular customer, thereby attaching the funds of the account in the  hands of third party or as the court may determine and direct for the  disposal of such funds.    

 

Clayton’s Rule

 
Clayton’s  Rule is a presumption in relation to the distribution of monies from a  bank account. The rule is based upon the deceptively simple notion of  first-in, first-out to determine the effect of payments from an account,  and will normally apply in the absence of evidence of any other  intention. Payments are presumed to be appropriated to debts in the  order in which the debts are incurred.  

 

KYC (Know Your Customer)

 
Know  your customer (KYC) norms are applicable to all customer accounts. It  deals with not only to identify the customer but also to understand the  activities of the customer, to ensure that the operations in the  customer accounts are for genuine purpose.    

 

Cash Credit

 
In  this type of credit scheme, banks advance loans to its customers on the  basis of bonds, inventories and other approved securities. Under this  scheme, banks enter into an agreement with its customers to which money  can be withdrawn many times during a year. Under this set up banks open  accounts of their customers and deposit the loan money. With this type  of loan, credit is created.  

 

Demand loans

 
These are  such loans that can be recalled on demand by the banks. The entire loan  amount is paid in lump sum by crediting it to the loan account of the  borrower, and thus entire loan becomes chargeable to interest with  immediate effect.  

 

Short-term loan

 
These loans may be  given as personal loans, loans to finance working capital or as priority  sector advances. These are made against some security and entire loan  amount is transferred to the loan account of the borrower.  

 

Over-Draft

 
Banks  advance loans to its customer’s upto a certain amount through  over-drafts, if there are no deposits in the current account. For this  banks demand a security from the customers and charge very high rate of  interest.  

 

Money Laundering

 
Money  Laundering Prevention Act, 2002 defines money laundering as properties  acquired or earned directly or indirectly through illegal means; illegal  transfer, conversion and concealment of location of the properties  earned through legal or illegal means or assistance in the said acts.   There are three main stages of money laundering. These are:  

 

  1. Placement:  The physical disposal of the initial proceeds derived from illegal  activity e.g. depositing the money earned by theft, robbery, bribery or  hijacking to a bank account.
  2. Layering: Separating illicit  proceeds from their sources by creating complicated layers of financial  transactions designed to disguise the audit trail and provide anonymity  e.g. electronic transfer of the fund to a fake firm, issuing overseas  bank draft, purchasing travelers cheques, transfer of fund from one bank  account to various names of different bank branches.
  3. Integration:  It means the provision of apparent legitimacy to property gained in an  unlawful way. If the layering process is complete, integration process  place the laundered proceeds back into the economy in such a way that  they re-enter the financial system appearing as normal business fund  e.g. sale of flat/house/land purchased by illegal income.
 
 
  Reasons:  

 

  1. a) Criminals  conduct their operations for financial gains. They have to bear  expenditures like operating expenses, purchasing services of the corrupt  officials etc,
  2. b) Criminals hide the sources of their wealth and they always try to disguise the ownership or control of the wealth, and
  3. c) Criminals conceal the proceeds from investigation or seizure.
 

SET-OFF

 
Set-off  means the total or partial merging of a claim of one person against  another in a counter claim by the latter against the former. It is in  effect the combining of accounts between a debtor and a creditor so as  to arrive at the net balance payable to one or the other. It is a right  which accrues to the banker as a result of the banker customer  relationship.   Set-off arises when a debtor or his creditor wishes  to arrive at the net figure owing between them when separate accounts or  debt are involved.  
 
 
Essential Requirements of Set-off:
  1. a)      Mutual debts for sums certain.
  2. b)      Debts must be due immediately.
  3. c)      Debts must be in the same right.
  4. d)      No agreement to the contrary.
 

 

Notice of Set-off

 
As  already stated the right of set-off accrues to the banker as a result  of banker customer relationship. When a customer opens two or more  accounts it may be his intention to keep them separate. So his different  accounts can not be arbitrarily combined without proper notice to the  customer. Under such situation, it is advisable to take prior letter of  set-off so that a banker can combine them at its discretion without  giving the customer any notice. It also serves as a proof that the  bankers right of set-off exists and the customer has not waived it.  However, in actual practice the bank sends a notice to the customer as  soon as the right of set-off is exercised.  

 

 

Automatic Right of Set-off

 
The  following are the situations where the banker’s right of set-off  automatically accrues and no notice of set-off is necessary: (1)   On the death, insanity or insolvency of the customer. (2)   On the insolvency of a partner of a firm. (3)   On receipt of a garnishee order. (4)   On the winding up of a company. (5)   On receipt of notice of assignment of the credit balance of the customer.  

 

 

Banker’s Right of Set-off

 
The  decision and judgment in different cases reveal that the following  cases where the branches can exercise the right of set off.
 
(a)   To combine two or more accounts of the same customer in the same branch of a bank.
 
(b)   To combine two or more accounts of a customer maintained in different branches of the same banks.
 
(c)  To adjust the surplus amount of the sale proceeds or realization of the  securities held as cover for one particular debt for liquidation of any  other debt after realization of that particular debt.  

 

CRR vs. SLR

 
Cash  reserve Ratio (CRR) is the amount of funds that the banks have to keep  with the central Bank. If the central bank decides to increase the CRR,  the available amount with the banks comes down. Central bank uses the  CRR to drain out excessive money from the system. Currently, commercial  banks are required to maintain with the Bangladesh Bank an average cash  balance, the amount of which shall not be less than 6% of the total of  the Net Demand and Time Liabilities (NDTL) of them.   On the other  hand, Statutory Liquidity Requirement (SLR) is the amount of liquid  assets, such as cash, precious metals or other approved short-term  securities, that a commercial bank must maintain in its reserves.  Currently, commercial banks are required to maintain 19% of the total of  the Net Demand and Time Liabilities (NDTL) in the form of cash,  precious metals or other approved securities.  

 

Holder for Value vs. Holder in due course

 
Holder for value: Person in possession of a negotiable instrument for which value has been given Holder in due course: Person in possession of bill –        that is complete and regular –        taken in good faith and for value –        no notice of any defect of transferor –        no notice of previous dishonor.  

 

Retail banking vs. Wholesale banking

 
Retail  Banking is typical mass-market banking where individual customers use  local branches of larger commercial banks. Services offered include:  savings and checking accounts, mortgages, personal loans, debit cards,  credit cards, and so forth. Wholesale Banking is banking services between merchant banks and other financial institutions.  

 

LIEN

 
Lien  is the right of a creditor in possession of goods or securities  belonging to a debtor to retain them until a debt due from the latter is  paid. Lien differs from other forms of charges in respect that it does  not arise out of an implied or express agreement. The right of lien  arises in law out of business dealings between the parties.   Lien  gives to a person only a right to retain the possession of goods and not  the power to sale unless such a right is expressly conferred by statute  (e.g. to unpaid seller or pawnee) or by custom or usage. The conditions  for right of exercise of lien are (a) creditor’s possession of  goods/securities in the ordinary course of business (b) the debtor has a  lawful debt due to discharge to the creditor (c) there must not be any  contract to the contrary.  
 
 
Kinds of Lien : There are two kinds of lien.  
(a) Particular lien and
(b) General lien.  

 

Particular lien

 
A  Particular lien arises, Where goods can be retained by the creditor in  respect of a Particular debt only. For example, a tailor has a  particular lien for his charges on the shirt made for his customer.  

 

General lien

 
Under  Section 171 of the contract Act, 1872, bankers, factors (mercantile  agents), wharfingers, attorneys of High court and policy brokers can, in  the absence of a contract to the contrary, exercise lien and retain  security for a general balance of account any goods bailed to them. So  general lien confers a right to retain goods and securities not only in  respect of a particular debt but in respect of the general balance due  by owner of the goods and securities.  

 

Banker’s lien

 
As  a general rule, the right of lien does not give the creditor any power  to sale the relative goods/securities retained. The position, however,  seems to be different in the case of bankers. Convention and legal  decisions have further extended the implications and scope of this  right. In Brenda VS, Barrette (1846) 12C1.and Fin 787 stated that  bankers have a general lien on all securities deposited with them as  bankers by a customer, unless there be an express contract, or  circumstances that show an implied contract, inconsistent with lien. A  bankers lien is more than a general lien; it is an implied pledge. Thus,  the banker can exercise all the rights of a pledgee in case of a  banker’s lien. In the event of default by a customer, he may proceed to  sale the goods/securities retained but after giving a reasonable notice.  

 

Negative lien

 
The  banker sometimes asks a borrower to execute a letter declaring that his  assets are free from encumbrance at the time the advance is made. The  borrower also undertake that the assets stated in the said letter shall  not be encumbered or disposed of without the bank’s permission in  writing so long as the advance continues. This undertaking is known as a  negative lien.   The banker cannot directly realize his debts from  such assets. But due to the above impositions, bankers interest are to  certain extent protected.  

 

Accommodation Bill

 
A  bill of exchange without any consideration or quid pro quo is known as  accommodation bill. In this case, a person signs a bill and makes  himself liable, without receiving any value in return, such as, an  advantage or a benefit. The purpose of accepting such a bill is to  accommodate the drawer who is temporarily in need of funds. The  acceptance enhances the liquidity of the instrument, which can be  discounted by the drawer with a bank.  

 

Pledge

 
When  a customer takes loan against jewels he pledges the jewel to the bank.  Similarly a customer availing loan on key cash credit basis pledges the  goods to the banker by keeping them in a godown under lock and key  control of the bank. Pledged goods are to be insured and the pledgee  (banker) has to take reasonable care to protect the property pledged.  

 

Lien

 
The  right of one person to retain possession of goods owned by another  until the possessor’s claims against the owner has been satisfied. The  lien may be general, when the goods are held as security for all  outstanding debts of the owner, or particular, when only the claims of  the possessor in respect of the goods held must be satisfied.  

 

Cash Credit vs. Overdraft

 
Both  CC and OD forms part of working capital finance. But Cash Credit is  granted against moveable goods (inventory/semi-finished goods/goods  etc.) whereas Overdraft is granted against paper security (Fixed deposit  receipts/shares/book debts).  

 

Loans vs. Advances

 
A  loan is granted for a specific time period. Generally, commercial banks  grant short-term loans. But term loans, that is, loan for more than a  year, may also be granted. The borrower may withdraw the entire amount  in lump sum or in installments. However, interest is charged on the full  amount of loan. Loans are generally granted against the security of  certain assets. A loan may be repaid either in lump sum or in  installments.   Advances differ from loan in the sense that loans  may be granted for longer period, but advances are normally granted for a  short period of time. Further the purpose of granting advances is to  meet the day to day requirements of business. The rate of interest  charged on advances varies from bank to bank. Interest is charged only  on the amount withdrawn and not on the sanctioned amount.

1 thoughts on “ATM-Mobile Banking-Garnishee Order-Bank Rate-Lien”

  1. AlvenNof says:

    You made your point! [url=https://theessayswriters.com/#]best dissertation[/url] how to write personal essay for college

Leave a Reply

Your email address will not be published. Required fields are marked *