Are Deposits Money ?

We know that the cash deposited into the accounts of the banks by the account holders are termed as deposits. We also know that the deposits are the borrowings of the banks from the people. These are repayable on demand. As and when depositors will make demand properly through cheques, banks are bound to make payment in cash. In this sense deposits are money (bank money).

 

Deposits into two types :

1. Demand Deposits
2. Time Deposits

 

Money is also 2 categories :

1. Narrow Money M1 (Currency Outside Bank + Deposit with B. Bank + Demand Deposit)
2. Broad Money M2 (Currency Outside Bank + Deposit with B. Bank + Demand Deposit + Time Deposit).

 

Safety of Depositors Money :

1. Deposit Insurance

All types of deposit/depositors are insured upto a maximum of Tk.1.00 lac per      account/depositor irrespective of whether one has one or more account.

1. Liquidity

The scheduled banks are required to maintain a certain percentage of their deposits as    liquidity (cash/near cash). Currently such liquidity 18% (13% SLR & 5% CRR).

1. Capital Adequacy Ratio :

Currency the Capital Adequacy Ratio is 10% of the risk weighted assets.

 

1. Provision against Classified Loans :
2. Good Governance

In addition, the central bank also ensures good governance of the banks through restrictions on directorship, sanction of large loans, loans/interest waiver and various       other means.

 

Government Deposit : Restriction on Private Banks :

20% of Annual Development Programme fund may be placed with the private banks which are engaged in banking in Bangladesh for the last 10 years or above.

 

25% of the funds of the government, semi government bodies, autonomous and semi-autonomous bodies may be placed with the private banks which are engaged in Bangladesh for last 5 years or more.

 

Who can open an Account ?

Anybody (natural or legal person, legal person means company) who are completed to enter into contract, are eligible to open bank accounts. Insolvents, lunatics (mad) is not eligible to open an account. A minor may, however, be allowed to open an account jointly with the legal guardians.

 

Natural person like married or unmarried man and woman, literate or illiterate persons, pardanshin ladies and even a blinds man can open an account either singly or jointly.

 

Opening of Accounts : Common Formalities :

1. Application on the prescribed form duly filled-in
2. Photograph/Identity
3. Specimen signature
4. Mandate for operation of the account
5. Nomination
6. Introduction
7. KYC (Transaction profile & source of fund).

 

Why Introduction need to an Account?

• Proper introduction serves as precaution against any fraud.
• It is a safeguard in case of inadvertent overdraft.
• Banker can get help to be satisfied on a proposed account opener about the identity, character, integrity and respectability.
• Real reason for obtaining introduction by the banks is to get legal protection from the courts (Sec-131, N.I. Act)
• It helps the banker to give proper and correct confidential opinion regarding the standing and creditability of the customer.

 

Why Introduction to an Account?

In case any fraudulent transaction takes place in the account, the banks may get some relief since it is the moral responsibility of the introducer at least to help the bank in finding out the customer or tracing him out.

 

A banker is found to be very careful in selecting his customers. Before opening an account, he is to be satisfied himself about the identity, character, integrity and respectability of the proposed account opener. To this end he talks to the proposed customer informally to gather as much information as possible to satisfy himself about his bonafide. Not only that, a banker is also now required to obtain information about the possible transaction needs of the customers and maintain those in the customer profile. Most importantly the banks are to compulsorily obtain introduction as well.

 

Who can Introduce an Account :

Anybody acceptable to a bank may introduce an account such as existing account holders, government high official, respectable person.

 

What is cheque ?

Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. (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 the order of, a certain person or the bearer of the instrument.

 

Kinds of Cheques : Debnath Sir.

Cheque supplied to the account holders can be used variously by them depending on the circumstances. In fact, based on the use and utility, cheques assume differing, characteristics and serve various purposes of the account holders.

(01). Bearer Cheque

(02). Order Cheque,

(03) Crossed Cheque and

(04) Non Negotiable Cheques.

 

Bearer Cheque :

Cheques in which the word ‘Bearer’ appears after the payee’s name are called Bearer Cheque.

 

These kinds of cheque are likely cash since they are freely transferable from one person to another without any bar and it can be encashed by anybody from the bank over the counter.

 

Order Cheque :

A cheque in which the word ‘Order’ appears after the name of the payee is called Order Cheque. An order cheque can be paid to the payee or to any person according to payee’s order. Instructions are written on the back of the cheque.

 

Crossed Cheque :

When two parallel lines are drawn across the face of a cheque, it is called crossed cheque. A crossed cheque can not be paid at the counter. It can be paid only through an account.

 

Not Negotiable Cheque :

These cheque is a further check on fraud and forgery. These cheque are transferable from one hand to another. But the drawer gives a message by adding the words ‘Not Negotiable’ to the cheque. About such cheques the N.I. Act. says that “a person taking a cheque crossed generally or specially bearing in either case the words “Not Negotiable” shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had”. This provision restricts the ‘negotiability’ of the cheque. However, restriction on negotiability does not restrict ‘transferability’. It implies that a cheque bearing ‘not negotiable’ crossing can not be encashed by the persons who got it from a thief or any finder even if he got it on consideration and without the knowledge of theft or less. Generally this kind of cheque is used by Government, Government Agencies or corporations etc. who want to restrict further negotiation of the cheques.

 

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.

 

Blank Cheque :

A cheque without any details bearing only the signature of the drawer is called blank cheque. This is also called inchoate (incomplete) instruments.

 

Conversion :

Conversion is another word for wrongful payment of a customers cheque. All cheques are drawn by the account holders to be payable to the intended person. If the bank pay it to any person other than the intended person, the payment will be wrongful payment or conversion.

 

Crossing of Cheques: A cheque may be classified

(a) an open cheque which can be presented for payment by the holder at the counter of the drawee’s bank.

(b) a crossed cheque which can be paid only through a collecting banker.

 

Crossing defined : A cheque is said to be crossed when two transverse parallel lines with or without any words are drawn across its face. A crossing is a direction to the paying banker to pay the money generally to a banker or a particular bankers as the case may be, and not to the holder at the counter. Crossing may be written, stamped, printed or perforated.

Object of Crossing : Crossing affords security and protection to the true owner, since payment of such a cheque has to be made through a banker. It can, therefore, be easily detected to whose use the money has been received. Cheques are crossed in order to avoid losses arising from open cheques falling into the hands of wrong persons.

 

Crossing of a cheque does not affect its negotiability. Crossed cheques are negotiable by delivery in case they are payable to bearer and by endorsement and delivery where they are payable to order. Holder of a crossed cheque, who has no account in any bank, can obtain payment by endorsing it in favour of some person who has got an account in a bank.

 

Crossed Cheque :

When two parallel lines are drawn across the face of a cheque, it is called crossed cheque. A crossed cheque can not be paid at the counter. It can be paid only through an account.

 

Kinds of Crossing.

1. General Crossing
2. Special Crossing

 

General Crossing :

When a cheque bears two parallel lines across its face, it is called a general crossing. A cheque bearing a general crossing can be paid only through an account. General crossing is usually put either at the top left corner or in the middle of the cheque.

 

Special Crossing :

When the name of the particular bank is written across the face of a cheque, it is called a special crossing. As per Section-124 of N.I. Act, a cheque shall be deemed to be crossed specially and to a particular banker “Where a cheque bears across its face an addition of the name of a banker, either with or without the words ‘not negotiable”.

 

When a cheque bears a special crossing, it can be paid only to that bank which is mentioned in the crossing. In case of special crossing, drawing of two parallel lines is not necessary. Simply writing of the name of the bank is sufficient.

 

Restrictive Crossing :

Besides the above two types of statutory crossing, in recent years the practice of crossing cheques with the words ‘account payee’ or ‘account payee only’ has sprung up. Such a crossing is termed as ‘restrictive crossing’.

 

Restrictive crossing is only a direction to the collecting banker that the proceeds are to be credited only to the account of payee named in the cheque. In case the collecting banker allows the proceeds to be credited to some other account, it may be held liable for wrongful conversion of funds. It does not in any way affect the paying banker, who has simply to see that the cheque has been presented to it for payment by any bank in case of general crossing and by the particular bank (named in crossing) in case of special crossing. It is under no duty to ascertain that the cheque is in fact collected for the account of the person named as payee.