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:

01. General Crossing,

02. Special Crossing.

01. 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.

02. 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 bank is sufficient.

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 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.

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.

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.

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.

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.

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.

Kinds of Cheques?

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.

(01). 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 the are freely transferable from one person to another without any bar and it can be encashed by anybody from the bank over the counter.

(02). 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.

(03). 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.

(04). 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.

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.)

Who can Introduce an Account?

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

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.

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.

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:

(a). Application on the prescribed form duly filled-in

(b). Photograph/Identity

(c). Specimen signature

(d). Mandate for operation of the account

(e). Nomination

(f). Introduction

(g). KYC (Transaction profile & source of fund).

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.

Safety of Depositors Money

(a). Deposit Insurance
All types of deposit/depositors are insured up to a maximum of Tk. 1.00 lac per account/depositor irrespective of whether one has one or more account.

(b). 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).

(c). Capital Adequacy Ratio:
Currency the Capital Adequacy Ratio is 10% of the risk weighted assets.

(d). Provision against Classified Loans:
(e). 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.

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:

(a). Demand Deposits

(b). Time Deposits

Money is also two categories:

(a). Narrow Money M1 (Currency Outside Bank + Deposit with B. Bank + Demand Deposit)

(b). Broad Money M2 (Currency Outside Bank + Deposit with B.Bank + Demand Deposit + Time Deposit).

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Special Types of Accounts Holders

(a). Non-government organizations (NGO)
(b). Co-Operatives (Samity)
(c). Club/Associations/Societies
(d). Non-Trading Concerns (Non profit organization)
(e). Liquidators (Appointed by Court)
(f). Executors/Administrators (Appointed by Court)
(g). Trustees
(h). Attorney Holders
(i). Minors
(j). Married Women
(k). Illiterate persons
(l). Pardanashin Lady
(m). Lunatics (This are not allowed to open accounts).

Types of Account Holder

(a). Individuals (Having 18 years old any person)
(b). Joint Accounts
(c). Sole proprietorship concern (Business trading firm)
(d). Partnership firms
(e). Hindu joint families
(f). Private Limited Company (Memorandum & Articles of Association, Certificate of Incorporation)
(g). Public Limited Company (Memorandum & Articles of Association, Certificate of Incorporation, Certificate of Commencement)
(h). Corporations (Corporation, autonomous bodies)
(i). Local Bodies (Municipal Corporation, District Council)

Deceased Account

In the event of death of an individual account holder, the contract of the account holder with the bank is ceased and all operations in his account are stopped. A caution mark 'deceased account' is drawn just below the balance of the account.

As soon as the information of death of any account holder is received by the banks either through newspapers or some reliable source, the date of death and source of information are noted on the ledger folio of the relevant account.

Payment of balance of deceased account:

(a) However, if there is any nominee of the account, bank's are fully discharged in paying him the balance of the account.

(b). Probate or letter of administration or succession certificate from court.

Dormant Account

Savings or Current accounts which become inoperative for a period of one year generally are marked as 'Dormant Account'. After one year of 'dormant' marked it transferred to the 'Dormant Account Ledger'.

Savings Deposit Account

Savings bank deposit accounts are intended for individual savers who want to save for meeting the future social, economic, educational or religious needs. Generally these deposits are of comparatively smaller amounts and are accepted by the banks to encourage persons of small means to make savings.

It is observed that the Central Bank currently treats only 9% of Savings deposit as demand liabilities and rest 91% is treated as time liabilities.

Current Deposit Account

A Current Deposit Account is a running and active account. Holder of such account can freely deposit or withdraw money on many times as he feels necessary in any working day. The banker undertakes to repay these deposits anytime within the banking hours. In fact, unlimited cheque facilities are it's special feature. Account can be drawn upon by cheque without any notice, without obtaining any permission and without any penalty. Loan sanctioned on CD A/C.

Current deposits are parts of Demand Deposit.

Shipping Guarantee

It is a guarantee cum indemnity issued by the bank in favour of the shipping company. When shipping documents against L/C are not received by the bank but the ship carrying the goods arrives at the port of destination and the shipping company is not willing to release the goods without the relative shipping documents but the importer may like to take delivery of the goods to avoid warehousing cost and demurrage charge against an agreement indemnifying the shipping company for any loss which it may sustain for delivery of goods without the relative bill of lading.

Guarantees given by bank to shipping companies for release of goods in the absence of Shipping Documents in case of goods arrive before receipt of the documents.

Indemnity?

A contract of indemnity is defined under Section-124 of the Contract Act- 1872 as:

A Contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.

Guarantee?

The Contract of Guarantee has been defined under Section-126 of the Contract Act-1872 as:

A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default.

Difference between Guarantee and Indemnity: 01

Guarantee	Indemnity
01. In case of guarantee, there are three parties i.e. the Creditor (party), the Principal Debtor (in his favour guarantee issued) and Surety (bank).	01. In case of indemnity, there are two parties i.e. Indemnifier (Promisor) and Indemnified (Promisee).
02. The liability of surety is secondary.	02. The liability of indemnifier is primary.
03. In case of guarantee, there is always existing debt.	03. The liability of the indemnifier arises only on the happening of the event.
04. The guarantor undertakes obligation at the request of the Principal Debtor.	04. Indemnity is given without any request, expressed or implied.
05. Guarantor can sue the Principal Debtor in case of Revocation.	05. Indemnifier cannot sue third parties unless there is the assignment.

Difference between Promissory Note and Bill of Exchange

Promissory Note	Bill of Exchange
01. It is promise to pay.	01. It is an order to pay.
02. There are two parties i.e. the Maker and the Payee.	02. Primarily there are 3 (three) parties, i.e. Drawer, the Drawee and Payee.
03. The liability of the maker is primary.	03. The liability of the maker/drawer is secondary.
04. A promissory note is not drawn in sets.	04. A bill of exchange may be drawn in sets.
05. There is no need to present it for acceptance.	05. A bill of exchange payable after sight requires acceptance.
06. A promissory note can not be made payable to the maker himself.	06. A bill of exchange can be made payable to self.

Difference between Cheque and Bill of Exchange

Cheque	Bill of Exchange
01. Cheque can only be drawn on bank.	01. Bill of Exchange is drawn on any person, firm, company or public including a bank.
02. A cheque is payable on demand	02. 3 (three) days of grace are allowed to the drawee.
03. There is no question of acceptance.	03. A bill of exchange payable after sight requires acceptance.
04. Bankers get statutory protection in case of crossed cheques.	04.Bankers do not get any protection in case of crossed bill of exchange.
05. A cheque can not be drawn in sets.	05. A bill of exchange may be drawn in sets.
06. The drawer has right to countermand.	06. The drawer has no right to countermand.

Difference between Cheque and Demand Draft

Cheque	Demand Draft
01. A cheque can be payable to bearer.	01. A draft can not made payable to the bearer.
02. The payment of cheque can be countermanded (stop payment).	02. Normally the payment of draft can not be countermanded.
03. In case of cheque, the banker has indirect liability.	03. In case of Demand Draft, the banker has a direct liability.

Difference between Demand Draft and Pay Order

Demand Draft	Pay Order
01. It is negotiable instrument (usually)	01. It is not negotiable instrument.
02. It is payable to same bank with other branch	02. It is payable on the issuing branch.
03. It is mode of remittance.	03. It is not mode of remittance.
04. Payment made in one place to another place.	04. Generally payment made is locally.

Demand Draft is a negotiable instruments?

Demand Draft is not a negotiable instruments as per N.I. Act-1881 but usually Demand Draft is a negotiable instruments.

What is Pay Order?

A pay order is an order by the issuing office of a bank upon itself to make payment of the amount mentioned therein to the named payee or according to his order. Thus, it is different from the Bank Draft which is drawn by one branch of the bank on another. Pay Orders are issued only for local payments.

A Pay Order is not a negotiable instruments and therefore, its holder cannot acquire a better title than what the transferor had. Its payments also cannot be easily stopped or countermanded.

What is Demand Draft?

An order to pay money, drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand.

Bank/Demand Draft: Also called Demand Draft. It is drawn by one branch of a bank on another of the same bank instructing the letter to pay a specified sum of money to a named payee or to his order. It is payable on demand and its payment can not be countermanded or stopped. Neither it is payable to bearer, because of these advantage, this instrument is used by the customers to make secured payment.

What is 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.

What is General Banking?

General Banking is an operational function of the bank which consists the management of deposit, cash, clearing house, bills, account opening, security instruments handling, customer services, locker facilities and other ancillary services of the bank besides Advance and Foreign Trade.

Banker's Rights on Customers:

01. Banker's Lien: A banker has the right of general lien in respect of the dues to him by the customer. Lien is the right to retain property belonging to another until a debt due from the latter is paid. In other words, it is the right of the creditor to retain the goods and securities in his possession, belonging to the debtor, until his debt due is paid. Lien, however, does not give right to sell unless such right is expressly conferred by statue or by custom or usage. The right of lien may ba (a) particular or (b) General.

02. Right of Appropriation: In case of several debts outstanding by the debtor(customer) to the bank, question arises as to which of the debts is to be discharged when payment is made by the debtor and the amount is not sufficient to discharge all the debts.

03. Banker's Right of Set-Off: A banker has the right to set-off. This right entitles him to adjust a debt balance in some account of a customer against any credit balance in his other account(s). Accounts of a customer can be combined/set-off subject to the following conditions, namely (a) If the different accounts are held by the same parties in the same right, debit balance in his own account can not be adjusted with the credit balance of trust account in his own name (b) The debt must have become actually due. The right can not be exercised against further or contingent debt and (c) There is no express or implied agreement to the contrary.

04. Banker's Right of Automatic Set-Off: A banker has th automatic right of set-off in the following circumstances
(a) On death, insanity or insolvency of the customer
(b) On the insolvency of partner of a firm or on the winding up of a company.
(c) On receipt of a Garnishee Order. The banker on receipt of a garnishee order can exercise the right of set-off and surrender only the surplus to the judgement creditor
(d) On receiving notice of assignment of a customer's credit balance and
(e) On receiving notice of second mortgage over the security charged to the bank.

Although the banker has the statutory right of set-off, yet by way of caution he obtains from the customer a letter of set-off duly signed in the presence of a witness to protect the banker from any possible futur objection to the exercise of his ritht of set-off.

05. Right to Charge Interest and Commission: A banker has an implied right on the customer to charges for various services rendered to them. Such charges are known as bank charges/commission. These are required to be reasonable.

Banker's Obligation to Customers

01. Acceptance of deposit
02. Honouring cheques
03. Maintenance of secrecy of the accounts
04. Notice to be given in case of closure of account
05. Payment of interest
06. Furnishing statement
07. Providing services

Banker-Customers: Special Relationship

While discussing the general relationship, it has already been stated that one of the relationship between a banker and customer is the debtor-creditor (contractual). The rights of one party are the duties of other and vice-versa. These rights and duties are the subjects of special relationship between and bank and its customers.
01. Banker's obligation to customers
02. Banker's right on customer
03. Customer's obligation to banker and
04. Customer's right on banker.

Banker-Customer : General Relationship

A banker, in course of his day to day business, enters into different kinds of relationship with his customers and clients. These relationships may be broadly categorized as -

(a) General Relationship and

(b) Special Relationship.

The general relationship between a banker and customer differs depending on the basis of types of dealing they undertake between themselves. Banker-customer is contractual relationship. Generally the following are the major forms of relationships between a banker and his customers:

(1) Debtor-Creditor,

(2) Principal-Agent,

(3) Trustee-Beneficiary,

(4) Bailor-Bailee and

(5) Lessor-Lessee.

(1) Debtor-Creditor: The general relationship between a banker and customer (account holder) is that of a debtor and creditor. If the customer's account shows credit balance, the bank is debtor and customer is creditor. On the other hand, if the account of the customer is overdrawn, the relationship is just the reverse and here the customer is the debtor.

(2) Principal-Agent: All modern banks provide agency services to their customers. When a bankers buys or sells securities on behalf of his customer, he performs an agency function. Similarly, when he collect cheques, bills, interest and dividend etc. or when he pays insurance premium from the customers account, as per his instruction, he acts as an agent.

(3) Trustee-Beneficiary: Many times a banker is in the position of a trustee. A trustee is one who holds property for the benefit of a person or beneficiary. The banker is a trustee when a customer deposits his valuables and securities for safe custody. In this case, the customer continues to be the owner and is entitled to the same goods and valuables as he deposited. The banker can not use the articles kept for safe custody anyway he likes. He can not return equivalent goods in place of the original one. Here the legal position of a banker as a trustee is quite different from that of debtor and creditor. For example, in the event of bank's liquidation, securities and valuables held by the bank as trustee are not available for distribution to the general creditors. Fund, if any, coming to the hands of the bank as a trustee must also be applied for specific purpose as the trust deed indicates.

(4)Bailor-Bailee: When a bank advances money to a borrower, the goods of the borrower may be brought under the control of a bank (pledge). Such goods are called pledged goods. In this case, the relationship between a customer and a banker in respect of the goods under pledge is of a bailor and bailee.

(5) Lessor-Lessee: In case of locker operation, the relationship between the banker and customer is lessor-lessee. Here the banker is Lessor and customer is Lessee.

Who is a Customers?

A person who have some sort of account with the bank (may be fixed, current or savings). Frequency of transaction is in the account is not essential . One single transaction is good enough. Banker-customer relationship is a contractual. Availing of DD/TT facilities and depositing valuables for safe custody and other services occasionally without having any account with the bank are not enough to become a customer.

Who is a Banker?

Banker is a person transacting the business of accepting, for the purposes of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise and include any post office savings Bank.

What is a Bank?

Bank is a financial Institution. It takes deposit from public, lending money to the people and make investment.

Main Funcition of a Bank :
(a) Accept of deposits from Public
(b) Lending Money to the people
(c) Investment

Banks also function of various works :
(a) Collection and payment of cheques
(b) Payment on behalf of customers
(c) Purchase and sale of stock
(d) Acting as trustee, acting as correspondents
(e) Opening letter of credit
(f) Safe custody
(g) Dealing in foreign exchange
(h) Complete service in foreign trade
(i) Providing credit reports
(j) Providing remittance facilities
(k) Providing advisory services