Capacity of Collecting Banker

As an Agent: A collecting banker acts as an agent of the customer if he credits the latter's account with the amount of the cheque after the amount is actually realised from the drawee bank. Thereafter, the customer is entitled to draw the amount of the cheque. The banker thus acts as an agent of the customer and may charge from him a commission for collecting the amount from other banks. As an agent of his customer, the collecting banker does not possess title to the cheque better than that of the customer. If the customer has no title thereto, or his title is defective, the collecting banker can not have god title to the cheque. He will be held liable for conversion of money, i.e. illegally interfering with the rights of the true owner of the cheque.

As Holder for Value : Collection of cheques takes some time, specially in case of outstation cheques. If the collecting banker pays to the customer the amount of the cheque or credits such amount to his account and allows him to draw it before the amount of the cheque is actually realised from the drawee bank, the collecting banker is deemed to be its 'holder for value'. The bankers takes an undertaking from the customer to the effect that the latter will reimburse the former in case of dishonour of the cheque.