Laws of Banking Companies

a few Laws and rules relating to Banking Companies:

Banker: the term “Banker” has nowhere been defined in precise terms. Banker includes also persons or a corporation or company acting as bankers.

Bank: bank is a corporation, partnership or individual carrying on the business of banking.

Banking Company: any company transaction transacting (the business of banking in Bangladesh), and includes all new banks and specialized banks

Banking business: the receipt of deposits of money from the public for the purpose of lending or investment, such money being repayable on demand or otherwise, and withdraw able by cheque, draft, order or otherwise and also includes collection of cheque, demand drafts (A bank issues a demand draft to a client (drawer), directing another bank (drawee) or one of its own branches to pay a certain sum to the specified party (payee). , remitting money and negotiating bills of exchange, with a view to making a profit by such business.

Customer: one who has entered into some relation with the bank, either by opening an account or by connecting the bank with some of his business ventures.

The principal duties of a bank vis-à-vis its customers are two namely:

1.       To pay the cheques drawn by the customers if conditions of such payment are fulfilled.

2.       To collect cheques and drafts paid in by customers.

Payment of cheques: the bank is bound to pay the cheque of its customer provided the following conditions are fulfilled, namely

1.       There must be sufficient funds of the drawer

2.       The funds must be properly applicable to the payment of the cheque.

3.       The bank must be duly required to pay.

Sufficient fund: sufficiency of depositors own funds so as to be more than or equal to the amount of the cheque unless the bank has agreed to overdraft facilities up to a certain limit, in which case “sufficient funds” will mean the depositors own money plus the maximum limit upto which overdraft facilities have been agreed to be allowed.

Kinds of account:

           a) Current account b) Savings account c) Deposit account also called fixed deposit account

d) joint account e) partnership account f) Account of Companies g) Trust account

h) Executor’s and Administrators account i) Agent’s account.

Payment of forged or altered cheque: a forged cheque is not a cheque is not a cheque but a mere nullity. A bank is supposed to know the the signature of its customers and has, at any rate, the obligation to ascertain the genuineness of the signature on the cheque before payment is made thereon and, therefore, if payment is made ona forged cheque, it cannot debit the amount of payment unless it can establish estoppel or adoption on the part of the customer.

Banker's Lien: An enforceable right of a bank to hold in its possession any money or property belonging to a customer and to apply it to the repayment of any outstanding debt owed to the bank, provided that, to the bank's knowledge, such property is not part of a trust fund or is not already burdened with other debts.