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chapter 2 Banking and insurance

Type of bank customers

Individual

Joint Hindu families

Joint account customer

Partnership firm

Limited liability companies

Club and associations


Individual customer

It is an account open by one  person in his/her own and individual capacity. Such type of account are maintain and operate upon only by the single person who has open the account this solo and single person is the customer of the bank . There are many type of individual like educated, illiterate,  insane,  intoxicated , insolvent, minor percent etc they have to be introduced their self by my filling the account opening form and KYC form etc.

Joint account customer

Joint account is a bank account share between two or more individuals. Joint account are most likely to be used by relatives couples or business partner who have a level of trust with each others

Type of accounts open between two persons

Either or survivor

Jointly

Jointly or survivor

Former or survivor

Joint account open between more than two person

Anyone or survivor

Latter or survivor

Joint Hindu family (Hindu undivided family)

Joint Hindu family is a legal entity and is a unique for Hindus. It has perpetual succession like a company. What is does not required any registration. The head of jhf is the karta. Member of the family are co-parctneners. The jhf business is managed by karta.

Partnership firm

Partnership is illegal entity. It is an association of person. Registration of partnership is not compulsory under partnership act. However many banks insist on registration of partnership. In any case stamped partnership deed or partnership letter should be taken when an account is open for a partnership. The partnership deed with contain name of partner, objective of partnership, and other operational details, when should be taken not of by the bank in its dealing.

Joint stock company (limited liability companies)

A company is register under companies act has legal status. A company is artificial person which has perpetual existence with limited liability and common seal. Memorandum and article of association certificate of incorporation, revolutions passed by the board to open account, name and designations of person who will operate the account with detail of restrictions place on them are the essential document required to open an account.

Club,societies and associations

The club, societies and associations etc May be register or unregistered. Account may be open only if  persons reliable are in the managing committee or governing body. Copy of certificate of registration and copy of bye-law, certified copy of resolution of managing committee governing body to open the account and give detail of office bearer etc to operate the account.

What type precaution generally are taken by bank while dealing with partnership firm and companies account?

Joint stock company it is an association of individual for the purpose of profit. The members contribute capital. These common capital is divide into a shares. Is member is a shareholder. The shares are transferable. While opening such account the banker should be very careful and he should adopt the following precautions:-

1) checking of documents

A) banker must check the following documents the certificate of incorporation. When we register our company in a companies Act. It is issue by the registrar of the joint stock company.

B) certificate of business commencement:- it is a certificate issue to public company after completion of formation process. Only public companies needed.

C) memorandum of association

D)article of association

2) checking of resolution:- resolution of the company must be checked. It is must be signed by the chairman and security of the company. It must contain the following documents

A) the name of authorised person who will operate the account of the company.

B) the name of the person who will execute the document on the behalf of the company

C) all type of condition related to power about borrowing lending, mortgageing delegated by the company must be check carefully by the banker.

3) director account in the same bank:- account of the company and personal account of the director should be in a same bank. Ab banker should keep an eye that there should be no wrongful conversion of fund between the two.

4) checking of limits :- a banker must check that a company may be used the power of borrowing than the fixed limit.

5) winding up case:- if company is wound up and liquidator is appointed the banker will stop the payment till the instruction of the liquidator.

Partnership account:- 

partnership is create by oral or written agreement it is the relation between person to share the profit of the business. Partnership maybe carry on buy all the member over by the single on behalf of other. If partnership deed is not clear then it is settle according to partnership Act 1932.

While opening the partnership account following equation must be taken by a banker

1) the account must be open in the name of firm.

2) partnership deed and change made in it time to time must be study carefully by the banker

3) it is necessary that all the partners should be sign on the whole that document.

4) all the instructions about the opening of the account must be signed by the all the partners.

5) the sample of signature on cards must be taken from the partner and authorised person who will operate the account.

6) in case of advancing law and execution of guarantees deed the banker will obtain the signature of all the partners.

7)The banker must observe the various provision of partnership Act in case death , entry or withdrawal of any partner.

8) the declaration and consent must be taken by the banker from all the partners and record to drawing and disbursement.


Types of deposits

Saving deposit / saving bank account

Current deposit

Fixed deposit

Recurring deposit

 

 

Saving bank account

Current deposit account

Fixed deposit account

Recurring Deposit account

Operate

Who have a defined income and looking for saving example labour, employee etc

Big businessman, companies and institutions, such as school, colleges, and hospital has to make payment through their bank account

This account customer want to invest money for long time and want high return on low risk or without risk.ex

Employees, labour etc.

The account can be open by a person individually or jointly with another. And the person who use this account salary man, pretty traders etc

Interest

Interest is allowed on the balance of deposit in the account. Interest rate is lower than fixed deposit and recurring deposit

The bank does not pay any interest on the balance. Rather the account holder pay a certain amount each year as operational charge.

If money is deposit in saving bank account, Bank allow a low rate of interest. Therefore, money is deposited in fixed deposit account to earn an interest at higher rate. Fixed deposit offer highest interest rate to any Deposit account.

The rate of interest allow on the deposits is higher than the saving bank account but lower than the fixed deposit account.

Withdrawal

Withdrawal can be made either by signing a withdrawal form or by issuing a cheque or by ATM card. Normally Bank put some restrictions on the number of withdrawal from this account

Withdrawal can be made any number of time or any amount.

Withdrawal are not allowed before the time of maturity. However, on request, the depositor can encash the amount before its maturity. In that case Bank give lower interest then what was agree upon.

The total deposit along with the interest is payable on maturity. However, the depositor can also be allowed to close the account before its maturity and get back the money along with the interest till that period.

Deposit

This type of account can be opened with minimum initial deposit interest is paid in this minimum deposit . Money can be deposit anytime in this account.

This account also required a certain minimum amount of deposit while opening the account like saving bank account

This type of deposit account money is deposit only one time in lumsume . For the specific period.The specific period can be one year to ten years

While operating the account of a person has to agree to deposit of fixed amount once in a month for a certain  period.

 Type of deposits

Saving bank account

Current deposit account

Fixed deposit account

Recurring deposit account

Saving bank account

As the name suggests this type of account is suitable for people who have a defined income and are looking to saving money. For example, the people who get salary or the people who work as a labour. This type of account can be open with a minimum initial deposit . Money can be deposited anytime in this account.

Withdrawal can be made either by signing a withdrawal form or by issuing a cheque or by using ATM card. Normally Bank put some restrictions on the number of withdrawal from this account. Interest is allowed on the balance of the deposit in the account. The rate of interest on saving bank account varies  from bank to bank. And also charges from time to time. Minimum balance has to be maintained in the account as prescribed by the bank.

 

Current deposit account:-

Big businessman, companies and institutions such as school colleges and hospital has to be made payment through their bank account. Since there are restrictions on the number of withdrawal from saving bank account, that type of account is not suitable for them. They need to have an account from which withdrawal can be made any number of time. Banks open a current account from them. Like saving bank account, this account also required a certain minimum amount of deposit while opening the account. On this deposit, the bank does not pay any interest on the balances. Rather the account holder pay a certain amount each year as operational charge. These account also have overdraft facility.

Fixed deposit account

Some Bank customers may like to put any money from a longer time. Such deposit offer a higher interest rate. If money is deposit in saving bank account, banks allow a lower rate of interest. Therefore, money is deposited in a fixed deposit account to earn interest at higher rate.

This type of deposit account allow the deposit to be made on and amount for a special period. This period of deposit may range for 15 days to 3 year or withdrawal is not allowed in this years. However, on request, the depositor can and cash the amount before it maturity. In that case, banks give lower interest then what agreed upon. The interest on fixed deposit account can be withdrawal as certain interval of time. At the end of the period. Banks also granted a loan on the security of fixed deposit receipts.

Recurring  deposit account:-

When opening the account a person has to agree to deposit of fixed amount once in a month for the certain period. The total deposit along with the interest  is payable on maturity. However that depositor can also be allow to close the account before its maturity and get back the money along with the interest till that period.

The account can be open by a person individually, or jointly with another. The rate of interest allowed on the deposit is higher than on saving deposit but lower than the rate of allowed on fixed deposit for same period

 

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