9 Questions
What is the main reason why banks pay higher interest on fixed deposits?
To have more funds available for loans and advances
What makes fixed deposits different from demand deposits?
Fixed deposits are repayable on a fixed maturity date
Which organization frames rules about the interest on call deposits according to the text?
Reserve Bank of India (RBI)
What type of deposits may or may not fetch interest based on the rules set by regulatory bodies?
Call deposits
What happens when a depositor requires payment of call deposits?
An advance notice of a week or less is required
How do term deposits differ from fixed deposits?
Term deposits are repayable on maturity dates agreed between customers and bankers
What feature distinguishes call deposits from other types of bank accounts?
"No operations are allowed" by the customer against the deposit
What do almost all banks provide to account holders to facilitate 24-hour withdrawal facilities?
"ATM cards"
In what situation are advance notices required for withdrawing funds from call deposits?
"When the depositor requires payment of call deposits"
Study Notes
Garnishee Order
- A Garnishee Order is a court order that extinguishes a banker's obligation to honor their customer's cheques.
- It is issued under Order 21, Rule 46 of the Code of Civil Procedure, 1908.
- The order is issued when a debtor fails to pay a debt owed to a creditor, and the creditor applies to the court for the issue of a Garnishee Order on the debtor's banker.
Effect of Garnishee Order
- The order attaches debts not secured by a negotiable instrument, prohibiting the creditor from recovering the debt and the debtor from making payment.
- The customer's account with the banker becomes suspended, and the banker is obligated not to make any payment from the account after receiving the order.
Parties Involved
- The creditor who requests the order is called the judgement-creditor.
- The debtor whose money is frozen is called the judgement-debtor.
- The banker who is the debtor of the judgement-debtor is called the Garnishee.
Types of Garnishee Orders
-
Order Nisi: A provisional order issued by the court to the banker, prohibiting payment from the account until further orders are issued.
-
The order seeks explanation from the banker as to why the funds in the account should not be utilized for the judgement-creditor's claim.
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The banker is prohibited from paying the amount due to the customer on the date of receipt of the Order Nisi.
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Order Absolute: A final order specifying the amount to be kept separate from the account.
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The court may issue the order after the banker files their explanation, and the entire balance in the account or a specified amount is attached to be handed over to the judgement-creditor.
Cases where Garnishee Order is not Applicable
- Debt is not actually due to the customer.
- Amount is in the joint names of the customer and another person, whereas the order is in the name of the customer only.
- Banker is entitled to set off the balance against debt to it from the judgement-debtor (customer).
- Money in the account is held by the customer as a trustee or is impressed with trust.
- The name of the customer as appearing on the Garnishee order is wrong.
- The account is overdrawn.
Deposit Schemes
- Classified into three categories:
- Demand Deposit
- Deposit (no further information provided)
- (Third category not mentioned)
Learn about the legal obligation of a banker to honour customer's cheques and how it is affected by a Garnishee Order issued by the Court. Understand the implications of this order under Order 21, Rule 46 of the Code of Civil Procedure, 1908.
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