NCC Bank Limited General Banking PDF

STUDY MATERIAL ON GENERAL BANKING FOR NCC BANK LIMITED Module: General Banking (Advance Level) January 30, 2020 Bangladesh Institute of Bank Management [BIBM] Dhaka, Bangladesh Study Material on “GB (Advance)” for NCC Bank Limited 1 Study Material on “Advance General Banking” for NCC Bank Limited Chapter1: Introduction 1.1 Background 1.2 Specific Objectives of the Manual 1.3 Methodology of preparing the Manual 1.4 Coverage and Limitation of the Report 1.5 Organization of the Manual Chapter 2: Banker Customer Relationship 2.1 Banker Customer Relationship – a Comprehension 2.2 Contractual Relationship 2.3 Special relationship 2.4 Customer Due Diligence for Banks 2.5 Termination of Banker–Customer Relationship 2.6 Relationship Banking 2.7 Customer Service Questions and answer indications Chapter 3: Opening and Operations of Bank Deposit Accounts 3.1 Bank Deposits 3.2 Deposit Products of NCC Bank Limited 3.3 Demand Deposit & Time Deposits 3.4 Common Documents required for Opening of Deposit Accounts 3.5 Special Types of Accounts and their Operational Procedures 3.6.1 Club/ Societies/ NGO/ Educational Institute/ Association 3.6.2 Account of Executors and Administrators 3.6.3 Trust Account 3.6.4 Accounts of Minors 3.6.5 Account of Illiterate Persons 3.6.6 Account of Local Authorities / Municipal Corporations etc. 3.6.7 Some Important Issues of Various Types of Account Operations Questions and answer indication Study Material on “GB (Advance)” for NCC Bank Limited 2 Chapter4: Negotiable Instruments 4.1 Negotiable Instruments 4.2 Promissory Note 4.3 Bill of Exchange 4.4 Cheque 4.5 Types of Cheque and their Significance 4.6 Paying Banker 4.7 Collecting Banker Questions and answer indications Chapter 5: Cash and Volt Management 5.1 Cash Management 5.2 Measures for Safe Keeping of Cash Questions and answer indications Chapter 6: Clearing and Collection of Instruments: BACH, BACPS 6.1 Clearing 6.2 BACH 6.3 MICR 6.4 Responsibility of Presenting Bank 6.5 For Enhanced Attention for Suitable Risk Management Techniques 6.6 Operational Due Diligence 6.7 Responsibility of Paying Bank as Regards Settlement 6.8 Paying Bank’s Due Diligence 6.9 Processing at PBM (Participating Bank Module) 6.10 BACPS Threats 6.11 Value Date Clearing 6.12 Same Day Clearing 6.13 Real Time Gross Settlement (RTGS) 6.14 Glossaries related to clearing Questions and answer indication Study Material on “GB (Advance)” for NCC Bank Limited 3 Chapter 7: Bills for Collection and Remittance 7.1 Definition 7.2 Inward Bills for Collection 7.3 Outward Bills for Collection 7.4 Remittance Questions and answer indications Chapter 8: Bank Locker: Sizes, Opening a locker, Rent, Safety, and Alternatives 8.1 Locker Service 8.2 Definition of Bank Locker 8.3 Locker Facility 8.4 Controls over Access to Locker 8.5 Keys of Locker Handling 8.6 Un-let and Surrendered Locker Keys 8.7 Nomination for Return of Articles kept in Safe Custody with the Bank Questions and answer indications Chapter 9: Risk Management 9.1 Risk Associated with General Banking 9.2 Other Risk 9.3 Importance of Risk Management in General Banking 9.4 Risk Control and Management 9.5 Monitoring and Reporting 9.6 Human Capital Questions and answer indications Chapter 10: Laws and Regulations Related to General Banking (Relevant sections ) 10.1 The Bank Companies Act, 1991: Relevant Issues of the Act 10.2 The Contract Act, 1872: Some Important Sections 10.3The Partnership Act, 1932: Relevant Issues 10.4 The Companies Act, 1994 (with amendments): Relevant Issues of the Act. Study Material on “GB (Advance)” for NCC Bank Limited 4 10.5 Negotiable Instrument Act, 1881 10.6 Money Laundering Prevention Act 2012: Relevant Issues of the Act. 10.7 Anti-terrorism Act, 2009: Relevant Issues of the Act. 10.8 The Bankers' Books Evidence Act (1891) Questions and answer indications Chapter 11: Fraud, Forgeries & Malpractices Related to General Banking 11.1 Fraud 11.2 Forgery 11.3 Malpractice Questions and answer indications Chapter 12: Leadership and Managerial Skills in Banking 12.1 Leadership and Managerial Skills 12.2 Leadership in Banks 12.2.1 Qualities of a Banking Leader 12.2.2 Qualities of a Good Bank Branch Manager 12.3 Employee Motivation 12.3.1 Motivating Bank Employees 12.4Work Stress 12.4.1 Work Stress in the Banking Sector 12.4.2 Some Strategies to Overcome Job Stress in the Banking 12.5 Changing the Attitude of Bank Employees 12.6 Employee Grievance 12.6.1 Handling Employee Grievance Glossary Appendix Questions and answer indications Study Material on “GB (Advance)” for NCC Bank Limited 5 List of Abbreviation ACH Automated Clearing House AAA Automated Accounting Advice AOF Account Opening Form ATM Automated Teller Machine BACH Bangladesh Automated Clearing House BAMLCO Branch Anti Money Laundering Compliance Officer BEFTN The Bangladesh Electronic Funds Transfer Network BFIU Bangladesh Financial Intelligence Unit BIN Business Identification Number BRPD Banking Regulations and Policy Division CAMLCO Chief Anti Money Laundering Compliance Officer CBS Core Banking Solution CD Current Deposit CD Capacity Development CHIPS Clearing House Interbank Payment System CRM Customer Relationship Management CRR Cash Reserve Ratio CSR Corporate Social Responsibility CTR Cash Transaction Reporting EFT Electronic Funds Transfer FDR Fixed Deposit Receipt GB General Banking GOB Government of Bangladesh IBCA Inter Branch Credit Advice IBDA Inter Branch Debit Advice KM Knowledge Management KYC Know Your Customer Study Material on “GB (Advance)” for NCC Bank Limited 6 LD Local Draft MISD Monthly Income Deposit Account MSDS Monthly Savings Deposit Account MICR Magnetic Ink Character Recognition NI Negotiable Instrument POA Power of Attorney RB Receiving Bank RJSC Registrar of Joint Stock Company RTGS Real Time Gross Settlement SB Scheduled Banks SLR Statutory Liquidity Ratio STR Suspicious Transaction Report TDR Term Deposit Receipt TIN Tax Identification Number TT Telegraphic Transfer TP Transaction Profile Study Material on “GB (Advance)” for NCC Bank Limited 7 TRAINING MANUAL ON GENERAL BANKING FOR NCC BANK LIMITED CHAPTER 1 Introduction Study Material on “GB (Advance)” for NCC Bank Limited 8 1.1Background The role of the commercial banks cannot be under emphasized due to its significant contribution in the development of nation's economy as well as its growing importance to enter in those sectors to fulfill the demand of the customers where services are inadequately served or not reached. Commercial banks collect capital in terms of the deposit of the general public and mobilize to the productive fields to activate the entire economic sector. Commercial banks in Bangladesh economy are to face an increasing competition for their business in coming days, like any other emerging market economies. Their business is no longer remaining easy as they earlier. Bank provides security to the deposits of the general public and organization on one hand and pays interest on such deposits on the other and encourage saving. The General Banking department is the vital part for financial institution. It is linked with all other department. The world of banking and finance is changing very fast and banks are also transforming themselves with the focus on knowledge. In many cases it is observed that the knowledge base of our bank employees are not that much rich as is expected. Therefore, there is a need for today’s bank employees to keep themselves updated with a new set of skills and knowledge. Banks and technology are evolving so rapidly that bank employees must continually seek new skills that enable them not only to respond to change, but also to build competence in handling various queries raised by customers as well. Since general banking holds the major part of overall banking activities, emphasis should have been given more on the issues related to general banking. The continuous changes which are taking place in the economic and financial surroundings of the country, the areas needing special attention for improvement in the areas for ensuring that the banks attract quality management and service, protecting and building up their deposit base, growing their capacity for creating products in different areas of operation, strengthening their ability to manage different areas of general banking, and enhancing their ability for providing services as per customer needs. A critical challenge of general banking, malpractices that take the form of irregularities or non-compliance of procedures and fraudulent activities like bank fraud, money laundering became a crucial concern for the banks. The common view that the main risk within general banking is fraud, Money laundering etc,. The malpractices could be particularly detrimental for banks that are widely perceived to be more fragile than other non-financial organizations. Study Material on “GB (Advance)” for NCC Bank Limited 9 As a measure to handle the challenges of malpractices and especially frauds, relevant legislative measures have been made and stringent compliance requirements increased tremendously. However, avoidance of the procedures and compliance requirements in general banking could prove to be very challenging for banks. Thus all associated risks of general banking must receive adequate attention of the policy makers of the bank. Especially, senior management must possess knowledge and skills on risk management and capacity development in general banking. In the context of Bangladesh, general banking is the key component that consists of the management of deposits (i.e., current deposit, savings deposit, short notice deposit, fixed deposit, and recurring deposit), cash, honor cheques, clearing of cheques, customer services, locker facilities and other ancillary services of the bank. General Banking Department is considered as the direct customer service center. It is the starting point of all the banking operations. Moreover, it opens new account, remits fund, takes deposit, issues bank draft and pay order, issues debit and credit cards etc. Alongside ensuring satisfaction of the customers, the efficiency level of the bankers in general banking with due compliance of the laws and procedures is also very crucial. As such, capacity development of all concerned officials of the banks is also matter to be considered for handling general banking challenges effectively. More specifically, banks must have specialized people having adequate knowledge base and skills to facilitate general banking effectively with a view to maximize profit for the banks. A group of senior bankers must also have adequate knowledge and skills to guide desk level bank officials. Such skills are clearly connected with minimizing risks in general banking and establishing or improving credibility of a bank. In such a circumstance, a customized information manual for the service providing bankers could serve to a great extent. 1.2 Specific Objectives of the Manual With this background in mind, the general banking manual targets to create and enhance knowledge and skills amongst the employees of NCC Bank Limited. The specific objectives of the manual are: one, to offer relevant information on the products and procedures of general banking operations of banks; two, to offer pertinent data on the products and procedures of general banking operations of banks with special reference to the NCC Bank limited; three, to provide information on the status and changes in domestic laws and regulations to general banking operations in Bangladesh; and four, to draw attention on Study Material on “GB (Advance)” for NCC Bank Limited 10 challenges and risks associated with general banking activities in Bangladesh for improving effectiveness of general banking by the NCC Bank Limited. 1.3 Methodology of Preparing the Manual Both primary and secondary data were collected to prepare the manual. Domestic set of laws was summarized and relevant circulars related to general banking operations of the Central Bank. To gather primary data, a questionnaire survey was conducted to have information on the products and their nature and amounts of NCC Bank Limited. A number of general banking experts were consulted in the process of formulation of the manual. The manual is prepared keeping in mind the knowledge requirements of relatively senior level bank executives of the NCC Bank Limited. 1.4 Coverage and Limitation of the Report Broad areas of the manual are general banking activities of banks. Widely used general banking related issues are covered in the guide. The manual also discusses the risk issues and capacity development aspects that are especially connected with the skills of senior management. Moreover a good number of questions have also been incorporated in this manual indicating answer of the related chapters. 1.5 Organization of the Manual The manual is organized under twelve chapters: after an introductory chapter with the objectives and methodological issues, chapter 2 deals with the Banker customer relationship, general relationship, and special relationship. Opening & operations of different bank accounts and some other important issues of various types of account operation are discussed in chapter 3. Chapter 4 is about Negotiable Instruments that mainly includes different types of negotiable instruments, their features and characteristics and some other important issues. Clearing and Collection of Instruments: BACH, BACPS Cash, and vault managements, measures for safekeeping of cash are having been discussed in chapter 5 where as Bills Collection and Remittance has been placed in Chapter 6. Chapter 7 of the manual covers about Cash and Vault Management and in chapter 8 Bank Locker and their different issues have been discussed. In chapter 9 Risk Management along with risk associated with general banking, and about risk control and management have been incorporated. Chapter 10 covers Laws and Regulations Related to General Banking (Relevant Sections). In chapter 11 Fraud, Forgeries & Malpractices Related to General banking whereas about the Leadership and Managerial Skills in Banking has been described. Study Material on “GB (Advance)” for NCC Bank Limited 11 CHAPTER 2 Banker Customer Relationship Study Material on “GB (Advance)” for NCC Bank Limited 12 2.1 Banker Customer Relationship – A Comprehension Relationship between banks and their clients is fiduciary one. It is based on trust and bank has to carry out their duties to the customer in utmost good faith and due diligence. Bank’s supreme responsibility lies in protecting customers’ deposit and secrecy about customers. Banks shall be impartial and non-discriminatory in their dealings with the customers. Any favor or indulgence to any one client or group of client will be considered violation of fiduciary relationship. A bank is basically a financial intermediary. The significance of the banking system in the development process invariably indicates the importance of commercial banks for the purposes of economic development, since the operation of the whole banking system rests mostly on the commercial banks. The essential function of a commercial bank is to act as an intermediary between the savers and the borrowers. That is, they mobilize the financial surpluses of the savers and allocate these savings to the credit worthy borrowers of the different sectors of the economy. Thus, commercial bank deals with the wide array of general banking like deposit collection, maintaining banking customer relationship, providing efficient services to their customers with a view to maximize profit for the organization. Banking in Bangladesh mainly governed by the Banking Companies Act, 1991 and also some other related laws. Basically a banker-customer relationship starts with the opening of an account with the bank. Bank accounts are opened basically in relation to Contract Act, 1872. Persons having competency to enter into a contract may open an account with the bank. Any dispute between two parties can be settled only on the basis of the nature of the existing relationship between the two. As such, it is essential that a banker should know the exact relationship between the banker and the customer. The basic and perhaps most common relationship between a banker and his customer is that of debtor and creditor. Besides, there are numerous kinds of relationship between the bank and the customer. The relationship between a banker and a customer depends on the type of transaction; products or services offered by bank to its customers. The bank has duties and rights and the customer has, at the same time, obligations to his bank. The relationship of a bank with its customers gives rise to important legal rights and duties quite apart from any commercial considerations. Study Material on “GB (Advance)” for NCC Bank Limited 13 2.2 Contractual Relationship In fact, the relationship between banker and customer is contractual in nature. Since bank offers the variety of services to the customer, the relationship between the bank and the customer vary according to the type of service rendered by the bank. Relationship of Debtor and Creditor Banker accepts deposits of money from his customers for the purpose of lending and investment and repays it on demand as per the terms of the contract of deposit. In fact, deposit accepted by the bank is technically money loaned out to the bank from the depositors. Therefore, the general relationship between a depositor and the banker is a relation of the debtor and the creditor. The depositors are creditors and the bank is the debtor. However, the relationship between the banker and customer is directly opposite when the bank lends money to its customer. The bank becomes the creditor and the customer becomes the debtor. Relationship of Trustee and Beneficiary When a banker accepts items like securities or documents for safe custody of the customers, the relation between the banker and customer is a Trustee and the Beneficiary. The bank is the Trustee and the customer is the beneficiary. Relationship of Lessor and Lessee Similarly, when a customer hires a safe deposit locker from the bank, the relation between the bank and the customer is lessor and lessee. The bank is the lessor and the hirer of safe deposit locker is the lessee (tenant). Relationship of Principal and Agent When a bank collects cheques, bills and other instruments for customers, the relation between the bank and customer is that of Principal and Agent. The bank also makes regular payments of insurance premium rent etc. as per standing instruction received from the customer. In the above cases also the relation between the bank and the customer is of Principal and agent. The bank acts as the agent and customer the principal. Relationship of Assigner and Assignee An assignor is a person who transfers his security rights to a lender as collateral to the money borrowed by him. The transfer of Life Insurance Policies, Supply bills etc. in the name of the bank is examples of assignment. The bank on whose name security rights are Study Material on “GB (Advance)” for NCC Bank Limited 14 transferred by the assignor is called as assignee. On full payment of dues to the assignee, the assignor can get the security re-assigned in his name. Relationship of Bailor and Bailee Bailment refers to delivery of goods by one person to another for some purpose under a condition that the goods to be returned to depositor when the purpose is accomplished or otherwise disposed of according to the directions of the person while delivering the goods. The person delivering the goods is known as bailor and the person to whom goods are delivered is called bailee. 2.3 Special Relationship 1. Rights of a Banker and 2. Obligations of a Banker Rights of a Banker It is not that the bank has only duties towards its customers; it too has certain rights to his customers. The rights can broadly be classified as:  Banker’s Right to Lien  Banker’s Right to Set-Off  Banker’s Right to appropriate payment  Right to Charge Interest and Commission  Right under Garnishee order Banker’s Right to Lien A lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid. The creditor (bank) has the right to maintain the security of the debtor but not to sell it. There are three types of lien: a) Right of Particular Lien and b) Right of General Lien c) Banker’s Lien Right of Particular Lien: A 'particular lien' gives the right to retain possession only of those goods in respect of which the dues have arisen. It is also termed as ordinary lien. If the bank Study Material on “GB (Advance)” for NCC Bank Limited 15 has obtained a particular security for a particular debt, then the banker's right gets converted into a particular lien. Right of General Lien: A 'general lien' gives the right to retain possession of any goods in the legal possession of the creditor until the whole of the debt due from the debtor is paid. Banker has a right of general lien against his borrower. General lien confers banks right in respect of all dues and not for a particular due. Banker’s Lien:A banker's lien is a legal right arise in many common law jurisdictions of a bank to exercise a lien over any property in the custody of the bank as security for the indebtedness of the customer to the bank. The bank has the right to seize and sell the defaulting borrower’s property in its possession, after giving a reasonable notice but without going through the foreclosure procedure. Banker’s right to set-off The banker has the right to set off the accounts of its customer. It is a statutory right available to a bank, to set off a debt owed to him by a creditor from the credit balances held in other accounts of the borrower. This right is applicable in respect of dues that are due and are becoming due shortly. It is not applicable on future debts. It is applicable in respect of deposits that are due for payment. Banker’s Right to Appropriate payment It is the right of the customers to direct his banker against which debt (when more than one debt is outstanding) the payment made by him should be appropriated. In case no such direction is given, the bank can exercise its right of appropriation and apply it in payment of any debt. Banker's right to charge interest and commission Banker has an implied right to charge for services rendered and sold to a customer. Banker charges interest on amount advanced, processing charges for the advance, charges commission etc. depending on the terms and conditions of advance banks charge interest at monthly, quarterly or semi-annually or annually. Banker charges commission for online share trading. Study Material on “GB (Advance)” for NCC Bank Limited 16 Banker’s Right to Garnishee order Garnishee Order is a court order instructing a garnishee (a bank) that funds held on behalf of a debtor (the judgment debtor) should not be released until directed by the court. Obligations of a Banker i) Obligation to honour the customer’s cheques. ii) Obligation to maintain secrecy of customer’s account. iii) Obligation to maintain proper records. Banker’s obligation to honour customer’s cheques: When a customer of a bank issues cheque and demand money the banker must honour the Customer’s cheque after the necessary verifications. The drawee (banker) of a cheque having sufficient funds of the drawer (customer) in his hands must pay the cheque amount. Bank’s liability for wrongful dishonor of cheque: A banker should not refuse to pay customer’s cheque on unreasonable and improper grounds. In such a case, the banker is liable to compensate the customer. Banker’s obligation to maintain secrecy of customer’s Account: The banker has an implied obligation to maintain secrecy of the customer’s account. He should not disclose matters relating to the customer’s financial position since it may adversely affect the customer’s credit and business. Banker’s obligation to maintain proper records: The banker should maintain the proper records of customer’s transactions. Any mistake of maintaining the records, customer is not liable. 2.4 Customer Due Diligence for Banks Supervisors are recognizing the importance of ensuring that their banks have adequate controls and procedures in place so that they know the customers with whom they are dealing. Adequate due diligence on new and existing customers is a key part of these controls. Without this due diligence, banks can become subject to reputational, operational, legal and concentration risks, which can result in significant financial loss. 2.5 Termination of Banker–Customer Relationship Since banking is a service industry, it is all the more essential that good relationship is not only created but also maintained by means of offering excellent personalized services. Study Material on “GB (Advance)” for NCC Bank Limited 17 As long as there is some sort of account either a deposit or a loan account, the relationship would continue. However, the relationship would be terminated on the following happenings:  Customer’s Request  Unclaimed Deposit Account  Death of customer  Insanity of the customer  Insolvency of the customer  Undesirable customer  Attachment order issued by the income Tax authorities  On receipt of Garnishee Order 2.6 Relationship Banking Relationship banking enables banks to provide a cost-effective, win-win service to the valued customers. Relationship banking emphasizes on managing relations among depositors, borrowers, and regulatory bodies with an ultimate object to earn sustainable growth in banking business. It is aimed at creating a long term, mutually beneficial and exclusive problem solving relations between customers & bankers with a view to holding loyalty of the customers. Side by side, relationship banking focuses on building solidarity with the fellow banks and regulators. 2.7 Customer Service Customer service has great significance in the banking industry. The banking system in Bangladesh today has perhaps the largest outreach for delivery of financial services and is also serving as an important conduit for delivery of financial services. While the coverage has been expanding day by day, the quality and content of dispensation of customer service has come under tremendous pressure mainly owing to the failure to handle the soaring demands and expectations of the customers. Customer service in banking is one of the most important ways to keep customers coming back. It includes responding to customers, addressing questions and complaints in a thorough and timely manner and interacting with customers through face-to-face meetings, telephone, mail, fax and email. Most if not all bank employees are involved in some aspect of customer service. Study Material on “GB (Advance)” for NCC Bank Limited 18 Good customer service is the heart of banking. Today banks have a wide variety of competitors for business. Banks continually strive for improvements in this area. Examples of such techniques include taking customer surveys and monitoring calls that come in through the call center. Incentives, such as customer service awards, may be offered to encourage staff members to improve the customer support they offer. The customer is the most important person. The customer is not dependent on the banker - banker is dependent on the customer - banker works for the customer. Customer service should be projected as a priority objective of a bank along with its profitability, growth and social responsibility and therefore the Managing Authority of each bank/FI should have direct involvement with customer service quality. With this end in view each bank shall form a separate framework for customer services and complaint management. With a view to strengthening the corporate governance structure of the bank/FI and also to bring about improvement in the quality of customer services of the Banks/FIs, each bank/FI shall constitute Customer Service & Complaints Management Cells as stated below: At the head office/country office level this cell will be named as Central Customer Service & Complaints Management Cell (CCS & CMC). It will be constituted under the direct supervision of the Managing Director or the Chief Executive Officer (CEO)/Country Manager of the bank. Of course, there are complaint cells in existence in the head offices of the Banks/FIs at present. These complaint cells at the head offices of the Banks/FIs will be renamed as CCS&CMC. It may be mentioned here that this cell will be exclusively for dealing with the complaints & customer Service related matters. The number of personnel of this cell will be determined by the Managing Authority of the bank. The personnel of this cell will be the dignitaries and they will be delegated with adequate power to settle the disputes with due diligence. Functions of Branch Level Customer Service & Complaints Management Desk (BLCS & CMD): 1. Branch Level Customer Service & Complaints Management Desk (BLCS&CMD) shall deal with all the complaints directly received from the customers either in written form or over telephone. It will also give patient hearing to those customers who physically appear before the desk with complaints. 2. The BLCS & CMD shall also give reply to the customer-service-related queries of the customers. Study Material on “GB (Advance)” for NCC Bank Limited 19 3. The BLCS & CMD shall maintain two separate registers to record the written and telephonic complaints. Then it will take action on the complaints received on priority basis. 4. The BLCS & CMD shall prepare a monthly/quarterly statement or report in prescribed format (Annex-C) showing the number of complaints received, resolved and outstanding and send it to the ZCS &CMC within fifth of the next month/the quarter ended. 5. The BLCS & CMD may refer any complex complaint to the ZCS & CMC for further suggestion or resolution. The BLCS & CMD will keep correspondences with ZCS & CMC for this purpose. Policy for General Management of the Branches: Banking system should be oriented towards providing better customer service and therefore, Banks/FIs should periodically study their system and its impact on customer service. Banks/FIs should also have a Managing Authority approved policy for general management of the branches which may include the following aspects: a) Providing customers with booklets containing all details of services and facilities available at bank branches in Bengali and English. b) Displaying indicator boards at all service counters in both English and Bengali. c) Surprise inspection and survey of customer services. d) Reviewing and improving existing security system in branches and ATM booths. e) Providing enquiry counters at big branches. f) Training of staff in line with customer service orientation. g) Developing banking products or services keeping view to suitability and appropriateness for general customers. h) Annual survey of customer satisfaction and grievances resolution. Code of Conduct: Generally Code of conduct is a set of rules for employees’ personal behavioral pattern, official decorum, dress code, environmental and disciplinary arrangement for staff, stakeholders and stock holders in the banking premises set forth by Bank Company. The purpose of the code of conduct is to create a sense of oneness among a group of employees, customers and guests in spite of individual differences. The aim of the code of conduct is also to develop a common perspective towards a mission & vision of the company. A Code of Conduct acts as an internal watchdog and memorandum of the basic requirements of appropriate professionalism within the organizational culture. Exercising code of conduct helps to make customers happy and Study Material on “GB (Advance)” for NCC Bank Limited 20 improve long term banker-customer relationship. So each bank/FI shall formulate the basic code of conduct for the employees and it will be applied in five essential areas (5Ps) as listed below: a. People - The team who serve the customers. b. Premises - The location from which bankers serve and communicate with customers and colleagues. c. Papers - The documents which are used to provide and receive information. d. Processes -The operation processes that enable bankers to delight customers. e. Practices - The way in which bankers interact with customers. Customer Charter: Customer Charter is, in fact, a general statement of commitments for providing banking services and necessary information to customers. This may be in the form of written document, banner, poster, leaflets etc. that exhibit the names of banking products and services available in the bank. It also contains road maps or indicators for the customers to get services in the bank premises. For example, the indications of Information desk, Customer Relationship Desk, Remittance Desk, Credit Desk etc. may be displayed in the charter for the customers for tracing the service points easily. The Charter will also include a list of customers’ rights & obligations to Banks/FIs. The main objective of the “Customer Charter” is to make the customers conscious about their general rights, obligations, grievance approach process and thereby help customers taking their own decision. Copies of the Customer Charter should be available on request to all customers at all branches, Customer-Service-Points and at bank's web site. All Banks/FIs shalla) prepare and preserve their "Customer Charter" in their respective branches and exhibit in their premises. b) Inform, publish or display customers’ rights & obligations as well as Bankers’ rights & obligations through their web site, leaflets, notice boards, posters or in any other communication channels. Services and Complaint Management Cells: With a view to making the complaint lodgment easier banks/FIs shall display the contact details including names, complete address, telephone number, fax number, email address, etc. of the officials of CCS & CMC, ZCS & CMC and BLCS & CMD in the prominent place of the branches. Study Material on “GB (Advance)” for NCC Bank Limited 21 b) display on their web-sites the contact details including names, complete address, telephone number, fax number, email address, etc. of the officials of CCS & CMC and ZCS & CMC. Customer Awareness Program: Now a days it has been observed that financial scams, financial frauds & forgeries, financial crisis, financial corruptions and customer harassment have been incurring frequently in financial sector with the development of E-banking (E- banking generally refers to the provision of banking products and services through electronic channels such as the personal computer, through land phone and mobile phone connections, or through automated teller machines - ATMs, Point of Sales etc.). The primary reasons behind these are identified as the information gap as well as the communication gap between customers & bankers and the lack of awareness & financial education of customers. In such a situation customer awareness is a key defense against fraud, forgery and identity theft and security breach. That’s why bank/FI should take attempt to make customers aware of and to make educated for financial literacy with a view to strengthening customers’ knowledge and experience and thereby to reduce fraud, forgery and harassment. Customer Awareness and Education Program for customers can be arranged for providing customers with the knowledge and understanding of the wide range of banking products and services. Thus, the customers will be aware and conscious of their own rights and responsibilities, safety measure thereof independently. Besides, bank shall continue monitoring off- line risks as well as online threats such as hacking, phishing, identity theft etc. and reviewing security procedures day to day. As a part of Customer Awareness Program bank/FI shall perform the activities as stated below: a. Banks/FIs shall publish or declare customers alert and precautionary message, guidelines etc. on their products and services time to time through brochures, leaflets and advertisement in communication channels on the following topics.  Customer alert and precautionary message on general banking.  Customer alert and precautionary message on Internet banking  Customer alert and precautionary message on loan and advances.  Customer alert and precautionary message on local and foreign remittances etc. Study Material on “GB (Advance)” for NCC Bank Limited 22 b. Banks/FIs shall arrange meeting, seminar, workshop or any other non-formal programs periodically to convey their awareness message and alert tips to the customers relating to their own banking products and services. c. Banks/FIs shall also train up their customer-service-related officials to enhance their efficiency, skill, knowledge, tact, technique for excellent customer services. Complaint Management Safeguarding the interest of depositors and other customers is a fundamental requirement in the financial system. The bank-customer relationship is disrupted and complaints are raised when interests of the customers are neglected. Unresolved complaints may cause losses for the customers, or Banks/FIs. The publication of complaints through the media may also damage the reputation of Banks/FIs in the public eye and can erode public confidence in the financial system if complaints are not handled promptly with proper procedures. Therefore, with a view to safeguarding the interests of bank customers as well as fostering public confidence to the banking sector the Banks/FIs must have an effective complaint management System for addressing complaints of their customers with specific emphasis on resolving such complaints fairly and expeditiously. The complaint management is a series of activities such as facilitating complaint lodgment, developing complaint recording system, complaint resolution process, root cause analysis of the complaints raised and necessary policy formulation. These are illustrated below: Complaint Lodgment Procedure: a) Banks/FIs may facilitate the customers to lodge complaints by any available means (for example, letter, telephone, facsimile, email, or in person) and the banks/FIs shall not insist that complaints be necessarily made only in writing. b) Electronic complaints lodgment system can be produced in the web portal of the bank. c) Banks/FIs may facilitate the customers to lodge their complaints at any branch of the bank regardless the branch at which the customer opened an account or branch at which the customer conducted a financial activity or transaction. d) Banks/FIs shall accept complaints lodged by customers, or authorized representative of the customers. Study Material on “GB (Advance)” for NCC Bank Limited 23 e) A description of the complaints handling system, or bank’s/FI’s prescribed form for submitting complaints should be accessible/available to customers, via the banks/FIs website, or through pamphlets and posters. Complaint Recording a) Banks/FIs must maintain Complaints Registers and records of complaints received. The registers should include, but not be limited to the followings:  Date of complaints received;  Name and contact details of the complainants or authorized customer representatives;  Brief description of the complaints;  Name and designation of the official, handled the complaints;  Resolution status;  Settlement date; b) Banks/FIs are required to retain the detailed records of handling and resolution of complaints. Prioritization of Complaints: Banks/FIs must prioritize the complaints on the basis of the gravity and sensitivity of the matter involved. For this purpose, complaints received at any level of the banks/FIs, shall be classified into the following categories and shall be marked as H.S. for Highly Sensitive, S for Sensitive or G for General category on the complaints: Complaint Resolution Process: Complaint handling is one of the important functions in an organization for their institutional reputation and existence. The Complaint Management Team should follow a systematic procedure to settle the complaints against Banks and FIs. The Complaint Resolution process requires at least the following five stages:-a) Acknowledgment, b) Screening of complaints c) Departmental actions for resolution. d) Appeal and review e) Response and closure Study Material on “GB (Advance)” for NCC Bank Limited 24 Questions and Answer Indications 1. Define banker customer relationship and (2.1) 2. State the rights and duties of bank to their customers. (2.2) 3. Mention the customer’s obligations to his bank. (2.3) 4. Why customer due diligence for bank is required? (2.4) 5. How a banker customer relationship can be terminated. (2.5) 6. Define relationship Banking. (2.6) 7. State the contractual relationships that exist between banker and customer. 8. What is customer complaint management? State the customer complains recording and resolution process. Study Material on “GB (Advance)” for NCC Bank Limited 25 CHAPTER 3 Opening and Operations of Bank Deposit Accounts Study Material on “GB (Advance)” for NCC Bank Limited 26 3.1 Bank Deposits Deposit mobilization is an integral part of banking activity. Mobilization of savings through intensive deposit collection has been regarded as the major task of banking. Money placed into a banking institution for safekeeping. Deposits are kept in the various accounts in a bank. Mostly the bank’s business is funded through deposits from retail and corporate customers as well as call money from local banks. Other sources of banks fund are paid-up capital, reserve & undistributed profit, borrowings. The management of each bank is aware of the situation and it has already started diversifying sources of funds to reduce the dependency on funds from other banks. Every bank has already introduced several deposit schemes to attract deposits from various customers group. Many a banks are opening branches all across the country to reduce dependence on urban deposits. Meanwhile, a number of banks have built up its alternative channel infrastructure to offer the full suite of ATM’s, POS, Internet Banking, Call center, SMS Banking for its customers. 3.2 Deposit Products of NCC Bank Limited Different Liability products of the bank along with their features, Schedule of charges etc., are described below. Special Notice Deposit (SND) STD is renamed as SND as per Bangladesh Bank Instruction. Nature : 100% Time Deposit. Account holder can withdraw their deposits with prior notice to the Bank. Target Group : Any businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate bodies, Joint stock companies etc. SND account may be opened in the name of Corporate Bodies, Joint Stock Companies and also in the name of Adult individual or jointly who is/are mentally sound. Current Deposit (CD) Nature : 100% Demand Deposit. Account holder can withdraw their deposits frequently without any limit. Target Group : Any businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate bodies etc. Study Material on “GB (Advance)” for NCC Bank Limited 27 CD account may be opened in the name of Firm, Corporate Bodies, Joint Stock Companies and also in the name of Adult individual or jointly who is/are mentally sound. Savings Bank Deposit (SB) Nature : Hybrid.10% is Demand and 90% is time Deposit. Account holder can withdraw their deposits twice in a week up to a certain limit. Target : Group Any Individual. Savings Bank account may be opened in the name of Adult individual or jointly who is/are mentally sound. It also be open in the name of illiterate persons and minor after observing/completion of necessary formalities. In some cases SB Account may be open in the name of Club, Society or similar Institution. Conditions  In case of Savings Bank A/c the depositor(s) may withdraw money from the account twice in a week and may withdraw money up to 25% of the balance without notice but withdrawal money exceeding 25%, 07(seven) days prior notice is required. If the depositor persistently withdraws more than twice in a week or a sum exceeding 25% of the balance in the account without notice, the depositor will not get interest for that month.  If the balance is turn down below Tk.500 at any day of a particular month then he will not be entitled of interest for that month.  Considering the deposited amount of the first 6th date of each month, interest will be paid on the minimum balance of the said month as per prescribed rate on June and December of each year. Customer Benefits of SB/CD/SND Account Wide network of Branches (121 Branches all over Utility payment service Bangladesh) MICR Cheque-book facility Debit card facilities Opportunity to apply for - safe deposit locker facility Online banking service Transfer of fund from one branch to another branch by Collection of cheques through DD/TT/MT Clearing. Collect foreign remittance in both T.C. & Taka draft SMS Banking facilities Study Material on “GB (Advance)” for NCC Bank Limited 28 Required documents (CD/SND/SB) Individual account/Joint accounts  Photographs of the applicant(S)  Photograph(s) of nominee  Copy of Photo ID-NID/DL/Passport  Proof of address-Copy of utility bills/Physical verification etc Partnership account  Letter of partnership  Partnership deed Company account  Certified true copy of Certificate of Incorporation or equivalent, details of the registered office, and place of business;  Certified true copy of the Memorandum and Articles of Association, or by- laws of the client.  Copy of the board resolution to open the account relationship and the empowering authority for those who will operate any accounts;  List of directors. For Public Limited Company  Certified true copy of Certificate of commencement The above documents are mainly common documents. Additional documents is required when and where is applicable. SDS (Special Deposit Scheme) Tenor : 01 and 03(Three) years. Nature : 100% Term Deposit. Account holder can withdraw their deposit (Principal amount) after expiry of maturity of deposit. Target Group : Any individual person, businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate bodies etc. Loan facility : In case Lending against pledge of SDS Receipt, interest have to be charged against loan outstanding. This interest rate is fixed and Study Material on “GB (Advance)” for NCC Bank Limited 29 applicable in all cases without further consideration. Payment of first : The duration of time between deposit and payment of first dividend/interest dividend/Interest must be minimum 30(Thirty) days. Mode of payment of : Encashment may be made by PO, DD or transferring to Account. No monthly dividend cash payment will be allowed. Premature encashment Before 01(one) year After 01(one) year After 02(Tw0) but before 02(two) year but before years 03(three) years Depositor will not be entitled to get monthly dividend Prevailing Interest Prevailing Interest / interest, so amount of dividend /interest paid earlier Rate of SB A/C Rate of SB shall have to be adjusted from the net amount payable. A/C+0.5% Fixed Deposit Receipt(FDR) Tenor : 1 month, 3 months,06 months, 12 Month, 2 Year, 3 Year Nature : 100% Time Deposit. Account holder can withdraw their deposits after expiry of maturity of FDR A/C. Corporate Deposit All concerned are requested to obtain permission from the EVP, Treasury Division, HO, before booking/renewal of corporate deposit for tk. 1.00 crore and above. Target Group : Any individual person, businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate bodies etc. Pre Loan facility : In case of lending against lien of FDR account, interest at the rate of 3% above has to be charged outstanding. This interest rate is and applicable in all cases without further consideration. SSS (Special Savings Scheme) & DPS Tenor : SSS-5 to 8 years and DPS-3 to 8 years Nature : 100% Term Deposit. Account holder can withdraw their deposit after expiry of maturity of deposit. Study Material on “GB (Advance)” for NCC Bank Limited 30 Target Group : Any individual person. Loan facility : Loan may be allowed 80% of the deposited amount after 03 years. Interest will be charged 3% above of the said SSS rate. Penalty for failure to deposit : @2% per month per installment.(On due installment) installment in due time For issuance of duplicate deposit book : Tk.100 for each book. IETD (Instant Earning Term Deposit) Period : 01 year(Fixed) Nature : 100% Term Deposit. Account holder can withdraw their deposits after expiry of maturity of Deposit. Amount : Tk.1.00 lac and above but multiple of Tk.1.00 lac. Rate of Interest : Payment of : Interest to be paid to the customer account after deducting necessary interest Existing rate of 12 months FDR – 1% charges/levies etc. at time of accepting deposit. For the purpose customer will have to open/maintain account relationship with the branch. Target Group : Retired personnel, housewives, widow and wage earners Loan facility : Loan may be allowed against lien of the receipt upto 75 % of the face value, interest at the rate of 3% above has to be charged outstanding. Death of account : Due money shall be paid to nominee/legal heairs. holder Post mature : No auto renewal or no extra benefit for post mature encashment. encashment Premature encashment Before 06 months After expiry of 06 months No interest on the deposited amount but interest Interest will paid at existing STD rate and already paid at the time of opening account will interest already paid at the time of opening be realized/deducted from the principal amount. account will be realized/deducted from the principal amount. Money Double Program Tenor of the : 8 years 6 month that will make the Principal amount Double on Maturity Study Material on “GB (Advance)” for NCC Bank Limited 31 (As per Instruction circular No.703/2016 dated Jan 2016 effect from1st Feb product 2016) Nature : 100% Term Deposit. Account holder can withdraw their deposits after expiry of maturity of Deposit. Amount : Tk.1.00 lac(minimum) and its multiple. Condition : Single Transaction will not over 50 lac but any individual can open more than one MDP A/C. Rate of Interest : Interest to be kept in provision A/c until maturity. Interest to be paid/credited into the A/c only at maturity. Loan facility : Loan may be allowed against MDP receipt up to 80% of the Face value at an interest rate of 16.50% p.a. following other rules and regulations applicable for SOD(FO) Premature encashment Before 01(one) year No interest will be paid After 01(one) year but before 02(two) years Prevailing Interest rate of SB A/c After 02(Two) years but before 03(three) years Prevailing Interest Rate of SB A/c +0.50% After 03(Three) years Prevailing Interest Rate of FDR for 02 years. Note : No auto renewal and no extra benefit for Post Mature Encashment. NCC Bank Youngster Account Nature : It is basically a Savings Account for school and high school going students of Bangladesh with added values and benefits. Age : Any Bangladeshi student enrolled in an enlisted school or high school with Bangladeshi government within the age of 18 years. Authentication : Photographs of account holder and parents/legal guardian is attested by school authority. Opening deposit : Initial deposit not less than BDT 100. Account : Zero balance not allowed. : Not less than BDT 50 and maximum any amount. continuation balance Minimum deposit Study Material on “GB (Advance)” for NCC Bank Limited 32 Annual service : Free : Any number of withdrawal and fund transfer is allowed. : Joint signature of account holder and either of any parents or legal guardian charge Withdrawal frequency Cheque endorsement Student A/C to is mandatory. : regular SB A/C Account holder can continue it until attaining 18 years. After 18 years account holder may apply for regular savings account with closer of NCCB Youngster Account. Nomination of : legal guardian Guardians name and signature must be attested by both of the parents on BDT 150 non judicial stamp and notarized. Nominee : Mandatory and selected by both of the parents or legal guardian. Eligibility : Any Bangladeshi student enrolled in an enlist school or high school with Bangladeshi Government within the age of 18 years can open the account at his/her name with Parents or the legal guardian’s written consent by putting signature at account opening form. NCC Bank Youngster Moneyplant Scheme Nature : It is basically a recurring deposit account for school and high school going students of Bangladesh with added values and benefits. Age : Any Bangladeshi student enrolled in an enlisted school or high school with Bangladeshi government within the age of 18 years but on maturity date the age of the applicant must below 18 years. Authentication : Photographs of account holder and parents/legal guardian is attested by school authority. Rate of interest : Average rate is 10% p.a. Interest will be calculated as regular as SSS effective from 01.12.2015 Installment size : Minimum monthly installment is BDT 250 and Maximum is BDT 10,000. Maximum number : One can open maximum 05 YMS of different or same installment amount of account in account holder’s name or in joint name with account holder’s sibling’s name provided sibling must know how to write his/her own name. Maturity tenure : 05/8/10 years but the maturity period shall not exceed up to the age of 18 Study Material on “GB (Advance)” for NCC Bank Limited 33 years of account holder. Penalty for default : 2% of the installment size or minimum Tk.10 installment Premature : encashment Nomination of Before 06 months-No interest will be paid. After 01 year bur before 05 years- existing savings rate. : legal guardian Guardians name and signature must be attested by both of the parents on BDT 150 non judicial stamp and notarized. Nominee : Mandatory and selected by both of the parents or legal guardian. Transfer of : Respective youngster account. But after completion of 18 years of the matured value account holder, matured value shall be transferred according to the written instruction of the account holder along with both parents/Legal guardian. Eligibility : Must be NCCB Youngster account Holder with written consent from both the parents/Legal guardian but on maturity the age of the applicant must be below 18 years. NCC Bank Youngster Maximus Account Nature : 100% Term Deposit. It is basically a fixed deposit account for school and high school going students of Bangladesh with added values and benefits. Age : Any Bangladeshi student enrolled in an enlisted school or high school with Bangladeshi government within the age of 18 years but on maturity date the age of the applicant must below 18 years. Maximum : 05 (but total amount must not Cross BDT 1,000,000.00) different account are number of allowed at a single name or in joint name with account holder’s sibling’s account name provided sibling must know how to write his/her own name. Maturity tenure : Minimum 3 years but the maturity period shall not exceed up to the age of 18 years of account holder. Premature encashment Nomination of legal guardian : Before 06 months-Existing NCCB savings rate After 06 months bur before 1 year-2% above on existing savings rate : Guardians name and signature must be attested by both of the parents on BDT 150 non judicial stamp and notarized. Nominee : Mandatory and selected by both of the parents or legal guardian. Transfer of : Respective youngster account. But after completion of 18 years of the Study Material on “GB (Advance)” for NCC Bank Limited 34 matured value account holder, matured value shall be transferred according to the written instruction of the account holder along with both parents/Legal guardian. Eligibility : Must be NCCB Youngster account Holder with written consent from both the parents/Legal guardian but on maturity the age of the applicant must be below 18 years. Documents required opening any youngster account  School Attested Photograph of Applicant and both the parents,  School Enrolment Proof,  Both the parents attested photograph of Nominee,  Copy of Birth certificate of the applicant  National ID Card/ Passport/Driving License of both the parents or legal guardian.  Birth registration certificate of the nominee. Wage Earners Welfare Deposit Pension Scheme(WEWDPS) Tenor : 5 years Nature : 100% Term Deposit. Account holder can withdraw their deposits after expiry of maturity at lump sum or monthly pension for further 10 years. Monthly installment should be paid through foreign remittance. Eligibility : Expatriate Bangladeshi can open this account in his own name or in the name of his nominate person/spouse Penalty for default installment In case of death of account holder : @1% per month per installment. (On due installment).Account will be closed if 06 installments is overdue. : Nominee/Heirs will be entitled for the amount. In that case applicable interest will be existing savings rate +1%.If the account holder is died during the pension period then nominee/heirs will be entitled for the pension. Premature encashment Before 01(one) year After 01(one) year but After 03(Three) years before 03(three) years Depositor will not be Prevailing Interest Rate entitled to get interest. of SB A/C Study Material on “GB (Advance)” for NCC Bank Limited Prevailing Interest Rate of SB A/C+1% 35 Required documents Attested photocopy of passport and work permit. 3.3 Demand Deposit & Time Deposits Traditionally banks in Bangladesh have two types of deposits, namely Demand Deposits and Time Deposits. Demand Deposit: All Current Deposits and a small portion of saving Deposit (10%) are termed as demand deposit. Such deposits are withdraw able on demand. Time/Term Deposit: Time deposits are repayable on maturity and usually interest bearing. Time deposits may be of: a) Fixed Deposits b) Short Notice Deposits c) Recurring Deposits d) Large portion of Saving Deposits (90%) The period of the deposit and rate of interest applicable to the deposit are matters to be agreed between the depositor and the bank under the terms of the deposit. 3.3 Common Documents required for Opening of Deposit Accounts All the essential features of a valid contract must be present when a banker opens an account. Every person can open an account with the bank that is competent to contract as per Contract Act, 1872. For opening each type of account some documents are commonly required which are mentioned below: a) Duly filled in Account Opening Forms b) Proof of identify, verification of the address of the customer c) Specimen Signature Card d) Expected Transaction Profile (ETP) Form e) Duly filled in Know Your Customer Form f) Photographs of the constituents Study Material on “GB (Advance)” for NCC Bank Limited 36 g) Photographs of the nominee(s) if any. h) Other necessary documents depending on the nature of the customer. i) FATCA As regards genuineness of the document/papers provided by the customer these may be verified from the concerned authorities if necessary: List of documents Issuing Authority Current Valid Passport Passport Office Up-to-date TIN Certificate Tax Authority Valid Driving License Bangladesh Road Transport Authority (BRTA) Voter ID Card Office of Election Commission (EC) Armed Forces ID Card Employer or their delegate A Bangladeshi Employer ID Card bearing the Employer photograph and signature of applicant A certificate from any local government UP Chairman / Ward Commissioner organs such as Union Council Chairman, Ward Commission etc. (In this case the certifier should attest applicants’ photograph along with signature). Trade License with photograph can be Local Govt. Authority accepted for individual’s identification In addition to the above documents, interview of the customers, introducer from acceptable person to the bank to be obtained while opening the accounts. Bank should not allow any transaction unless the address in confirmed. 3.4 Special Types of Accounts and their operational procedures Apart from Individual and Joint A/Cs, Proprietorship A/C, Partnership account and Company / Corporate accounts there are some other special types of accounts also. While opening these accounts required documents and their modus operandi are as under: 3.6.1Club/ Societies/ NGO/ Educational Institute/ Association Study Material on “GB (Advance)” for NCC Bank Limited 37 a. Copy of the Constitution / Byelaws / Deed registered with the competent registration authority of Government of Bangladesh (GOB). b. Copy of the Registration Certificate issued in favor of the Organization by competent registration authority of GOB. c. Extract of the resolution, which intended to open the A/C relationship and the empowering authority for those who will operate account with specimen signature attested by the President/ Executive Director/ Head of the Educational Institution. d. Audited financial statements for latest 3(three) years but in case of a newly constituted organization its projected financial statements (if any). e. Copy of latest Annual Returns submitted to GOB authority by the organization. f. The personal identity of all the Members of Executive Committee to be established by any of the document as mentioned in individual / joint customer category. g. Two recent color photographs of all the signatories duly attested by the President/ Executive Director/ Head of the Educational Institution or any valued customer having Current Account. h. The personal identity of all key persons of the organization to be established by any of the document as mentioned in individual / joint customer category. i. Copy of Tenancy Agreement to be attested by the President/ Executive Director/ Head of the Educational Institution where Registered Office of the organization housed at a rented building. 3.6.2 Account of Executors and Administrators Executors and administrators are persons who are appointed to conduct the affairs of a person after his death. A person to whom the execution of a will is entrusted by the deceased (testator) is called the executor of the will. The executor has to obtain the confirmation of the will from the court in the form of a letter of probate. If a person dies without leaving a will (intestate), the court appoints a person to look after the property under a letter of administration. The persons appointed to wind up and distribute a Deceased’s Estate are called personal Representatives. Personal Representatives appointed by the Court are called Administrators. Both the executor and the administrator perform the same duties, i.e., to realize the assets of the deceased and to pay off his debts. The executor is appointed by the will. His powers and Study Material on “GB (Advance)” for NCC Bank Limited 38 authority are vested therein. He has to act according to the directions given in the will, but he is required to obtain a probate (official confirmation of the will) from the court. Operational procedures a. Executors and Administrators should sign Account opening Form and Specimen Signature Card while opening account in their names. b. Branches should not open the accounts of Executors / Administrators without prior permission from the Head Office. c. Executors / Administrators Accounts may be opened before probate is granted, but only for credits until receipt of the probate. d. The Account Opening Form should be signed by all the Executors, to whom probate has been granted by a competent Court or by all the Administrators if there is more than one Administrator. e. While opening the account, the probate or the Letter of Administration should be registered with the Bank by the Executor / Administrator(s) and an attested copy thereof should be retained with the Account Opening form. Also establish the identity of the Executor / Administrator. f. While opening the account, clear instructions to determine which of the Executors / Administrators is authorized to operate on the account should be obtained under the signatures of all the Executors / Administrators. If there is more than one Executor / Administrator. g. The Executors / Administrators should neither be allowed to transfer funds from the account of the Estate to their personal accounts nor should they be allowed to borrow from the Bank in their personal names against securities belonging to the Estate Account. h. These Accounts must be carefully monitored, as personal representatives and executors may only exercise their powers for a limited period of time. 3.6.3 Trust Account As regards Trusts, Trustees, Trust deed and other relevant issues are governed by ‘Trust Act, 1882’. A ‘Trust’ is an obligation annexed to the ownership of property, arising out of confidence reposed in a person / group of persons and accepted by him / them for the benefit of another or of another and the owner. The person who reposes or declares confidence is called the author of the trust. The person who accepts the confidence is called the trustee. The person for whose benefit the confidence is accepted is called the beneficiary. The subject matter of the trust is called the trust property or Trust Money. The beneficial interest Study Material on “GB (Advance)” for NCC Bank Limited 39 of the beneficiary is his right against the trustees as owner of the trust property. The instrument by which the trust is created is called the Trust Deed. While opening an account in the names of persons in their capacity as trustees the banker should take the following precautions: a) The banker should thoroughly examine the Trust Deed appointing the applicants as the trustees. The Trust Deed contains the names of the trustees, power vested in them for administering the trust property and other terms and conditions. b) The trustees are authorized to act jointly and are not competent to delegate their powers unless the Trust Deed authorizes them to do so. c) The banker should examine the trust deed to ascertain the powers and functions of the trustees. d) In case of two or more trustees, the banker should ask for clear instruction regarding the person or persons who shall operate the account. e) In the absence of such instruction all the trustees must sign the cheques, etc., because the estate is placed under their joint charge. f) If one or more of the trustees dies or retires, the authority vested in the remaining trustees depends upon the provisions of the Trust Deed. g) When all the trustees are dead, new trustees may be appointed by the court. h) The insolvency of a trustee does not affect the Trust property and the creditor of the trustee cannot recover their claims from such property. i) The banker should take all possible precautions to safeguard the interest of the beneficiaries of a trust, failing which he shall be liable to compensate the latter for any fraud on the part of the trustee. j) The trustees may borrow money from the banker and pledge or mortgage the Trust property only if the Trust Deed specifically confers such power on them. The banker should, therefore, grant loans to the trustee after thorough examination of the borrowing powers as given in the Trust Deed. 3.6.4 Accounts of Minors As per Contract Act, 1872 since a contract with a minor is void; no account in the name of a minor shall be opened. An account may be opened in the name of a minor jointly with parent or guardian. The account must be titled as “Minor Account. “The following terms & conditions shall be followed in maintaining & operating minor account: Study Material on “GB (Advance)” for NCC Bank Limited 40 a) The date of birth of the minor and the date when s/he attains majority will be recorded on the Account opening Form and Account Opening Register. b) Before authorizing a legal guardian to open an account in the name of a minor, the appointment order issued by Court in his/her name should be examined, and a copy thereof retained with the Account Opening Form. c) No overdraft should be allowed on a minor’s account. d) Where a natural / legal guardian operates a minor’s account, this account should be closed on the minor’s attaining majority. The outstanding balance should be transferred to a new account to be operated upon by the erstwhile minor as per a fresh mandate under his authority. Verification of his signature should be obtained from the natural / legal guardian. 3.6.5 Account of Illiterate Persons a. Accounts of illiterate persons may be opened on proper introduction. Such persons will put their thumb impression on the Account opening form (Advice of New A/c), specimen signature card etc. in presence of the Manager /Sub-Manager and the Introducer who will attest the thumb impression mentioning his Current Account Number. b. Two copies of passport size photographs of the Account holder should be obtained duly attested by the Introducer and admitted by the Authorized officer of the Branch, one of which should be kept attached with the specimen signature card. c. A letter of undertaking shall be obtained from the Account holder to the effect that he will not operate on the a/c unless he personally comes to the Bank and put his thumb impression on the cheques in presence of the Bank Manager/Sub-Manager who will attest the same on verifying the photograph of the depositor on Bank’s record. d. The Manager/Sub-Manager should record a Certificate to this effect on the back of the cheque. Precautionary measures should be taken to see that no cheque bearing thumb impression and presented through clearing is paid by the Branch. 3.6.6 Account of Local Authorities / Municipal Corporations etc. a. The accounts of any government or semi government organizations or a local body may be opened on obtaining the copy of the status or any other law by which the body was created and is governed. b. Such accounts should not be opened or in contravention of the provisions of that statute or law. Study Material on “GB (Advance)” for NCC Bank Limited 41 c. Along with a certified copy of the statute, the following documents are required to open such an account: i) Account Opening Form ii) Specimen Signature Card iii) Mandate, which will authorize the person(s), to operate the Account. 3.6.7 Some Important Issues of Various Types of Account Operations KYC: The adoption of effective KYC standards is an essential part of banks' risk management policies. Banks with inadequate KYC program may be subject to significant risks, especially legal and reputational risk. Sound KYC Policies and Procedures not only contribute to the bank's overall safety and soundness, they also protect the integrity of the banking system by reducing money laundering, terrorist financing and other unlawful activities. KYC procedures refers knowing a customer physically and financially. This means to conduct an effective KYC, it is essential to accumulate complete and accurate information about the prospective customer. The verification procedures establishing the identity of a prospective customer should basically be the same whatever type of account or service is required. It would be best to obtain the identification documents from the prospective customer which is the most difficult to obtain illicitly. No single piece of identification can be fully guaranteed as genuine, or as being sufficient to establish identity, so verification will generally be a cumulative process. The overriding principle is that every bank must know who their customers are, and have the necessary documentary evidences to verify this. CDD: Customer Due Diligence (CDD) combines the Know Your Customer (KYC) procedure, transaction monitoring based on the information and data or documents collected from reliable and independent sources. The CDD obligations on banks under legislation and regulation are designed to make it more difficult to abuse the banking industry for money laundering or terrorist financing. The CDD obligations compel banks to understand who their customers are to guard against the risk of committing offences under MLPA, 2012 including 'Predicate Offences' and the relevant offences under ATA, 2009. Therefore, banks should be able to demonstrate to their supervisory authority to put in place, implement adequate CDD measures considering the risks of money laundering and terrorist financing. Such risk sensitive CDD measures should be based ona) Type of customers; b) Business Study Material on “GB (Advance)” for NCC Bank Limited 42 relationship with the customer; c) Type of banking products; and d) Transaction carried out by the customer. EDD: Banks should conduct Enhanced CDD measures, when necessary, in addition to normal CDD measures. Bank should conduct Enhanced Due Diligence (EDD) under the following circumstances:  Individuals or legal entities scored with high risk;  Individuals who are identified as politically exposed persons (peps), influential persons and chief executives or top level officials of any international organization;  Transactions identified with unusual in regards to its pattern, volume and complexity which have no apparent economic or lawful purposes; Enhanced CDD measures includes:  Obtaining additional information on the customer (occupation, volume of assets, information available through public databases, internet, etc) and updating more regularly the identification data of customer and beneficial owner.  Obtaining additional information on the intended nature of the business relationship.  Obtaining information on the source of funds or source of wealth of the customer.  Obtaining information on the reasons for intended or performed transactions.  Obtaining the approval of senior management to commence or continue the business relationship when applicable.  Conducting regular monitoring of the business relationship, by increasing the number and timing of controls applied and selecting patterns of transactions that need further examination.  Making aware the concerned bank officials about the risk level of the customer. Politically Exposed Persons (PEPs): It refer to “Individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials.” Study Material on “GB (Advance)” for NCC Bank Limited 43 The following individuals of other foreign countries must always be classed as PEPs: i. heads and deputy heads of state or government; ii. ii. senior members of ruling party; iii. iii. ministers, deputy ministers and assistant ministers; iv. members of parliament and/or national legislatures; v. members of the governing bodies of major political parties; vi. members of supreme courts, constitutional courts or other high-level judicial bodies whose decisions are not subject to further appeal, except in exceptional circumstances; vii. heads of the armed forces, other high ranking members of the armed forces and heads of the intelligence services; viii. heads of state-owned enterprises. CDD Measures for PEPs: Banks need to identify whether any of their customer is a PEP. Once identified banks need to apply enhanced CDD measures that is set out in 6.3 of this guidelines. Moreover, they need to perform the following(a) Banks have to adopt the Risk Based Approach to determine whether a customer or the real beneficial owner of an account is a PEP; (b) Obtain senior managements’ approval before establishing such business relationship; (c) Take reasonable measures to establish the source of fund of a PEP’s account; (d) Monitor their transactions in a regular basis; and (e) All provisions of Foreign Exchange Regulation Act, 1947 and issued rules and regulations by Bangladesh Bank under this act have to be complied accordingly. ‘Influential persons’(IPs): It refers to, “Individuals who are or have been entrusted with prominent public functions, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials.” The following individuals must always be classed as Influential persons: (a) Heads and deputy heads of state or government; Study Material on “GB (Advance)” for NCC Bank Limited 44 (b) Senior members of ruling party; (c) Ministers, state ministers and deputy ministers; (d) Members of parliament and/or national legislatures; (e) Members of the governing bodies of major political parties; (f) Secretary, Additional secretary, joint secretary in the ministries; (g) Judges of supreme courts, constitutional courts or other high-level judicial bodies whose decisions are not subject to further appeal, except in exceptional circumstances; (h) Governors, deputy governors, executive directors and general managers of central bank; (i) Heads of the armed forces, other high ranking members of the armed forces and heads of the intelligence services; (j) Heads of state-owned enterprises; (k) Members of the governing bodies of local political parties; (l) Ambassadors, chargés d’affaires or other senior diplomats; (m) City mayors or heads of municipalities who exercise genuine political or economic power; (n) board members of state-owned enterprises of national political or economic importance. Mandate: A mandate is an authority given by the account holder in favor of a third person to do certain acts on his behalf. An account holder issues this with a direction to banker authorizing the person to operate the account on his/her behalf. Power of Attorney: It is a document executed by one person called donor or principal in favour of another person called done or agent to act on behalf of the former strictly as per authority given in the document. Power of Attorney is of two types: i) Specific i.e. power given for a specific purpose ii) General i.e. general authority to operate on behalf of the giver for a length of time. Power of Attorney, when presented to the Branch, should be scrutinized on the following points: Study Material on “GB (Advance)” for NCC Bank Limited 45 a) It is regular (i.e. that it is operated exactly within the specific objects laid down). b) It is still in force. c) It is definite and not conditional or provisional. d) The identity of the attorney is verified. e) It is not restricted by such conditions as “during my absence” or during the period of my inability to attend”. These restrictions are not acceptable and such a power of Attorney should not be witnessed. f) It is stamped in accordance with the provisions of the Stamp Act applicable in the area of operation. g) It covers the purpose for which it is tendered, especially with regard to the opening of the account and the borrowing powers. The authority embodied in a Power of Attorney must be rigidly interpreted. Where the identity of the executants is not known, a Notary Public, or the matter to be referred to supervising authority should attach his signature. Cancellation of Power of Attorney The Power of attorney is cancelled / terminated under the following circumstances: a) When the Principal is notified as insane, insolvent or deceased. b) When the notice of cancellation of Power of Attorney is received from the Principal. c) At the expiry of the period it covers. d) On completion of the purpose for which it was drawn up. Insolvency of Joint Account Holder: The insolvency of the joint account holders terminates the joint relationship. In such an event, all operations on the joint account should be stopped unless fresh instructions are received from the remaining solvent account holders, duly signed by them jointly with the official assignee of the insolvent account holder. Study Material on “GB (Advance)” for NCC Bank Limited 46 Insanity of Joint Account Holder: Insanity of a joint account holder has the same effect on the account as insolvency. The balance in the account is held to the order of remaining account holders jointly with the receiver of the insane account holder. Dispute between Joint Account Holders: It is always advisable to have a clear instruction from the joint account holder duly signed by them while opening the account to avoid any complicacy in making payment that may arise as a future dispute by any one of the joint account holder. Garnishee Order: Garnishee order refers to the order issued by a court attaching the funds of the judgment debtor (i.e., the customer) in the hands of a third party (i.e., the banker). The term ‘garnishee’ refers to the person who has been served with the order. This Garnishee proceeding comprise of two steps. As a first step ‘Garnishee Order Nisi’ will be issued. ’Nisi’ means ‘unless’. In other words, this order gives an opportunity to the banker to prove that this order could not be enforced. If the banker does not make any counterclaim, this order becomes an absolute. This ‘Garnishee Order absolute’ actually attaches the account of the customer. If it attaches the whole amount of a customer’s account, then, the banker must dishonor the cheque drawn by that customer. He can honor his cheques to the extent of the amount that is not garnished. Hence, the banker should go through the terms of the order very carefully. Garnishee Order - Banker’s Responsibilities Payment of cheques: In Cash payment of cheques, if order is received after debit of account, but before payment of cash, better course would be to refuse payment, with appropriate objection. While in case of cheques received in clearing, order received before the stipulated returning time of clearing, and then the cheques must be returned. If the transfer of amount, internally is done in another customer A/C the credit can be cancelled and cheque be returned unpaid, provided credit is not advised. Right to set-off: When a bank has a prior right to set-off then the bank is not bound by the garnishee order where lien is marked on Fixed Deposit receipts, it cannot be attached by this order. However the fact of right off should be intimated to court and order must be vacated. It should be noted that any excess over the lien marked is attachable by the garnishee order. Study Material on “GB (Advance)” for NCC Bank Limited 47 Joint Accounts: A garnishee order received against a joint account should clearly specify the full details of the account. This should include specifying all the names of the joint account holders against whom the order is served. If the order mentions only one of the joint accounts as judgment debtor, a joint account is not attached. Reference should immediately be made to the Head Office seeking their instructions in such cases. Trust accounts: The outstanding in the trust account cannot be attached, if the judgmentdebtor has deposited the money as a trustee. Partnership Accounts: The personal account of a partner can be attached for the firm's debt because partners are jointly and severally liable for the firm's debts. But the firm's account cannot be attached for individual debts of the partners. Liquidator: When a company is the judgment-debtor, an order attaching the accounts of the liquidator cannot be passed, because the money does not belong to the company but to the liquidator. When the garnishee order does not name the customer correctly or with sufficient accuracy, to enable the bank to identify the account in its books, the bank is not bound to act upon it and is not responsible for passing cheques till the order is amended. In cases where customer is having more than one accounts in the bank's branch, one is in debit and the other is credit balance, the net result if in credit can be attached. The order will not attach only the credit balance account. But if the debit balance is in a loan account, which has not been recalled by the bank, on the date of service of order, credit into another account cannot be adjusted. The bank cannot appropriate the credit balance towards the contingent liabilities of the customer, when a garnishee order is served. Right of set-off: A banker, like other creditors, possesses the right of set-off, which enables him to combine two accounts in the name of the same customer and adjust the debit balance in one account with the credit balance in the other. This right to combine two accounts is known as the right of set-off. Minor as Partner: While opening the account of a partnership firm in which a minor has been admitted as partner, the date of birth of the minor should be recorded on the Account Opening Form. However, the minor is not liable to the liabilities of the firm. Ordinarily, a minor should give notice within a specified time on the attaining majority or on his obtaining knowledge that he is admitted to the benefits of a partnership, that he has elected to be liable Study Material on “GB (Advance)” for NCC Bank Limited 48 or not to be liable as a partner in the firm. If he fails to give notice, he becomes the partner after the expiry of the specified period. Branches should consult the local lawyer to determine the period within which a minor should elect to become a partner after attaining majority and should obtain his signature if the minor fails to give notice after the expiry or the specified period. Dormant Accounts Accounts in which no operation either deposit or withdrawal takes place for a period of one year should be treated as inoperative account and thereafter these accounts to be transferred to “DORMANT” account. The first withdrawal from such account should be allowed with prior permission from the Manager / Sub-Manager only when the account holder personally approaches for the purpose and after being properly satisfied about the identity of the account holder. The account should be retransferred to Regular Client/s A/c Ledger and then operation be allowed. Reactivating Dormant Accounts a) Normal operations are not expected in Dormant Accounts. If a cheque is presented for payment in a Dormant Account is should invariably be referred to the Manager / Authorized Officer of the account Branch, who should satisfy himself as to the genuineness of the drawing. b) Customer may request to account Branch for activation of his/her dormant account at first for verifying the genuineness. c) Account activation in the system is customer-initiated debit to the account. The account will be regular at the end of day processing of the debit transaction date. Deceased Accounts As soon as any authenticated information is received by the bank as to the death of a constituents, the operations of the concerned account is to be stopped immediately. Since then the account would have been termed as deceased account. The procedures of handling such account are described below: Application of Interest in Deceased Accounts: As per Bangladesh Bank BCD Circular # 18 dated 27th May 1984, the Scheduled Banks are advised to follow the following Guidelines in connection with application of interest on Deposit and Loan account of the Deceased. Savings Bank Account: Interest on the balance of Savings Bank Accounts will be paid upto the date of withdrawal / closing of the accounts as admissible under Savings Bank Accounts rules, irrespective of the date of expiry of the depositor. Term Deposit Accounts: Premature encashment: In such cases deposit should be deemed to have been made up to the date of withdrawal and not up to the date of death. Interest should Study Material on “GB (Advance)” for NCC Bank Limited 49 be paid and recovery of penal interest made in accordance with prevalent instructions regarding premature encashment. Encashment at Maturity: Interest should be paid up to the date of Maturity at the rate applicable for the relevant TDR. Encashment beyond Maturity: Interest up to the period of maturity should be paid at the rate applicable for the relevant TDR. Interest for the period beyond the date of Maturity upto the date of withdrawal should be paid at the rate applicable for the Savings Bank Accounts with checking facility. Nominee Bank account holders having deposit accounts in their individual names or in joint names of two or more individuals can appoint a nominee to their accounts. A person who receives the benefit in case of death of the account holder is a nominee. The account holder(s) chooses or nominates his/her nominee at the time of opening the bank account. The account holder can nominate one or more person as his/her nominee. Nomination is a facility that enables a deposit account holder(s) (individual or sole proprietor) or safe deposit locker holder(s) to nominate an individual, who can claim the proceeds of the deposit account(s) or contents of the safe deposit locker(s), after the death of the original depositor(s) or locker holder(s). The benefit of nomination is that in the event of death of an account holder(s) or locker holder(s), the bank can release the account proceeds or contents of the locker to the nominee(s) without insisting upon a Succession Certificate, Letter of Administration or Court Order and the bank's liability is duly discharged on payment to the Nominee. As regards Choice for the payment of deposited money, The Bank Company Act, 1991under sec.103 provides - (1) Where an individual has, or several persons have jointly deposited money with a banking company in his or in their name, that individual depositor may separately or, as the case may be, the group of depositors may jointly, in the way prescribed, choose a person to which, in the case of the death of the individual depositor or of all of the joint depositors, the deposited money shall be given: Provided that the said individual depositor or the said group of depositors may at any time cancel their choice and choose, in the way prescribed, another person. (2) The person chosen under sub-section (1) being a minor, the individual depositor or the joint depositors may, in the prescribed way, direct who shall, in the case of the death of the individual depositors or of the joint depositors, receive the money during the period of minority of the chosen person. Study Material on “GB (Advance)” for NCC Bank Limited 50 (3) Notwithstanding anything contained in any Act for the time being in force or in any will or any kind of document regarding the allotment of properties, the person chosen under subsection (1) or directed under sub-section (2) shall, after the death of the individual depositor or as the case may be, of all of the joint depositors, attain all the rights the individual depositor or the joint depositors had on that deposit, and every other person shall be deprived of those rights. (4) Where a banking company has made payments in accordance with this section, all its obligations in respect of the deposit concerned shall be deemed fulfilled: Provided that no right or claim that any person may have or make against the person to whom the deposited money has been paid under this section shall be prejudicial to the provision of this subsection. Payment to the Heirs of the Deceased (Where there is no nominee) a) In case of death of Account Holder, his/her heirs shall inform the Bank immediately in writing or by electronic media. b) In support of their application they will submit death certificate or any other evidence of death. c) Paper news may be a source of knowing about the deceased. d) The message received either verbal or in writing, the Bank shall take the fact into account and proper instruction “Drawer Deceased” shall be marked in the system by the authorized Officer. e) The heirs shall apply to the Bank for Balance certificate of the Deceased for submitting to the court in support of their Succession Certificate. f) After getting Succession Certificate the heirs shall apply to the Bank for releasing the money in their favor as per court order along with other supporting documents. The Branch will keep photocopy duly attested by an authorized officer after seeing the original. g) The Branch shall check the genuinely of the Succession Certificate from the office of the issuing Authority. h) The heirs of the deceased in an affidavit or through Notary Public will inform their identity to the Bank and that they are the legal heirs and they will indemnify the Bank for any loss or damage that may arise in future as well as confirm the individual in whose favor the payment is to be released as per Court Order. i) Any client acceptable to the Bank will identify the Heirs of the Deceased and may stand Guarantee or sign an indemnity Bond to compensate the Bank for any loss or damage that may arise in future. Study Material on “GB (Advance)” for NCC Bank Limited 51 j) Before releasing Payments to the heirs in case of complicated issues, the Branch shall obviously refer the same for the Head Office approval and/or Legal Opinion. k) Payment must be made through Payment Order. No matter, how small the amount involved the Branch shall in no way make cash payment to the Beneficiaries. l) In case the deceased selects the nominee before his death, the Bank shall act accordingly. m) Any event of confusion or suspicion, the matter must be dealt with caution and the Head Office and/or Legal Advisors should be informed immediately. n) The procedures shall be applicable in case of credit balance held against all types of Deposit Accounts. Documents Required: The following are the documents needed while releasing the fund to the heirs of the Deceased Account Holder. Depending upon the circumstances the Branches will advise the heirs to submit the relevant documents require by the Bank. a) The Death Certificate issued by the Hospital Authority. b) The Death Certificate issued by the Police Station. c) The Certificate issued by the Chairman of Union Council or Ward Commissioner with or without citing the name of the successors. d) Death Certificate issued by any other competent Authority. e) Graveyard Certificate. f) Succession Certificate issued by the Court (The authenticity of the same shall be verified from the concerned Office). g) Selection of Payee out of present heirs by the Court. h) Passport of the successors or any other proof their respective identity. i) Affidavit or Notary Public submitted by the heirs. j) Marriage certificate issued from Marriage Register’s Office (in case of spouse). k) Indemnity from the successors or Guarantee from third party. l) The payment order may be issued in favor of the pay(s) mentioning the name of his/her/their deceased husband/wife or father as applicable Unclaimed Deposits Note: As regards unclaimed deposits relevant circulars in relation to maintenance of unclaimed deposit account of the bank which is also stipulated in section 35 of the bank company act 1991 (amendment up to 2013) to be followed which is placed in annexure-5. Study Material on “GB (Advance)” for NCC Bank Limited 52 Moreover, a detailed list stating the list of files and documents along with the time limit for maintenance of bank records are placed in annexure-6 for compliance. An instruction circular letter of the bank regarding procurement of fresh and renewal of corporate deposits is also placed in annexure-7. Questions and Answer Indications 1. What risk does a banker incur in opening an account with Trustees and Executors? What precautions will you take in such cases? (3.6.3) 2. Mention the formalities of opening an account in the case of local authorities and Municipal Corporation. (3.6.6) 3. Define Mandate and Power of attorney. (3.6.7) 4. Under what circumstances a Power of attorney may be cancelled? (3.6.7) 5. What is Garnishee Order? (3.6.7) 6. State the banker’s responsibilities under Garnishee Order? (3.6.7) 7. Differentiate between Dormant and Unclaimed deposit account. (3.6.7) 8. Mention the document required for payment to the heirs of the deceased. (3.6.7) Study Material on “GB (Advance)” for NCC Bank Limited 53 CHAPTER 4 Negotiable Instruments Study Material on “GB (Advance)” for NCC Bank Limited 54 4.1Negotiable Instruments A negotiable instrument is a piece of paper which entitles a person to a sum of money and which is transferable from person to person by mere delivery or by endorsement and delivery. The person to whom it is so transferred becomes entitled to the money and also to the right to further transfer it. ‘Negotiable’ means transferable by delivery and ‘Instrument’ means a written document by which a right is created in favor of some person. The term Negotiable Instrument literally means ‘a document transferable by delivery’. A negotiable instrument is transferable document, which satisfies certain conditions. According to sec-13 of Negotiable Instrument Act 1881, “Negotiable Instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer. Characteristics of negotiable instruments The instruments like money are transferable from hand to hand by way of negotiation. The instruments like money are transferable from hand to hand for value and are used for settlement of debt. The transferee's title is not affected due to transferor's defective title if the transferee can prove himself as holder in due course. The title of the Holder in due course does not affect for defective title of his prior holders due to fraud, forgery etc. The Holder in due course is entitled to sue in his own name against all the prior parties to realize proceeds of the instruments. 4.2 Promissory Note A 'Promissory Note' is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay on demand or at a fixed or determinable future time a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. The person who makes the promise to pay is called the maker. He is the debtor and must sign the instrument. The person who gets the money (the creditor) is called Payee. 4.3Bill of Exchange A 'bill of exchange' is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed determinable future time a certain sum of money only to, or to the order of a certain person or to the bearer of the Study Material on “GB (Advance)” for NCC Bank Limited 55 instrument”. It is observed from the above definition that a bill of exchange contains an order from the creditor to the debtor, to pay a certain sum, to a certain person, either on demand or after a certain period. The person who draws the bill is called the ‘drawer’ and the person on whom it is drawn, is called the ‘drawee’or ‘acceptor’ and the person to whom the amount is payable is called the ‘payee’. 4.4 Cheque A 'Cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. A cheque is a document of great importance in the business world. It can pass from one hand to another easily and so it has become a popular mode of payment. A cheque is the most commercial and safe method of money transaction because the transfer cost is very low and also the possibility of loss is minimum. Material alteration (3f) “material alteration” in relation to a promissory note, bill of exchange or cheque includes any alteration of the date, the sum

NCC Bank Limited General Banking PDF

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