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03.

Special types of customers in retail banking self study material

Hints are in italics


Caselets
Joint Accounts
1. In case of a joint account of two persons, which of the following mode of operation is
allowed by the bank:
i.
Either or survivor ( when they trust each other)
ii.
Former or survivor ( one former wants to control as long as he is alive)
iii.
Jointly by both
( when both want to control and dont trust each other)
iv.
All of the above
2.

In the joint account of And B operated jointly, on death of B, balance was paid by
the branch manager to A as A pleaded with the manager and convinced him that he
was the only other person with B in the joint account. Later Legal heirs of B come to
claim their share in the joint account. Is their claim tenable in law? Discuss.
Bank is fully discharged when it makes payment to A along with legal heirs of B
because the account was having joint operation mandate.

3. In the joint account of And B operated Either or Survivor basis, on death of B,


balance was paid by the branch manager to A as A pleaded with the manager and
convinced him that he was the only other person with B in the joint account and any
one of them can operate. Later Legal heirs of B come to claim their share in the joint
account. Is their claim tenable in law?
Bank is right in making payment to A as he as a survivor can operate the account
and even withdraw entire balance and close the account. Legal heirs can move the
court against A and not the Bank.
4. In the joint account of And B operated Former or Survivor basis, on death of A ,
balance was paid by the branch manager to B as B pleaded with the manager and
convinced him that he was the only other person with A in the joint account and any
one of them can operate. Later Legal heirs of A come to claim their share in the joint
account. Is their claim tenable in law?
Bank is right in making payment to B as he as a survivor can operate the account
and even withdraw entire balance and close the account. Legal heirs can move the
court against B and not the Bank
5. In account of A and B, operated by either or survivor , you receive instructions from
B to revoke the authority of A to operate the account. A issues a cheque next day.
Will you pay the cheque issued by A ?

The joint mandate given to bank stands canceled now and the cheque signed by A will
not be paid unless signed by B also. Now this will be treated and operated as a joint
account.
6. In account of A and B, operated by Former or survivor , you receive instructions
from B to revoke the authority of A to operate the account. A issues a cheque next
day. Will you pay the cheque issued by A ?
The joint mandate given to bank stands canceled now and the cheque signed by A will
not be paid unless signed by B also. Now this will be treated and operated as a joint
account.
7. In case of joint account of A and B, operated by either or survivor, the account
becomes single account on death of A. Legal heirs can not dispute with the bank ,
about the ownership of B over the funds. Discuss.
Position is correct.
8. A and B have a joint fixed deposit account with mode of operation as Either or
survivor. A requests the bank to make premature payment of fixed deposit amount to
him before the due date of FD due to some exigency and agree for any penalty is
levied by the bank for premature payment. Should the bank pay to A ?
Either can operate the FDR account only on maturity.
Before maturity, both have to sign the request.
Facility of Nomination in Deposit accounts and locker accounts
9. Under section 45 ZA of the banking laws amendment act.1983, the facility of
nomination by depositors is allowed. Which one of the followings is not correct:
i.

It is compulsory to make nomination in favour of some person who can receive


payment in case of death of the depositor. No, it is optional

ii.

RBI has instructed the banks recently to tell the customer about availability of
nomination facility, its benefits and ask the customer not availing this facility to
write on the AOF (Account Opening Form) that he does not want to avail
nomination facility. This position is correct

iii.

The facility is available in which of the following accounts:


a) Single individuals accounts
b) joint accounts
c) minors account
d) Proprietorship accounts
e) HUF account
f) Trust account
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g) Company accounts
h) Partnership accounts
iv.

The nominee can be a minor also but a name of major will be mentioned to
receive the deposit amount in case of death of depositor if the minor is still a minor
at the time of death. Correct

v.

More than one persons can be nominated in one deposit account but their share
should be fixed in advance in the nomination form.
In- correct- only one individual can be nominated

vi.

The nominee is only a person nominated to receive the deposit amount from bank
and holds the money so received in trust for the legal heirs of the deceased who
can claim this amount.
Correct legal heirs of depositor can still claim from the nominee.

vii.

In case of payment to a nominee on proper identification in the account in the


event of death of the account holder, the bank is discharged from its obligation as a
debtor.
Correct bank need not find out legal heirs if nominee is alive and claims the
balances.

viii.

In case the nominee dies, the nominations stands cancelled. The money will not be
paid to legal heirs of nominee but it had to be paid to legal heirs of the account
holder. Correct

Accounts of minors :
A minor has a special status in law . He can bind all other parties except himself.
No loan or overdraft is recoverable from him.
10. Which one of the following is not correct:
i.

The account can be opened in the name of minor below 12 years under
guardianship of natural guardian or court appointed guardian only and in no other
way. Correct

ii.

The account can been opened if the age of minor is 12 years and he understands
the nature of transactions he is doing. Correct

iii.

Two minors can open a joint account . Correct

iv.

On minor becoming major, he will be allowed to operate after one year from the
date of attaining majority.

Incorrect he will operate from the date he attains majority, need not wait for one
year..
v.

On attaining majority, this account is closed and new account is opened with this
balance so that minor who is now major is free to operate.
Correct

vi.

If the minor dies, the father can close the account and take the money from bank.
No- the legal heirs of minor will get the money of the account in the first degree
of relations sons, daughters, wife, mother, if there is none in this category, then
only father may claim.
The bank allowed overdraft to minor inadvertently he can recover the amount by
filing suit.
No- loan can not be recovered from a minor as he can not be sued for loan in
curt of law unless the loan was given to meet his necessities as a minor.

vii.

viii.

Manager took precaution and took guarantee of a worthy person and gave a loan to
a minor. The minor is not repaying the installments for the last six months. The
manager filed a suit against the minor and guarantor. Discuss banks rights against
minor and guarantor.
Minor is not liable for loan. The loan contract with minor is invalid abinitio, so
guarantor is also not liable.

ix.

A minor can not be appointed as an agent to represent his principal as he is not


competent to enter into contracts. Discuss.
Minor can bind others but can not be bound himslef. He can act as an agent to
bind the principal.

x.

Branch manager refused to open account under guardianship of the mother of


minor who lives with mother separately as the father is the natural guardian as per
law and was still alive. Discuss.
RBI has permitted opening of accounts of a minor under guardianship of
mother even if natural guardian father is alive. They do not see many
complications in such cases.

Illiterate persons
11. Illiterates can not write and sign, so banks take their thumb impression (left hand
thumb for male and right hand thumb for female). The thumb impression and the
Photograph taken on record must be witnessed by a literate person who should read
out and explain the contents of AOF to him. Correct
12. Illiterates need to come personally to the bank and put thumb impression in presence
of bank officer for proper identification with the photograph on bank record. Correct
Customers attorney
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A customer may appoint an attorney to deal with his bank account. The power of attorney is a
general notice and an authority for his purpose. It is different from an ordinary mandate
authorizing a person to operate his bank account. A mandate connotes a letter of authority to
operate the account for a limited period in banking context.
By special power of attorney, a person so authorized gets powers in regard to certain matters only,
e.g. sale or purchase of property etc. or to operate a bank account. In case of general powers of
attorney person is authorized in general, to act on behalf of the grantor in all matters concerning
his business.
27. Which one of the following is not correct:
i

The power of attorney need not be stamped and registered or attested by a Notary.
It needs to be stamped as per law of each state differently for stamp duty amount.
Needs to be registered with registrar of assurances.

ii

The power of attorney must be in force at the time of opening the account. Correct

iii

The AOF Account Opening Form should be signed by the principal. The attorney or
agent should be identified by the principal. A Photograph of agent should also be kept.
Correct

iv

The account will be titled as Bahadur Singh (Principal) by his agent /POA holder,
Paramvir Singh(agent) Correct

In case of a mandate to operate the account, the title of the account in name of
depositor (principal) need not be changed. Specimen signature and mandate letter
should be kept on record. Correct

vi

The purpose of the mandate letter and the POA is same.


It may be same as regards operation of account only. For short periods and
operation of account alone, a mandate is given and for miscellaneous purposes
combined, POA is given.

vii

viii

The mandate and POA is irrevocable once issued.


No- both are revocable as per desire of the grantor (principal)
A Mandate says, I authorize Pawan Kumar to operate my SB account no
01321000026689 with you during my absence from the country. His specimen
signature is appended below and attested by me on this authority letter. If other things
are in order, should the branch manager accept this or not?
No- it will be difficult to ascertain the period of absence form the country.
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Closing of an account
29. Which one of the following is correct:
i

The customer has given written request but not the reason of closure of account. The
account can be closed.
Yes, no reason need be given.

ii

A, one of the two joint account holders (either or survivor) can give a written request to
close the account.
No- If another onedoes not know, and issues a cheque it will
be dishonored. So, both of them must give the request unless in the account opening
form, any one is authorized to close the account specifically.

iii

A customer has issued cheques on several occasions without sufficient funds in the
account. Bank has decided to close his account and sent him a notice to close the account
in 15 days failing which the account will be closed and amount will be remitted to him
through a bankers cheque.
Banker can close the account on giving a reasonable notice to client so that previous
cheques are cleared.

iv

The account has been not operated for three years. Bank can close the account without
any notice to the customer.
Bank must give a notice before closing the account.

The banker customer relationship comes to an end in which of the following situations:
a. death of customer
b. insolvency of customer
c. insanity of customer
d. serving of garnishee order
e. attachment order received
f. notice of assignment ( a transfer in favor of a third party , that may or may not happen
in future ) of any amount in favor of third party.