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Modes of Operation and Types of Customers Objectives

In this session, you will learn to:


Understand the mode of operation of bank accounts opened by customers Understand the various types of customers

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Modes of Operation and Types of Customers Modes of Operation


A bank caters to different types of customers. Customers operate accounts in various modes, such as:
Operate accounts in their own names. Operate in joint names.

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Modes of Operation and Types of Customers Modes of Operation (Contd.)


Single account is opened and operated by an individual in his/her name. Operation in an account includes:
Withdrawing the money. Issuing cheques to others. Issuing instructions to the bank for transfer of money from one account to other account. Asking the bank to issue for statement of account. Asking for the outstanding balance in an account.

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Modes of Operation and Types of Customers Modes of Operation (Contd.)


Operations by mandate holder:
Mandate is written in a simple sheet of paper to allow the mandate holder to operate the account. Bank takes the specimen signature and obtain a photograph of the mandate holder along with the mandate. Account holder can cancel the mandate by issuing a letter in writing to the bank.

Power of attorney (PA) is a stamped registered document in which:


A person grants certain powers to another person for operating the account.

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Modes of Operation and Types of Customers Modes of Operation (Contd.)


Two types of PA are:
General power of attorney Special power of attorney

Bank obtains a copy of the original PA. Banks perform the following operations regarding PA:
Joint operation Jointly or survivor Either or survivor Former or survivor Anyone or survivor

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Modes of Operation and Types of Customers Modes of Operation (Contd.)


Facility of nomination for bank accounts came into force only in the year 1985, after amendment to the Banking Regulations Act. Nomination facility is available only for deposit accounts. Nomination facility is not available for accounts in the names of:
Partnership Trust Limited company Club

Nomination is done by the account holder by signing the prescribed form in the bank. Nomination form has to bear witness.

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Modes of Operation and Types of Customers Types of Customers


Types of customers are:
Individual customers Business entities

Minor:
Is a person who has not completed 18 years of age. Is protected by law. Is not competent to enter into a contract and all agreements. Is represented by a guardian.

Two types of guardians are:


Natural guardian Legal guardian

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Modes of Operation and Types of Customers Types of Customers (Contd.)


A minors account can be operated in the following two modes:
Guardian operated accounts Self operated accounts

In sole proprietorship the proprietor is not distinct from the business entity. Sole proprietor is responsible for all the matters related to the business. Section 4 of the Indian Partnership Act, 1932 defines partnership as:
The relation between persons who agree to share the profits of a business carried on by all or anyone of them acting for all.

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Modes of Operation and Types of Customers Types of Customers (Contd.)


The contract between the partners in a partnership firm can be:
Oral Written

Points to be considered by a bank while opening an account for a partnership firm are:
Number of partners Title of the account Perusal of partnership deed Partnership letter Account opening form Signing of cheques Registration of the firm Dissolution of a partnership
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Modes of Operation and Types of Customers Types of Customers (Contd.)


The joint stock company is:
An artificial person. Distinct from the owners.

Two major types of joint stock companies are:


Private limited company Public limited company

Private limited company:


Should have minimum 2 and maximum 50 shareholders. Should have minimum 2 directors. Should have a name that ends with the words private limited. Should not quote its shares in the share market and have restrictions on the right of transfer of shares.

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Modes of Operation and Types of Customers Types of Customers (Contd.)


Public limited company:
Should have minimum seven share holders. Should have minimum three directors. Should have a name that ends with the words limited or private limited. Should have no restriction on the transfer of shares to the public or to any person who purchases the shares. Should obtain certificate of commencement of business, in addition to certificate of incorporation for starting the business.

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Modes of Operation and Types of Customers Types of Customers (Contd.)


Important documents to be obtained by bank before opening an account for a joint stock company are:
Memorandum of association Article of association Certificate of incorporation Certificate of commencement of business Resolution of the board

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Modes of Operation and Types of Customers Types of Customers (Contd.)


A joint Hindu family:
Possesses ancestral property. Carries on with ancestral business.

Two schools of Hindu law, which govern Hindu Undivided Family (HUF) are:
Dayabhaga Mitakshara

Societies and clubs are:


Non profit-making organisations.

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Modes of Operation and Types of Customers

Check Your Understanding

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Modes of Operation and Types of Customers

Practice Questions

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Modes of Operation and Types of Customers Summary


In this session, you learnt that:
Individuals can open accounts in a bank either singly or jointly with others. A letter of authorisation to operate the account given in a sheet of paper is called the mandate. The power of attorney given by the account holder is stamped and registered. A customer can nominate a person to receive the balance in his account after the customers death. A nominee can receive the balance amount without producing any court order such as probate or succession certificate. An account can be opened with a bank in the names of two or more individuals.

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Modes of Operation and Types of Customers Summary (Contd.)


The mode of operation in joint accounts can be any one of the following types:
Both jointly Jointly or survivor Either or survivor Anyone or survivor Former or survivor

A minor is a person who has not completed 18 years of age. The laws governing the Hindu Undivided Family are Mitakshara and Dayabhaga. A partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them on behalf of all the partners.

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Modes of Operation and Types of Customers Summary (Contd.)


A company is a legal entity distinct from its shareholders. The two major types of joint stock companies are the private limited company and the public limited company.

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