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RETAIL BANKING RETAIL BANKING ACCOUNTS

SYED FAZAL AZIZ

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Retail Banking Accounts Types of Relationship

Broad Customer segments & their expectations. Who is a customer? A question asked frequently. But__________ Never defined completely. With the passage of time and more scientific study of social and economical demands the meaning / definition of a customer (legally) fine tuned.

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Evolution__________ Definition of customer.

In Great Western Railway Company v. London and County Banking Co. Ltd. (1901. A.C 414) Lord Davey remarked that a customer is a person who has "some sort of account. Either deposit or current account or some similar relation" with a banker.

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To constitute a customer, there must be some recognisable course of habit of dealing in the nature of regular banking business." The most important point that establishes relationship is "duration" according to Sir John Paget: but it was ruled off in the case of Landbroke v. Todd of Justice Bailhache who declared that "In my opinion a per-son becomes a customer of a bank when he goes to the bank with money or a cheque and asks to have an account opened in his name, and the bank accepts the money or cheque and is prepared to open an account in the name of that person: after that he is entitled to be called a customer of the hank." He further adds. "I think such a person becomes a customer the moment the bank receives the money or cheque and agrees to open an account."

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This was confirmed by the Privy Council when Lord Dunedin delivered the .judgement. It was pointed out that the word 'Customer' signifies a relationship in which duration is not of the essence. Therefore:

For a bank customer the habit of dealing is not essential. Duration and frequency of operation in the account does not effect the relationship / meaning of customer.

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Qualification of a Customer

Relationship between customer and the Bank It is a contract between two parties Who can enter into a contract? Defines? Contract Act 1872 (as adopted by GOP) SECTION II

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As per contract Act

A minor cannot enter into an agreement all such agreements are VOID in nature.

An insane person section 12 of Contract Act says that

A person is said to be of sound mind for the purpose of making a contract if at the time when he makes it. he is capable of understanding it and of forming a rational judgement as to its effect upon his interests."

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A person who have been debarred from entering into any contract under law. (Though there are several reservations regarding un-discharged bankruptcy) proclaimed offender etc. etc.

However:

An exception has been allowed to open an account of a minor in the practice of banking.

The account is opened jointly in the name of minor and guardian. Upon the orders of a competent court of law Appointing guardian and setting terms and conditions of conduct of account (operation)

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Rights and Duties of a Customer

RIGHTS: The customer has the following universally accepted rights:

(a) (b)

(c)

(d)

(e)

to draw cheques against his credit balance. to receive statement containing a copy of his account with the banker. to sue the bank for the cost. loss and damages when his cheque is wrongfully dishonoured: to sue when the banker has not maintained the secrecy of his account. to claim for and receive the profit I return on his deposits as promised by the bank.

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DUTIES: The customer has the following duties towards his banker:

Section 72 of the Negotiable instruments Act. 1881. lays down that the customer must present the cheques for payment and collection within the business hours of his banker. Section 84 of the Negotiable Instruments Act, 1881. lays down that the customer should see that the cheque and other instruments are presented for payment within a reasonable time from the date of their issue. He should keep his cheque book under Iock and key so that no unauthorised person gets access to it.

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Customer Segments
Customer(s)

Individuals

Firms/Business concerns

Govt Deptt.

Society

Proprietary Concerns Regd./Un-Regd.

Joint Stock Companies

Autonomous Bodies

Semi Autonomous Bodies

Local Bodies

Clubs

Cooperative Societies

Public Ltd.

Pvt. Ltd.

Companies Ltd. By Guarantees

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Bank Account Types and their Likely Users

Types of Account PLS A/c PLS Term Deposit PLS SNTDR Current A/c FC Saving/FC Current FC Term NIDA Call Deposit

Individuals / Joint

Individuals (partnership Joint A/cs

Salaried

Business concerns

Widows

Govt. Deptts.

House Wives Pardanasheen Ladies

Club / Societies / Trust

Blind & visually impaired persons

Institutions

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Business Accounts:
Current A/c. ---- NIDA A/c.---- F.C A/c

Definition of Business An individual, firm or corporate entity engage in commercial activity as permissible under law, abiding all moral / ethical values and social norms of the society to earn profit. Current A/c

Can be opened by an individual, in his name or jointly. To carryout day today business a firm company, society or Trust have to maintain a Current A/c.

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Maintenance of an account is a mandatory requirement:

a) To documented the economic activities. B) To prevent tax evasion and illegal activities.

CLASSIFICATION OF CUSTOMERS (BUSIENSS) Partnership A/cs. What is partnership?

An agreement either written or oral between two or more persons to carryout business called partnership.

Each individual is termed as PARTNER. Collective group constitute a FIRM

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Partnership

Autonomous Bodies self governing corporate bodies and institutions in public sector working under the direction of Federal Government in Pakistan Requirement to open a partnership account CNIC of all Partners. Partnership Deed (Certified Copy). Attested copy of Registration Certificate with Registrar of Firms. Original Authority letter favoring persons authorized to operate the Account. In case the partnership is unregistered, this fact should be clearly mentioned on the Account Opening form. Undertaking from partners involved for responsibility of conduct of account individually and jointly. Account Opening Form should bear the signature of all the partners.

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A partner cannot open a Bank account on behalf o the firm in his own name. JOINT STOCK COMPANIES: A joint Stock company is an association of individuals for the purpose of profit, possessing a common capital contributed by the members constituting it, such capital commonly divided into shares of which each possess one or more and which are transferable by the owner
(Companies Act 1984 Section 2)

PRIVATE LTD COMPANY: A Private Limited Company is a company where the right to transfer the shares of its members is restricted, and public subscription in the shares of the company is prohibited under its Articles. The maximum number of its members is 50. A company limited by shares may register its own Articles of Association; and the minimum number of members to form such a Company is fixed.

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PUBLIC LTD COMPANY:

No restriction for sale, purchase and transfer of shares The liability of the members of the company is limited to a fixed amount of money. Non-profit earning entity Purpose of formation to promote, culture, sports, commerce etc.

COMPANY LTD. BY GUARANTEE:

Stock Exchange Sindh Club (Ltd.)

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PRIVATE/PUBLIC LIMITED COMPANIES: Certified copies of:

Certificate of Incorporation, Certificate of Commencement of Business, Memorandum & Articles of Association, List of Directors, Board of Directors Resolution, CNICs of all the Directors. Power of Attorney / Mandate (If required).

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CLUB, SOCIETIES AND ASSOCIATIONS:

Non-Trading Organizations. Registered under Societies Act - 1866 Certificate of Registration. By-Laws/Rules & Regulations, Constitution. Resolution of Governing Body for account opening. An undertaking signed by all authorized persons when any change takes place in the persons authorized to operate in the account, the banker will be informed immediately.

Certified copies of:

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TRUST ACCOUNT "A Trust' is an obligation annexed to the ownership of property and arising out of a confidence proposed in and accepted by him for the benefit of another, or of another and the owner". A Trust may be created for any lawful purpose It has following constituents: The person who declares the confidence and is called the "Author of the Trust. The person who accepts the confidence and is called the "Trustee". The person who benefits from the confidence and is called the "beneficiary". The subject matter of the 'Trust that it is called 'Trust property" or "Trust money" or "Beneficial interest". The instrument by which a Trust is declared, is called the "Instrument of Trust".

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Opening and Operation of the Account

The account should be opened in the name of Trust and all the trustees should sign the accountopening form.

Attested copy of

Certificate of Registration, CNIC of all the trustees. Certified copy of Instrument of Trust.

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EXECUTERS AND ADMINISTRATORS ACCOUNT Executor An EXECUTOR is a person to whom the execution of a will is entrusted by the testator. Executor derives his authority from the will. Administrator An ADMINISTRATOR is a person appointed by a court of law to look after the estate of a person who died without leaving a will or the persons he appointed are incapable of acting as executors. Opening and Operations of Account. Attested photocopy of identity cards of Executor Administrators. Certified copy of Letter of Administration or Probate. Probate or Letter of Administration It is a certified copy of a will issued under the seal of the court. i.e. High Court, District Judge's Court, or First Class Sub-Judge's Court in Sindh.

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National Income Daily Account

In view of the present competitive atmosphere in the Banking sector different Banks introduced a new type of account with their branded names but have the common characteristics that: Bracketed in Saving Account But Contains the characteristics of Current Account. Profit is paid on daily product basis Profit is paid on daily product basis. Profit applicable on these types of accounts are higher than the profit paid on PLS Account. Customers have to maintain minimum sum of Deposit. Other terms and conditions are same as of PLS / Current Account for opening, maintaining the Account.

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Saving Accounts

PLS ACCOUNT Profit paid on half yearly basis. Zakat is deducted Number of transactions is not restricted PLS A/Cs are opened for individuals (single or joint).

Charitable Institutions Provident and other Funds of benevolent nature of

Local Bodies Autonomous Corporations Companies Associations

Educational Institutions Firms etc. etc.

No. restrictions on maintaining the upper limit of deposit and withdrawals of amount

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PLS Account

Individual

Joint

Blind & Visually Impaired Persons

Minor Account

Salaried

Widow

Housewives

Pardanasheen Ladies

Literate

Illiterate

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INDIVIDUAL / JOINT

Identification Documents Purpose Source of Income (Salaried, Self-employees, Business, Student, Mustahqeen-e-Zakat etc. etc) Verification of Credentials / Documents Allowing opening / operation or otherwise. Pardanasheen lady Literate.

In case of

Treated at par with literate male customers Accounts may be opened in the joint names with an adult male member payable either or survivor. Lady will affix her mark, right hand thumb impression Jointly signed by the joint Account Holder

Pardanasheen lady Illiterate

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BLIND AND VISUALLY IMPAIRED PERSONS

A Joint Account can be opened of blind and visually impaired persons with visually literate. To facilitate operation of the Joint Account

Purpose of visually literate person:

Have

No claim or interest to the funds in the Joint Account. Presence of both visually blind and Joint Partner is necessary for operations in accounts. Can be opened joint with an adult.

MINOR ACCOUNTS.

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DEPOSIT ACCOUNT Banks, DFIs and National Saving Center accepts deposit for a period ranges from 3 months to 10 years. Banks accept Deposit Account in Pak Rupee + Foreign Currency (Dollar based). Payment of Profit made either

Monthly Half Yearly On maturity

Deposit Accounts have condition of Minimum / Maximum investment on single party basis. MONTHLY / HALF YEARLY PROFIT PAYMENT DEPOSIT ACCOUNTS These types of account are only for Individuals (single or joint) category of customers. Private and public limited companies, local, autonomous and semi autonomous bodies can not open these types of account.

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SPECIAL PURPOSE ACCOUNTS

Government Revenue Collection Accounts. Office Accounts. Accounts for collection of Zakat for Charitable Organization Accounts for collection of Donations

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