Sunday, February 28, 2016

AHSEC - Class 11: Unit 6 Different Types of Bank Customer

1. What do you mean by a Customer? What are the two conditions for a person to become a customer of a Bank?
Ans: A person or an institution or corporate body that opens an account in a Bank and undertakes banking services with the Banker is known as Customer of a Bank or Bank’s customer.
The two conditions for a person to become a customer of a Bank are:
a)      The person must be legally capable of entering into a valid contract.
b)      The person must apply to the banker in a prescribed manner.

2. What are the two categories of a Customer? Who are the special customers of a Bank?
Ans: The two categories of a Customer are:
a)      Ordinary Customers
b)      Special Customers.
The special customers of a Bank are: Minor, Married Woman, Pardanasheen Woman, Lunatic, Drunkard, Insolvent, Joint-Account holder, Illiterate persons, Partnership firm, Trustee, Executor and Administrator , Liquidator, Non trading institutions (Club, Charitable Trust, etc.), Individuals, Joint Stock Company, Ombudsman.

3. Who is known as a Minor? What are the kinds of accounts that a Minor can open with the banker?

Ans: A person who has not attained or completed the age of 18 years is known as Minor. A Minor is not capable of entering into a valid contract and a contract entered into by a minor is void. The Bank can open a saving, fixed or recurring deposit account in the name of minor.

4. What are the precautionary measures that a banker should take which opening an account in the name of the minor?
Ans: The precautionary measures are:
a)      Nature of Account: The banker may open a savings bank account in the name of a minor. The banker should not open a current account in the name of minor.
b)      Age of opening account: The banker should allow the minor to open a savings bank account in his own name only if he/she has an age between 10 – 14 years and could be able to read and write English, Hindi or any other language. If the minor does have such quality, then the banker must open his account in the joint names of the minor and his guardian.
c)       Recording date of birth of minor: The banker must record the date of birth of the minor as disclosed by his/her guardian before opening account.

d)      Death of the minor: The banker must take special care at the time of death of the minor or his guardian. In case, if the minor dies, then the balance in the account should be paid to his guardian.
e)      Death of the guardian: In the event of death of guardian, the banker should be given to the minor on attaining majority or any other guarding appointed by court.
f)       Advance to a minor on the guarantee of a third party: The banker should not grant loan to a minor on the guarantee of a third party.

5. Write a note on Married Woman as a customer of a Bank.
Ans: India is a democratic country. Every person, either male or female, is equal in the eyes of law. The law does not make any kind of distinction among a male and a female. So a married woman can open an account in bank. According to the Indian Contract Act, 1872, a married woman can enter into contracts, acquire and sell property and land or borrow money. But a banker should be very conscious which is opening an account in the name of a married woman:
a)      While opening an account with a married woman, the bank should obtain all necessary information such as the name of her husband, address, phone number, occupation, personal property, etc.
b)      While granting a loan to the married woman, the banker must examine the personal property of a married woman. The banker must verify that the married woman should have her own separate personal property apart from husband which must be sufficient to cover the amount of the loan.
c)       In case, the wife has taken a loan on the basis of her property than the banker should make the debts liable to herself only. Her husband will not be held liable for any debt of her wife even though he have sufficient property to pay the debts.
d)      When a married woman desires to open a joint account with her husband, the banker should clarify that in the event of death of any one of them, then who will be entitled to receive the amount.

6. Who is known as a Lunatic? What precautions are necessary while opening account in the name of a lunatic?
Ans:  Lunatic is a person of unsound mind and a person of unsound mind cannot enter into a valid contract. The banker should take the following precautions while dealing with a lunatic:
a)      If a lunatic person applies for opening an account, the banker must refuse to open an account for him.
b)      When an existing customer become lunatic or insane, the bank should suspend the operations of his account.
c)       While suspending the operations of account, the banker must have sufficient proof of lunacy.
d)      The banker must not honour any cheque after receiving the notice of insanity of customer. Banker can honour all cheques before getting notice for lunacy.
e)      If banker honours any cheque after receiving notice of lunacy, then he will lose the right to debit the account of the lunatic person.

7. What is joint account? What precautions are necessary while opening a joint account?
Ans: When an account is opened by two or more persons jointly in their names, it is called joint account. The banker before opening joint account must take the following precautions:
a)      The application for opening a joint account must be signed by all persons intending to open a joint account.
b)      The banker must obtain clear mandate in writing signed by all the joint account holders regarding the operation of the account.
c)       The banker should ascertain whether the person operating the account is authorised to do so.
d)      In case of insanity of a joint account holder, the banker should stop the operation of the account.
e)      In case of death of one or more joint account holder, the balance in the account will vest with the survivor or survivors.

8. What is partnership? State the position of partnership firm as a customer of a bank.
Ans: According to Sec.4 of the Indian Partnership Act, 1932, partnership is the relation between persons who have agreed to share the profits of the business, carried on by all or any of them acting for all. A banker should take the following precautions while opening an account in the name of a partnership firm:
a)      The account must be opened in the name of the partnership firm and not in the name of the partners.
b)      The banker should ask for copy of partnership deed and should thoroughly examine it before opening account.
c)       The banker must obtain clear mandate in writing signed by all the partners regarding the operation of the account.
d)      The partner who is authorised to operate the firms account cannot delegate his authority to another partner without the consent of other partners.
e)      In case a new partner is admitted to the firm, then the banker should obtain a new mandate signed by all partners including the new partner.
f)       In case of retirement, death or insolvency of a partner, the banker may allow the other partner to carry on the account if it shows a credit balance.

9. Describe how a company becomes the customer of a bank.
Ans: Following precautions are necessary before opening an account in the name of a company:
               a)      As the company is an artificial person, the banker should carefully examine the following documents:
1.       Certificate of incorporation
2.       Certificate of commencement of business
3.       Memorandum of association
4.       Articles of association
5.       Prospectus
b)      The banker should ask for a copy of board’s resolution signed by the chairman before opening account.
c)       The bankers should ascertain that the company borrows only for the purposes set out in its memorandum and within the limits, if any.
d)      The banker should ask for the register of charges maintained by the registrar of companies before granting advance to the company.
e)      The company’s account and the personal account of the person authorised to operate account must remain separated.
After completing all these formalities only a company can be a customer of a bank.

10. What is non-trading institutions? What precautions should be taken by a banker while opening an account in the name of a non-trading concern?
Ans: A non-trading institutions are those which are formed with the object to serve the society and not to earn profit. For example: club, school, hospital, college etc.  if such institutions desires to open an account in its own name the banker should take the following precautions:
a)      The banker must ensure that the organisation is registered under the Societies Registration Act or The Companies Act or the Co-operative Societies Act.
b)      The banker must ask for the copy of memorandum of association and articles of association of the institutions to know about the objectives and functions of the institutions.
c)       The banker should ask for a copy of the resolution passed by the managing committee of the institution.
d)      In case of lunacy or death of the person authorised to operate the account, the banker should stop the operation of the account till another person is nominated.
e)      While granting loan to such non-trading organisation, the banker should examine the charter and memorandum to find out the borrowings powers of the institutions.
f)       The institutions account’s and the personal account of the person authorised to operate account must remain separated.

11. Define the following: Executors, Administrator, Liquidator, Trustee, Ombudsman.
Ans: Executors: An executor is a person who is appointed by a person making a will to execute the will after his death.
Administrator: If a person dies without a will or make a will but does not mention the name of the executor, then the court shall appoint a person for the purpose of the execution of the will. Such person is called administrator.
Liquidator: A person who is appointed to manage the winding up of a company is called Liquidator. Winding up is a process by which the company comes to an end.
Trustee: A trust is an arrangement whereby a sum of money or other property is held by a person or organisation on behalf of another person. The person who is entrusted with the responsibility of managing the estate of a trust is known as trust.

Banking Ombudsman: Ombudsman in a bank is a person appointed to receive, investigate and report on complaints by customers against banking officials.


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