function of banking understand through pictures

1. BANKING LAW &
PRACTICE
ES12C04

2. BANKING LAW & PRACTICE
ES12C04
Unit-I
Definition of Banking
The term Banking is
defined as “accepting for
the purpose of lending or
investment, of deposits of
money from the public,
repayable on demand or
otherwise, and
withdrawable by cheque,
draft, order or other wise”.
[section 5(b)]

3. Banker:
 A person who manages
all banking transaction is
called as a banker.
Customer:
 According to Dr. Hart “a customer is one who has an
account with a banker or for whom a banker habitually
undertakes to act as such”. (Or)
 Ordinarily, a person who has an account in a bank is
considered its customer

5.  The borrowing, raising or taking of money;
 The lending or advancing of money either upon security or without
security;
 The negotiating of loans and advances;
 The collecting and transmitting of money and securities.
 The buying and selling and dealing of foreign exchange including foreign
bank notes
 It may contract for public and private loans and negotiate and issue the
same
 It may undertake and execute trusts.
 The purchasing and selling of bonds, scrips and other forms of securities
on behalf of constituents or others;
 The providing of sale deposit vaults;
 The receiving of all kinds of bonds, scrips or valuable on deposit or for safe
custody or otherwise
 It may acquire, construct and maintain any building for its own purpose
 It may do all such things which are incidental or conducive to the
promotion or advancement of the business of the company

6. The range of services offered differs from bank to bank, depending mainly on
the size and type of banks , but the acceptance of deposits from the public and
provision of credit from the mainstay of the banking business. The services
offered by banks may be classified into (i) services to depositors
and borrowers (ii) Ancillary services
Services rendered to depositors and borrowers:
• Collection of cheques, demand drafts, bills of exchange, promissory notes,
hundis , inland and foreign documentary and clean bills.
• purchase of local and foreign currency documentary/ clean bills, and foreign
letters of credit
• Carrying out the standing instructions for the payment of insurance premia,
subscriptions, certain taxes and gift remittances.

7. Ancillary Services
 Credit cards
 Safe Deposit Vault.
 Credit transfers
 Purchase and Sale of Securities.
 Executor and trustees.
 Collections of interest on Securities/Debentures and dividend
on Shares, collection of pension bills.

8. On the opening of an account the banker assumes the position of a
debtor. The money deposited by the customer with the banker is, in
legal terms, lent by the customer to the banker.
In deposits time customer will be creditor & banker will be debtor.
Banker becomes creditor of the customer (debtor) who has taken
a loan from the banker.
Though the relationship between a banker and his customer is
mainly that of a debtor and creditor this relationship differs
from similar relationship arising out of ordinary commercial
debts in following respects

9.  The creditor must demand payment
Ex: A person made fixed deposit in bank for 1year but the
customer urgently wanted money. Customer has right to demand
his money but the1year terms of the contract is not completed.
The banker is under obligation to repay the debts to his customer.
 Proper place and time of demand:
Now days customer demand money in ATM centre. The demand
by the Creditor must be made at the proper and in proper time.
Ex: In case of DD, traveller’s cheques etc.,
 Demand must be made in proper manner:
According to the statutory definition of banking, deposits are
withdrawable by cheques, drafts, order or otherwise. In other
words, the demand should not be made verbally or through
telephonic message or in any such manner.

10. BANKER ACT AS TRUSTEE
EX: If the customer deposits securities or other
valuables with the banker for safe custody the latter act
as a trustee of his customer. The customer continues to
be the owner of the valuables deposited with the
banker. The legal position of the banker as a trustee,
therefore, differs from that of a debtor of his customer.
Customer personal A/c details will be 100%
secret in bank In case of a cheque sent for collection
from another banker, the banker acts a trustee till
the cheque is realised and credited to his customer’s
account and thereafter he will be the debtor for the
same amount.

11. BANKER ACT AS AGENT:
A banker acts as an agent of his customer and
performs a number of agency functions for the
convenience of his customers. For Ex: He buys or
sells securities on behalf of his customer,
collects cheques on his behalf and make
payment of various due of his customers
Ex: insurance premium ,vehicle loan & telephone
bills also.
Banker provide the DEBIT Card, CREDIT
Card to his customer and service
charge will be taken by a banker.