TYPES OF ACCOUNTS
Current Account (Current Deposit) :
The Current Account facilitates commercial and industrial undertakings (Companies, Firms etc.) and public bodies and authorities in attending to their numerous and frequent transactions. Deposits and issue of cheques are continuous processes and bank's role is appreciable. No interest is payable by the Bank under this account, as per R.B.I.
regulations, but Banks may levy incidental charges.
The obligations on the bank is onerous in respect of current accounts as customers cheques are to be answered as long as there are. funds to their credit. Further the bank should keep sufficient funds to meet such cheques In Fixed Deposit, the Bank may be aware of the maximum the customer may demand, but in respect of Current Account, the bank should make available large funds to meet all emergent demands.
The bank is a debtor to the depositor in fixed deposits. This is so even after the expiry of the date of maturity. The legal relations of depositor-bank is that of creditor-debtor in fixed deposits. The relations continue even after the F.D. receipt matures and until it is paid up or discharged. The bank in order to accommodate the depositor may allow withdrawal subject to R.B.I, directives (regarding interests) but F.D.R. is to be discharged by the depositor. This affects the cash-reserves of the Bank. After due date, interest is payable as per R.B.I, directives, if the F.D.R. is renewed.
The F.D.R. issued by the Bank is not negotiable. But it can be assigned. The F.D.R. is not a negotiable instrument. This was so held in Abdul Rahaman V, Central Bank. An assignment may be made with due notice to the Bank. The Bank should obtain a .letter of authority from the depositor for making payment, in such cases. The F.D.R: is a debt or an actionable claim and hence a gift of it may be made by making an instrument of transfer.. If an F.D.R. is lost the Bank may issue a duplicate or make the payment on maturity to the depositor by obtaining an indemnity bond in either case. Under a garnishee order the F.D.R. may be attached if there was a real "debt" of the judgment-debtor.
The Income-tax Assessment officer (or T.R.O.) may issue a notice to the Bank demanding payment or attachment of F.D.R. If the notice is received before maturity of F.D., the bank is bound to make payment to the Department on date of maturity of the F.D. The F.D.s may be made payable to "either or survivor" or Former or survivor. In such a case the appointment of a nominee is not necessary,
S. B. Accounts : , The Banks had not evinced much interest in S.B. Accounts earlier, but when banking services became extensive and savings started becoming a movement among people, banks found this to be a paying business Of the total bank deposits of 56 lakh crores, nearly 14 lakh crores were in savings bank deposits. (2011 March) This is not a small amount to be ignored ! Further it fosters savings habit. The S.B. account holder, should leave a fixed minimum as balance in his account and may withdraw by cheques or withdrawal forms. Cheques payable to the customer are sent for collection. These deposits earn interest as per Bank regulations. Banks provide special services and also privileges of safety vaults etc. to such account holders, to have good customer-bank relations. From the Banker's stand point maintenance of these accounts does not involve much expenditure and hence less expensive.
Closing of Account or Stoppage of Operation :
The customer - banker relation is not only that of a creditor - debtor and hence contractual, but it is also statutory in view of the Negotiable Instruments Act and other statutes. As such there are well-defined principles in regard to closing of Accounts of 'stoppage of operation by the Bank.
The Bank may close or stop operation of an account on the following grounds :
(i)customer's notice to close the account;
(ii) customer's death;
(iii) customer's insanity;
(v) Garnishee order from Court;
(vi) Assignment of Credit balance and notice thereof by customer.
Every customer has a right to close his Account and the reasons may be varied. It may be in respect of Bank's services, rate of interest, incidental charges, lack of facilities, and lack of confidence in the Bank etc. Similarly the bank may close the account if the customer is "undesirable" or is convicted of forgery etc.
Notice necessary : The customer may give notice to close his account, but he is not bound to do so. But so far as the Bank is concerned adequate notice should be given. It was held in the "snowball" scheme case i.e. Prosperity Lid, V Lloyd Bank Lid., that as the scheme had spread world-wide and bank had full knowledge of the wide spectrum of operations, a month's notice given to the company was inadequate and amounted to violation of contract by the Bank. Closing an account by the Bank without notice is invalid and against the Banking Code. Generally, one month's notice suffices.
Customer's death : The death of a customer and notice or knowledge thereof is sufficient for the Bank to close the account, in UBI V Devi, the Supreme Court held that notice to one branch is not a constructive notice to all other branches.
Customer's insanity: The general presumption by the Bank is that the customer insane unless there is conclusive proof of his insanity and based on this if there is notice of Insanity the Bank may stop operation of the account (Young V Toynbee).
Insolvency: In the case of individual customer, on notice of insolvency the Bank should stop the operation of the Account and should not honour cheques etc. In the case of a company (private and public) when the winding-up proceedings start and the Liquidator is appointed, the Bank should transfer the balance in the account to the Liquidator.
Gurnishee Order :
On receipt of the order of the civil court, the Bank should take steps, as per the order. If an amount is specified, such amount is to be earmarked for the purpose and the balance may be subject to honour customer's cheque. If the entire account is to be garnished the Bank may do so and stop all further payments.
Assignments : The assignee gets a right and hence, when the Bank receives notice of the assignment (transfer), the assignor (customer) will have no right to the balance in his account, and the Bank is justified in closing the account.