Banking

1. PAYINGBANKERANDITS DUTIES
L. PRAKASH KANNAN, M.COM., M.PHIL., (PH.D.), ASSISTANT PROFESSOR,
S. J. MONISHA, II B.COM.,

2. PAYING BANKER
 The paying banker is a banker on whom a cheque is drawn and
presented of payment. It is his statutory obligations to honour his
customer’s cheques when there is sufficient funds of the customer in
his hands. Other wise, he will be liable to compensate for any loss
for damage caused to the customer. However, he should not honour
the cheques carelessly and negligently without obeying the
instructions of the drawer. Therefore, the paying banker should
ensure that the cheque is proper in all respect for making payment by
taking certain precautions.

3. Duties of Paying Banker
 Form of Cheque
 Date of Cheque
 Amount of Cheque
 Material Alteration
 Sufficiency of Funds
 Drawer’s Signature
 Mutilation
 Payment during banking hours
 Open or Crossed Cheque
 Endorsement
 Legal Restrictions
 Countermanding Order
 Notice Death, Insanity or Insolvency of a Customer

4. Formof Cheque
 The cheque should be in proper form. The form of a cheque has not been prescribed by
law. But the banks have made the drawing up of cheques in printed forms as a condition
for opening an account. The opening of an account is a contract between the banker and
customer. Therefore, the cheques between the banker and customer. Therefore, the
cheques must be drawn only in printed forms supplied by the banks. Otherwise, the
banker may refuse payment. The printed forms are convient for both banker and
customer.
Dateof Cheque
 A cheque may be current dated, ante-dated, post-dated undated. If a cheque is current
dated, there is no problem. If it is ante-dated, the banker can very well make payment on it
until the expiry of 6 months from such date. In case of undated and post-dated cheques,
the banker should not make payment on them. As regards undated cheques, it will not be
possible for the banker to decide whether they are stale or not. In no case, a banker should
honour a stale cheque.

5. Amountof Cheque
 The amount of cheque must be written both in words and figures. If the amount in words
and figures differs, the amount in words shall be taken as correct. However, if a cheque is
written only in figures, it should not be honoured.
Material Alteration
 The banker should not honour a cheque materially altered unless such alteration has been
authorised by the drawer by his full signature. However, the banker will not be liable for the
payment made on a materially altered cheque if he proves that,
 The alteration is not apparent
 The payment has been made in due course.

6. Sufficiency of Funds
 The sufficiency of funds means the funds atleast equal to the amount of cheque. If the
funds are insufficient, the banker should refuse payment of a cheque. He need not even
make part payment. The cheques should be paid in the following order:
 When the cheques are received one by one, they should be pain in chronological order of their
receipt by the bank.
 When several cheques are received at the same time and the funds are insufficient to meet all of
them, the cheque for greater amount should be paid first.
 In the above case, if two or more cheques are for equal amounts, the banker has the direction to
honour any of them to the extent of funds available.

7. Mutilation
 A cheque is said to be mutilated when it is torn into two or more pieces. Such a cheque should
not be honoured unless the banker is satisfied that-
 There is no intention to cancel it;
 No material fact of the cheque is erased or illegible;
 The drawer has confirmed it.
Paymentduring bankinghours
 A cheque is payable on demand only during banking hours. Any payment made by the banker
after the working hours will not be considered as payment in due course. The banker will be held
liable for any loss resulting therefrom to the customer.

8. Openor CrossedCheque
 An open cheque can be paid across the counter. But when a cheque is crossed, the banker
should see whether I is generally or specially crossed. If it is crossed generally, the payment
should be made only to a banker whose name is mentioned in the crossing. If any payment is
made contrary to crossing, the payment will not be considered as payment in due course. The
banker will be liable for any loss reslting therefrom to the drawer and true owner of the cheque.
Endorsement
 The banker should see the regularity of endorsements made in the order cheques before making
payment. Otherwise, he will be liable if a payment is made on an order cheque bearing irregular
endorsement.

9. Legal Restriction
 If there is any legal restriction regarding the payment of a cheque like Garnishee Order, the banker
should act carefully.
Countermanding Order
 If any order is received form the drawer to stop payment of a cheque, the banker should not make
payment on it.
Notice of Death, Insanity or Insolvency of a Customer
 The banker should also take into consideration the information received regarding the death,
insanity or insolvency of a customer before honouring his cheques.