Unit – III
Chapter - V
TYPES OF CUSTOMERS AND THEIR ACCOUNTS
Objectives
To know who are customers to
To understand various types of individual customers
To know the formalities to be carried out on opening a bank account in the name
of joint stock companies
To know the procedure for opening a bank account in the name of Non Trading
associations
Definition of Customer:
According to John Paget, “a Customer constitutes a person who has an account with a
bank, whether fixed or savings, and has dealing of banking nature”. Dealings of banking nature
refer to those transactions of deposit and withdrawal of money at frequent intervals. The above
definition is popularly known as the ‘Duration Theory’.
A bank opens accounts for various types of customer’s like,
Individual/s- either singly or jointly with other individuals
Sole relationship
Hindu Undivided Family
Limited Liability Partnership firm
Limited Company (Joint Stock Company)
One – Person Company Ltd.,
Club and Association, Institution, Society
Trust
Executor and Administrator
Official Liquidator
Co-operative Society
, While opening the accounts, the banker keeps in mind the various legal aspects and
practices involved in opening and conducting these accounts.
Who can open an account?
As the banker- customer relationship is a contractual relationship, all the essential
features of a valid contract must be present when a banker opens an account. Even though the
actual formalities will differ depending on the type of the customer, certain formalities are
common to all. The common formalities are:
The banker must ensure that the customer is competent to contract. For entering into a
valid contract, a person needs to fulfil the basic requirements of being a Major (18 years of age
or above) and possessing sound mental health (ie., not being a lunatic). A person who fulfils
these basic requirements, as also other requirements of the banks as mentioned below can open
an account.
However, minors (below 18 years of age) can also open SB accounts with certain
limitations. A person who wants to open a deposit account has to fill up and sign the prescribed
account opening application form and furnish:
Acceptable proof of his/her identity and residential address,
His/her photographs, and
Initial deposit not less than the prescribed minimum (varies from bank to bank
according to the types of deposit accounts)
Introduction not Mandatory for opening accounts:
Introduction was obtained primarily by banks to get protection under Section 131 of the
Negotiable Instruments Act, 1881. The legal protection given to bankers in respect of cheques
collected “in good faith and without negligence” was available only if the account was opened
with proper introduction.
However, even though there was no legal responsibility on the part of the introducer, the
introducer is deemed to have connived with the account holder, for conversion (Collection of
instruments not legitimately owned by the customer).
Chapter - V
TYPES OF CUSTOMERS AND THEIR ACCOUNTS
Objectives
To know who are customers to
To understand various types of individual customers
To know the formalities to be carried out on opening a bank account in the name
of joint stock companies
To know the procedure for opening a bank account in the name of Non Trading
associations
Definition of Customer:
According to John Paget, “a Customer constitutes a person who has an account with a
bank, whether fixed or savings, and has dealing of banking nature”. Dealings of banking nature
refer to those transactions of deposit and withdrawal of money at frequent intervals. The above
definition is popularly known as the ‘Duration Theory’.
A bank opens accounts for various types of customer’s like,
Individual/s- either singly or jointly with other individuals
Sole relationship
Hindu Undivided Family
Limited Liability Partnership firm
Limited Company (Joint Stock Company)
One – Person Company Ltd.,
Club and Association, Institution, Society
Trust
Executor and Administrator
Official Liquidator
Co-operative Society
, While opening the accounts, the banker keeps in mind the various legal aspects and
practices involved in opening and conducting these accounts.
Who can open an account?
As the banker- customer relationship is a contractual relationship, all the essential
features of a valid contract must be present when a banker opens an account. Even though the
actual formalities will differ depending on the type of the customer, certain formalities are
common to all. The common formalities are:
The banker must ensure that the customer is competent to contract. For entering into a
valid contract, a person needs to fulfil the basic requirements of being a Major (18 years of age
or above) and possessing sound mental health (ie., not being a lunatic). A person who fulfils
these basic requirements, as also other requirements of the banks as mentioned below can open
an account.
However, minors (below 18 years of age) can also open SB accounts with certain
limitations. A person who wants to open a deposit account has to fill up and sign the prescribed
account opening application form and furnish:
Acceptable proof of his/her identity and residential address,
His/her photographs, and
Initial deposit not less than the prescribed minimum (varies from bank to bank
according to the types of deposit accounts)
Introduction not Mandatory for opening accounts:
Introduction was obtained primarily by banks to get protection under Section 131 of the
Negotiable Instruments Act, 1881. The legal protection given to bankers in respect of cheques
collected “in good faith and without negligence” was available only if the account was opened
with proper introduction.
However, even though there was no legal responsibility on the part of the introducer, the
introducer is deemed to have connived with the account holder, for conversion (Collection of
instruments not legitimately owned by the customer).
