DEPOSIT ACCOUNTS OF CUSTOMERS

• DEPOSIT ACCOUNTS.
• MAJOR TYPES OF CUSTOMERS:
• - Individuals, Joint & Minors.
• Sole Proprietary
• Partnership Concerns.
• Joint Stocks Companies.
• Others (Agents, Executors, Administrators, Clubs, Societies etc. )
• INDIVIDUALS :- These may be classified as:
•
• Accounts of Literate ladies and gents.
• Accounts of illiterate ladies and gents.
• Accounts of parda observing ladies.
• Joint accounts.
 DEPOSIT ACCOUNTS OF CUSTOMERS

• (PRECAUTIONS, OPERATIONS IN THE ACCOUNT, PROBLEMS,

LAW & BANKER’S ACTION)

• Death of an individual customer: There may be two situations:-

• died in testate; or
• died after leaving a will.
• In case a customer died in testate, an Administrator will be
appointed by the Court of Law and the credit balance in the
customer’s account will be disposed off accordingly.
• In case a customer dies after leaving a Will, credit balance in the
customer’s account will be given to the Executor (named in the Will
be the testator i.e. the deceased customer)
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• Insanity of an Individual Customer:
• In case of insanity of the customer (whether partial or permanent), credit balance
lying in the insance customer’ account shall be placed at the option of the Manager in
lunacy, appointed by the court, through Lunacy Order, under The Lunacy Act, 1912.
• Insolvency of an Individual Customer:
• Insolvency is civil death All rights of an insolvent customer are transferred to the
official Assignee / Receiver / Liquidator, appointed by the Court of Law under
Provincial Insolvency Act, 1921.
• Servicing of a Garnishee Order:
• Under Section (60) and order (21) of the Civil Procedure Code (CPC), A Court is
authorized to issue Garnishee Order (Nisi or Absolute) on a banker attaching the
credit balance lying in the customers account. In case of Nisi Garnishee Order, a
banker is directed by the Court that operations of the account should be stopped
suspended and the amount should be disposed off according to instructions of the
court of Law contained in the order. In an absolute Garnishee Order, a banker is
directed by the court of law to remit the whole or specified amount from the
Garnished account of the customer. The banker is supposed to act accordingly.
 DEPOSIT ACCOUNTS OF CUSTOMERS

• JOINT ACCOUNT:
• When account is opened by more than one person and the
relationship between them is neither of trustees nor of partners, it is
termed as a joint account.
• Whenever such accounts are opened, definite instructions regarding
operations of the account and payment of balance in case of death
of any one of them should be obtained. In absence of any
instructions for the account operations, all the joint account holders
should sign the cheques for withdrawal of amount from their
account. Likewise, definite instructions must also be obtained for
payment of balance in the account in the event of death of any of the
joint account holders. For this purpose, all the joint account holders
are required to sign account Opening Form.
• Any member of the joint Account may lodge stop payment
instructions of any cheque and the bank shall honour such
instructions. However, removal of these instructions must be signed
by all the members.
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• The member of a Joint Account may wise to delegate authority to

any outsider to operate upon the account such a mandate is
necessarily to be signed by all the members.
• Any mandate becomes automatically rescinded or cancelled when
the bank comes to know about death, insolvency or insanity of any
of the members of the joint account.
• In case any of the members of the joint account becomes insolvent
or insane, operation on the account should be stopped and
instructions to be required for payment of the balance amount from
the remaining solvent and sane members.
• In case, any of the members of the joint account dies, operation on
the account must be stopped and balance in the account is to be
paid as per instructions recorded with the bank.
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• MINOR’S ACCOUNT:
• According to section 3 of the Majority act, 1875:
• A person who has not attained the age of 18 years is said to be a minor.
However, where the guardian is appointed by the Court of Law, majority
extends to 21 years.
• Legally, a minor cannot open a bank account since opening of a bank
account is the result of a contractual relationship which a minor does not
possess. However, in order to inculcate the habit of savings, deposit
account/s may be opened in the name of the minor jointly with his/her
guardian.
• OPERATION IN THE ACCOUNT:
• Minor can neither give stop payment instructions nor can claim the balance
during his her minority.
• Operation of the account, nevertheless, shall rest with the guardian.
• In case of death or insanity of a minor, balance is to be paid to the person
authorized by the Court of Law.
• In case of death, insanity or bankruptcy of the guardian, balance in the
account is to be paid according to the instructions of the Court of Law.
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• ACCOUNT OF SOLE PROPRIETARY CONCERNS:

• Sole Proprietorship is that
• Kind of business, which is controlled and owned by a single person.
• In the absence of delegation of authority, the proprietor himself is
required to operate upon the account.
• Authority to operate is automatically revoked in the following
circumstances.
• Death of the proprietor.
• Insolvency / bankruptcy of the proprietor.
• Insanity of the proprietor.
• If a Garnishee Order has been served on the firm’s account,
operations of the account should be stopped forthwith.
• If the firm is indebted to the bank, the banker has the right of set off
upon credit balance lying in the proprietor’s private or individual
accounts
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• In case of death of the authorized person (i.e. the case of delegated

authority), all cheques drawn by him are to be counter signed by the
proprietor.
• In case of death of the proprietor operation of the account should be
stopped forthwith where the account is:
• A Deposit Account:- In case the proprietor dies in testate, balance
lying in his account is to be paid to legal heirs upon receipt of
Succession Certificate and Letter of Administration issued by the
Court of Law; or the balance be paid to the Executor upon
production of Succession Certificate and Probate issued by the
Court of Law where the proprietor died after leaving a will.
• A Loan Account: The Banker has absolute right to satisfy his claims
before proceeds are handed over to the legal heirs of the deceased.
•
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• PARTNERSHIP ACCOUNTS:
• Partnership is the relation between persons who have agreed to
share profits of the business, to be carried out by all or any one of
them acting for all.
• GENERAL INFORMATION:
• Opening of account: Eligibility, Number of Partners, Signing
Capacity of AOF Introduction of Account and Partnership Letter.
• All or anyone or more (with consent of all) can operate.
• Operational authority can be delegated to 3rd party.
• Cheques payable to firm should not be credited in partner’s personal
account without written consent of all partners.
• Every partner can countermand payment of any cheque (whether or
not operating upon the account)
• INCOMING OF A NEW PARTNER: Fresh Partnership Letter is to
be obtained Operation of the account should not be stopped.
 DEPOSIT ACCOUNTS OF CUSTOMERS

• RETIREMENT OF A PARTNER. If Provided in the Deed, the firm

may continue its business. Operation of the account should not be stopped.
Cheques signed by the retired partner may be paid after getting counter
signatures of the remaining partners.
• DEATH OF A PARTNER. If provided in the Deed, the firm may
continue its business. Cheques signed by the deceased partner should not
be paid Old account should be closed by opening a new account.
• INSOLVENCY OF A PARTNER: Partnership stands dissolved and operation
of the account should be stopped. However, if provided in the Deed, Solvent
partners can continue the business for winding up of the firm. Cheques
signed by the insolvent should be paid only after getting counter signatures
from all solvent partners.
• INSANITY OF A PARTNER. It also dissolves partnership Operation of the
account should be stopped.
• BANKRUPTCY OF THE FIRM. On such adjudication, operation of the
account should be stopped under this situation; personal accounts of the
partners. Also become inoperative.
 DEPOSIT ACCOUNTS OF CUSTOMERS

• JOINT STOCK COMPANIES:

• There are various types of companies. Normally the following two
types of companies open their account with the bank.
• Private Limited Companies.
• Public Limited Companies.
• Private Limited Companies are those where the share capital is not
offered to the general public, Instead the Offer is restricted to
particular class of society or within the family members. Generally,
their shares are not transferable. The minimum number of
shareholders is 1 with maximum of 50.
• In case of public limited companies share capital is contributed by
the general public every national of Pakistan who is authorized to
enter into contract can purchase his or her shares. Shares of these
companeis are transferable and traded freely in the stock exchange
markets. Minimum number of shareholders is 7 whereas there is no
upper limit extending to infinity.
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• Operation in the account: precautions, problems law & banker

action:
• Death, retirement or dismissal of the directors does not effect
operation on the Account. However, death, retirement or dismissal of
the directors authorized to operate upon the accounts temporarily
put embargo on operations of the account in such an eventuality,
fresh resolution authorizing another person to operate upon the
account is to be called for from the Company.
• The cheque signed by the directors before their death, retirement or
dismissal should be honoured since they are considered valid
instruments. In case of their doubtfulness, the matter may be
referred to the Company.
• Winding up of the Company in any manner terminates its career. At
this stage operation on the account should be stopped. Thereafter,
no cheque is to be honoured.
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• AGENT:
• An agent is a person employed to do any act for another or to
represent an other in dealings with 3rd parties. The person for whom
such act is done or which is so represented is called the principal.
• Operation in the account shall be allowed strictly in accordance with
the provisions contained in the Power of Attorney.
• In case of death, insanity, insolvency or bankruptcy of the principal,
operation of the account should be stopped and cheques signed by
the agent should not be paid.
• Death, insanity, insolvency or bankruptcy of the agent terminate his
authority to operate upon the account operations of the account is
not affected as the principal on whose behalf the agent signed the
instruments is there and competent. (However, in order to avoid
implications, operation of the account should be suspended and
necessary instructions be sought from the principal regarding
payment of cheques signed by the agent)
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• ADMINISTRATOR’S ACCOUNT; Administrator is the person

appointed by the Court of Law to look after the estate of a deceased
where.
• The deceased died in testate; or
• The deceased left a WILL but did not name any executor; or
• The executor died before the testator; or
• The executor named is a minor or incapable to enter into contract; or
• The executor named in the WILL does not accept to become an
executor.
• EXECUTOR’S ACCOUNT:
• An executor is a person to whom execution of a WILL is entrusted
by the testator.
• All Administrators/Executors are required to sign AOF in their
personal capacity and furnish an undertaking as to be liable as joint
and several.
 DEPOSIT ACCOUNTS OF CUSTOMERS

• In the absence of any instructions regarding operation, all are required to

operate upon the account.
• Administrator(s) Executor(s) can delegate their powers among themselves
but not to outsiders.
• In case of death of any of the administrators/Executors:-
• If the account is having credit balance, operation of the account should not
be stopped and cheques signed by the deceased Administrator/Executor
should be honoured.
• In case the account is having debit balance operation of the account should
be stopped forthwith in order to establish the liability of the deceased
Administrator/Executor.
• In case of the death of the sole executor or the last surviving executor,
powers will pass to his i.e; deceased executor’s executor). If such a
deceased executor has not appointed any executor, court will appoint an
administrator.
• Cheques payable to Administrator(s)/Executor(s) should not be credited in
their personal account/s without the consent of all administrators or
executors as the case may be.
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• TRUSTS:
• Trust can be created by any person who is authorized to enter into
contract as per qualifications laid down in section 11 of the contract
Act 1872. However, creation of trust must be for lawful purpose and
must also be for a property transferable to the beneficiary.
• All trustees should sign the account opening form. Likewise,
instructions for operation on the account must also be signed by all
the trustees.
• All trustees should sign the cheques unless the number is restricted
to certain extent in terms of the trust deed.
• As a general rule, trustees have no authority to delegate their
powers to anyone or more of themselves or to 3rd parties. For the
purpose, they may be specifically permitted in the trust deed.
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• Trusts can be created by oral agreement but the trust

intended to have banking relationship are expected to
have trust deed codified.
• Death, insanity and insolvency of any of the trustees do
not effect operation on the account. However, these
eventualities if arise at the stage when there was only
one trustee authorized to operate, fresh instructions
should be sought from the remaining trustees.
• For appointment of new trustees, care must be taken to
ensure that his appointment is strictly in accordance with
the provisions contained in the Trust Deed.
• If there is no operation on the account, say for at least 6
months, the matter should be taken up with the trust
authorities.
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• CLUBS, SOCIETIES AND ASSOCIATIONS:

• These concerns are non – trading in nature. They have their own rules and
regulations and their affairs are monitored by a committee called as
Governing Body or Managing Committee or Executive Committee.
• Account Opening:
• Resolution duly passed by the Governing Body wherein it is resolved that.
• Banking account be opened in their name with the bank (to be specified)
• Name(s) of persons to be specified for operation on the account.
• The manner in which the account shall be operated]
• Certified copy of Rules and Regulations or Bye Laws.
• Letter of registration.
• Letter of Undertaking to the effect that as and when any change takes place
they will inform the bank of such change.