Page 85 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes 5.6 Keywords

Attachment Order: an order from a court to hold a debtor’s property to prevent it from being
sold until debts are paid

Banke Lien: A charge that lets a bank have claim on assets in the banks possession. It can take and
sell this property if default should occur.
Banking: As per Section 5(b) of Banking Regulation Act, 1949, banking means the 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, and order or otherwise.
Garnishee Order: The obligation of a banker to honour his customer’s cheque is extinguished on
receipts of an order of the court known as garnishee order issued under order 21 Rule 46 of civil
procedure code.
KYC Norms: KYC is an acronym for “Know your Customer”, a term used for customer
identification process.

Lessor-Lessee: On hiring out of locker, bank becomes lessor and the hirer a lessee and the
relationship is that of landlord and tenant.
Mandate: a written order to a bank that asks the bank to open an account, names the peon(s)
allowed to sign checks on behalf of the account holder, and provides specimen signatures, etc.
Power of Attorney: A written authorization allowing a peon to perform certain acts on behalf of
another, such as moving of assets between accounts or trading for a peon’s benefit.
Recurring Account: Recurring deposit Account in a bank is a special account in which certain
fixed amount can be deposited in every month for a specified period. The rate of interest in
recurring deposit account is higher than savings account. After maturity period the total deposited
amount along with accrued interest is paid to the account holder either in cash or by credit to the
savings account in the same bank.
Right of set off: Right of set off is a statutory right and is available to any creditor even in the
absence of express agreement. Right of set off means, where a customer has credit balance in one
of his accounts and debit balance in another, the banker has a right to adjust credit balance with
the debit balance and to arrive at the net sum due. Such right is known as “Right of set off”.

5.7 Review Questions

1. Explain, in detail, the relation between the banks and the custome.
2. Briefly describe the concept of garnishee order.
3. What is attachment order? Explain in detail.
4. Differentiate between garnishee order and attachment order.
5. What are the objectives and components of KYC norms?
6. Explain the KYC framework.
7. Write a descriptive note on types of accounts.
8. Briefly describe mandate and power of attorney.
9. Write a short notes on:
a. Banke Lien
b. Right of set off
10. Explain termination of relationship.

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