Page 48 - DMGT303_BANKING_AND_INSURANCE

Unit 3: Concept of Retail Banking

Interest Notes

The interest is calculated on the minimum balance from 10th to the last day of the month.
Minimum interest to be paid in the account per half year is Rs.1. The rate of interest to be
allowed by the bank is decided by the Reserve Bank of India and this area has not been so far
deregulated . The rate of interest payable by the bank on Savings Fund Account as on June 07 is
3.5% p.a. on half yearly basis.

Withdrawal

By and large, banks do not permit withdrawals from a saving fund account during every half
year, whether by cheque or otherwise for more than 50 occasions. However, there is no bar that
the bank should not allow more than 50 times.

Transfer of Account

An account may be transferred from one branch to another branch of the bank, generally free of
charge on written request of the depositor.

Premature Closure of Account

In case the account is closed within a year, except on account of death of the account holder,
banks levy certain charges as per their internal guidelines.

3.4 Accounts

3.4.1 Banker Customer Relationship

Bank accounts may have a positive, or credit balance, where the bank owes money to the
customer; or a negative, or debit balance, where the customer owes the bank money.

Broadly, accounts opened with the purpose of holding credit balances are referred to as deposit
accounts; whilst accounts opened with the purpose of holding debit balances are referred to as
loan accounts.
Some accounts are defined by their function rather than nature of the balance they hold. Bank
accounts designed to process large numbers of transactions may offer credit and debit facilities
and therefore do not sit easily with a polarised definition.

Relation of a Debtor and a Creditor

The general relationship between banker and a customer is that of a debtor and a creditor i.e.
borrower and lender. In Foley v. Hill, Sir John Paget remarks, “the relation of a banker and a
customer is primarily that of debtor and creditor, the respective positions being determined by
the existing state of account. Instead of the money being set apart in a safe room, it is replaced by
the debt due from the banker. The money deposited with him becomes his property, and is
absolutely, at his disposal, and, save as regards the following of the trust funds into his hands,
the receipt of money by a banker from or on account of his customer constitutes him merely the
debtor of the customer with ‘super added’ obligation to honour his customer’s cheques drawn
upon his balance, in so far the same is sufficient and available”.
On the opening of an account a banker assumes the position of a debtor. The money deposited
by the customer with the bank is in legal terms lent by the customer to the banker who males use

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