presentation of banking law and precedent

2. MD.Mohibullah Any
172-11-5562

3. Chapter-1

4. OPENING WORDS
According to some economists, the word ‘Bank’ has been derived from the German word Banc’ which
means a joint stock firm while others say that it has been derived from the Italian word ‘Banco’ which
means a heap or mound. Perhaps the word ‘Banc’ or ‘Banco’ was used to denote the accumulation of
securities or money with a joint stock firm which later on with the passage of time came to be known as
‘bank’.
So, from the origination of the word ‘Bank’ and its functions and in the modern sense the term bank we
can define.

5. WHAT IS MEANT BY BANK?
A bank is a financial institution where customers can save or borrow money. Banks
also invest money to build up their reserve of money. Banks may give loans to
customers under an agreement to pay the money back to the bank at a later time, with
interest.

6. From the definition of dictionary of Banking & Finance-
“Bank is an organization chartered by the state or federal Govt. Some principal
functions of Banks are:
1. To receive demand deposits & pay customers cheques drawn against them.
2. To receive time deposits & pay interest thereon.
3. To discount notes, make loans and invest in Govt. or other securities.
4. To collect cheques, drafts, notes etc.
5. To issue drafts & Cashier’s cheques.
6. To certify depositors cheques.
7. When authorized by a chartering Govt. It may act in a fiduciary capacity.

7. WHAT IS MEANT BY BANKING?
Banking can be defined as the business activity of accepting and safeguarding money
owned by other individuals and entities, and then lending out this money in order to
earn a profit.

8. Definition of Banking:
1. Banking is a business of a banker, keeping or management of a bank. -–The
Oxford English Dictionary
2. Banking means the accepting for the purpose of lending or investment of
deposit of money from the public, repayable on demand or otherwise and
withdrawal by cheque,draft, order or otherwise. --Indian Banking Companies Act,
1949

9. WHAT IS MEANT BY BANKER?
Simply, a person who manages or owns a bank or group of banks.
A banker is an employee of a bank or financial institution who services the financial needs of
clients. These clients can be individuals or institutions, both with different needs.

10. WHAT IS MEANT BY CUSTOMER?
A banker is an employee of a bank or financial institution who services the
financial needs of clients. These clients can be individuals or institutions,
both with different needs.

11. OBJECTIVE OF A BANK
Business objective
1. Making profits.
2. Providing services.
3. Currency issue.
4. Creation of transaction media.
5. Receiving deposit.
6. Making loan.
7. Ensuring safety.
8. Investment.
Social objective
1. Creating savings.
2. Capital formation.
3. Industrialization.
4. Employment.
5. Developing living standard.
6. Economic development.
7. Supplying information.
8. Advising.
9, Representation.

12. CHARACTERISTICS OF BANKING BUSINESS
1. Dealing in Money:Bank is a financial
institution which deals with other people's
money i.e. money given by depositors.
2. Individual / Firm / Company:A bank may be a
person, firm or a company. A banking company
means a company which is in the business of
banking.
3. Acceptance of Deposit; A bank accepts
money from the people in the form of deposits
which are usually repayable on demand or after
the expiry of a fixed period. It gives safety to the
deposits of its customers. It also acts as a
custodian of funds of its customers.
4. Giving Advances:A bank lends out money in
the form of loans to those who require it for
different purposes.
5. Payment and Withdrawa:A bank provides
easy payment and withdrawal facility to its
customers in the form of cheques and drafts, It
also brings bank money in circulation. This
money is in the form of cheques, drafts, etc.
6. Agency and Utility Services:A bank provides
various banking facilities to its customers. They
include general utility services and agency
services.

13. 7. Profit and Service Orientation:
A bank is a profit seeking institution having
service oriented approach.
8. Ever increasing Functions:
Banking is an evolutionary concept. There is
continuous expansion and diversification as
regards the functions, services and activities
of a bank.
9. Connecting Link:
A bank acts as a connecting link between
borrowers and lenders of money. Banks
collect money from those who have surplus
money and give the same to those who are
in need of money.
10. Banking Business:
A bank's main activity should be to do
business of banking which should not be
subsidiary to any other business.
11. Name Identity:
A bank should always add the word "bank"
to its name to enable people to know that it
is a bank and that it is dealing in money.

14. FUNCTIONS OF BANK
Bank is the financial institution which
earn profit through accepting deposit,
extending credit, issuing notes &
cheque, receiving and paying
interest. Bank performs many
activities out of achieving
organizational goal to develop
socioeconomics of a country. The
activities of bank may be divided into
3 stages
A. General functions.
B. Economic functions.
C. Others functions.

15. General functions
1. Receiving deposits.
2. Advancing of loan.
3. Receiving & paying interest.
4. Issuing notes & currencies.
5. Creation of medium of exchange.
6. Money transfer.
7. Safe custody.
8. Creating deposits of credit.
9. Credit control.
10. Controlling money market.
11. Discounting.
12. Investment.
Economic functions
1. Creating savings.
2. Capital formation.
3. Representation.
4. Advising.
5. Industrial development.
6. Agricultural development.
7. Establishing relationship.
8. Issuing letter of credit.
9. Employment

16. Others functions
1. Social development.
2. Cultural development.
3. Assist to the govt..
4. Manpower development.
5. Regional development.

17. CLASSIFICATION OF BANK

18. BANK SYSTEM AROUND THE WORLD
Around the world the managerial
process of banks share some
similarities. But with the different
patterns of Govt. system, Banks
may exist in several ways while
performing its duties:
Current Commercial Banking System can be
classified as follows:
A. Anglo-American Banking System
B. German Universal Banking System
C. Japanese Main Banking System
D. Indian Lead Banking System

19. GENERAL RELATIONSHIP BETWEEN BANKER AND CUSTOMER:

21. OBLIGATIONS OF A BANKER
The primary relationship between
a banker and his customer is that
of a debtor and creditor. Thos
relationship imposes the following
special obligations on the banker.
1. Obligation to honor the cheques
2. Obligation to maintain secrecy
of accounts

23. GARNISHEE ORDER
In case a debtor fails to pay the
money due to his creditor, the
creditor may apply to the court to
issue a “Garnishee Order” on the
debtor’s bank. As a result of this
order, the debtor’s account with bank
is to be frozen & the bank
cannot make any payment out of the
account defying the order of the
court.
The creditor, on whose request
such order issued, is called
“Judgment-Creditor”.
The debtor, whose account is
frozen is called ‘’Judgment-
Debtor” .
The banker who has the
customer’s account is called the
“Garnishee”.

24. The Garnishee Order is issued by the court in two parts:
Order Nisi:
By this order the court-
asks the banker to freeze the debtor’s
account asks the banker to explain why the
funds in account so freeze should not be
used for payment of Judgment-Creditor.
On receipt of such order the banker is
prohibited from paying the amount due to his
customer. He should, therefore, immediately
inform the customer so that he can make
necessary arrangement for payment of the
debt.
Order Absolute:
After the banker files his
explanation, if any, the court may
issue the final order, called Order
Absolute. By this order the court
directs the banker to pay either the
whole or a part of the funds lying
in the account against which Order
Nisi has been issued to Judgment-
Creditor.