The slide detailed speaks about Banking and its functions. it is very much useful for Under graduate Commerce Students.

2.  A Bank is a financial institution licensed to receive
deposits and make loans. Banks may also provide
financial services such as wealth management,
currency exchange, and safe deposit boxes. There
are several different kinds of banks including retail
banks, commercial or corporate banks, and
investment banks. In most countries, banks are
regulated by the national government or central
bank.
 DEFINITION:-
› “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”.

3.  Debtor-Creditor Relationship :When a
customer (debtor) deposits money with a bank
(creditor), the customer becomes a lender and
the bank becomes borrower. As such, the
relationship is that of a debtor and creditor. It
is a general relationship between banker and
his customer. Some important points to note in
Debtor-Creditor Relationship are,
› The banker is the debtor of the customer
with the obligation to honor his
customer's cheque drawn upon his
balance.
› When the banker lends money to his
customer, the customer becomes the
debtor and the banker, the creditor.
 Banker as an agent : Generally, bankers
render agency services for their customers.
They pay insurance premium, electricity bills,
taxes, etc. They collect interest on
investments, dividends on shares, collect
cheques, etc. Bankers act as per the
'Standing instructions' of their customers. For
these services, the banker charges a nominal
commission from the customer. The banker,
by providing these services acts as an agent
and the customer who gives the standing
instructions, acts as a principal. Hence, the
relation of banker and customer is that of
agent and principal as far as these services
are concerned.
 Creditor (i.e., customer) demanding
payment : Under a commercial debt, the
liability of the debt arises only at the
maturity of the debt i.e., on the due date.
The debtor i.e., the banker is to pay the
debt on the maturity date. The customer
must demand in writing for repayment, only
then, will the payment be made to the
customer.
 Banker as a bailee : Bailee is one who
posses goods or articles on behalf of the
owner (calledbailor) of the goods.
According to the Sec. 148 of Indian
Contract Act. a bailment is the delivery of
goods by one person to another for some
purpose, upon a contract, that they shall,
when the purpose is accomplished, be
returned or otherwise deposited off
according to the directions of the person
delivering them. In other words, when
customer leaves with the banker some
valuables for safe custody in the safe
deposit vaults or lockers, the banker
performs the functions of the bailee and
the relationship between the banker and
the customer in such a case is that of a
bailee and the bailor.

4.  Banker as a Trustee : A trust is a
relation between two persons by virtue of
which one of them (called trustee) holds
property vested in him for the benefit of the
other (called beneficiary). For example. if a
customer deposits securities or other
valuables with the banker for safe custody,
he acts as a trustee of his customer. The
customer continues to be the owner of the
valuables deposited with the banker. The
legal position of the banker as a trustee
differs from that of a debtor of his
customer. In the event of bank's liquidation,
such trust properties held by the banker
are not available for the distribution to
general creditors of the bank.
 Proper place and time of demand :
The demand by the creditor (i.e., depositor)
must be made at the proper place and in
proper time. A commercial bank has a
large number of branches. His / her
demand for withdrawal of amount from the
deposited funds must be made at the
branch where the account has been
opened in his / her name during the
business hours.
 Bank as an executor : Where a
customer appoints a banker as his
executor and leaves property through
a will, the banker has to administer
the property according to the terms of
the will after the death of such
customer. Where no will is written by
the deceased, the court may appoint
the banker as administrator. In such a
case the banker has to distribute the
property of the deceased according
to the suggestion laws applicable.
 Banker as an Attorney : The
customer may grant a special power
of attorney to his banker to transact
certain dealings on his behalf. The
banker is the attorney of the
customer in such cases.
› Note :Power of Attorney refers to
the authority to act for another
person in legal or financial
matters.

5.  Not time barred : The
deposits with a bank are not
time - barred on the expiry of
three years as the case with
ordinary debt. The Law of
Limitation Act does not apply
to a banking debt.
 Banker has a right to
combine accounts : If a
customer has two or more
accounts in his / her name at
the same branch and in the
same capacity, a banker as a
debtor can exercise his right
to combine those accounts
into one.
 A banker has no right
to close the account : A
banker as a debtor has
no right to close the
account of its creditor
(depositor-customer) at
any time without the
prior permission from
him / her.
 A banker as a creditor
If a banker disburses
loan and overdraft, it
assumes the role of a
creditor and the
customer assumes the
role of a debtor.

6.  1. Obligation to honorcheques :
According to Sec. 31 of the
Negotiable Instruments Act, 1881,
every banker must honor the
cheques drawn on it by a customer,
provided :
1.The customer has sufficient amount
of balance to his account with the
banker;
2.The funds are properly applicable
to the payment of such cheque;
3.The banker has been duly required
to pay;
4.The cheque has been presented to
the banker within a reasonable time
(i.e., within six months) after the
apparent date and of its issue;
5.No prohibition order of the court or
any other competent authority (e.g.,
income tax) is standing against the
account of the customer.
 2. Banker's Lien : A lien may be
defined as the right to retain property
belonging to a debtor until he is discharged
of his debt due to the retainer (creator) of
the property. The banker's lien refers to the
right of banker over such of his customer's
securities as may come into his possession
in the ordinary course of business.
According to Sec.171 of the Contract Act, a
banker has a general lien on cash,
cheques, bills of exchange and securities
deposited with him.
 Conditions required for the banker to
exercise general lien
 The securities and goods must come to his
hands in his capacity as a banker.
 The banker should have obtained the
possession of the securities and goods
lawfully.
 The goods or securities should not have
been entrusted to the bank for a specific or
special purpose.
 The goods and securities, held by the bank
shall stand in the name of borrower only
and not jointly with others.
 There must be no arrangement either
express or implied that is inconsistent with
the banker's right to lien.

7.  3. Secrecy of Customer's
Accounts : It is an obligation
on the part of a banker to
maintain secrecy about the
customer's accounts. The
banker must not disclose any
information pertaining to the
customer to any one. But
there are certain exceptions.
They are,
 Where such disclosure is
required by law
 Where such disclosure is in
public interest to disclose
 Where the interest of the bank
require such disclosure
 Where disclosure is made by
the express or implied
consent of the customer; and
 Where such disclosure is
permissible on account of
banking practices
 4. Banker's Right to
Combine Accounts :The
banker has a right to
combine several accounts
kept by the customer at the
same branch or different
branches of the bank
(Garnet V. Mc Kervan).
The banker however,
cannot combine the
personal account of a
customer with a joint
account of a customer and
some other person.
Customer has no right to
treat two accounts as one.

8.  5. Banker's Right to Set-Off :
The banker can adjust a debit
balance to a 1.customer's
account with any balance
standing to the customer's
credit. While doing so, the
banker gives due notice to the
customer. To exercise the right
of set-off the following
conditions should be fulfilled;
2.The debts are certain and
are due. The right cannot be
exercised against future debt /
or contingent debts.
3. The debit and credit
balances are of the same
person in the same capacity.
There should not be any
express or implied agreement to
the contrary.
 6. Banker's Right of
Appropriation : As a part of
ordinary banking business,
the banker receives deposits
of money from his customer.
The customer has the right to
dictate as to which account a
particular amount is to be
credited where he has more
than one account and / or
loan account. In case the
customer has not
appropriated, i.e., not
indicated his account to which
the said amount is to be
credited, the creditor is at
liberty to apply the payment to
any debt owed by the debtor
including to a debt barred by
limitation.

9. Savings Bank Account
 As the name suggests this type of
account is suitable for people who
have a definite income and are
looking to save money. For example,
the people who get salaries or the
people who work as laborers. This
type of account can be opened with a
minimum initial deposit that varies
from bank to bank. Money can be
deposited at any time in this account.
 Withdrawals can be made either by
signing a withdrawal form or by
issuing a cheque or by using an
Normally banks put some restriction
on the ATM card. number of
withdrawal from this account. Interest
is allowed on the balance of deposit
in the account. The rate of interest on
savings bank account varies from
bank to bank and also changes from
time to time. A minimum balance has
to be maintained in the account as
prescribed by the bank.
Current Deposit
Account
 Big businessmen, companies, and
institutions such as schools ,
colleges, and hospitals have to make
payment through their bank accounts.
Since there are restrictions on the
number of withdrawals from a
savings bank account, that type of
account is not suitable for them. They
need to have an account from which
withdrawal can be made any number
of times.
 Banks open a current account for
them. Like a savings bank account,
this account also requires a certain
minimum amount of deposit while
opening the account. On this deposit,
the bank does not pay any interest on
the balances. Rather the account
holder pays a certain amount each
year as an operational charge.

10. Fixed Deposit Account
 Some bank customers may like to put
away money for a longer time. Such
deposits offer a higher interest rate. If
money is deposited in a savings bank
account, banks allow a lower rate of
interest. Therefore, money is
deposited in a fixed deposit account
to earn interest at a higher rate.
 This type of deposit account allows
the deposit to be made of an amount
for a specified period. This period of
deposit may range from 15 days to
three years or more during which no
withdrawal is allowed. However, on
request, the depositor can encash the
amount before its maturity. In that
case, banks give lower interest than
what was agreed upon. The interest
on a fixed deposit account can be
withdrawn at certain intervals of time.
At the end of the period, the deposit
may be withdrawn or renewed for a
further period. Banks also grant a
loan on the security of the fixed
deposit receipt.
Recurring Deposit Account
 While opening the account a
person has to agree to deposit a
fixed amount once in a month for
a certain period. The total deposit
along with the interest therein is
payable on maturity. However,
the depositor can also be allowed
to close the account before its
maturity and get back the money
along with the interest till that
period.
 The account can be opened by a
person individually, or jointly with
another, or by the guardian in the
name of a minor. The rate of
interest allowed on the deposits
is higher than that on a savings
bank deposit but lower than the
rate allowed on a fixed deposit
for the same period.

11.  1. Introduction :-
Before opening an account the
banker should obtain satisfactory
introduction from the applicant. If a
new account is opened with out
introduction it may create problems
for the bankers.
2. Signature Of The Customer :-
A banker must obtain specimen
signatures on account opening
form and also on the card.
3. Importance Of Form :-
The account opening form is an
important document it must be
filled neatly and correctly.
 4. Personal Information About
The Customers :-
All the time of opening an
account the banker should get
the information about the
character and capital of the
customers tactfully.
5. Opening With Cash :-
New account should be opened
only with cash. In case of cheque
it may create any problem for the
banker.
6. The Issuance Of A Cheque
Book :-
Cheque book should not be
issued to the new customer
unless there is a reasonable
balance in the account.

12.  Bearer Cheque
The first among the types of
cheques is the bearer cheque.
This cheque is payable to the
bearer of the check or whose
name the cheque carries in the
column meant for the name of
the drawee. Ideally, this cheque
has “or bearer” printed at the end
of the dotted lines, which is
meant to have the name of the
drawee. This cheque can be
presented over the counter of the
drawee bank and is payable to
the one presenting it. It is a
transferable instrument and thus
can be passed on to another by
mere delivery, there is no need to
endorse this type of cheque.
 Order Cheque
In this cheque, the printed
word “bearer” is cancelled
thereby making it payable
only to the person whose
name is written in the place
of drawee. Once “bearer”
has been cancelled on the
cheque, it is automatically
understood that this is an
order cheque and the bank
can only complete the
transaction once they have
identified, to their
satisfaction, the bearer of
the cheque to be the same
person, as named in it.

13.  Crossed Cheque
In a crossed cheque, the drawer
makes two parallel transverse
lines at the top left corner of the
cheque with or without writing
“a/c payee”. This makes sure that
no matter who presents the
cheque to the drawer bank, the
transaction is made into the
account of the person named in
the cheque only. The advantage
of cross cheque is that it reduces
the risk of money being given to
an unauthorized person because
this type of cheque can only be
cashed by the drawee’s bank.
 Open Cheque
Also known sometimes as an
uncrossed cheque. Any cheque
that is not crossed comes under
open cheque category. This
cheque can be presented to the
drawer’s bank and is payable to
the person presenting it. The
drawee of this cheque can also
transfer it to another person by
writing their name on the cheque
and thereby making them the
drawee. To make the cheque
open, the word OPEN should not
be crossed off, and the person
issuing the cheque must ensure
his/her signatures on both the
front and the back of the cheque.
Otherwise, the payee may be
denied the payment by the bank.
The payee is also expected to
sign at the back of the cheque
while receiving the amount.

14.  Post- Dated Cheque
A cheque bearing a later
date than the one on which
it is actually issued, is
called as a post-dated
cheque. This cheque
maybe presented to the
drawee bank at any time
after its issuance, but the
money will not be
transferred from the
account of the payer until
the date mentioned on the
cheque. The payee can
also present the cheque
after the date mentioned
on the cheque too. It will
still be valid, and the
money will be transferred
to the payee’s account.
 Travelers’ Cheque
These may be equated
with a universally accepted
currency. A travelers’
cheque is available almost
everywhere and comes in
various denominations.
This is an instrument
issued by the bank itself to
make payments from one
place to another. There is
no expiry date of a
travelers’ cheque and thus
it can be used during your
next travel as well, or you
have the option to encash
it once you land back in
India.

15.  Self Cheque
The drawer usually issues a self-
cheque to his or her self. The
name column of the drawee has
the word “self” written in it. A self-
cheque is drawn when the
drawer wishes to withdraw
money from the bank in cash for
his use. This cheque can only be
encashed in the account holder’s
or the drawer’s bank. This
cheque must be used carefully
because if it is lost, another
person may easily get it
encashed by visiting the drawer’s
bank.
 Stale Cheque
As the name suggests, a stale
cheque is one which is past its
validity period and can no longer
be encashed. Initially, this period
was six months from the date of
issue. Now, this period has been
reduced to three months.
 Bankers Cheque
A banker’s cheque, as is self-
explanatory here, is a cheque
issued by the bank on behalf of the
account holder in order to make
payment of a specified sum, by
order, to another person within the
same city. It is valid only for three
months from the date of issue, but
if needed, can be re-validated upon
fulfilling certain legal obligations.

18.  Crossing a cheque refers to drawing two parallel
transverse lines on the cheque with or without additional
words like “& CO.” or “Account Payee” or “Not Negotiable”
between the lines.
 By using a crossed cheque, one can make sure that the
amount specified cannot be en-cashed but can only
be credited to the payee’s bank account.
 Crossing of Cheque is recognized under The Negotiable
Instruments Act, 1881.
 The crossing of cheque had developed gradually as a means
of protection against misusing of cheques.
 Crossing of cheque provides instruction to the paying
banker to pay the amount through banker only, and not
directly to the payee or holder presenting it at the counter.
This ensures that payment is made to the actual payee.

19. Meaning
Specimenof
generalcrossing
 Section 123 of TheNegotiable Instruments Act, 1881 defines
General Crossing as:
 “Where a cheque bears across its face an addition of the
words “and company” or any abbreviation thereof, between
two parallel transverse lines, or of two parallel transverse lines
simply, either with or without the words “not negotiable”, that
addition shall be deemed a crossing, and the cheque shall be
deemed to be crossed generally”.
 Two parallel transverse lines are drawn on the face of the
cheque, generally, on the top left corner of the cheque
 Holder or payee cannot get the payment at the counter but
through the bank only
 Including the name of the banker is not essential, hence, the
amount can be encashed by any banker
 The words, “& Company”, “Not Negotiable”, “A/C. Payee” may
or may not be written
 It can be converted into Special Crossing

20. Meaning
Specimenof
SpecialCrossing
 Special Crossing
 Section 124 of TheNegotiable Instruments Act, 1881 defines Special
Crossing as:
“Where a cheque bears across its face an addition of the name of a
banker, either with or without the words “not negotiable”, that in
addition shall be deemed a crossing, and the cheque shall be deemed
to be crossed specially and to be crossed to that banker.”
Also known as Restricted Crossing
 Two transverse lines are not necessary to be drawn
 Name of the banker is added across the face of the cheque
 The Name of the Banker may or may not carry the abbreviated word, ‘&
Co.’, ‘Account payee’ or ‘Not Negotiable’
 Payment can be made only through the bank mentioned in the
Crossing. The Banker, mentioned in the Crossing, may appoint
another banker as his agent to collect such cheques. thus, making it
safer than ‘generally’ crossed cheques
 Specially Crossed Cheques can never be converted to General Crossing.

21. Double Crossing
Here the cheque bears two separate “special” crossing. For eg., a cheque
is crossed specially in the name of ‘Canara Bank’, and further in the name of
‘Bank of Baroda’.
As per Section 127 of TheNegotiable Instruments Act, 1881:
“Where a cheque is crossed specially to more than one banker
except wdoubly crossed shall be payed by the banker hen
crossed to an agent for the purpose of collection, the banker on
whom it is drawn shall refuse payment thereof.”
Thus, a cheque when the second banker is acting only as the agent
of the first collecting banker and this has been made clear on the
Cheque, i.e., crossing must specify that the banker to whom it has
been specially crossed again shall act as the agent of the first banker
for the purpose of collection of the cheque.
It is done in case, the banker, to whom a cheque is specially crossed,
does not have a branch at the place of the paying banker, or if he,
otherwise, feels the necessity, he may cross the cheque specially to
another banker (by clearly specifying).

22.  1. Blank Endorsement or General
Endorsement
An endorsement is blank or general where
the endorser signs his name only, and it
becomes payable to bearer. Thus, where a
bill is payable to “Ram or order”, and he
writes on its back “Ram”, it is an
endorsement in blank by Ram and the
property in the billl can pass by a mere
presentation.
 We can convert a blank endorsement into
an endorsement in full. We can do so by
writing above the endorser’s signature, a
direction to pay the instrument to another
person or his order.
 2. Special or Full Endorsement
An endorsement “in full” or a special
endorsement is one where the endorser
puts his signature on the instrument as
well as writes the name of a person to
whom order the payment is to be made.
 A bill made payable to Ram or order,
and endorsed “pay to the order of
Shyam” would be specially endorsed
and Shyam endorses it further. We can
turn a blank endorsement into a special
one by adding an order making the bill
payable to the transferee.

23.  4. Restrictive Endorsement
An endorsement is restrictive which restricts
the further negotiation of an instrument.
 Example of restrictive endorsement: “Pay to
Mrs.Geeta only” or “Pay to Mrs Geeta for my
use” or “Pay to Mrs Geeta on account of
Reeta” or “Pay to Mrs.Geeta or order for
 5. Partial Endorsement
An endorsement partial is one which allows
transferring to the endorsee a part only of the
amount payable on the instrument. This does
not operate as a negotiation of the
instrument.
 Example: Mr. Mohan holds a bill for Rs. 5,000
and endorses it as “Pay Sohan or order Rs.
2500”. The endorsement is partial and
invalid.
 6. Conditional or Qualified Endorsement
Where the endorser puts his signature
under such writing which makes the
transfer of title subject to fulfilment of
some conditions of the happening of
some events, it is a conditional
endorsement.
 For example, Ram, the holder of a bill
endorses it to Bala, Bala endorses to Kala,
and Kala to Lala, and endorses it again to
Ram. Ram, being a holder in due course
of the bill by the second endorsement by
Lala, can recover the amount thereof from
Bala, Kala, or Lala and himself being a
prior party is liable to all of them.

24. Payment in due Course
Meaning:
Any person legally responsible to make payment under negotiable instrument must make the
payment of the amount due under in due course with the purpose of obtaining a valid discharge
against the holder.
Payment in due Course is defined in Section 10 of Negotiable Instruments Act 1991. Any person
legally responsible to make payment under negotiable instrument must make the payment of the
amount due under in due course with the purpose of obtaining a valid discharge against the holder.
Payment in due course refers to a payment in keeping with the evident tenor of the instrument, in
good faith & without negligence to any person in possession thereof.
A payment will be regarded as a payment in due course if:
(a) It is in agreement with the apparent tenor of instrument, that is, according to what comes into
view on the face of instrument to be the intention of the parties;
(b) It is made in good faith & without negligence, & under conditions which do not meet the expense
of a ground for believing that the person to whom it is made is not allowed to receive the amount;
(c) It is made to the person who possesses the instrument who is entitled as holder to obtain
payment;
(d) Payment is made under conditions which do not pay for a rational ground believing that he is not
entitled to obtain payment of the amount stated in the instrument; and
(e) Payment is made in money & money only.

25. Holder in Due Course
Meaning
Holder in Due Course is a legal term to describe the person who has received a negotiable instrument in
good faith and is unaware of any prior claim, or that there is a defect in the title of the person who
negotiated it.
For example; a third-party check is a holder in due course.
The 3rd party who gets the check is not aware of any prior issues with a check, such as it was
overdue, dishonored when presented for payment, had any claims against it,
Holder in Due Course called protected holder or bona fide holder for value.
So Holder in Due Course means;
If payment is not made on a negotiable instrument when it is due, the holder can use the court system
to enforce the instrument.
Various parties, including both signers and non-signers, may be liable for it.
Accommodation parties (i.e., guarantors) can also be held liable.
The holder of a negotiable instrument means any person entitled in his name to the possession thereof
and to receive or recover the amount due thereon from the parties thereto.
A person is called the holder of a negotiable instrument if the following conditions are satisfied:
He must be entitled to the possession of the instrument in his name and under a legal title.
He must be entitled to receive or recover the amount from the parties concerned in his name.

26. The holder in due
course is a particular
kind of holder. The
holder of a negotiable
instrument is called the
holder in due course if
he satisfied the
following conditions;
The negotiable
instrument must have
the holder in due
course.
The negotiable
instrument must be
regular and complete in
all respects.
He obtained the
instrument for valuable
consideration.
He becomes the holder
of the instrument before
its maturity before the
amount mentioned in it
becomes payable.
He has no cause to
believe that any defect
existed in the title of the
person from whom he
derived his title.

27.  A) In case of sufficiency of funds in the
account of the drawer which can be
properly used to pay the cheque, the
banker must pay the cheque when
required to do so.
 B) The paying banker is expected to
pay the cheque to the genuine payee
as per the direction of the drawer.
 C) The paying banker should pay the
cheque when there is no restriction
imposed on the payment by the
drawer or by the law.
 D) The payment should be made when
the cheques are presented for
payment within a reasonable time
after being drawn and during
banking hours.
 E) He has to honour the cheque
drawn against the account
maintained at that branch of the
bank where the cheque is
presented.
 F) The banker should not make
payment of crossed cheques over
the counter of the bank. He must
pay the crossed cheques through
a banker.

28.  A) When there are sufficient funds in the
account of the customer applies for the
payment of cheques the paying banker shall
be liable to pay damages if he wrongfully
dishonours the cheques.
 B) When the customer has been granted
overdraft facility, the banker will be held
liable if he dishonours cheques drawn by the
customer on the basis of the overdraft.
 C) When the customer is misled by the entry
in the passbook and draws a cheque
believing the balance shown by passbook as
the actual balance, the banker shall be liable
if the cheque is dishonoured.
 D) When the customer is allowed
by the banker to draw a cheque on
the basis of cheque deposited for
collection, before it is actually
realised, the banker shall be liable
to the customer if he subsequently
dishonours the cheque.
 E) The paying banker shall be
liable if he pays the cheque
contravening the legal provisions
laid down by the Negotiable
instruments act.

29.  A) Form of Cheque: The cheque
drawn by customer must satisfy
all the requisites of a valid
cheque. The negotiable
instruments act has not given the
form of a cheque.
 B) Date of Cheque: A cheque
must be bear a date without
which it is incomplete. The date
of the cheque is important
because the order of the customer
to the banker given through the
cheque becomes legally effective
on the date mentioned on the
cheque.
 C) Amount of Cheque: The amount
should be mentioned on the cheque
both in words and in figures. It should
be written as distinctly as possible and
in a way to prevent insertions or
alterations.
 It should commence as near printed
Words “Rupees and Rs ” as possible
and should add the words “only” or
draw a line after the amount in words
or figure.
 D) Fund of the customer: The banker
should see whether there are sufficient
funds in the account of the customer
to pay the cheque.
 It may be noted that the cheque has to
be paid in full and not in part and
therefore, the inadequacy of funds of
the customer will result in the
dishonour of the cheque unless the
banker has granted loan or overdraft
facility to the customer.

30. Collecting Banker
Collecting Banker is the one who accumulates the proceeds of a cheque for the
customer. Even though a banker gathers the proceeds of a cheque for the
customer solely as a matter of service, hitherto the Negotiable Instruments Act,
1881 ultimately inflicts obligation, statutory in nature.
As per Section 131 of Negotiable Instruments Act 1881, "A banker who has in good faith
and without negligence received payment for a customer of a cheque crossed generally or
specifically to himself -shall not, in case the title to the cheque proves defective, incur any
liability to the true owner of the cheque by reason of only having received such payment.
Explanation: A banker receives payment of a crossed cheque for a customer within the meaning
of this section notwithstanding that he credits his customer's account with the amount of-the
cheque before receiving payment thereof.“
The fundamentals of claiming protection under Section 131 of Negotiable
Instruments Act 1881 are as follows:
(i) The collecting banker should have acted in good faith & without negligence. Acted in good faith
refers that the act that is done honestly. The plea of good faith can be refuted on the ground of
unruliness indicative of want of proper care & attention.
(ii) The banker should have accumulated a crossed cheque
(iii) The proceeds should have been gathered for a customer, i.e., a person who has an account
with him.
(iv) That the collecting banker has acted as an agent of the customer. If he had developed into the
holder for value, the protection available in Section 131 of Negotiable Instruments Act 1881 is
forfeited.

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