All Banking LEGAL Points You must know

Legal Aspects of Banking

1. NI Act, BR & RBI ACT

Definitions
 The Negotiable Instruments Act is applicable in whole of India including J&K. The Act came
into force w.e.f. Mar 01, 1882. Latest amendment was in Dec 2015. Total sections in NI Act
are 147.
 As per Section 13 of the N I Act, NI means and includes promissory note (PN), bill of
exchange (BoE) and cheque.
 Promissory Note, Bill of Exchange, Cheque & DD are negotiable instruments as per NI Act
 Negotiable Instruments as per Section 137 of Transfer of Property Act: Documents of title
to goods such as Railway Receipt, Bill of Lading, Warehouse Receipt, Dock warrant,
Wharfinger certificate etc.
 Negotiable Instruments as per practice and usage: Treasury Bills, Certificate of Deposit,
Commercial Paper, Govt. Promissory Note.
 Documents which are not negotiable – FDR, life insurance policy, currency notes, bank
notes, postal orders, NSCs, airway bill, letter of credit etc.
 Features of Negotiable Instrument: (i) it is freely transferable and (ii) the title of the
transferee will be better than the transferor if the transferee took the instrument for value
and in good faith under circumstances when he did not have suspicion about any defect in
the title of the transferor. Such a transferee is called holder in due course and is defined in
Section 9 of the Act.
 Promissory Note: defined in Section 4 of N I Act. It is an instrument in writing (not being a
bank note or a currency note) containing an unconditional undertaking signed by the maker,
to pay a certain sum of money only to, or to the order of, a certain person, or the bearer of
the instrument. There are two parties in a PN i.e. promisor and promisee or maker and
payee. Currency notes and bank notes are not promissory notes as per sec 4.
 Bill of Exchange: defined in Section 5 of N I Act. Bill of exchange is an instrument in writing
containing an unconditional order, signed by the maker, directing a certain person to pay a
certain sum of money only to, or to the order of, a certain person or to the bearer of the
instrument. In a Bill of Exchange, the person ordering for payment is called Drawer and the
person directed to pay is called Drawee. The beneficiary is called payee. If a Bill is lost,
holder can obtain duplicate of the same as per section 45A of N I Act.
 Cheque: defined in Sec 6 of NI Act. It is a bill of exchange but always payable on demand
and drawee is always a banker. Thus, a cheque is similar to a Bill of Exchange. Further, any
bill which is payable on demand and in which drawee is a banker will be called cheque. The
definition includes cheques in electronic form and truncated cheques.
 Demand & Usance PN or BOE: The promissory note or bill of exchange can be payable on
demand or after some time. If no time is mentioned then the same will be treated as
Demand promissory note or Demand Bill of Exchange. If these are payable after sometime
called as Usance PN or BOE.
 Bearer or Order: A negotiable instrument can be payable to bearer or order. If neither bearer
nor order is written it is treated as payable to order. If both bearer or order are written it is
treated as payable to bearer.
 On demand bearer instruments: As per Section 31 of RBI Act, 1934, no person other than
Central Government or Reserve Bank of India or any other person authorized in this behalf
can issue bearer promissory notes and a demand bill of exchange payable to bearer.
 Presumption of N I: As per Section 118 of N i Act, N I is presumed to be (i) made, drawn,
accepted, endorsed and negotiated or transferred for consideration (ii) executed on the date
appearing on the instrument and (iii) every holder is a holder-in due course (iv) every
transfer of Nis was made before maturity.
 Inchoate instrument: defined in section 20 of the NI Act. It is an instrument on which date,
payee or amount is not mentioned. It can be completed by the Holder and the completion

will not be treated as material alteration. An instrument without signatures is not treated as
an instrument at all.
 Ambiguous instrument: defined in Section 17 of N I Act. An instrument which can be
treated as Bill of Exchange or Promissory Note is called as Ambiguous instrument. Holder
can treat it PN or BOE as per his discretion.
 Holder: defined in section 8 of the NI Act. Holder of a promissory note, bill of exchange or
cheque means any person entitled in his own name to the possession, thereof and to receive
the amount due thereon from parties thereto.
 Holder in Due Course: defined in Section 9 pf the NI Act. Holder in due course is a person
who became possessor of a NI for valuable consideration, in good faith, before becoming
due, and without having any reason to believe that the person transferring the instrument
was not entitled thereto.
Transfer of a Negotiable Instrument and Endorsement
 Transfer of a Negotiable instrument: by assignment (under Transfer of Property Act) or by
Negotiation (under NI Act).
 Negotiation of a Bearer instruments: A bearer instrument is negotiated by mere delivery and
no endorsement is required.
 Negotiation of an order instrument: An order instrument can be negotiated by endorsement
followed by delivery. Legal heirs cannot complete the negotiation of a negotiable instrument
with endorsement by the deceased merely by delivery.
 Endorsement: Signing of an instrument on the back or face thereof or on a slip of paper
annexed thereto for the purpose of negotiation is called endorsement (Section 15). The
person who transfers the instrument is called endorser and the person to whom it is
transferred is called endorsee. Endorsement can be done by drawer, holder, payee.
 Blank Endorsement: In a blank endorsement the endorser just signs his name without
indicating endorsee. It can be converted into full by writing name of a person above
signatures. The effect of an endorsement in blank is that it makes an instrument dawn
originally payable to order to bearer instrument for the purpose of negotiation which can be
further negotiated by mere delivery.
 Endorsement in Full: When, the endorser indicates the name of the endorsee it is called full
endorsement.
 Sans Recourse Endorsement: An endorsement in which endorser excludes his liability is
termed 'sans recourse' or without recourse endorsement. In case of dishonour of
instrument, the amount can’t be recovered from such endorser.
 Facultative endorsement: An endorsement in which endorser waives the notice of dishonour
is called Facultative endorsement. But this is not applicable to other parties to the
instrument.
 Restrictive endorsement: An endorsement which restricts further right of negotiation is
called as restrictive endorsement. For example if it is written in the endorsement as "Pay to
Hari for my use" it is restrictive endorsement.
 Conditional Endorsement: When along with endorsement, condition is imposed by endorser.
For example, pay to C on completion of studies. Paying bank not to ensure compliance of
condition. Condition binds endorser and endorsee only.
 Back to Back Endorsement: An endorsement in which the endorser himself becomes
endorsee is called as back to back endorsement and in such a case, the endorsee can
recover the amount only from parties prior to his own endorsement.
 Negotiation Back: When the drawer of a cheque himself becomes endorsee, it is called
"Negotiation Back" and this cheque is treated as satisfied.
 Partial Endorsement: The endorsement can be made only for full amount but in case part
payment has been received and a note to that effect is made on the instrument, then the
same can be endorsed for the balance amount.

 Regular endorsement: Which appears to have been made by holder. Paying bank gets
protection u/s 85(1) of N I Act only when endorsement is regular even though it may not be
genuine.

PAYMENT OF CHEQUES:
 Protection to paying banker: A paying banker gets protection under Section 85 of the NI Act.
 In case of order cheques, protection is available under section 85(1) and for bearer cheques
it is available under section 85(2) of NI Act. In the case of drafts it is available under section
85A.
 As per section 85(1) of the Act a paying banker is discharged by payment in due course of a
cheque payable to order and which purports to be endorsed by or on behalf of payee. It
means paying banker is concerned about regularity of endorsement and not its genuineness
or forgery.
 As per section 85(2) of the NI Act, a bank will be discharged of its liability by making
payment in due course of a cheque payable to bearer if the payment is made in due course
notwithstanding any endorsement. If the cheque is endorsed, the bank is not required to
take note of any such endorsement. Thus as per section 85(2), 'Once a bearer always a
bearer' Payment in due course is defined in Sec 10 of the Act and means (i) payment is
accordance with the apparent tenor of the instrument (ii) in good faith and without
negligence (iii)to any person in possession thereof (iv) under circumstances which don't
afford a reasonable ground for believing that the-is not entitled to receive payment of the
amount therein mentioned.
 Payment of a cheque: While making payment of a cheque, bank is required to take certain
precautions.
 (a) Form of the cheque has not been given in the Act. It is simply as per practice.
However, RBI has prescribed format at centres where cheque truncation has started. RBI
has prescribed the new cheque standards "CTS-2010.
 (b) Different ink: A cheque can be drawn in different inks, handwritings or different
scripts. Thus, a cheque presented with different ink, handwriting or script can be paid.
 (c) Language: The cheque should be written in Hindi, English or Regional language. Bank
is within its powers to return a cheque written in a language other than the language of
that region.
 (d) Signatures on Back: When a cheque is presented for payment signatures of the
presenter are taken on the back as a witness of payment. if the presenter refuses to
sign, the bank can take receipt on a separate paper.
 (e) Date: Ante dated: A cheque dated prior to its date of presentation is called ante dated
cheque and can be paid within 3 months from the date of issue. Post dated cheque
means a cheque which is dated subsequently to the date of presentation. Both antedated
and post-dated cheques are valid in law. A postdated cheque can be passed only
on the date written on it or within 3 months thereof. The drawer may further reduce
validity and can revalidate the cheque any number of times. Impossible Date: A cheque
with impossible date like 31.11.10 should be paid on the last day of the month or within
3 months of the last day of the month. Cheque dated prior to opening the account: A
cheque dated prior to the date of opening the account or issue of cheque book can be
paid if otherwise in order.
 (f) Amount: (i) The amount should be written both in words and figures. (ii) Amount in
words is called legal amount and amount written in figures is called courtesy amount.
(iii) As per Sec 18 of the NI Act, if the amount written in words and figures differ, the
amount written in words will be the amount intended to be payable. (iv) If the balance in
the account is just equal to the amount of the cheque, the cheque will be paid. (v) If the
balance in the account is insufficient to pay the cheque, it should not be paid relying on
the - balance in some other account or transferring the amount from other account
unless there is an arrangement to that effect. (vi) If number of cheques are presented at

the same time and the balance is not sufficient to pay all the cheques, then normally
priority is given to cheques favouring revenue authorities, then to cheques favouring
public authorities. If balance is left, maximum number of cheques should be passed
taking care that cheque of very small amount is not dishonoured.
 Banking hours: As per section 65 of the Act, presentment for payment of a cheque must
be made within banking hours. If a cheque presented after banking hours is paid, it will
not be a payment in due course. However, the payment of a reasonable amount can be
made to drawer even after banking hours. Further, the presentment should be within
banking hours. Actual payment may be even after banking hours. Mutilation: if there is
any mutilation of cheque, it should be confirmed by drawer.
 Material alteration: (i) Any change in date, amount or name of payee is called material
alteration. (ii) The change from order to bearer, or cancellation of crossing or converting
special crossing to general crossing is also material alteration. (iii) However, bearer to
order or crossing a cheque or converting general crossing to special crossing is.not
material alteration. (iv) If there is any material alteration on a cheque it can be paid only
after confirmation from drawer. In the case of joint accounts with "either or survivor"
clause any of the account holders can confirm material alteration. (v) The confirmation
should be under full signatures as per specimen signatures (vi) With effect from 1st Dec
2010, in case of clearing houses where image based cheque truncation has started,
cheques with material alteration will not be acceptable even if the same has been
authenticated. This rule does not apply to change in date. (vii) Under Section 89 of the
NI Act, 1881 paying banker gets protection in case of payment of materially altered
cheques if the alteration is not apparent at the time of payment and payment has been
made in due course.
 Payee: If the payee is fictitious person then the cheque can be paid to bearer if it is
payable to bearer but if the cheque is payable to order, it can be paid only to the drawer.
 Forged signatures: (i) if there is a forgery in the signatures, such an instrument is null
and void. Paying banker will not get protection if it pays such a cheque even though the
drawer might have been careless in custody of the cheque book or bank might have sent
statement of accounts and the customer did not point out the mistake. (ii) However, if
the cheque has been signed by the drawer himself but in a different fashion, the banker
will not be liable.
 Crossing: (a) General Crossing: if a cheque or a draft bears across its face addition of two
parallel transverse lines with or without addition of words 'and company' or any
abbreviation thereof, it is called General Crossing (Section 123). (b) General Crossing is a
direction to the paying banker to pay the cheque/draft through some bank. (c) Even if the
name of a city is written between two parallel lines like "Indere'', it will continue to be a
general crossing and the cheque can be paid to any bank. Such cheque can be paid at any
station to a bank and not necessarily at indore. (d) Special Crossing: When a cheque/draft
bears the name of a bank across its face with or without two parallel transverse lines either
with or without the words 'not negotiable', it is said to be specially crossed (section 124). (e)
As per section 126, A cheque with special crossing can be paid only to the named bank or
his authorized agent for collection. (f) A cheque crossed to two banks has to be returned
unpaid unless crossed by one bank to another as his agent for collection (Section) 27). (g)
For special crossing, two branches of a bank are considered as same bank. The special
crossing is in favour of a bank and not in favour of a particular branch. Hence a cheque
favouring PNB Bhopal, can be paid to a branch of PNB at any other place also. (h) For special
crossing it is not necessary that the cheque should bear two parallel lines. The Act does not
restrict the payment of a crossed cheque to the banker in cash.
 Applicability of provisions relating to Crossing: Provisions relating to crossing are
applicable to cheques and drafts only and not to Promissory Notes or Bill of Exchange.
Therefore, if any Bill or Promissory note is having addition of two parallel lines or name of a
banker, it does not have any effect.
 Who can cross a cheque: The Crossing can be done by drawer, payee or holder or a banker.

 Account payee crossing : (i) Account payee crossing is not recognised by law but is a long
standing practice amongst bankers. (ii) It is .a direction to the collecting banker. (iii) Such a
cheque can be collected for credit of the named payee and cannot be endorsed.
 Not negotiable crossing takes away an important characteristic of negotiability. A cheque
with Not negotiable crossing remains freely transferable and can be endorsed. But a person
taking a cheque crossed generally or specially bearing in either case the words 'not
negotiable' shall not have and shall not be capable of giving a better title to the cheque than
that which the person from whom he took it had (Section 130). Nobody will be a holder in
due course of a cheque bearing Not Negotiable Crossing. However, paying bank will pay the
cheque in normal course.
 Cancellation of crossing can be done by drawer only under his full signatures by writing the
words crossing cancelled. In such cases, the payment is made in cash to a person known to
the bank.
 Under Section 128 of the NI Act. The paying banker is will get protection in respect of
crossed cheques or drafts provided the instrument has been paid in accordance with the
requirement of the crossing and payment has been made in due course.
 As per Section 129 of the N I Act, if a banker pays a cheque in violation of the crossing
direction, it will not be a payment in due course and bank shall be liable to the true owner
of the cheque for any loss he may sustain owing to payment of the cheque.
Others
a) Instruments returned unpaid should have a signed / initialed objection slip on which a
definite and valid reason for refusing payment must be stated.
b) When cheque valuing rupees one crore and above drawn on a particular account of the
drawer is dishonoured on four occasions during the financial year for want of sufficient funds
in the account, no fresh cheque book should be issued.
c) The payment of cheque should not be made in case of (a) death, insolvency, insanity of
customer or insolvency of partner or firm or liquidation of company (b) stop payment (c)
receipt of garnishee/attachment order (d) post dated and (e) stale cheque.
d) However, payment of a cheque signed by agent can be made in case of death of agent,
trustee, director of a company, office bearer of society if cheque is dated prior to date of death.
e) Cheque signed in representative capacity can be paid if it is not dated prior to date of
authority.

PROTECTION TO BANKERS
 85-1 Paying banker protected by payment in due course of order cheque that bears regular
endorsement. Genuineness of endorsement is not to be ensured by the paying bank.
 85-2 Protection to paying banker in case of a bearer cheque. Endorsement on a bearer
cheque to be ignored.
 85-A Protection to paying banker in case of Bank drafts.
 89-Protection to paying bank for materially altered instrument when alteration not visible.
 128- Protection for payment in due course of crossed cheques.
 131 - Protection to collecting bank for crossed cheques subject to compliance of conditions

COLLECTION OF CHEQUES
Protection to Collecting Banker:
 Under section 131 of the Act a collecting banker gets protection for collection of cheques
and under section 131A for collection of drafts.
 The protection is against risk of conversion i.e. illegal interference with rights of true owner
of the instrument inconsistent with his right of ownership.
 Such protection is available to the banker when: (i) the cheque/draft is crossed (ii) the bank
receives the payment for its customer (iii) the bank acts as agent for collection and not
holder for value (iv) it receives the payment in good faith and without negligence.

 To get protection as a collecting banker the bank must ensure that there is no negligence
involved. Examples of negligence could be opening of accounts without proper introduction,
ignoring 'not negotiable or 'account payee' crossing, collecting cheques payable to firm, Ltd
Co, Trust, Institutions in the personal accounts of partner, director, trustee or the office
bearer.

DISHONOUR OF CHEQUES DUE TO INSUFFICIENT BALANCE
 Section 138 to 142 deals with bouncing of cheques and these provisions are equally
applicable for dishonor of electronic funds transfer instructions as per provisions of
Payment and Settlement Systems Act 2007.
 Liability of drawer: The drawer of a cheque which is returned unpaid due to insufficiency of
funds, is deemed to have committed criminal liability under Section 138 to 142 of NI Act
1881. He can be prosecuted. The pre-requisites for prosecution are as under;
 The cheque has been issued to discharge a liability. (gift cheque will not fall in the
framework).
 The cheque should be presented within validity period
 Cheque is dishonoured for insufficiency of funds.
 The holder should give notice to drawer within 30 days of his receiving information,
demanding payment.
 The drawer can make payment within 15 days of the receipt of notice. If he fails to do
so, prosecution could take place.
 The suit is to be filed within one month of the cause of action (period can be extended
by the court if there is sufficient reason for not making the complaint within such
period). By another presentation of the cheque, a new cause of action can arise, if
drawer fails to pay. (sec 142).
 No court inferior to that of Metropolitan Magistrate or Judicial Magistrate of 1st class will
try the offence.
 Place to file suit – where payee (holder) or drawer maintains the account.
 Punishment – imprisonment may extend up to 2years or fine up to twice the amount of
cheque or both. All offences are compoundable (Sec 147). In case of compounding court can
impose a fine up to Rs.5000.00/imprisonment up to 1 year.
 Mode or service of summons – The summons can be served by speed post or by authorized
courier services and if not accepted, will be treated as duly served.

BILL OF EXCHANGE

 Demand Bill: A bill of exchange payable on demand or at sight or on presentment is called
Demand Bill.
 Usance Bill: A bill of exchange payable after some time is called Usance Bill.
 Documentary bill is one which is accompanied by document of title to goods like railway
receipt, bill of lading, etc.
 Clean bill: is one which is not accompanied by any document of title to goods.
 Inland bill: is one which is drawn or made in India and is either payable in India or on a
person6. Foreign bill: is one which is not an inland Bill i.e. it is drawn outside India or if
drawn in India is payable outside India on a person resident outside India. Foreign Bills are
issued in more than one part.
 Accommodation Bill: means a bill issued without consideration and dealing in such bills is
called kite flying
 Interest Rate: if in a bill of exchange or promissory note, interest rate is not mentioned, it
will be 18% p.a.
CALCULATION OF DUE DATE
 Usance bills should be presented for acceptance within a reasonable time.
 As per section 105, reasonable time means as per usage and practice of the area.
 The drawee is allowed 48 hours excluding public holiday to accept the bill.

 If a Usance bill is payable after date, its due date is calculated from date of the bill and if it
is payable after sight, its due date is calculated from the date of acceptance.
 As per section 22 of the N I Act, three days of grace are allowed in the case of Usance bills
and Usance promissory notes. But if the due date is fixed on a particular day or days of
grace are specifically prohibited, the same need not be given.
 As per Section 25 of the Act, if a bill or promissory note matures for payment on public
holiday under NI Act, 1881 (Sunday or any day declared to-be public holiday by the Central
Government) it falls due on immediate next preceding business day.
 If the period of usance is given in days, then the day from which due date is to be calculated
is excluded. Due consideration should be given to leap year in which February has 29 days
 If the period of usance is given in months and there is no corresponding day in the month
in which bill matures, last day of the month is taken into account.
DISHONOUR OF A BILL
 If the drawee does not accept the bill within stipulated period it is treated as dishonoured
by non acceptance. In such case, drawee will not be liable on the bill. In certain cases, such
bill is required to be presented to a person named in the bill called as Drawee in case of
need. If a bill after being accepted is not paid on due date, it is said to have been
dishonoured due to non payment.
 Noting and Protesting: Under section 99 of the Act, when a promissory note or bill of
exchange has been dishonoured by non-acceptance or non-payment, the holder may get the
dishonour noted by a notary public upon the instrument within a reasonable time after
dishonour. If the dishonour is got certified from the Notary public, such certificate is called
a pretest.(Sec 100).
 while noting and protest is optional in case of Inland bills, foreign bills of exchange must be
protested for dishonour when such protest is required by the law of the place where they
are drawn (Section 104). Noting and Protesting is done only in the case of dishonour of
demand or usance bills or promissory notes and not in the case of dishonor of a cheque.
 A person accepting the bill to save the honour of a party to the bill is called "Acceptor for
Honour".
 Liabilities of the parties: If a bill is dishonoured by non acceptance, then holder can recover
the amount from all prior parties except drawee. In this case, the drawer will be the
principal debtor. If a bill is dishonoured due to nonpayment (it means it was accepted), then
the holder can recover the amount from all prior parties including the acceptor of the bill
(previously called the drawee), In this case, acceptor (drawee) will be the principal debtor.
 Stamping of a Bill: A demand bill need not be stamped but a usance bill is stamped as per
provisions of the Indian Stamp Act. The value of stamps on a usance bill or promissory note
depends on tenor and amount of the bill. However, if the usance period of a bill is up to 3
months, no stamp duty is levied if the bill is for genuine trade transaction and bank is a
party to the bill.

SUMMARY OF IMPORTANT SECTIONS OF NI ACT

Section 4 - Definition of Promissory note
Section 5 - Definition of Bill of exchange
Section 6 - Definition of Cheque including Electronic &Truncated cheque
Section 7 - Definition of Drawer, drawee, drawee in case of need, acceptor
Section 8 - Definition of Holder
Section 9 - Definition of Holder in due course
Section 10 - Payment in due course
Section 11 - Inland instruments
Section 12 - Foreign instruments
Section 13 - Definition of Negotiable instruments
Section 14 - Negotiation defined
Section 15 - Endorsement defined
Section 16 - Endorsements in blank and full
Section 17 - Ambiguous instruments
Section 18 - Amount in words and figures, if differs
Section 19 - Instruments payable on demand defined
Section 20 - Inchoate instruments
Section 21 - Instruments payable after sight
Section 22 - Maturity date of Promissory notes/bills of exchange; Days of Grace
Section 25 - Bill maturing on a holiday will be due on preceding business day
Section 26 - Capacity of the minor - A minor can draw, endorse and deliver and negotiate a
negotiable instrument so as to bind all parties except himself
Section 31 - Obligation of the Paying Banker to pay cheque
Section 51 - Who can negotiate?
Section 65 - Hours of presentment
Section 80 - Interest rate when no rate specified in the instrument will be 18%
Section 85(1) - Protection to Paying Banker for order cheques
Section 85(2) - Protection to Paying Banker for Bearer cheques
Section 85 A - Protection to Paying Banker for payment of drafts
Section 87 - Effect of Material Alteration
Section 89 - Payment of instrument on which alternation is not apparent; protection to banker
Section 99 - Noting of Bill of Exchange & Promissory Note
Section 100 - Protesting.of BOE & PN
Section 105 - Reasonable Time for Presentment etc.
Section 123 - General Crossing
Section 124 - Special Crossing
Section 125 - Who can cross
Section 126 - Effect of crossing
Section 128 - Payment in due course of crossed cheque
Section 129 - Payment of crossed cheque out of due course; liability to true owner
Section 130 - Not Negotiable Crossing
Section 131 - Protection to collecting banker
Section 138 - Dishonour of a cheque for insufficiency of funds
Section 139 - Presumption in favour of holder'
Section 140 - Defence not allowed in prosecution u/s 138
Section 141 - Offence by companies’ u/s 138.


Banking Regulation Act, 1949

 The law relating to banking came into force on 16.03.1949 under the name of the Banking
Companies Act, 1949. W.e.f. 01.03.1966 its name was changed to Banking Regulation Act,
1949. Originally the Act was not applicable to the State of J&K. In 1956 it was made
applicable to J&K also.
 The Banking Regulation Act, 1949 does not apply to primary agricultural credit societies,
cooperative land mortgage banks and non-agricultural primary credit societies with paid up
capital and reserves of less than Rs.1 lakh.
 Section 5b: '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 order or otherwise. 'Demand Liabilities' means liabilities which must be
met on demand and 'time liabilities' means liabilities which are not demand liabilities.
 Section 6: lays down the forms of business in addition to the business of banking in which
a bank may engage.
 Section 7: prohibits use of words 'bank' banker' or banking company by a company other
than a banking company.
 Section 8: prohibits trading activities for a bank except in connection with realisation of
security given to or held by it.

 Section 9: a banking company cannot hold any immovable property, howsoever acquired
except such as is required for its own use, for a period exceeding 7 years from the
acquisition thereof. The aforesaid period of 7 years can be extended by RBI by a period not
exceeding 5 years where it is satisfied that such extension would be in the interest of
depositors of the banking company.
 Section 13: payment of commission, brokerage, discount or remuneration in respect of any
 shares by a banking company shall not be more than 2.5% of the paid up value of said
shares. (being changed as per Banking Companies Amendment Law Bill.
 Section 17: a banking company is required to transfer to Reserve Fund 20% of the profits
before declaring dividend. As per current guidelines of RBI a scheduled bank is required to
transfer 25% of the profit before providing for bonus and declaring dividend.
 Section 19(2): no banking company can hold shares in another company whether as
pledgee, mortgagee or absolute owner of an amount exceeding 30% of the paid up. share
capital of that company or 30% of its own paid up share capital and reserves, whichever is
less.
 Section 20(a): banks cannot grant loan against security of their own shares.
 Section 21:RBI can issue directive to banks for loan policy (purpose, margin, extent, interest
rate or other conditions).
 Section 21A: Rate of Interest charged by banks are not subject to scrutiny of courts.
 Section 22: Licence for Bank - obtaining of licence from RBI is essential.
 Section 23: Branch licencing : RBI authority on branch licensing.
 Section 24: banks are required to maintain Statutory Liquidity Ratio as prescribed by RBI.
Maximum SLR will be 40% of NDTL. As per amendment to Banking Regulation Act, the
condition of minimum SLR of 25% of NDTL has been removed. Thus, RBI has liberty to fix
minimum SLR.
 Section 26: banking companies are required to submit a return of all deposit accounts
which have not been operated for the last 10 years. The return is submitted as on 31st
December and within one month
 Section 35: Inspection of banks - RBI authorised to inspect banks and give directions, as
deemed appropriate. RBI has directed banks to round-off transactions to nearest rupee u/s
21 and Section 35.
 Section 35A: RBI can issue directions to banks in public interest / banking policy.
 Section 45 Y relates to power granted to Central Govt. to make rules for preservation of
records.
 Section 45Z relates to return of paid instruments to customers after keeping a true copy of
all relevant parts of such instruments.
 Section 45ZA to 45 ZF relate to nomination in deposits, safe custody and locker accounts.
 Section 49A: Other than a banking company/RBUSBI, no person can accept deposits of
money withdraw able by cheque
Reserve Bank of India Act, 1934
 Reserve Bank of India Act, 1934 came into force on 01.04.1935.
 RBI was established on the recommendations of the Hilton Young Commission.
 Section 2(e): Scheduled Bank means a bank whose name is included in the 2nd schedule of
RBI Act 1934
 Section 4 : The capital of RBI shall be 5 crores of rupees.
 Section 21: RBI has the right to transact Govt. business in India i.e. remittance, exchange,
keeping deposit free of interest etc.
 Section 22: confers sole right on RBI to issue bank notes.
 Section 24: RBI can issue bank notes of denomination of 2, 5, 10, 20, 50, 100, 500, 1000,
 5000, 10000. Central Govt. may direct discontinuance or non-issue of bank note of any
denomination.
 Section 26: Bank notes issued by RBI shall be legal tender and shall be guaranteed by
Central Govt.

 Section 27 lays down that RBI shall not reissue bank notes which are torn, defaced or
excessively spoiled.
 Section 28: RB1'can frame rules for refunding value of mutilated, soiled or imperfect notes
as a matter of grace.
 Section 29: exempts RBI from stamp duty on Bank notes.
 Section 31: prohibits drawing, accepting, making or issue of any bill of exchange, hundi,
promissory notes payable to bearer on demand except by Central Govt or RBI. Promissory
Note can’t be issued payable to _bearer even if it is payable after some time.
 Section 33: lays down that assets of the issue department of RBI shall consist of gold coin,
gold bullion, foreign securities, rupee coins and rupee securities. The aggregate value of
gold coin, gold bullion and foreign securities held shall not at anytime be less than Rs.200
crore of which gold coin and gold bullion not less than Rs.115 crore
 Section-42(1) deals with cash reserves ratio to be maintained by scheduled commercial
banks.
 Section: 45-A to F - Empowers RBI to collect credit information. (Section 45-C — Return :
last Friday of Apr & Oct giving information on borrowers enjoying secured credit limits of
Rs.10 lac and above and-unsecured limits of Rs.5 lac and above). RBI also collects details
(1/2yearly March/Sept) of all doubtful, loss and suit filed accounts with aggregate
outstanding of Rs.100 lac and above and circulates the information amongst banks and
financial institutions.
 Section 49 requires RBI to publish bank rate from time to time.
CASH RESERVE RATIO
 Scheduled Commercial Banks are required to maintain CRR as per section 42(1) of RBI Act.
 Banks are required to maintain certain percentage of Net Demand & Time Liabilities as cash
with RBI.
 With effect from 1st April 2007, the RBI* can prescribe the Cash Reserve Ratio (CRR) for
Scheduled Commercial Banks without any floor rate or ceiling rate. Accordingly, there is no
minimum or maximum CRR as per RBI Act and RBI will fix CRR.
 Banks are required to maintain the prescribed CRR based on their NDTL as on the last
Friday of the second preceding fortnight.
 The actual balance on any day of the fortnight (14 days) may be more or less than the
required balance. However, cash balance with RBI on any day of the fortnight should not fall
below 90 per cent of the required average daily cash balance.
 RBI will not pay any interest on the CRR balances with effect from 31st March 2007.
 In cases of default in maintenance of CRR requirement on a daily basis, which is presently
90% of the total Cash Reserve Ratio requirement, penal interest will be recovered for that
day at the rate of three per cent per annum above the bank rate on the amount by which the
amount actually maintained falls short of the prescribed minimum on that day and if the
shortfall continues on the next succeeding day/s, penal interest will be recovered at a rate
of five per cent per annum above the bank rate.
 RBI has prescribed statutory returns i.e. Form A return (for CRR) to be sent fortnightly
within 7 days and final Form A within 20 days.
STATUTORY LIQUIDITY RATIO
 Statutory Liquidity Ratio is maintained as per section 24 of Banking Regulation Act.
 RBI is free to fix minimum SLR. However, it can be increased to maximum of 40% of NDTL.
 SLR can be kept in the form of (a) cash (b) gold valued at a price not exceeding the current
market price, (c) unencumbered approved securities valued at a price as specified by the RBI
from time to time (d) cash balance with other banks (e) excess cash balance with RBI.
 For calculation of SLR, banks are required to send monthly statement on Form VIII under
Section 24 of the B R Act.
 If a bank fails to maintain SLR on any day of the fortnight, RBI will charge penal interest for
that day at the rate of three per cent per annum above the bank rate on the amount of

shortfall. If the shortfall continues on the next succeeding day/s, penal interest will be
recovered at a rate of five per cent per annum above the bank rate.


TOOLS OF MONETARY CONTROL

 CRR-Cash Reserve Ratio
 Statutory Liquidity Ratio: it has three objectives - To restrict expansion of banks' credit to
increase banks' investment in approved securities. To ensure the solvency of banks.
Increasing SLR will have the effect of reduction in the lending capacity of banks by preempting
a certain portion of DTL for Govt. and other securities. It has therefore a
deflationary impact on the economy, not only by reducing the loanable funds but also by
increasing the lending rates in the face of increasing demand for bank credit. And vice-versa
when SLR is reduced.
 Bank Rate - is the standard rate at which RBI rediscount BE or other eligible commercial
papers from banks. Bank Rate is tool used by the RBI to affect the cost-and availability of
refinance and to change the loanable funds of banks. Change in Bank Rate will affect the
interest rates on loans and deposits in the banking.
 Open Market Operations (OMO):- are the sales or purchase of Govt. securities by RBI in open
market with a view to increase or decrease the liquidity in the banking system and thereby
affect the loanable funds of banks. The pricing policy under OMO cans 'also alter the
interest rate" "structure.
 Selective Credit Control (SCC):-RE31 stipulates certain restrictions on bank advances against
specified sensitive commodities with the, objective of preventing speculative holding of
essential commodities.
Regulatory Restrictions on Lending:- as per RBI directives or the Banking Regulation Act are:
 No loans and advances can be granted against the security of bank's own shares.
 No bank shall hold shares in a company, 3.As pledgee or mortgagee in excess' of the limit of
30% of the paid-up capital that company or 30%of the Bank's pait-up capital + reserves
whichever is less.
 In the management of which MD or Manager the Bank is interested.
 Banks' aggregate investment in shares, CDs, bonds etc. Should not exceed the limit of 40%of
bank's net owned funds as on the previous year.
2. CUSTOMERS & THEIR ACCOUNTS
Banker Customer Relationship and Accounts of Customers
Banker Customer Relationship
Bank is one which conducts business of banking. Banking has been defined in Section 5 of
Banking Regulation Act. Customer is not defined in any Act. However, it is defined in KYC
norms. As per various court decisions, any person for whom bank agrees to open an account is
called as customer of the bank.
Various types of relationships
Type of Transaction Bank Customer
Deposit in the bank (CR balance in account) Debtor Creditor
Loan from. Bank (Debit balance in account) Creditor Debtor
Safe Deposit-Locker Lessor (Licensor) Lessee (Licensee)
Safe custody Bailee Bailor
Issue of draft (after issue of draft) Debtor Creditor
Payee of draft Trustee Beneficiary

Collection of cheque & Standing Instruction Agent Principal
Goods left negligently by customer Trustee Beneficiary
Purchase of cheque from customer Holder for value Endorser
Purchase/sale of securities on behalf of customer Agent Principal
Money deposited. No instructions for its disposal. Trustee Beneficiary
Pledge pawner (Pledgee) Pawner (Pledger)
Mortgage Mortgagee Mortgagor
Hypothecation Hypothecatee Hypothecator
Assignment Assignee Assignor
Banker's Obligations
There are two main duties of a bank i.e. (1) Duty to maintain secrecy of customer's account (ii)
Duty to honour cheques.
Duty to maintain secrecy:
 A bank has duty to maintain secrecy of customer's account as per Implied Contract.
Moreover, as per Section 13 of Banking Companies (Acquisition and Transfer of
Undertaking) Act also, the bank is required not to disclose any information relating to
affairs of its customers.
 The duty to maintain secrecy continues even after closure of account.
 Balance in the account of an employee should not be disclosed to employer. Similarly
balance in the account of wife not to be disclosed to husband and vice versa.
 If bank discloses customer's affair (e.g. in case of insufficient balance in the account
advising the presenter of cheque to deposit deficit amount), bank will be liable to customer
for resultant loss.
Exceptions to rule of secrecy:
 Courts: As per Banker's Book Evidence Act, bank may be required to produce certified
copies of record in the court.
 Police: Officer in charge of a police station may issue a written order for production of
documents in connection with trial or investigation. Police can even seize records against
proper receipt.
 The information may also be required to be parted to inspector appointed to investigate
affairs of a limited company under section 235/237 or under FEMA.
 Revenue Authorities: Bank may be required to produce to income Tax Authority, record
pertaining to transaction of a customer. However, roving enquiries should not be made
except in case of cash transactions of Rs 1 lac and above.
 RBI: As per Banking Regulation Act or RBI Act, Reserve Bank may seek information from
bank.
 Banking Practice: Banks have the practice of sharing information in general among
themselves. The information should be given in confidence and without any responsibility
on the part of supplying bank.
 Consent of customer: For example, information is given to a Credit Information Company as
per express consent of customer.
 To protect bank's interest.
Duty to honour cheques
 As per section 31of N I Act, a bank is under obligation to pay cheques issued by customer
provided there is a sufficient balance in the account (ii) the cheque is otherwise in order (iii)
the funds are properly applicable i.e. not attached by Garnishee order or attachment order.
If a bank dishonour a cheque drawn by a customer despite satisfaction of aforesaid
conditions, bank will be liable to Drawer (and not to payee or true owner) for damages
suffered by him.

Banker’s Rights: Bank has three rights namely (i) Right of Lien (ii) Right of Set Off (iii) Right
of Appropriation
Right of Lien:
 Lien is the right of creditor to retain possession of goods and securities belonging to the
debtor till the debts due to him (creditor) are paid. This right is available only on goods and
securities and not on balances in the accounts. Lien entitles retention of possession of
goads but the creditor cannot sell the goods.
 Lien can be Particular lien (Sec 170 of the Indian Contract Act) or General Lien. Right of
General Lien, is available only to bankers, factors, wharfingers, attorneys (Section 171 of the
Indian Contract Act).
 Banker's Lien is also a general lien but it is an implied pledge because the banker has right
to retain as well as sell goods of the borrower after giving him reasonable notice.
 For exercising right of lien, (a) the goods or securities and debt should be in the same right
and same capacity (b) Loan should be due or overdue and lawful (c) Reasonable notice is
given.
 Further, Right of Lien is available on the goods and securities received in the ordinary
course of business.
 It is not available when the goods or securities have been deposited for a specific purpose;
goods received for safe custody or lying in safe deposit vault or goods left by the debtor
negligently.
 However, in the case of loans against pledge of jewellery, bank can exercise right of general
lien on the ornaments left in the possession of the bank after adjustment of the jewellery
loan in case some other advance is outstanding.
 Negative lien is a declaration from the borrower to the effect that securities/goods offered
as security are not encumbered and that the borrower will not create any charge over them
without bank's permission. This undertaking does not create any charge in favour of the
bank and therefore advance against negative lien are treated as dean advance.
Right of Set Off:
 Set off is the right to combine two or more accounts having debit and credit balance.
 It is not defined in any Act.
 This right arises when two parties are debtor as well as creditor to each other i.e. one
account should be in debit and another account should be in credit.
 In the case of banks, this right arises when wants to combine its loan due from a borrower
with his deposit accounts. For exercising right of set off following conditions should be
satisfied (i) Both accounts should be in same right and same capacity (ii) The debt should be
due and not accruing due. Reasonable notice should be sent to the depositor before
exercising set off.
 Right of set off can be exercised even in case of loans which are time barred.
 It can be applied on fixed deposit when it matures and not on FD which is not due as yet.
 Similarly it can’t be applied for adjusting term loan or CC or overdraft which are regular
and not overdue. If a loan is in the name of an individual, set off can be exercised on credit
balance in his individual account and sole proprietorship account. Set off can not be
exercised on deposit accounts which are held jointly with other individuals, or partnership
in which the borrower is partner, or client account maintained by a solicitor or account of
minor under guardianship where borrower is the guardian or on the credit balance of a
trust in which borrower is trustee.
 If loan is in joint names, set off can be exercised on credit balance in joint account as well
as credit balance in individual accounts of joint borrowers.
 If loan is in the name of a partnership firm then set off can be exercised on credit balance in
the name of firm, partners and any other partnership firm which has just same partners as
are in the borrowing firm.
 For exercising right of set off, all branches of a bank are considered as one.
Right of Appropriation
 Section 59,60,61 of Indian Contract Act, deal with appropriation of payments.
 Clayton's Rule is related to appropriation of payments. This rule is applicable in case of
death, insolvency, insanity of a joint borrower or partner or guarantor or retirement of a
partner or revocation of guarantee by guarantor.
 Clayton's rule is applicable in case of running borrowal accounts like cash credit or
overdraft.
 As per Clayton's rule, credit entry will set off debits in the chronological order of time. This
means that first item on the debit side will be discharged first by a credit and so on.
Garnishee Order
 A Garnishee Order is an order issued by court under section 60 (Order 21, Rule 46) of the
Code of Civil Procedure, 1908. Through this order the court attaches the deposit of a
particular depositor with the bank. The bank upon whom the order is served is called
Garnishee. The depositor who owes money to another person is called judgement debtor
while the person to whom money is due is called judgement creditor.
 The court first issues order Nisi requiring the bank to explain as to why the funds in the
account not be utilised to meet the judgement creditor's claim. After this order, the order
Absolute is issued directing the bank to freeze the entire balance or a portion of credit
balance in the account of the judgement debtor.
 Upon receipt of Garnishee Order Nisi, the operation in the account are suspended, the bank
has to earmark desired balance in the account of the judgement debtor.
 Garnishee Order applies to existing debts as also debts accruing due i.e. SB/CD/RD/FD.
 Garnishee Order applies only.to those accounts of Judgement Debtor which have credit
balance.
 The relationship between bank and judgement debtor is of debtor and creditor. Bank is the
debtor of Judgement Debtor who is a creditor of the bank.
 Garnishee order does not apply to money deposited subsequent to receipt of Garnishee
order. It also does not apply to cheques sent for collection but yet to be realized. But if
credit was allowed in the account before realization with power to withdraw to customer,
GO will be applicable on this amount.
 Garnishee order does not apply to unutilized portion of overdraft or cash credit account of
the borrower as no debt is due to judgement debtor.
 Bank can exercise right of set off before applying Garnishee Order.
 Garnishee order is-applicable only if both debts are in same right and same capacity.
Garnishee order issued in a single name does not apply to accounts in the joint names of
judgement debtor with other person(s). But if Garnishee order is issued in joint names, it
will apply to individual accounts also of the same debtors. When Garnishee Order is in the
name of a partner it will not apply to partnership account but when Garnishee order is in
the name of firm, accounts of individual partners are covered.
 Garnishee Order can be served on Head Office of the bank and it can take reasonable time
to communicate the same to its branches, If amount is not specified in the order, then it will
be applicable on the entire balance in the account. However, if it is for specific amount, the
cheques can be paid from the balance available after setting aside the amount as mentioned
in the Garnishee order. Garnishee order is applicable on accounts of deceased persons but
not applicable if depositor declared insolvent.
 Garnishee order not applicable on fixed deposit taken as collateral security.
Income Tax Attachment Orders
 Income Tax Authorities issue Attachment Orders in terms of Section 226(3) of Income Tax
Act, 1961. On receipt of this order, banker is required to remit the desired amount to
income tax authorities. An order without mentioning the amount is not a valid order.
Attachment Order is different from Garnishee order in following respects (i) Attachment
order applies to money deposited in the account after receipt of order also till it is fully

satisfied whereas Garnishee order does not apply to subsequent deposits. (ii) Attachment
Order in single name applies to joint accounts also proportionately unless the contrary is
proved whereas Garnishee order in single name does not apply to joint accounts.
 In case banker fails to comply with Attachment Order, it will be liable for the amount of
order and deemed as an assessee in default. However, right of set off is available to bank
before applying the order.
 When both Garnishee order and Attachment Order are received simultaneously, priority
should be given to attachment order.


ACCOUNTS OF CUSTOMERS

Accounts of Minors
 A minor is a person who has not attained the age of 18 years. A person will become major
at the age of 18 whether guardian is natural or appointed by a court of law.
 There could be three types of guardians — natural, testamentary and legal guardian. The
guardian appointed by will is called Testamentary Guardian and the one appointed by court
is called legal guardian.
 As per section 11 of the Indian Contract Act, 1872 a minor is not competent to enter into a
contract. A minor cannot ratify an agreement after attaining majority.
 A minor cannot appoint an agent. However, a minor can be appointed as an agent and he
can make principal liable by his actions. A minor can’t delegate authority in his self
operated account.
 Banks do not grant overdraft / loan to a minor, even if security is provided because a
contract with minor being void, the bank will not be able to recover the loan. Even when
loan has been raised on a term deposit in the name of a major person, his request for
addition of the name of the minor cannot be entertained. However, if loan is given for
necessity, it can be recovered.
 If a minor misrepresents age for raising a loan bank cannot recover loan from him.
 Loan given to a minor is guaranteed then bank cannot recover loan from guarantor.
 According to Section 26 of NI Act, a minor can draw or endorse or negotiate a cheque or a
bill but he cannot be held liable on such cheque or bill. However, other parties will be liable
in their respective capacities.
 A minor can’t appoint nominee. However, minor can be appointed nominee.
 As minor does not incur any personal liability, he cannot be declared insolvent.
 Minor as a partner: A minor cannot be partner in a partnership concern. As per Indian
Partnership Act, 1932 a minor may be admitted to benefits of partnership with the consent
of all partners. However, the liability of the minor partner will be limited to his share in the
business of the firm. On attaining majority, a minor has to give public notice within six
months of attaining majority or when it comes to his knowledge after becoming major
whichever is lesser, whether he wants to continue as a partner. If he chooses to become a
partner, he will be held liable as a partner from the date he has been admitted to the benefit
of the partnership firm and his profit sharing ratio will continue as it was existing before
becoming major.
 In case of Hindus, father is the natural guardian of a Hindu minor boy or an unmarried girl
and after him, the mother. In case of a married Hindu minor girl, her husband is the natural
guardian. If the husband is minor or minor girl becomes widow, her father in law and after
him the mother in law will be the guardians. When guardian of a Hindu minor ceases to be a
Hindu he/she ceases to be natural guardian. Testamentary guardian will come into picture
only on the death of father as well as mother.
 In case of Muslims, father is the natural guardian. A Muslim father can appoint a
testamentary guardian and even mother of a Muslim child can be testamentary guardian. If
the father dies without leaving behind a will, father's father i.e. paternal grandfather is the
guardian. On the death of paternal grandfather, the person appointed by the will of the
paternal grandfather will be guardian.

 Accounts of a minor: A minor can have account under guardianship as well as self operated
account.
 In the case of accounts under guardianship, the account will be operated by the guardian
during minority of the child and once the minor becomes major the debit in the account will
be allowed only with the consent of minor who has become major. If guardian dies during
minority, next guardian will operate the account. In case the minor dies, the balance in the
account will be paid to the legal heirs of the minor.
 Minor's Account with Mother as Guardian: RBI has allowed mother to open and operate all
types of deposit accounts even though the father is alive.
 A minor can open self-operated deposit account provided he has completed the age of 10
years and is literate. He cannot appoint nominee in this account. On his behalf nomination
will be done by a person legally competent to act on his behalf. Joint account is also allowed
in the name of two minors provided both are of 10 years of age, are literate, belong to the
same family and operation is jointly.
 Minor's account can be a joint account with the guardian also. In jointly operated accounts
with minor, till attainment of majority by minor, guardian will sign for himself as well as on
behalf of minor When minor becomes major, account will be operated jointly by guardian
and minor who has become major.
 A bearer cheque presented for cash payment by a minor may be paid as a minor can give a
valid discharge in the capacity of the payee.
 Minor can obtain premature payment of FOR as he can give valid discharge but cannot raise
loan against security of FDR.
Joint accounts
 Joint accounts can be opened with various types of operating instructions like Either or
Survivor, Joint Operation or Former or Survivor or Either or Joint or Survivor. The position
in such cases as under:
 Either or Survivor (E or S): It means anyone can operate the account till both are alive. After
the death of either of them, the bank can pay the balance to the survivor without any
formality.
 To be operated jointly: Account will be operated by both jointly till both are alive and, if one
of the two expires, the bank would pay the final balance to the survivor, along with all the
legal heirs of the deceased.
 Jointly or by Survivors: Account can be operated by both / all the person jointly during their
lifetime and, in the event of death of any one, the balance is payable to the surviving
persons jointly.
 Former or Survivor: Till the first named person is alive, the second named person has no
right to withdraw/operate the account. After the death of the first named person, the
payment will be made to second named person.
 In case of "either" or "either or survivor" or "joint" operation any one of the account holders
can stop payment of the cheque. The revocation in case of either or either or survivor can
be done by either but in case of joint operation, revocation has to be done by all jointly. In
case of Former or Survivor accounts, stop payment of cheque can be done by Former and
revocation of stop payment can also be done by Former.
 In case of "either of survivor" alteration on the cheque can be confirmed by any of the
account holders.
 Any authority to a third party has to be with the consent of all joint account holders.
 Joint accounts are joint property. Therefore, unless there is clear mandate in the account
opening form that anyone can undertake the following functions, these should be done by
all joint account holders jointly under signatures of all (a) opening the account (b) closure of
account (c) making or altering nomination (d) raising loan against term deposit (e)
premature payment of term deposit (1) addition or deletion of names.

 In case of joint accounts with either or survivor instruction, if any of the account holders
becomes insane, the balance will be paid jointly to the account holders other than who has
become insane and guardian of the insane minor appointed by court.
 In all types of joint accounts, Garnishee order issued in joint names will be applicable on
joint accounts but Garnishee order issued in the name of one of the account holders will
not be applicable on joint account.
Partnership Firms
 As per section 4 of the Indian Partnership Act, 1932 partnership is the relation between
persons who have agreed to share the profits of a business carried on by all or any of them
acting for all.
 Minimum partners: A partnership firm should have minimum 2 partners.
 Maximum partners: As per Companies Act 2013, an association of more than 100 persons
which is not registered as Company or Society will be an illegal association. Therefore,
maximum number of partners can be 100. (As per Companies. Act 1956, maximum number
of partners could be 20 for any business other than banking and 10 for banking business).
 In case of Limited Liability Partnerships, there is no limit on maximum number of partners.
 Who can become a partner? Only a person competent to contract can become partner.
Minor, insolvent, insane cannot become partners A company and a firm can become partner
in another firm.
 Who can’t become a partner?: HUF can’t become partner as per judgement of the Supreme
Court because HUF is neither a legal person nor a natural person and can’t be liable for
action of others.
 Partnership Deed: Partnership can be oral or in writing. Therefore, banks do not insist on
partnership deed while opening accounts of a partnership concern.
 Registration of Partnership: A partnership firm is registered with registrar of firms. Though,
it is not necessary that the firm be registered yet registration is, preferred because an
unregistered firm can’t sue others in its own name for recovery of its dues while others can
sue it in its name. Therefore, while granting loans banks prefer that the firm should be
registered one.
 Implied authority of partner: As per section 19 of the Partnership Act, 1932, a partner of a
firm has implied authority to act on behalf of the firm for the normal business of the firm
and bind the firm. Alt actions of the partner in the ordinary course of business are actions
of all partners. However, in the absence of any usage or custom of the trade to the contrary,
a partner's implied authority does not cover '(a) admission of any liability in a suit against
the firm (b) withdrawal of any suit filed on behalf of the firm (c) acquire/transfer any
immovable property on behalf of the firm (d) submitting a dispute relating to the business
of the firm to arbitration (e) opening a bank account on behalf of the firm in his own name
(f) compromising on behalf of a firm (g) entering into partnership on behalf of the firm. But
if all partners agree for these issues—and authorize anyone in this regard, these jobs can be
undertaken by the said partner.
 Liability of partner: As per section 25 of the Indian Partnership Act, 1932 every partner is
liable, jointly with all other partners and also severally, for all acts of the firm while he is a
partner. Thus, liability of a partner is unlimited. In case of Limited Liability Partnership, the
liability of partner is limited up to the amount agreed to be contributed by him.
 Account of Partnership firm: For opening account of a partnership firm, all partners are
required to sign Account opening form except minor who is admitted for benefits of firm.
 In Partnership accounts operation authority is given by all partners. Any change in the
operational authority is also with the consent of all partners including those who were
earlier not authorized to operate. Every partner including a sleeping partner has authority
to stop payment of a cheque issued by another partner of the firm. The revocation of stop
payment of cheque will be as per operational authority.

 As per section 18, a partner is the agent of the firm for the purpose of business-of the firm.
Being an agent, he can't delegate his authority to an outsider without the written consent of
all other partners.
 Death, insolvency, insanity of partner: On the death, insolvency or insanity of a partner, the
partnership is dissolved and operations are stopped. The cheques signed by the deceased,
insane or insolvent partner will not be paid. If the account is in credit, operations are
allowed for winding up of the firm. In such case operations are allowed on the basis of a
fresh mandate. It the account is in debit, operations in the account should be stopped to
retain liability of the deceased /insolvent partner or his/her estate and to avoid operations
of the Clayton's rule.


Limited Liability Partnership

 Limited Liability Partnership is governed by Limited Liability Partnership Act 2008.
 It is registered with Registrar of Companies. 3. Minimum number of partners is 2 but there
is no limit on number of partners. An individual or a 15-Ody coporate can be a member of
an LLP. Liability of partner is limited to the extent of his contribution in the firm. A partner
shall not be personally liable.
Accounts of Limited Companies
 A limited company is an artificial person with perpetual succession incorporated under the
Companies Act.
 Number of members: As per Companies Act 2013, in the case of a private limited company,
minimum number of members should be 2 and maximum number of members excluding
employees can be 200. For public limited company minimum number of shareholders
should be 7 and there is no ceiling on maximum number
 Number of Directors: Minimum Directors in a public limited company should be three, in a
private limited company 2 and in One Person Company one. Maximum directors in all types
of companies can be 15. However, company may appoint more than 15 directors by passing
a special resolution. An individual cannot be director of more than 20 companies at one
time out of which public co should not be more than 10.
 Shareholders are owners of the company, directors are agents of the company and
debenture holders are creditors of the company.
 Documents for opening_ account: For opening account of a limited company bank should
obtain the following: Memorandum of Association: It contains name of the Company, its
authorised capital, registered office and liability of shareholders, objects of the company
etc. Anything done by the directors beyond the objects stated in the memorandum of
association is called ultravires the company and can't be ratified even in a general body
meeting. Directors can borrow only for the objects mentioned in the MOA. if any loan is
given for objects other than those mentioned in Memorandum of Association, company will
not be liable for such loans.
 Articles of Association: lays down the internal working of the company like rights and
powers of the directors, rules of conducting meetings, borrowing power of directors etc.
 Certificate of incorporation : It is equivalent to birth registration certificate of the company.
This is the most important document. A company does not exist without it. Certificate of
commencement of business: used to be issued by Registrar of companies. Earlier it was
required by public limited companies only. Now it is not required by either public limited
company or private limited company. Resolution of Board of Directors which is passed by
the Board of Directors authorizing opening and operation of the account by named officials
of the company. A copy of the resolution should be attested by its Company Secretary and /
or Chairman of the meeting at which resolution was passed.
 While opening account of a limited company, no introduction is required as Certificate of
incorporation is sufficient for that purpose. However, KYC norms are required to be applied
on all persons authorized to operate the account of company.

 As per doctrine of 'Constructive Notice' anybody dealing with company is assumed to have
knowledge of Memorandum and Articles of Association.
 Operational Authority: The operational authority is decided by Board Resolution. Any
change in operational authority is also as per Board Resolution. Stop payment of a cheque
and revocation of stop payment will be as per operational authority. The directors can not
delegate their authority to any other person.
 In case a director dies, the cheques signed by him presented for payment can be paid if
these are otherwise in order and are dated prior to his death.
 Common Seal of the Company is to be affixed on documents as per Articles of Association
or Board Resolution.
 Borrowing powers of Directors: The borrowing powers of company arise from Memorandum
of Association. The Borrowing powers of directors are given in the Articles of Association. If
it is not mentioned in Articles of Association, it is equal to paid up capital and reserves of
the company. The Board of Directors of a public limited company or a private limited
company which is a subsidiary of public limited company can't borrow in excess of its paidup
capital and free reserves. If the directors want to borrow more than the paid up capital
and reserves of the company, consent of the shareholders is required in the General Body
meeting.
 Winding up of company: Winding up can be (a) voluntary (b) Compulsory by court (c)
through court supervision.
Registration of Charge
When to be registered: Under section 77 of the Companies Act, 1956, a charge other than
created by way of pledge or lien, by a company is required to be registered with Registrar of
Companies (ROC).
 Modification: Whenever, there is a change in terms and conditions of the loan, then the
particulars of Modification of charge should be filed with the ROC.
 Satisfaction: When loan is repaid, particulars of satisfaction of charge should be filed with
ROC , within 30 days of the satisfaction of charge.
 ROC with whom particulars to be filed: The particulars of the charge should be filed with
the Registrar of companies in whose jurisdiction the Registered Office of the Company is
 located.
 Forms: For filing particulars of fresh charge, Form No. CHG 1 is required. Form used for
modification of the charge is same as that for fresh registration. For satisfaction of charge,
Form No. CHG 4 is to be submitted.
 Period for filing particulars: Particulars of charge are required to be filed within 30 days of
creation of charge.
 Extension of Period of Registration: ROC can grant extension of 270 days in filing
particulars of charge. The company will be required to pay additional fees not exceeding 10
times the specified fees. Beyond this period permission is required from Company Law
Board.
 Duty to file particulars of charge: It is the primary duty of the company to get the charge /
modification of charge / satisfaction of the charge registered with ROC. However, if the
company does not get the charge registered, bank in its own interest can file particulars of
charge.
 Consequence of non filing the particulars: In case the particulars of charge are not filed, the
bank becomes the unsecured creditor against the official liquidator.
 Priority of charge: The priority of the charge is reckoned from the date of creation of charge
(i.e. date of documents) and not from the date of registration if the charge is registered
within the stipulated period.
Accounts of Hindu Undivided Family (HUF)
 HUF is neither a legal person nor a natural person, It is not created by agreement. 1t is not
incorporated under any Act. It is from—a-eornmon ancestor and membership is by birth or

adoption. The eldest coparcener including daughter is the Karta and continues to be Karta
even when he/she lives outside India.
 Operational authority to operate the account is with Karta. Karta can appoint any other
coparcener or third party to conduct business of HUF and/or operate the account. Co
parcener cannot stop payment of the cheque unless he is authorized to operate the account.
 In case of death, insanity or insolvency of Karta, next senior most member of family
becomes Karta. The liability of Karta is unlimited while that of co-parceners is limited up to
their share in the firm.
Account of Trusts
 Types of Trusts: Trusts can be of two types - private trusts where beneficiaries are certain
specified individuals or groups and public trusts where beneficiary is public at large. The
document creating a trust is called 'trust deed'. Public Trusts are registered with the Charity
Commissioner.
 Operational Authority: The operation and other aspects of the bank account are to be
conducted as per the Trust Deed. Unless otherwise provided for in the trust deed, all
trustees have to operate the account jointly. Trustees can't delegate their powers to an
outsider even by mutual consent.
 Loan to a trust: Unless specifically provided for in the trust deed, no trustee can raise loan
against the security of the assets of the trust. Loan should be for the objects as mentioned
in the Trust Deed.
 On the death of a trustee, the trust property is passed on to the next trustee while in the
event of death of sole trustee or last surviving trustee, the court can appoint a trustee.
 Death or insolvency of a trustee does not affect the trust property-and the bank can pay
cheques issued by the deceased trustee prior to his death.
 Stop payment of a cheque and revocation of stop payment as per operational authority.
Account of Executors and Administrators
 An executor is a person named by the deceased in his will to mange his estate whereas an
administrator is appointed by the court of law for the same purpose where the deceased
dies without leaving behind a will.
 Executors and administrators are treated as one person. On opening a bank account,
therefore, executors/administrators can authorize any one or more of them to operate the
account. On the death of an executor or administrator, the surviving executor(s) or
administrator(s) can continue to operate the account unless otherwise provided for in the
will or letter of administration.
 While opening the account of an executor, bank should obtain letter of probate, which is an
official confirmation of the will of the deceased by a court of law. For opening account in
the name of administrator(s), letter of administration is required which is issued by the
court of law.
Societies and Clubs
 Societies and Clubs are non-profit making organizations.
 These can be registered under Societies Registration Act 1860 with Registrar of Societies.
 Societies can also be registered with Registrar of Companies under section 25 of Companies
Act which pertains to nonprofit making companies.
 Documents to be obtained while opening the account: (i) Copy of Registration Certificate (ii)
Copy of Bye laws which contain rules and regulations (iii) Copy of resolution passed by the
Managing Committee which should include authority to open the account and operational
authority.
 Cheques presented after death of Secretary or Office Bearer: Any cheque signed by the
Secretary of Club or Society or any other office bearer who is authorized to operate the
account and presented after his death can be paid provided if is otherwise in order and
dated prior to his death.

Mandate and Power of Attorney
 When an account holder authorizes another person through a simple letter of authority, it is
called mandate. On the other hand, power of attorney is executed on stamped paper and
may cover any other transactions besides opening/operation of an account. Bank generally
accepts mandates. However, Power of Attorney is also acceptable. A mandate does not
require witnessing or stamping. On the other hand, power of attorney is stamped as per the
State Stamp Rules of the state where it is executed. It must either be registered with a
Registrar of Documents or attested by Notary Public.
 The account holder can revoke mandate or power of attorney any time even if it is stated to
be irrevocable.
 Any cheque signed by the agent and presented after cancellation of authority shall not be
paid irrespective of date on the cheque.
 Any cheque signed by agent and dated prior to delegation of authority will not be paid.
 Power of attorney or mandate is revoked by death, insanity, insolvency of the Principal. Any
cheque signed by the principal or agent presented after the death, insanity or insolvency of
the principal will not be paid.
 In case Cheque issued by the agent is presented for payment after his death, insanity or
insolvency, the same can be paid provided the same is dated prior to the date of death or
insanity of the agent.
Death of a Customer and Settlement of Claims
 In the case of death of individual customer, operation in the account should be stopped.
 The person named in the will or probate is called Executor. When a person dies without
writing will, he is said as having dies intestate.
 For making payment of balance in the account of deceased customer to legal heirs of the
deceased, Succession certificate is not mandatory for any amount.
 While delivering contents of locker or safe custody, inventory should be prepared. If some
sealed packet is found in the locker of safe custody, it should be delivered as it is without
opening the same.
 The claim should be settled and payment should be made within 15 days from the date of
receipt of completed papers.
 If any credit is received in the account after death of customer, it should be credited to a
separate account in the name of customer with the permission of legal heir or nominee.
Otherwise it should be returned to remitter under intimation to the legal heir or-nominee.
 Pre-mature payment of term deposit can be allowed but no loan can be allowed.
 Interest in case of current account should be paid at Saving rate from date of death till date
of payment.
 In case of term deposits, up to due date interest should be paid at contracted rate. For
overdue period. Interest should be paid at applicable rate on date of maturity if the death
was before maturity and at saving rate if the depositor died after maturity.
Nomination Facilities in Customers' Accounts
 Nomination facility was introduced on the recommendation of Talwar Committee.
 Nomination facilities are available in deposit accounts (Sec 45 ZA & 45ZB of Banking
Regulations Act), articles deposited for safe custody with the bank (Sec 45ZC & 45ZD) and in
locker accounts (45ZE & 45ZF).
 Sections 45ZA, 45 ZC, 45ZE relate to nomination change in nomination and cancellation of
nomination. Sections 45ZB, 45 ZD, 45ZF state that bank will be discharged of liability by
making payment/delivery to nominee.
 Where facility is available: All types of deposit accounts like SB, CA, FD, RD, NRE, FCNR(B)
and NRO.
 Who can nominate: Individual, joint account of individuals or a sole proprietorship firm.

 Who cannot nominate: Partnership firm, HUF, clubs/societies/limited companies/trusts. A
minor cannot appoint a nominee. On his behalf, nomination facility can be exercised by the
person legally competent to act on behalf of the minor.
 Who can be nominee: Only an individual including minor. If nominee is a minor, the
depositor has to appoint a major person to receive deposit amount / articles in the safe
custody / locker etc. on behalf of the minor nominee.
 Number of nominees: Deposit accounts — only one; Safe Custody — only one but if articles
are deposited by more than one person, nomination facility is not available; Safe Deposit
Locker – single names or in joint names with either or survivor instruction only one; Locker
in joint names with joint operation - more than one nominee (max 2).
 When does the right of nominee start?: In case of joint accounts, right of a nominee starts
only after death of all depositors. The only exception is the nominee(s) in case of jointly
operated lockers.
 Status of nominee: The status of nominee is just like trustee of legal heirs.
 Legal Heir versus nominee: bank will make payment to the nominee unless there is a court
order to make payment to legal heirs. Bank gets a valid discharge by payment to nominee.
 In case of term deposits, there is no need of fresh nomination in the case of renewal of FDR.
 While making nomination, the thumb impression of the accountholder should be attested
by two witnesses. However, signatures of the accountholders in forms DA1, DA2 and DA3
need not be attested by witnesses.
 In the case of accounts in the name of single persons, nomination must be obtained. If the
depositor does not want to nominate anybody, he should give in writing.
 Banks should incorporate the legend "Nomination Registered' on every pass book or deposit
receipt. In addition to the legend "Nomination Registered", banks should also indicate the
name of the Nominee in the Pass Books / Statement of Accounts / FDRs, in case the
customer is agreeable to the same.
 Nomination can be made any time. It can be cancelled and changed any time.


SETTLEMENT OF CLAIMS IN RESPECT OF MISSING PERSONS


 As per the provisions of Section 108 of the Indian Evidence Act, presumption of death can
be raised only after a lapse of seven years from the date of his/her being reported missing,
As such, the nominee / legal heirs have to raise an express presumption of death of the
subscriber under Section 107/108 of the Indian Evidence Act before a competent court. If
the court presumes that he/she is dead, then the claim in respect of a missing person can
be settled on the basis of the same.
Banking Ombudsman Scheme 2006.
The Scheme was introduced in 1995 under Section 35A of Banking Regulation Act.
 Scheme is applicable to all Scheduled Commercial Banks including private sector, public
sector, foreign banks, RRBs, Scheduled Co operative Banks throughout India including J&K.
 Ombudsman is appointed by RBI. The appointment will be for 3 years at a time.
 The Chief General Manager / General Manager of RBI can be Banking Ombudsman.
 The expenses of the Ombudsman will be borne by RBI.
 Scope: Complaints relating to deficiency in service in deposit, ancillary services, non
adherence of RBI guidelines on advances, credit card, internet banking, non-adherence to
the provisions of the fair practices code for lenders or the Code of Bank's Commitment to
Customers issued by the Banking Codes and Standards Board of India (BCSBI).
 Period for filing complaint: if no reply is received from the bank within one month of
lodging the complaint with bank or reply received is not satisfactory. Maximum period is 1
year from the date of receiving the reply from the bank and 13 months from the date of
making the complaint to the bank if reply not received.

 Ombudsman will not entertain a complaint where (a) case is pending in the court (ii) case
has already been decided by the court (iii) similar case has already been decided
Ombudsman.
 The role of the Ombudsman is that of Arbitrator with mutual consent.
 Amount of Award: actual loss suffered by the complainant subject to a maximum of Rs 10
lakh; In case of credit cards, up to Rs 1 lakh.
 Period for acceptance: 30 days of receipt of the copy of the award.
 Period for implementation by bank: 1 month of receipt of acceptance from the complainant.
 Appeal: Complainant can file an appeal to the Appellate authority (Deputy Governor, RBI)
within 30 days of the of the date of receipt of communication regarding award or rejection
of the complaint. Bank may also file appeal with Deputy Governor, RBI within thirty days
from the date of receiving acceptance from complainant. Appeal may be filed by a bank
only with the previous sanction of the CMD or ED or CEO of the bank.
 If the bank does not implement the award it should inform Customer Service Committee of
the Board and also give a note to this effect in the Annual Report of the Bank.
 The Scheme does not include certain banking transactions, such as, failure to honour bank
guarantee or letter of credit and misbehavior of staff.
Other issues relating to Customer service
 Banks should submit a statement of all the complaints received at the Head Office /
Controlling Office level/branch level. However, where the complaints are redressed within
the next working day, banks need not include the same in the statement of complaints.
 Delays in Cheque Clearing: For local cheques credit and debit shall be given on the same
day or at the most the next day of their presentation in clearing. Timeframe for collection of
cheques drawn on state capitals / major cities / other locations to be 7/10/14 days
respectively. If there is any delay in collection beyond this period, interest at the rate
specified in the Cheque Collection Policy of the bank, shall be paid.
 Customer Committees: Branch level committees include their customers including senior
citizen. The Branch Level Customer Service Committee may meet at least once a month.
 Cheque Drop Box: Both the drop box facility and the facility for acknowledgement of the
cheques at the regular collection counters should be available to customers and no branch
should refuse to give an acknowledgement if the customer tenders the cheque at the
counters. Banks should invariably display on the cheque drop-box itself that "Customers
can also tender the cheques at the counter and obtain acknowledgment on the pay-in-slips".
The above message should he displayed in English, Hindi and the concerned regional
language of the State.


Code for Banking Service: Salient features
 Changes in Fees & Charges: If bank increases any of charges or introduce a new charge, it
will be notified one month prior to the revised charges being levied / becoming effective.
 Changes to Terms and Conditions: (i) normally, changes will be made with prospective
effect giving notice of one month. (ii) If any change is made without notice, bank will notify
the change within 30 days. If such change is to customer's disadvantage, customer may
within 60 days and without notice, dose account or switch it without having to pay any
extra charges or interest. Bank will immediately update on its website, any changes in the
terms and conditions.
 Chapping customer's account: (a) If customer is not happy about choice of current / savings
account, within 14 days of making first payment into the account, he can switch to another
account or Bank will give customer's money back with any interest it may have earned. If
customer decides to close his current/savings account, Bank will close account within three
working days of receiving customer's instructions.
 Savings/Current Accounts: Bank will inform of any change in minimum balance to be
maintained 30 days in advance.

Consumer Protection Act
 Consumer Protection Act was implemented with effect from April 15, 1987. The Act is not
applicable in J&.K.
 A complaint can be filed by the consumer, voluntary consumer association, Central or State
Government.
 Objective: to address consumer's grievances against deficiency in the quality of goods or
services for consideration.
 Limitation period for lodging the complaint is 2 years from the date of cause of action.
 The Forum operates at three levels i.e. District, State or National. For claims up to Rs 20 lac,
complaint will be lodged with Distt. Forum, for claims over Rs 20 lac up to Rs 100 lac with
State Commission and for claims more than Rs 100 lac with the National Commission.
 Admissibility of complaint to be decided within 21 days of the receipt of complaint;
decision within 3 months without analysis and within 5 months with analysis.
 Appeal from one forum to another can be made within 30 days of the order. For making
appeal against decision of District Forum to State Forum, amount to be deposited is 50% or
Rs 25,000 whichever is less, to National Forum it is 50% or Rs 35,000 whichever is less and
for making appeal against decision of National Commission to Supreme Court the amount
to be deposited is 50%or Rs 50,000 whichever is less.
 Punishment for Frivolous complaint: Imprisonment 1 month to 3 years and fine Rs.2000 to
Rs.10000

JAIIB LEGAL 18.11.2018 recollected questions ...

60 JAIIB LEGAL 18.11.2018 recollected questions ...


1.Banking ombudsman-max.amount,no.of members in Pvt LTD and public LTD company,
2.paid up capital for Pvt and public LTD company,
3.sale of goods act relate to??
4.DRT related 5 to 6 questions
5.Sec 131 of NI ACT
6.Many questions regarding drt  , negotiable instruments
7.More than 15- 20 case studies
8.RTI act rejected by
9.Amalagation of two banks
10. Chairman of sebi who appoint
11.LIABILITY of drawee cover under NI act
12.MONEY laundering related
13.Two parties of BOE
14.Appelate Tribunal chairmander
15. Order NISI garnishee order
16.Appeal against district court
17.1st appeal in appellate and fee
18.Around 10-20 questions are from only partnership and companies
19.IBC 2016 can be filed by
20.RBI inspection to Banking companies
21.FEMA ED IS ESTABLISHED BY
22 FEMA act objectives
23 .What is public key
24.features of Lokadalat
25. Award means by Lokadalat
26.rejected by district forum than where you can appeal
27.DRAT can be headed by
28.DRT to DRAT .....%of amount to deposit
29.RTI has to dispose information
30. More than 3 no.of parties involved in which.
a.LC
b.guarantee
C.BOE
D.indeminity

31.Banking license can be cancelled by??
32.One 2 mark question regarding mode of charges
1.car loan
2.finished goods
3.FDR
4.HOME LOAN
5.LIC POLICY

33.Consumer means???
34.Conract of goods what are going to transmit??

35.Recovery officer duties??
36.DRAT can transfer the cases to any other DRT within his juridiction

37.2 marks question...firm is registered at  mumbai and factory at chennai avail loan at kolakata based bank against factory ..then where will be mortagage takes palce??

38..Bank given loan against Hypothecation of work in process goods ....then Charge witb ROC will be filed when???

39.Counter claim filed under sub section8   has the same effect a

40.IBC 2016 can be filed by

41.Foreign banks question ...place of business mumbai with amount and profit % will be transferred to rbi???  Macmillan page 19

42.Assessee and assessment question based on place of residence
43.National council forum is headed by whom???

44.Minister of consumer affairs

45.Agreement related question ....contract = agreement + enforceability

46.National council forum is headed by whom???

47.Continuing guarantee in the case of death of guarantee??

48.Recovery officer duties??

49.DRAT can transfer the cases to any other DRT within his juridiction

50.Regarding nature of pledge

51.Parties related to LC


52.BR act 17(1)
53.NBFC

54.NI act

55.Sarfasei act

56.law of limitations

57.Types of securities


58.130 transfer property act

59.RTI act

60.lokadalat

61.Possesion of immobile property


Recollected questions posted by our members

Limitations period of foreclosure - 30 Years
Section 35 of RBI act - Initial assets and liabilities
Section 35 of Banking Regulation Act, 1949 - Inspection
Minor Partner liability in firm - cannot be held personally liable
Payee bank protection in case of forged Instrument - Sections 10, 85 and 128 of NI Act
Elder Male member called as in HUF - Karta
Non negotiation crossing Obligation to payee bank
Limitation period in case of Default of loan in EM
Bank Negotiation stamp of cheque, presented to other bank
5-6 questions frm DRT/DRAT
Bank Guarantee
Questions from NI Act
Limitation Act
Charges, Mortgage
Partnership Act
FEMA
Consumer Protection Act
Banking Ombudsman
Majority of the paper from Chapter A
Questions on minor admitted benefits
LC types i.e red clause and green clause
Public Ltd and Pvt company differs
No of members in pvt ltd
Case studies on Bank Guarantee
LC case study
Winding up decisions

• Loan documents signed by in case of loan to HUF

Distress to De-Stress

WHAT IS STRESS  ?
STRESS

 Is a reaction / Response to any kind of change

 Is physical and emotional responses to situations which are perceived as novel, frightening, confusing, exciting, or tiring.

 Gets precipitated by external demands

 Can also be generated from with in by our fears, hopes, expectations and beliefs

 Acts like a signal for body and mind to get ready to rise to an occasion.  It is an alarming reaction.

 Can’t be avoided.  It is every day fact of life.

 Creeps in stealthily and has potential to either make or mar us.

 Affects our mood and behaviour.

 Produces tension and pressure on bodily systems.

 Accelerates aging process.

 Reduces immunity to illness.

 Final effect may be serious illness of body or mind or even death.


So what? Is all the stress bad?

Good verses bad stress

 No, all stress is  not  Bad.

 It can be positive or Negative.

 Positive situations like, promotion, a new job, marriage prove to be stressful but these increase our resistance to stress on account of positive feelings like pleasure, confidence, and happiness generated by them.

 Negative situations like illness, interpersonal problems, financial losses, death of family members having been associated with negative feelings, like sadness, conflict, dissatisfaction lower our resistance to stress and make us more vulnerable to diseases.

 A certain amount of stress is essential for health, and to stimulate us to do simple day to day tasks.  Absence of stress in life makes our lives monotonous and dull.

 More and more negative situations, in quick succession and negative perceptions about our existing conditions make it difficult to adjust or adapt.  Then we feel anxiety, tension, worry and uneasiness.  At this state good effects of ‘positive stress’ in our lives are over powered, by effects of negative stress.  We start imaging all bad things that are likely to happen in our lives.  We drive our elves to illness.

 So, let us develop our capabilities to utilize good stress to our advantage and to prevent bad stress from spoiling our lives.

ROLE OF PERSONALITY FACTORS AND BEHAVIOURAL PATTERNS:

Every one responds differently to a potentially stressful situation.  It is not only the outside stressor alone that causes stress, but also our response to that stressor.  Let us note here that ‘what happens to us is not important, but how er react to what happens to us that is important.

Some PERSONALITIES SUSCEPTIBLE TO STRESS are
a) Suspicious :
Hyper vigilant, guarded, cold and unemotional by nature, uneasy in social interactions.  He causes stress to himself and also to those who deal with him.

b) Asocial : Eccentric, isolated, lonely , aloof and uninvolved, lacks concern for others, engages excessively in day dreaming, lack of expression of appropriate anger, Introvert.  For him performing day to day functions is of too much burden.  It is difficult to handle such person at work and in house.

c) Volatile : Excitable, emotional, extrovert maintains deep long lasting attachments.  Highly demanding in inter personal relations, irrational behaviour, angry out bursts under stress.  Uncontrolled emotionality is stressful to him and those around him.

d) Antisocial : In conflict with acceptable social norms, rules, regulations, constant marital tensions, repeated physical fights, wife or child abuse, very unpopular, repeated lieing, drunk driving offenses appears stressful and hardy, underlying stress and frustration takes form of aggressive and antisocial behaviour.

e) Hypersensitive : Extreme sensitivity to rejection, socially withdrawn, low self esteem lack of self confidence, seeks jobs on the side lines, shy and eager to please others, creates stress in interpersonal relations.  These are handle with care variety.

f) Inadequate : Loves to sit back and enjoy life, passive.  Pessimistic, fearful about expressing fearful and aggressive feelings, avoids positions of responsibility, anxious and stressful to face responsibility.  Indecisive cause great stress to other family members.

g) Obsessive : Stubborn, insists on things being done in ways and suggested by them, preoccupied with order and detail, serious, formal, highly stressful to others.

h) Passive : Procrastinate, justifying their unreasonable behaviour , lacks assertiveness, critical of those on whom they depend on, don’t directly state needs, confused are mostly under stress.


Thus, personality determines how we perceive life events, how we behave in responsive to stress encounters and how quickly and how easily we handle stress.

STRESS PERSONALITY – ILLNESS

Understanding personality types help us to modify our behaviour patterns in order to relieve stress symptoms and thereby prevent related illness.

Type A:  Ambitious, impatient, competitive, always struggle to achieve, irritable and annoyed if any thing gets in their way.

Those who don’t show above characters are type ‘B’.

None of the above two types is type ‘B’

Type A is more prone to heart attack and other heart related problems / disorders.  In case of loss of control over SITUATIONS ‘A’ type falls into state of collapse.

Cancer Prone : Severe emotional disturbances before 15 years as children felt sense of loss, loneliness, anxiety, rejection, try to please people to win their affection.


Migraine prone : Feels sense of unworthiness, accepts greater burden than they can cope, easily given to frustration, sudden outbursts of anger, poor judgment.


Other uncertain, qualities : concerned above neatness, morality, conformity, can’t express anger / hostility.  Therefore, facts are given not to threaten readers, but to encourage them to take positive preventive action to deal with stress.

Not only personality facts, but also a host of other factors also determine stress to individual.  We may not be able to change stress situations or our genetic inherent characters but, we can change our reactions to stress and how we perceive it.


STRESSORS

Life events cause stress.  No. of life events in particular period of time can lead to increased ill health.


These are birth, death, marriage, divorce, job, retirement, moving house  But what is important is how often we experience them.  All of them need social readjustment to a new change.


Greater the amount of readjustment required, greater the likelihood of developing illness.  Loss events like death or loss of job cause more stress induced illness than gain events like birth or new job.  In addition to daily events our beliefs and attitudes, unrealistic expectations and negative self-talk lead us to stress.


The stressors can be classified as Domestic, occupational and social


Domestic : Marriage, children divorce
Occupational : Physical environment, job structure, Interpersonal relations, Burnout unemployment, Role o f working  women.


Socio-economic : Tax problems communal tension, over population, strikes etc come under political stress.

HOW TO RECOGNIZE STRESS


The body has its own ways of signaling that it is in discomfort.  Whenever it is subjected to prolonged stress.  Presence of symptoms is suggestive of the fact that some thing has gone wrong some where in body.

But, some people are so externally oriented that they are not aware of their own feelings.  Until and unless we recognize our sysmptoms of stress, we can’t prevent/minimize them.  Let us try to recognize “BAD STRESS SYMPTOMS” are:

Mental : Increased irritability and angry out bursts.  Lack of concentration, Indecisiveness, Forget fullness.

Emotional : Becoming fussy, suspicious, touchy or weepy, feeling anxious, hopelessness, guilty, insecure, increased moodiness.

Physical : Tense muscles, irregular breathing sweaty palms, cold fingers dryness of mouth, palpitations, Diarrhea.  More urination, Restlessness, shaky hands / legs.

Behavioural : Increased smoking, drinking, increased/decreased eating, sleep, nail biting, hair pulling, not mixing with others, neglecting looks, tapping fingers, lipsmacks, mannerisms, non stop talking, workholism/absenteeism.



Recognizing these symptoms and having appropriate timely intervention can prevent us from falling prey to severe stress related disorders/illness.

HEALTH CONSEQUENCES OF STRESS

Reaction to stress occurs in four ways

Normal : Alertness followed by action of defense
Neurotic : Alert/anxiety is so great, that defense becomes ineffective.
Psychotic : Alert is mis-interpreted or ignored.

Psychosomatic : Defense by mind fails, alert is transmitted to bodily system causing changes in body tissues and leading to several health problem as shown here under:

Prolonged alertness / tension / stress can produce physiological  disorders, which includes, tension headache,back ache, migraine and triggers off asthma, eczema, arthristis, palpitations indigestion, diarrhea, constipation, disturbed sleep.


 It can also increase our succeptability to High Bold Pressure, Heart disease, Diabetes or Cancer.  Even though, certain level of stress is needed in the life, but prolonged pervasiveness and high level of stress can ruin our physical as well mental Health.



So, recognize early signs symptoms and timely intervention can prevent future health hazards.


How to prevent / overcome?

COPING WITH STRESS

Stress is inescapable.  So, it should be maintained in manageable levels.  For this, every one develop his own strategies… coping is nothing but think strategies to handle stress.  Coping with stress means the ways and means to be adopted to keep stress in manageable levels.  For managing the stress, we shall bring CHANGE in 3 areas of ourlife.  Self, others environment.

Some people try to choose to cope with stress NEGATIVELY.  It is not good in long run.  In negative coping one tries to manage or control stress by using methods, which on surface appear to be worthwhile efforts, but in reality only further add to increase stress levels in imperceptible ways.  Negative coping strategies are smoking, Drinking too much coffee, alcohol, tranquilizers, eating too much, too little food.  These habits rob away the resources from the body, which has already been stressed much.  Managing stress is more than coping it is learning to cope adaptively, effectively.

POSITIVE COPING STRATEGIES includes

Nutrition : Healthy habits and supplementing body with vitamins/foods rich in vitamins like B complex, C and E protect body from stress.
Relationship : Developing meaningful relationship with others reduces stress.
Diversion : Theater, T.V.  Amusement parks, provide a source of joy and entertainment and help us to tackle our problems in positive frame of mind.  But diversion is a temporary escape from stress.

Removal : Temporarily getting away from stress situation resorts/beaches, gurus, Religious organizations.  They  give needed Relaxation, sleep and re-change body to meet stress situation again.  But it fades away again after sometime of our facing stress situation.  But his can’t give any direct solution.
Selecting a few of the techniques, which are most suitable to us land practicing them daily can give us direct solution to our stress.


WHAT ARE OTHER TECHNIQUES
Mental techniques

Breathing : There is direct relationship between mind and breathing.  Out of the chest breathing and abdominal breathing, the later one is most efficient type as it enhances greater expansion and ventilation of lungs.  Increases circulation and increases mental and physical relaxation.
The abdominal breathing also called as Diaphromatic breathing diaphragm is a sheet of muscle separating chest from abdomen.  In abdominal breathing while we breath, Diaphragm contracts and pushes downward.  This relaxes abdominal muscles.  When we breath out, abdominal muscles contract, Diaphragm relaxes.This helps to reduce anxiety, depression, irritability, Tension, fatigue, Reduces shallow breathing.  It can be learned in a few minutes.  Do it five minutes at a time, twice a day.
PROGRESSIVE RELAXATION   : Reduces muscular Tension, anxiety, insomnia, fatigue, irritable bowls, muscle spasm, neck and back pain, high B.P. Mild phobias, stuttering.
Sit in a chair in a relaxed and comfortable way.. select a part of your body.  Tighten the muscles of that part.. as tight as is possible.  Relax muscles.  Do it thrice.  Then select another part.  Tighten and Relax muscles.  Like this do it in all the parts including face, scalp etc abdomen, back etc.
After the exercise is over raise slowly, to allow body to readjust.
Do it twice a day
Autogenic Training, Self Hypnotism, Visualizing (Guided Imagining), Positive thinking Meditation, Yoga are some other methods available.  Learning them from some one who is eminent in them and practicing them regularly will help us not only from reducing stress in our lives but also prevent the health hazards we are likely to face.  French pharmacist, emil coue commands his patients  to repeat following phrase.

“EVERY DAY IN EVERY WAY I AM GETTING BETTER AND BETTER”.

This positive statement had cured many diseases under his guidance.  So, why not say it to yourself everyday atleast 20 times immediately after getting up from bed.


BEHAVIOURAL TECHNIQUES TO COMBAT STRESS


Bio-feed back : Is use of instrumentation to observe bodily processes which are otherwise not visible or audible and to bring them under voluntary control.  Information about your body is fed to you by means of a visual audio display.  So that you are actually able to observe how your heart, breathing etc.  behaves when you are stressed.  Biofeed back machines serves as a an ‘inner eye’ offering.  This is helpful in reducing Tension headache, Migraine, Hypertension, Insomnea, Muscle Spasm, Epilepsy, anxiety, Phobia, asthma and stuttering.

Thought stopping : Useful for getting rid of obsessive and phobic behaviour.  Obsessive though are irrational, repetitive thoughts that worry a person leading to constant self doubt and severe anxiety, phobias are extreme fear reactions leading to avoidance of specific objectives or situations.


Thought stopping involves stopping a specific though chain.  Concentrate on unwanted thought for a brief period and suddenly stop of empty your mind.  A verbal command ‘stop’ or a loud sound are useful to interrupt unpleasant thoughts.

This is highly useful in treating obsessive thoughts of failures, accidents, death, sexual inadequacy, obsessive memorises etc. also useful in treating phobias like fear of snake, driving in the dark, lifts, fear of going mad, fear of diseases.


An aid to improve effectiveness of thought stopping is wearing a Rubber Band around your wrist.  When ever you say ‘stop’ stretch the rubber band and leave it, so that it inflicts a small degree of pain.  This sort of little self punishment will stop the ongoing thoughts.  The main idea is to stifle the each difficult thought as soon as it comes.  Such thoughts will slowly decrease in frequency and eventually go away altogether.


STRESS INOCULATION/COPING SKILLS


Preparation for a battle is half the battle won.  Similarly, awareness of what causes stress in preparation to combat its effects boldly.  Our body responds to mental images we create within us.  By relax the mind.  We can prepare ourselves mentally and physically to face an anticipated stressful event.  This is a rehearsal in imagination for real life event that are threatening or distressing.   This is useful in situation like… appearing an interview, presentation of paper before audience, arrival of new boss at work, first day in college, giving important speech.

Steps involved in this are as under:

01. Imagine forth coming event
02. prepare adequately
03. Rehearse before event
04. Give a break to yourself with pleasurable activities
05. Prepare for the worst.
06. Relax before the event
07. Expect some stress
08. Take time to recover
09. Reward yourself
10. Tell yourself in the middle of stressful situations, anxiety conquering statements like… ‘stay calm’ ‘don’t loose your cool’.  You have handled this before, Relax now, you cn surely do this, he can’t really hurt me’.  More you concentrate on these coping statements, quicken the relief from stress.

Assertiveness training

Being assertive means being able to standup for your rights, needs and feelings without violating rights or sensitivities of others, without showing aggression.  It is learning to communicate effectively in a polite firm honest and open manner.  It is the only way in which you can have your opinion heard, feelings appreciated and rights honoured.. assertiveness involves communicating effectively both verbally and non-verbally.  It is also a state of mind.  It is having choice and exercising that choice.

First find out to which style of behaviour you belong to among aggressive, passive or Assertive.  One should learn to behave in Assertive style.

In this process of learning we shall learn assertive body language, listening skills, getting compromise and being persistent.


Body language : Maintain eye cantact, erect body posture, speak clearly audibly, firmly.  Don’t use apologetic tone., use gestures and facial expression of emphasis
Listening : Be ready, beware of your own needs and feelings give undivided attention to other person.  Look at his point of view, let other person know that you are listening to him.
Compromise : Meet halfway, part of what I want with part of what you want etc.
Persistence : Don’t get put off by people who say things to anger you or distressed you.  Don’t give up till you get satisfactory answer.
Avoid manipulation : learn to avoid being manipulated by others.  When some one refuses to take ‘no’ as answer, use a carefully, chosen sentences to use it as a ‘broken record’ and say it over and over agin.


Learn can ‘Defuse’ anger of other one by putting of discussion when some body in salts or criticizes you, give appearance of agreeing without promising change.  This is ‘clouding’.  Assertive inquiry, Assertive delay will help us in calming down our critic.

Assertive behaviour reduces distress and induces a positive state of mind and general good health.


JOB STRESS MANAGEMENT

Overload of work, time pressures, deadlines, conflicting demands, job uncertainty, under utilization of skills, unsympathetic Boss, and work monotony are some of common sources of job stress.
The individual, organization and environment in which organization functions determine one’s vulnerability to job-stress.  Management of this job stress is essential for healthy functioning of individuals and Institution.
Job Stress Management helps us to improve our ability to cope, gives sense of control at work, decreases feelings of guilt anxiety and low self esteem, improves relationships at work, increases problem solving abilities, reduces Psychosomatic symptoms, such as fatigue, insomnia Backaches, Ulcer etc.

How to Manage Job Stress:
01. Identify your symptoms of Job stress

02. Identify your sources of your job stress like lack of control, information gap, conflicts, over load under load, conflict in values etc.

03. Identify how you are responding to your job stressors

04. Set goals to change the ways of dealing with above job stress.

05. Change your thinking.  Make realistic appraisal of situation, Repetition of coping statements (I can handle it)  don’t blame yourself or anyone else.

06. Deal with your relationships at work.

07. Learning skills of negotiation in dealing with trouble some people / situations artfully.
These steps followed with thorough consideration will enable us to reduce our Job stress.

STEPS TO PREVENT JOB STRESS:
01.. Having Rational belief and attitude towards job, yourself and job performance.
02. Develop skills to develop behaviours need to do job effectively.
03. Develop support system at work.
04. Learn to Relax and use leisure time constructively.

LIFE STYLE CHANGES

NUTRITION: Adopting healthy habits and taking proper Nutrition increases resistance to stress.  Eat variety of foods, eat slowly, eat regularly, Don’t eat when feeling bored, or in angry or tired or anxious, eat smaller portions, Don’t see T.V. or Read News Paper when eating.

Avoid fats, particularly animal fate, avoid sugars, eat more lightly steamed fruits, whole grains cereals, avoid salt, alcohol, coffee, maintain vegetarianism, eat frequent small needs.

SLEEP:A sound sleep is one of the most important preprequisite for a healthy body and a healthy mind. So,

1. Go to bed only when sleepy
2. Have regular selling hours
3. Take warm milk before sleep
4. Don’t try hard to fall asleep
5. Stop worrying about not being able to sleep
6. Exercise during day
7. Engage in quite pleasant activities before sleep
8. Get massage for neck and shouders

EXERCISE:Jogging and waling are best exercises.  Do this for 20 to 40 minutes daily.  Indoor exercise equipment, yoga exercises, warmup exercises all help us in reducing stress.

TIME MANAGEMENT: Helps us in reducing Dead line anxiety.  Symptoms of poor time management are avoidance anxiety and job fatigue.  Constant rushing, Vacillating between unpleasant choices, missing deadlines.  Not having breaks in between to Relax, sense of being overwhelmed by work demands.

Strategies For Time Management

Establish priorities, create time by eliminating low priority tasks, learn to make basic decisions, plan in terms of time rather than tasks don’t start number of tasks at a time.  Complete a task before going to next task.  Group similar tasks,  allow some time for family, some time for yourself, you must have time to feel a sense of accomplishment and contentment.

OTHER STRATEGIES


LAUGHTER:

Improves breathing, lowers B.P. Releases healing harmones.  When you smile whole body becomes calm-humor, which eliminates gloom and worry, improves the bodies natural resources.  Laughter, the best medicine, can keep us healthy.  So try to spend time with cheerful people.  Try not to be too serious always, go through books, comedy videos/films.

ANGER:

 Is acid which can do more harm to vessel in which it is poured, than to thing on which it is poured.  It is normal human reaction.
We should learn to.  Reduce it in a healthy way.  Recognize the anger you feel, decide what makes you angry.  Give the provoker the benefit of doubt, practice mental relaxation, listen, learn the art of forgiving…. Use anger creatively.  Accept anger and handle it effectively.

MASSAGE:

Relaxes tensions from aching Muscles.  Stimulates blood flow, eases stress helps fluid drainages, generates sense of whole someness and peace.  Stroking, kneading, preasure and friction are four basic Manage movements.

SELF MASSAGE:

 Can be done while watching T.V. or taking Bath.  If necessary pleasant smelling oil can be used to lubricate.  It’s helpful in relieving pains and aches. Start from face, to scalp , neck, shoulders, back, hands and arms, legs and thighs, feet, Massage helps to rediscover healing power.  Get your mind of thoughts and concentrate on task of massaging.

Where to seek help?

PROFESSIONAL HELP
Some time it may not be possible to cope with stress despite using several strategies mentioned earlier.  It such case we could seek the help of our doctor, Psychiartist or Psychologist or Trained Counceler.They would listen to you objectively, analyse problem situation more clearly classify your thinking and offer a course of action that is tailored to suit your individual needs.

MEDICINES:
Play a role in acute intense stress related symptoms to be used only as a last resort and for a short term.

SOCIAL SUPPORT
This plays an important role.

1. Emotional support providing sympathy care and concern, love, trust.
2. Instrumental support provides to needs, like money, looking after children.
3. Informational support provides information helpful in coping with stress
4. Appraisal support provides indirect support by approving and recognizing persons actions.

Social support reduces stress, impact of stress, improves resistance to illness, workplace friends, family members, clubs religious groups can provide social support.

HELPING OTHERS TO HELP YOUR SELF:
Regular voluntary service actually increases life expectancy.   It is good for one’s mind and nervous system.  Ultimately when going gets really tough, One should into shy away from seeking professional help or mobilizing social support in dealing with stressful time.

REMEMBER
TOUGH TIMES DON’T LAST
BUT
TOUGH PEOPLE DO

Cultivating Self-development

What is Self-development ?
Self   development   is   an   approach   that   emphasises     the  importance  of  life  long
learning.  It  recognises that  we  all  have  a  great  potential for  learning  and for  changing
what we do.  This is  a  continuous learning process.  Organisations  that  do  not  learn 
faster   than  the  rate  of  change  in   the   environment   will  eventually   die.    Self
environment  will  eventually   die.    Self-development   focuses   on   cyclical  process   of 
learning,  which encourages us to build the ability to take responsibility and  be proactive 
- initiating action, rather than being reactive  -  in the way we work.
There  are four ways in which self-development helps  people to adapt to and enjoy the
new challenges of organisational  life.  It :
1. encourages continuous learning
2. makes us reconsider our attitude to change
3. helps us to adapt to new ways of working
4. enables us to grow in a holistic way.
Our approach to change
Now  rate of change has increased but philosophy has  remained the  same : everything
and  everyone  is  constantly  changing.   Self  development   helps   us  to  recognise  that
change  is  natural  and inevitable part of our working lives, stimulating us to be  aware of
our own role in responding to it.
New ways of working
The  way  we  work  is   changing  dramatically.  Information technology  has automated
many  of  our  processes   and   transformed  methods  of  product  design.    Many
organisations  are  restructuring  to   make   themselves   flatter  or   smaller,   semi-
autonomous   work  units.    Multiskilled,   self-directed  teams  are   being   developed
because  they  are  more  flexible  and  responsive  than  those  found  in  more   traditional
styles  of  production  management.    During    the  process  of  self-development,  learners
create a portfolio of their skills and knowledge

Growing in a holistic way
Self-development  involves both  our  ourselves (which relate to  other  people)  and our
innerselves(which   look   at   our   own  motivation,   values  and  beliefs).   The  most
important   ingredient   is  a  desire to  do things  differently.   One  should  think why   he  is
dissatisfied and how he want to do about it.
Conditions for success
i. Be open to new understanding
ii. Be prepared to take action
iii. Open culture which encourages individual action
iv. Commitment from management and staff to change the style of working
Self-development and Personal Change
The   author  has  focussed  on  how  to  prepare  ourselves   for   a  self-development 
programme.   The  metaphor  of  the  learner   driver  is  used  to  helps  in  develop  our
thoughts.
Mirror
a) Look at what you are now and where you would like to be
b) Work at your learning preferences and learning blockage
c) Look at the effect your development may have on those close to you.
Signal
Tell the appropriate people something about your development activity
Manoevvre
Choose the best method, release the handbrake and have a fun
The Self-development Process
Creativity   and   insight  of  individuals  help   to   learn   new  things   and   reinvent   and
develop,  our   understanding   of   self-development   process.   The  self-development
scheme  is   voluntary.   The   culture   in   organisation  affects  how   people   regard   self-
development.    Self-developers   are  best  served  by  setting   up   a  strong   dialogue 
between  individual  needs  and  organisational imperatives.
Creating a Self-devlopment Programme
Range  of activities involved in self development  programme are :-
a) know yourself
b) make a plan
c) learning sets
d) individual tools
e) working with the organisation

It   is  important when starting out on a process  of  self-development to develop a clear
image of yourself.  Ask  others how they see you helps you do this.  Individuals  can  be 
helped   to  set,  and  hold  to,  a  direction   in   their   own  development  by  preparing  a
development plan.  The precise  format of  this plan is less important than the individual's 
degree  of commitment to it.  To get into self-development and get moving in your  life,  it 
is  valuable  to  explore  a   range   of   development  activities.    A  core  process  in  self-
development  is  the   support  and   challenge  offered  by  one's  peers  in  a  small  learning 
group. 
The  group  maximises benefits to its member's  by  focussing  on action  and reflection. 
Facilitators,  though  not  essential,   can  help   greatly  in  guiding  the  group's  progress. 
Self-development is   nurtured  by  being  linked  to  strategy   and   work-based action.
Valuing Self-development
Self-development  can  be  of  value to  a  whole  range  of stakeholders, namely to:
a) Individuals engaged in self-development
b) The colleagues of self-developers
c) The organisation in which the self-developers work
d) The    human   resources   (HR)   department   within   the    self  developer's
organisation.
e) The facilitators of self-development programme
Tools and Resources for self-development
Clearly  the  crucial  tool  for  self-development  is   ourselves,  our  own  consciousness. 
Equally, just relying on ourselves is not enough.    Self-development  works  best  as  a 
social    process  -involves  other  people.   The  author  has  focussed  on  non  personnel
resources  that  one  can  employ  alongside  the  help  one  desire   from  oneself    and 
others.    Read   books   to   develop   insight    into  themselves  and  their  work.   Use
questionnaires to develop a truly realistic self-image.
Cultivating Self-development
We   all   have  the  seeds  of  self-development  within   us.    We  need  to  create  the  right
conditions to enable our seeds to  grow.  All   staff  need  to  be  engaged  in  life  long 
learning   if organisations are to thrive.  Managers and HR professions should, therefore, 
be   like  gardeners :  it  is their  job  to   create  the  right   conditions for the  seeds  of  self-
development to  grow  and blossom.  Everyone has potential in some people it is hidden 
and has  to be identified by others.  To assist this  process,   right conditions  for growth
are to be created.  If we are to  increase our creativity in order to do things differently at
work, we  may need  to  challenge  traditional ways  of  working;   this  means identifying 
and  implementing procedures that  allow  space  for risk-taking and change.

*Very very useful financial tips*

*Very very useful financial tips*

1. *Avoid buying property on loans unless you have a clear plan for its repayment. Monitor cash flow*

2. *Start a SIP at a very young age*

3. *Avoid buying a car unless you use it everyday*

4. *Do not let this sentence scare you. “Mutual fund investment are subject to market risk”. Look at the history and growth of Mutal Funds*

5. *Try having a simple wedding*

6. *Atleast 20% of your wealth should be liquid so you can utilize it when necessary*

7. *Considering inflation, do not keep huge money in savings bank account*

8. *If you invest in stocks, pay due attention*

9. *Do not have a belief that property & car make you rich*

10. *Never invest in insurance for returns*

11. *Use credit card for needs not for wants*

12. *Cancel all credit cards before you die, or inform family. Even a small residue will cost your family much*

13. *Invest on yourself & then on other investments*

14. *Balance your earnings with your savings first, then on spending and loans. Never take unnecessary loans*

15. *Always have a plan for future events on your career, life, spending and finance*

16. *Always have a reserve on your savings for contingency and urgent situations*

17. *Investment like, have a regular health check & do healthy workout every day*

18. *Do buy adequate term Insurance if you have dependents*

19. *Prepare a Will*

Mortgage details

Mortgage

1.Mortgage is defined in Section 58 of the Transfer of Property Act.

2. Mortgage is the transfer of interest in a specific immovable property, for the purpose of securing an existing or future debt or

for the performance of an engagement which may give rise to a pecuniary liability. The person creating the mortgage is called as

the mortgagor and the person in whose favour mortgage is created (bank) is called as the mortgagee.

3. Immovable property, means land and things attached or permanently fastened to the earth.

4. Types of Mortgage: There are six types of mortgages namely (i) Simple Mortgage (ii) Mortgage by Conditional Sale (iii)

Usufructuary Mortgage (iv) English Mortgage (v) Mortgage by Deposit of title Deeds (Equitable Mortgage) and (vi). Anamalous

Mortgage. Of these, all • mortgages except Equitable Mortgage require registration with the Registrar of Assurances.

5. Registered Mortgage: In the case of registered mortgage (also called legal mortgage) first a mortgage deed is written which is

stamped as per Stamp Act of the concerned state. The deed is then executed in the presence of two witnesses. Thereafter, in

terms of the Indian Registration Act 1908, it is to be registered with the Registrar of Assurances (Sub Registrar) within 4 months of

the execution.

6. Simple Mortgage: In simple mortgage the mortgagor makes himself personally liable to pay the debt and agrees that in the

event of failing to pay according to his contract, mortgagee can get the property sold through the intervention of the court. If after

sale of property some debt is still outstanding, the borrower shall be- personally liable for the outstanding amount. Neither the

possession nor ownership of the property is transferred to the mortgagee. The mortgagee cannot exercise the right of foreclosure.

7. Mortgage by Conditional Sale: The mortgagor ostensibly sells the property to the mortgagee upon the condition that if the

debt is paid in time the property will be transferred back to him and in case of nonpayment within the specified time the

transaction would become a real sale. There is no personal liability of the mortgagor. In case of default, the mortgagee can exercise

his right of foreclosure through court.

8. Usufructuary Mortgage: In this mortgage, possession of the property is transferred to the mortgagee. The mortgage money is

recovered through income of the mortgaged property. There is no personal liability of mortgagor.

9. English Mortgage: As in the case of simple mortgage, the mortgagor undertakes personal liability to pay the debt. He transfers

the ownership of mortgaged property to the mortgagee upon a condition that property must be transferred back to him on

payment of debt. Mortgagee can sell the mortgaged property even without the intervention of court.

Equitable Mortgage

1. Equitable Mortgage is called as Mortgage by Deposit of Title Deeds.

2. It can be created by mere deposit of title deeds of property with intention to borrow.

3 a.Title deeds should be deposited at Mumbai, Kolkata, Chennai ( Presidency Towns) or any other town notified by the State

Government in this regard. It is not necessary that the title deeds should be deposited with the branch or at the place where the

loan is being raised.

3 b.These can be deposited anywhere in India at a notified place.

it is not necessary that it should be within bank branch premises. Mortgagor can deliver the title deeds to an authorized

representative of the bank at mortgagor's residence or other place provided it is in a Notified Centre.

4. The property to be mortgaged may be located anywhere in India (For example, for property located in Delhi, title deeds can be

deposited at Chennai.

5. Equitable Mortgage does not require registration with Registrar of Assurances. But in case of a limited company, charge in

yespect of equitable mortgage under Section 125 of the Companies Act, 1956 must be registered with Registrar of Companies.

6. A title deed can be a sale deed, lease deed, partition deed, gift deed, deed of assignment, deed of relinquishment, or such

other documents. Agreement to sale is not a title deed.

7. Normally a bank should insist for original title deeds but in exceptional cases equitable mortgage can be. created even by

certified copy of the title deeds.

8. Property located in cantonment areas should not be accepted for equitable mortgage, without clearance from cantonment

authorities.

10.The bank should not part with the title deeds even for a short duration at the request of the mortgagor because if some other

creditor is induced to finance on the basis of title deeds, the bank may Lose priority over the mortgaged property.

11. No registration with Registrar of Assurance is required. For a company, registration with ROC within 30 days is required u/s

87 of Companies Act 2013. Under SARFAESI Act, registration with CERSAI.

12.Deposit can take place within Municipal limits of Presidency Towns (Kolkata, Chennai or Mumbai) or State Govt. Notified Towns.

It is not necessary that the place for deposit of title.deeds, should be bank branch premises

Legal Opinion and Search Report: Before accepting mortgage of immovable property, legal opinion should be

obtained that the property is fit for mortgage and search should be conducted in the records of Registrar /Sub

Registrar for at least 12 years to ensure that the property is free from prior encumbrance.

Priority of Mortgage: The priority of the mortgage is considered from the date of execution of the mortgage deed (in the case of

registered mortgage) or from the date of creation of mortgage by deposit of title deeds and not with reference to the type of

mortgage or date of registration.

Right of Redemption: Right of the mortgagor to get back his mortgaged property on repayment of the loan, is called as the right of

redemption. This is available in all types of mortgages.

Right of foreclosure: The right of the mortgagee to deny the mortgagor of the property to exercise his right of redemption i.e.

debarring the mortgagor for ever to get back the mortgaged property is called as the right of foreclosure. This right is available to

the mortgagee in case of mortgage by conditional sale.

Caiib BFM Strategy

BFM::;;

The strategy for the study of Bank Financial Management which many people finds difficult to clear. If you study properly, it is easy to clear the BFM. This subject also contains 4 modules, they are;

-International Banking

-Risk Management

-Treasury Management

-Balance Sheet Management

Many people do not correlate the syllabus of the subject with day to day banking activity. So they find it difficult to score and understand this subject. But this not true, this subject is very much important which will increase your knowledge regarding top management & middle management functioning of your bank as well as banking as a whole industry.

All the modules are equally important, but you may clear the paper with three modules study also. Module A & B are relatively easy and scoring as well. Let us discuss strategy for each module.

Module A-International Banking

Important topics are Exchange Rates and Forex Business, Basics for Forex Derivatives, Documentary LC, and Facilities for Exporters & Importers

Rapid reading or bullet point reading is quite useful for this module. Practice numerical again and again.

Many numerical/case studies are asked from this module which are quite easy as compared to Module B & Module D case studies. Refer the case studies from McMillan given at the end of the topic. Also N.S.Toor book has many numerical and case studies. Questions are asked on Exchange rates, Shipment Finance etc.

Module B-Risk Management

All chapters are equally important as they are interlinked to each other. Again focus more on case studies/numericals given in Apendix at the end of chapter. Maximum case studies are asked from this module. Though short notes are useful for this module I would suggest McMillan reading for this module because some questions are twisted type for which you require details of the concept which is hard to get from short notes. RBI website contains FAQs which are quite useful for this modules, you should read them at least once.

Module C- Treasury Management

Important topics are Introduction, Types of treasury products, Treasury Risk Management, Treasury and Asset-Liability Management.

Mostly questions asked on this module are theoretical type, so through reading of McMillan is important. If you don’t get time then you can skip this module or read short notes since the weighted of this module for exam point of view is low according to me as compared to Module A&B. But those who wish to make carrier or work in treasury department, this is the best module to learn.

Module-D Balance Sheet Management

Important chapters are Components of ALM in Bank’s Balance Sheet, Capital and banking Regulation,, Capital Adequacy, Asset Classification and Provisioning Norms, Interest rate Risk management.

Though McMillan book contain sufficient material but I would suggest you to refer RBI website for this module. In this module focus more on Case Studies as compared to theoretical questions. Do not skip this module as it is much important for exam as well as knowledge point of view. No need to read McMillan line by line.

Overall you have to keep balance between theoretical reading as well as case studies/numerical since the paper would contain 40-45% case studies. N.S.Toor book contains good case studies and MCQs. Also there are many resources available on the internet from where you will get case studies for this module. After giving this paper you will realized that BFM is easier as compared to ABM and no need to worry for BFM.

CAIIB ABM Strategy

CAIIB ABM Strategy

ABM is one of the compulsory subjects for CAIIB. Most of the people find difficult to clear this paper. Today, I will tell you how to study for ABM subject.

This subject also contains 4 modules

MODULE – A: Economic Analysis

MODULE – B : Business Mathematics

MODULE – C : HRM in banks

MODULE – D : Credit Management

As we are bank employees we get very less time for study, so how to decide which topics to be read, which topics to be skipped?

-As I had told you in my previous blog article that generally paper consists of 60% theoretical & 40% numerical or case studies, so choose the module to be study in deep so as to clear the paper easily depending upon your personal strength and weakness.

If you observed all the modules, you will realize that Module A and Module C are most scoring modules. Do not skip these modules. Module B contains Business Mathematics which many people find difficult to study as the level of mathematics is tough, especially for non-engineering background people. Those who works in Credit/Loan Department will find that Module D easy as well as interesting. Module D is most important not only exam point of view but also for your daily working in Credit Department. So do not skip Module D.

IMPORTANT TOPICS FROM EACH MODULE

Module A- Supply and Demand, Money Supply and Inflation, Business Cycles, GDP Concepts and Union Budget.

No need to read McMillan Book line by line for thise module, short notes will be quite useful for studying this module. Don’t read stats given in these chapters. In GDP Concepts and Union Budget chapters numerical are asked which are quite easy provided you know the components and formula.

Module B-Time Value of Money, Sampling Methods, Simulation, Bond Investment

Don’t go to deep for study this module as mathematical calculations are difficult to understand especially for non engineering background people. Practice the examples given in McMillan. Those who are not good at math can skip this module and focus more on remaining modules.

Module C-Development of Human Resources, Human Implications of Organisations, Performamce Management, HR & IT

You need to read thoroughly all the topics from this module from McMillan. It is quite easy and theoretical only. Repeatedly read MCQs from N.S. Toor book of this module.

Module D-Overview of Credit Management, Analysis of Financial Statement, Working Capital Finance, Credit Control and Monitoring, Rehabilitation and Recovery.

Read this module from McMillan book only. The chapters in this module are not lengthy as compared to other modules. Practice Numerical from Financial statement and balance sheet.

Overall, you have to study at least three modules in detail so as to achieve the 50 score. You can choose the modules to study more depending upon your strength. I would suggest that you can keep module B at last, just read formulas from this module, as this module is quite boring, lengthy and hard to understand.

Cash flow analysis:

Cash flow analysis:
We need to analyse and comment on three factors of cash flow i.e., Cash Flow from Operating Activities, Cash Flow from Investing Activities and Cash flow from Financing Activities.
Remember – Cash flow analysis is based on actual inflow and outflow of cash in a financial year. An increase in assets side represents cash outflow and an increase in liabilities side represents cash inflow.
➢ If the net cash from operating activities is positive, it is an indication that the unit is generating enough cash from its operations. If it is negative, the unit is not in a position to get enough cash out of its operations.
➢ If the cash from investment activities is positive, it is an indication that the investments made by the unit are unlocked or the company has sold out certain assets to have inflow of cash. If it is negative, it’s an indication that the investments in the form of fixed assets/ A&S have gone up. Here the user has to analyze source of this investment.
➢ If the cash from financing activities is positive, it is an indication that the unit is depending on outside finance and capital. If it is negative, it’s an indication that the unit has repaid loans/ capital is withdrawn.
Overall, comments on cash flow to be given in all the directions i.e., operating, investing and financing

TIME MANAGEMENT..Nice Article

TIME MANAGEMENT

Many of us claim our days are never wasted. "I'm very organised" we say, "I know where I
am going and what I'm going to do". If you truly feel that way then you are in the minority.
Most people become frustrated with a day that is unproductive. We would all like to get more
done in a day.
The idea of time management has been in existence for more than 100 years. Unfortunately
the term "Time management" creates a false impression of what a person is able to do. Time
can't be managed, time is uncontrollable we can only manage ourselves and our use of time.
Time management is actually self-management. It’s interesting that the skills we need to
manage others are the same skills we need to manage ourselves: the ability to plan, delegate,
organise, direct and control
There are common time wasters, which need to be identified. In order for a time
management process to work it is important to know what aspects of our personal
management need to be improved. Below you will find some of the most frequent reasons for
reducing effectiveness in the workplace. Tick the ones which are causing to be the major
obstacles to your own time management. These we refer to as your "Time Stealers".
Identifying your time stealers
 Interruptions - telephone
 Interruptions - personal visitors
 Meetings
 Tasks you should have delegated
 Procrastination and indecision
 Acting with incomplete information
 Dealing with team members
 Crisis management (fire fighting)
 Unclear communication
 Inadequate technical knowledge
 Unclear objectives and priorities
 Lack of planning
 Stress and fatigue
 Inability to say "No"
 Desk management and personal disorganisation

Fortunately there are strategies you can use to manage your time, be more in control and
reduce stress, but you can analyse your time and see how you may be both the cause and the
solution to your time challenges.
Below, we examine time management issues in more detail
1. Shifting priorities and crisis management.
Management guru Peter Drucker says that "crisis management is actually the form of
management preferred by most managers" The irony is that actions taken prior to the crisis
could have prevented the fire in the first place.
2. The telephone.
Have you ever had one of those days when you thought your true calling was in
Telemarketing. The telephone-our greatest communication tool can be our biggest enemy to
effectiveness if you don't know how to control its hold over you.
3.Lack of priorities/objectives.
This probably the biggest/ most important time waster. It affects all we do both professionally
and personally. Those who accomplish the most in a day know exactly what they want to
accomplish. Unfortunately too many of us think that goals and objectives are yearly things and
not daily considerations. This results in too much time spent on the minor things and not on
the things, which are important to our work/lives
4. Attempting too much.
Many people today feel that they have to accomplish everything yesterday and don't give
themselves enough time to do things properly. This leads only to half finished projects and no
feeling of achievement.
5. Drop in visitors.
The five deadliest words that rob your time are "Have you got a minute". Everyone's the
culprit-colleagues., the boss, your peers. Knowing how to deal with interruptions is one of the
best skills you can learn .
6. Ineffective delegation.
Good delegation is considered a key skill in both managers and leaders. The best managers
have an ability to delegate work to staff and ensure it is done correctly. This is probably the
best way of building a team’s moral and reducing your workload at the same time. The
general rule is -this; if one of your staff can do it 80% as well as you can, then delegate it.
7. The cluttered desk.
When you have finished reading this article look at your desk. If you can see less than 80% of it
then you are probably suffering from 'desk stress'. The most effective people work from clear
desks.
8.Procrastination.
The biggest thief of time; not decision making but decision avoidance. By reducing the amount
of procrastinating you do you can substantially increase the amount of active time available to
you.
9. The inability to say "no!”
The general rule is; if people can dump their work or problems on to your shoulders they will
do it . Some of the most stressed people around lack the skill to 'just say no' for fear of
upsetting people.
Meetings.
Studies have shown that the average manager spends about 17 hours a week in meetings
and about 6 hours in the planning time and untold hours in the follow up. I recently spoke to
an executive who has had in the last 3 months 250 meetings It is widely acknowledged that
about as much of a third of the time spent in meetings is wasted due to poor meeting
management and lack of planning If you remember your goal is to increase your self
management, these are the best ways to achieve this;
There are many ways we can manage our time. We have listed some strategies you can use
to manage your time.
1. Always define your objectives as clearly as possible.
Do you find you are not doing what you want because your goals have not been set. One of
the factors, which mark out successful people, is their ability to work out what they want to
achieve and have written goals, which they can review them constantly. Your long term goals
should impact on your daily activities and be included on your "to do" list. Without a goal or
objective people tend to just drift personally and professionally
2. Analyse your use of time.
Are you spending enough time on the projects, which although may not be urgent now are
the things you need to do to develop yourself or your career. If you are constantly asking
yourself "What is the most important use of my time, right now?" it will help you to focus on
'important tasks' and stop reacting to tasks which seem urgent (or pleasant to do) but carry
no importance towards your goals.
3. Have a plan.
How can you achieve your goals without a plan. Most people know what they want but have
no plan to achieve it except by sheer hard work. Your yearly plan should be reviewed daily
and reset as your achievements are met. Successful people make lists constantly. It enables
them to stay on top of priorities and enable them to remain flexible to changing priorities. This
should be done for both personal and business goals.
4. Action plan analysis.
Problems will always occur, the value of a good plan is to identify them early and seek out
solutions. Good time management enables you to measure the progress towards your goals
because "What you can measure, you can control". Always try to be proactive.
Time management (or self management) is not a hard subject to understand, but unless you
are committed to build time management techniques into your daily routine you'll only achieve
partial (or no) results and then make comments such as "I tried time management once and it
doesn't work for me". The lesson to learn is that the more time we spend planning our time
and activities the more time we will have for those activities. By setting goals and eliminating
time wasters and doing this everyday you may find you will have extra time in the week to
spend on those people and activities most important to you.




The Eleven Biggest Time Management Lies !!


In the world of Time Management there are things said to us that we Accept as truth and we act
accordingly. The problem is sometimes they Are not truths. They are lies and as we believe
them, they waste our Time.
Those who speak these lies to us are not bad people at all because You and I are among them.
We all speak these untruths to one another from time to time. So let's not wish harm and doom
to the liars. Let's avoid the time traps their lying may cause us.
Here are the eleven biggest lies to shield yourself from.
1. "This will just take a minute." Has anyone grabbed you with that line? Does it ever "just take a
minute"? Rarely. What typically "just takes a minute", generally consumes several minutes and
more. Next time, when someone asks for your time and assures you," This will just take a
minute", tell them, "You're lying. You may not realize you're lying, but you are. I'll give you five
minutes. You may begin now."
2. "I need this as soon as possible." No you don't. That's a lie too. you need it by a certain date
and time because you are going to do something with what I provide for you. And if you're not
going to do anything with what I provide for you, why am I doing it for you in the first place?
Don't lie to me. Tell me when I have to get it to you. Be specific. You and I probably have two
difference dates in mind when we think in terms of "as soon as possible".

3. "I want this now." I doubt it. In this 24/7/365 world, everyone is under a sense of artificial
pressure to get it done "now" or worse," Yesterday". Things are generally not that urgent. Don't
get caught up in someone else's urgent trivialities. Call the liar to task. "I'm not sure I can get
that done now. What if I got it to you one week from today?" Use an outside deadline to give
yourself ample time to prevent getting into crisis management. Oh, and if they reject that
alternative, try three better dates for you. Why? Because, they may keep lying to you.
4. "It's not about the money." When it's not about the money, it's about the money.
5. "This is the best (investment, business opportunity, book, movie, restaurant, boss, job, etc.)
you'll ever find." Not true. There's always something better. The best is yet to come.
6. "I can get this done in an hour." It's a fib. Ever notice how it almost always takes twice as long
to get something done as what you thought it would? That's because few of us have a very
accurate internal clock to estimate the time required to complete most tasks.
7. "He's a' late' person." Most people who are "late" have a consistency about their behavior. My
friend Dwayne is 20 minutes late all the time. If we need to meet for lunch tomorrow, it will take
him 24 hours and twenty minutes to get there. Dwayne is not "late". He's "On-time; 20 minutes
later".
8."No Cost." You don't get "nothing for nothing". Everything has a cost. It may not cost you your
money but more often it will be your time and more of it than what you are getting in return for
"no cost".
9. "I'll prove you're wrong if it's the last thing I do." And it may well be. No one wants to be
proven wrong. Everyone likes to be caught doing things "right". Most, however, don't mind being
shown how to do things better.
10. "By the time I show him how to do it I could just as quickly have done it myself." If it's a onetime
proposition this may be true. It doesn't make a lot of sense to spend an hour to show
someone how to do a task that takes only 10 minutes.
But if it's a repetitive task, it's a lie. If that one hour investment will save you 10 minutes every
day, then in about a week you have your investment back and now you have a dividend of 10
extra minutes a day. What if you do that six different times? You get an extra hour in your day
and 365 hours over the next year.
11. "This is going to be really hard." Not true. Going through whatever you have to go through is
almost never as difficult as you imagined It to be. My high school principal, taught me that 95%
of what we fear coming at us will never hit us. It will ditch itself before it ever reaches us. And as
to the remaining 5%, tap your inner strengths to deal with it.

Do’s of Time Management


1) Draw out clear KPAs, time bound objectives and detailed plans for your job.
2) Plan your day ahead. List out the most important things to be done the next day in order
of importance.
3) Do delegate matters which you do not have to decide yourself. Insist on exercise of
delegated authority.
4) Be predictable. Know your staff and let your staff know your mind.
5) Record occasionally for some stretch of time how you spend your time and analyse
critically your time management.
6) Do accept that whatever your superior wants is urgent and important (till you are able to
convince him that it is not really so). But as a superior, decide priorities with reference to
organisational needs.
7) Do set aside fixed hours in a day when your staff can meet you or you will call them,
other than in any emergency.
8) Do set aside some time a week for innovative thinking and long range planning
regarding your area of responsibility, so as to anticipate problems and heighten your
contribution to the organisation.
9) Set aside some time, preferably towards the end of the day for trivial administrative
details.
10) Insist on completed staff work.
11) Finish the task you have taken up before getting to another.
12) Develop the habit of single handling i.e., making a decision or disposing of a paper at the
first opportunity itself.
13) Manage your time as you manage your money.
14) Do find time to relax, to draw back and look at what you are / have been doing (Review
time)
The trouble with service delivery is that it can’t be checked in advance, like a piece of crystal, or
a luxury car. We can’t sample it, package it, systemize it or automate service. It’s only produced
at the moment of consumption, our win-or-lose moment. That service delivery is often
performed by the most junior of our employees, often least motivated.
-- John Sharpe