Types Of Customers

Bank Customer Relationship

l Banking relationship is a contract between
the Bank & the Customer. Bank has to
ensure that the customer is legally capable of
entering into a valid contract & he has applied
to the Bank in the proper form (Indian
Contract Act, 1872).
l (Eg Minor account)
 Contract Act- terms

l As per Indian Contract Act 1872, a person is

competent to enter into a valid contract provided:
l Individual should be major, i.e. of 18 years of age.
l He is sound mind,
l He is otherwise not disqualified by any law,
l He Should not be an insolvent,
l Drunken person/ person of unsound mind is not
legally competent to enter into a contract,
l Should be in good sense while opening
account/entering into a contract
Types of Bank Customers
l For Liabilities
l For Assets
l For TPP
Customers for Liabilities
l CASA Accounts
l Deposits
l Fixed
l Recurring
l Bonds/Debentures
Customers for Assets
l Investments
l Loans
l TPP
Types of Customers
1. Individual accounts
a) Single account
b) Joint account (J&S), (E&S) Jointly
c) Minor Account
d) Illiterate Person
e) Blind Person
f) Pardanashin women
g) Insane person (unsound mind) ?
h) Insolvent Person?
DIFERENT TYPE OF GUARDIANS

1. Natural Guardian
2. Testamentary Guardian - (Appointed by will)
3. Legal Guardian - (Appointed by court)
 Natural Guardians For Hindu Minors

l In case of a boy or an unmarried girl : Father & if father

not alive Mother.
l In case of illegitimate boy or girl : Mother
l In case of minor married girl : the husband
l In case of minor widow girl : her husband’s father
l (mother if father not alive)

l In case of a adopted child : Adoptive Father/Mother

l Father ceases to be guardian on change of religion.
 Natural Guardians For Muslim Minors
l Father
l Father`s Father
l Legal Guardian
l Account of mohammedan minors are to be operated upon
l by father who is the natural guardian & mother can not act as natural
guardian under Mohammedan Law.
l Mother can act as Testamentary Guardian if appointed by court.
 Illiterate Person
l Illiterate person is a person who cannot read or write.
l Such persons are competent to enter in to a valid contract.
l We used thumb impression for entering into an agreement.
l Normally, Left Hand Thumb impression (LHT) of male & Right Hand
Thumb impression (RHT) of female to be obtained.
l Thumb impression must be authenticated by bank official.
l Photographs for identification.
l While opening account and providing loans, evidence to be created that
the person understood terms & conditions beyond doubt.
l Two witnesses required for nomination.
l Joint account of two illiterates after observing usual safeguards
l Joint account with literate should be carefully opened
l Normally no cheque book facility is provided to illiterate persons. However,
to meet periodic repayment of retail loans, utility bills etc
 Blind Persons
l Blind Persons can operate the account in bank.
l Signature of Thumb impression of blind person in the A/c opening
form to be witnessed by a person who should certify that contents of
the A/c opening form were explained to the blind person in his
presence.
l The sign may be authorised by bank officer and a witness known to
both the bank and the blind person.
l He should always visit the branch for cash withdrawal.
l As per all banking facilities including net banking, ATM, Cheque
Book, Locker facility, loans to be
 Pardanashin woman
l Pardanashin woman is a lady who remains in complete seclusion &
does not transact any business with people other than her own
family members.
l Normally no current account is opened.
l Her signature to be attested by her husband in case of married
woman & by natural guardian in case of unmarried girl.
l Her photo and signature is attested by husband or by natural
guardian.
l Generally, banks discourage to open accounts in her name as her
identity can not be ascertained
Person of unsound mind
l As per provisions of Indian Lunacy Act, 1912 insane or lunatic
means a person who is of unsound mind.
l As per Indian Contract Act (S. 11) a person of unsound mind is
not capable of entering into a valid contract.
l As per RBI circular , RBI/2013-14/444 DBOD.No.Leg.BC.
84/09.07.005/2013-14 dated January 13, 2014

The Mental Health Act, 1987 provides for a law relating to the treatment and
care of mentally ill persons and to make better provision with respect to their
property and affairs. According to the said Act, “mentally ill person” means a
person who is in need of treatment by reason of any mental disorder other
than mental retardation. Sections 53 and 54 of this Act provide for the
appointment of guardians for mentally ill persons and in certain cases,
managers in respect of their property. The prescribed appointing authorities
are the district courts and collectors of districts under the Mental Health Act,
1987.
Person declared Insolvent
l When a person is not able to discharge his liabilities in
full or fails to pay his debts, he is known as insolvent.
l Insolvents account should not be opened nor money
should be advanced to un discharged insolvent.
l The operation in the account of a person declared
insolvent should be stopped and the account can be
operated by official receiver
l The account can be operated once he is discharged by
the court/authorities.
Types of Customers
2. Hindu Undivided Family (HUF)
3. Proprietorship Firm
4. Partnership Firm
5. Limited Liability Partnership (LLP)
6. Companies
l Private Ltd. Company

l Public Ltd. Company

l Government Company

l One person Company

7. Trust
8. Club & Society
 HUF
l Hindu Undivided Family’ otherwise known as ‘Joint Hindu Family’
property, business or estate is ancestral and its common
possession, enjoyment ownership is the basis of formation of HUF.
l As per Hindu law, the Hindus, Sikhs & Jains can form HUF.
l HUF is governed basically by two school of thought. In Bengal , it is
governed by Dayabhaga law in other parts of India, it is governed by
Mitakshara Law .
l Creation of Hindu Law under which all major members of the family
get right by birth in the ancestral property of the family.
l PAN of HUF required, if not at least Karta should have PAN
 HUF
l HUF property is managed by senior most major male member called
‘Manager’ or ‘Karta’. Upon death of Karta, next senior male
coparcener becomes Karta.
l Joint owner of HUF are known as coparceners.
l It consists of one common living ancestor and his all male & female
(female from Sept. 2005) descendents up to 3 generation next to
him.
l HUF A/c is operated upon by Karta.
l Joint Hindu Family Letter (CD-115) to be signed by Karta & all the
coparceners.
l Minor coparcenors signature by his guardian
 HUF

l Karta has authority to borrow money for the family necessities & for
ancestral family business.
l In law, each coparcener’s liability is limited to his own interest in the
joint property. Hence, Bank insists that security documents are
signed by all the coparceners.
l Death of coparcener does not dissolve HUF.
l According to IT act, tax rebates and deductions can be availed
under sections 80C, 88 and 80L for HUF account.
 Proprietory Firms
l Business wholly owned by an individual.
l In law, there is no difference between proprietor & the firm.
l Proprietorship letter in bank’s Performa to be obtained.
l Proof of proprietorship may be obtained.
l In all respects, it is an account in the name of an individual only
except that it is operated upon by the proprietor on behalf of firm.
l The firm should have PAN or TAN
 Proprietory Firms
l Business wholly owned by an individual.
l In law, there is no difference between proprietor & the firm.
l Proprietorship letter in bank’s Performa to be obtained.
l Proof of proprietorship may be obtained.
l In all respects, it is an account in the name of an individual only
except that it is operated upon by the proprietor on behalf of firm.
l Creditors have recourse not only against assets of the firm but also
against private assets of the proprietor.
l Bank insist that proprietor should execute the security documents in
the capacity as Proprietor on behalf of the firm as well as in his
individual capacity.
l Proprietor can authorise another person to operate the account
through Mandate or Power of Attorney.
 Partnership Firms
l Partnership is the relation between persons who have agreed to
share profits of business carried on by all or any one them acting for
all (Partnership Act 1932).
l Registration Certificate and Partnership deed to be obtained
l As per Companies Act 2013, Maximum number of partner can be up
to 100 (excluding minor) in a firm. (Earlier number restricted to 20 for
other businesses & 10 for Banking business).
l Partnership is not a distinct legal person from the partners who
have made partnership firm.
l The firm should have PAN or TAN.
 Partnership Firms
l Partners will sign on behalf of firm & also in their individual capacity.
l Operational instructions should be clear in Partnership
deed.
l In the absence of clear cut operational instructions, account to be
operated upon by all the partners jointly.
l Any partner can stop cheque issued by another partner.
l Cheques favouring firm can not be deposited in the individual
accounts of partners.
l
 Partnership Firms
l A partner can not delegate his authority to operate the account.
l A minor cannot a partner , but he can be admitted for his benefit in
an existing partnership firm.
l The particulars of minor partner, particularly the
l DOB should be properly recorded.
l In case of death/retirement/insolvency of a partner a/c should be
stopped, if the balance is in debit and a fresh account should
opened after fresh sanction of limit.
l In case of dispute when one partner revokes the authority against
the other partner, operation in the account should be stopped.
 Dissolution of Partnership Firms
l Dissolution takes place:
l By mutual consent;
l Death/insolvency/retirement of a partner;
l Operation of Law ( insolvency of all partners, business becoming
unlawful, dissolution by a competent court, and in case of automatic
dissolution.
 Limited Liabilty Partnership Firms
l A limited liability partnership (LLP) is a partnership in which some or
all partners (depending on the jurisdiction) have limited liabilities.
l LLP is governed by limited liability partnership Act 2008.
l Liability is limited to the extent of his contribution in the LLP.
l Minimum 2 designated partner, no limit on maximum No. of
Partners.
l A partner is not liable for another partner’s misconduct or
negligence, except in certain cases.
l LLP is a legal entity separate from its partner. It has own assets in
his name, sure and be sued.
l It has perpetual succession (death of a partner does not effect the
existence of LLP).
l Partners have a right to manage the business directly.
l Firms and companies can get themselves converted into LLP.
l LLP can not raise fund from public.
Non resident Accounts

l As an NRI, there are numerous options to

choose between multiple products when it
comes to deciding about savings and
investments. One can make an informed
choice only when one is aware of the various
options that are available.
 What are the types of NRI Accounts?

l There are various types of NRI Accounts that are

available to an NRI Investor. Some of the major ones
are-
l Ordinary Non-Resident Rupee Accounts (NRO
Accounts)
l Non-Resident (External) Rupee Accounts (NRE
Accounts)
l Foreign Currency (Non –Resident) Accounts (Banks)
(FCNR (B) Accounts
l Non-Resident (Non-Repatriable) Rupee Deposit
Accounts (NRNR Accounts)
l Non-Resident (Special) Rupee Accounts with banks in
India
NRE Savings Account /Fixed Deposit
Account
l NRE Accounts are maintained in INR. This means that when you
deposit the money in the NRE Account, the foreign currency is
converted to Indian rupees at the prevailing foreign exchange
rates.
l It is mainly used to house your savings from income that you
have earned abroad.
l The principal amount, as well as the interest, are fully repatriable,
i.e., transferable.
l The interest income earned on the amount in an NRE account is
non-taxable in India.
l You can have other NRIs or Resident Indians as joint account
holders on NRO Accounts.
NRO Savings Account/Fixed Deposit
Account
l NRO Accounts are maintained in INR. This means that
when you deposit the money in the NRO Account, the
foreign currency is converted to Indian rupees at the
prevailing foreign exchange rates.
l It is used to house funds from your income that you have
earned from India or abroad.
l Income like rent, dividend, pension, etc. can be sent
abroad through the NRO Account.
l Interest income earned on the amount in an NRO
Account is liable for TDS or Tax Deductible at Source.
l You can have other NRIs or resident Indians as joint
account holders on NRO Accounts.
l
FCNR Account
l
l Foreign Currency Non -Resident Accounts have
to be opened and maintained in foreign currency.
l Your principal amount and the interest in
an FCNR Account are fully repatriable, i.e.,
transferable
l Interest income earned on your money in an
FCNR account is non-taxable in India.
l
Microsoft Word
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KYC
KNOW YOUR CUSTOMER
What is KYC?
“KYC (Know Your Customer) is a framework
for banks which enables them to know /
understand the customers and their financial
dealings to be able to serve them better.”

All banks have been advised by The Reserve Bank

of India (RBI) to follow certain ‘KYC Guidelines’
 Objectives of KYC
Ø To enable the Bank to have positive
identification of its relationship

Ø Is in the interest of customers to safeguard their

hard earned money
When does KYC apply?
KYC will be carried out at the following stages:
Ø Opening a new account
Ø In respect of accounts where documents as per current KYC
standards have not been submitted while opening the initial
account
Ø Opening a Locker Facility where these documents are not
available with the Bank for all the Locker facility holders
Ø When the Bank feels it necessary to obtain additional
information from existing customers based on conduct of
account
Ø When there are changes to signatories, mandate holders,
beneficial owners etc.
Ø For non-account holders approaching the Bank for high
value one-off transactions like Drafts, Remittances etc.
Proof needed from customers
regarding KYC
RBI mandates three proofs to be collected from customers:

Ø Photograph

Ø Proof of identity

Ø Proof of address

These are to be submitted by the customer both at the time

of opening of account as well as at the time of change of
address.
Small Deposit Accounts

Ø Small deposit accounts are those accounts where,

Ø Balance does not exceed Rs. 50,000/- and
Ø Annual turnover does not exceed Rs. 1,00,000/-

Ø Simplified KYC norms prescribed for Small Deposit

accounts
Ø Customers can open this type of accounts by getting
introduced by existing fully KYC compliant account as also
attestation of address / photograph by him.
Contact Point in Banks for
KYC
Ø Contact point for customers in the Bank will be the
Relationship Manager / official who opens the account and
is the contact person during transactions
MONEY LAUNDERING
What is Money Laundering?
Ø Money laundering refers to the conversion of money
illegally obtained to make it appear as if it originated from
a legitimate source.

Ø It is being employed by launderers worldwide to conceal

proceeds of criminal activity associated with it, such as
drugs / arms trafficking, terrorism and extortion.
 Effect on Customers

Ø For prevention of opening of accounts in false identities,

Banks have to ask for proof of customer’s identity and
address during opening of new accounts
Ø Being asked for these documents does not imply that the
customers are suspected of money laundering
Ø It is a necessity to identify all prospective account holders
or customers as anybody including a criminal could
falsely use another customer’s identity, if the respective
documents are not obtained.
What proof of identity will you
need?
Ø Best identification documents are those issued by a
Government authority, having a photograph, address and
signature
Ø One document can be used to establish both identity and
address, else two or more documents will suffice

Some proofs of Identity & Proofs of Identity & Address for

Address for Individuals: companies, Trusts, Firms:
Ø Passport ØPartnership Deed
Ø Election ID card ØTrust Deed
Ø Driving License ØMemorandum & Articles of
Ø Voter ID card Association
ØCertificate of Incorporation etc.
What proof of identity will you
need? (Contd.)
Documents used for Documents used for
Identity only for Address only for
individuals: individuals :
Ø Pan card ØSalary Slip
Ø ID card of reputed ØElectricity Bill
employers ØTelephone Bill
ØRation Card
Laundering Act (PMLA)
2002
Ø Mandates banks to report certain transactions to the
nominating agency under instructions issued by RBI in
consultation with the Indian Government and Indian
Bank’s Association
Ø It specifies that,
Ø Demand drafts, mail transfers and travelers cheques for Rs.
50,000/- and above can be issued only by debit to customer’s
account or cheque etc, and not against cash payment
Ø Demand drafts, mail transfers and travelers cheques for Rs.
50,000/- and above can be paid by banks only by credit to
customer’s account or through other banking channels and not
cash