Consumer Decision Making Buyer Behaviour

1Partnership AccountsA Partnership firm is an association of 2 or more persons called partners who undertake a venture for mutual benefit.The Indian Partnership Act, 1932 defines partnership as the relation between the persons who have agreed to share the profits of a business carried on by all or any of them acting for all of them .2Bankers Duty Partnership A/cPrecautions to be taken by a banker :Opening of an Account-The banker can open an account in the name of the firm only on the receipt of written application from anyone or more partnersThe banker should obtain a letter called partnership letter duly signed by all the partners stating the :name and address of all the partnersnature of the firms business, etc. He should take a copy of duly stamped Partnership Deed and study its objectives, capital, borrowing powers etc.3Bankers Duty Partnership A/cPrecautions to be taken by a banker :Personal Account and a Firms Account-Usually a banker has a personal account of a partner side by side with the partnership account.Banker should not mix one account with another and has no right of set-off and lien against each otherCheque payable to partnership firm must not be accepted for collection to the private a/c of the partner w.o. enquiry or consent of allThe bank can transfer the funds from the personal a/c of the partner to the partnership a/c by his consent but not reverse.

4Bankers Duty Partnership A/cPrecautions to be taken by a banker :Mandate:Banker should ask for a Mandate duly signed by all the partners.Mandate contains information as to:The name of one or (advisably) two partners who are authorized to operate firms accountThe extent of authority given such as the:powers to draw, endorse and accept billsmortgage and sell properties of the firm(Deed of Mortgage must be signed by all the partners, only then all would be liable)right to overdraw etc.5Bankers Duty Partnership A/cPrecautions to be taken by a banker :Mandate:The authority to operate the account can be withdrawn by any of the partners by giving a notice to the banker. A partner authorized to operate the account cannot delegate his authority to another person without the consent of all the other partners in writing.6Bankers Duty Partnership A/cPrecautions to be taken by a banker :Retirement of a Partner:When the banker receives a notice of retirement from the retiring partner, he should examine the position of the firms account & the nature of securities.If no notice is served, the retiring partner will continue to be liable for the advances made after his retirement.If the partnership a/c shows a debit balance and if the retiring partner is to be made liable, the banker should immediately close the a/c and open a new a/c.7Bankers Duty Partnership A/cPrecautions to be taken by a banker :The Death of a Partner:The death of a partner may or may not dissolve the partnership firm.If the a/c shows a credit balance, the existing partners may continue to operate the a/c.If the a/c shows a debit balance, the banker should immediately close the a/c and open a new a/c to make the deceased partner liable for his share.8Bankers Duty Partnership A/cPrecautions to be taken by a banker : It is advisable for the banker to get a written consent of all the partners of the firm before granting any loan to the firm.No partner can bind his co-partners by giving a guarantee on behalf of the firm.

9Definition: A joint stock company has been defined as an artificial person ,invisible, intangible & created by law. It is recognized as separate entity different from the members who constitute it.It has a common seal.It can sue others and can be sued.As it is an artificial creation, it cannot act by itself. It has to act through human agents.Joint Stock Companies10Precautions to be taken by a banker :Opening of an Account-The first step is taken by the Board of directors. They pass a resolution authorising the secretary to open an account. The banker asks the secretary to fill up the prescribed application form and submit it along with the certified copy of the resolution duly signed by the Chairman and countersigned by the secretary.

Bankers Duty Joint Stock Company A/c11Precautions to be taken by a banker :Opening of an Account- Scrutiny by bankerCertificate of Incorporation which is a proof of the legal existence of companyObtain latest copy of MoA and AoA that has:Name of the company and address of the registered officeName of the Directors and their addressesNature of the firms business, its objectives, capital, borrowing powers etc. Obtain the copy of the Prospectus of the company , certificate of Commencement of Business, recent balance sheet , P&L account.Bankers Duty Joint Stock Company A/c12Precautions to be taken by a banker :Mandate:Banker should ask for a Mandate from the company.Mandate contains information as to:The name of persons who are authorized to operate the account and their specimen signaturesThe extent of authority given such as the:powers to draw, endorse and accept billsSecurities and Safe Custodies etc.Any change in the operation should be done by a fresh resolution and fresh mandateBankers Duty Joint Stock Company A/c13Precautions to be taken by a banker :Mandate:The authority to operate the account can be withdrawn by any of the partners by giving a notice to the banker. A partner authorized to operate the account cannot delegate his authority to another person without the consent of all the other partners in writing.Bankers Duty Joint Stock Company A/c14Precautions to be taken by a banker : Directors Personal A/c and Company A/cIf a banker has a personal account of the authorized director side by side with the companys account :Banker should not mix one account with another and has no right of set-off and lien against each otherCheque payable to the company must not be accepted for collection to the private a/c of the director w.o. proper enquiry

Bankers Duty Joint Stock Company A/c15Precautions to be taken by a banker :Borrowing Powers:Every company has an implied power to borrow and mortgage its property. As per the Companies Act-1956, the borrowings should not exceed the aggregate paid-up capital and free reserves. The AoA also puts a limit on the borrowing powers. The banker should obtain a certificate from the Chairman of the BoD that the advances are within the prescribed limit.If the borrowing is ultra-vires and not ratified, the company will not be liable.Bankers Duty Joint Stock Company A/c16Precautions to be taken by a banker :Registration of charges:Banker must find out the whether there is any prior charge over the assets on which he wants to create a charge. He needs to inspect the Register of Mortgages and Charges at the office of Registrar of Joint Stock companies. When the banker creates a charge, he should immediately register it.Non-registration will affect the security of the bank in the event of liquidation and/ or claim by another creditor whose charge is registered on the same property. Bankers Duty Joint Stock Company A/c17Precautions to be taken by a banker :Winding up of the Company:Once a resolution is passed w.r.t. winding up i.e. liquidation, the borrowing powers of the directors and the officers cease. The Banker is advised to stop the operation of the accounts and wait for the information on presentation of petition by the liquidator. Thereafter, he must act according to the instructions of the liquidator.Bankers Duty Joint Stock Company A/c18Executor: Is a person to whom the execution of a will is entrusted by the maker of the will. The certified copy of the final will is called Probate and is granted only to an executor.

Administrator: If the person named in the will refuses to act (executor) or if a person dies without any will, then the court will appoint a person called Administrator and issue an order called Letter of Administration.

Trustee: Is a person in whose care the control of an estate/ property is placed under an instrument of trust called Trust Deed. Executors, Administrators or Trustees19Bankers DutyExecutors, Administrators or TrusteesPrecautions to be taken by a banker :Opening of an Account-The banker must take a certified copy and go through the Probate, Letter of Administration or the Trust Deed.Operating of an Account-In case there are 2 or more Executors/ Trustees, the banker should seek clear instructions about the powers of each of them.The Executors and Trustees cannot delegate their powers to an outsider. Executors can delegate their powers to another executor but Trustees cannot do so.

20Bankers DutyExecutors, Administrators or TrusteesPrecautions to be taken by a banker :Operating of an Account-In the case of Joint Executors, any one can deal with the funds but in case of Joint Trustees, all must sign the documents, cheques etc.In the case of insolvency, insanity or death of any one of the of Joint executors, there is no change in the operation of account. In the case of Joint Trustees, the banker should not assume that the continuing trustees possess full powers to deal with the trust property.21Bankers DutyExecutors, Administrators or TrusteesPrecautions to be taken by a banker :Operating of an Account-Breach of Trust: A banker is liable to protect the interest of beneficiaries of Trust. He is justified to dishonor a cheque drawn by a trustee, if a breach of trust is intended.

22Bankers DutyExecutors, Administrators or TrusteesPrecautions to be taken by a banker :Borrowing Power-Trustees and Executors have no implied power to borrow. They can borrow only in their personal capacity against their personal assets as security.If they are authorized to borrow to discharge the debts of a deceased, banker must lend it against the assets of the deceased (however, creditors of the deceased have prior rights). Banker is advised to get the personal assets of executors/ trustees as security.

23Bankers DutyExecutors, Administrators or TrusteesPrecautions to be taken by a banker :Personal Account and Trust Account-If a banker has a personal account of the Trustee / Executor side by side with the Trust account :Banker should not mix one account with another and has no right of set-off and lien against each otherCheque payable to the trust a/c must not be accepted for collection to the private a/c of the trustee.

24These are social institutions which are run to render service to the people at large. The banker should see if these institutions are registered or not.The society, a club/ school/ institution/ association, must be registered under the Societies Registration Act or the Co-operative Societies Act.In case of registered institutions, the banker can open the account in the name of the institution. Bankers should take all the precautions as applicable in case of Joint stock co.Clubs, Societies & Associations25In the absence of registration, the society will have no legal existence and will have no contracting powers.The banker will not be in a position to sue either the society or the individual members. However, the banker may open the account in the name of an individual and designate it as a club account. For eg. Mr. Arun Kumar, account Marathalli Sports Club.Such an individual can be held responsible for any loans or overdraft.

Clubs, Societies & Associations26It is an undivided family which comprises of all male members, descended from a common ancestor.A JHF/ HUF is a family which consists of more than one member, possesses ancestral property & carries on family business.A business carried by HUF is governed by the provisions of Hindu Law.The senior male member is called Karta & other male members as coparceners .

Joint Hindu Family/Hindu Undivided Family

27Karta manages the whole business of the family & his liability is unlimited; whereas coparceners have limited liability to the extent of share in JHF. A banker should know the laws and customs relating to succession and transfer of rights.Joint Hindu Family/Hindu Undivided Family

28Precautions to be taken by banker in dealing with JHF a/c :Opening of A/cThe banker must get complete information about the JHF including the names of major & minor coparceners. The banker should get a declaration from the Karta along with the specimen signatures of all coparceners. The name in which JHF a/c is to be opened has to be ascertained & banker should know who will operate the a/c. In the absence of this, only karta is allowed to operate the a/c.Bankers DutyJoint Hindu Family / HUF29Precautions to be taken by banker in dealing with JHF a/c :Operating the A/cThe Karta has the implied power to mortgage & pledge the property of JHF for raising loan or discharge ancestral debts.While making advance ,the banker should ascertain the purpose of the loan & if it is required by the JHF for business then banker should take signatures of all coparceners.If the advance is made for the personal use of Karta or for speculative purposes, the JHF & the coparceners are not held responsible.Bankers DutyJoint Hindu Family / HUF30Precautions to be taken by banker in dealing with JHF a/c :Operating the A/cIf a new business is started by the Karta in a JHF ,then coparceners are liable for such debts, as it is deemed to be JHF business.Bankers DutyJoint Hindu Family / HUF31

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Opened by two or more persons jointly such as husband & wife, father & son etc.JOINT ACCOUNTJOINT ACCOUNT32Bankers Duty Joint A/cPrecautions to be taken by a banker :The application form should be signed by all who wish to open an account.Mandate:Banker should ask for a clear Mandate in writing with specific instructions on the operations of Joint A/c. Options given under Mode of Operation are:Former or Survivor (A only, A then B)Either or Survivor (A / B; A then B or B then A)Any One or Survivor (A, A then B ; B, B then A)Jointly (Both A and B)Banker should get a clear Mandate as to:The nature and extent of authority33Withdrawals :The banker should obtain clear instruction from the account holders regarding withdrawal of money or drawing of cheque. The application form usually give the option of withdrawal clauses such as :Either or Survivor / Former or SurvivorAll to sign etc.JOINT ACCOUNT34Borrowing Power:All the joint account holders must make a joint demand, signed by all. Banker should not accommodate if a joint request signed by all is not submitted.Power to Overdraw: involves right to overdraw and withdraw the articles under safe custody. If the banker provides any advance or loan or overdraft to the joint account, the banker should establish joint and several liability i.e. joint liability as well as separate individual liability.

JOINT ACCOUNT35Insolvency / Insanity of a Joint account holder: The authority given to one or more to operate the account automatically ceases when the authoriser becomes insane/ insolvent.Banker should stop the operation of the account.He should act according to the instructions of the solvent person/ sane person along with the Official receiver (court representative).The rule of survivorship is not applicable in the case of insolvency/ insanity.JOINT ACCOUNT36Death of a Joint A/c Holder/ Rule of Survivorship: The authority obtained by the banker should also contain the provision relating to the payment of amount held in the joint a/c when one of the joint a/c holder dies.The options are:Survivor shall have full control over the joint a/c then and thereafter ORA nominee may be appointed by the a/c holders which may be entitled to the amount in the event of the death of a joint a/c holder.JOINT ACCOUNT37Joint accounts of husband and wife:The doctrine of Survivorship becomes difficult to apply, in case of a Joint a/c of husband & wife, if the banker do not have the clear instruction of Former or Survivor, Either or Survivor etc..In the absence of any such instruction, the banker can pay the amount to the widow.However, if a legal representative of the deceased interfere, then the court decides the matter by understanding the intention of the parties Protection of Wife or Convenience of account holders.

JOINT ACCOUNT38Joint accounts of husband and wife:If only husband operates the account, then the intention is to provide for the protection of wife. In this case, on the death of husband the amount goes to wife.If both husband and wife operate the account, then the intention is convenience of a/c holders. In this case, on the death of husband, the doctrine of survivorship is not applicable. The amount is transferred to the estate of the deceased husband and not to the widow.

JOINT ACCOUNT39Whenever a banker opens an account of a prospective customer, he should find out whether the customer is a resident or a non resident. Non Resident Indian is an Indian citizen who stays abroad for employment or business or vocation. A Non-resident foreign citizen of Indian origin are also treated on par with NRI citizens except citizens of Nepal and Bhutan.

Non Resident Account40NRIs are granted the following facilities:Maintenance of Bank A/c in IndiaIn rupees as well as foreign currency; current, savings, term deposit a/csInvestment in securities, shares and deposits of Indian companiesInvestment in immovable property in India.

Non Resident Account41Only those Banks can open and maintain accounts in the name of NRIs who Are authorized to (has acquired a license) to deal in foreign exchange OR Are specifically permitted by RBI to maintain accounts of NRIs although not an authorized dealers.

Non Resident Account42NRE Non Resident External Rupee AccountsNRO Non Resident Ordinary Rupee AccountsFCNR-Foreign Currency Non Resident Accounts

Types of Non Resident Account43Types of Non Resident AccountNRONREFCNRAuthority to open accountAuthorized dealers in foreign exchange. Banks authorized to deal in foreign exchange or that has RBI approval for opening such accounts. Currency denominationIndian Rupee

Indian Rupee

US $, Pound, Yen, EuroType of A/cSavings, Current, RD, FDSavings, Current, RD, FD

Term deposits (FD) onlyJoint AccountCan be held jointly with residents

Cannot be held jointly with residents, only 2 or more NRIsCannot be held jointly with residents, only 2 or more NRIsFunds CreditedLocal funds which cannot be remitted abroadRemitted from abroad or local funds to be remitted abroadRemitted from abroad 44Types of Non Resident AccountNRONREFCNRRate of InterestSame as in the case of domestic deposits

Fixed by the bank concernedPrevailing interest rates in international marketsRepatriableMostly Not repatriable with some exceptionsYes

YesCurrency ConversionMarket RateMarket RateMarket RateTax ImplicationsNo Tax concessionsInterest Income exempted. No Gift tax

Interest Income exempted. No Gift tax 45Bankers Duty Non Resident AccountsBank should be authorized to deal in foreign exchange or have got approval from RBI for opening such accounts.Banker should find out whether the prospective customer is a resident or non-resident.Be careful in opening such accounts as it involves foreign exchange regulations.They are advised to go through the Exchange Control Manual and follow its guidelines.46Accounts of Government DepartmentsGovernment Department Accounts may be opened in banks for transacting the govt. business.Govt. business transacted through banks relate to collection of taxes, payment of money on behalf of various govt. depts.Central Govt. transactions are governed by the Treasury Rules and the Account Codes Vol. I and Vol. II.State Govt. transactions are governed by the State Financial Handbook.

47Accounts of Government DepartmentsThe Central & State Govt. transactions are handled by SBI, its associate Banks or authorised public sector banks.The banks send the statement of transactions to the Government A/c Link Cell maintained in Bombay. This cell passes on the transaction to RBI, the banker to the GOI.At the district level, there is a District Treasury headed by a Treasury Officer. Treasury officer liases with the bank on behalf of the Govt. and issues Cheques/ bills.

48Accounts of Government DepartmentsBankers DutyBe well conversant with the treasury rules, Account Codes Vol. I and Vol. II and State Financial Handbook, as the case be.While receiving Govt. dues such as sales tax, excise duty, customs duty etc. , banker should pay attention to the head of account to which the amount is to be credited.Banker should sign the challans that is returned to the depositor acknowledging the receipt and put initials on the other copies.Banker should not issue any duplicate copies for the lost challan, instead give a certificate.

49Accounts of Government DepartmentsBankers DutyFor any payments by the govt. dept. (eg. payment of salaries to govt. employees), banker should see that the bill is in the prescribed format and duly stamped and signed by the concerned treasury. The banker should pay special attention to the drawing power of the officer concerned and his specimen signature.

50Payment of PensionsGovernment gives pension after retirement to following categories of people:Employees retired from Central and State Govt. departments.Railway pensioners retired from railwaysDefence pensioners retiring from defence servicesJudges retired from Supreme Court and High CourtMPs/ MLAs/ MLCsFreedom FightersTo receive pension, pensioners have to open savings bank a/c in any public sector banks.51Payment of PensionsBankers DutyBanker should open the account in the name of the pensioner alone not a joint account. Bankers make payment against the Pension Payment Order that contains all the relevant information.On the last day of month, the bank credits the savings a/c of the pensioner with the pension amount, after debiting the relevant head of accounts of the Govt.52Payment of PensionsBankers DutyThe banker should insist that the pensioner collect the pension personally at least once every year to confirm that he is alive.Banks also insist on documents like Life Certificate from the pensioner periodically.Upon the death of the pensioner, the pension due to him until the date of death is calculated and credited to his account. If the pension is credited for the period subsequent to his death, it is debited from the pensioners a/c.