Duties and Responsibilities of a Collecting Banker
Posted by Ripon Abu Hasnat on Sunday, June 14, 2015 | 0 comments
The duties and
responsibilities of a collecting banker are discussed below:
1. Due care and
diligence in the collection of cheque.
2. Serving
notice of dishonor.
3. Agent for
collection.
4. Remittance
of proceeds to the customer.
5. Collection
of bill of exchange.
1. Due Care
and Diligence in the Collection of Cheques:
The collecting
banker is bound to show due care and diligence in the collection of cheques
presented to him. In case a cheque is entrusted with the banker for collection,
he is expected to show it to the drawee banker within a reasonable time.
According to Section 84 of the Negotiable Instruments Act, 1881, “Whereas a
cheque is not presented for payment within a reasonable time of its issue, and
the drawer or person in whose account it is drawn had the right, at the time
when presentment ought to have been made, as between himself and the banker, to
have the cheque paid and suffers actual damage, through the delay, he is
discharged to the extent of such damage, that is to say, to the extent to which
such drawer or person is a creditor of the banker to a large amount than he
would have been if such cheque had been paid.”
In case a
collecting banker does not present the cheque for collection through proper
channel within a reasonable time, the customer may suffer loss. In case the collecting
banker and the paying banker are in the same bank or where the collecting branch
is also the drawee branch, in such a case the collecting banker should present the
cheque by the next day. In case the cheque is drawn on a bank in another place,
it should be presented on the day after receipt.
2. Serving
Notice of Dishonour:
When the cheque
is dishonoured, the collecting banker is bound to give notice of the same to
his customer within a reasonable time.
It may be noted
here, when a cheque is returned for confirmation of endorsement, notice must be
sent to his customer. If he fails to give such a notice, the collecting banker
will be liable to the customer for any loss that the customer may have suffered
on account of such failure.
Whereas a
cheque is returned by the drawee banker for confirmation of endorsement, it is
not called dishonour. But in such a case, notice must be given to the customer.
In the absence of such a notice, if the cheque is returned for the second time
and the customer suffers a loss, the collecting banker will be liable for the
loss.
3. Agent for
Collection:
In case a
cheque is drawn on a place where the banker is not a member of the ‘clearing-house’,
he may employ another banker who is a member of the clearing-house for the
purpose of collecting the cheque. In such a case the banker becomes a
substituted agent. According to Section 194 of the Indian Contract Act, 1872, “Whereas
an agent, holding an express or implied authority to name another person to act
in the business of the agency has accordingly named another person, such a
person is a substituted agent. Such an agent shall be taken as the agent of a principal
for such part of the work as is entrusted to him.”
4. Remittance
of Proceeds to the Customer:
In case a
collecting banker has realised the cheque, he should pay the proceeds to the
customer as per his (customer’s) direction. Generally, the amount is credited
to the account of the customer on the customer’s request in writing, the
proceeds may be remitted to him by a demand draft. In such circumstances, if
the customer gives instructions to his banker, the draft may be forwarded. By
doing so, the relationship between principal and agent comes to an end and the
new relationship between debtor and creditor will begin.
5. Collection
of Bills of Exchange:
There is no
legal obligation for a banker to collect the bills of exchange for its
customer. But, generally, bank gives such facility to its customers. In
collection of bills, a banker should examine the title of the depositor as the
statutory protection under Section 131 of the Negotiable Instruments Act, 1881.
Thus, the
collecting banker must examine very carefully the title of his customer towards
the bill. In case a new customer comes, the banker should extend this facility to
him with a trusted reference.
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