Banking Transactions

Fixed deposit account

A customer can deposit his money with a bank for a fixed period. Such an account is called ‘Fixed Deposit Account’ . The period in fixed deposit account usually varies from three months to five years. The amount deposited cannot be withdrawn before the expiry of the fixed period. The bank normally allows as higher rate of interest on fixed deposits. The rate of interest increases with the period of deposit.

Saving Bank Account

A saving bank account provides limited withdrawal facility and carries a moderate rate of interest on deposits. Interest is allowed on the savings bank account on the lowest credit balance kept in a particular month.

Bearer and Order Cheques

A cheque may be made payable to a bearer or to order. A bearer cheque may be made payable to the bearer i.e. it can be encashed by any person who presents it to the bank for payment. The bank is under no obligation to ascertain that the payment has been made to the right person. An order cheque on the other hand is made payable to a particular person or order. An order cheque can be transferred only by endorsement and delivery.

Crossing Cheque

When a cheque is to be sent through post, it is desirable to draw two parallel lines with or without the words ” & Co.” between the lines. This is called crossing the cheques. Crossed cheques cannot be encashed at the counter but can be collected only by a bank from the drawee bank. If the payee has no banking account, he must get a person possessing a bank account to cash that cheque for him. Crossing thus provides a protection and safeguard to the owner of the cheque as by securing payment through a banker it can be easily detected to whose use the money is received.

Crossing may be general or special. A general crossing is one where two parallel lines are drawn across the face of a cheque with or without the words’ & Co.’ but not including the name of a bank.

Where a cheque is crossed generally, the paying banker shall not pay it except to a banker. Sometimes the words ‘Not negotiable’ appear in crossing. These two words do not meem that the cheque cannot be transferred. It simply means that the person holding such a cheque gets no better title than that of his transferor and cannot convey a better title to his own transferee. Sometimes the words ‘Account Payee only’ are inserted between two parallel lines constituting a crossing. This is a direction to the collecting banker to collect the cheque and to place the amount to the credit of the payee only.

A special crossing is one which requires the name of the bank to be added across the face of the cheque either with or without the words ‘not negotiable’. A special crossing makes the cheque more safer than a general crossing because the payee or holder cannot receive payment except through the banker named on the cheque. Special crossing may take anyone of the following forms.

Endorsement

Endorsement is the act of signing a cheque for the purpose of transferring it to somebody else. Under Negotiable Instruments Act it means the writing of ones name on the back of the instrument or any paper attached to it with the intention of transferring the rights therein. A bearer cheque can be transferred by mere delivery but an order cheque is transferred by endorsement and delivery. Endorsements are usually made on the back of the cheque, though they can be made on its face as well. If, however, no space is left on the instrument, it may be made on a separate paper attached to it.

Endorsement on the cheque must be made in proper fashion, otherwise the bank will not pay it.The endorser’ must sign his name exactly as it has been written on the cheque. He must sign his name with the same spellings as already appear on the cheque. He may, if he, likes put down the correct spellings after he has signed in the manner already appearing on the cheque. Where a cheque is endorsed on behalf of a company, a firm or some other institution, the person signing the endorsement must so sign as to make it clear that he is so doing on behalf of the company or the firm and not in his personal capacity.