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The public sector banks, namely, State Bank and its subsidiaries, the Nationalised banks and the regional rural banks are statutory corporations (or body corporate) established under special statutes.
RRBs were first set up in 1975 under the RRB Ordinance 1975. The ordinance was later replaced by RRB Act, 1976. Section 3 of the RRB Act authorised Central Govt. to establish RRB by notification in the official gazette at the request of Sponsor Bank.
Issued Capital ratio (50:35:15) (Cental Govt:SponsorBank:state govt.)
The regional rural banks are also commercial banks but operating in limited local areas to cater to rural industries, trade, farmers, artisans, etc.
A Cooperative Bank is a cooperative society engaged in the business of banking.
A cooperative bank shall not grant any loans and advances as under :
a. Loans and advances against its own shares.
b. Unsecured loans or advances to any of its directors
c. Directors interest
d. Unsecured loans and advances in which the Chairman managing agent etc.
Section 131 of the NI Act grants protection to a collecting banker
1. Non-liability of a banker receiving payment of cheque
2. Conditions for protection
Duties of Collecting Bank
1. Duty to open account with references
2. Duty to follow up the reference where the referee is not known
3. Duty to Ensure Crossing : It is duty of the banker to ensure that the cheque is crossed specifically to himself and if the cheque is crossed to some other banker they should refuse to collect it. Similarly where the cheque is crossed to a specific account then crediting the same to another account without necessary enquiry’s would make him liable on the grounds of negligence.
4. Duty to verify the instruments / any apparent defect in the Instruments
5. Duty to take into account the state of customers account
6. Negligence of Collecting Bank in Collecting Cheques Payable to Third parties.
- Partnership is governed by Indian Partnership Act 1932.
- Minimum number of partners is 2 and maximum can be 10 for banking business and 20 for other business.
- Who can become a partner: An individual, partnership firm, limited company.
- Who cannot become a partner: Minor, insolvent, insane cannot become partner because they are not competent to contract.
- Though a minor cannot become partner, he can be admitted for sharing the benefits.
- As per Supreme Court Judgement, HUF cannot become partner as HUF cannot be liable for action of others.
- Registration of a partnership firm is optional. It is not necessary that the firm be registered. But an unregistered firm can not file suit against others for recovery of its debt whereas others can file suit against the firm.
- Liability of a partner: Every partner is liable, jointly with all other partners and also personally, for all acts of the firm while he is a partner. His liability is unlimited.
Limited Companies
- A limited company is an artificial person with perpetual succession incorporated under the Companies Act.
- Shareholders are owners of the Company and directors are agents of the company to manage company.
- A limited company may be private limited or public limited.
- Members in a private limited company: minimum 2; maximum excluding employees can be 50.
- Members in a public limited company: minimum 7 and there is no ceiling on maximum number.
- Number of Directors: A private limited company should have minimum 2 directors whereas a public limited company should have minimum 3 directors. No limit on maximum number of directors. In a public limited company, if directors are more than 12, permission from central govt required.
- Public company: When minimum 51% shares with government.
- Documents for opening the account: Memorandum of Association, Articles of Association, Certificate of Corporation, Certificate of Commencement of Business (only for public limited companies) and Board Resolution. No introduction is required as Certificate of Incorporation is enough introduction. However, KYC norms to be applied on all persons authorized to operate the account.
- Memorandum of Association: It contains name of the Company, its authorised capital, registered office and liability of shareholders, objects of the company etc.
Hindu Undivided Family (HUF) : HUF is neither a legal person nor a natural person. It is not created by agreement_ It is not incorporated under any Act. It is from a common ancestor and membership is by birth or adoption.
- The eldest member of family is the Karta and others are co parceners. Daughter can also be Kerta.
- Senior most member continues to be Karta even when he/she lives outside India.
- Operational authority to operate the account is with Karta
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.
- Private trusts are governed by Indian Trust Act, 1882, public trusts are governed by Public Trusts Act of the concerned state.
Clubs and Societies
- For opening account of Clubs and Societies bank will require Certificate of Registration, Bye laws of the Society, and resolution of Managing Committee or Executive Committee.
- Operational Authority will be as per resolution of Managing Committee.
- Change in Operational authority as per resolution of Managing Committee.
- Stop payment and revocation of stop payment as per Operational Authority.
- Cheque signed by the secretary or treasurer or president of society and presented after his death can be paid if otherwise in order.
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