Banking and Cash Transactions

As defined under the Negotiable Instrument Act, a promissory note, bill of exchange or cheque drawn or made in India, and made payable in or drawn upon any person resident in India shall be deemed to be an inland instrument. 

A truncated cheque is a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

A valid promissory note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. "Mr. B, I will pay you one thousand rupees on demand" is a valid promissory note.

This crossing can be made in both general and special crossing by adding the words 'account payee' or 'A/C payee only'.

Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course.

A negotiable instrument may be dishonoured by non-acceptance or non-payment. It is only the bills of exchange which may be dishonoured by non-acceptance. Of course, any type of negotiable instrument - promissory note, bill of exchange or cheque - may be dishonoured by non-payment.

It is the application of funds. It would decrease the balance in bank account. The decrease in current assets means decrease in working capital and the decrease in working capital indicates that there is application of funds. Working capital is excess of current assets over current liabilities.

There wll be no effect on inflow or outflow of cash. Since the bills accepted by us are dishonoured on due date, no payment will be made to creditors. Hence, there will be no inflow or outflow of cash.

The term 'Illegal Tender' refers to a dishonoured or invalid financial instrument that cannot be legally tendered. Neither black money, mutilated cheque, nor dishonoured cheque individually captures this concept.

Correct Answer: II is true. Under MWP Act, in case of a death claim, the policy proceeds are received by the trust and cannot be claimed by the debtors nor will it form part of the estate of the proposer. Hence, the welfare/the wife/child/children are protected with utmost care.

In respect of cheques lost in transit or in the clearing process or at the paying branch, the collecting branch should immediately bring the same to the notice of the account holder, so that the account holder can inform the drawer to record stop payment and can also take care that other cheques issued by him are not dishonoured due to non-credit of the amount of the lost cheques. If the cheque has been lost by the individual, he/she can inform the drawee bank about the same.

Section 131 in The Negotiable Instruments Act, 1881 Non-liability of banker receiving payment of cheque.— A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.

In a joint account, if one of the signatures is forged, then there is no mandate and banker cannot make payment.

The bank should obtain from the borrower the deposit receipt duly discharged by signing on the back of it across a revenue stamp and a memorandum of pledge authorising the bank to utilise the proceeds of the deposit on its maturity towards repayment of the loan.

In 2006, Reserve Bank of India announced the revised Banking Ombudsman Scheme with enlarged scope that included customer complaints on certain new areas, such as credit card complaints, deficiencies in providing the promised services even by banks' sales agents, levying service charges without prior notice to the customer and non-adherence to the fair practices code as adopted by individual banks. Bank customers can complain about non-payment or any inordinate delay in payments or collection of cheques towards bills or remittances by banks, as also non-acceptance of small denomination notes and coins or charging of commission for acceptance of small denomination notes and coins by banks.