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Banking Operations Unit3.pptx

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Banker - Customer Relationships Outline of Bank ServicesTypes of AccountsKnow Your Customer (KYC) Savings and Fixed Deposit Accounts Cheques, Money Transmission, and Other Payment MechanismsMODULE COVERAGE1Code of Banking Practice Plastic Cards and Electronic Banking

Types of Bank accountsMost banks offer current and savings accounts to individuals and other legal entities depending on the requirements of the particular entities. Most corporate customers and businesses will prefer to operate current accounts while individuals may maintain savings accounts.    2IndividualsSole proprietorshipLimited liability companiesMinorsIlliteratesBlindThe HandicappedPartnershipsJoint accountTrusteesSolicitorsLiquidatorsExecutors and administratorsTrusteesClubs and associations

Individual’s accountAn individual of sound mind is free to open an account with the bank both current and savings depending on his requirements. To avoid possibilities of being involved in litigation arising out of accusations of negligence, banks will require proof of identity and references before an account can be openedSole proprietorship accounts – This is an individual who has registered a business in different names or sometimes incorporating his names in the title. An example may be ‘Johns & sons’ where John is the sole proprietor. To open an account with the bank John should tender the business names registration certificates and references like in any other instances. Limited liability Company Accounts Limited companies are separate legal entities from their members and may be public or private. The common feature though is that they are both limited by shares and are governed by memorandum and articles of association which detail how the affairs of the company will be conducted.3

Special types of customers  Special customers are those who differ from normal or ordinary customers because of some special features. Special customers are dealt with in special ways. The following are some examples of special types of customers: Minors – A minor means a person who is not yet eighteen years old, according to Uganda laws, and as such cannot enter into a legally binding agreement. Banks therefore must be extremely careful when opening accounts for minors as they may not sue them in a court of law say if they are involved in fraud.In practice, therefore, banks will open only savings accounts for minors either in their names or their guardians/trustees names or in their joint names. The account will be operated by the guardian or trustee for the minor’s benefit. On attaining majority (when the minor reaches 18) the minor will operate the account in his own right.  4

Illiterate persons –Those who are unable to sign their names but use thumb impression are illiterates for banking purposes. Illiteracy does not make a person incompetent to contract and operate a bank account. However, banks rarely open current accounts for illiterate persons. Should the bank, however, accept to open an account for an illiterate, he will be required to come to the bank in person together with a witness known to the bank. While opening an account banks obtain thumb impression as a substitute for a signature. The thumb impression is obtained in the presence of a person known to the bank and the depositor, witnessed by a customer of the bank. Photograph of the account holder is obtained which is affixed on account opening documents. Banks are required to explain the terms and conditions governing the account to the illiterate.For withdrawing money, the illiterate must attend personally and affix his thumb impression in the presence of an official of the bank, for the purpose of identification. The introduction of electronic banking has made it much easier for illiterates to withdraw from their accounts using plastic cards. Keeping photographs electronically in bank data bases has made it much easier for identification purposes.  5

 Blind Persons – A blind person can be a bank customer and is legally competent to enter into a contract or to open and operate an account. For opening an account, the person has to personally come to the bank along with a witness known to him and the bank. Both the signature and thumb impression of the blind person are obtained on the specimen signature card along with the signatures of witnesses known to the bank. A rubber stamp indicating that the account-holder is a blind customer is affixed on the account opening documents. This enables bank officials to exercise caution in the transactions with the blind customers. The Bank is required to explain the terms and conditions governing the account to the blind person. In general the blind customers are given special attention whenever they come to the bank. 6

Handicapped (like a person who has lost both hands) – A handicapped person is not barred from being a bank customer and opening an account. When opening or operating an account, the bank obtains his/her toe impression as a substitute of the signature on the relevant forms in presence of bank officials and a witness. As an alternative, the person is also advised to give a suitable power of attorney to a person of his/her confidence. 7

Joint account holders – This refers to two or more individuals holding one bank account. Depending on the mandate given to the bank, any individual who is a member of the joint account can withdraw from the account and deposit to it. If two individuals open a joint account and one of them dies, the other person is entitled to the remaining balance and is liable for the debt of that account. In practice, if a joint account holder dies when the account is overdrawn the account is stopped so as to preserve its right to claim from the deceased’s estate. Similarly if a cheque signed by the deceased account holder is presented it will be returned unpaid marked with ‘Drawer deceased’ unless the survivor authorizes payment. The most common joint account in banks is that of husband and wife.8

 Partnership Accounts – The bank will satisfy itself that the partnership firm legally exists and normally ask for the partnership Deed and a letter signed by all the partners providing following information:The name and address of all partnersThe nature of the firm’s businessThe names and mandate of the partners authorized to operate the account in the name of the firm and the manner in which it will be operated The mandate form completed by partners will require them to accept joint and several liability, meaning that should they be indebted to the bank the liability extends them collectively and individually. Death of one partner dissolves the partnership and the account will normally be stopped if the bank is notified.9

Trustees – A trustee is a person who deals with property for the benefit of other persons of whom he may be one himself. Banks have to take care with trustee accounts so that they do not knowingly or unknowingly become party to breaches of trust and be liable for damages to bonafide beneficiaries.To open an account of a trust, the bank obtains copy of constitution of the trust; Trust Deed; the necessary resolution passed by the trustees for opening the account with the bank; certified copy of the resolution signed by all the trustees in regard to the conduct of the account. Most common trustee accounts are for estates of deceased persons where close relatives and older children of the deceased may be appointed trustees until children become adults 10

Liquidators – A liquidator is a person appointed by the court to wind up the affairs of a company. His business is to realize (sell) the company’s assets and apply funds thus collected in repayment of debts and distribute the balance among shareholders. He has power to borrow money on the security of the company’s assets and to draw, endorse or accept instruments on behalf of the company. While exercising such powers, the liquidator is free of personal liability.The bank should obtain a copy of the court order before opening an account for the liquidator. The court order normally details how the affairs of the company will be conducted by the liquidator.Societies, clubs, associations and other non trading institutions–A club or a society gets becomes a legal entity only when it is incorporated under Company’s Act, or under Cooperative Societies Act. While opening accounts, the bank must obtain a copy of the bye laws; a copy of resolution by the managing committee regarding opening and conduct of the account; original certificates of registration; a list of the managing committee members; copies of resolutions electing them as committee members duly certified. 11

 Executors and Administrators - Executors and administrators are persons appointed by a person through a Will to manage the affairs of his estate after his death. The person appointing an executor in his will is known as testator. There can be more than one executors or administrators. If the person has not appointed any one to manage the affairs of his estate after his death, court appoints an administrator for the purpose. In Uganda, it is the Office of the Administrator General. Banks generally do not permit an executor to deal with the moneys or securities of the deceased until he produces the probate –letters of administration from the Administrator General. To open an account for Executors and Administrators, the bank obtains account opening forms duly signed by all the executors or administrators and obtains clear instructions as to the manner in which the account will be operated. Bank also obtains copy of probate or letters of administration in original for scrutiny. 12