Banking has been under the Banking Regulation Act 1949 as:-
“Accepting for the purpose of banking or investment of deposits of money from the public and withdraw able by cheque, draft or otherwise.
Bank is a financial institution which is run by the Government as well as private sector to assist the public in general to lend money to persons for doing business in order to better their living standards or for development purposes. It provides interest on funds deposited with it by the depositors and charges interest from the persons who borrow money from the Bank. Apart from lending and depositing money, bank renders a number of other services, which are known as subsidiary or ancillary services, such as working as remittance of funds from one place to another, providing safe deposit lockers, working as an agent for the customer etc.
Functions of a Bank:
There are some important functions of a Bank which they perform are:
1. To accept deposit of money from the public.
2. To grant loans and advances to traders, industrialists, professionals and other sections of society.
3. Remittance of funds from one place to another.
4. To collect and discount bills of exchange and other negotiable instruments.
5. Acting as an agent on behalf of customers by honoring their standing instructions etc.
6. To provide safe deposit lockers to customers for safety of their valuables.
7. To supply credit, financial or status information of customers.
8. To issue letter of credit, guarantee, travelers’ cheque, and gift vouchers etc.
9. To act as an advisor and guide to customers
Types of Banking Correspondence: There can be classifications of all banking letters into four groups and they are as follows:
1. There are banking correspondence that relates to opening, closing and transfer of accounts of customers.
2. There are banking correspondence that relates to operations in accounts of customers – deposit, collection and payment of cheques, drafts, bills etc.
3. There are banking correspondence that relates to Loans and Advances including overdrafts, cash-credits, demand and term loans, discounting of bills, letters of credit, guarantees etc.
4. There are banking correspondence that relates to subsidiary or ancillary services like remittances, safe deposit lockers, agency services, supplying credit or status information and traveler’s cheques etc.
They can be discussed in detail as under: -
1. Customer’s Account: The relationship between customer and banker develops when a customer opens his account with the bank. All other services offered by banks are based on it. The customer has to fill in the Account Opening Form for opening an account in the bank by supplying specimen signatures and giving introduction. The bank account may be introduced by anyone who is either already a customer of the bank or well known to the bank.
Types of Bank Account: - The customer’s accounts can be current accounts, saving bank accounts, fixed/term deposit accounts or other deposit accounts. There are different set of rules for different type of accounts in individual bank.
Current account works best for traders and other business people so that they can freely operate upon the accounts by numerous transactions in a single day. In current account, no interest is paid on a current account of a customer but some charges are levied by bank in proportion to the pages of ledger filed in.
Saving Bank Account works best for service class peoples as the number of transactions are few and irregular. The bank offers some interest to the saving bank account holders on the credit balances maintained with the bank between the close of 12th day and the last day of each calendar month. The other deposit accounts are those where the transactions are less and more interest is allowed by the bank.
There is also facility of transfer of accounts from one branch to branch or place in the bank. The bank account can also be closed anytime depending upon the rules of the concerned bank.
Specimen of Letter for Customer’s request for opening an Account
15, Kamla Market
Ref.No. GTL/Bank/98/2314 10th May 1998
Bank of India
We wish to open a current account in our company’s name with your esteemed branch.
We request you to; please let us know as to what formalities are to be fulfilled for this purpose.
We would like to bring it to your kind notice that our company is a sole proprietor concern. Presently we are not dealing with any other nationalized bank anywhere in Delhi.
Please give us necessary account opening forms and also let us know the other formalities to be fulfilled for opening an account with you.
We anticipate an early compliance in this matter.
For GENERAL TRADERS
Specimen of Bank’s Reply
BANK OF INDIA
Chandni Chowk Branch, Delhi
B.O. Chandni Chowk
Ref.No. BOI/H/Gen/8965 15th May 1998
This letter is in reference to your letter No. Ref.No. GTL/Bank/98/2314 dated 10th May 1998.
We are enclosing herewith the required Account Opening Form (A.O.F) for opening a current account for sole proprietor firms or company’s. It will be advisable that you visit us during business hours along with A.O.F with the rubber stamp of your firm to be affixed on it.
You are requested to sign in the form in our presence and the account has to be introduced by a person having an account with us.
Enc: as above
Specimen of Letter for Customer’s request for Pass Book or Statement of Account
25, Kirti Nagar,
New Delhi -110015
Ref.No. KBR/Accts/99/5612 20th April 1999
Krishna International Bank,
South Extension Part-2
Re: Our current A/c No. 16723 with you.
We want to bring it to your kind notice that we haven’t received the statement of account for the above mentioned current account. We have opened current account with your bank for more than three months and have a heavy turnover in the accounts.
It would be difficult for us to tally our bank accounts in the absence of upto date bank entries so we request you to please send us the statement of our account with your bank with latest upto date entries.
We would also like to request to you for sending us statement of our accounts regularly every month in the future.
For KHANNA BROTHERS
KRISHNA INTERNATIONAL BANK
South Extension Part-2, New Delhi
B.O South Extension Part-2
No. CA/Misc/99/8123 25th April 1999
M/s Khanna Brothers
25, Kirti Nagar
New Delhi -110015
Ref.No. KBR/Accts/99/5612 dated 20th April 1999
Reg. Current A/c No. 16723
With reference to the above mentioned details, we are enclosing herewith upto date statement of your current account. We have also taken notice of your request of sending statement regularly month-wise in the future.
Please acknowledge receipt.
Enc: as above
2. Operations on Customer’s Accounts: - After the opening of bank account, the customer operates it by way of depositing cash, cheques, bills etc in the account and withdrawing amount by issuing and drawing cheques or otherwise. There are many types of correspondence that take place during this course of operation on accounts between the bank and customer.
Specimen of letter for customer notifying delay in collection of cheques, drafts, bills etc deposited in account
MAX INDIA LIMITED
12 floor Devika Towers
Ref.: MIL/Accts/Bank/1002 24th March 2007
Our Current Account No. 456 with you
This is to inform you that we deposited two cheques for Rs. 5000/- and Rs. 7000/ respectively on 10th March 2007, for credit to our above said account. After checking our Account Statement of 24th March 2007, we find that these amounts have not be credited to our account. We would like to know the reason for delay as they were local cheques and the normal course of realization is three to five days for local cheques. It is now past 14 days that the cheques have not been realized so far.
We, therefore, request you to kindly arrange for the early realization without any further delayo as we need the abovesaid amount for the clearance of our pending bills of the company.
We hope you will do the needful as early as possible.
For MAX INDIA LTD.
Stop Payment Instructions
The instructions given by the customer to the bank regarding the stop payment of a particular cheque giving full details of the cheque and to exercise proper precaution in the matter.
While writing the letter to the bank regarding the stop payment of the cheque the following points should be kept in mind they are:
1. Explain the reason for the stop payment, whether lost or misplaced or the payment to be withheld.
2. The exact particulars of the cheque must be given such as cheque number, date, amount and name of payee, etc.
3. Give a firm request to stop its payment and for the proper precautions be taken to deal with this matter.
4. Mention the date and time of writing the letter to the bank on the letter.
5. Request the bank to acknowledge the receipt of your letter for future reference.
Customer’s request for Stop Payment of a Cheque
5, Ansari Road
Ref.:XYZ/bank/245 20th March 2007
Bank of India,
Tilak Nagar Branch,
Stop Payment-Cheque No. 450623 dated 21st March 2007 of Rs. 5000/-
We request you to kindly stop the payment of our cheque no. 450623 dated 21st March 2007 for Rs. 5000/- favouring M/s ABC Consulting Services issued in our current account No. 456 with you.
Please acknowledge receipt.
For XYZ Ltd.
When any customer requests his bank in writing for making certain payments on regular basis for insurance premium, rent or for any other purpose then they are called STANDING INSTRUCTIONS. In banks there are generally printed forms for carrying out standing instructions.
There are some important pre-requisites for standing instructions and they are as follows:
1. The customer should have account in the bank – current account or saving account in giving standard instructions.
2. There has to be sufficient credit balance so as to enable Bank to debit the amount and remit.
3. The customer should specify the amount to be paid by the bank so that it could be easily remitted every month. It is not possible for the bank to remit the different amounts every month.
4. The bank should be given an authority to debit the customer’s account.
5. The payment to be remitted or effected by the bank should be at regular intervals – weekly, fortnightly, monthly or quarterly.
Advantages of Standing Instructions: -
1. They are very useful in those cases where regular payments of the same amount are to be made through the bank. It saves customer’s time and botheration of visiting bank and giving letters every time.
2. They ensures timely regular payment of amount and avoids any delay because the bank effects the payment on due date every time automatically.
Disadvantages of Standing Instructions: -
1. They are of no use where sufficient or adequate credit balance cannot be arranged or maintained by the customer because in such case the standing instructions cannot be implied by the bank.
2. There are times when payments are delayed due to rush of work with the bank or due to their staff’s negligence. It may results in undesired complications and problems to the customer.
Essentials for drafting Standard Instructions: -
1. The customer should request the bank for making payments on his behalf.
2. The customer should give complete details about the payments like policy number, period date of payment, specific amount, name of payee etc.
3. The customer should assure the bank that he will maintain sufficient credit balance in his saving or current account on or before the due date.
4. The customer should give his account number and put his signatures as on bank’s record so that the bank is authorized to debit account and effect remittance.
Customer giving Standing Instructions for Payment of Shop Rent and School Fees
The Branch Manager,
Union Bank of India,
Re: Standing Instructions
Kindly arrange to pay the following amounts to debit of my saving bank account No. 23123 with your branch: -
Name of Payee Amount Date On A/c of
1. Mr. Ravi Kumar Rs.5000/- On or before 10th of Rent for shop –
every month. 3, Karol Bagh, N.Delhi
2. Principal – S.D School Rs. 1200/- On or before 15th of School Fees of Master
Ram Nagar, N.Delhi every month. Vijay of Class IV
I assure you to maintain sufficient credit balance in my above mentioned account on or before the date’s of payment. Please make the payments regularly through my account. If there are any extra bank charges then they can also be debited from account.
Please acknowledge receipt.