What is bank? List the important duties of a bank.
Bank is an institution which accepts deposits from public repayable on demand and invests or lends the money. It also provides various other services to its customers like collection of cheques, drafts and bills, making payment on behalf of his customers, discounting bills of exchange, acceptance of valuables for safe custody etc.
The duty of the bank is to repay the money on demand to respective depositors. Banks help in mobilizing the resources by accepting the deposits and utilizing such funds by profitably employing them. A concern is not said to be a bank, if it performs banking business only as an ancillary to some other main business.
The important duties of a bank.
Obligation to maintain proper records: Proper records should be maintained by the banker regarding all the transactions that the customers made with the bank.
Obligation to give notice before closing the account: A bank cannot close the customer’s account without giving him a reasonable notice, even if the bank has serious consequences to the customer.
Obligation to follow customer’s instructions: It is a legal obligation of the bank to follow instructions given by the customers because a contractual relationship exists between bank and the customer.
Obligation to maintain secrecy: Banks should not reveal the details relating to customer’s account to any outsider or unknown person because such details if revealed can affect the business of the customer. Bank can reveal the information, when practices amongst banks permit such disclosure or when law requires such disclosures to be made.
Obligation to honor Cheques: It is statutory obligation of the bank to honor the cheques to his customers up to the amount standing to the credit of customer’s account. Bank has to compensate the customer, if it refuses to honor the cheque.