JAIIB PPB Paper-2 Module-A Unit 14: Responsibility Of Collecting Bank

05/03/2023

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JAIIB Paper 2 (PPB) Module A Unit 14: Responsibility Of Collecting Bank (New Syllabus)

The Institute of Indian Banking and Finance (IIBF) recently announced the updated syllabus and exam pattern for the JAIIB Exam 2023. The JAIIB 2023 will include four papers, with Paper 2 (Principles & Practices of Banking) covering Unit 14: Responsibility Of Collecting Bank. This unit is crucial for candidates to understand thoroughly as it will impact their performance in the exam.

To aid candidates in comprehending the topic, we will provide all necessary details related to Unit 14: Responsibility Of Collecting Bank of JAIIB Paper 2 (PPB) Module A: General Banking Operations. We highly recommend candidates refer to this article and use our Online Mock Test Series to improve their knowledge of Foreign Currency Accounts for Residents and Other Aspects.

For JAIIB Certification Examination 2023 candidates, understanding each unit in the syllabus, including the Marketing unit, is critical. This unit is essential in the banking industry, and candidates must prepare adequately to excel in the exam and establish a successful career in the banking sector.

Statutory Protection To Collecting Bank

Sec. 131 grants protection to a collecting banker. This is applicable to both cheques and drafts.

Conditions for Protection

The collecting banker acts in good faith.
It acts without negligence.
It receives payment for a customer.
The cheque is crossed generally or specially to the collecting bank.
It verifies the prima facie genuineness of the cheque for collecting payment under CTS clearing.
It looks for any fraud, forgery or tampering that can be verified with due diligence and ordinary care, and is apparent on the face of the cheque to be truncated.

Duties Of The Collecting Bank

Duty to Open the Account with References and Sufficient Documentary Proof:

RBI has advised when opening accounts, photograph of the customer and documentary proofs for identity, constitution and address be obtained as per KYC norms.

Duty to Confirm the Reference where the Referee is not known or has given Reference in Absentia:

Bankers in India were obtaining introduction by an existing customer of the bank. This was not always possible, especially for a newly opened branch. In such cases, the customers were required to get references from known persons in the locality or from their existing bankers. In such case, the banker was required to make enquiries with the referee to ascertain that the person whose account was being opened was a genuine person.

Duty to follow the KYC Norms under Prevention of Money Laundering Act/ Rules and KYC Directions of RBI:

Under the KYC norms, the identity of the customer is required to be verified by obtaining an OVD and, PAN number. Where required, the address can be evidenced by obtaining a latest copy of electricity or telephone bill. Only for small accounts, this requirement is waived.

Duty to Ensure Crossing and Special Crossing:

The banker has 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 enquiries would make him liable on the grounds of negligence.

Duty to Verify the Instruments for any Apparent Defect in the Instruments:

Sometimes the instrument, which is presented for collection would convey to the banker a warning that a customer who has presented the instrument for collection either is committing a breach of trust or is misappropriating the money belonging to some other. In case the banker does not heed the warning, which is required of a prudent banker, then he could be held liable on the grounds of negligence.

Duty to take into Account the State of Customer’s Account

The collecting banker is required to take into account the status of the customer and various transactions that took place in the customer’s account to know the circumstances and the standard of living of the customer.

If for example, a person is an employee as a clerk, his salary would be approximately known to the bank and any substantial credits by way of collection of cheques would be suspected and it would be the duty of the banker to take necessary precautions while collecting such cheques.

Negligence of Collecting Bank in Collecting Cheques Payable to Third Parties:

The collecting bank has to make necessary enquiries before any third party cheques, are collected on behalf of its customer.

JAIIB PPB Module A Unit 14 Responsibility Of Collecting Bank (Ambitious Baba) PDF