PROMOTION MATERIALS – 2010

BANKING TERMS – A SERIES

 

ACCEPTANCE:

 

A Bill is presented for acceptance which has two parties.i.e. drawer and drawee. Acceptance is writing the name of the drawee across the face of the bill by which drawee agrees to the order of the drawer.

 

Bills payable after sight require presentation for acceptance in order to fix the date of the maturity of the bill. Acceptance should be given by the drawee on the bill itself across the face of the bill, by putting signature, as a token of acceptance. The concept of acceptance is completed only when the drawee after accepting the bill delivers it back to the holder.

 

ACCEPTOR:

 

When the drawee in a bill agrees to the order of  the drawer he shows his ascent by signing his name across the bill for acceptance, and when it is done he is called the acceptor. The acceptor is the person who is expected to retire the bill on mautiry.

 

ACCEPTOR FOR HONOUR:

 

Generally no person other than the drawee or drawee in case of need specified in the bill can accept it. However, in case the original drawee refuses to accept the bill to furnish better security when demanded by the notary any person not liable on the bill who wishes that the bill should not be dishonoured without acceptance by the drawee, may accept it with the consent of the holder to honour the bill. Such an acceptor is called as “Acceptor for honour”

 

ACCEPTANCE FOR HONOUR:

 

When the bill is noted or protested for non-acceptance by the named drawee the acceptor shall declare in writing on the bill for having honoured the bill. The usual form of such acceptance is “Accepted for the honour of XY-AB”

 

ACCOMMODATION BILL:

 

A bill which is drawn to accommodate another person without receiving any consideration is called as accommodation bill. The main objective of such bill is to facilitate the drawer to raise funds. Such bills are also called as “Kite Flying” “Windmills”. The party who draws such a bill is called as “Accommodated party” whereas the acceptor is called as “Accommodation party”. The transaction takes place only by mutual consent without any consideration. The bills are mostly drawn for round sums and drawees do not exist. The bills are drawn with sister concerns without movement of goods. Normally around the due date the drawer presents next bill for discount and remits the proceeds to the drawee to retire the earlier Bill. The bill is normally inflated and is not linked to turnover of the party. The banker should be cautious while handling the bills.

 

ACCOUNT PAYEE:

 

“Account payee” are the words used in the crossing of cheques indicating the purpose that the proceeds of the cheque should be credited to the payee’s account named therein.

The practice of so crossing a cheque has all along been recognized by courts. The transferability of a cheque is restricted when it has been crossed account payee, as the payee therefore becomes the true owner of the cheque. The collecting banker has the responsibility, in the wake of a series of frauds in encashment of the instruments. IBA has decided that the Account Payee crossing should be treated in the true sense and necessarily proceeds should invariably flow into the account of the payee named in the instrument.

 

ACTUAL DELIVERY:

 

It is a process of actual handling over the instrument/security by one person to another or to an agent on his behalf, which constitutes “a change of actual possession”. For example, in KCC advance the borrower delivers the goods to the Bank to be kept under lock and key indicating bank’s charge over the goods.

 

ACTIONABLE CLAIMS:

 

Actionalable claim represents a claim to any debt, other than a debt secured by mortgage of immovable property by hypothecation or pldge of movable property. Civil courts recognize as affording grounds for relief whether such debt be existent, accruing conditional or contingent. Book debts are actionable claim under law.

 

ACTUAL POSSESSION:

 

In order to create a valid pledge the owner of the goods i.e. pledger/borrower must deliver the goods to the pledge (lender/banker). The delivery is complete, when the pledger actually hands over the goods to the pledge and the pledge i.e. the banker is said to have “actual possession” of the goods as security. i.e. gold loan, OD against securities etc.,

 

ACID TEST RATIO:

 

The acid test is meant for ascertaining the soundness/health of a company and it indicates the company’s preparedness to meet the immediate demands on its liquidity besides the current ratio. It is the relation between all current liabilities other than bank finance and immediately realizable current assets such as cash receivables and investment. Th Acid test ratio indicates the solvency or ability to meet immediate current obligation.

 

ADHESIVE STAMP:

 

As per the Indian Stamp act all duties with which any instruments are chargeable should be paid and such payments should be indicated by means of stamps. The determination of valid document is known by the fact of proper stamping.  There are three kinds of stamps namely, adhesive, impressed and non judicial. Adhesive stamps are affixed by gum on the documents as quoted in the official gazette published by the Government.

 

Some examples are –

-Bills of Exchange and promissory notes drawn or made in sets.

- Entry as an advocate, vakil, or attorney on the roll of a high court.

- Notary acts

- Transfer of shares etc.

 

Adhesive stamps require to be cancelled in terms of Sec 12 of Indian Stamp Act so that it cannot be used again.

 

ADJUDICATION:

 

The process of determining the duty to be charged on an instrument document for execution by the competent authority is called adjudication. Hence concept refers to proper stamping of a document.

 

ADMINISTRATION:

 

Administrator is a person appointed by the court to manage the property of the deceased. There are two circumstances/situations:

 

Where the person dies “intestate”, i.e. without leaving a will. In this situation the court appoints a person usually the next of kin to manage the property of the deceased, called as an administrator.

 

Where the person does leaving a will.

i)                    but does name any one to act as executor

ii)                  The executor named therein died before the testator.

iii)                The executor named therein refuses to act

 

The court appoints an administrator granting “Letter of Administration” with will annexed, to it

 

AD VALOREM:

 

It is a Latin word meaning “According to the value”, and used in connection with duties and customs on some goods by stamp duties, relating to the value of the subject matter to which the document pertains to.

 

AFFIDAVIT:

 

It is a written declaration given on oath before an authority who administers the oath as a solicitor, a magistrate consul or notary public. Such authority is conferred by the state or central government.  The affidavit should be on a stamp paper of requisite value and contain, deponent name, address and signature properly attested by the authority before whom it is sworn.

 

AFTER SIGHT:

 

These words are sometimes written on Bills of Exchange or Promissory notes it is brought to the sight of the holder on presentation.

 

-         In case of Promissory Notes it is brought to the sight of the holder on presentation.

-         In case of Bills of Exchange, after acceptance by the drawee, or noting for an acceptance or protest for non acceptance  as per Sec 21 of Negotiable Instruments Act.

 

AGENT:

 

Section 182 of Indian Contract Act defines an agent as a person who represents another i.e. principal in his dealings or brings him into legal relationship with third persons. A minor and a person having unsound mind cannot become an agent. Principal kinds of agents are auctioning brokers, commission agents, del credere agents, factors and co-agents.

 

Agents are classified into three groups:

 

i)                    General Agent: Acts within limits

ii)                  Special agent: Entrusted with a particular commission/assignment

iii)                Universal agent: Unlimited authority to do any act on behalf of his principal

 

ALLONGE:

 

It is a slip of paper annexed to a bill for making endorsements when there is no space left on the bill. There is no legal limit for number of endorsements and this does not require fresh stamps. There is a practice to make the first endorsement on the allonge over the junction to prevent the allonge being removed from one bill and attached to other bill.

 

AMALGAMATION:

 

It is the process of merger of two or more companies to form a new company which comes into existence having all the property, rights and powers and subject to all the duties and obligation of the constituent companies by virtue of powers contained in

the memorandum. The process may take place by, sale by shares, by sale of undertaking, by sale and distribution or by virtue of arrangement.

 

AMBIGUOUS ENDORSEMENT:

 

The word ambiguous means uncertain or doubtful. When in an endorsement the name of the endorsee is not clearly ascertainable the endorsement becomes ambiguous. Eg. If an endorsement reads “Pay to x or y and z then the endorsee can be either (i) x or (ii) y and z or (III) x and y jointly, Such ambiguous endorsement should be got amended by the payee/endorsee under full authentications.

 

AMORTISATION:

 

The gradual reduction of any amount such as the retirement of a debt by serial payments to the creditor is called amortization.

 

ANAMALOUS INSTRUMENT:

 

Instrument which does not fall within the purview of the Negotiable Instruments Act but possesses characteristics akin to negotiable instruments are called anomalous instruments e.g. dividend warrants, interest warrants, coupons, pension payment order etc.,

 

APPARENT TENOR:

 

It means what appears on the face of the instrument to be the intention of the parties such as date, amount in words and figures, signature, cheque serial number, branch name, crossing etc. Payment in accordance with apparent tenor is treated as payment in due course and paying banker gets protection accordingly.

 

APPROVED SECURITIES:

 

Securities such as Government of India loans, state government loans and other trustee securities as defined under section 20 of the Indian Trust Act, 1882 are called approved securities, for the purpose of computing the SLR to be maintained.

 

ARBITRATION:

 

It is a procedure adopted to settle a dispute between two parties by referring it to an agreed third party, who is called as an Arbitrator. The parties agree to abide by the decision given by the arbitrator who acts as a judge. The process is carried out without the intervention of the court.

 

ARTICLE OF ASSOCIATION:

 

It is one of the important documents containing the internal regulations or bye laws of a joint stock company by which the affairs are governed and distinctly defines the powers of the directors. The printed articles of association should bear the prescribed stamp duty.

 

ARTISANS:

 

Artisans are those who are engaged either in traditional or cottage industries or handicrafts like shoe making, weaving, tanning, blacksmiths, carpet making etc.,

 

ASSIGNMENT:

 

It means the transfer or making over of an existing or future right, property or a debt by one person to another. It is a form of offering security to the creditor. The one who transfers is called assignor and the one in whose favour it is transferred is called “Assignee”

 

ASSOCIATE:

 

Where the interest of one company in another is exactly 50% unless the second company is said to be an associate or an affiliate of the first. The balance of the share capital may be held by another company or by shareholders

 

ATTACHMENT:

 

Attachment refers to seizure of property so that it can be put under the control of a court. Where a person has obtained a judgement for the recovery of money, an application to the court may be made to obtain attachment relating to assets in satisfaction of a judgment. It may be in the form of prohibition order which prohibits

the bank from releasing an asset without the permission of the court, or in the form of attachment order with reference to specified amount of an account of asset attached by the court, making it incumbent on the bank to pay the amounts/deposit the assets in the court

 

ATTESTATION:

 

Attestation is formal witnessing of a signature. In law, three documents require compulsory attestation:

 

i)                    Mortgage deed

ii)                  Deed of Gift

iii)                A will

 

Attestation to an instrument must be made by two or more witnesses each of whom has seen the person executing the instrument.

 

Essential of a valid attestation:

i)                    The document must be signed by the executant first and then by the attesting witnesses

ii)                  The executants must sign in the presence of the attesting witness.

iii)                The attesting witness should also sign in the presence of the executant.

iv)                An attesting witness need not know the contents of the document as he is attesting only the signature of the executant

v)                  A party to the document cannot be an attesting witness

 

AFFREIGNMENT

 

It is a contract by ship owner to transport goods by sea in consideration of a certain payment called: “freight”

 

AUTHORISED CAPITAL:

 

A company whether private limited or public limited before raising capital through issue of shares, should mention in its articles of association for authorizing such an

issue. The quantum of the capital to be raised depends on the promoter’s estimate of the funds required for the business.  The capital mentioned in the articles may be suitably amended in case of any need for increase in the capital

 

AIR CONSIGNMENT NOTE:

 

Also called as airway bill, it is a document which acknowledges receipt by the airliner of the goods for dispatch by air. It contains three copies i.e. consignor copy, consignee copy and one for the carrier. It is not a document of title to goods as it is non-negotiable

 

ARBITRAGE:

 

Relating to Foreign Exchange business arbitrage means simultaneously buying and selling of foreign currencies with the expectation of profits from temporary disparities in exchange rates prevailing at the same time in different centres or in different currencies.