The primary relationship between the bank and its customer is that of a debtor-creditor, various other relationships also arise out of the other functions performed by bank. Banks deals with different types of customers such as Individuals, companies, partnership firm, club, trusts, co-operative society etc. Banks are required to ascertain the capacity to contract of the persons opening bank accounts and also adhere to various legal provisions that apply to various categories of customers in the matter of opening and operation of the bank account. In this article, we will discuss about different types of customer and their mode of operation of accounts.
Different Types of Account their Mode of Operation
- Jointly or Survivor
- Either or Survivor
- Former or Survivor
- Anyone or Survivor
- Joint accounts with Special Instructions
- Via Letter of Authority / Power of Attorney holder
- Minor account
Single Account: When an account is opened in the name of one individual it is known as single account. All the powers to operate the account are vested in the individual account holder concerned only and no one else. The mode of operation for a single account is SINGLE. Only the account holder can instruct the bank in matters such as issue of cheque books, withdrawal and transfer of funds from his/ her account etc. Even the closest relatives are treated as third parties and these include blood relatives such as father, mother, brother and sister, children and spouse.
Joint Account: Joint accounts are opened for two or more persons. The account opening form is required to be completed and signed by all the joint account holders. In joint accounts, banks takes customers instruction regarding Mode of Operations, Payment of balance n the event of death of any account holder.
- Jointly: The bank account will be operated by both or all account holders jointly. In such accounts, operations are permitted only with the mandate or authority of both or all the account holders jointly. For Example: A and B opened a joint bank account in Bank X with mode of operation Jointly, to do some transaction or instruct bank for any service booth A and B need to sign the form.
- Jointly or Survivor: This is an account with survivor-ship clause, but during the lifetime of the account holders, operation on the account are made jointly. In the event of death of a joint account holder, the balance become payable to the survivor. For Example A and B opened a joint bank account in Bank X with mode of operation Jointly or Survivor, to do some transaction or instruct bank for any service booth A and B need to sign the form and if A dies, then B can individually operate the account or transfer the proceeds to his own other bank account.
- Either of Survivor: This is the most popular modes of operating joint account as it provides convenience of operation as well as payment of balance to survivor. The account can be operated by any of the account holder independently.
- Former or Survivor: In such accounts, while the settlement of balance to the survivor is ensured, the operations are done solely by the former account holder. In other word, the customer whose name appearing first or earlier in the account opening form is authorized to solely operate the account during his lifetime. In the event of death of such account holder, balance is payable to survivor.
- Anyone or Survivor: Such accounts are opened when there are more than two account holders. The operations in the account and settlement of balance in the event of death of one of the account holders are done in the same manner as in case of E or S.
Joint Account Holders with Special Instructions: These types of bank accounts are more prevalent for corporate bank accounts where by the management wants to enforce internal controls based upon the materiality of the amount. In these accounts, the management specifies the limits upto which a single named account holder can sign a cheque and beyond which dual or even more than two account holders would be required to sign. For very high value transactions, it can also be mentioned that signature would be required from a specific named individual in addition to other named account holders. For example, for cheques upto Rs. 100,000 Mr. X can sign. Between Rs. 100,000 & 10,00,000 Mr. X & Mr. Y both need to sign. Any cheque beyond Rs. 10 lacs, signature of Mr. Z is required.
Via Letter of Authority / Power of Attorney Holder: In some accounts you can authorise a third party to operate your bank account in your name. In such cases, though the third party can sign the cheques, but can not deposit any cheques of their own into your account. Simply speaking only an authority to sign cheques or perform other functions such as create demand drafts, and other banking functions can be performed by the authority holder. Such accounts are more common in case of Non Resident Bank accounts (NRE / NRO) or current accounts. All the joint account holders needs to agree before creating an authority holder to the respective bank account.
Minor Bank account: According to Indian Majority Act, any one who is less than 18 years of age is classified as a minor. A minor above 14 years of age can open and operate saving bank account. However, a minor who is a student (literate) can generally open and operate bank accounts above 12 years of age. However any account operated by Minor themself would not be issued a cheque book – probably the reason behind that is – any contract with a Minor is not valid (as per Contract Act) and hence collection of cheques are not generally allowed in Minor operated bank accounts. A guardian can also open an account in the name of the minor and can operate it. Once the minor attains majority or dies, the guardian should not operate the account.