GB_Advance bibm

STUDY MATERIAL ON
GENERAL BANKING
FOR NCC BANK LIMITED
Module: General Banking (Advance Level)
January 30, 2020
Bangladesh Institute of Bank Management [BIBM]

Dhaka, Bangladesh
Study Material on “GB (Advance)” for NCC Bank Limited 1

Study Material on “Advance General Banking” for NCC Bank Limited
Chapter1: Introduction
1.1 Background
1.2 Specific Objectives of the Manual
1.3 Methodology of preparing the Manual
1.4 Coverage and Limitation of the Report
1.5 Organization of the Manual
Chapter 2: Banker Customer Relationship
2.1 Banker Customer Relationship – a Comprehension
2.2 Contractual Relationship
2.3 Special relationship
2.4 Customer Due Diligence for Banks
2.5 Termination of Banker–Customer Relationship
2.6 Relationship Banking
2.7 Customer Service
Questions and answer indications

Chapter 3: Opening and Operations of Bank Deposit Accounts
3.1 Bank Deposits
3.2 Deposit Products of NCC Bank Limited
3.3 Demand Deposit & Time Deposits
3.4 Common Documents required for Opening of Deposit Accounts
3.5 Special Types of Accounts and their Operational Procedures
3.6.1 Club/ Societies/ NGO/ Educational Institute/ Association
3.6.2 Account of Executors and Administrators
3.6.3 Trust Account
3.6.4 Accounts of Minors
3.6.5 Account of Illiterate Persons
3.6.6 Account of Local Authorities / Municipal Corporations etc.
3.6.7 Some Important Issues of Various Types of Account Operations
Questions and answer indication

Chapter4: Negotiable Instruments
4.1 Negotiable Instruments
4.2 Promissory Note
4.3 Bill of Exchange
4.4 Cheque
4.5 Types of Cheque and their Significance
4.6 Paying Banker
4.7 Collecting Banker
Chapter 5: Cash and Volt Management

5.1 Cash Management
5.2 Measures for Safe Keeping of Cash
Chapter 6: Clearing and Collection of Instruments: BACH, BACPS

6.1 Clearing
6.2 BACH
6.3 MICR
6.4 Responsibility of Presenting Bank
6.5 For Enhanced Attention for Suitable Risk Management Techniques

6.6 Operational Due Diligence
6.7 Responsibility of Paying Bank as Regards Settlement
6.8 Paying Bank’s Due Diligence
6.9 Processing at PBM (Participating Bank Module)
6.10 BACPS Threats
6.11 Value Date Clearing
6.12 Same Day Clearing
6.13 Real Time Gross Settlement (RTGS)
6.14 Glossaries related to clearing
Questions and answer indication

Chapter 7: Bills for Collection and Remittance
7.1 Definition
7.2 Inward Bills for Collection
7.3 Outward Bills for Collection
7.4 Remittance
Chapter 8: Bank Locker: Sizes, Opening a locker, Rent, Safety, and Alternatives
8.1 Locker Service
8.2 Definition of Bank Locker
8.3 Locker Facility
8.4 Controls over Access to Locker
8.5 Keys of Locker Handling
8.6 Un-let and Surrendered Locker Keys
8.7 Nomination for Return of Articles kept in Safe Custody with the Bank
Chapter 9: Risk Management

9.1 Risk Associated with General Banking
9.2 Other Risk
9.3 Importance of Risk Management in General Banking
9.4 Risk Control and Management
9.5 Monitoring and Reporting
9.6 Human Capital
Chapter 10: Laws and Regulations Related to General Banking (Relevant sections )
10.1 The Bank Companies Act, 1991: Relevant Issues of the Act
10.2 The Contract Act, 1872: Some Important Sections
10.3The Partnership Act, 1932: Relevant Issues
10.4 The Companies Act, 1994 (with amendments): Relevant Issues of the Act.

10.5 Negotiable Instrument Act, 1881
10.6 Money Laundering Prevention Act 2012: Relevant Issues of the Act.
10.7 Anti-terrorism Act, 2009: Relevant Issues of the Act.
10.8 The Bankers' Books Evidence Act (1891)
Chapter 11: Fraud, Forgeries & Malpractices Related to General Banking

11.1 Fraud
11.2 Forgery
11.3 Malpractice
Chapter 12: Leadership and Managerial Skills in Banking

12.1 Leadership and Managerial Skills
12.2 Leadership in Banks
12.2.1 Qualities of a Banking Leader
12.2.2 Qualities of a Good Bank Branch Manager
12.3 Employee Motivation
12.3.1 Motivating Bank Employees
12.4Work Stress
12.4.1 Work Stress in the Banking Sector
12.4.2 Some Strategies to Overcome Job Stress in the Banking
12.5 Changing the Attitude of Bank Employees
12.6 Employee Grievance
12.6.1 Handling Employee Grievance
Glossary
Appendix

List of Abbreviation
ACH Automated Clearing House
AAA Automated Accounting Advice
AOF Account Opening Form
ATM Automated Teller Machine
BACH Bangladesh Automated Clearing House
BAMLCO Branch Anti Money Laundering Compliance Officer
BEFTN The Bangladesh Electronic Funds Transfer Network
BFIU Bangladesh Financial Intelligence Unit
BIN Business Identification Number
BRPD Banking Regulations and Policy Division
CAMLCO Chief Anti Money Laundering Compliance Officer
CBS Core Banking Solution
CD Current Deposit
CD Capacity Development
CHIPS Clearing House Interbank Payment System
CRM Customer Relationship Management
CRR Cash Reserve Ratio
CSR Corporate Social Responsibility
CTR Cash Transaction Reporting
EFT Electronic Funds Transfer
FDR Fixed Deposit Receipt
GB General Banking
GOB Government of Bangladesh
IBCA Inter Branch Credit Advice
IBDA Inter Branch Debit Advice
KM Knowledge Management
KYC Know Your Customer

LD Local Draft
MISD Monthly Income Deposit Account
MSDS Monthly Savings Deposit Account
MICR Magnetic Ink Character Recognition
NI Negotiable Instrument
POA Power of Attorney
RB Receiving Bank
RJSC Registrar of Joint Stock Company
RTGS Real Time Gross Settlement
SB Scheduled Banks
SLR Statutory Liquidity Ratio
STR Suspicious Transaction Report
TDR Term Deposit Receipt
TIN Tax Identification Number
TT Telegraphic Transfer
TP Transaction Profile

TRAINING MANUAL ON GENERAL BANKING FOR NCC BANK LIMITED
CHAPTER 1
Introduction

1.1Background
The role of the commercial banks cannot be under emphasized due to its significant
contribution in the development of nation's economy as well as its growing importance to
enter in those sectors to fulfill the demand of the customers where services are inadequately
served or not reached. Commercial banks collect capital in terms of the deposit of the
general public and mobilize to the productive fields to activate the entire economic sector.
Commercial banks in Bangladesh economy are to face an increasing competition for their
business in coming days, like any other emerging market economies. Their business is no
longer remaining easy as they earlier. Bank provides security to the deposits of the general
public and organization on one hand and pays interest on such deposits on the other and
encourage saving. The General Banking department is the vital part for financial institution.
It is linked with all other department.
The world of banking and finance is changing very fast and banks are also transforming
themselves with the focus on knowledge. In many cases it is observed that the knowledge
base of our bank employees are not that much rich as is expected. Therefore, there is a need
for today’s bank employees to keep themselves updated with a new set of skills and
knowledge. Banks and technology are evolving so rapidly that bank employees must
continually seek new skills that enable them not only to respond to change, but also to build
competence in handling various queries raised by customers as well. Since general banking
holds the major part of overall banking activities, emphasis should have been given more on
the issues related to general banking.
The continuous changes which are taking place in the economic and financial surroundings
of the country, the areas needing special attention for improvement in the areas for ensuring
that the banks attract quality management and service, protecting and building up their
deposit base, growing their capacity for creating products in different areas of operation,
strengthening their ability to manage different areas of general banking, and enhancing their
ability for providing services as per customer needs.
A critical challenge of general banking, malpractices that take the form of irregularities or
non-compliance of procedures and fraudulent activities like bank fraud, money laundering
became a crucial concern for the banks. The common view that the main risk within general
banking is fraud, Money laundering etc,. The malpractices could be particularly detrimental
for banks that are widely perceived to be more fragile than other non-financial organizations.

As a measure to handle the challenges of malpractices and especially frauds, relevant
legislative measures have been made and stringent compliance requirements increased
tremendously. However, avoidance of the procedures and compliance requirements in
general banking could prove to be very challenging for banks. Thus all associated risks of
general banking must receive adequate attention of the policy makers of the bank.
Especially, senior management must possess knowledge and skills on risk management and
capacity development in general banking.
In the context of Bangladesh, general banking is the key component that consists of the
management of deposits (i.e., current deposit, savings deposit, short notice deposit, fixed
deposit, and recurring deposit), cash, honor cheques, clearing of cheques, customer services,
locker facilities and other ancillary services of the bank. General Banking Department is
considered as the direct customer service center. It is the starting point of all the banking
operations. Moreover, it opens new account, remits fund, takes deposit, issues bank draft and
pay order, issues debit and credit cards etc.
Alongside ensuring satisfaction of the customers, the efficiency level of the bankers in
general banking with due compliance of the laws and procedures is also very crucial. As
such, capacity development of all concerned officials of the banks is also matter to be
considered for handling general banking challenges effectively.
More specifically, banks must have specialized people having adequate knowledge base and
skills to facilitate general banking effectively with a view to maximize profit for the banks.
A group of senior bankers must also have adequate knowledge and skills to guide desk level
bank officials. Such skills are clearly connected with minimizing risks in general banking
and establishing or improving credibility of a bank. In such a circumstance, a customized
information manual for the service providing bankers could serve to a great extent.
1.2 Specific Objectives of the Manual
With this background in mind, the general banking manual targets to create and enhance
knowledge and skills amongst the employees of NCC Bank Limited. The specific objectives
of the manual are: one, to offer relevant information on the products and procedures of
general banking operations of banks; two, to offer pertinent data on the products and
procedures of general banking operations of banks with special reference to the NCC Bank
limited; three, to provide information on the status and changes in domestic laws and
regulations to general banking operations in Bangladesh; and four, to draw attention on

challenges and risks associated with general banking activities in Bangladesh for improving
effectiveness of general banking by the NCC Bank Limited.
1.3 Methodology of Preparing the Manual
Both primary and secondary data were collected to prepare the manual. Domestic set of laws
was summarized and relevant circulars related to general banking operations of the Central
Bank. To gather primary data, a questionnaire survey was conducted to have information on
the products and their nature and amounts of NCC Bank Limited. A number of general
banking experts were consulted in the process of formulation of the manual. The manual is
prepared keeping in mind the knowledge requirements of relatively senior level bank
executives of the NCC Bank Limited.
1.4 Coverage and Limitation of the Report
Broad areas of the manual are general banking activities of banks. Widely used general
banking related issues are covered in the guide. The manual also discusses the risk issues
and capacity development aspects that are especially connected with the skills of senior
management. Moreover a good number of questions have also been incorporated in this
manual indicating answer of the related chapters.
1.5 Organization of the Manual

The manual is organized under twelve chapters: after an introductory chapter with the
objectives and methodological issues, chapter 2 deals with the Banker customer relationship,
general relationship, and special relationship. Opening & operations of different bank
accounts and some other important issues of various types of account operation are
discussed in chapter 3. Chapter 4 is about Negotiable Instruments that mainly includes
different types of negotiable instruments, their features and characteristics and some other
important issues. Clearing and Collection of Instruments: BACH, BACPS Cash, and vault
managements, measures for safekeeping of cash are having been discussed in chapter 5
where as Bills Collection and Remittance has been placed in Chapter 6. Chapter 7 of the
manual covers about Cash and Vault Management and in chapter 8 Bank Locker and their
different issues have been discussed. In chapter 9 Risk Management along with risk
associated with general banking, and about risk control and management have been
incorporated. Chapter 10 covers Laws and Regulations Related to General Banking
(Relevant Sections). In chapter 11 Fraud, Forgeries & Malpractices Related to General
banking whereas about the Leadership and Managerial Skills in Banking has been
described.

CHAPTER 2
Banker Customer Relationship

2.1 Banker Customer Relationship – A Comprehension
Relationship between banks and their clients is fiduciary one. It is based on trust and bank
has to carry out their duties to the customer in utmost good faith and due diligence. Bank’s
supreme responsibility lies in protecting customers’ deposit and secrecy about customers.
Banks shall be impartial and non-discriminatory in their dealings with the customers. Any
favor or indulgence to any one client or group of client will be considered violation of
fiduciary relationship.
A bank is basically a financial intermediary. The significance of the banking system in the
development process invariably indicates the importance of commercial banks for the
purposes of economic development, since the operation of the whole banking system rests
mostly on the commercial banks. The essential function of a commercial bank is to act as an
intermediary between the savers and the borrowers. That is, they mobilize the financial
surpluses of the savers and allocate these savings to the credit worthy borrowers of the
different sectors of the economy. Thus, commercial bank deals with the wide array of
general banking like deposit collection, maintaining banking customer relationship,
providing efficient services to their customers with a view to maximize profit for the
organization. Banking in Bangladesh mainly governed by the Banking Companies Act, 1991
and also some other related laws.
Basically a banker-customer relationship starts with the opening of an account with the
bank. Bank accounts are opened basically in relation to Contract Act, 1872. Persons having
competency to enter into a contract may open an account with the bank. Any dispute
between two parties can be settled only on the basis of the nature of the existing relationship
between the two. As such, it is essential that a banker should know the exact relationship
between the banker and the customer.
The basic and perhaps most common relationship between a banker and his customer is that
of debtor and creditor. Besides, there are numerous kinds of relationship between the bank
and the customer. The relationship between a banker and a customer depends on the type of
transaction; products or services offered by bank to its customers. The bank has duties and
rights and the customer has, at the same time, obligations to his bank. The relationship of a
bank with its customers gives rise to important legal rights and duties quite apart from any
commercial considerations.

2.2 Contractual Relationship
In fact, the relationship between banker and customer is contractual in nature. Since bank
offers the variety of services to the customer, the relationship between the bank and the
customer vary according to the type of service rendered by the bank.
Relationship of Debtor and Creditor

Banker accepts deposits of money from his customers for the purpose of lending and
investment and repays it on demand as per the terms of the contract of deposit. In fact,
deposit accepted by the bank is technically money loaned out to the bank from the
depositors. Therefore, the general relationship between a depositor and the banker is a
relation of the debtor and the creditor. The depositors are creditors and the bank is the
debtor. However, the relationship between the banker and customer is directly opposite
when the bank lends money to its customer. The bank becomes the creditor and the customer
becomes the debtor.
Relationship of Trustee and Beneficiary

When a banker accepts items like securities or documents for safe custody of the
customers, the relation between the banker and customer is a Trustee and the Beneficiary.
The bank is the Trustee and the customer is the beneficiary.
Relationship of Lessor and Lessee

Similarly, when a customer hires a safe deposit locker from the bank, the relation between
the bank and the customer is lessor and lessee. The bank is the lessor and the hirer of safe
deposit locker is the lessee (tenant).
Relationship of Principal and Agent

When a bank collects cheques, bills and other instruments for customers, the relation
between the bank and customer is that of Principal and Agent. The bank also makes regular
payments of insurance premium rent etc. as per standing instruction received from the
customer. In the above cases also the relation between the bank and the customer is of
Principal and agent. The bank acts as the agent and customer the principal.
Relationship of Assigner and Assignee

An assignor is a person who transfers his security rights to a lender as collateral to the
money borrowed by him. The transfer of Life Insurance Policies, Supply bills etc. in the
name of the bank is examples of assignment. The bank on whose name security rights are

transferred by the assignor is called as assignee. On full payment of dues to the assignee, the
assignor can get the security re-assigned in his name.
Relationship of Bailor and Bailee

Bailment refers to delivery of goods by one person to another for some purpose under a
condition that the goods to be returned to depositor when the purpose is accomplished or
otherwise disposed of according to the directions of the person while delivering the goods.
The person delivering the goods is known as bailor and the person to whom goods are
delivered is called bailee.
2.3 Special Relationship
1. Rights of a Banker and
2. Obligations of a Banker
Rights of a Banker
It is not that the bank has only duties towards its customers; it too has certain rights to his
customers. The rights can broadly be classified as:
 Banker’s Right to Lien

 Banker’s Right to Set-Off
 Banker’s Right to appropriate payment
 Right to Charge Interest and Commission
 Right under Garnishee order
Banker’s Right to Lien
A lien is the right of a creditor in possession of goods, securities or any other assets
belonging to the debtor to retain them until the debt is repaid. The creditor (bank) has the
right to maintain the security of the debtor but not to sell it. There are three types of lien:
a) Right of Particular Lien and
b) Right of General Lien
c) Banker’s Lien
Right of Particular Lien: A 'particular lien' gives the right to retain possession only of those
goods in respect of which the dues have arisen. It is also termed as ordinary lien. If the bank

has obtained a particular security for a particular debt, then the banker's right gets converted
into a particular lien.
Right of General Lien: A 'general lien' gives the right to retain possession of any goods in
the legal possession of the creditor until the whole of the debt due from the debtor is paid.
Banker has a right of general lien against his borrower. General lien confers banks right in
respect of all dues and not for a particular due.
Banker’s Lien:A banker's lien is a legal right arise in many common law jurisdictions of a
bank to exercise a lien over any property in the custody of the bank as security for the
indebtedness of the customer to the bank. The bank has the right to seize and sell the
defaulting borrower’s property in its possession, after giving a reasonable notice but without
going through the foreclosure procedure.
Banker’s right to set-off

The banker has the right to set off the accounts of its customer. It is a statutory right
available to a bank, to set off a debt owed to him by a creditor from the credit balances held
in other accounts of the borrower. This right is applicable in respect of dues that are due and
are becoming due shortly. It is not applicable on future debts. It is applicable in respect of
deposits that are due for payment.
Banker’s Right to Appropriate payment
It is the right of the customers to direct his banker against which debt (when more than one
debt is outstanding) the payment made by him should be appropriated. In case no such
direction is given, the bank can exercise its right of appropriation and apply it in payment of
any debt.
Banker's right to charge interest and commission
Banker has an implied right to charge for services rendered and sold to a customer. Banker
charges interest on amount advanced, processing charges for the advance, charges
commission etc. depending on the terms and conditions of advance banks charge interest at
monthly, quarterly or semi-annually or annually. Banker charges commission for online
share trading.

Banker’s Right to Garnishee order
Garnishee Order is a court order instructing a garnishee (a bank) that funds held on behalf of
a debtor (the judgment debtor) should not be released until directed by the court.
Obligations of a Banker
i) Obligation to honour the customer’s cheques.
ii) Obligation to maintain secrecy of customer’s account.
iii) Obligation to maintain proper records.
Banker’s obligation to honour customer’s cheques:

When a customer of a bank issues cheque and demand money the banker must honour the
Customer’s cheque after the necessary verifications. The drawee (banker) of a cheque
having sufficient funds of the drawer (customer) in his hands must pay the cheque amount.
Bank’s liability for wrongful dishonor of cheque:

A banker should not refuse to pay customer’s cheque on unreasonable and improper
grounds. In such a case, the banker is liable to compensate the customer.
Banker’s obligation to maintain secrecy of customer’s Account:

The banker has an implied obligation to maintain secrecy of the customer’s account. He
should not disclose matters relating to the customer’s financial position since it may
adversely affect the customer’s credit and business.
Banker’s obligation to maintain proper records:

The banker should maintain the proper records of customer’s transactions. Any mistake of
maintaining the records, customer is not liable.
2.4 Customer Due Diligence for Banks
Supervisors are recognizing the importance of ensuring that their banks have adequate
controls and procedures in place so that they know the customers with whom they are
dealing. Adequate due diligence on new and existing customers is a key part of these
controls. Without this due diligence, banks can become subject to reputational, operational,
legal and concentration risks, which can result in significant financial loss.
2.5 Termination of Banker–Customer Relationship
Since banking is a service industry, it is all the more essential that good relationship is not
only created but also maintained by means of offering excellent personalized services.

As long as there is some sort of account either a deposit or a loan account, the relationship
would continue. However, the relationship would be terminated on the following
happenings:
 Customer’s Request
 Unclaimed Deposit Account
 Death of customer
 Insanity of the customer
 Insolvency of the customer
 Undesirable customer
 Attachment order issued by the income Tax authorities
 On receipt of Garnishee Order
2.6 Relationship Banking
Relationship banking enables banks to provide a cost-effective, win-win service to the

valued customers. Relationship banking emphasizes on managing relations among
depositors, borrowers, and regulatory bodies with an ultimate object to earn sustainable
growth in banking business. It is aimed at creating a long term, mutually beneficial and
exclusive problem solving relations between customers & bankers with a view to holding
loyalty of the customers. Side by side, relationship banking focuses on building solidarity
with the fellow banks and regulators.
2.7 Customer Service
Customer service has great significance in the banking industry. The banking system in
Bangladesh today has perhaps the largest outreach for delivery of financial services and is
also serving as an important conduit for delivery of financial services. While the coverage
has been expanding day by day, the quality and content of dispensation of customer service
has come under tremendous pressure mainly owing to the failure to handle the soaring
demands and expectations of the customers.
Customer service in banking is one of the most important ways to keep customers coming
back. It includes responding to customers, addressing questions and complaints in a
thorough and timely manner and interacting with customers through face-to-face meetings,
telephone, mail, fax and email. Most if not all bank employees are involved in some aspect
of customer service.

Good customer service is the heart of banking. Today banks have a wide variety of
competitors for business. Banks continually strive for improvements in this area. Examples
of such techniques include taking customer surveys and monitoring calls that come in
through the call center. Incentives, such as customer service awards, may be offered to
encourage staff members to improve the customer support they offer. The customer is the
most important person. The customer is not dependent on the banker - banker is dependent
on the customer - banker works for the customer.
Customer service should be projected as a priority objective of a bank along with its
profitability, growth and social responsibility and therefore the Managing Authority of
each bank/FI should have direct involvement with customer service quality. With this end
in view each bank shall form a separate framework for customer services and complaint
management. With a view to strengthening the corporate governance structure of the
bank/FI and also to bring about improvement in the quality of customer services of
the Banks/FIs, each bank/FI shall constitute Customer Service & Complaints Management
Cells as stated below:
At the head office/country office level this cell will be named as Central Customer Service
& Complaints Management Cell (CCS & CMC). It will be constituted under the direct
supervision of the Managing Director or the Chief Executive Officer (CEO)/Country
Manager of the bank. Of course, there are complaint cells in existence in the head
offices of the Banks/FIs at present. These complaint cells at the head offices of the
Banks/FIs will be renamed as CCS&CMC. It may be mentioned here that this cell will be
exclusively for dealing with the complaints & customer Service related matters. The
number of personnel of this cell will be determined by the Managing Authority of the bank.
The personnel of this cell will be the dignitaries and they will be delegated with
adequate power to settle the disputes with due diligence.
Functions of Branch Level Customer Service & Complaints

Management Desk (BLCS & CMD):
1. Branch Level Customer Service & Complaints Management Desk (BLCS&CMD) shall
deal with all the complaints directly received from the customers either in written
form or over telephone. It will also give patient hearing to those customers who
physically appear before the desk with complaints.
2. The BLCS & CMD shall also give reply to the customer-service-related queries of the
customers.

3. The BLCS & CMD shall maintain two separate registers to record the written and
telephonic complaints. Then it will take action on the complaints received on priority basis.
4. The BLCS & CMD shall prepare a monthly/quarterly statement or report in prescribed
format (Annex-C) showing the number of complaints received, resolved and
outstanding and send it to the ZCS &CMC within fifth of the next month/the quarter
ended.
5. The BLCS & CMD may refer any complex complaint to the ZCS & CMC for
further suggestion or resolution. The BLCS & CMD will keep correspondences with ZCS &
CMC for this purpose.
Policy for General Management of the Branches:
Banking system should be oriented towards providing better customer service and
therefore, Banks/FIs should periodically study their system and its impact on
customer service. Banks/FIs should also have a Managing Authority approved policy
for general management of the branches which may include the following aspects:
a) Providing customers with booklets containing all details of services and facilities
available at bank branches in Bengali and English.
b) Displaying indicator boards at all service counters in both English and Bengali.
c) Surprise inspection and survey of customer services.
d) Reviewing and improving existing security system in branches and ATM booths.
e) Providing enquiry counters at big branches.
f) Training of staff in line with customer service orientation.
g) Developing banking products or services keeping view to suitability and
appropriateness for general customers.
h) Annual survey of customer satisfaction and grievances resolution.
Code of Conduct:
Generally Code of conduct is a set of rules for employees’ personal behavioral
pattern, official decorum, dress code, environmental and disciplinary arrangement for
staff, stakeholders and stock holders in the banking premises set forth by Bank
Company. The purpose of the code of conduct is to create a sense of oneness
among a group of employees, customers and guests in spite of individual differences.
The aim of the code of conduct is also to develop a common perspective towards a
mission & vision of the company. A Code of Conduct acts as an internal watchdog and
memorandum of the basic requirements of appropriate professionalism within the
organizational culture. Exercising code of conduct helps to make customers happy and

improve long term banker-customer relationship. So each bank/FI shall formulate the basic
code of conduct for the employees and it will be applied in five essential areas (5Ps) as listed
below:
a. People - The team who serve the customers.
b. Premises - The location from which bankers serve and communicate with customers and
colleagues.
c. Papers - The documents which are used to provide and receive information.
d. Processes -The operation processes that enable bankers to delight customers.
e. Practices - The way in which bankers interact with customers.
Customer Charter:
Customer Charter is, in fact, a general statement of commitments for providing
banking services and necessary information to customers. This may be in the form
of written document, banner, poster, leaflets etc. that exhibit the names of banking
products and services available in the bank. It also contains road maps or indicators for the
customers to get services in the bank premises. For example, the indications of
Information desk, Customer Relationship Desk, Remittance Desk, Credit Desk etc.
may be displayed in the charter for the customers for tracing the service points easily.
The Charter will also include a list of customers’ rights & obligations to Banks/FIs. The
main objective of the “Customer Charter” is to make the customers conscious about
their general rights, obligations, grievance approach process and thereby help customers
taking their own decision. Copies of the Customer Charter should be available on
request to all customers at all branches, Customer-Service-Points and at bank's web site.
All Banks/FIs shall-
a) prepare and preserve their "Customer Charter" in their respective branches and
exhibit in their premises.
b) Inform, publish or display customers’ rights & obligations as well as Bankers’ rights &
obligations through their web site, leaflets, notice boards, posters or in any other
communication channels.
Services and Complaint Management Cells:
With a view to making the complaint lodgment easier banks/FIs shall display the contact
details including names, complete address, telephone number, fax number, email
address, etc. of the officials of CCS & CMC, ZCS & CMC and BLCS & CMD in the
prominent place of the branches.

b) display on their web-sites the contact details including names, complete
address, telephone number, fax number, email address, etc. of the officials of CCS
& CMC and ZCS & CMC.
Customer Awareness Program:

Now a days it has been observed that financial scams, financial frauds & forgeries, financial
crisis, financial corruptions and customer harassment have been incurring frequently
in financial sector with the development of E-banking (E- banking generally refers to
the provision of banking products and services through electronic channels such as the
personal computer, through land phone and mobile phone connections, or through
automated teller machines - ATMs, Point of Sales etc.). The primary reasons behind these
are identified as the information gap as well as the communication gap between
customers & bankers and the lack of awareness & financial education of customers. In
such a situation customer awareness is a key defense against fraud, forgery and
identity theft and security breach. That’s why bank/FI should take attempt to make
customers aware of and to make educated for financial literacy with a view to strengthening
customers’ knowledge and experience and thereby to reduce fraud, forgery and harassment.
Customer Awareness and Education Program for customers can be arranged for
providing customers with the knowledge and understanding of the wide range of banking
products and services. Thus, the customers will be aware and conscious of their own
rights and responsibilities, safety measure thereof independently. Besides, bank shall
continue monitoring off- line risks as well as online threats such as hacking, phishing,
identity theft etc. and reviewing security procedures day to day.
As a part of Customer Awareness Program bank/FI shall perform the activities as
stated below:
a. Banks/FIs shall publish or declare customers alert and precautionary message,
guidelines etc. on their products and services time to time through brochures, leaflets
and advertisement in communication channels on the following topics.
 Customer alert and precautionary message on general banking.
 Customer alert and precautionary message on Internet banking
 Customer alert and precautionary message on loan and advances.
 Customer alert and precautionary message on local and foreign remittances etc.

b. Banks/FIs shall arrange meeting, seminar, workshop or any other non-formal
programs periodically to convey their awareness message and alert tips to the
customers relating to their own banking products and services.
c. Banks/FIs shall also train up their customer-service-related officials to enhance their
efficiency, skill, knowledge, tact, technique for excellent customer services.
Complaint Management
Safeguarding the interest of depositors and other customers is a fundamental requirement in
the financial system. The bank-customer relationship is disrupted and complaints are
raised when interests of the customers are neglected. Unresolved complaints may cause
losses for the customers, or Banks/FIs. The publication of complaints through the media
may also damage the reputation of Banks/FIs in the public eye and can erode public
confidence in the financial system if complaints are not handled promptly with
proper procedures. Therefore, with a view to safeguarding the interests of bank customers
as well as fostering public confidence to the banking sector the Banks/FIs must have
an effective complaint management System for addressing complaints of their
customers with specific emphasis on resolving such complaints fairly and expeditiously.
The complaint management is a series of activities such as facilitating complaint
lodgment, developing complaint recording system, complaint resolution process, root
cause analysis of the complaints raised and necessary policy formulation. These are
illustrated below:
Complaint Lodgment Procedure:

a) Banks/FIs may facilitate the customers to lodge complaints by any available means
(for example, letter, telephone, facsimile, email, or in person) and the banks/FIs shall
not insist that complaints be necessarily made only in writing.
b) Electronic complaints lodgment system can be produced in the web portal of the
bank.
c) Banks/FIs may facilitate the customers to lodge their complaints at any branch of
the bank regardless the branch at which the customer opened an account or branch at which
the customer conducted a financial activity or transaction.
d) Banks/FIs shall accept complaints lodged by customers, or authorized representative of
the customers.

e) A description of the complaints handling system, or bank’s/FI’s prescribed form
for submitting complaints should be accessible/available to customers, via the banks/FIs
website, or through pamphlets and posters.
Complaint Recording
a) Banks/FIs must maintain Complaints Registers and records of complaints received.
The registers should include, but not be limited to the followings:
 Date of complaints received;
 Name and contact details of the complainants or authorized customer
representatives;
 Brief description of the complaints;
 Name and designation of the official, handled the complaints;
 Resolution status;
 Settlement date;
b) Banks/FIs are required to retain the detailed records of handling and resolution of
complaints.
Prioritization of Complaints:
Banks/FIs must prioritize the complaints on the basis of the gravity and sensitivity
of the matter involved. For this purpose, complaints received at any level of the banks/FIs,
shall be classified into the following categories and shall be marked as H.S. for Highly
Sensitive, S for Sensitive or G for General category on the complaints:
Complaint Resolution Process:
Complaint handling is one of the important functions in an organization for their
institutional reputation and existence. The Complaint Management Team should
follow a systematic procedure to settle the complaints against Banks and FIs. The
Complaint Resolution process requires at least the following five stages:-a)
Acknowledgment,
b) Screening of complaints
c) Departmental actions for resolution.
d) Appeal and review
e) Response and closure

Questions and Answer Indications
1. Define banker customer relationship and (2.1)

2. State the rights and duties of bank to their customers. (2.2)
3. Mention the customer’s obligations to his bank. (2.3)
4. Why customer due diligence for bank is required? (2.4)
5. How a banker customer relationship can be terminated. (2.5)
6. Define relationship Banking. (2.6)
7. State the contractual relationships that exist between banker and customer.
8. What is customer complaint management? State the customer complains
recording and resolution process.

CHAPTER 3
Opening and Operations of Bank Deposit Accounts

3.1 Bank Deposits
Deposit mobilization is an integral part of banking activity. Mobilization of savings through
intensive deposit collection has been regarded as the major task of banking. Money placed
into a banking institution for safekeeping. Deposits are kept in the various accounts in a
bank. Mostly the bank’s business is funded through deposits from retail and corporate
customers as well as call money from local banks. Other sources of banks fund are paid-up
capital, reserve & undistributed profit, borrowings. The management of each bank is aware
of the situation and it has already started diversifying sources of funds to reduce the
dependency on funds from other banks. Every bank has already introduced several deposit
schemes to attract deposits from various customers group. Many a banks are opening
branches all across the country to reduce dependence on urban deposits. Meanwhile, a
number of banks have built up its alternative channel infrastructure to offer the full suite of
ATM’s, POS, Internet Banking, Call center, SMS Banking for its customers.
3.2 Deposit Products of NCC Bank Limited
Different Liability products of the bank along with their features, Schedule of charges etc., are
described below.
Special Notice Deposit (SND)
STD is renamed as SND as per Bangladesh Bank Instruction.

Nature : 100% Time Deposit. Account holder can withdraw their deposits with prior notice to
the Bank.
Target : Any businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate
Group
bodies, Joint stock companies etc.
SND account may be opened in the name of Corporate Bodies, Joint Stock
Companies and also in the name of Adult individual or jointly who is/are mentally
sound.
Current Deposit (CD)
Nature : 100% Demand Deposit. Account holder can withdraw their deposits frequently
without any limit.
Target : Any businessman, firm, Limited Companies, Local Bodies, Corporation, Corporate
Group bodies etc.

CD account may be opened in the name of Firm, Corporate Bodies, Joint Stock
Companies and also in the name of Adult individual or jointly who is/are mentally
sound.
Savings Bank Deposit (SB)
Nature : Hybrid.10% is Demand and 90% is time Deposit. Account holder can withdraw their
deposits twice in a week up to a certain limit.
Target : Any Individual.
Group Savings Bank account may be opened in the name of Adult individual or jointly who
is/are mentally sound. It also be open in the name of illiterate persons and minor after
observing/completion of necessary formalities. In some cases SB Account may be
open in the name of Club, Society or similar Institution.
Conditions
 In case of Savings Bank A/c the depositor(s) may withdraw money from the account twice in a
week and may withdraw money up to 25% of the balance without notice but withdrawal money
exceeding 25%, 07(seven) days prior notice is required. If the depositor persistently withdraws
more than twice in a week or a sum exceeding 25% of the balance in the account without
notice, the depositor will not get interest for that month.
 If the balance is turn down below Tk.500 at any day of a particular month then he will not be
entitled of interest for that month.
 Considering the deposited amount of the first 6th date of each month, interest will be paid on the
minimum balance of the said month as per prescribed rate on June and December of each year.
Customer Benefits of SB/CD/SND Account
Wide network of Branches (121 Branches all over Utility payment service
Bangladesh)
MICR Cheque-book facility Debit card facilities
Opportunity to apply for - safe deposit locker facility Online banking service
Transfer of fund from one branch to another branch by Collection of cheques through
DD/TT/MT Clearing.
Collect foreign remittance in both T.C. & Taka draft SMS Banking facilities

Required documents (CD/SND/SB)
Individual account/Joint accounts

 Photographs of the applicant(S)
 Photograph(s) of nominee
 Copy of Photo ID-NID/DL/Passport
 Proof of address-Copy of utility bills/Physical verification etc
Partnership account
 Letter of partnership
 Partnership deed
Company account
 Certified true copy of Certificate of Incorporation or equivalent, details of the

registered office, and place of business;
 Certified true copy of the Memorandum and Articles of Association, or by- laws of
the client.
 Copy of the board resolution to open the account relationship and the empowering
authority for those who will operate any accounts;
 List of directors.
For Public Limited Company
 Certified true copy of Certificate of commencement
The above documents are mainly common documents. Additional documents

is required when and where is applicable.
SDS (Special Deposit Scheme)
Tenor : 01 and 03(Three) years.

Nature : 100% Term Deposit. Account holder can withdraw their deposit
(Principal amount) after expiry of maturity of deposit.
Target Group : Any individual person, businessman, firm, Limited Companies, Local
Bodies, Corporation, Corporate bodies etc.
Loan facility : In case Lending against pledge of SDS Receipt, interest have to be
charged against loan outstanding. This interest rate is fixed and

applicable in all cases without further consideration.
Payment of first : The duration of time between deposit and payment of first
dividend/interest dividend/Interest must be minimum 30(Thirty) days.
Mode of payment of : Encashment may be made by PO, DD or transferring to Account. No
monthly dividend cash payment will be allowed.
Premature encashment
Before 01(one) year After 01(one) year After 02(Tw0)

but before 02(two) year but before
years 03(three) years
Depositor will not be entitled to get monthly dividend Prevailing Interest Prevailing Interest
/ interest, so amount of dividend /interest paid earlier Rate of SB A/C Rate of SB
shall have to be adjusted from the net amount payable. A/C+0.5%
Fixed Deposit Receipt(FDR)
Tenor : 1 month, 3 months,06 months, 12 Month, 2 Year, 3 Year

Nature : 100% Time Deposit. Account holder can withdraw their deposits after
expiry of maturity of FDR A/C.
Corporate Deposit All concerned are requested to obtain permission from the EVP,
Treasury Division, HO, before booking/renewal of corporate deposit
for tk. 1.00 crore and above.
Target Group : Any individual person, businessman, firm, Limited Companies, Local
Bodies, Corporation, Corporate bodies etc.
Pre
Loan facility : In case of lending against lien of FDR account, interest at the rate of
3% above has to be charged outstanding. This interest rate is and
applicable in all cases without further consideration.
SSS (Special Savings Scheme) & DPS
Tenor : SSS-5 to 8 years and DPS-3 to 8 years

Nature : 100% Term Deposit. Account holder can withdraw their deposit
after expiry of maturity of deposit.

Target Group : Any individual person.
Loan facility : Loan may be allowed 80% of the deposited amount after 03 years.
Interest will be charged 3% above of the said SSS rate.
Penalty for failure to deposit : @2% per month per installment.(On due installment)
installment in due time
For issuance of duplicate
deposit book : Tk.100 for each book.
IETD (Instant Earning Term Deposit)
Period : 01 year(Fixed)
Nature : 100% Term Deposit. Account holder can withdraw their deposits after expiry
of maturity of Deposit.
Amount : Tk.1.00 lac and above but multiple of Tk.1.00 lac.
Rate of Interest : Existing rate of 12 months FDR – 1%
Payment of : Interest to be paid to the customer account after deducting necessary
interest charges/levies etc. at time of accepting deposit. For the purpose customer will
have to open/maintain account relationship with the branch.
Target Group : Retired personnel, housewives, widow and wage earners
Loan facility : Loan may be allowed against lien of the receipt upto 75 % of the face value,
interest at the rate of 3% above has to be charged outstanding.
Death of account : Due money shall be paid to nominee/legal heairs.
holder
Post mature : No auto renewal or no extra benefit for post mature encashment.
encashment
Before 06 months After expiry of 06 months

No interest on the deposited amount but interest Interest will paid at existing STD rate and
already paid at the time of opening account will interest already paid at the time of opening
be realized/deducted from the principal amount. account will be realized/deducted from the
principal amount.
Money Double Program

Tenor of the : 8 years 6 month that will make the Principal amount Double on Maturity

product (As per Instruction circular No.703/2016 dated Jan 2016 effect from1st Feb
2016)
Nature : 100% Term Deposit. Account holder can withdraw their deposits after
expiry of maturity of Deposit.
Amount : Tk.1.00 lac(minimum) and its multiple.
Condition : Single Transaction will not over 50 lac but any individual can open more than
one MDP A/C.
Rate of Interest : Interest to be kept in provision A/c until maturity. Interest to be paid/credited
into the A/c only at maturity.
Loan facility : Loan may be allowed against MDP receipt up to 80% of the Face value at an
interest rate of 16.50% p.a. following other rules and regulations applicable
for SOD(FO)
Before 01(one) year No interest will be paid

After 01(one) year but before 02(two) years Prevailing Interest rate of SB A/c
After 02(Two) years but before 03(three) years Prevailing Interest Rate of SB A/c +0.50%
After 03(Three) years Prevailing Interest Rate of FDR for 02 years.
Note : No auto renewal and no extra benefit for Post Mature Encashment.
NCC Bank Youngster Account
Nature : It is basically a Savings Account for school and high school going students
of Bangladesh with added values and benefits.
Age : Any Bangladeshi student enrolled in an enlisted school or high school with
Bangladeshi government within the age of 18 years.
Authentication : Photographs of account holder and parents/legal guardian is attested by
school authority.
Opening deposit : Initial deposit not less than BDT 100.
Account : Zero balance not allowed.
continuation
balance
Minimum deposit : Not less than BDT 50 and maximum any amount.

Annual service : Free
charge
Withdrawal : Any number of withdrawal and fund transfer is allowed.
frequency
Cheque : Joint signature of account holder and either of any parents or legal guardian
endorsement is mandatory.
Student A/C to : Account holder can continue it until attaining 18 years. After 18 years
regular SB A/C account holder may apply for regular savings account with closer of NCCB
Youngster Account.
Nomination of : Guardians name and signature must be attested by both of the parents on
legal guardian BDT 150 non judicial stamp and notarized.
Nominee : Mandatory and selected by both of the parents or legal guardian.
Eligibility : Any Bangladeshi student enrolled in an enlist school or high school with
Bangladeshi Government within the age of 18 years can open the account
at his/her name with Parents or the legal guardian’s written consent by
putting signature at account opening form.
NCC Bank Youngster Moneyplant Scheme
Nature : It is basically a recurring deposit account for school and high school
going students of Bangladesh with added values and benefits.
Age : Any Bangladeshi student enrolled in an enlisted school or high school
with Bangladeshi government within the age of 18 years but on maturity
date the age of the applicant must below 18 years.
Authentication : Photographs of account holder and parents/legal guardian is attested by
school authority.
Rate of interest : Average rate is 10% p.a. Interest will be calculated as regular as SSS
effective from 01.12.2015
Installment size : Minimum monthly installment is BDT 250 and Maximum is BDT 10,000.
Maximum number : One can open maximum 05 YMS of different or same installment amount
of account in account holder’s name or in joint name with account holder’s
sibling’s name provided sibling must know how to write his/her own
name.
Maturity tenure : 05/8/10 years but the maturity period shall not exceed up to the age of 18

years of account holder.
Penalty for default : 2% of the installment size or minimum Tk.10
installment
Premature : Before 06 months-No interest will be paid.
encashment After 01 year bur before 05 years- existing savings rate.
Transfer of : Respective youngster account. But after completion of 18 years of the
matured value account holder, matured value shall be transferred according to the
written instruction of the account holder along with both parents/Legal
guardian.
Eligibility : Must be NCCB Youngster account Holder with written consent from both
the parents/Legal guardian but on maturity the age of the applicant must
be below 18 years.
NCC Bank Youngster Maximus Account
Nature : 100% Term Deposit. It is basically a fixed deposit account for school and
high school going students of Bangladesh with added values and benefits.
Age : Any Bangladeshi student enrolled in an enlisted school or high school with
Bangladeshi government within the age of 18 years but on maturity date the
age of the applicant must below 18 years.
Maximum : 05 (but total amount must not Cross BDT 1,000,000.00) different account are
number of allowed at a single name or in joint name with account holder’s sibling’s
account name provided sibling must know how to write his/her own name.
Maturity tenure : Minimum 3 years but the maturity period shall not exceed up to the age of 18
years of account holder.
Premature : Before 06 months-Existing NCCB savings rate
encashment After 06 months bur before 1 year-2% above on existing savings rate
Transfer of : Respective youngster account. But after completion of 18 years of the

matured value account holder, matured value shall be transferred according to the written
instruction of the account holder along with both parents/Legal guardian.
Eligibility : Must be NCCB Youngster account Holder with written consent from both the
parents/Legal guardian but on maturity the age of the applicant must be below
18 years.
Documents required opening any youngster account

 School Attested Photograph of Applicant and both the parents,
 School Enrolment Proof,
 Both the parents attested photograph of Nominee,
 Copy of Birth certificate of the applicant
 National ID Card/ Passport/Driving License of both the parents or legal guardian.
 Birth registration certificate of the nominee.
Wage Earners Welfare Deposit Pension Scheme(WEWDPS)
Tenor : 5 years
Nature : 100% Term Deposit. Account holder can withdraw their deposits
after expiry of maturity at lump sum or monthly pension for further 10
years.
Monthly installment should be paid through foreign remittance.
Eligibility : Expatriate Bangladeshi can open this account in his own name or in
the name of his nominate person/spouse
Penalty for default : @1% per month per installment. (On due installment).Account will be
installment closed if 06 installments is overdue.
In case of death of : Nominee/Heirs will be entitled for the amount. In that case applicable
account holder interest will be existing savings rate +1%.If the account holder is died
during the pension period then nominee/heirs will be entitled for the
pension.
Before 01(one) year After 01(one) year but After 03(Three) years
before 03(three) years
Depositor will not be Prevailing Interest Rate Prevailing Interest Rate of SB A/C+1%
entitled to get interest. of SB A/C

Required documents
Attested photocopy of passport and work permit.
3.3 Demand Deposit & Time Deposits
Traditionally banks in Bangladesh have two types of deposits, namely Demand Deposits and
Time Deposits.
Demand Deposit: All Current Deposits and a small portion of saving Deposit (10%) are
termed as demand deposit. Such deposits are withdraw able on demand.
Time/Term Deposit: Time deposits are repayable on maturity and usually interest bearing.
Time deposits may be of:
a) Fixed Deposits
b) Short Notice Deposits
c) Recurring Deposits
d) Large portion of Saving Deposits (90%)
The period of the deposit and rate of interest applicable to the deposit are matters to be
agreed between the depositor and the bank under the terms of the deposit.
3.3 Common Documents required for Opening of Deposit Accounts
All the essential features of a valid contract must be present when a banker opens an
account. Every person can open an account with the bank that is competent to contract as per
Contract Act, 1872.
For opening each type of account some documents are commonly required which are
mentioned below:
a) Duly filled in Account Opening Forms
b) Proof of identify, verification of the address of the customer
c) Specimen Signature Card
d) Expected Transaction Profile (ETP) Form
e) Duly filled in Know Your Customer Form
f) Photographs of the constituents

g) Photographs of the nominee(s) if any.
h) Other necessary documents depending on the nature of the customer.
i) FATCA
As regards genuineness of the document/papers provided by the customer these may be

verified from the concerned authorities if necessary:
List of documents Issuing Authority
Current Valid Passport Passport Office
Up-to-date TIN Certificate Tax Authority
Valid Driving License Bangladesh Road Transport Authority

(BRTA)
Voter ID Card Office of Election Commission (EC)
Armed Forces ID Card Employer or their delegate
A Bangladeshi Employer ID Card bearing the Employer

photograph and signature of applicant
A certificate from any local government UP Chairman / Ward Commissioner

organs such as Union Council Chairman,
Ward Commission etc. (In this case the
certifier should attest applicants’ photograph
along with signature).
Trade License with photograph can be Local Govt. Authority

accepted for individual’s identification
In addition to the above documents, interview of the customers, introducer from acceptable
person to the bank to be obtained while opening the accounts. Bank should not allow any
transaction unless the address in confirmed.
3.4 Special Types of Accounts and their operational procedures
Apart from Individual and Joint A/Cs, Proprietorship A/C, Partnership account and
Company / Corporate accounts there are some other special types of accounts also. While
opening these accounts required documents and their modus operandi are as under:
3.6.1Club/ Societies/ NGO/ Educational Institute/ Association

a. Copy of the Constitution / Byelaws / Deed registered with the competent registration
authority of Government of Bangladesh (GOB).
b. Copy of the Registration Certificate issued in favor of the Organization by competent

registration authority of GOB.
c. Extract of the resolution, which intended to open the A/C relationship and the
empowering authority for those who will operate account with specimen signature
attested by the President/ Executive Director/ Head of the Educational Institution.
d. Audited financial statements for latest 3(three) years but in case of a newly constituted
organization its projected financial statements (if any).
e. Copy of latest Annual Returns submitted to GOB authority by the organization.
f. The personal identity of all the Members of Executive Committee to be established by

any of the document as mentioned in individual / joint customer category.
g. Two recent color photographs of all the signatories duly attested by the President/
Executive Director/ Head of the Educational Institution or any valued customer having
Current Account.
h. The personal identity of all key persons of the organization to be established by any of
the document as mentioned in individual / joint customer category.
i. Copy of Tenancy Agreement to be attested by the President/ Executive Director/ Head

of the Educational Institution where Registered Office of the organization housed at a
rented building.
3.6.2 Account of Executors and Administrators
Executors and administrators are persons who are appointed to conduct the affairs of a
person after his death. A person to whom the execution of a will is entrusted by the deceased
(testator) is called the executor of the will. The executor has to obtain the confirmation of the
will from the court in the form of a letter of probate. If a person dies without leaving a will
(intestate), the court appoints a person to look after the property under a letter of
administration. The persons appointed to wind up and distribute a Deceased’s Estate are
called personal Representatives. Personal Representatives appointed by the Court are called
Administrators.
Both the executor and the administrator perform the same duties, i.e., to realize the assets of
the deceased and to pay off his debts. The executor is appointed by the will. His powers and

authority are vested therein. He has to act according to the directions given in the will, but he
is required to obtain a probate (official confirmation of the will) from the court.
Operational procedures
a. Executors and Administrators should sign Account opening Form and Specimen
Signature Card while opening account in their names.
b. Branches should not open the accounts of Executors / Administrators without prior
permission from the Head Office.
c. Executors / Administrators Accounts may be opened before probate is granted, but
only for credits until receipt of the probate.
d. The Account Opening Form should be signed by all the Executors, to whom probate
has been granted by a competent Court or by all the Administrators if there is more
than one Administrator.
e. While opening the account, the probate or the Letter of Administration should be
registered with the Bank by the Executor / Administrator(s) and an attested copy
thereof should be retained with the Account Opening form. Also establish the identity
of the Executor / Administrator.
f. While opening the account, clear instructions to determine which of the Executors /
Administrators is authorized to operate on the account should be obtained under the
signatures of all the Executors / Administrators. If there is more than one Executor /
Administrator.
g. The Executors / Administrators should neither be allowed to transfer funds from the
account of the Estate to their personal accounts nor should they be allowed to borrow
from the Bank in their personal names against securities belonging to the Estate
Account.
h. These Accounts must be carefully monitored, as personal representatives and executors
may only exercise their powers for a limited period of time.
3.6.3 Trust Account
As regards Trusts, Trustees, Trust deed and other relevant issues are governed by ‘Trust Act,
1882’. A ‘Trust’ is an obligation annexed to the ownership of property, arising out of
confidence reposed in a person / group of persons and accepted by him / them for the benefit
of another or of another and the owner. The person who reposes or declares confidence is
called the author of the trust. The person who accepts the confidence is called the trustee.
The person for whose benefit the confidence is accepted is called the beneficiary. The
subject matter of the trust is called the trust property or Trust Money. The beneficial interest

of the beneficiary is his right against the trustees as owner of the trust property. The
instrument by which the trust is created is called the Trust Deed.
While opening an account in the names of persons in their capacity as trustees the banker
should take the following precautions:
a) The banker should thoroughly examine the Trust Deed appointing the applicants as the
trustees. The Trust Deed contains the names of the trustees, power vested in them for
administering the trust property and other terms and conditions.
b) The trustees are authorized to act jointly and are not competent to delegate their
powers unless the Trust Deed authorizes them to do so.
c) The banker should examine the trust deed to ascertain the powers and functions of the
trustees.
d) In case of two or more trustees, the banker should ask for clear instruction regarding
the person or persons who shall operate the account.
e) In the absence of such instruction all the trustees must sign the cheques, etc., because
the estate is placed under their joint charge.
f) If one or more of the trustees dies or retires, the authority vested in the remaining
trustees depends upon the provisions of the Trust Deed.
g) When all the trustees are dead, new trustees may be appointed by the court.
h) The insolvency of a trustee does not affect the Trust property and the creditor of the
trustee cannot recover their claims from such property.
i) The banker should take all possible precautions to safeguard the interest of the
beneficiaries of a trust, failing which he shall be liable to compensate the latter for any
fraud on the part of the trustee.
j) The trustees may borrow money from the banker and pledge or mortgage the Trust
property only if the Trust Deed specifically confers such power on them.
The banker should, therefore, grant loans to the trustee after thorough examination of
the borrowing powers as given in the Trust Deed.
3.6.4 Accounts of Minors
As per Contract Act, 1872 since a contract with a minor is void; no account in the name of a
minor shall be opened. An account may be opened in the name of a minor jointly with parent
or guardian. The account must be titled as “Minor Account. “The following terms &
conditions shall be followed in maintaining & operating minor account:

a) The date of birth of the minor and the date when s/he attains majority will be recorded
on the Account opening Form and Account Opening Register.
b) Before authorizing a legal guardian to open an account in the name of a minor, the
appointment order issued by Court in his/her name should be examined, and a copy
thereof retained with the Account Opening Form.
c) No overdraft should be allowed on a minor’s account.
d) Where a natural / legal guardian operates a minor’s account, this account should be
closed on the minor’s attaining majority. The outstanding balance should be
transferred to a new account to be operated upon by the erstwhile minor as per a fresh
mandate under his authority. Verification of his signature should be obtained from the
natural / legal guardian.
3.6.5 Account of Illiterate Persons
a. Accounts of illiterate persons may be opened on proper introduction. Such persons will
put their thumb impression on the Account opening form (Advice of New A/c),
specimen signature card etc. in presence of the Manager /Sub-Manager and the
Introducer who will attest the thumb impression mentioning his Current Account
Number.
b. Two copies of passport size photographs of the Account holder should be obtained
duly attested by the Introducer and admitted by the Authorized officer of the Branch,
one of which should be kept attached with the specimen signature card.
c. A letter of undertaking shall be obtained from the Account holder to the effect that he
will not operate on the a/c unless he personally comes to the Bank and put his thumb
impression on the cheques in presence of the Bank Manager/Sub-Manager who will
attest the same on verifying the photograph of the depositor on Bank’s record.
d. The Manager/Sub-Manager should record a Certificate to this effect on the back of the
cheque. Precautionary measures should be taken to see that no cheque bearing thumb
impression and presented through clearing is paid by the Branch.
3.6.6 Account of Local Authorities / Municipal Corporations etc.
a. The accounts of any government or semi government organizations or a local body

may be opened on obtaining the copy of the status or any other law by which the body
was created and is governed.
b. Such accounts should not be opened or in contravention of the provisions of that

statute or law.

c. Along with a certified copy of the statute, the following documents are required to
open such an account:
i) Account Opening Form
ii) Specimen Signature Card
iii) Mandate, which will authorize the person(s), to operate the Account.
3.6.7 Some Important Issues of Various Types of Account Operations
KYC: The adoption of effective KYC standards is an essential part of banks' risk
management policies. Banks with inadequate KYC program may be subject to significant
risks, especially legal and reputational risk. Sound KYC Policies and Procedures not only
contribute to the bank's overall safety and soundness, they also protect the integrity of the
banking system by reducing money laundering, terrorist financing and other unlawful
activities.
KYC procedures refers knowing a customer physically and financially. This means to
conduct an effective KYC, it is essential to accumulate complete and accurate information
about the prospective customer.
The verification procedures establishing the identity of a prospective customer should

basically be the same whatever type of account or service is required. It would be best to
obtain the identification documents from the prospective customer which is the most
difficult to obtain illicitly. No single piece of identification can be fully guaranteed as
genuine, or as being sufficient to establish identity, so verification will generally be a
cumulative process. The overriding principle is that every bank must know who their
customers are, and have the necessary documentary evidences to verify this.
CDD: Customer Due Diligence (CDD) combines the Know Your Customer (KYC)
procedure, transaction monitoring based on the information and data or documents collected
from reliable and independent sources. The CDD obligations on banks under legislation and
regulation are designed to make it more difficult to abuse the banking industry for money
laundering or terrorist financing. The CDD obligations compel banks to understand who
their customers are to guard against the risk of committing offences under MLPA, 2012
including 'Predicate Offences' and the relevant offences under ATA, 2009. Therefore, banks
should be able to demonstrate to their supervisory authority to put in place, implement
adequate CDD measures considering the risks of money laundering and terrorist financing.
Such risk sensitive CDD measures should be based ona) Type of customers; b) Business

relationship with the customer; c) Type of banking products; and d) Transaction carried out
by the customer.
EDD: Banks should conduct Enhanced CDD measures, when necessary, in addition to
normal CDD measures. Bank should conduct Enhanced Due Diligence (EDD) under the
following circumstances:
 Individuals or legal entities scored with high risk;
 Individuals who are identified as politically exposed persons (peps), influential persons
and chief executives or top level officials of any international organization;
 Transactions identified with unusual in regards to its pattern, volume and complexity
which have no apparent economic or lawful purposes;
Enhanced CDD measures includes:
 Obtaining additional information on the customer (occupation, volume of assets,

information available through public databases, internet, etc) and updating more
regularly the identification data of customer and beneficial owner.
 Obtaining additional information on the intended nature of the business

relationship.
 Obtaining information on the source of funds or source of wealth of the

customer.
 Obtaining information on the reasons for intended or performed transactions.
 Obtaining the approval of senior management to commence or continue the

business relationship when applicable.
 Conducting regular monitoring of the business relationship, by increasing the

number and timing of controls applied and selecting patterns of transactions that
need further examination.
 Making aware the concerned bank officials about the risk level of the customer.
Politically Exposed Persons (PEPs): It refer to “Individuals who are or have been entrusted
with prominent public functions by a foreign country, for example Heads of State or of
government, senior politicians, senior government, judicial or military officials, senior
executives of state owned corporations, important political party officials.”

The following individuals of other foreign countries must always be classed as PEPs:
i. heads and deputy heads of state or government;
ii. ii. senior members of ruling party;
iii. iii. ministers, deputy ministers and assistant ministers;
iv. members of parliament and/or national legislatures;
v. members of the governing bodies of major political parties;
vi. members of supreme courts, constitutional courts or other high-level

judicial bodies whose decisions are not subject to further appeal,
except in exceptional circumstances;
vii. heads of the armed forces, other high ranking members of the armed
forces and heads of the intelligence services;
viii. heads of state-owned enterprises.
CDD Measures for PEPs: Banks need to identify whether any of their customer is a PEP.
Once identified banks need to apply enhanced CDD measures that is set out in 6.3 of this
guidelines. Moreover, they need to perform the following-
(a) Banks have to adopt the Risk Based Approach to determine whether a customer or the
real beneficial owner of an account is a PEP;
(b) Obtain senior managements’ approval before establishing such business relationship;
(c) Take reasonable measures to establish the source of fund of a PEP’s account;
(d) Monitor their transactions in a regular basis; and
(e) All provisions of Foreign Exchange Regulation Act, 1947 and issued rules and
regulations by Bangladesh Bank under this act have to be complied accordingly.
‘Influential persons’(IPs): It refers to, “Individuals who are or have been entrusted with
prominent public functions, for example Heads of State or of government, senior politicians,
senior government, judicial or military officials, senior executives of state owned
corporations, important political party officials.” The following individuals must always be
classed as Influential persons:
(a) Heads and deputy heads of state or government;

(b) Senior members of ruling party;
(c) Ministers, state ministers and deputy ministers;
(d) Members of parliament and/or national legislatures;
(e) Members of the governing bodies of major political parties;
(f) Secretary, Additional secretary, joint secretary in the ministries;
(g) Judges of supreme courts, constitutional courts or other high-level judicial bodies whose
decisions are not subject to further appeal, except in exceptional circumstances;
(h) Governors, deputy governors, executive directors and general managers of central bank;
(i) Heads of the armed forces, other high ranking members of the armed forces and heads of
the intelligence services;
(j) Heads of state-owned enterprises;
(k) Members of the governing bodies of local political parties;
(l) Ambassadors, chargés d’affaires or other senior diplomats;
(m) City mayors or heads of municipalities who exercise genuine political or economic
power;
(n) board members of state-owned enterprises of national political or economic importance.
Mandate: A mandate is an authority given by the account holder in favor of a third person
to do certain acts on his behalf. An account holder issues this with a direction to banker
authorizing the person to operate the account on his/her behalf.
Power of Attorney: It is a document executed by one person called donor or principal in

favour of another person called done or agent to act on behalf of the former strictly as per
authority given in the document. Power of Attorney is of two types:
i) Specific i.e. power given for a specific purpose
ii) General i.e. general authority to operate on behalf of the giver for a length of
time.
Power of Attorney, when presented to the Branch, should be scrutinized on the following
points:

a) It is regular (i.e. that it is operated exactly within the specific objects laid down).
b) It is still in force.
c) It is definite and not conditional or provisional.
d) The identity of the attorney is verified.
e) It is not restricted by such conditions as “during my absence” or during the period of my

inability to attend”. These restrictions are not acceptable and such a power of Attorney
should not be witnessed.
f) It is stamped in accordance with the provisions of the Stamp Act applicable in the area
of operation.
g) It covers the purpose for which it is tendered, especially with regard to the opening of
the account and the borrowing powers. The authority embodied in a Power of Attorney
must be rigidly interpreted.
Where the identity of the executants is not known, a Notary Public, or the matter to be
referred to supervising authority should attach his signature.
Cancellation of Power of Attorney

The Power of attorney is cancelled / terminated under the following circumstances:
a) When the Principal is notified as insane, insolvent or deceased.
b) When the notice of cancellation of Power of Attorney is received from the Principal.
c) At the expiry of the period it covers.
d) On completion of the purpose for which it was drawn up.
Insolvency of Joint Account Holder: The insolvency of the joint account holders
terminates the joint relationship. In such an event, all operations on the joint account should
be stopped unless fresh instructions are received from the remaining solvent account holders,
duly signed by them jointly with the official assignee of the insolvent account holder.

Insanity of Joint Account Holder: Insanity of a joint account holder has the same effect on
the account as insolvency. The balance in the account is held to the order of remaining
account holders jointly with the receiver of the insane account holder.
Dispute between Joint Account Holders: It is always advisable to have a clear instruction
from the joint account holder duly signed by them while opening the account to avoid any
complicacy in making payment that may arise as a future dispute by any one of the joint
account holder.
Garnishee Order: Garnishee order refers to the order issued by a court attaching the funds
of the judgment debtor (i.e., the customer) in the hands of a third party (i.e., the banker). The
term ‘garnishee’ refers to the person who has been served with the order. This Garnishee
proceeding comprise of two steps. As a first step ‘Garnishee Order Nisi’ will be issued.
’Nisi’ means ‘unless’. In other words, this order gives an opportunity to the banker to prove
that this order could not be enforced.
If the banker does not make any counterclaim, this order becomes an absolute.
This ‘Garnishee Order absolute’ actually attaches the account of the customer.
If it attaches the whole amount of a customer’s account, then, the banker must dishonor the
cheque drawn by that customer. He can honor his cheques to the extent of the amount that is
not garnished. Hence, the banker should go through the terms of the order very carefully.
Garnishee Order - Banker’s Responsibilities
Payment of cheques: In Cash payment of cheques, if order is received after debit of

account, but before payment of cash, better course would be to refuse payment, with
appropriate objection. While in case of cheques received in clearing, order received before
the stipulated returning time of clearing, and then the cheques must be returned. If the
transfer of amount, internally is done in another customer A/C the credit can be cancelled
and cheque be returned unpaid, provided credit is not advised.
Right to set-off: When a bank has a prior right to set-off then the bank is not bound by the
garnishee order where lien is marked on Fixed Deposit receipts, it cannot be attached by this
order. However the fact of right off should be intimated to court and order must be vacated.
It should be noted that any excess over the lien marked is attachable by the garnishee order.

Joint Accounts: A garnishee order received against a joint account should clearly specify
the full details of the account. This should include specifying all the names of the joint
account holders against whom the order is served. If the order mentions only one of the joint
accounts as judgment debtor, a joint account is not attached. Reference should immediately
be made to the Head Office seeking their instructions in such cases.
Trust accounts: The outstanding in the trust account cannot be attached, if the judgment-
debtor has deposited the money as a trustee.
Partnership Accounts: The personal account of a partner can be attached for the firm's debt
because partners are jointly and severally liable for the firm's debts. But the firm's account
cannot be attached for individual debts of the partners.
Liquidator: When a company is the judgment-debtor, an order attaching the accounts of the
liquidator cannot be passed, because the money does not belong to the company but to the
liquidator.
When the garnishee order does not name the customer correctly or with sufficient
accuracy, to enable the bank to identify the account in its books, the bank is not bound to
act upon it and is not responsible for passing cheques till the order is amended.
In cases where customer is having more than one accounts in the bank's branch, one is in
debit and the other is credit balance, the net result if in credit can be attached. The order
will not attach only the credit balance account. But if the debit balance is in a loan account,
which has not been recalled by the bank, on the date of service of order, credit into
another account cannot be adjusted.
The bank cannot appropriate the credit balance towards the contingent liabilities of the
customer, when a garnishee order is served.
Right of set-off: A banker, like other creditors, possesses the right of set-off, which enables
him to combine two accounts in the name of the same customer and adjust the debit balance
in one account with the credit balance in the other. This right to combine two accounts is
known as the right of set-off.
Minor as Partner: While opening the account of a partnership firm in which a minor has
been admitted as partner, the date of birth of the minor should be recorded on the Account
Opening Form. However, the minor is not liable to the liabilities of the firm. Ordinarily, a
minor should give notice within a specified time on the attaining majority or on his obtaining
knowledge that he is admitted to the benefits of a partnership, that he has elected to be liable

or not to be liable as a partner in the firm. If he fails to give notice, he becomes the partner
after the expiry of the specified period. Branches should consult the local lawyer to
determine the period within which a minor should elect to become a partner after attaining
majority and should obtain his signature if the minor fails to give notice after the expiry or
the specified period.
Dormant Accounts
Accounts in which no operation either deposit or withdrawal takes place for a period of one
year should be treated as inoperative account and thereafter these accounts to be transferred
to “DORMANT” account. The first withdrawal from such account should be allowed with
prior permission from the Manager / Sub-Manager only when the account holder personally
approaches for the purpose and after being properly satisfied about the identity of the
account holder. The account should be retransferred to Regular Client/s A/c Ledger and then
operation be allowed.
Reactivating Dormant Accounts
a) Normal operations are not expected in Dormant Accounts. If a cheque is presented for
payment in a Dormant Account is should invariably be referred to the Manager /
Authorized Officer of the account Branch, who should satisfy himself as to the
genuineness of the drawing.
b) Customer may request to account Branch for activation of his/her dormant account at
first for verifying the genuineness.
c) Account activation in the system is customer-initiated debit to the account. The account
will be regular at the end of day processing of the debit transaction date.
Deceased Accounts
As soon as any authenticated information is received by the bank as to the death of a
constituents, the operations of the concerned account is to be stopped immediately. Since
then the account would have been termed as deceased account. The procedures of handling
such account are described below:
Application of Interest in Deceased Accounts: As per Bangladesh Bank BCD Circular # 18
dated 27th May 1984, the Scheduled Banks are advised to follow the following Guidelines in
connection with application of interest on Deposit and Loan account of the Deceased.
Savings Bank Account: Interest on the balance of Savings Bank Accounts will be paid upto
the date of withdrawal / closing of the accounts as admissible under Savings Bank Accounts
rules, irrespective of the date of expiry of the depositor.
Term Deposit Accounts: Premature encashment: In such cases deposit should be deemed to
have been made up to the date of withdrawal and not up to the date of death. Interest should

be paid and recovery of penal interest made in accordance with prevalent instructions
regarding premature encashment.
Encashment at Maturity: Interest should be paid up to the date of Maturity at the rate
applicable for the relevant TDR.
Encashment beyond Maturity: Interest up to the period of maturity should be paid at the
rate applicable for the relevant TDR. Interest for the period beyond the date of Maturity upto
the date of withdrawal should be paid at the rate applicable for the Savings Bank Accounts
with checking facility.
Nominee
Bank account holders having deposit accounts in their individual names or in joint names of
two or more individuals can appoint a nominee to their accounts. A person who receives the
benefit in case of death of the account holder is a nominee. The account holder(s) chooses or
nominates his/her nominee at the time of opening the bank account. The account holder can
nominate one or more person as his/her nominee.
Nomination is a facility that enables a deposit account holder(s) (individual or sole
proprietor) or safe deposit locker holder(s) to nominate an individual, who can claim the
proceeds of the deposit account(s) or contents of the safe deposit locker(s), after the death of
the original depositor(s) or locker holder(s). The benefit of nomination is that in the event of
death of an account holder(s) or locker holder(s), the bank can release the account proceeds
or contents of the locker to the nominee(s) without insisting upon a Succession Certificate,
Letter of Administration or Court Order and the bank's liability is duly discharged on
payment to the Nominee.
As regards Choice for the payment of deposited money, The Bank Company Act, 1991under
sec.103 provides - (1) Where an individual has, or several persons have jointly deposited
money with a banking company in his or in their name, that individual depositor may
separately or, as the case may be, the group of depositors may jointly, in the way prescribed,
choose a person to which, in the case of the death of the individual depositor or of all of the
joint depositors, the deposited money shall be given:
Provided that the said individual depositor or the said group of depositors may at any time
cancel their choice and choose, in the way prescribed, another person.
(2) The person chosen under sub-section (1) being a minor, the individual depositor or the
joint depositors may, in the prescribed way, direct who shall, in the case of the death of the
individual depositors or of the joint depositors, receive the money during the period of
minority of the chosen person.

(3) Notwithstanding anything contained in any Act for the time being in force or in any will
or any kind of document regarding the allotment of properties, the person chosen under sub-
section (1) or directed under sub-section (2) shall, after the death of the individual depositor
or as the case may be, of all of the joint depositors, attain all the rights the individual
depositor or the joint depositors had on that deposit, and every other person shall be
deprived of those rights.
(4) Where a banking company has made payments in accordance with this section, all its
obligations in respect of the deposit concerned shall be deemed fulfilled:
Provided that no right or claim that any person may have or make against the person to
whom the deposited money has been paid under this section shall be prejudicial to the
provision of this subsection.
Payment to the Heirs of the Deceased (Where there is no nominee)
a) In case of death of Account Holder, his/her heirs shall inform the Bank immediately in
writing or by electronic media.
b) In support of their application they will submit death certificate or any other evidence of
death.
c) Paper news may be a source of knowing about the deceased.
d) The message received either verbal or in writing, the Bank shall take the fact into
account and proper instruction “Drawer Deceased” shall be marked in the system by the
authorized Officer.
e) The heirs shall apply to the Bank for Balance certificate of the Deceased for submitting
to the court in support of their Succession Certificate.
f) After getting Succession Certificate the heirs shall apply to the Bank for releasing the
money in their favor as per court order along with other supporting documents. The
Branch will keep photocopy duly attested by an authorized officer after seeing the
original.
g) The Branch shall check the genuinely of the Succession Certificate from the office of
the issuing Authority.
h) The heirs of the deceased in an affidavit or through Notary Public will inform their
identity to the Bank and that they are the legal heirs and they will indemnify the Bank
for any loss or damage that may arise in future as well as confirm the individual in
whose favor the payment is to be released as per Court Order.
i) Any client acceptable to the Bank will identify the Heirs of the Deceased and may stand
Guarantee or sign an indemnity Bond to compensate the Bank for any loss or damage
that may arise in future.

j) Before releasing Payments to the heirs in case of complicated issues, the Branch shall
obviously refer the same for the Head Office approval and/or Legal Opinion.
k) Payment must be made through Payment Order. No matter, how small the amount
involved the Branch shall in no way make cash payment to the Beneficiaries.
l) In case the deceased selects the nominee before his death, the Bank shall act
accordingly.
m) Any event of confusion or suspicion, the matter must be dealt with caution and the Head
Office and/or Legal Advisors should be informed immediately.
n) The procedures shall be applicable in case of credit balance held against all types of
Deposit Accounts.
Documents Required: The following are the documents needed while releasing the fund to
the heirs of the Deceased Account Holder. Depending upon the circumstances the Branches
will advise the heirs to submit the relevant documents require by the Bank.
a) The Death Certificate issued by the Hospital Authority.
b) The Death Certificate issued by the Police Station.
c) The Certificate issued by the Chairman of Union Council or Ward Commissioner with
or without citing the name of the successors.
d) Death Certificate issued by any other competent Authority.
e) Graveyard Certificate.
f) Succession Certificate issued by the Court (The authenticity of the same shall be
verified from the concerned Office).
g) Selection of Payee out of present heirs by the Court.
h) Passport of the successors or any other proof their respective identity.
i) Affidavit or Notary Public submitted by the heirs.
j) Marriage certificate issued from Marriage Register’s Office (in case of spouse).
k) Indemnity from the successors or Guarantee from third party.
l) The payment order may be issued in favor of the pay(s) mentioning the name of
his/her/their deceased husband/wife or father as applicable
Unclaimed Deposits
Note: As regards unclaimed deposits relevant circulars in relation to maintenance of
unclaimed deposit account of the bank which is also stipulated in section 35 of the bank
company act 1991 (amendment up to 2013) to be followed which is placed in annexure-5.

Moreover, a detailed list stating the list of files and documents along with the time limit for
maintenance of bank records are placed in annexure-6 for compliance.
An instruction circular letter of the bank regarding procurement of fresh and renewal of
corporate deposits is also placed in annexure-7.
1. What risk does a banker incur in opening an account with Trustees and
Executors? What precautions will you take in such cases? (3.6.3)
2. Mention the formalities of opening an account in the case of local
authorities
and Municipal Corporation. (3.6.6)
3. Define Mandate and Power of attorney. (3.6.7)
4. Under what circumstances a Power of attorney may be cancelled? (3.6.7)
5. What is Garnishee Order? (3.6.7)
6. State the banker’s responsibilities under Garnishee Order? (3.6.7)
7. Differentiate between Dormant and Unclaimed deposit account. (3.6.7)
8. Mention the document required for payment to the heirs of the deceased.
(3.6.7)

CHAPTER 4
Negotiable Instruments

4.1Negotiable Instruments
A negotiable instrument is a piece of paper which entitles a person to a sum of money and
which is transferable from person to person by mere delivery or by endorsement and
delivery. The person to whom it is so transferred becomes entitled to the money and also to
the right to further transfer it. ‘Negotiable’ means transferable by delivery and ‘Instrument’
means a written document by which a right is created in favor of some person. The term
Negotiable Instrument literally means ‘a document transferable by delivery’. A negotiable
instrument is transferable document, which satisfies certain conditions.
According to sec-13 of Negotiable Instrument Act 1881, “Negotiable Instrument” means a

promissory note, bill of exchange or cheque payable either to order or to bearer.
Characteristics of negotiable instruments

• The instruments like money are transferable from hand to hand by way of
negotiation.
• The instruments like money are transferable from hand to hand for value and are
used for settlement of debt.
• The transferee's title is not affected due to transferor's defective title if the transferee
can prove himself as holder in due course.
• The title of the Holder in due course does not affect for defective title of his prior
holders due to fraud, forgery etc.
• The Holder in due course is entitled to sue in his own name against all the prior
parties to realize proceeds of the instruments.
4.2 Promissory Note

A 'Promissory Note' is an instrument in writing (not being a bank note or a currency note)
containing an unconditional undertaking, signed by the maker, to pay on demand or at a
fixed or determinable future time a certain sum of money only to, or to the order of, a certain
person, or to the bearer of the instrument.
The person who makes the promise to pay is called the maker. He is the debtor and must
sign the instrument. The person who gets the money (the creditor) is called Payee.
4.3Bill of Exchange
A 'bill of exchange' is an instrument in writing containing an unconditional order, signed by

the maker, directing a certain person to pay on demand or at a fixed determinable future time
a certain sum of money only to, or to the order of a certain person or to the bearer of the

instrument”. It is observed from the above definition that a bill of exchange contains an
order from the creditor to the debtor, to pay a certain sum, to a certain person, either on
demand or after a certain period. The person who draws the bill is called the ‘drawer’ and
the person on whom it is drawn, is called the ‘drawee’or ‘acceptor’ and the person to whom
the amount is payable is called the ‘payee’.
4.4 Cheque
A 'Cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand. A cheque is a document of great importance in the business
world. It can pass from one hand to another easily and so it has become a popular mode of
payment. A cheque is the most commercial and safe method of money transaction because
the transfer cost is very low and also the possibility of loss is minimum.
Material alteration (3f)
“material alteration” in relation to a promissory note, bill of exchange or cheque includes

any alteration of the date, the sum payable, the time of payment, the place of payment, and,
where
any such instrument has been accepted generally, the addition of a place of payment without
the acceptor's assent;
Holder (Sec. 8)
The “holder” of a promissory note, bill of exchange or cheque means the payee or indorsee
who is in possession of it or the bearer thereof but does not include a beneficial owner
claiming through a benamidar.
Explanation - Where the note, bill or cheque is lost and not found again, or is destroyed, the
person in possession of it or the bearer thereof at the time of such loss or destruction shall be
deemed to continue to be its holder.
Holder in due course (Sec. 9)

“Holder” in due course” means any person who for consideration becomes the possessor of a
promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee
thereof, if payable to order, before it became overdue, without notice that the title of the
person from whom he derived his own title was defective.
Essential conditions to constitute a 'Holder in due course'
 Who receives an instrument innocently i.e. in good faith and without negligence.
 Who has paid value for the same.

 Who has received the instrument before its maturity.
 Who is in possession of the instrument as a bearer or payee or endorsee.
For all legal purposes, the title of the holder in due course is superior to that of the true
owner.
Rights and privileges of a holder in due course:
 He/ She obtains a better title to the instrument than that of a true owner.
 The defective title of the previous endorsers (if any) will not adversely affect his /her
rights.
 He/ She can pass on a better title to others, since, once the instrument passes through
his hands, it is purged of all defects.
 Until the instrument is finally discharged, every party to that instrument is liable to
him/her.
 Even the drawer of a negotiable instrument cannot claim invalidity of the instrument
against him/her.
 His/ Her claim cannot be denied on the ground that the payee has no capacity to
endorse.
Payment in due course (Sec. 10)
“Payment in due course” means payment in accordance with the apparent tenor of the
instrument in good faith and without negligence to any person in possession thereof under
circumstances which do not afford a reasonable ground for believing that he is not entitled to
receive payment of the amount therein mentioned.
Where amount is stated differently in figures and words (Sec. 18)

If the amount undertaken or ordered to be paid is stated differently in figures and in words,
the amount stated in words shall be the amount undertaken or ordered to be paid:
Provided that if the words, are ambiguous or uncertain, the amount may be ascertained by
referring to the figures.
Forged or unauthorized signature (Sec.29B)

Subject to the provisions of this Act, where a signature on a promissory note, bill of
exchange or cheque is forged or placed thereon without the authority of the person whose

signature it purports to be, the forged or unauthorized signature is wholly inoperative, and no
right to retain the instrument or to give a discharge therefor or to enforce payment thereof
against any party thereto can be acquired through or under that signature, unless the party
against whom it is sought to retain or enforce payment of the instrument is precluded from
setting up the forgery or want of authority:
Provided that nothing in this section shall effect the ratification of an unauthorized signature
not amounting to a forgery.
Defective title (Sec. 58)
When a promissory note, bill of exchange or cheque has been lost or has been obtained from
any maker, drawer, acceptor or holder thereof by means of an offence or fraud, or for an
unlawful consideration, neither the person who finds or so obtains the instrument nor any
possessor or endorsee who claims through such person is entitled to receive the amount due
thereon from such maker, drawer, acceptor or holder, unless such possessor or endorsee is,
or some person through whom he claims was, a holder thereof in due course.
Cheque payable to order Sec. 85
(1) Where a cheque payable to order purports to be indorsed by or on behalf of the payee,
the drawee is discharged by payment in due course.
(2) Where a cheque is originally expressed to be payable to bearer, the drawee is discharged
by payment in due course to the bearer thereof, notwithstanding any endorsement whether in
full or in blank appearing thereon, and notwithstanding that any such endorsement purports
to restrict or exclude further negotiation.
Drafts drawn by one branch of a bank on another payable to order (Sec. 85A)
Where any draft, that is, an order to pay money, drawn by one office of a bank upon another
office of the same bank for a sum of money payable to order on demand, purports to be
endorsed by or on behalf of the payee, the bank is discharged by payment in due course.
Effect of material alteration (Sec. 87)

Any material alteration of a negotiable instrument renders the same void as against any one
who is a party thereto at the time of making such alteration and does not consent thereto,
unless it was made in order to carry out the common intention of the original parties.
Payment of instrument on which alteration is not apparent (Sec. 89)

Where a promissory note, bill of exchange or cheque has been materially altered but does
not appear to have been so altered, or where a cheque is presented for payment which does

not at the time of presentation appear to be crossed or to have had a crossing which has been
obliterated, payment thereof by a person or banker liable to pay, and paying the same
according to the apparent tenor thereof at the time of payment and otherwise in due course,
shall discharge such person or banker from all liability thereon; and such payment shall not
be questioned by reasoned of the instrument having been altered or the cheque crossed.
Revocation of Banker’s authority (Sec. 122A)

The duty and authority of a banker to pay a cheque drawn on him by his customer are
determined by-
(1) Countermand of payment;
(2) Notice of the customer's death;
(3) Notice of adjudication of the customer as an insolvent.
Cheque bearing “not negotiable” (Sec. 130)
A person taking a cheque crossed generally or specially, bearing in either case the words
“not negotiable,” shall not have, and shall not be capable of giving, a better title to the
cheque than that which the person from whom he took it had.
Non-liability of banker receiving payment of cheque (Sec.131)
Subject to the provisions of this Act relating to cheques crossed “account payee”, where a
banker in good faith and without negligence receives payment for a customer of a cheque
crossed generally or specially to himself, and the customer has no title or a defective title
thereto, the banker shall not incur any liability to the true owner of the cheque by reason
only of having received such payment. Non-liability of banker receiving payment of cheque.
Explanation - A banker receives payment of a crossed cheque for a customer within the
meaning of this section notwithstanding that he credits his customer's account with the
amount of the cheque before receiving payment thereof.
Protection to banker crediting cheque crossed “account payee” (Sec. 131B)
Where a cheque is delivered for collection to a banker which does not at the time of such
delivery appear to be crossed “account payee” or to have had a crossing “account payee”
which has been obliterated or altered, the banker, in good faith and without negligence
collecting payment of the cheque and crediting the proceeds thereof to a customer, shall not
incur any liability by reason of the cheque having been crossed “account payee”, or of such
crossing having been obliterated or altered, and of the proceeds of the cheque having been
credited to a person who is not the payee thereof.

Dishonour of cheque for insufficiency etc., of funds in the account (Sec. 138)
Where any cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account is returned by
the bank unpaid, either because of the amount of money standing to the credit of that
account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid
from that account by an agreement made with that bank, such person shall be deemed to
have committed an offence and shall, without prejudice to any other provision of this Act, be
punished with imprisonment for a term which may extend to one year, or with fine which
may extend to thrice the amount of the cheque, or with both.
4.5 Types of Cheque and their Significance
Open Cheque: An open cheque is presented for payment over the counter of the drawee
bank for its making payment. It need not be collected through a bank. An open cheque can
again be of bear or order.
Crossed Cheque:A crossed cheque can not be presented for its making payment over the
counter of the drawee bank. Crossing is a direction to the paying bank to pay the money to
the payees account of the bank only. A crossed cheque can again be of general or special.
Significance of General and Special Crossing: Where a cheque is crossed generally, the
banker on whom it is drawn shall not pay it otherwise than to a banker. Where a cheque is
crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the
banker to whom it is crossed or his agent for collection. (Section- 126).
Double Crossing: Where a cheque bears two separate special crossing, it is said to have
been double crossed. Where a cheque is crossed specially to more than one banker, except
when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall
refuse payment thereof. (Section-127).
‘Not Negotiable’ Crossing: The crossing of a cheque ‘not negotiable’, however, does not
render the instrument non-transferable. It only deprives the instrument of the incident of
negotiability. If the holder has good title, he can still transfer it with good title; but if the
transferor has a defective title, his transferee is affected by such defects and he cannot claim
the rights of a holder in due course. (Section- 130).
Account Payee Crossing: Section-123A provides: where a cheque crossed generally bears
across its face an addition of the words ‘account payee’ between two parallel transverse lines
constituting the general crossing, the cheque, besides being crossed generally, is said to be
crossed ‘account payee’. When a cheque is crossed ‘account payee’-

(a) It shall cease to be negotiable; and
(b) It shall be the duty of the banker collecting payment of cheque to credit the proceeds
thereof only to the account of the payee named in the cheque.
4.6 Paying Banker
A Banker on whom a cheque is drawn should pay the cheque when it is presented for
payment. This obligation has been imposed on him by sec. 31 of the N.I Act, 1881.
a) A banker is bound to honour his customer’s cheque, to the extent of the funds available
and the existence of no legal bar to payment.
b) Again, for making payment the cheque must be in order and it must be duly presented
for payment at the branch where the account is kept.
c) The paying banker should use reasonable care and diligence in paying a cheque, so as to
abstain from any action likely to damage his customer’s credit.
d) If the paying banker wrongfully dishonors a cheque, he will be asked to pay heavy
damages.
Responsibility of Paying Bank
1. Comply with the applicable BACPS rules
2. Authorizes the Bangladesh Bank to charge the amount of a payment item to the Paying
Bank’s Settlement Account on the Settlement Date
3. Indemnify the Bangladesh Bank for any loss or expense incurred as a result of a breach of
the foregoing agreements or of any action taken by the Bangladesh.
4. The agreements, authorization and indemnity do not limit any other agreement,
authorization or indemnity not inconsistent with these Rules.
5. Return an approved payment item to the Bangladesh Bank by the deadline in the BACPS
schedule.
4.7 Collecting or Presenting Banker

A presenting or collecting banker is one who undertakes to collect the amount of a
cheque for his customer from the paying banker.
Duties of a Collecting Banker
o Due care and diligence: The collecting banker should exercise due care and
diligence in collection of cheques entrusted to it for collection by its customers ;

o Presentment within reasonable time: The collecting banker must present the cheque
for collection within reasonable time. The banker must not delay in presenting the
cheque , if there is no reasonable ground ;
o Crediting the proceeds to the customer’s account: When the cheque is realized, the
bank must pay the proceeds to the customer by crediting his account without delay;
o Notice of dishonour: In case the cheque is dishonoured, the collecting banker must
serve notice of dishonour to the customer without delay ,failing which , the banker
will be liable held to the customer for any loss or damage that the customer might
have suffered on account of such failure;
1. Define Promissory a Note. (4.2)

2. Define Bill of exchange. (4.3)
3. Define Cheque. (4.4)
4. Define crossed cheque. (4.5)
5. What are the significance of general and special crossing? (4.5)
6. Discuss the significance of crossings.(4.5)
7. Define Paying Banker. (4.6)
8. What are the responsibilities of paying banker (4.6)
9. Define Collecting banker. (4.7)

CHAPTER 5
Cash and Vault Management

5.1 Cash Management
Cash is the most volatile and liquid Current Asset of Bank’s Balance Sheet and as such it
demands special attention of Efficient Management. Cash Department plays a paramount
role in creating good perception among the customers about the services of a bank. Cash in-
charge, ideally a senior level officer with direct experience in cash management shall be
responsible in performing good cash management. Writing and Checking of Cash Balance
Book
After Balancing of (i) Cash Receiving Register and (ii) Cash Payment Register by the
respective Cash Officials, Cash In-Charge shall prepare and sign the Cash Balance Book and
shall submit the same to the Deposit In-charge/Manager Operation (MoP), who, upon
satisfaction about its accuracy and genuineness shall authenticate the same by his / her
countersignature thereon. No doubt, officers at branch level are responsible for maintaining
overall cash management and other related activities thereto. They also play a vital role in
management of cash. Cash management is very important from the following point of view:
i) Safety & Security
ii) Proper utilization
iii) Customers Service Development
Safe Custody of Cash (after transaction) over night: Cash balance of the counter at the
end of a day together with Cash in Safe (if any) shall be preserved in the ‘Fire Proof Iron
Safe’ of Branch’s Vault for Safe-Triple-Custody until next reopening of the Vault. But
before storing cash in the Iron Safe, the Triple Custodian shall additionally ensure that entire
cash i.e. Closing Balance of the day as per Cash Position Book (Balance Cash of Cash
Counter and remaining Cash Iron Safe) are accurate and correct.
Vault Register: Cash In-Charge shall Maintain Vault Register for keeping record of Cash
Movement to and from the Iron Safe. Denominations of Cash in Hand mentioned in the
Cash Balance Book must match with the denominations recorded in the Vault Register at the
end of day’s transaction.
Cash-in-safe, Cash-on-Counter and Cash-in-Transit Limit: Branch must handle cash

within Cash-in-Safe, Cash-on-Counter and Cash-in-Transit Limit duly approved by Head
Office. Excess cash over the approved limit shall not be held in the Branch at any time either
on Counter or in Iron Safe. However, the Cash In-charge, under due record &

acknowledgment in the relevant register, shall immediately move the Excess Cash of the
counter, to the Strong Room during transaction hours.
Access of unauthorized person(s), including officials of other departments, to the Cash

Enclosure of the Branch, is strictly prohibited. Only the officials working in the Cash
Department shall have access to the Cash enclosure but normally they will not be allowed to
go outside the Bank premises until entire cash is balanced and handed over to the Cash-in-
Charge. Counting, Stitching / Banding of cash (as per instructions / guidelines of Bangladesh
Bank / Head Office) should be made inside Cash Enclosure by the concerned staff(s) who
will not be allowed to leave Cash enclosure until cash is duly handed over to the Cash-in-
charge in his full satisfaction & acknowledgement.
Maintaining vault limit: Branch has to ensure the vault/cash in safe limit as set by the Head
Office time to time. Cash in excess of vault has to be deposited immediately with BB/Sonali
Bank or designated cash feeding branch.
Security Measure of Cash-in-Transit: Branch shall ensure adequate and effective security
measures while carrying cash to and from link branches of the Bank and Bangladesh Bank /
any other banks, where the branch maintains Bankers’ Account.
Rotation of Cash Officers’ Duty: Rotation of duties between Paying and Receiving Cash
Officials should be made at regular monthly frequency.
Surprise Verification of Cash: Head of Branch (HoB) shall make surprise verification by
physical counting of entire Cash-in-Safe at least once a month and shall confirm its accuracy
with the remarks “Entire Cash Checked and Found Correct” on the particular page of Cash
Position Book under his / her signature.
In case of excess & shortage of cash accounting procedures to be followed as per the branch
operations manual of NCC Bank Limited.
Exchange of Defective, Mutilated Currency etc. Currency Notes

a) The Branches should meticulously follow the instructions of Bangladesh Bank in
connection with payment of exchange value of defective and mutilated / torn notes over
the Counter. Mutilated currency notes should be examined carefully to see that these are
not counterfeit notes
b) The notes which should be withdrawn from circulation shall be separately bundled and
paste with paper at the Back and put Branch seal and sent it to Principal / Main /
Feeding Branch.
a) The Principal / Main / Feeding Branch shall put a seal “Defective Notes” on the face of
the note and signed by an Authorized Officer and make bundle of 100 of each category
of notes and send it to Bangladesh Bank. Bangladesh Bank will receive the same on the

counter and credit our account or it will receive the cash in security vault under joint
custody of Bangladesh Bank and our Local Office.
b) They will fix up a date and the safe shall be opened for counting. Bangladesh Bank will
receive the notes and credit our account. In case of return of any notes against which no
exchange was paid shall be taken back by Principal / Main / Feeding Branch and debit
the concerned Branch from which it receives the value.
c) Transactions in system will be as like as inter Branch transfer transactions.
d) The Notes received from the clients which are not acceptable for paying of exchange
value at the counter, the Bank shall receive the notes and get an application filled in by
the client and send the filled in Application form to Bangladesh Bank. They will give
you a date of decision on the notes. Branch will give a receipt to the Client mentioning
serial number of notes, denomination and total amount etc.
e) On collection of the proceeds Branch will pay off the client.
f) The Branches shall meticulously follow the above two circulars of Bangladesh Bank
regarding handling of defective notes.
5.2 Measures for Safe Keeping of Cash
Safe keeping of Cash
1. Construction of strong room
2. Strong room door
i) Locking: The twelve bolt are secured by two independent high grade dual control
unpick able special key locks. These locks have ten levers each and provided with
stainless steel keys in duplicate.
ii) Fire Protection: The door is lined with 55mm layer of non-conducting, fire
resisting material.
iii) Automatic Relocking Device: It comes into operation if a lock is dislodged by
explosives or attacked by other means. The door remains firmly closed no matter
what the nature of the attack may be.
3. Safe/Vault
Cash must be kept in iron Safe. The safe must be fire and burglar resistant. Size of the safe
will be selected as per need of the branch. Several vaults may be used as per necessity but
size of the vault must be the specified size either small or big.
Vault Security Management (VSM): Every branch must consider the following measures
in general in case of Vault security as under:

A. Structural Security
1. To ensure that Steel frame has been given around vault space
2. Security tested door has been established
3. Security of floor, roof and wall around vault space is ensured by a certified civil
engineer
4. Structural position of the branch should be well built building
5. Year of construction of the building to be considered in case of rental one.
6. Emphasis should be given on the age of iron safe.
7. Present physical condition of iron safe should also be looked into.
8. Approval of the building plan from proper authority to be obtained.
9. Surrounding of the branch should be kept under close watching.
10. Windows of the branch building situated above man height in case of ground floor
11. High voltage transformer/electric substation / gridline etc. adjacent to branch building
should be avoided.
B. Technological Security
1. To ensure CCTV has been established in vault room which is active for 24 hours.
2. Security alarm should be in vault room which will remain active for 24 hours
3. Automated information system has to be established with the requisite Key holders of
the branch.
4. Automatic fire extinguisher has to be set up in vault room which is to remain active for
24 hours
5. Last drill date of all the employee of the branch regarding firefighting to be recorded.
6. The expiry date of fire extinguishers is to be watched out.
7. CCTV has been established in adjacent ATM booth which is to remain active for 24
hours
8. The security of ATM booth to be ensured properly.
C. Insurance Security:
Security in terms of cash in safe limit and also expiry date of the insurance Policy to be kept
up to date.
D. Cash Related Information:
The following information to be observed
1. Cash-in-Safe limit

2. Cash-in-Counter limit
3. Cash-in-Transit limit
4. Name and designation of approval authority of the cash-in safe limit
5. Number and amount of mutilated note in hand
E. Vault Audit Information
Audit in respect of total cash security system has to be checked periodically by the
respective Authority
ATM Cash management: Today cash is still king, and in a society that is on the go,
consumers rely heavily on ATMs for fast convenient access to cash when they want it. To
meet customers’ cash needs, banking financial institutions like yours have invested in and
rely heavily on an ATM network to meet the cash demands of your customers.
In order to meet these demands, a premier service provider is needed, one who will properly
maintain your network and guarantee the most efficient operating manner and maximum up
time.
Retention and destruction of notes: Notwithstanding the denomination of a note or the
decision of the Prescribed Officer on the claim, a note presented before the Prescribed
Officer for the purpose of making a claim shall be retained and destroyed or otherwise
disposed of by the Bank in the following manner, namely-,
(a) in the case of a note in respect of which full payment is made, at any time after the
payment; and
(b) in the case of a note in respect of which no payment is made, or on which half value
payment has been made, on the expiry of a period of three months from the date of the
decision rejecting the claim or to pay half-value, as the case may be, unless within this
period, an order from a competent Court or any Appellate Authority is submitted to any
office of the Bank restraining the Bank from destroying or otherwise disposing of the
said note.
Note: As regards effective cash management relevant circulars/guidelines provided by the

bank are placed in Annexure-8, 9, 10, 11 and 12.
1. Define cash management. (5.1)
2. State the measures for safe keeping of cash. (5.2)
3. State the measures for vault security management. (5.3)

CHAPTER 6
Clearing and Collection of Instruments: BACH, BACPS

6.1 Clearing
Clearing is the process of collection of proceeds of instruments of different banks by a

collecting bank through some systematic procedures with the involvement of Central Bank.
6.2 BACH
“BACH” (Bangladesh Automated Clearing House) means the overall system and facility
that supports the Exchange and settlement of payment items between Participating Banks
and the Bangladesh Bank.
BACH Component
1. BACPS- Bangladesh Automated Cheque Processing System “BACPS” means a facility

that clears cheques and approved payment items for Bank companies.
2. BEFTN- Bangladesh Electronic Fund Transfer Network The Bangladesh Electronic

Funds Transfer Network (BEFTN) will operate as a processing and delivery centre
providing for the distribution and settlement of electronic credit and debit instruments
among all participating banks.
6.3 MICR
Magnetic ink character recognition, or MICR, is a character recognition technology used

primarily by the banking industry to facilitate the processing and clearance of cheques and
other documents.
6.4 Responsibility of Presenting Bank
1. Comply with the BACPS rules.
2. Certifies that presented item is a copy of the original instrument.
3. Prima facie genuineness of the cheque be verified with
i) Due diligence and ordinary care.
ii) Genuineness of the cheque leaf,
iii) Material alteration of payee name, amount or date.
iv) Verification by UV detector
4. Instruments, Image & data preserve for 6 years.
5. Original cheque available for inspection within 7 calendar days.

6. If failed, it will result in non-payment of the instrument.
7. Credit to customer A/C on settlement date or internal rules of the bank.
8. Central Bank holding the Bank’s Settlement A/C to credit on house date.
9. Indemnify the BB processing/settling for the item for any loss or expense.
10. Reconciliation.
8.5 Presenting Banks Due Diligence:
1. Verify the prima facie genuineness of the cheque
2. To be truncated
3. Attempt to detect any fraud, forgery or tampering
4. Enforce KYC norms in letter and spirit.
5. Observe all precautions, which a prudent banker takes,
6. To check the apparent tenor of the instrument,
7. Physical feels of the instrument,
8. Tampering visible to the naked eye with reasonable care, etc.
6.5 For Enhanced Attention for Suitable Risk Management Techniques
1. Scrutiny of high value transactions,
2. Limit based checking by officials,
3. New account alerts, etc.
6.6 Operational Due Diligence
1. Sorting of Instruments
2. Stamping
3. Capture of images and data
4. Reject repair and balancing
5. DIN (document identification no.) endorsement
6. Re-presented cheques
7. Validation
8. Master table synchronization
9. Image quality checking

10. Handling Image Quality Analysis (IQA) failure
11. Frequency of submission
12. Submitting electronic data and images
13. Alternative delivery media
14. Submitting items to The Bureau Service
15. Electronic File Acceptance or not Acceptance 16. Internal Control
6.7 Responsibility of Paying Bank as regards settlement
1. Comply with the applicable BACPS rules
2. Agrees to process the item in accordance with these Rules.
3. Authorizes the Bangladesh Bank to charge the amount of a payment item to the Paying
Bank’s Settlement Account on the Settlement Date
4. Indemnify the Bangladesh Bank for any loss or expense incurred as a result of a breach of
the foregoing agreements or of any action taken by the Bangladesh.
5. The agreements, authorization and indemnity do not limit any other agreement,
authorization or indemnity not inconsistent with these Rules.
6. Return an approved payment item to the Bangladesh Bank by the deadline in the BACPS
schedule.
7. Taking Positive Pay Instruction from cheque issuer.
6.8 Paying Bank’s Due Diligence
1. Transmission of Posting File
2. Digital Certificate Verification of CHM (Clearing House Module)
3. Payment Processing
a. Signature verification
b. Account balance verification
c. Verification of endorsement
d. Positive Pay instruction
e. Restriction to account by customer or other legal authority
f. Stop payment verification
g. Verification of date

h. Matching amount and figure
i. Verification of data entry error
j. Other prudent practice
4. Returned Cheque
Items that fail paying bank approval and are therefore not to be honoured and are required to
be returned to the BACPS in electronic format.
5. Request for paper
The paying bank may, request a physical instrument from the presenting bank; if it believes
that the item is not genuine or has questions about its validity.
6. Internal Control
In addition to the inward instruments drawn on branches of a bank, the reports generated by
the Clearing House would contain the summary position of the total number of instruments
and the total value thereof.
6.9 Processing at PBM (Participating Bank Module)
The BACPS Participating Bank Module (PBM) provides cheque envelope validation and
provides an interface for sending and receiving cheque envelopes from and to BACPS.
For Outward Clearing
1. Duplication Checking
a. Destination Routing Number
b. Origin Routing Number
c. File Creation Date
d. File Creation Time
e. File ID Modifier
2. Receiving Outward Presentment
3. Image Quality Analysis and Failure Handling
4. Item Processing
5. Session Attachment
6. Use of PKI (Public Key Infrastructure)
7. Reconciliation of Outward Presentment

For Inward Clearing
1. Receipt of Inward Data/Images
2. Validation, Authentication and Acknowledgement
3. Control Mechanism
4. Generation of Posting File Eligible Instruments for BACPS
6.10 BACPS Threats
The whole system is highly secured but some fraudulent attempts have found misusing the
BACPS system:
Reasons behind fraudulent attempt
a. Material alternation in amount both numeric and word figure
b. Material alternation in instrument no.
c. Material alternation in MICR encoded line
d. Material alternation in MICR line
e. Duplicate print
Protective measures
a. Verifying by UV detector before present
b. Instrument print with erasable UV ink
c. Positive pay Instruction
d. New account alert
e. KYC update and monitoring Example
6.11Value Date Clearing
a) When an outward clearing instrument is posted in the system, the amount lye at the
account as un-cleared balance.
b) Based on type of clearing, the instrument has a maturity date i.e. date when the
instrument is supposed to honor through clearing house.
c) If the instrument is not return by the drawee Bank, on the maturity date the instrument
amount is accumulated with available balance at the account level as cleared fund after
running Value date clearing process in the system.

6.12 Same Day Clearing
Bangladesh Bank, Dhaka introduced another clearing house named “Same Day Clearing”
for quick clearing large amount instruments. This clearing house deals with instruments
drawn on Branches of different Bank and for the instrument amount Tk. 5.00 lac and
above.As regards the timing of clearing for presentation of instruments followed as per the
detailed Guidelines of the Bank.
Bangladesh Electronic Funds Transfer Network (BEFTN): The Bangladesh Electronic

Funds Transfer Network (BEFTN) will operate as a processing and delivery centre
providing for the distribution and settlement of electronic credit and debit instruments
among all participating banks. This Network will operate in a real‐time batch processing
mode. All payment transactions will be calculated into a single multilateral netting figure for
each individual bank. Final settlement will take place using accounts that are maintained
with Bangladesh Bank.
Participants in BEFTN: The EFT Network is a multilateral electronic clearing system in

which electronic payment instructions will be exchanged among Scheduled Banks. The
system involves transmitting, reconciling and calculating the net position of each individual
participant at the end of each processing cycle. The participants involved are:
(a) Originator.
(b) Originating Bank (OB)
(c) Bangladesh Electronic Funds Transfer Network (EFT Operator)
(d) Receiving Bank (RB)
(e) Receiver
(f) Correspondent Bank
Consumer vs. Corporate Payments: EFT transactions are typically categorized as either
consumer payments, Government payments or commercial payments. These transactions are
defined in accordance with the relationship of parties involved in the transaction and the
type of receiver account.
Consumer payments that could be made via the EFT network include credit applications
such as payroll, dividend, interest and annuity payments and so on. Consumer EFT debit
applications include the collection of utility bills, insurance premiums, loan installments and
other recurring obligations.

Corporate EFT applications include cash collection and disbursement, corporate trade
payments, government, tax payments etc. Cash collection and disbursement allows
companies to achieve efficiency in cash management through intra‐company transfer of
funds. Corporate trade payments enable corporations to exchange both data and funds with
trading partners, facilitating an automated process of updating their accounts receivable and
accounts payable systems.
Preauthorized Bill Payment: A preauthorized payment is a debit application. Companies

with existing relationship with the customers may participate in the EFT through the
electronic transfer (direct debit) of bill payment entries. Through standing authorizations, the
consumer grants the company authority to initiate periodic charges to his or her account as
bills become due. This concept is especially applicable in situations where the recurring bills
are regular and do not vary in amount such as insurance premiums, loan installments, etc.
Standing authorization may also used for bills where the amount does vary, such as utility
payments.
6.13 Real Time Gross Settlement (RTGS)
An RTGS system is a gross settlement system of money or securities in which both

processing and final settlement of funds transfer instructions can take place continuously
(i.e., in real time). It will enable instant settlement of high value local currency transactions
as well as government securities and foreign currency based transactions. As it is a gross
settlement system, transfers are settled individually, i.e., without netting debits against
credits. An RTGS system can thus be characterized as a fund transfer system that is able to
provide continuous intraday finality for individual transfers. In RTGS or large-value funds
transfer system, the transmission and processing of payment messages are typically
automated or electronic, while settlement takes place in central bank funds. Along with these
individual interbank transactions all other Deferred Net Settlement Batches (DNSB) such as
BACPS, BEFTN or NPSB will settle their net position through RTGS system, RTGS in turn
will be linked to Bangladesh Bank core banking solution.
Note: Discussion on BACH, BEFTN and RTGS has been made in general. However the
concerned officers of the bank must follow the detailed operational guidelines in these
regards.
6.14 Glossary
Account means an account with reserve and/or clearing balances on the books of the
Bangladesh Bank.
Archive means a repository used to store and index Images and associated information,
including MICR line information, item sequence number, and full audit trail information, for
necessary retention and accessibility.

BACH (Bangladesh Automated Clearing House) means the overall system and facility that
supports the Exchange and settlement of payment items between Participating Banks and the
Bangladesh Bank.
BACPS (Bangladesh Automated Cheque Processing System) means a facility that clears
cheques and approved payment items for Bank companies.
BACPS-Eligible Item means an electronic copy of a paper-based Payment Item that the
Presenting bank certifies is a copy of the original instrument acceptable for Exchange using
MICR and Image technologies and is listed as one of the Items or instruments in Chapter 3,
section 8 of these Rules.
BACPS Participating Bank Module means the software and equipment that manages the
transmission and receipt of BACPS Cheque Envelopes, acknowledges receipt of BACPS
Cheque Envelopes, and interfaces with the Banking Companies’ host systems.
BACPS Cheque Envelope means an electronic file that is exchanged between a Sending
and a Receiving Point, which contains electronic information representing BACPS-eligible
Items, Returned BACPS Items, and the relevant audit trail information.
BEFTN- Bangladesh Electronic Fund Transfer Network The Bangladesh Electronic Funds
Transfer Network (BEFTN)
Business Day means a Banking day including all days except weekly holidays and all
approved Bank holidays.
Bureau Service means BACPS cheque processing service offered by the Bangladesh Bank
to process the Outward Clearings on behalf of the commercial banks.
Capturing Bank means a Bank or the Bangladesh Bank that creates or purports to create an
Image of a BACPS-eligible Item on its own behalf or on behalf of another Bank.
Cheque Truncation means the process by which the physical movement of a cheque within
a Banking company, between banking companies is stopped and replaced by the exchange,
or storage, of Images and corresponding electronic information.
Cheque Image means a digital representation of the front and back of a cheque.
Clearing means the exchange of payment instructions between payment system participants,
and includes without limitation, the processes associated with clearing, sorting, editing,
netting and prioritizing such instructions or orders in whatever form these take.
Convenience Amount means the amount that appears on a cheque that is normally written
in numeric values.
Correspondent Bank means bank acting on behalf of a participating Bank. That means it
will send and received approved payment items to and from Bangladesh Bank on behalf of
the participating bank(s).

Counterfeit Item means an Item that appears to be original or genuine, but has been
fraudulently made and, for the purpose of these Rules, shall be considered an Item with a
Forged or Unauthorized Signature.
Electronic Cheque: is an electronic version of a paper cheque, including date, payee name,
payment amount, and signature.
Electronic Cheque Presentment (ECP) means the process by which BACPS-eligible
Items, Returned BACPS Items and Redirected Returned BACPS Items are exchanged
through the transmission and receipt of Images and corresponding electronic information.
Exchange means the delivery and receipt of Payment Items.
Financial Institution: as defined in clause (b) of section 2 of the Financial Institutions Act,
1993.
Forged or Unauthorized Signature means (i) a signature on the face of an Item that is not
the signature of the person (the drawer) that it purports to be, or (ii) a signature that is
written on or applied to an Item without the drawer’s authority.
Force Majeure means any event beyond the control of a Banking company that could not
be avoided by the exercise of such standard of care as is reasonable in the circumstances,
including acts of God (earthquakes, natural floods, and storms), fire, explosion, war,
insurrection, riot, disaster, and civil disorder.
High Value Items means Item amounting taka 5.00 (Five) lacks and above. Item means an
instruction for the payment of money via an approved payment instrument (negotiable
instrument) that is handled by the Bangladesh Bank for clearing and settlement under these
rules.
Legal Amount means the amount of a cheque that is normally written in words.
Magnetic Ink Character Recognition (MICR) means the machine recognition of numeric
data printed with magnetically charged ink.
Material Alteration means an unauthorized change to one or more of the completed details
of an originally authorized Item, and includes those material alterations identified in the
Negotiable Instruments Act, 1881 which are alterations: (i) to the date, (ii) to the sum
payable, (iii) of the time of payment, (iv) of the place of payment, or (v) of the addition of a
place of payment without the acceptor’s asset where a bill has been accepted generally, as
well as any alteration of the Paying Bank or of the payee name.
Participating Bank means a Bank who is a participant in the BACH.
Paying Bank means the Bank upon which a Cheque or other item is drawn.
Presenting Bank means the Bank presenting a Cheque or other items for collection.
Public Key Infrastructure means a set of cryptographic techniques in which two different
keys (private and public keys) are used for encrypting and decrypting data. Its holder keeps
the private key secret while the public key is made available to communicating entities.

Returned BACPS item means the corresponding payment information of a BACPS eligible
Item that is returned to the Presenting Bank in accordance with and for any reason permitted
by these Rules.
Sending Point/Receiving Point A bank will have one single point of connection with
BACH which will be termed as sending/receiving point. The PBM will be located at this
point.
Settlement Account means the Account at the Bangladesh Bank that the Participating Bank
maintains for the purpose of settlement.
Settlement Date means the date for settlement of an item as provided in these Rules.
Service Branch is a branch, which will act as a sending and receiving point, for each
individual bank there will be only one service branch for each bank.
Truncation means a settlement process in which the physical exchange of a paper based
payment instrument is substituted by the exchange of images and data in electronic format.
Cheque truncation involves stopping the physical movement of cheques and the replacement
of physical instrument by images of the instrument and corresponding data contained in the
item MICR line.
Truncation Point is a point from which physical movement of an instrument is stopped,
here the image and data will be captured and transmitted to the service branch. A bank may
have multiple truncation points.
Unqualified Item refers to an item, which does not meet the criteria of a BACPS eligible
Item.
Unusable Image means an Image that does not meet the requirements of the Image
Usability Standard.
Note: An instruction circular of the bank regarding the implementation of upgraded version
of Bangladesh Automated Clearing House is placed in annexure- 13 for compliance.
1. Define BACH. (6.2)

2. Define BACPS. (6.2)
3. What do you mean by BEFTN? (6.2)
4. State the responsibilities of presenting bank under BACH. (6.4)
5. What are the responsibilities of paying bank as regard settlement of Payment
under BACH. (6.7)
6. What is same day clearing? (6.12)
7. Define RTGS. (5.13)

CHAPTER 7
Bills for Collection and Remittance

7.1 Definition
One of the important functions of the Bank is to collect different types of bills including
cheques, draft, payment order, dividend warrant, FDR, Sanchaya Patra, Unit Certificate, and
Bonds etc. in favor of its clients. On the other hand as a Paying Banker the branch has to
honor those instruments drawn on it when other banks through collection present them. Such
procedure for collection of values of the instruments is called the Bills for Collection.
7.2 Inward Bills for Collection
When instruments received from others bank for collection of the proceeds into the
respective account of their customers is called the Inward Bills for Collection.
7.3 Outward Bills for Collection
When instruments received from the customer and forwards the bill for collection of the
proceeds in the customer’s account is called Outward Bills for Collection.
If the bills are documentary in both the cases, they are termed as Outward Documentary
Bills for Collection (ODBC) and Inward Documentary Bills for Collection (IDBC)
respectively. In order to effect the collection, the collecting bank sends the bill to its own
branch of the locality which, in turn arranges collection of the bill through Clearing house
and sends Inter Branch Transaction Credit Advice (IBTCA) to the collecting bank branch.
The collecting branch on receipt of the IBTCA credits the proceeds to the respective account
maintained with them. The modus operandi is vice-versa for other bank’s collection.
7.4 Remittance
A remittance refers to money that is sent or transferred to another party. The term is derived
from the word remit, which means to send back. Remittances can be sent via a wire transfer,
electronic payment system, mail transfer, Demand draft etc.
Chaques and demand draft are increasingly losing their places as instruments that are used
for payments. This is because; most individuals are today making payments through RTGS
and BEFTN mechanism. These methods are faster than the traditional methods and there is
also no worry of dishonor of a cheque.

Mode of Remittance
Although Demand Draft (DD), Telegraphic Transfer (TT) and Mail Transfer are considered
as mode of remittance, but with the passage of time and innovations in banking technology,
most of the banks having online banking practicing only PO/LD as mode of remittance.
However, some banks are also using Payment Order for local payments only.
Demand Draft (DD), Pay Order (PO), Pay Slip, Telegraphic transfer (TT), Mail transfer
(MT) are issued by the Remittance Department. DD, TT, and MT are issued for effecting
remittance from one place to another at the request of the customer.DD is required to be
carried or mailed by the customer/applicant himself or herself to the destination while for
MT, an MT advice is mailed to the concerned branch by the particular bank as per request of
the applicant. So, it takes time to credit the amount against DD and MT to the particular
account of the payee branch. Therefore, to effect remittance at the quickest possible time, TT
is issued by the branch if customer agrees to that, because, the charge is higher for issuance
of TT. Now a day, DD, TT and MT are issued at the request of the account holders of the
particular branch only to avoid any fraudulent transaction.
For issuance of DD, TT, MT and PO applicant is required to fill up prescribed application
form and is required to make payment of charges and commission as per norms.
Cheque and DD
 The cheque is issued by the customer, whereas Demand draft is issued by the bank.
 The cheque payment is made after presenting the cheque to the bank, while in DD is
given after making payment to the bank.
 A cheque can bounce due to insufficient balance. DD cannot be dishonored as the
amount is paid beforehand.
 Payment of cheque can be stopped by the drawee, whereas payment cannot be
stopped in DD.
 A cheque can be paid to the bearer or order. While DD is paid to a person on order.
 In cheque drawer and payee are different persons. In DD, both parties are banks.
 A cheque needs signature to transfer amount, while DD does not require signature to
transfer funds. However, banks do charge certain amount depending on the amount
on Demand draft. Outstation cheque are also charged.

Payment Order (PO)
A pay order is an order drawn by a bank upon itself to make payment of the amount
mentioned therein to the named payee. The pay order carries the primary liability of the
issuing bank for payment and must make its payment to the payee or some other person
named by the payee. The pay order cannot be cancelled or its payment stopped without the
consent of the beneficiary. Pay order (PO) and pay slip (PS) are normally issued by the bank
for effecting internal payment of different bills. PO is issued as a security deposit or advance
deposit to be kept with different government, other departments or custom authorities
against any contract, work order or duty payment to be settled later on.
Note: An instruction circular letter of the bank regarding cash incentive assistance for
inward remittances of Bangladeshi expatriates living in abroad are placed in annexure-14.
1. Define Bills for Collection. (7.1)

2. Distinguish between Inward and Outward Bills for Collection.(7.2, 7.3)
3. State different modes of remittance in brief. (7.4)
4. Define Payment Order. (7.4)

CHAPTER 8
Bank Locker: Sizes, Opening a locker, Rent, Safety,
Alternatives

8.1 Locker Service
One of the safest ways to store valuables like your jewellery, important documents and other
precious items in safe deposit vaults or bank lockers. There is a risk of these valuables being
stolen from residential or office premises.
8.2 Definition of Bank Locker
A locker is a small, usually narrow storage compartment. Bank lockers are relatively safe for
a person to store valuables for a period of time. Bank Lockers are small boxes kept in a room
that is guarded heavily and has solid iron doors or concrete walls around it. To open the
locker a pair of keys is needed, one key is with the bank and the other is with the customer.
Both keys have to be used together to open the locker.
The relationship of the bank and the locker holder is that of a lessor and lessee, or in simple
words that of an owner and a tenant. Each customer is charged an annual fee for holding the
locker with the bank.
8.3 Locker Facility
The facility is extended only to the valued clients maintaining account in the Branch of the
Bank, who agree to abide by the set rules and regulations governing the use and operations
of the locker. Following general guidelines should be complied by the Branch.
a) No information about the renting of Lockers, mode of operation or visits made by

Lessee / Renters must not be divulged except with the clear consent of the Lessee /
Renters and or when compelled by Law.
b) The specimen signature cards and all other books and records in the vault should be
kept under lock and key outside business hours.
c) A torch / Electric charger / Candles should be kept ready for use in the vault in case of
electricity failure unless an alternative generator IPS is already installed in the Branch.
d) It is desirable that staff posted to the Locker is adequately senior to understand the
responsibility attached to the work involved and that they are rotated periodically.
e) Branch staff should not rent a locker jointly with persons other than the members of his
/ her family. When a locker is let out to the Manager with or without his family
members he should report this to Head Office, other officers should report to the Branch
Manager.

f) There must always be adequate arrangements for guarding the vault. The Branch must
ensure that the security alarm is properly operated and serviced.
g) Wherever legal issues are involved, e.g. in the event of death of the Lessee / Renter,
issuance of prohibitory orders etc. legal requirements and practice must be followed.
Branches are advised to obtain specific advice from Legal Advisors and take
appropriate action as per Head Office guidelines.
h) The Bank may also forcibly open any locker with prior approval of Head Office after
giving due notice to the lessee, if the locker rent/any other charges due to the Bank
remains unpaid for a period of two years or if the Bank terminates the lease and the key
is not surrendered to the Bank, after the expiry of 6 months from the date of mailing the
notice of termination. Such forcible opening of a locker should be done in the presence
of a Magistrate and an inventory of the contents therein shall be made in his presence
that should be signed by the authorized officer of the Branch and duly counter-signed
by the Magistrate with date. In case of forcible opening due to default in payment of
annual rental, the matter should be referred to Head Office prior to forcible opening.
8.4 Controls over Access to Locker
a) A Locker Register as per prescribed format should be maintained for each leased out
locker where all the required particulars should be properly entered under proper
authentication. Separate Folio should be allotted for each locker. The date of each
operation/access to the locker should be chronologically recorded in the prescribed
Register duly authenticated.
b) Complete the relevant columns in the Locker Register and take the signature of the
Lessee in appropriate column.
c) Verify signature and authority of access in the locker.
d) When the client operates the locker, an authorized officer should remain present nearby.
e) Record time of entry and departure in Locker Register.
f) The hired out locker should not be allowed to be left unlocked at any time. Soon after
each operation, an authorized officer of the Bank should examine the locker to ensure
that the same has been properly locked and that the client leaves behind no article
inadvertently.
8.5 Keys of Locker Handling
a) Two keys are used for operating a locker, - one of which is delivered to the hirer for
keeping under his custody, while the other known as Master key, is retained by the
Branch under the custody of Manager/Sub-Manager during the day and kept in an iron

safe in the vault over night. For opening a locker the Master key is used in conjunction
with the Customer’s key.
b) The duplicate Master key of the locker should be kept under a sealed box for safe
custody with another Branch (preferably with main Branch) of the Bank in the area and
where there is no other Branch of the Bank in that place, with another Bank of the
locality.
c) The key cabinet holding the keys of unused lockers must be kept inside the vault and
kept locked under dual control by the Locker Officer and another authorized officer,
even during working hours.
8.6 Un-let and Surrendered Locker Keys
a) The Locker Officer should count the keys of Un-let Lockers in the key cabinet at the
end of each day to verify that the number of keys agrees with the number of un-let
lockers. Any discrepancy must be reconciled immediately
b) At the time of surrender of a locker the client must sign the Final Access Slip. The
inside space of the locker should be examined in presence of the client and recorded on
the History Card duly authenticated. Surrendered key should be immediately deposited
in the key safe and the client shall sign surrender clauses on the Contract Card. The card
then is stamped with a “CANCELLED” stamp duly authenticated and placed in the
closed file with all other relevant papers.
c) Locker custodian will follow the under mentioned procedures while customers
surrendered locker:
i) Follow the procedures as prescribed.
ii) After removal of contents of customer out of Locker receive key from customer
and relock the vacant Locker.
iii) Customer will sign the release portion appended to the License.
iv) Place key in ‘Surrendered Key Box’.
v) Withdraw record and agreement from files.
vi) Remove signature card from current cards.
vii) Staple original agreement to signature card and record card, mark “Surrendered”
and place in the Surrendered file.
viii) Make appropriate entry in Locker Register
d) Custodians of the surrendered keys and locks will follow the under noted procedures:
i) At convenient intervals remove contents from “Surrendered Key Box”

ii) Confirm that each key is supported by the relevant documentation.

iii) Ensure that the number of keys agrees with the number of lockers shown in the
Locker Register as having been surrendered and awaiting change of locks.
iv) File documentation in “Closed” file.
v) From the supply of spare locks, change locks on surrendered lockers.
vi) Place the removed locks and keys in the cabinet.
vii) Place the keys to each of the replacement locks in envelops, seal and deliver to the
custodians of the unrented lockers who will initial in the record of the Lockers as
evidence of receipt.
viii) Initial record of Lockers to signify that locks has been changed.
ix) Raise new record for those lockers on which locks have been changed and hand
over to safe deposit locker custodian.
x) A remark “Surrendered” should be made in the appropriate places in the Locker
Register and Due Date Diary preferably by means of a rubber stamp
8.7 Nomination for Return of Articles kept in Safe Custody with the Bank
a) As per Section 105 of the Bank Company Act, 1991, the Lessee of a Locker may
nominate a person to whom in the event of the death of the person leaving the article
in the safe custody, such articles may be returned by the Bank. The Lessee may
cancel the nomination at any time.
b) As per Section 107 of the Bank Company Act, 1991, the Lessee may nominate a
person to whom the contents of the safety lockers held with the Bank shall be
released in the event of the death of the person.
c) In the event of death of the hirer, the contents of the locker should be delivered only
to the legal heirs of the deceased client on production of a valid Succession
Certificate from a Court of Law after obtaining legal opinion from Legal
Adviser/Retainer where the renter did not make nomination.
1. Define bank locker. (8.2)

2. Discuss about locker facilities provided by the bank.(8.3).
3. How controls over access to locker are made? (8.4)
4. How to maintain locker keys? (8.5)
5. How to manage un-let surrendered locker keys? (8.6)
6. Discuss about the nominations for return of articles kept in locker. (8.7)

CHAPTER 9
Risk Management and Capacity Development

9.1 Risk Associated with General Banking
Risk is the uncertainties of happening the expected result. Every business organisation
involves some risk. Without risk possibly there being no business. In banking business there
is also a good number of risks. The bank exists to take on the risks of its customer base.
Bank’s primary expertise stems from their ability both to measure and manage risk exposure
on their own behalf and on behalf of their clients. As such in all levels of bank officials must
have a clear understanding about the related risks and their mitigational tools in general
banking operations.
Objective of risk management is to identify and analyze risks and manage their
consequences. Basel II Accord, the standards of Risk Management as guided by the Bank
for International Settlements (BIS) and bank regulators have applied particularly Basel
Committee on Banking Supervision (BCBS), across the world. Bangladesh Bank also issued
guidelines, which forms the basis of risk management of the banks in Bangladesh.
The guidelines require that the banks adopt enhanced policies and procedures of risk
management. Risk management strategy in NCCBL should base on a clear understanding of
various risks, disciplined risk assessment, measurement procedures and continuous
monitoring. It should also focus on improving its risk management systems not only to
ensure compliance with regulatory requirements but also to ensure better risk-adjusted return
and optimal capital utilization keeping in mind of the business objectives. For sound risk
management, NCCBL try to manage risk in strategic layer, managerial layer, and operational
layer.
Operational risk is involved in all the activities of the banking business. Particularly in
general banking there is also operational risk. But in practice the following risks are directly
involved in general banking.
Legal Risk: The risk of the unexpected application of a law or regulation, usually resulting
in a loss. Legal Risks are categorized as under:
a. Compliance with legislation: The risk that the management fails to implement
legislative or regulatory requirements.
b. Contracts: The risk that arises due to contractual failure.
c. Litigation risk: Risk associated with existing and potential litigation due to procedural
lapses.

Fraud Risk: Risk arises due to improper personal gain or loss of assets through deliberate
misrepresentation, deceit or deception. Fraud Risk arises due to the following cases:
1. Financial Instruments
2. Fraudulent Financial Reporting
3. Misappropriation of Assets
4. Assets gain for fraudulent or illegal activities
5. Other misconduct
Money Laundering Risk: Money Laundering means properties acquired or earned directly
or indirectly through illegal means or illegal transfer, conversion and concealment of
location. Bangladesh Bank through BRPD Circular No. 17 dated October 07, 2003 advised
the scheduled commercial banks operating in the country to put in place effective risk
management system which includes Money Laundering Risk Management among others.
The bank has to update Anti Money Laundering Guidelines, which should include Senior
Management commitment to the anti-money laundering program.
The Management should also evolve such a culture for the bank so that all the employees
strictly adhere to each and every provision of Money Laundering Prevention Act 2012 and
Anti-Terrorism Act-2009 with amendment of 2013. All employees of the Bank,
irrespective of the position they hold, are accountable to the top management and
regulatory body for their activities which might directly or indirectly relate to money
laundering. For effective management of money laundering, all employees of the bank
should follow the Money Laundering Prevention Act, 2012 and the detailed guidelines of the
bank as well.
Note: As regards combating money laundering and terrorist financing of the commercial
banks, a circular number 19 dated September 17, 2017 of BFIU are placed in annexure-16
for compliance.
Process Risk: It is the risk which arises due to lack of knowledge, inefficiency, violations of
circular /instruction or using of obsolescence existing procedures.
Compliance Risk: Compliance risk arises due to failure to comply with any or all of the
applicable laws, regulations, code of conduct, regulatory standards and usual good principles
and practices.

9.2 Other Risks
Ethical Risk: Ethical Risk arises because of not having distinction between right and wrong,
good and bad, just and unjust, virtues and vice and also lack of having morality, dishonesty
and also making discrimination in their banking activities.
System Risk: This risk arises due to loss of use or functionality of information systems or
the integrity of data.
Reputation Risk: Reputation risk comes from negative public opinion. This risk may leads
to trial, financial loss, or a decline in customer base for the institution.
Internal Control and Compliance (ICC) Risk: Internal Control and Compliance is a
management process designed to achieve effectiveness and efficiency of operations, reliable
financial reporting and compliance with laws and regulations. A robust Internal Control and
Compliance System of the bank will help to mitigate the possible risks that may arise in
general banking. Management Committee (MANCOM) of the bank is expected to review
the overall effectiveness of internal control system.
Strategic Risk: Strategic risk arising from adverse business decisions, improper
implementation of decisions, or lack of responsiveness to industry changes.
Detection Risk: The risk that the auditor will not detect a material misstatement that exists
in the financial statements. The auditor through the scope of the audit procedures performed
can control detection risk.
Cultural Risk: There are many misunderstandings that can occur in business transactions
negotiated among different domestic areas and cross border countries in distant time zones,
with different languages, varying cultural practices and dissimilar ethical values.
Management Risk: The risks associated with ineffective, destructive or underperforming

management of the organization.
Communication Risk: Communication risk arises due to the failure of internal/external

communications or relationship management processes.

Documentation Risk: It is the risk that created a probability of loss that a legal agreement
may turn out to be incomplete, insufficient or otherwise unenforceable.
Competence risk: Competence risk is the risk which arises due to insufficient training,
skills, experience and knowledge which cause to the inability of the employee to perform
their job efficiently and effectively.
9.3 Importance of Risk Management in General Banking
Establishing sound risk management is the responsibility of banks’ management. An

effective risk management system requires identifying, measuring and limiting risks
involved in general banking which depends on appropriate internal control and compliance
procedures of the bank. Effective risk management helps to derive the following benefits:
1. Increases overall productivity of the bank
2. Balance cost effectiveness
3. Increase profitability
4. Improve service quality
5. Maintain reputation
6. Retain Brand Value
7. Improve earning quality
8. Increase customer base
9. Increase knowledge base
10. Increase efficiency and confidence level of the employees
9.4 Risk Control and Management
 Policies, Standard Operating process, Manuals, circulars, instructions, system and

network Procedures in regard to general banking should be in place and implementation
of those are to be regularly monitored.
 Internal Audit & Inspection and Internal Control and Compliance Division of the bank
should undertake periodical comprehensive and special audit of branches for review of
the general banking related operational procedures and their compliance The Audit
Committee of the Board subsequently would have reviewed the reports of the Internal
Control and Compliance Division.

 Segregation of duties and multi-tier checking and approval procedure are to be in place
 IT Audit is to be carried out on regular basis
 Data Center for backup of data and information has to be established.
 Regular testing of system's back-up procedure and contingency plan are to be made.
9.5 Monitoring and Reporting

The overall management of the general banking operations to be monitored on an ongoing
basis for effectiveness of the bank. Monitoring of key risks should be the part of the daily
activities of the bank as well as periodic evaluations by the business lines and internal audit.
Reporting of the activities is one of the important issues of risk management. It may be
treated as the mirror of the organization as to the fact what actually happening in the
activities that are being carried out by the bank. Accuracy of the report is a vital one, as
because decisions are expected to be made based on reliable, dependable and correctness of
the facts. In general banking operations, monitoring and proper reporting by the line
business is quite significant to prevent any operational loss. The higher authority as well as
the MANCOM is supposed to be very vigilant in this regard also.
9.5 Human Capital
 The Bank will have a performance-driven rewarding work culture; where employees are
treated with respect and receive widened opportunities to realize their diverse Learning
& development opportunities. Bank should continuously thrive to transform Human
Resources to Human Capital through appropriate learning and development initiatives in
every aspects of the work area. HR Division regularly should undertake effectively
designed general banking related training programs targeting the right group of
employees through proper training need assessment. Effectively designed program will
provide ample opportunities to acquire necessary knowledge, skills, attitude and on-the-
job-experience of the bank that will ultimately help to increase the capacity development
of the bank employees.
 The Bank has to acknowledge that Succession Planning and Management is vital to the
continued success of the Bank. So, the Bank continuously should assess organizational,
divisional and team capability gaps to identify, develop and retain the successors in a

timely manner to meet the demands of the future. To ensure a proper performance
evaluation and rate the employees based on their comparative performance, the line
Management is guided by the Human Resources Division. This performance appraisal
system is considered as crucial for the Bank as this is a very important tool to identify
and distinguish the performers and non-performers. Bank should believe that a well-
executed performance appraisal system can help to reward the deserving employees, as
well as help to ensure further development program for the rest. The comprehensive
performance management also includes an assessment of employees' functional and
leadership competencies. This appraisal process will help to identify the competency gap
and training needs of employees in general banking.
Capacity Development (CD)
Banks can bring about a change in their operational activities through Capacity
Development to a great extent. Capacity Development is a change process. It can entail
change of knowledge, skills, work processes, tools, systems, authority patterns, management
style, etc. CD takes place in people or organizations, and, like learning, it cannot be forced
upon them. People and organizations can have strong or weak incentives to change, develop,
and learn—but eventually the change is an internal process that has to happen in the people
or organizations changing.
Capacity development needs for the dissatisfaction with the present situation and where it
requires the change of knowledge, skill development through learning and training and also
developing the procedures to perform the desired activities of the organization. If change
management is poor or poorly prioritized, then the hope of getting to a better future quickly
fades, even if everybody can see how much better capacity and performance could become.
Capacity development is essentially required for the employees of the bank who will
especially involved in general banking, of course, if the management so desires.
Knowledge Management (KM)
A bank can also create their capacity development in general banking through Knowledge
Management also. Knowledge management is becoming very important in almost all banks
since it simplifies the delivery of timely and effective information. It helps managers in
formulating strategic, tactical and operational activities in the best ways in order to achieve
desired objectives.

KM can lead to many organisational benefits like better solution to problems and decision-
making, improved customer services, increasing profits, better stuff attraction, more
innovation and greater creativity. The process becomes essential and banks assign
specialized personnel to watch over and manage these critical processes of KM.
The most common fields of KM applications in a bank are risk management, marketing
management, customer relationship management and performance measurement. Nowadays
modern banks investigate the importance of the value of KM in the banks' business
practices.
The knowledge covers the range from the bank's own internal intellectual capital to the
wealth of data on customer transactions. For a bank, the implicit knowledge is very
important which is rarely recorded and transferred. The level of implicit knowledge depends
upon several factors that include task knowledge, expertise knowledge, and level of training.
Knowledge must be made available in a useful format to anyone in the organization, who
needs it, anywhere and anytime which is known as Knowledge Dissemination in a KM
system.
Banks in Bangladesh generally do not have any formal KM strategies or KM system.

However, banks have some sort of arrangement for knowledge creation, storing, and
dissemination. These KM functions are performed by the training institutions/centers of the
banks. Bangladesh Bank Training Academy (BBTA), the training wing of the central bank
of the country, has a reasonably good training infrastructure to facilitate training, workshops
and seminars. To promote training facilities in banks, Bangladesh Bank has a guideline
related to training infrastructure of banks. All banks in the country have training
institutes/wing and have budget allocations for training purposes.
A good number of banks have started using e-learning to train their employees for
disseminating knowledge. Some banks also send their employees outside the country to
obtain training.
Formulating and enforcing a 'KM Strategy' by banks is a need of the time in the country for
better banking services and improved operation. In case of general banking capturing up-to-
date knowledge, storing it and its application are crucial for handling new banking
challenges.
Corporate Governance in Banks

Corporate governance is gaining centre stage in the recent times due to failure of corporate
and wide dissatisfaction among the people with the way corporate works and hence became
a widely discussed topic worldwide. Corporate Governance is now recognized as a paradigm
for improving competitiveness and enhancing efficiency and thus improving investors’
confidence and accessing capital. Now corporate governance has become a more dynamic
concept and not a mere static one. Bank and Financial Institutions are the backbone of the
economic sector of any country. The healthy economic condition of a nation is depicted
through the sound functioning of its banks.
Banks form a crucial link of a country’s economic sector and hence they are universally
regulated industry and their wellbeing is imperative for the economy. Working of banks is
different from other corporate in many important respects, and that makes corporate
governance of bank not only different but also critical. Hence corporate governance is
conceptually different for banks. If a corporate fails, the fall outs can be restricted to the
stakeholders, but if a bank fails, the impact can spread rapidly through other banks with
potentially serious consequences for the entire financial system and the macro economy.
Thus though various guidelines are provided for working of a bank, corporate governance
cannot be overlooked or discarded. Regulations, guidelines and corporate governance are
complementary to each other in banking industry.
1. Define Legal Risk and Fraud Risk. (9.1)
2. What is Money Laundering? (9.1)
3. How process risk and compliance risk arises? (9.1)
4. What is ICC risk? (9.2)
5. What is the use of risk management? (9.3)
6. How risks control and management can be made in banks. (9.4)
7. How human capital can be better utilize for bank performance. (9.5)
8. Discuss about knowledge management. (9.5)

CHAPTER 10
Laws and Regulations Related to General Banking
(Relevant Sections)

10.1 The Bank Companies Act, 1991(with Amendment 2013): Relevant Provisions
Some Important Sections of the Act
Section – 5: Definition of different terminologies/concept
a. “Company” means any company which may be wounded up in accordance with
regulation of the Companies Act, 1994.
d. “Bank Company” means any company which serves financial transactions
(Banking Business in Bangladesh) including all new banks and specialized banks.
e. “Banking business” means accepting, in order to lend or invest, of deposits of
money from the public which will be paid on demand or otherwise and will be withdrawal
by cheque, draft, order or otherwise.
Section - 5 (GaGa) as amended in 2013: “Defaulting Borrower” means borrower person or
institution or company, any advance, loan or other financial facilities granted in whose
favour or in favour of whose interest-concerned institution or any part thereof or any interest
or profit therein has been overdue according to the definition notified by the Bangladesh
Bank and been followed by 6 (six) months.
Explanation: To fulfill the objective of this section, unless any person or, in some cases,
institution or company is director of another institution or holds more than 20% of the shares
of such institution or is guarantor.
Section -10: Disposal of non-banking assets
(1) Notwithstanding anything contained in section 7, no banking company shall hold any
immovable property howsoever acquired, except such as is required for its own use, for any
period exceeding 7 years from the acquisition thereof or from the commencement of this
Act, whichever is later.
(2) Notwithstanding anything contained in subsection (1), the Bangladesh Bank may extend
the period mentioned in subsection (1) by a period not exceeding 5 years where it is satisfied
that such extension would be in the interest of the depositors of the banking company.
(3) For the purpose of this section, property a substantial portion of which is used by a
banking company for its own genuine requirements shall be deemed to be property for its
own use.
Section- 12. Restrictions on removal of records and documents. -No banking company
shall remove from its head-office or any of its branches, whether they are at the time being
functioning or not, any of its records or documents relating to its business to a place outside

Bangladesh, without the prior permission in writing of the Bangladesh Bank.
Explanation. - In this section-
a) the term "records" means any electronically or otherwise preserved ledger, day-book, cash
book, account book and all other books used in the business of a banking company; and
b) the term "document" means any electronically or otherwise preserved voucher, cheque,
bill, pay order, security for an advance and any other document supporting entries in the
books of, or claims by or against, a banking company.
Section - 14 (Ka) as amended in 2013: Restriction on Acquisition of Shares of Bank,
etc.
1. The Shares of a Bank Company shall not be controlled centrally by any individual,
company or members of the same family and any individual, company or members
of a family shall not acquire more than 10% shares of a Bank Company individually,
jointly or in both ways.
2. If requested by a Bank Company, a purchaser, at the time of purchase of shares of a
Bank Company, shall submit a declaration to the effect that he has not bought the
shares as a nominated person of others than or in pseudo name and has not also
purchased any shares in pseudo name in the past.
Section - 14(kha) as amended in 2013: Holding of Significant Shares

1. No individual or institution or company individually or jointly with others shall
directly or indirectly, be holder of significant shares of a Bank Company without prior
approval of Bangladesh Bank.
2. For obtaining prior approval as mentioned at sub-section-1, application is to be made
in prescribed form of Bangladesh Bank and information sought by Bangladesh Bank are to
be furnished in the form.
Explanation:
‘Holder of significant shares’ shall mean holding of more than 5% shareholding of
ownership interest of a Bank Company by any individual or institution or company
individually or jointly with others directly or indirectly.
Section - 15 (Kha)(4) as amended in 2013: Appointment of Adviser, Managing Director

or CEO
Every Banking Company, other than specialized Banks, shall have to obtain approval from
Bangladesh Bank before appointment or posting of any of its Director, Managing Director or

Chief Executive Officer and such appointed Officers shall not be dismissed, discharged or
removed from his position without obtaining prior approval of Bangladesh Bank.
Section - 15 (5) as amended in 2013: Appointment of Directors

Bangladesh Bank, subject to fulfillment of Sub-section-6, shall accord approval in respect of
appointment of any Director and Managing Director or Chief Executive Officer.
Section - 15 (Kha) (6) as amended in 2013: Appointment of Directors (Cont’d.)

No person shall be eligible to be appointed as a Director, Managing Director or Chief
Executive Officer of a Bank Company unless-
a) He has at least 10 (ten) years of Managerial or Business or Professional experience.
b) He was not awarded punishment for any criminal offence and associated with any
fraud-forgery, financial crime or any other illegitimate activities.
c) There is no an adverse observation or comments in respect of him in the
judgment/order of any civil or criminal court of law.
d) He has not been punished for violation of rules, regulations or code of conduct of any
regulatory institution relating to financial sector.
e) He was not associated with any company or institution, registration or licence of
which has been cancelled or which has been wound-up.
f) He becomes defaulter or fails in repayment of credit facilities availed in his own
name or in the name of the institutions in which he has interests.
g) He was not declared bankrupt by any court of law.

The proposed Director, Managing Director or Chief Executive Officer of a Bank Company
shall declare in prescribed form of Bangladesh Bank to the effect that he is not ineligible to
become a Director as per regulations of sub-section-6.
Provided however, that in case of appointment of the nominated person, the Bank Company
shall forward the signed declaration letter to Bangladesh Bank.

The regulations of sub-section-6 shall be in addition to other acts in vogue in this respect.

Notwithstanding anything contained in any other law now in vogue or in the Memorandum
or Articles of Association of a Bank Company, after elapse of 01 (one) year from the date of

effectiveness of this Act, there shall in aggregate be not more than 20 (twenty) Directors
including 03 (three) Independent Directors in a Bank Company.
Provided however, that the number of Independent Directors shall be at least 02 (two) in a
Bank Company which has less than 20 (twenty) Directors.
Also provided that approval of Bangladesh Securities & Exchange Commission shall have to
be obtained before appointment of Independent Directors.
Further provided that appointment of Independent Directors as per regulations of this sub-
section shall have to be ensured within 03 (three) years from the date of effectiveness of this
Act.
Explanation: Under this sub-section, Independent Director shall mean any person who is
independent of a Bank Company’s Management and shareholders and who shall provide his
opinion only in the interest of the Bank Company and who has no past, present or future real
or apparent interest in the Bank or with any person associated with the Bank.

or Articles of Association of a Bank Company, not more than 02 (two) members of the same
family shall at the same time be in the position of Directors of a Bank Company after elapse
of 01( one) year from the date of effectiveness of this Act.

For the purpose of this section, if any Director of a Bank Company is required to retire then
the Directors themselves shall decide who is to retire from the position of Director,
otherwise the same shall be determined by lottery held in a Meeting of the Board of
Directors.

No Bank Company shall have any Director who is not eligible to fulfill the fit and proper
tests/conditions of becoming a Bank Director as set by Bangladesh Bank.
Explanation: For the purpose of this section, family member shall mean husband or wife,
father, mother, son, daughter, brother, sister and all persons who are dependent on the
concerned person.

Section - 15 (Ka ka) as amended in 2013: Restriction on Tenures and Terms of
Directors
1. Notwithstanding anything contained in any other law now in vogue or in the
Memorandum or Articles of Association of a Bank Company, the highest tenure of the
position of Director of a Bank Company shall be 03 (three) years from the date of
effectiveness of this Act.
Provided however, that no other Director except the Managing Director or the Chief
Executive Officer of a Bank Company, by whatever name called, shall hold the position of
Director in a Bank Company for more than 02 (two) consecutive terms.
2. According to Sub-section-1, if a Director of a Bank Company remains in Office for
consecutive 02 (two) terms then he shall not be eligible for re-election in the position of
Director of the said Bank Company until elapse of 03 (three) years from the date of
conclusion of the 2nd term.
Explanation:
For the purpose of this section, part of a term shall be treated as 01 (one) full term.
Section - 15 (Kha) as amended in 2013: Role of the Board of Directors

1. The Board of Directors of a Bank Company shall be responsible for policy
formulation and implementation, risk management, internal control, internal audit and its
compliance.
2. Every Bank Company shall constitute an Audit Committee comprising those
Directors who are not members of its Executive Committee.
3. Every Bank Company shall constitute a Risk Management Committee comprising
the members of its Board of Directors.
Section - 15 (Ga) as amended in 2013: Internal Audit & Control

1. The Board of Directors shall ensure an effective Internal Audit & Control System in
the Bank Company. The Internal Audit Functions shall be independent of the Bank
Management and its report shall have to be placed before the Audit Committee of the Board.
2. The Internal Auditors shall have liberty to consult with the Management of the Bank
to carry out their functions and shall be able to collect data or files from the Management for
the purpose of Audit.
3. Persons engaged in conducting Internal Audit shall not at the same time be eligible to
get involved in any contract of the Bank Company or shall not represent the Bank Company.

Section - 17 (Kha) (7) as amended in 2013: Vacancy in the Position of Director
Under Sub-section-1, if a Director of a Bank Company receives any notice, he or she will
not be able to transfer the shares standing in his or her own name of the Bank Company until
repayment of all dues of the concerned Bank or Financial Institution.
Section - 17 (Kha) (8) as amended in 2013: Vacancy in the Position of Director
(Cont’d.)
No question can be raised in any court of law or tribunal other than the court of law
constituted under section-3 of the Company Act-1994 (Act No. 18 of 1994) in respect of any
action, order or decision taken under this section.
Section - 23 (Ka) as amended in 2013: Restriction on Appointment of Common

Directors
or Articles of Association of a Bank Company, if a person is a Director of a Bank Company,
he shall not, at the same time, remain as a Director in another Bank Company or Financial
Institution. However, he will be able to remain as a Director in any Insurance Company
maximum for 02 (two) terms following the date of effectiveness of this Act.
Section - 23 (Kha) (ee) as amended in 2013: Restriction on Appointment of Common
Directors (Cont’d.)
or Articles of Association of a Bank Company, without the permission of Bangladesh Bank,
there shall not be any Director in a Bank Company, who has been appointed as Director in
another Bank Company.
Section - 25 (1) as amended in 2013: Cash Reserve

Every banking company, not being a scheduled bank, shall maintain by way of cash reserve
in Bangladesh in cash with Bangladesh Bank or its agent-bank not less than rate determined
by Bangladesh Bank time to time of its time and demand liabilities:
Provided that the Bangladesh Bank may, in any special case, change, by notification in the
official gazette and subject to the conditions stipulated therein in this behalf, the
requirements relating to the cash reserve will repeal, on prior approval by the Government,
such requirements.

Explanation: For the purposes of this section, “liability” shall not include the paid-up
capital or the cash reserves or the credit balance in the profit and loss account of the banking
company or the amount of any loan from the Bangladesh Bank.
Section - 26 (Ka) as amended in 2013: Holding Shares of Another Companies by a

Bank Company
1. Subject to the provisions of Section 26 of the Act, a Bank Company, in case of
holding of shares of another Companies, shall not hold shares of more than the following
ceiling:
(ka) the market value of shares held is 5% of some total of the Bank Company’s paid-up
capital, share premium, statutory reserve and retained earnings.
(kha) 10% of paid-up capital of the company.
Provided however, that the shares held under sub-section (ka) and (kha) above shall not
exceed 10% of paid-up capital.
Further provided that within 03 (three) years from the date of effectiveness of this Act, every
Bank Company shall reconstitute its capital market portfolio in such a manner that the total
market value of shares, corporate bonds, debentures, mutual funds and other capital market
instruments held by it and the credit facilities sanctioned in favour of own subsidiary
company or companies or any other company or companies directly or indirectly engaged in
capital market operations and subscriptions paid to any fund constituted for investment in
the capital market shall not in aggregate exceed 25% of the sum total of the Bank
Company’s paid-up capital, share premium, statutory reserve and retained earnings.
2. Notwithstanding anything contained in Sub-section-1, if the Managing Director or

Manager of a Bank Company is engaged in the Management of the Company or has any
interest in the Company, the concerned Managing Director or Manager shall not hold any
share in that Company after the term of 01 (one) year from the date of effectiveness of this
Act.
3. In case of violation of regulations of Sub-section-1 by a Bank Company, a fine not

exceeding Tk.20.00 lac shall be imposed on the Bank Company by Bangladesh Bank
and in case of continuation of such violation, an additional fine not exceeding Tk.50,
000/- for each day shall be imposed after the 1st day of such violation.

Section – 27 as amended in 2013: Restriction on Allowing of Loans and Advances.
1. No Bank Company shall-
(ka) grant any loan, advance , guarantee or any other financial facility against the security of
its own shares.
(kha) Sanction any loan or advance in favour of any of its Directors other than ‘secured loan
or advance’ or any loan, advance, guarantee or any other financial facility other than
‘secured loan or advance’ on the basis of the guarantee of any of its Directors.
(ga) Sanction any loan or advance in favour of the following persons or institutions without
security or sanction any loan or advance on the basis of guarantee of the following persons
or institutions:
(i) any of the members of the family of any of its directors;
(ii) any interested institution or private company in which the Bank Company or any of
its directors or any member of the family of any directors is a director, proprietor or partner;
(iii) Any public limited company which is in any way regulated by the Bank Company
itself or any of the directors or any member of the family of any of its directors or the shares
held by these persons give them opportunity to at least 20% of the voting rights.
2. No Bank Company, in the following cases, without the approval of the majority of
its Directors except the concerned Director shall grant any loan, advance, guarantee or any
other financial facility –
(i) To any of its Directors or;
(ii) Any person, commercial institution or company in which any of the Directors of the
said Bank Company has interest as partner, Director or Guarantor.
Explanation:
In this section, Director means the Director’s wife, husband, father, mother, son, daughter,
brother, sister and other persons dependent on the Director.
Section – 40 as amended in 2013: Submission of Reports

The Accounts, Balance Sheet and Report and Auditors’ Report as approved by the Board of
Directors or by the shareholders in the General Meeting of the Company, as the case may be,
as mentioned in section-38 shall be published in the prescribed manner and 03 (three) copies
thereof shall be submitted to Bangladesh Bank within 02 (two) months from the date of
conclusion of the period to which they relate.
Provided however, that the Bangladesh Bank may increase the said time limit for submission
of Reports by not more than 02 (two) months.

Amendment of section 109 of Act No.14 of 1991.- After sub-section (8) of section 109 of
the said Act the following sub-sections (9) and (10) shall be inserted, namely:-
"(9) If anybody has committed an offence punishable in accordance with the provisions of
sub-section (3), (4), (5), (6) and (7), the Bangladesh Bank may give him opportunity to show
cause why the Bangladesh Bank should not proceed against him and punish him with a fine
and the Bangladesh Bank may, if it is not satisfied with his explanation or if he has not
furnished an explanation, punish him with a fine of any amount which does not exceed the
highest amount fixed by the said bank. (10) If, within fourteen days after the imposition of a
fine under sub-section (9), the person concerned has paid the fine, no further legal
proceeding for the offence committed by him under the sub-sections referred to in the said
sub-section shall be taken against him; but if he fails to pay the fine within such period, the
Bangladesh Bank shall file at a court a suit against the person concerned for the offence
committed by him."
22. Restrictions on the payment of dividends.- (1) No banking company except new and
special banks shall pay any dividend on its shares, unless-
a) all its capitalized expenses including preliminary expenses, organization expenses,
commission for share selling and brokerage, losses and other items have been completely
written off, or
b) it manages to preserve constantly six per cent of its temporary and demand deposits as
discharged and reserved capital.
(2) Notwithstanding anything to the contrary contained in subsection (1) or in the
Companies Act, any banking company may pay dividends on its shares without writing off
under the following circumstances:
a) in any case where the depreciation of its investments in approved securities has not
actually been capitalized or otherwise accounted for as a loss,
b) in any case where adequate provision for the depreciation in the value of its investments
in shares, debentures or bonds (other than approved securities) has been made to the
satisfaction of the auditor of the banking company,
c) in any case where adequate provision for bad debts has been made to the satisfaction of
the auditor of the banking company.

Section -24: Reserve Fund
To transfer 20% of the profit to the Reserve Fund as long as the accumulated Reserve Fund
is below its paid-up capital.
Section-28: Restrictions on the respite of loans.- (1) No banking company shall, without
the previous approval of the Bangladesh Bank, grant respite of loans taken from it by any of
the following persons or institutions,-
a) any of its directors, and his family members;

b) a commercial institution or company in which any director of the banking company is
interested as landowner, co-director, managing agent; and
c) any such person in which any director of the banking company is interested as partner or
landowner.
(2) Any respite of loans in disregard of the provisions of subsection (1) shall be illegal, and
whoever is responsible for such a respite shall be punishable with imprisonment for no more
than three years or a fine of no more than thirty thousand Takas or both.
Section-29: Power of the Bangladesh Bank to control the giving of advances.- (1)
Whenever the Bangladesh Bank is satisfied that it is necessary or expedient so to do, it may
determine the policy in relation to advances to be followed by banking companies generally
or by any banking company in particular and when the policy has been so determined, all
banking companies or the banking company concerned shall be bound to follow the policy
so determined.
(2) Without prejudice to the generality of the power vested in the Bangladesh Bank under
subsection (1), the Bangladesh Bank may give directions, strictly to be complied with, to
banking companies either generally or to any banking company or group of banking
companies in particular with regard to the following items,-
a) the upper limit of the loan to be given;

b) the ratio to be maintained between the total amount of an advance and loans of little
amount or of other kind;
c) the purposes for which advances may or may not be given;
d) the upper limit of advances to be given to any banking company or any group of banking
companies or person or assembly of persons;
e) the limit of interests on secured advances and advances; and
f) the rate of interest to be charged on advances.

(3) Whenever a banking company fails to comply with any direction referring to a subject
mentioned in clause (a) and (b) of subsection (1), the Bangladesh Bank may order that
banking company to deposit at the Bangladesh Bank such amount of money as the latter may
determine; and the said banking company shall be bound to comply with such directions on
such conditions as the Bangladesh Bank may determine:
Provided that the Bangladesh Bank may not order the said banking company to deposit any
amount exceeding the amount in regard of which the said failure did happen.
(4) The Bangladesh Bank may at any definite time, by an order in written form, release the
money or part of the money deposited at the Bangladesh Bank under subsection (3) to the
depositing banking company on or without any condition.
Section-30: Jurisdiction of Courts regarding interest rates. - Notwithstanding any Act

for the time being in force, no transaction between a banking company and any of its debtors
shall be triable by a Court on the mere ground of excessiveness of the interest rate taken by
the banking company.
Section -31: License of Banking Companies
No banking company shall carry out banking business in Bangladesh without obtaining a
license from Bangladesh Bank.
Section-38: Accounts and balance sheet.- (1) At the expiration of each financial year every
banking company incorporated inside or outside Bangladesh shall, in respect of all business
transacted by it and through its branches within that year, prepare a balance sheet and profit
and loss account as well as a financial report as on the last working day of the year in the
forms set out in the first schedule or as near thereto as possible.
(2) The balance sheet, profit and loss account and financial report of any banking company-
a) shall be signed in the case of a banking company incorporated in

Bangladesh, by its managing director or its principal officer and where there
are more than three directors of the banking company, by at least three of
those directors, and where there are not more than three directors, by all of
them;
b) shall be signed in the case of a banking company incorporated outside
Bangladesh, by the manager or agent of the principal office of the company
in Bangladesh and by another officer next in seniority to the manager or
agent.

(3) Notwithstanding that the forms relating to the submitting of a balance sheet, profit and
loss account and financial report of a banking company differ from the form E of the Third
Schedule of the Companies Act, the provisions of that Act shall, in the case of submitting
such balance sheet, profit and loss account and financial report, be applicable to the extent
they are consistent with the provisions of this Act.
(4) The Bangladesh Bank may amend the forms set out in the First Schedule:
Section-39: Audit. - (1) The profit and loss account and financial report of a banking
company shall be audited in accordance with the balance sheet prepared under section 38 by
a person qualified under the Bangladesh Chartered Accountants Order, 1973 (P.O. No. 2 of
1973), or any other law for the time being in force to be an auditor of companies and
approved by the Bangladesh Bank to be qualified to audit a banking company.
(2) The auditor referred to in subsection (1) shall have the powers and duties of, and shall be
subject to the obligations and penalties imposed on, auditors of companies by Section 145 of
the Companies Act.
(3) In addition to the matters which under the aforesaid Act the auditor is required to state in
his report, he shall also state-
a) whether or not the financial standing and the profits and losses of the company in
the period concerned are truly reflected in the financial report;
b) whether or not the financial report has been correctly prepared in accordance with
the usual accounting methods;
c) whether or not the financial report has been made in accordance with the current
rules and laws and the regulations issued by the Bangladesh Bank with regard to
accounts;
d) whether or not sufficient provisions have been made for such advances and
property assets as are doubtful;
e) whether or not the financial report, on discussion with professional accountants
from Bangladesh, has been approved as being in accordance with the regulations for
accounts issued by the Bangladesh Bank;
f) whether or not the reports and accounts obtained from the branch offices of a
banking company have been duly kept and consolidated;
g) whether or not the information and explanations required by the auditor have been
found to be satisfactory;

h) any other matter which the auditor considers should be brought to the notice of the
shareholders of the company;
(4) Where an auditor discharging his duty as auditor of a banking company is satisfied to the
effect that-
a) any provision of this Act has been seriously transgressed or a serious

irregularity has occurred in fulfilling those provisions;
b) there has occurred a criminal offence of fraught or dishonesty;
c) on account of losses the capital has fallen under eighty five per cent;
d) the payment of the creditors demands is no longer guaranteed or any other
serious irregularity has occurred; or
e) there exists any doubt as to the sufficiency of the company's assets to meet the
demands of the creditors;
he shall without any delay inform the Bangladesh Bank on those subjects.
39A. Special Audit.- (1) If the Bangladesh Bank, on consideration of an audit report
under section 39 or an inspection report under section 44 or on the basis of an report
received in any other way, has sufficient reason to be satisfied that it is necessary to
audit the activities of, or any special part of the activities of, any banking company, it
may cause a special audit of the activities of, or any part of the activities of, such
banking company by any person referred to in sub-section (1) of section 39.
(2) During a special audit under sub-section (1), the banking company concerned
shall render such assistance to the auditor as may be required.";
Section -44: The Bangladesh Bank shall conduct inspection of any banking company by one
or more of its officers and it shall supply to the banking company a copy of its report on
such inspection.
Section-46: Power of the Bangladesh Bank to remove a director etc. of a banking

company.- (1) Where the Bangladesh Bank is satisfied that it is necessary to remove a
chairman or director or principal executive officer, by whatever name he be called, of a
banking company in order to prevent its affairs being conducted in a manner prejudicial to
the interests of the banking company or its depositors or to secure in the public interest the
proper management of the banking company, it may, after committing its reasons to writing,
issue direction that such chairman, director or principal executive officer be removed from
his office.

(2) Before issuing a direction under subsection (1), the person affected shall be given
reasonable opportunity to make a representation: Provided that, notwithstanding anything
contained in subsection (2), where the Bangladesh Bank is of the opinion that a delay arising
from giving such opportunity will be prejudicial to the public interest or to the interest of the
banking company or its depositors, it may at any time, when or after giving the
abovementioned opportunity or while deciding on a representation made under that
subsection, give, by a direction in written form, order that-
a) the said chairman or director or principal executive officer shall, from the date on which
the direction in writing comes into effect, cease to act as chairman, director or principal
officer or cease to take any part in the management of the company in any manner, directly
or indirectly; and b) whoever is temporarily appointed for this purpose by the Bangladesh
Bank shall act as chairman or, as the case may be, director or principal executive officer.
(3) Where a chairman or director or principal executive officer of a banking company has
been removed under subsection (1), he shall not be reinstated as chairman or, as the case
may be, director or principal executive officer, and he shall not, for the term of the direction
which shall not exceed three years, be connected with or take part in any manner, directly or
indirectly, in the management of that banking company or any other banking company. (4)
Chairmen, directors or principal executive officers appointed under subsection (2) shall-
a) subject to the conditions determined in their letter of appointment, occupy that position
for the period, not exceeding one year, determined by the Bangladesh Bank and in
dependence of the Bangladesh Bank being satisfied or not; and
b) not be responsible, financially or otherwise, for anything carried out in accomplishment of
the duties of their offices.
(5) No person removed under subsection (1) may claim any compensation on account of
thus having been removed.
(6) Nothing contained in this section shall apply to any chairman, director or principal
executive officer, by whatever name he be called, chosen or appointed by the Government.
Section-47: Power of the Bangladesh Bank to dismiss the Board of Directors of a

banking company.- (1) Where the Bangladesh Bank is satisfied-
a) that the Board of Directors of a banking company, by whatever name it be called,

conducts its affairs in a manner detrimental or prejudicial to the interest of the banking
company or its depositors; or

b) that, for any or all of the reasons mentioned in subsection (1) of section 46, it is necessary
to dismiss that Board of Directors, it may, after committing its reasons to writing, dismiss
that Board of Directors by a direction; and the direction to dismiss that Board shall come
into effect from such date and be in force for such period as is mentioned therein.
(2) The Bangladesh Bank may extend, from time to time, the period of a direction issued
under subsection (1), provided that the total period shall not exceed two years, all extensions
included.
(3) A Board of Directors being dismissed, the person appointed in this behalf from time to
time by the Bangladesh Bank shall have all the powers and functions, and accomplish all the
duties of the Board.
(4) The provisions of subsection (2), (3), (4) and (5) of section 46 including their necessary
modifications shall be applicable to a direction issued under this section.
Section-48: Restrictions.- (1) No person other than the Governor of the Bangladesh Bank
shall issue a direction under section 46 or 47:
Provided that the Governor shall issue the above mentioned direction on the basis of a report
of the permanent committee established in this behalf.
(2) Whoever has been affected by a direction from the Governor of the Bangladesh Bank
under section 46 or 47 may appeal to the Board of Directors of the Bangladesh Bank and
whatever that Board decides thereupon shall be final.
(3) It shall not be possible to raise any question before any Court, Tribunal or any other
authority with regard to any measure taken, direction issued or decision made under this
section or section 46 or 47, nor shall it be possible to raise any question before any Court,
Tribunal or any other authority against such measure, direction or decision.
Section -57: Punishment for certain activities relating to Bank Companies
If anybody makes obstruction from entering or leaving any banking company within office
hours or works in any manner planned to lower the confidence of the depositors regarding
the banking company, he shall be punishable with imprisonment of maximum two years or
with penalty of taka twenty thousand or with both.
Section-103: Choice for the payment of deposited money-
(1) Where an individual has, or several persons have jointly deposited money with a
banking company in his or in their name, that individual depositor may separately or,

as the case may be, the group of depositors may jointly, in the way prescribed,
choose a person to which, in the case of the death of the individual depositor or of all
of the joint depositors, the deposited money shall be given:
Provided that the said individual depositor or the said group of depositors may at any time
cancel their choice and choose, in the way prescribed, another person.
(2) The person chosen under sub-section (1) being a minor, the individual depositor or
the joint depositors may, in the prescribed way, direct who shall, in the case of the
death of the individual depositors or of the joint depositors, receive the money during
the period of minority of the chosen person.
(3) Notwithstanding anything contained in any Act for the time being in force or in any
will or any kind of document regarding the allotment of properties, the person chosen
under sub-section (1) or directed under sub-section (2) shall, after the death of the
individual depositor or as the case may be, of all of the joint depositors, attain all the
rights the individual depositor or the joint depositors had on that deposit, and every
other person shall be deprived of those rights.
(4) Where a banking company has made payments in accordance with this section, all its
obligations in respect of the deposit concerned shall be deemed fulfilled:
whom the deposited money has been paid under this section shall be prejudicial to the
Section-104: Unacceptability of claims of other persons on deposits - Notices of claims

on deposits by persons other than those in the name of which the deposits are kept with the
banking company shall not be acceptable for that company, nor shall that company be bound
to take measures in accordance with any such notice:
Provided that nothing contained in this subsection shall be prejudicial to the authority of any
court having jurisdiction on the said deposits; and the company shall give adequate
importance to any decree, order, certificate or any other such document the court may
submit.
Section-105: Choice for giving back safe kept articles.-
(1) Any person having deposited for safekeeping articles with a banking company may,
in the way prescribed, choose a person to which, after his death, the said articles, as

long as they are deposited, shall be given:
Provided that the depositor may at any time cancel his choice and choose, in the way
prescribed, another person.
(2) The person chosen under sub-section (1) being a minor, the depositor may, in the
way prescribed, direct who shall, in the case of his death, receive the said articles
during the period of minority of the chosen person.
(3) Before giving back the deposited articles to any person chosen or directed under sub-
section (1) or (2), the banking company which has taken the deposit shall, in the way
prescribed from time to time by the Bangladesh Bank, prepare a list containing
descriptions of those articles, take the signature of the said person and send a copy
thereof to him.
(4) Notwithstanding anything contained in any Act for the time being in force or in any
will or any other kind of document regarding the allotment of properties, the person
chosen under sub-section (1) or directed under sub-section (2) shall, after the death
of the depositor, attain all the rights the depositor had on that deposit, and every other
person shall be deprived of those rights.
(5) Where a banking company has in accordance with the provisions of this section
given back the articles deposited with it for safekeeping, all its obligations in respect
of that deposit shall be deemed fulfilled:
whom the articles have been given back under this section shall be prejudicial to the
Section-106: Unacceptability of claims of other persons on articles deposited for

safekeeping.-Notices of claims by persons other than those in the name of which articles
have been deposited for safekeeping with the banking company shall not be acceptable for
that company, nor shall that company be bound to take measures in accordance with any
such notice:
Provided that nothing contained in this subsection shall be prejudicial to the authority of any
court having jurisdiction on the said articles; and the company shall give due weight to any
decree, order, certificate or any other such document the court may submit.

Section-107: Giving back of articles deposited in lockers
(1) Where a person has separately rented a locker in the safety vaults or in any other
place of a banking company, the said company shall, in the case of his death, permit
the person chosen by him in advance to open, after his death, as long as the locker is
rented, the locker and to take the bonds back from it.
(2) Where two or more persons have rented a locker of a banking company jointly and
where the rent agreement contains a provision to the effect that the locker is to use by
the joint signature of two or more renters, those renters by the signature of whom the
locker is to be used may, in the case of the death of one or more renters, choose one
or more persons so that the company may give another person, in place of the
deceased ones, the opportunity to open, together with the living renters, the locker
and to take back the articles deposited therein.
(3) The choices under sub-section (1) or (2) are to be made in the ways prescribed.
(4) Before giving back the articles deposited in a locker to any chosen person or, as the
case may be, to any jointly chosen person and the living renters, the banking
company shall, in the way prescribed from time to time by the Bangladesh Bank,
prepare a list containing descriptions of the articles deposited in the locker, take the
signature of the said persons and send them a copy thereof.
(5) Where a banking company has in accordance with the provisions of this section
given back articles deposited in its lockers, all its obligations in respect of the
deposited articles concerned shall be deemed fulfilled:
whom any article has been given back under this section shall be prejudicial to the provision
of this subsection.
(6) No suit, complaint nor any other kind of legal proceeding shall be filed or
commenced against a banking company, if any article has been damaged, or appears
to have been damaged by reason of the banking company having consented in
accordance with the provisions of sub-section (1) or sub-section (2) the locker to be
opened and the articles deposited therein to be taken out of it.

Section-108: Unacceptability of claims of other persons on articles deposited in
lockers.- Notices of claims on articles deposited in lockers by persons other than those in the
name of which the articles have been deposited in the lockers of the banking company shall
not be acceptable for that company, nor shall that company be bound to take measure in
accordance with any such notice:
Provided that nothing contained in this section shall be prejudicial to the authority of any
court having jurisdiction on the said articles and the company shall give adequate
importance to any decree, order, certificate or any other such document the court may
submit.
10.2 The Contents of the Contract Act, 1872

The law of contract is the most important part of commercial law because every commercial
transaction starts from an agreement between two or more persons.
The Contract Act occupies the most important place in the Commercial Law. Without
contract Act, it would have been difficult to carry on trade or any other business activity and
in employment law. It is not only the business community which is concerned with the
Contract Act, but it affects everybody. The objective of the Contract Act is to ensure that the
rights and obligations arising out of a contract are honored and that legal remedies are made
available to those who are affected. It is a legislation governing the contractual relationship
between two or more parties - individuals, companies, governments. It deals with all aspects
of contracts, such as formation, performance, enforceability of contracts, indemnities and
guarantees, bailment and pledge and agency, among others. The person who is competent to
enter into contract, may open a Bank account.
Definition of Contract: “An Agreement enforceable by law is contract (Sec. 2h). An

agreement comes into an existence whenever one or more persons promise to one or others,
to do or not to do something. ‘Every promise and every set of promises, forming the
consideration for each other, is an agreement’- Sec. 2(e). Some agreements cannot be
enforced through the courts of law, e.g., an agreement to play cards or to go to a cinema. An
agreement, which can be enforced through the courts of law, is called a contract.
Combining two aforesaid sections, we can opine that “Contract is an agreement between
two of more parties which is supported by consideration and enforceable by law”.
The essential elements of a contract

1. Proposal / Offer and Acceptance 2. Free consent
3. Intention to create Legal Relationship 4. Legality of the object
5. Lawful consideration 6. Certainty
7. Capacity of parties 8. Possibility of performance
9. Writing, Registration and Legal formalities
Competent to Contract (Sec. 11): “Every person is competent to contract who is of the age
of majority according to the law to which he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he is subject.”
“Every person domiciled in Bangladesh shall be deemed to have attained majority when he
shall have completed the age of 18 years”. Section 3(i) of Majority Act, 1875)
“If in case of a minor, domiciled in Bangladesh, before he has completed the age of 18
years, a guardian of his person or property or both, he has been appointed by a court or the
superintendence of his property is assumed by a court of wards then he shall be deemed to
have attained majority when he shall have completed the age of 21 years. (Section 3(ii) of
Majority Act, 1875)
Section 12: “A person is said to be of sound mind for the purpose of making a contract if, at
the time when he makes it, he is capable of understanding it and of forming a rational
judgment as to its effect upon his interests.”
“A person who is usually of unsound mind, but occasionally of sound mind, may make a
contract when he is of sound mind”.
“A person, who is usually of sound mind, but occasionally of unsound mind, may not make
a contract when he is of unsound mind”.
Example:
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during
those intervals.
(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the
terms of a contract or form a rational judgment as to its effect on his interests, cannot
contract whilst such delirium or drunkenness lasts.
"Consent” defined
13. Two or more persons are said to consent when they agree upon the same thing in the
same sense.

"Free consent" defined
14. Consent is said to be free when it is not caused by-
(1) Coercion, as defined in section 15, or
(2) Undue influence, as defined in section 16,or
(3) Fraud, as defined in section 17, or
(4) Misrepresentation, as defined in section 18, or
(5) Mistake, subject to the provisions of sections 20, 21 and 22.
Consent is said to be so caused when it would not have been given but for the existence of
such coercion, undue influence, fraud, misrepresentation or mistake.
"Coercion" defined
1. "Coercion" is the committing, or threatening to commit, any act forbidden by the
Penal Code or the unlawful detaining or threatening to detain, any property, to the
prejudice of any person whatever, with the intention of causing any person to enter
into an agreement.
Explanation - It is immaterial whether the Penal Code is or is not in force in the place
where the coercion is employed.
Illustrations
A, on board an English ship on the high seas, causes B to enter into an agreement by an act
amounting to criminal intimidation under the Penal Code.
A afterwards sues B for breach of contract at Chittagong.
A has employed coercion, although his act is not an offence by the law of England, and
although section 506 of the Penal Code was not in force at the time when or place where the
act was done.
"Undue influence" defined
16.(1) A contract is said to be induced by "undue influence" where the relations subsisting
between the parties are such that one of the parties is in a position to dominate the will of the
other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person
is deemed to be in a position to dominate the will of another-
(a) Where he holds a real or apparent authority over the other or where he stands in a
fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distr

(3) Where a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue
influence shall lie upon the person in a position to dominate the will of the other.
Illustrations
(a) A having advanced money to his son, B, during his minority, upon B's coming of age
obtains, by misuse of parental influence, a bond from B for a greater amount than the sum
due in respect of the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced, by B's influence over him as his
medical attendant, to agree to pay B an unreasonable sum for his professional services. B
employs undue influence.
(c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms
which appear to be unconscionable. It lies on B to prove that the contract was not induced by
undue influence.
(d) A applies to a banker for a loan at a time when there is stringency in the money market.
The banker declines to make the loan except at an unusually high rate of interest. A accepts
the loan on these terms. This is a transaction in the ordinary course of business, and the
contract is not induced by undue influence.
"Fraud" defined
17. "Fraud" means and includes any of the following acts committed by a party to a contract,
or with his connivance, or by his agent, with intent to deceive another party thereto or his
agent, or to induce him to enter into the contract:-
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be
true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation – Mere silence as to facts likely to affect the willingness of a person to enter
into a contract is not fraud, unless the circumstances of the case are such that, regard being
had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in
itself, equivalent to speech.

Illustrations
(a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B
about the horse's unsoundness. This is not fraud in A.
(b) B is A's daughter and has just come of age. Here, the relation between the parties would
make it A's duty to tell B if the horse is unsound.
(c) B says to A-"If you do not deny it, I shall assume that the horse is sound." A says
nothing. Here, A's silence is equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has private information of a change in
prices which would affect B's willingness to proceed with the contract. A is not bound to
inform B.
"Misrepresentation" defined
18. “Misrepresentation" means and includes–
(1) the positive assertion, in a manner not warranted by the information of the person
making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the person
committing it, or any one claiming under him, by misleading another to his prejudice or to
the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement to make a mistake as to the
substance of the thing which is the subject of the agreement.
Mistake
Mistake may be defined as a erroneous belief concerning something consent cannot be said
to be “Free” when an agreement is entered into under a mistake. An agreement is valid as a
contract only when the parties agree upon the same thing in the same sense.
Classification of Contract: Contract can be classified based on:
 The Method of Formation of a Contract
 The Time of Performance
 The Parties of the Contract
 Legality or Validity of the Contract
1. The Method of Formation of a Contract: Based on the formation method a contract can
further be classified as:
Express Contract: This is expressed in words, spoken or written.

Implied Contract: Understood from the acts, the conduct of the parties and /or the course of
dealing between them.
Quasi Contract: Which are not contracts strictly, though the parties act as if there is a
contract.
2. The Time of Performance: When time is considered, a contract can be:
Executed Contract: The parties perform their obligations immediately, i.e., as soon as the
contract is formed.
Executory Contract: Obligations are to be performed at a later time.
3. The Parties of the Contract: Upon consideration of the number of parties of a contract,
contract can be:
Bilateral Contracts: There must be at least two parties to the contract. Therefore all contracts
are bilateral or multilateral.
Unilateral Contracts: One party has to fulfill his obligations whereas the other party has
already performed his obligations.
4. Legality or Validity of the contract: By recognizing the legal impact or validity,
contract is classifies as:
a) Valid Contract
b) Void Contract
c) Voidable Contract (Sec. 2i)
d) Illegal Contract
e) Unenforceable Contract
Types of Agreement
Valid agreement: An agreement which fulfills all the essential elements of a contract. , and
which is enforceable through the courts.
Void agreement: a void agreement has no legal effect. It confers no rights on any person and
creates no obligations. ‘An agreement not enforceable by law is said to be void’.- sec.2(g).
Example- An agreement made by a minor.
Voidable agreement: ‘An agreement which is enforceable by law at the option of one or
more of the parties thereto, but not at the option of the other or others, is a voidable
contract.’-Sec.2 (I). A voidable agreement can be avoided. Until it is avoided, it is a good
contract. Example- Contracts brought about by coercion, undue influence, misrepresentation
etc.

 X coerces Y into entering into a contract for the sale of Y’s house to X. This contract
can be avoided by Y.
 X cannot enforce the contract. But Y, if he so desires, can enforce it against X.
Unenforceable agreement: Agreements which cannot be enforced in a court of law one or
both of the parties, because of some technical defect, e.g., want of registration or non-
payment of the requisite stamp duty.
Illegal Agreement: An illegal agreement is one which is against a law in force. Example- an
agreement to commit murder, robbery or cheating.
Lawful Acceptance (Sec. 7)

 Absolute and unqualified
 Conditional acceptance
 Must be expressed in some usual or reasonable manner
 Mental acceptance or un-communicated assent
 Time of Acceptance
 When Acceptance is complete
 Before offer
Communication (Sec. 4)
Proposal: When it comes to the knowledge of the person to whom it is made.
Acceptance: As against the proposer, when it put in the course of transmission to him, so as
to be out of the power of the acceptor. As against the acceptor, when it comes to the
knowledge of proposer.
Revocation: As against the person who makes it, when it is put into a course of transmission
to the person to whom it is made, so as to be out of the power of the person who makes it as
against the person to whom it is made, when it comes to his knowledge.
Lawful Consideration: Consideration is an essential element in a contract. It is essential for
the validity of a contract. A promise without consideration is a gratuitous undertaking and
cannot create a legal obligation. Lawful consideration can be: past, present and future
consideration
Consideration-Exceptions (Sec. 25)

a) Natural Love & Affection: by a written & registered document, natural love and
affection, near relation to each other
b) Voluntary Compensation

c) Time-barred debt
d) Agency
e) Completed gift
Void Agreements
An agreement not enforceable by law is said to be void. A void agreement has no legal
effect. It confers no rights on any person and creates no obligations. An Agreement can be
void because of mistake, lack of consideration, want of capacity etc.
Revocation
A proposal may be revoked at any time before the communication of its acceptance is
completed as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is
completed as against the acceptor, but not afterwards.
Termination of Contract
1. By performance of the promise of all parties
2. By mutual consent canceling the agreement or substituting a new agreement in place
of the old
3. Subsequent impossibility of performance
4. By operation of law – death, insolvency, or merger
5. By lapse of time
6. By material alteration without the consent of the other party
7. By beach made by one party
Remedies of Breach of Contract

a) Free from obligation
b) Suit for damages
c) Specific performance
d) Injunction
Contract of indemnity and Guarantee (Sec-124-147)

Generally loans and advances are made against tangible securities. When a customer has no
tangible security to offer or when the security offered is inadequate, a guarantee is demanded
by the banker.
Contract of indemnity (Sec-124)

A contract by which one party promises to save the other from loss caused to him by the
conduct of the promisor himself, or by the conduct of any other person, is called a "contract
of indemnity“.
Contract of guarantee (Sec-126)
A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a
third person in case of his default.
The person who gives the guarantee is called the "surety": the person in respect of whose
default the guarantee is given is called the "principal debtor", and the person to whom the
guarantee is given is called the "creditor“.
The essential feature of a contract of guarantee:
 The guarantor is liable when the principal debtor fails to repay the debt. The liability
of the principal debtor is primary and that of guarantor is secondary.
 A guarantee may be either oral or written. Banks, however, do not accept oral
guarantees. The contract must be in writing and should satisfy all legal requirements
as to signature, stamp duty etc.
 A guarantee may be either (a) specific guarantee or (b) a continuing guarantee. A
specific guarantee covers a single transaction. It comes to an end when the specific
promise is fulfilled.
 The continuing guarantee is applicable to a series of transactions. The surety can fix
up a limit on his liability as to time or amount of guarantee when the guarantee is a
continuing one. For example, X enters into cash credit arrangement with Modern
bank for a credit limit of Tk.50, 000/-. Y stands as guarantor for this amount for a
period of one year. Under this arrangement, X can undertake any number of
transactions subject to the amount and time specified.
 The party must be competent to enter into contract.
 Minor’s guarantee is not allowed but if any major gives guarantee in favor of minor,
the guarantor becomes principal debtor.
 Credit worthiness of the guarantor is to be considered before obtaining guarantee.
 As per contract, the guarantee must be supported by lawful consideration.
 The contract must be entered into with free consent.
 A guarantee obtained under misrepresentation, fraud and undue influence is void
able.
A contract of indemnity

A contract of indemnity is defined as ‘a contract by which one party promises to save the
other from the loss caused to him by the conduct of the promise himself or by the conduct of
any other person. The person who makes such promise is called the ‘indemnifier’ and the
other person is called the ‘indemnified’ or ‘beneficiary’. For example, X who has lost a fixed
deposit receipt issued by modern bank may claim the amount by furnishing an indemnity
bond. By this act, X promises to reimburse the bank any loss that may be caused to it for
paying the amount without the receipt.
Bailment (sec-148)
A "bailment" is the delivery of goods by one person to another for some purpose, upon a
contract that they shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person delivering them. The person delivering
the goods is called the "bailor". The person to whom they are delivered is called the "bailee".
Pledge (Sec-172)
The bailment of goods as security for payment of a debt or performance of a promise is
called "pledge". The bailor is in this case called the "pawnor". The bailee is called the
"pawnee“.
Agency (Sec-182-238)
An "agent" is a person employed to do any act for another or to represent another in dealings
with third persons. (Sec- 182)
The person for whom such act is done, or who is so represented, is called the "principal“.
Who may employ agent (Sec-183). Any person who is of the age of majority according to
the law to which he is subject, and who is of sound mind, may employ an agent.
Sec-191: A "sub-agent" is a person employed by, and acting under the control of, the
original agent in the business of the agency.
10.3 The Partnership Act, 1932: Relevant Issues
Introduction
Until 30 September 1932 the partnership businesses of the Indian subcontinent were
controlled according to the Contract Act of 1872. But due the expansion of business and
trade, a separate Partnership Act was enacted which was effective from 0ctober 1, 1932. It
was accepted as it was in 1947 in the then East Pakistan and after liberation it was effective
and enforceable in Bangladesh from March 26, 1971.
Definition of Partnership

According to the Partnership Act, “Partnership is the relationship between persons who have
agreed to share the profits of a business carried on by all or any one of them acting for all”.
Who can be or cannot be partners
a. Any person who has the capacity of contract can be a partner
b. Minor cannot be a partner
c. Person of unsound mind cannot be a partner
d. A company cannot be a partner
e. An alien enemy cannot enter into a contract of partnership.
Classes of Partnerships
a) Partnership At Will
b) Particular Partnership
Creation of Partnership
A partnership is brought into existence through agreement or contract (oral / written / written
and registered) between persons who agree to become partners in a business.
The deed (written agreement) is known as the articles of partnership. This generally contains
the following particulars:
a. Name and address of the firm
b. Nature, scope, objective and duration of the business
c. Management and operational guidelines of the business
d. Keeping of accounts and its examination
e. Authority for signing cheque(s) etc.
Registration of a partnership business
Registration is only a concrete and reliable evidence of the existence of a partnership.

Registration does not create partnership. Contract between partners create partnership. The
Partnership Act does not make registration compulsory. But when a firm is registered, the
partners cannot deny the partnership to avoid liability. Thus it affords protection to persons
dealing with the firm. An unregistered firm may suffer from certain disadvantages.

Duration and Reconstitution of a Partnership Firm
a) Duration of Partnership
Unless a partnership is dissolved in the meantime a partnership will continue for whatever
period of time is specified in the agreement, or where the partnership is for carrying out a
particular venture, until the completion of that venture.
b) Reconstitution of a firm
A partnership firm is said to be reconstituted when any of the following changes occurs
a. Introduction of a new member
b. Retirement of a partner
c. Expulsion of a partner
d. Insolvency of a partner
e. Death of a partner
Right and obligation of the parties: The Partnership Act lays down two general rules
regarding the conduct of the partners to one another:
a. Utmost good faith
b. Indemnity
Besides, the following rules are laid down in the Act regarding the relationship between the
partners as regards the management of the business and their mutual rights and liabilities.
a. Rules regarding the conduct of the business

b. Mutual rights and Liabilities
c. Personal profits earned by partners
d. The property of the firm
e. Continuance of pre-existing terms
Rights of the Partner: The important rights of partners are summarized below:
a. Conduct of business
b. Can express opinion
c. Access, inspection, copy
d. Equality of profits
e. Interest on capital

f. Interest on advance
g. To get indemnity
h. Application of property of firm
i. Partner's authority
j. Powers in an emergency
k. Reconstitution
l. Dissolution
m. Right to carrying on a competing business
n. Right to share profits after retirement
o. Unlimited Liability
Dissolution of a Firm
A firm is dissolved in the following ways:
a. Dissolution by agreement of partners
b. Compulsory Dissolution
c. Dissolution on the happening of certain contingencies
d. Dissolution by notice
e. Dissolution by court
Minor as a Partner – Special Guidelines
According to the Section 30 of The Partnership Act defines that a minor cannot be a partner
of any kind of business. So, a minor cannot become a partner in a firm. But with the consent
of all the partners, for the time being he may be admitted to the benefits of partnership. Such
a minor has a right to such share of the property and of the profits of the firm as may be
agreed upon, and he may have access to and inspect and copy any of the accounts of the
firm.
But such a minor is not entitled to sue the partners for an account or payment of his share of
the property or profits of the firm, except when he severs his connection with the firm.
Such a minor is not personally liable for the liabilities of the firm but his share in the
business is liable for such liabilities.
10.4 The Companies Act, 1994 (with amendments): Relevant Issues of the Act.

All the companies including the banks are formed under this Act. In case of opening of
accounts in the name of a company bankers’ must follow the required issues of this Act. The
Companies Act 1994 has been enacted by the parliament on 11 September 1994 and gazette
on 12 September 1994. This Act is basically originated from the companies Act, 1913,
which was adopted in Bangladesh in 1971.
The Companies Act 1994 is divided into 11 parts (total 404 sections) and 12 schedules.
Defining Company
"Company means a company formed and registered under this Act or an existing company".
[Sec. 2 (1), the Companies Act, 1994.]
"A Company is a voluntary association or organizations of many persons who contribute
money or money's worth to a common stock and employs it in some trade or business and
who share the profit or loss arising there from."-- Justice Lindley.
Common Characteristics of a Company
a. Artificial Entity- It is regarded by law as a single person. It has a legal personality.

b. Voluntary Organization- Formed by the choice and consent of the members.
c. Perpetual succession- the death or insolvency of a shareholder does not affect its
existence.
d. Creation of law- a company comes into existence only after registration under the Act.
e. Common seal- a company must have a common seal.
f. Division of capital- a company must have a capital. Otherwise it cannot work.
g. Limited liability- Liabilities of shareholder are usually limited.
h. Separation of ownership from control
i. Democratic control
j. Transferability of shares- the shareholder of a company can transfer its share and the
transferee becomes member of the company.
k. Number of members.
Types of Companies: There are two types of companies: a) Public and b) Private.
a) Private company: A Private company is one which, by its articles, (a) restricts the right
of the members to transfer their shares, if any; (b) limits the number of its members (not
counting its employees) to 50; and (c) prohibits any invitation to the public to subscribe
for any shares in, or debentures of, the company. —Sec.3 (1) (iii).

Where two or more persons hold one or more shares in a company jointly, they shall, for the
purposes of this definition, be treated as a single member.
b) Public Company: All companies other than private companies are called public
companies. —Sec 3(1) (IV).
Public companies may be classified into three types:
a) Companies Limited by Shares
b) Companies Limited by Guarantee and
c) Unlimited Companies
Difference between Public Ltd. Company and Private Ltd. Company
Public Limited Company Private Limited Company
Minimum number of member is 7 and the Minimum number of members is 2 and

maximum number is unlimited. maximum 50.
At least 3 directors. At least 2 directors.
Can issue IPO Can not issue IPO
Statutory meeting and report is mandatory. It is not required.
An audit firm must audit financial statement. It is not mandatory.
Its financial statement is open for public It is not open for public disclosure.
disclosure.
It has no restriction in transferring of shares. It restricts transfer of shares.
Certificate of commencement is required to start Certificate of incorporation is sufficient

business operation. to start business operation.
Formation of a Company
a. Verification Company Name to the registrar of the Joint Stock Companies.
b. When verified, the Memorandum of Association (MoA) and Articles of Association

(AoA) must be prepared and submitted to the Registrar of the Joint Stock Companies
along with the application form.

Contents of Memorandum of Association:
a. Name of the Company
b. Address of the registered office
c. Objects of the Company
d. Limited Liability
e. Share Capital Amount and Number of Shares
f. Each subscriber of the MoA shall take at least one share
g. Each subscriber shall write opposite to his name the number of share he takes.
Contents of Articles of Association:
a. Provisions for Regulating the Affairs of the Company Share/ General Meeting/
Power of Directors/Accounts/Audit.
b. In case of public Limited Company, a duly signed list of persons has to be consented
as directors of the company with their consent.
c. Declaring that all the requirements of the Act have been complied with.
Types of Shares of a Public Limited Company
a) Ordinary Share / Equity Share
b) Preference Share
c) Cumulative and Non-Cumulative preference
d) Participating and Non-participating preference share
e) Redeemable and Irredeemable preference share
f) Convertible and non-convertible preference share
Winding-up
a. By the Court
b. Voluntary or
c. Subject to Supervision of Court
10.5 Negotiable Instrument Act, 1881

Bankers’ have to deal with a lot of financial instruments while conducting their banking
business. But all the financial instruments are not exactly negotiable instruments. The law
relating to negotiable instruments is contained in the Negotiable Instrument Act, 1881. It

may be considered as a legal framework of handling negotiable instruments. To get the legal
protection under this law in handling negotiable instruments, bankers’ must have the
knowledge on the important provisions of this Act.
Important Provisions:
Sec.1- Application of the Act:
All the negotiable instruments are guided by this Act. Any other Acts, which are
contradictory to this Act, will not be applicable to negotiable instruments.
Sec.3B- Banker:
'Banker' means a person transacting the business of accepting for the purposes of lending or
investment of deposits of money from the public, repayable on demand or otherwise and
withdraw able by cheque, draft, order or otherwise, and includes any post office savings
Bank.
Sec.3C-Bearer:
Bearer means a person who by negotiation comes into possession of a negotiable instrument,
which is payable to bearer.
Sec.3F-Material alteration:
It means the alteration of important parts of negotiable instruments i.e. Promissory note, Bill
of Exchange and Cheque. The material parts may include date, the sum payable, the time of
payment, and the place of payment etc.
Sec.14-Negotiation:
When a promissory note, Bill of Exchange or cheque is transferred to any person, so as to

constitute that person the holder thereof, the instrument is said to be negotiated.
Sec.15-Endorsement:
When the maker or holder of a negotiable instrument signs the same, otherwise than as such
maker, for the purpose of negotiation, on the back or face on a slip of paper annexed thereto,
or so signs for the same purpose a stamped paper intended to be completed as a negotiable
instrument, he is said to endorse the same, and is called the” Endorser”.

Sec.18: Where amount is stated differently in figure and words, the amounts stated in words
shall be the amount ordered to be paid.
Sec.29B-Forged or unauthorized signature:
An instrument having forged signature of the drawer or the persons required for it not treated
as instrument under this Act and will remain inoperative, since nobody is entitled to have
title of those instruments.
Sec.30-Liability of Drawer:
The drawer of the negotiable instrument will remain responsible to the payee till it is paid
off.
Sec.31-Liability of the Drawee of cheque:
The drawee of a cheque having sufficient funds of the drawer in his hands properly
applicable to the payment of such cheque must pay the cheque when duly required so to do,
and in default of such payment, must compensate the drawer for any loss or damage caused
by such default.
Sec.36-Liability of prior parties to holder in due course:
Every prior party to a negotiable instrument is liable thereon to a holder in due course until
the instrument is duly satisfied.
Sec.50-Effect of Endorsement:
The endorsement of a negotiable instrument followed by delivery transfers to the endorsee

the property therein with the right of further negotiation; but the endorsement may, by
express words, restrict or exclude such right, or may merely constitute the endorsee an agent
to endorse the instrument, or to receive its contents for the endorser or for some other
specified person.
Sec.51-Who may negotiate:
Every sole maker, drawer, payee or endorsee, or all of several joint makers, drawers, payee
or endorsees, of a negotiable instrument may, if the negotiability of such instrument has not
been restricted or excluded as mentioned in section 50, endorse and negotiate the same.
Sec.58-Defective title:

A person who receives an instrument which has been lost or by means of fraud or any other
unlawful means is not entitled to receive the amount due thereon unless he claims as holder
in due course.
Sec.85-Cheque payable to order:
a) Where a cheque payable to order purports to be endorsed by or on behalf of the payee,

the drawee is discharged by payment in due course;
b) Where a cheque is originally expressed to be payable to bearer, the drawee is discharged

by payment in due course to the bearer thereof, notwithstanding any endorsement
whether in full or in blank appearing thereon and notwithstanding that any such
endorsement purports to restrict or exclude further negotiation.
Sec.85A-Drafts drawn by one branch of a bank on another payable to order
Where any draft, that is, an order to pay money, drawn by one office of a bank upon another
office of the same bank for a sum of money payable to order on demand, purports to be
endorsed by or on behalf of the payee, the bank is discharged by payment in due course.
Sec.89-Payment of instrument on which alteration is not apparent
Payment of any negotiable instrument which has been materially altered but not apparent to
identify the alteration or any crossed cheque where crossing is not apparent and if otherwise
in due course, the paying banker shall be discharged from all liabilities there on and such
payment shall not be questioned for alteration.
Sec.123-Cheque crossed generally
Where a cheque bearers across its face an addition of the words “and company” or any
abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines
simply, either with or without the words “not negotiable”, that addition shall be deemed a
crossing and the cheque shall be deemed be crossed generally.
Sec.123A-Cheque crossed A/C payee
When a cheque is crossed 'Account payee' -

a) it shall cease to be negotiable and
b) it shall be the duty of the banker collecting payment of the cheque to credit he
proceeds thereof only to the account of the payee named in the cheque.
Sec.124-Cheque crossed specially:
Where a cheque bears across its face an addition of the name of a banker, either with or
without the words 'not negotiable', that addition shall be deemed a crossing, and the cheque
shall be deemed to be crossed specially and to be crossed to that banker.
Sec.126-Payment of cheque crossed generally:
Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it
otherwise than to banker.
Payment of cheque crossed specially:
Where a cheque crossed specially, the banker on whom it is drawn shall not pay it otherwise
than to the banker to whom it is crossed or his agent for collection
Sec.127-Payment of cheque crossed especially more than once:
Where a cheque crossed specially to more than one banker, except when crossed to an agent
for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.
Sec.128-Payment in due course of crossed cheque
Where the banker on whom a crossed cheque is drawn has paid the same in due course, the
banker paying the cheque and (in case such cheque has come to the hands of the payee) the
drawer thereof, shall respectively be entitled to the same rights, and be placed in the same
position in all respects as they would respectively be entitled to and placed in if the amount
of the cheque had been paid to and received by the true owner thereof.
Sec.129-Payment of crossed cheque out of the course
Any banker paying a cheque crossed generally otherwise than to a banker or a cheque
crossed specially otherwise than to the banker to whom the same is crossed, or his agent for

collection, being a banker shall be liable to the true owner of the cheque for any loss he may
sustain owing to the cheque having been so paid.
Sec.130-Cheque bearing 'Not negotiable':
A person taking a cheque crossed generally or specially, bearing in either case the words 'not
negotiable' shall not have, and shall not be capable of giving a better title to the cheque than
that which the person from whom he took it.
Sec.131-Non-liability of banker receiving payment of cheque:
A banker who had in good faith and without negligence received payment for a customer of
a cheque crossed generally or specially to himself shall not in case the title to the cheque
proved defective incur any liability to the true owner of the cheque by reason only of having
received such payment.
Sec. 131A:The above provisions shall apply to any draft, as defined in sec.85A as if the draft
were cheque.
Sec.131 B: Protection to banker crediting cheque crossed “Account Payee”:
Where a cheque is delivered for collection to a banker which does not at the time of such
delivery appear to be crossed “Account Payee” or to have had a crossing “Account payee”
which has been obliterated or altered, the banker, in good faith and without negligence
collecting payment of the cheque and crediting the proceeds thereof to a customer, shall not
incur any liability by reason of the cheque having being crossed “Account Payee”, or such
crossing having been altered or obliterated, and of the proceeds of the cheque having
credited to a person who is not the payee thereof.
Sec.138-: Dishonor of cheque:
According to amendment in 1994 and 2000 penalties in case of dishonor of certain cheque
for insufficiency of funds in the account of drawer of the cheque is that such person shall be
deemed to have committed an offence and shall be punished with imprisonment for a term
which may extend to one year, or with fine which may extend thrice the amount of the
cheque, or with both;
Provided that-
a. The cheque has been presented to the bank within a period of validity.

b. The payee or holder in due course of the cheque makes a demand for the payment of
the said amount of money by giving a notice, in writing to the drawer of the cheque
within fifteen days of the receipt of information by him from the bank regarding the
return of the cheque as unpaid and
c. The drawer of such cheque fails to make the payment of the said amount of money to
the payee or, as the case may be, to the holder in due course of the cheque, within
fifteen days of the receipt of the said notice.
10.6Money Laundering Prevention Act 2012: Relevant Issues of the Act.
It is the process by which proceeds from a criminal activity are disguised to conceal their
illicit origins. Basically, money laundering involves the proceeds of criminally derived
property rather than the property itself. Money launderers send illicit funds through legal
channels in order to conceal their criminal origins.
Major Features of the Money Laundering Prevention Act 2012
Definition of Money Laundering
As per Money Laundering Prevention Act, 2012 (section 2(FA))
“money laundering” means –
(i) knowingly moving, converting, or transferring proceeds of crime or property involved

in an offence for the following purposes:-
(1) concealing or disguising the illicit nature, source, location, ownership or control of
the proceeds of crime; or (2) assisting any person involved in the connection of the
predicated offence.
(ii) smuggling money or property earned through legal or illegal means to a foreign
country;
(iii) knowingly transferring or remitting the proceeds of crime to a foreign country or
remitting or bringing them into Bangladesh from a foreign country with the intention of
hiding or disguising its illegal source; or
(iv) concluding or attempting to conclude financial transactions in such a manner so as to
reporting requirement under this Act may be avoided;
(v) converting or moving or transferring property with the intention to instigate or assist
for committing a predicate offence;

(vi) acquiring, possessing or using any property, knowing that such property is the
proceeds of a predicate offence;
(vii) performing such activities so as to the illegal source of the proceeds of crime may
be concealed or disguised;
(viii) Participating in, associating with, conspiring, attempting, abetting, instigate or
counsel to commit any offences mentioned above;
(cc) “Predicate offence” means the offences mentioned below, by committing which within
or outside the country, the money or property derived from is laundered or attempt to be
laundered, namely:-
(1) Corruption and bribery;
(2) Counterfeiting currency;
(3) Counterfeiting deeds and documents;
(4) Extortion;
(5) fraud;
(6) forgery;
(7) illegal trade of firearms;
(8) Illegal trade in narcotic drugs, psychotropic substances and substances causing
intoxication;
(9) Illegal trade in stolen and other goods;
(10) Kidnapping, illegal restrain and hostage taking;
(11) Murder, grievous physical injury;
(12) Trafficking of women and children;
(13) Black marketing;
(14) Smuggling of domestic and foreign currency;
(15) Theft or robbery or dacoity or piracy or hijacking of aircraft;
(16) human trafficking;
(17) dowry;
(18) smuggling and offences related to customs and excise duties;
(19) tax related offences;

(20) Infringement of intellectual property rights;
(21) terrorism or financing in terrorist activities;
(22) adulteration or the manufacture of goods through infringement of title;
(23) offences relating to the environment;
(24) sexual exploitation;
(25) insider trading and market manipulation using price sensitive information relating
to the capital market in share transactions before it is published for general
information to take advantage of the market and attempting to manipulate the
market for personal or institutional gain;
(26) organized crime, and participation in organized criminal groups;
(27) racketeering; and
(28) any other offence declared as predicate offence by Bangladesh Bank, with the
approval of the Government, by notification in the official Gazette, for the purpose
of this Act.
(W) “Reporting organization” means –
(i) bank;
(ii) financial institution;
(iii) insurer;
(iv) money changer;
(v) any company or institution which remits or transfers money or money value;
(vi) any other institution carrying out its business with the approval of Bangladesh
Bank;
(vii) (1) stock dealer and stock broker,
(2) portfolio manager and merchant banker,
(3) securities custodian,
(4) asset manager;
(viii) (1) non-profit organization,
(2) non government organization,

(3) cooperative society;
(ix) real estate developer;
(x) dealer in precious metals or stones;
(xi) trust and company service provider;
(xii) lawyer, notary, other legal professional and accountant;
(xii) any other institution which Bangladesh Bank may, from time to time, notify
with the approval of the Government;
Section 4 Offence of money laundering and punishment.–
(1) For the purposes of this Act, money laundering shall be deemed to be an offence.
(2) Any person who commits or abets or conspires to commit the offence of money
laundering, shall be punished with imprisonment for a term of at least 4 (four) years but not
exceeding 12(twelve) years and, in addition to that, a fine equivalent to the twice of the
value of the property involved in the offence or taka 10(ten) lacks, whichever is greater.
(3) In addition to any fine or punishment, the court may pass an order to forfeit the property
of the convicted person in favour of the State which directly or indirectly involved in or
related with money laundering or any predicate offence.
(4) Any entity which commits an offence under this section shall be punished with a fine of
not less than twice of the value of the property or taka 20 (twenty) lacks, whichever is
greater and in addition to this the registration of the said entity shall be liable to be
cancelled.
(5) It shall not be a prerequisite to charge or punish for money laundering to be convicted or
sentenced for any predicate offence.
Section 5 Punishment for violation of an order for freezing or attachment.– Any person
who violates a freezing or attachment order issued under this Act shall be punished with
imprisonment for a term not exceeding 3 (three) years or with a fine equivalent to the value
of the property subject to freeze or attachment, or with both.
Section 6 Punishment for divulging information.–
(1) No person shall, with an ill motive, divulge any information relating to the investigation
or any other related information to any person, organization or news media.

(2) Any person, institution or agent empowered under this Act shall refrain from using or
divulging any information collected, received, retrieved or known by the person, institution
or agent during the course of employment or appointment, or after the expiry of any contract
of service or appointment for any purpose other than the purposes of this Act.
(3) Any person who contravenes the provisions of sub-sections (1) and (2) shall be punished
with imprisonment for a term not exceeding 2 (two) years or a fine not exceeding taka 50
(fifty) thousand or with both.
Section7 Punishment for obstruction or non-cooperation in investigation, failure to

submit report or obstruction in the supply of information.-
(1) Any person who, under this Act –
(a) Obstructs or declines to cooperate with any investigation officer for carrying out
the investigation; or
(b) declines to supply information or submit a report being requested without any
reasonable ground;shall be deemed to have committed an offence under this Act.
(2) Any person who is convicted under sub-section (1) shall be punished with imprisonment
for a term not exceeding 1 (one) year or with a fine not exceeding taka 25 (twenty five)
thousand or with both.
Section 8 Punishment for providing false information.–
(1) No person shall knowingly provide false information in any manner regarding the source
of fund or self identity or the identity of an account holder or the beneficiary or nominee of
an account.
(2) Any person who violates the provision of sub-section (1) shall be punished with
imprisonment for a term not exceeding 3 (three)years or a fine not exceeding taka 50 (fifty)
thousand or with both.
Section 11 Cognizancy, non-compoundability and non-bailability of offences.–Offences

under this Act shall be cognizable, non-compoundable and non-bailable.
Section 12 Inevitability of the approval of the Anti Corruption commissions-

(1) Notwithstanding anything contained in the Code of Criminal Procedure or any other law
for the time being in force, no court shall take cognizance of any offence under this Act,
except with the approval of the Anti Corruption Commission.
(2) After concluding the investigation under this Act, the investigation officer shall take
prior approval of the Anti-Corruption Commission before submitting his report and shall
submit a copy of the approval before the court along with the report.
Section 13 Provisions relating to bail- Any person accused under this Act shall be released
on bail, if –
(a) the complainant is given an opportunity of being heard on the application for
bail; and
(b) the court is not satisfied that there are reasonable grounds to believe that the
accused shall be found guilty of the charges brought against him; or
(c) the accused is a woman, child or physically disabled person and the court is
satisfied that justice may not be hindered by reason of releasing him on bail.
Section 23 Powers and responsibilities of Bangladesh Bank in restraining and

preventing the offence of money laundering.( Details may be seen in the relevant Act)
Section 24 Establishment of the Bangladesh Financial Intelligence Unit (BFIU)
(1) In order to exercise the power and perform the duties vested in Bangladesh Bank under
section 23 of this Act, there shall be a separate unit to be called the Bangladesh Financial
Intelligence Unit (BFIU) within Bangladesh Bank.
(2) For the purposes of this Act, the governmental, semi-governmental, autonomous
organizations or any other relevant institutions or organizations shall, upon any request or
spontaneously, provide the Bangladesh Financial Intelligence Unit with the information
preserved or gathered by them.
(3) The Bangladesh Financial Intelligence Unit may, if necessary, spontaneously provide
other law enforcement agencies with the information relating to money laundering and
terrorist financing.
(4) The Bangladesh Financial Intelligence Unit shall provide with information relating to
money laundering or terrorist financing or any suspicious transactions to the Financial
Intelligence Unit of another country on the basis of any contract or agreement entered into
with that country under the provisions of this Act and may ask for any such information
from any other country.

(5) The Bangladesh Financial Intelligence Unit may also provide with such information to
the Financial Intelligence Units of other countries spontaneously where there is no such
contract or agreement under sub-section (4).
Section 25 Responsibilities of the reporting organizations in prevention of money

laundering
(1) The reporting organizations shall have the following responsibilities in the prevention of
money laundering, namely:-
(a) to maintain complete and correct information with regard to the identity of its
customers during the operation of their accounts;
(b) if any account of a customer is closed, to preserve previous records of transactions

of such account for at least 5(five) years from the date of such closure;
(c) to provide with the information maintained under clauses (a) and (b) to Bangladesh
Bank from time to time, on its demand;
(d) if any doubtful transaction or attempt of such transaction as defined under clause
(n) of section 2 is observed, to report the matter as ‘suspicious transaction report’ to
the Bangladesh Bank immediately on its own accord.
(2)If any reporting organization violates the provisions of sub-section (1), Bangladesh Bank
may-
(a) impose a fine of at least taka 50 (fifty) thousand but not exceeding taka 25 (twenty-
five) lacs on the reporting organization; and
(b) in addition to the fine mentioned in clause (a), cancel the license or the authorization
for carrying out commercial activities of the said organization or any of its branches,
service centers, booths or agents, or as the case may be, shall inform the registration
or licensing authority about the fact so as to the relevant authority may take
appropriate measures against the organization.
(3) Bangladesh Bank shall collect the sum of fine imposed under sub-section (2) in such
manner as it may determine and the sum collected shall be deposited into treasury of the
State.
Money Laundering Prevention Guidelines for Commercial Banks
At Head Office Level
 Designate CAMLCO

a) Chief Anti Money Laundering Compliance Officer (CAMLCO) will designate suitably
qualified Branch staff (Presently designated Sub-Manager of the Branch as BAMLCO)
for their practical performance for the operation of the designated functions.
b) Branch Anti Money Laundering Compliance Officer (BAMLCO) will ensure that each
division, department that deals directly with the public is carrying out policies and
procedures as required.
c) BAMLCO should report to the CAMLCO regularly on compliance issues and the need
for any revisions to policies and procedures
d) Bank officials at all levels would be made aware of the identity of CAMLCO, related
official and procedures to follow when making a suspicious activity report. All related
staff must be aware of the chain through which suspicious activity reports should be
passed to the CAMLCO.
e) Desk officer will perform the following job for AML purpose:
i. Perform due diligence on prospective clients prior to opening of an account
ii. Be diligent regarding the identification (s) of account holder and the transaction
relating to the account.
iii. Ensure all required documentation is completed satisfactorily.
iv. Complete the KYC profile for the new customer.
v. Obtain Estimated Transaction Profile.
vi. On going monitoring of customer’s KYC profile and transaction activity
vii. Obtain documentary evidence of large cash deposit.
viii. Escalate any suspicion to the Supervisor, Branch Manager and BAMLCO.
f) BAMALCO will perform the following:
At branch level:
 Designate BAMLCO
Each branch will designate a senior level officer (preferably branch manager) as ‘ Branch
Anti Money Laundering Compliance Officer (BAMLCO)’;

a. Manages the transaction monitoring process.
b. Reports any suspicious activity to Branch Manager, and if necessary to the CAMLCO.
c. Provide AML training to Branch Staff.
d. Update policy with local AML regulations and communicate to all staff.
e. Submit Branch returns (CTR, STR etc.) to CAMLCO on regular basis.

f. BAMLCO is responsible for compliance of AML in accordance with AML Act, 2015
and Bangladesh Bank circulars.
g. Preserve correct and complete identification information about a customer;
h. Preserve all transaction records of an account for five years from the date of closure of
the account;
i. Provide information to Bangladesh Bank from time to time, as directed ;
j. Inform immediately Bangladesh Bank of any suspicion of money laundering in any
account at its own accord.
k. Incorporate all information, as applicable, in the uniform AOF (Prescribed by
Bangladesh Bank for all banks)
l. Obtain all papers/ documents relating to opening of the account.
m. Complete KYC procedures
 KYC profile
a. Categorize risk-based customer- High , Medium & Low rating ;
b. Risk- rating (High-5, Medium-3, Low-1) will be based on:
i. Occupation of the customer

ii. Net worth of the customer
iii. Types of opening of the account
iv. Expected monthly amount of transactions
v. Expected monthly number of transactions
vi. Expected monthly amount of cash transactions
vii. Expected monthly number of cash transactions.
c. For > = 14 risk rating; nature of risk is high.
d. Make KYC Profile (as prescribed by Bangladesh Bank) documented and signed by the
Relationship Officer and Branch Manager.
e. Update KYC profile on defined basis or there are major changes.
Transaction Profile (TP)

 Each account must be associated with transaction profile by the customer by putting
his / her signature in the uniform TP form ( as prescribed by Bangladesh Bank);
 Monitor transactions and consult TP;
 Focus on high- risk customers and also transactions inconsistent with TP.
Suspicious Transaction Reporting
1. Suspicious transaction may include:
a. transaction inconsistent with TP
b. transaction structured to avoid
c. transaction unusual for the type of business
d. transaction having no reasonable explanation , etc.
2. Identification of suspicious transaction through:
a. monitoring of transactions
b. clients contact
c. third party information etc.
Reporting of suspicious transaction, if identified, immediately in a confidential manner in

the uniform STR form (prescribed by Bangladesh Bank) along with related papers/
documents
(I.e. photocopies of AOF, TP, KYC Profile, Vouchers evidencing suspicious transactions
etc.) by BAMLCO to CAMLCO ,CCU, Head Office for onward submission to Bangladesh
Bank.
Though STR is made, normal transaction in the account may continue.
Cash Transaction Reporting (CTR)
Comply CTR for multiple cash transactions within one day exceeding threshold limit
(above10 lac) on monthly basis; CTR is applicable for:
a. Cash deposit
b. Cash withdrawal
c. Cash remittance / On-line deposit.
10.7 Anti-terrorism Act, 2009: Relevant Issues of the Act.

Introduction: Terrorist financing provides funds for terrorist activity. The main objective of
terrorist activity is to intimidate a population or compel a government to do something by
killing, seriously harming or endangering one or more persons; causing substantial property
damage that is likely to seriously harm one or more persons; or seriously interfering with or
disrupting essential services, facilities or systems. To the prevention of certain terrorist
activities, this law was first enacted in 2009 and was amended twice, in 2012 & 2013.
Section 2.
Definitions. – In this Act, unless there is anything repugnant in the subject or context,
(2) “arms” means arms mentioned in section 4 of the Arms Act, 1878 (Act No. XI
of 1878), and shall also include all types of atomic, chemical and biological weapons;
(3) “court” means the court of a Sessions Judge or, as the case may be, the court
of an Additional Sessions Judge;
(13) “Explosive substance” means –
(a) gun powder, nitro-glycerin, dynamite, gun-cotton, blasting powder, fulminate mercury or
any other metal, colored fire and any other substances used or manufactured to create an
explosive or firework effect whether or not similar to the substances mentioned above; and
(b) any material used to make explosives and any machine, equipment, machinery or thing
including any part of similar machine, equipment or machinery used to create an
explosion with the help of any explosive material, or with the intention of conversion or
providing assistance to create an explosion, and shall also include fuse, rocket, percussion
caps, detonator, cartridge and any other ammunition;
(14) “Property” means, whether in or outside the country, -
(i) any type of funds or assets, corporeal or incorporeal, moveable or immoveable,

tangible or intangible, however acquired, and legal documents or instruments in any form,
including electronic or digital, evidencing title to, or interest in, such assets or funds and any
interest, dividends or other income on or value accruing from or generated by such funds or
assets.
(ii) cash, any other type of financial assets, economic resources, whether tangible or
intangible, movable or immovable, however acquired, and legal documents or instruments in
any form, including electronic or digital, evidencing title to, or interest in, such funds

or other assets, including, but not limited to, bank credits, travelers cheques, bank
cheques, money orders, shares, securities, bonds, drafts, or letters of credit, and any
interest, dividends or other income on or value accruing from or generated by such funds or
other assets;
(14A) “terrorist person” means any natural person who commits an offence under section
6(1), 10, 11, 12 or 13;
(14B) “terrorist entity” means any entity that commits an offence under section 6(1), 10,
11, 12 or 13;
(14C) “terrorist property” means property that –
(i) has been or is being used, or is intended for use, in the commission of a terrorist activity
under this Law, or a corresponding offence under a law of a foreign State;
(ii) is the subject of such a terrorist activity;
(iii) is proceeds of terrorism i.e. the property is derived from or obtained, directly or
indirectly, through the commission of such a terrorist activity;
(iv) has been collected, by any means, directly or indirectly, with the intension that the
property should be used for the purpose of a terrorist activity or for supporting a terrorist or
a terrorist entity, group or organization;
(v) is owned or controlled directly or indirectly by a terrorist, terrorist entity, group

or organization and property of persons and entities acting on behalf of, or at the direction
of a terrorist, terrorist entity, group or organization, including funds derived or generated
from property owned or controlled directly or indirectly by such persons and associated
persons and entities, groups or organizations.
16. Duties of reporting agency.– (1) Every reporting agency shall take necessary
measures, with appropriate caution and responsibility, to prevent and identify financial
transactions through them which is connected to any offence under this Act and if any
suspicious transaction is identified, the agency shall spontaneously report it to the
Bangladesh Bank without any delay.
(2) The Board of Directors, or in the absence of the Board of Directors, the Chief
Executive Officer, by whatever name called, of each reporting organization shall approve
and issue directions regarding the duties of its officers, and shall ascertain whether the

directions issued by Bangladesh Bank under section 15, which are applicable to the
reporting agency, have been complied with or not.
(3) If any reporting agency fails to comply with the provision under sub-section (1) the said
reporting agency shall be liable to pay a fine determined and directed by Bangladesh
Bank not exceeding taka 25 (twenty five) lac and Bangladesh Bank may suspend the
registration or license with intent to stop operation of the said agency or any of its branches,
service centers, booths or agents within Bangladesh or, as the case may be, shall inform the
registering or licensing authority about the subject matter to take appropriate action against
the agency.
(4) If the Board of Directors, or in the absence of the Board of Directors, the Chief
Executive Officer, by whatever name called, of any reporting organization fails to comply
with the provision under sub-section (2) the chairman of the Board of Directors, or the
Chief Executive Officer, as the case may be, shall be liable to pay a fine determined and
directed by Bangladesh Bank not exceeding taka 25 (twenty five) lac and Bangladesh
Bank may remove the said person from his position, as the case may be, shall
inform the competent authority about the subject matter to take appropriate action against
the person.
(5) If any reporting agency fails to pay or does not pay any fine imposed by Bangladesh
Ban k according to subsection (3) or if the chairman of the Board of Directors, or the Chief
Executive Officer, whatever they may be called, fails to pay or does not pay any fine
imposed by Bangladesh Bank according to sub -section (4), Bangladesh Bank may
recover the amount from the reporting agency or from the account of the respective person
by debiting any account maintained in any bank or financial institution or
Bangladesh Bank and in case of any unrealized or unpaid amount, Bangladesh Bank
may, if necessary, apply before the concerned court for recovery.
Note: Anti-terrorism (Amendment) Act, 2013 may also be consulted where necessary.
10.8 The Bankers' Book Evidence Act (1891)
The important piece of legislation, which is made for Bankers alone in this country, is the
Bankers' Book Evidence Act-1891. It is a special Act giving certain privileges to Banks as
regards the mode of proving of entries in their books and the production thereof in Courts of
Law.

The Law of evidence requires that the existence, condition or contents of a document can be
proved before a court only by producing the original document. So long as the original
document is available a copy cannot be produced. One of such exception is when the
original is a document of which any Law permits a certified copy. The Bankers' Books
Evidence Act is one of the provisions of the Law that allows the production of certified copy
of document.
Section - 2 (3):
"bankers' books" include ledgers, day-books, cash-books, account-books and all other books
used in the ordinary business of a bank:
(4) "legal proceeding" means any proceeding or inquiry in which evidence is or may be
given, and includes an arbitration:
(5) "the Court" means the person or persons before whom a legal proceeding is held or
taken:
(6) "Judge" means a Judge of [the High Court Division]:
(7) "trial" means any hearing before the Court at which evidence is taken: and
(8) "certified copy" means a copy of any entry in the books of a bank together with a
certificate written at the foot of such copy that it is a true copy of such entry, that such entry
is contained in one of the ordinary books of the bank and was made in the usual and ordinary
course of business, and that such book is still in the custody of the bank, such certificate
being dated and subscribed by the principal accountant or manager of the bank with his
name and official title.
4. Subject to the provisions of this Act, a certified copy of any entry in a banker's book shall
in all legal proceedings be received as prima facie evidence of the existence of such entry,
and shall be admitted as evidence of the matters, transactions and accounts therein recorded
in every case where, and to the same extent as, the original entry itself is now by law
admissible, but not further or otherwise.
Section 5. No officer of a bank shall in any legal proceeding to which the bank is not a party
be compellable to produce any banker's book the contents of which can be proved under this
Act, or to appear as a witness to prove the matters, transactions and accounts therein
recorded, unless by order of the Court or a Judge made for special cause.
Section 6. (1) On the application of any party to a legal proceeding the Court or a Judge may
order that such party be at liberty to inspect and take copies of any entries in a banker's book
for any of the purposes of such proceeding, or may order the bank to prepare and produce,
within a time to be specified in the order, certified copies of all such entries, accompanied by

a further certificate that no other entries are to be found in the books of the bank relevant to
the matters in issue in such proceeding, and such further certificate shall be dated and
subscribed in manner hereinbefore directed in reference to certified copies.
(2) An order under this or the preceding section may be made either with or without
summoning the bank, and shall be served on the bank three clear days (exclusive of bank
holidays) before the same is to be obeyed, unless the Court or Judge shall otherwise direct.
(3) The bank may at any time before the time limited for obedience to any such order as
aforesaid either offer to produce their books at the trial or give notice of their intention to
show cause against such order, and thereupon the same not be enforced without further
order.
Section 7. (1) The costs of any application to the Court or a Judge under or for the purposes
of this Act and the costs of anything done or to be done under an order of the Court or a
Judge made under or for the purposes of this Act shall be in the discretion of the Court or
Judge, who may further order such costs or any part thereof to be paid to any party by the
bank if they have been incurred in consequence of any fault or improper delay on the part of
the bank.
(2) Any order made under this section for the payment of costs to or by a bank may be
enforced as if the bank were a party to the proceeding.
(3) Any order under this section awarding costs may, on application to any Court of Civil
Judicature designated in the order, be executed by such Court as if the order were a decree
for money passed by itself:
Provided that nothing in this sub-section shall be construed to derogate from any power
which the Court or Judge making the order may possess for the enforcement of its or his
directions with respect to the payment of costs.
The Bank Deposit Insurance Act, 2000
According to "The Bank Deposit Insurance Act, 2000", in case of winding up of an

insured bank, Bangladesh Bank shall pay to every depositor of that bank an amount equal to the
amount of his/her deposit in that bank but not exceeding Taka one hundred thousand.
Deposit Insurance System in Bangladesh
Introducing Deposit Insurance:
Deposit Insurance System (DIS) is an institutional initiative by Bangladesh Bank for the protection
of the commercial banks deposits maintained by small depositors in Bangladesh. The system works
among deposit owners. In Bangladesh, deposit insurance was introduced in August, 1984 as a
scheme in terms of the provisions of the legal framework called "The Bank Deposit Insurance

Ordinance, 1984" promulgated by the Government on August 11, 1984. In July, 2000 the Ordinance
was repealed by an Act of the Parliament called the "Bank Deposit Insurance Act, 2000". Deposit
Insurance in Bangladesh is now being administered by the said Act. Bangladesh Bank has taken the
membership of International Association of Deposit Insurers (IADI) in 2006. Membership/Member
Institution: All scheduled banks including foreign banks operating in Bangladesh are brought under
the Deposit Insurance Scheme by the Bank Deposit Insurance Act, 2000. Membership is compulsory
for all Banks (56 banks) as provided in the said Act. Deposit Insurance Trust Fund (DITF) and
Investment Scope: In accordance with the provisions of the Bank Deposit Insurance Act, 2000,
premium collected from the insured banks and all other receivables are deposited in to an account
called Deposit Insurance Trust Fund (DITF) maintained by Bangladesh Bank. The DITF is invested
in the Government Securities and the income derived from such investments is also credited to the
DITF account to strengthen and enhance the overall insurance coverage. Coverage under Deposit
Insurance Scheme: According to "The Bank Deposit Insurance Act, 2000", in case of winding up of
an insured bank, Bangladesh Bank shall pay to every depositor of that bank an amount equal to the
amount of his/her deposit in that bank but not exceeding Taka one hundred thousand. Eligible
compensation up to the coverage cap Taka one hundred thousand would be on per depositor per bank
basis. Management of Scheme: As per provisions of the Act, The Board of Directors of the
Bangladesh Bank is the Trustee Board is responsible for administration and management for the
DITF. Deposit Insurance Premium Rates: According to Deposit Insurance Act, 2000, every member
of scheduled bank is to be treated as insured bank and premium from the member banks are required
to contribute half yearly premium, prescribed from time to time, and based on the total insured
deposits held by a member bank as of preceding 30 June or 31 December. Before 2007, the premium
was determined at a flat rate. Now risk based deposit insurance premium rates have been introduced
and the new increased premium rates which have been affected from 2013 are as follows: Sl. No.
CAMEL Rating/Category Premium Rate 1 Private Commercial Banks under Problem Bank category.
0.10% 2 Private Commercial Banks under Early Warning Bank category. 0.09% 3 Private Banks
outside the Problem & Early Warning Bank category. 0.08% 4 State owned Commercial Banks
(SCBs) 0.08% Conclusion: If the scheme introduces without being accompanied or preceded by
improved regulation and supervision by Bangladesh Bank authorities, then moral hazard would arise
in the banking sector. Towards this end, the presence of deposit insurance system will complement
the existing supervisory framework in promoting stability and soundness of the financial system. The
effectiveness of DIS in reducing systemic risk would be increased if the public is well aware of its
existence and scope. For this view, Bangladesh Bank has already advised the banks for bringing
Deposit Insurance Systems into the notice of the public through displaying the same in their display
boards.
1. Define Bank Company and banking business as per The Banking Companies
Act, 1991. (10.1)
2. What is unclaimed deposit? (10.1)
3. Who are competent to enter in to a contract?(10.2)

4. Define contract and agreement. (10.2)
5. How a contract can be terminated? (10.2)
6. Define Contract of Indemnity and Guarantee.(10.2)
7. Whether registration of Partnership is mandatory?(10.3)
8. Define a Company? (10.4)
9. Differentiate between Public and Private Limited Company.(10.4)
10. What is Holder in due course mean? (10.5)
11. Define Payment in due course? (10.5)
12. What is the revocation of Bankers authority? (10.5)
13. Define money laundering as per MLP Act 2012. (10.6)
14. Define and explain KYC and TP.(10.6)
15. What is cash transaction reporting? ( 10.6)

CHAPTER 11
Frauds, Forgeries and Malpractices Related to General
Banking

Frauds, Forgeries and Malpractices Related to General
Banking
11.1 Fraud
Fraud means: ‘the successful practice of deception or artifice with the intention of cheating
or injuring another. Ordinarily fraud involves willful misrepresentation, the deliberate
concealment of a material fact for the purpose of inducing another person to do or to refrain
from doing something to his detriment, or the failure to disclose a material fact.A false
representation by means of a statement or conduct made knowingly or recklessly in order to
gain a material advantage.
11.2 Forgery
Forgery may be termed as the offence of making a “false statement” in order that it may be
accepted as genuine, thereby causing harm to others. Forgery is the act of making or
alteration of any document with the intention of prejudicing another person. It may be an
inferior substitute imitating an original, giving a false impression of truth or authenticity.
Forge means make or write in fraudulent imitation, act of forging, forged documents.
11.3 Malpractice
Malpractice includes Careless, Illegal or unacceptable behavior by somebody in professional
or official position and improper or unethical conduct by the holder of an official or
professional position. It may alsoinclude negligence, dishonesty, misconduct and serious
procedural lapses with malafide intentions thus causing loss to the bank.
The act or an instance of improper practice in Banks is now wide spread. It is said that the
fraud and forgery in banks is the resultant of malpractice.
Causes of Malpractices, Frauds and Irregularities
 Negligence
 Malafide intention
 Degradation of overall moral and ethical values and spreading of corruption in all
spheres of society and absence of social condemnation against corruption.
 Management inefficiency to withstand pressure of the trade unions.
 Procedural lapses / bottlenecks.
 Lacking of knowledge about Banking laws & practices, bank manual, circulars and
instructions.
 Lacking of proper supervision over the fraud prone areas.
 Loose and ineffective administration and control over the employees

 Absence of periodical rotation of work among the staffs & officers.
 Unethical exercise of delegation of power.
 Influence, Biasness, prejudices and personal interest.
 Concealment of facts
 Breach of trust
 Lacking of knowledge about job procedures
 Breaking chain of command.
Who commits Malpractice, Fraud and Forgeries?

1. Bank employees themselves acting singly or jointly
2. Bank employees in collusion with outsiders
3. Outsiders having knowledge about the loopholes in banking system.
How to prevent fraud and forgery?

 Transparency in Transactions
 Maintaining Accountability
 Establishing Ethical standard
 Corporate governance
 Effective Internal Auditing
 Effective prevention of Money Laundering
 Following Basel principles
o Customer Identification
o Compliance with laws
o Cooperation with law-enforcing agencies
o Adherence to the Statement
 Banks should adopt appropriate general personal policies geared towards rewarding
performance and stiff punishment meted out to poor and negligent performance to serve
as a deterrent to others.
 Banks are to render reports on fraud cases and other fraud related matters to the
appropriate authority on regular basis.

Usual Fraud and Forgeries in Banks:
 Stolen checks
 Cheque kiting
 Forgery and altered cheques
 Accounting fraud
 Demand draft fraud
 Fraudulent Account opening
 Forged or fraudulent documents
 Wire transfer fraud
 Payment card fraud
 Stolen payment cards
 Duplication or skimming of card information
 Money laundering
 Fraudulent Retail loans
Note: Detailed guidelines regarding prevention of fraud and forgeries given by the bank
authority for strict compliance are placed in annexure-15.
1. Define Fraud. (11.1)

2. What does that Forgery mean? (11.2)
3. Mention the causes of malpractices and irregularities in bank.(11.3)
4. How to prevent Fraud and Forgery n banks? (11.3)
5. What are the usual Fraud and Forgeries that happens in banks? (11.3)

CHAPTER 12
Leadership & Managerial Skills in Banking

12.1Leadership and Managerial Skills
The success of an organization depends on many factors, of which management styles come
first. Leadership is an important aspect of managing the organization. Management styles
(Leadership) have a direct impact on the effectiveness of the individual as well as the
organization as a whole.
Leader: The word Leader came from “LEAD” means to guide, to conduct, to precede the
followers for achieve determined goal.
Leadership: Leadership is the process of influencing and supporting others to work

enthusiastically toward achieving objectives. It is the critical factor that helps an individual
or a group identifies its goals and then motivates and assists in achieving the stated goals.
The three important elements in the definition are:
i. Influence/support
ii. Voluntary effort
iii. Goal achievement
Leadership and managerial skills are very significant in banking. Therefore, bank should be
very thoughtful in this issue. Banks need bank officials with sound leadership and
managerial skills, to run their branches/departments efficiently and to achieve the ultimate
objective of bank. Banks also need to give more emphasis on various soft skills for their
senior bank employees such as leadership, team building, motivation etc.
The following issues are very noteworthy to improve the leadership and managerial skills of
senior bankers.
12.2 Leadership in Banks
In today’s world banks play a very important role in the economy. The banking industry
falls under the service domain where efficient management cannot be possible without
efficient and skilled manpower. To achieve the ultimate success in the banking industry,
leadership plays a vital role. Leadership is the process of influencing and supporting others
to work enthusiastically toward achieving objectives of the organization. It is the vital factor
that helps an individual to identify the goal and then motivates and assists others in
achieving the stated goals.

Manager Vs. Leader
o The manager administers; the leader innovates.

o The manager is a copy; the leader is an original.
o The manager maintains; the leader develops.
o The manager focuses on systems and structure; the leader focuses on people.
o The manager relies on control; the leader inspires trust.
o The manager has a short-range view; the leader has a long-range perspective.
o The manager asks how and when; the leader asks what and why.
o The manager has his or her eye always on the bottom line; the leader’s eye is on the
horizon.
o The manager imitates; the leader originates.
o The manager accepts the status quo; the leader challenges it.
o The manager is the classic good soldier; the leader is his or her own person.
o The managers have employees; the leaders win followers.
o The managers react to change; the leaders create change.
o The managers have good ideas; the Leaders implement them.
o The managers direct groups; the leader create teams.
o The managers try to be heroes; the leaders make heroes of everyone around them.
o The managers take credit; the leaders take responsibility.
o The managers exercise power over people; the leaders develop power with people.
12.2.1 Qualities of a Banking Leader
Some essential qualities / traits of a Successful / Ideal / Good Leader are:-
Ability to inspire and motivate others: Leaders should have a vision of the future that
should be vivid and convincing and that motivates bank employees. A good leader should be
able to help the team members, inspire them, and guide them to achieve the ultimate
objective of the bank.
High Integrity and Honesty: Great leaders are honest and transparent, and have high
integrity-they do what they say they are going to do, and they walk their talk.

Problem Solving and Analyzing Skills: These are analytical and creative skills of a leader.
Which particular skills are needed in a particular situation depending on the problem?
Therefore, good leaders should have sound problem solving and analyzing skills.
Drives for Results: Great leaders have a higher level of determination and drive than most
anyone else, and they can be counted on to get things done.
Communicates Powerfully and Effectively: Great leaders are able to communicate

efficiently with the followers in a variety of ways. Such as one-on-one conversations, team
meetings, email messages, phone or Skype calls or any other such medium.
Builds Relationships: A bank business is built on a solid foundation of relationships and

trust. Therefore, good banking leader should possess strong relationship skills.
Displays Technical or Professional Expertise: Good leaders have to have some specific
skill, such as selling, accounting, computing etc. The best leaders build on their technical
and professional skills over time, becoming valuable experts in their field and skilled at
leading their team.
Displays a Strategic Perspective: Great leaders have a long-term vision of the future. They
can be tactical when necessary; they are able to maintain the strategic outlook necessary to
guide their businesses to the best future possible.
Develops others: The best leaders set aside time to develop their work force. They look for
the most promising employees, and provide them with the training they need to become their
bank's next generation of great leaders.
Three Most Important Skills for a Leader
 Technical skill refers to a person’s knowledge in some technical areas. Examples are
the skills learned by accountants, engineers, doctors, chemists.
 Human skill is the ability to work effectively with people and to build teamwork.
 Conceptual skill is the ability to think in terms of models, framework, and broad
relationship such as long-range plan.
12.2.2 Qualities of a Good Bank Branch Manager
A branch manager is responsible for all of the functions of a branch office, like deposit
collecting, approving loans, marketing the branch, building a rapport with the community in

order to attract business and assisting customers with account problems. A branch manager
is also responsible for making sure that the branch's goals and objectives are met in a timely
manner.
A branch manager should also possess strong sales, people-management and customer-
service skills, because a branch manager's responsibilities include developing and
maintaining a good relationship with customers and employees. Essential qualities of a good
bank manager are as follows:
Good Communication: This is the main and prerequisite skill of a good bank manager. In
all kind of management tasks the first and most common thing we do is communicating our
needs, expectations and opinions to other people.
Good Organization: This is the second most important skill, Good communication skills
indicate able to make schedule, organize and follow future plan. It also involves
understanding the rules and processes in the bank and among customers, and predicting what
will happen and when.
Team building: A good bank manager should keep his team sealed. As banking is
teamwork, so bank manager should have strong team management skills. A healthy and
successful team relies on trust to large extent. If a manager systematically builds trust, the
team will feel more appreciated and committed.
Leadership: A good bank manager has to solve them and prove his commitment to the team
goals. It’s also his responsibility to define goals together with his team and assign the
responsibility to team members in a clear manner.
Dealing with changes: Banking sector has changed a lot in recent times. So, ability to adjust
with the change is a crucial quality of a bank manager. The true manager should be flexible
and adaptable and able to react quickly when facing any obstacles.
Domain knowledge: A good manager has to understand what kind of process he is

managing. How his team members are working. What kind of tasks they perform. This skill
is not as important as the others but without it, in some cases, the team and the manager will
never work at full capacity, using the whole potential due to lack of mutual understanding.

12.3 Employee Motivation
Motivation is a core element of management in human resources. Motivation is a behavior,

willingness and contribution of employees to perform a particular task. It is a process, which
arise, direct and maintain human behavior to attain some goal. There is no similarity in
qualities, feelings and behaviors of employees so it is some difficult to take care of human
being with varying characteristics and qualities. Without motivation, organization could not
run long time. It is more important for human resources to activate, train and develop all
motivated in order that make individual and organization goals. Every single employee has
skills, abilities and knowledge, if there is no added motivation, would not open a way of
success, if there is added motivation, would open a way of success for an organization.
There are various sources of motivation by which bank officials can be motivated, such as
good pay structure, provision of decent accommodation, good condition of service and
opportunity for staff training. Motivated employees can increase the capacity of their
productivity.
12.3.1 Motivating Bank Employees
Instilling motivation isn't easy, but it's necessary if we want our employees to grow and stay
satisfied with their jobs. That being said, there isn't any single strategy that can magically
motivate all employees at once and keep them motivated throughout their employment.
Everyone is unique, with unique values and ideas, and if we want to be successful in
instilling company-wide motivation, so multiple motivational strategies may be needed to
motivate different bank employees. Some motivational techniques are as follows:
Individual Attention Matters: Teamwork is an important element of a bank. Team work

not only makes the employee feel recognized and appreciated, it also reinforces the positive
behavior for the entire workforce. If someone is underperforming, take him/her aside for
some personal coaching or one-on-one talks that can help that employee work through
his/her problems.
Advancement Opportunities: People tend to feel stifled when their job becomes repetitive
or stagnant. Going too long in the same position, with no changes or hope for change, will
eventually demotivate even the most ambitious employees.
Leaders Set the Example: As followers follow the leader so leader should set good
example for the organization. As a leader within the organization, people are going to look
to set an example for the rest of the group.

Environmental Motivators: Work environment significantly affect employee performance.
So, a good leader should ensure good working environment in his organization. Thus, a bank
branch manger needs to ensure a better working environment in his bank branch.
Socialization: Socialization makes people motivated in the workplace. So, banks should
consider socialization significantly to improve employee motivation in the workplace. Thus,
banks can arrange spouse gathering, cultural programs, sports etc. for better employee
socialization.
Transparency: Creating an environment of transparency is very important for employee

motivation. That's because transparency builds trust among the employees. Therefore, bank
should create a transparent environment, within the organization to enhance employee
motivation level.
12.4 Work Stress
Stress is a state of mental tension and worry caused by problems in our life, work, etc.:
something that causes strong feelings of worry or anxiety: physical force or pressure. Stress
is the body's reaction to a change that requires a physical, mental or emotional adjustment or
response. The signs of stress can include sleeplessness and pains and sometimes physical
symptoms of anxiety about going to work. What is more, people who are chronically
stressed are no fun to work with. They may be irritable, miserable, lacking in energy and
commitment, self-absorbed. They may find it hard to concentrate on any one task and
cannot be relied on to do their share.
12.4.1 Work Stress in the Banking Sector
Workplace stress is becoming more and more concerning, specially certain sectors as the
banking industry where the levels of stress are now a major issue for the employees and the
organizations. Bank employees cannot afford the time to relax and "wind down" when they
are faced with work variety, discrimination, favoritism, delegation and conflicting tasks.
12.4.2 Some Strategies to Overcome Job Stress in the Banking
 These following strategies are aimed to banks in order to manage stress in the banking
sector:
 Organize a Stress Management Program that focuses on different categories of

employees at all hierarchical levels.
 Introduce more job oriented training programs, which improve employee’s skill and
their confidence to work effectively.

 Encourage open channel of communication to deal work related stress.
 Provide counseling on work related and personnel problems and support from a team of
welfare health and counseling staff.
 Design an attractive system of reward and recognition of good work.
 Justified workload is a vital factor to reduce job stress, excessive work or work outside
one’s capability certainly increases job stress.
 Responsibility for people: liable for well-being of employees, their training and
development.
 Proper feedback is very important in every organization. Lack of feedback about

performance of employee, lack of rewards and performance appraisal by managers may
increase job stress.
 Technological change: keeping the pace of technological change in information

processing field.
 Proper organization structure and environment are also significant to reduce job stress.
Poor working conditions, undefined structure of workplace and line of authority may
enhance job stress.
12.5 Changing the Attitude of Bank Employees
Nowadays, service quality has received vital attention because of its obvious relationship
with costs, financial performance, customer satisfaction, and customer retention. To ensure
better customer service in banks at first banks should try to change the attitude of the bank
employees. Bank employees should always show positive attitude in their job.
In changing the attitude of the employees the following strategies may be followed:
 Acknowledge concerns. Organization should not gloss over complaints. If appropriate,

acknowledge the other person’s point of view and provide clarification on any
misunderstandings.
 Be part of the solution. Instead of allowing employees to present only problems,

encourage them to propose solutions. Ask them to offer at least one resolution to any
complaint.
 Encourage humor. Humor can diffuse tension and ease stress. But humor should be
positive and lighthearted, and should never occur at the expense of others.
 Make time for others. Have an open-door policy and be approachable. This
encourages employees to be open and upfront about problems and concerns.

 Watch body language. Smile, establish eye contact, listen attentively, and nod in
encouragement are essential in the organization. Employees should avoid body
language that's perceived as negative.
 Suggest privacy, if appropriate. If a major setback or crisis occurs at work for an

employee, encourage the person to take a few minutes to be alone. That way, the
individual can work through strong emotions and avoid scenes or actions that he or she
may later regret.
 Praise, praise, praise. When successes occur, share them with others and praise those
who made them happen. Recognizing achievements makes everyone feel good.
 Develop team work: Teamwork has become an integral part of the modern workplace.
No longer are companies sticking to the old-fashioned hierarchical structure. They
realize that their staff can be more productive when they work together.
12.6 Employee Grievance
Grievance may be any genuine or imaginary feeling of dissatisfaction or injustice which an

employee experiences about his job and its nature, about the management policies and
procedures. It must be expressed by the employee and brought to the notice of the
management and the organization. The following may be the reasons of employee
grievances:
a. Improper working conditions such as strict production standards, unsafe workplace,

bad relation with managers, etc.
b. Irrational management policies such as overtime, transfers, demotions, inappropriate

salary structure, etc.
c. Violation of organizational rules and practices
12.6.1 Handling Employee Grievance
The manager should immediately identify all grievances and must take appropriate steps to
eliminate the causes of such grievances so that the employees remain loyal and committed to
their work. Effective grievance management is an essential part of personnel management.
The managers should adopt the following approach to manage grievance effectively-
Quick action- As soon as the grievance arises, it should be identified and resolved. Training
must be given to the managers to effectively and timely manage a grievance. This will lower
the detrimental effects of grievance on the employees and their performance.

Acknowledging grievance- The manager must acknowledge the grievance put forward by
the employee as manifestation of true and real feelings of the employees. Acknowledgement
by the manager implies that the manager is eager to look into the complaint impartially and
without any bias. This will create a conducive work environment with instances of grievance
reduced.
Gathering facts- The managers should gather appropriate and sufficient facts explaining the
grievance’s nature. A record of such facts must be maintained so that these can be used in
later stage of grievance redressal.
Examining the causes of grievance- The actual cause of grievance should be identified.
Accordingly remedial actions should be taken to prevent repetition of the grievance.
Decisioning- After identifying the causes of grievance, alternative course of actions should
be thought of to manage the grievance. The effect of each course of action on the existing
and future management policies and procedure should be analyzed and accordingly the
manager should take decision.
Execution and review- The manager should execute the decision quickly, ignoring the fact,
that it may or may not hurt the employees concerned. After implementing the decision, a
follow-up must be there to ensure that the grievance has been resolved completely and
adequately.
Handling Employee Grievances
One-on-one meeting: Sometimes, an open forum may be ideal for some employees, others
shrink back at the idea of talking out loud in front of others, especially when it’s a grievance.
For employees who aren’t so open, an opportunity to talk one-on-one with a manager or HR
manager can be the perfect opportunity.
Formal Employee Survey: Sometimes typing is better than speaking. It makes sense that
employees may be more comfortable submitting responses electronically than in person
since we live in a very digital age. They tweet instead of calling, post statuses instead of
chatting at the water cooler and now, they can take an electronic survey instead of opening
up in person.
Exit interview: When employees leave on good terms or because they feel their grievances
are irreconcilable. It’s very likely that they have plenty to say and will be more open than

those still employed. As a result, organization may conduct exit interview to know the actual
reason of employee exit.
Decision Communication: Once a decision is made, there should be no time wasted in

communicating the resolution. The action taken might not be agreeable to all employees, but
they have to understand the stand of the management. The course of action to be taken must
be clear in the minds of all those concerned.
Maintain a good grievance policy: Grievance policies determine the actions to be taken. It
is important in coming up with solutions, which should be fair to all those involved. Having
well documented policies makes it easier to handle grievances, as the policies provide a
framework, which will be followed in settling disputes.
1. State the qualities of a good leader.(13.2.1)

2. Mention the qualities of a good branch manager. (13.2.2)
3. Define employee motivation. How it helps in increasing the productivity of the bank.
(13.3.1)
4. How to handle employee grievances in bank? (13.6.1)

GLOSSARY
Archive means a repository used to store and index Images and associated information,
including MICR line information, item sequence number, and full audit trail information, for
necessary retention and accessibility.
BACH (Bangladesh Automated Clearing House) means the overall system and facility that
supports the Exchange and settlement of payment items between Participating Banks and the
Bangladesh Bank.
BACPS (Bangladesh Automated Cheque Processing System) means a facility that clears
cheques and approved payment items for Bank companies.
Business Day means a Banking day including all days except weekly holidays and all
approved Bank holidays.
Cheque Truncation means the process by which the physical movement of a cheque within
a Banking company, between banking companies is stopped and replaced by the exchange,
or storage, of Images and corresponding electronic information.
Cheque Image means a digital representation of the front and back of a cheque.
Clearing means the exchange of payment instructions between payment system participants,
and includes without limitation, the processes associated with clearing, sorting, editing,
netting and prioritizing such instructions or orders in whatever form these take.
Counterfeit Item means an Item that appears to be original or genuine, but has been
fraudulently made and, for the purpose of these Rules, shall be considered an Item with a
Forged or Unauthorized Signature.
Electronic Cheque: is an electronic version of a paper cheque, including date, payee name,
payment amount, and signature.
Electronic Cheque Presentment (ECP) means the process by which BACPS-eligible

Items, Returned BACPS Items and Redirected Returned BACPS Items are exchanged
through the transmission and receipt of Images and corresponding electronic information.
Magnetic Ink Character Recognition (MICR) means the machine recognition of numeric
data printed with magnetically charged ink.
Paying Bank means the Bank upon which a Cheque or other item is drawn.

Presenting Bank means the Bank presenting a Cheque or other items for collection.
Service Branch is a branch that will act as a sending and receiving point, for each individual
bank there will be only one service branch for each bank.
Unusable Image means an Image that does not meet the requirements of the Image
Usability Standard.
Mutual Fund: A mutual fund is a financial intermediary that sells shares of individuals and
then invests the proceeds in bonds or stocks. Mutual Fund may be open ended or closed
ended.
Branch Banking: Engaging in banking activities such as accepting deposits or making

loans at facilities away from a bank's home office.
Lien: Lien is the right of the creditor to retain possession of the goods and securities owned
by the debtor until the debt due from the latter is paid (Contract Act, 1872). Particular lien
and General lien
Particular Lien: A particular lien confers a right to retain the goods in respect of a
particular debt involved in connection with a particular transaction.
General Lien: A general lien confers a right to retain goods not only in respect of debts
incurred in connection with a particular transaction but also in respect of any general balance
arising out of the general dealing between the two parties.
Inspection: Inspection is to check/examine whether existing rules & procedures are

followed in operation.
Malpractice: Malpractice is improper or unethical conduct by the holder of an official or

professional position.
Fraud: Fraud has been defined as an act committed by a person with a view to deceiving
other person.
Forgery: Forgery may be defined as an act of making an instrument with intention to

prejudice any public or private right by using the false document as genuine.
Irregularities: are something which are committed regularly violating the given instructions
rules and norms.

Clearing House
A place provides an arrangement by which various representatives of each clearing bank

assemble there each business day to exchange local cheques, drafts, bill of exchange etc.
which are received by them for collection from, their customers.
Corporate Governance
Corporate Governance means the system by which corporations are managed and controlled
efficiently. Corporate governance is the system by which companies are directed and
controlled. Boards of directors are responsible for the governance of their companies. The
shareholders' role in governance is to appoint the directors and the auditors and to satisfy
themselves that an appropriate governance structure is in place.
Automated Teller Machine (ATM):
A machine, activated by a magnetically encoded card or other medium, that can process a
variety of banking transactions. These include accepting deposits and loan payments,
providing withdrawals, and transferring funds between accounts.
Electronic Funds Transfer (EFT):
The transfer of money between accounts by consumer electronic systems-such as automated

teller machines (ATMs) and electronic payment of bills-rather than by check or cash. (Wire
transfers, checks, drafts, and paper instruments do not fall into this category.)
Anytime Banking:
With introduction of ATMs, Tele-Banking and internet banking, customers can conduct their
business anytime of the day and night. The 'Banking Hours' is not a constraint for transacting
banking business.

REFERENCE
Banking Theory, Law and Practice by E. Gordon and K. Nataranjan

Commercial law by A.K. SEN &J.K.MITRA
Banking Law and Practice by S.N. MAHESHWARI.
Principles of Banking, Indian Institute of Banking & Finance, Macmillan.
Pond, K.,(2000), The Value of the Banker-customer Relationship, Published by
Loughborough University Banking Centre
http://www.businessdictionary.com
K. Shafiqur (2013), General Banking: Practice & Law of Banking, First Edition, Centre for
Research on Banking & Human Resource Development, Dhaka-1216
K.C. Shekhar (2004), Banking Theory and Practice, 21st Edition, Vikas Publishing house
Pvt. Ltd.
AllBankingSolutions.com
http://www.businessdictionary.com
The Contract Act, 1872
The Banking Companies Act, 1991
The Companies Act, 1994
The Partnership Act, 1932
The Negotiable Instruments Act, 1881
The Banker’s Books Evidence Act, 1891
The Money Laundering Prevention Act, 2012
The Anti-Terrorism Act, 2009
The Negotiable Instrument Act, 1881 (Act XXVI OF 1881)
Bangladesh Gazette Dated September12, 1994
Bangladesh Gazette Dated July 06,2000
BIBM Reading Materials.
Extras:
2.2Bank’s Duties and Rights

 The bank must honour the cheques of their customer provided that the customer’s
cheques are properly drawn and there has been sufficient balance to honour the cheque.
 The bank is entitled to charge its customers reasonable commission for services rendered
to them, and to charge interest on loans made to them, except where special
arrangements have been made;
 A bank can exercise a lien over any of its customers’ securities that are in its possession,
other than those deposited for safe custody, for any money owing to it;
 A bank must maintain strict secrecy about its customers’ affairs, both while the account
is opened and even after it had been closed;
 A bank must give reasonable notice to its customer, before closing an account, which is
maintained in credit;
 The bank is to render statements of account to its customer periodically or upon request;
 A bank has no obligations to third parties, arising out of the duty to pay its customer’s
cheques;
 A bank is to collect cheques and other normal banking instruments for its customer and
to credit the amounts collected to his account;
 A bank should exercise proper care and skill in carrying out any business it has agreed to
transact for its customer.
2.3 Customer’s Obligations to his Bank
 The customer is under the duty to exercise reasonable care when drawing his cheques, to
help prevent fraud or forgery;
 The customer must observe due care when he requires payment either from the counter
of the bank or through ATM or by any other means;
 Before drawing the cheques, the customer must ensure that, there has been sufficient
balance in his account to meet it;
 A customer must pay reasonable interest and commission and other charges for banking
services and this is implied when he/she opens an account.

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STUDY MATERIAL ON

Module: General Banking (Advance Level)

January 30, 2020

Bangladesh Institute of Bank Management [BIBM]

Study Material on “GB (Advance)” for NCC Bank Limited 1

Questions and answer indications

Questions and answer indication

Study Material on “GB (Advance)” for NCC Bank Limited 2

Questions and answer indications

Chapter 5: Cash and Volt Management

Questions and answer indications

Chapter 6: Clearing and Collection of Instruments: BACH, BACPS

6.5 For Enhanced Attention for Suitable Risk Management Techniques

Questions and answer indication

Study Material on “GB (Advance)” for NCC Bank Limited 3

Questions and answer indications

Questions and answer indications

Chapter 9: Risk Management

Questions and answer indications

Study Material on “GB (Advance)” for NCC Bank Limited 4

Questions and answer indications

Chapter 11: Fraud, Forgeries & Malpractices Related to General Banking

Questions and answer indications

Chapter 12: Leadership and Managerial Skills in Banking

Study Material on “GB (Advance)” for NCC Bank Limited 5

ACH Automated Clearing House

AAA Automated Accounting Advice

AOF Account Opening Form

ATM Automated Teller Machine

BACH Bangladesh Automated Clearing House

BAMLCO Branch Anti Money Laundering Compliance Officer

BEFTN The Bangladesh Electronic Funds Transfer Network

BFIU Bangladesh Financial Intelligence Unit

BIN Business Identification Number

BRPD Banking Regulations and Policy Division

CAMLCO Chief Anti Money Laundering Compliance Officer

CBS Core Banking Solution

CHIPS Clearing House Interbank Payment System

CRM Customer Relationship Management

CRR Cash Reserve Ratio

CSR Corporate Social Responsibility

CTR Cash Transaction Reporting

EFT Electronic Funds Transfer

FDR Fixed Deposit Receipt

GOB Government of Bangladesh

IBCA Inter Branch Credit Advice

IBDA Inter Branch Debit Advice

KYC Know Your Customer

Study Material on “GB (Advance)” for NCC Bank Limited 6

MISD Monthly Income Deposit Account

MSDS Monthly Savings Deposit Account

MICR Magnetic Ink Character Recognition

POA Power of Attorney

RJSC Registrar of Joint Stock Company

RTGS Real Time Gross Settlement

SLR Statutory Liquidity Ratio

STR Suspicious Transaction Report

TDR Term Deposit Receipt

TIN Tax Identification Number

Study Material on “GB (Advance)” for NCC Bank Limited 7