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Opening of Deposit Accounts

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Opening an account with a bank creates relationship between the bank and the account holder. Anyone who can enter into a contract can open an account. Even minors can open account jointly with their guardians. Individuals, sole proprietors, partnerships, Hindu Undivided Family (HUF), trusts, associations and Limited companies are some examples of those who can open an account with the bank. As per RBI guidelines an account can be opened only if the person wanting to open an account has an introducer. The guideline further suggests that the introduction should be by an existing customer, a respectable person of the local community, and another banker. The bank can insist on a photograph before opening the account except in cases of savings account where no cheque facility is provided, fixed and term deposit upto an amount of Rs 10,000, accounts like cash credit and overdrafts etc. and staff members. Apart from furnishing a proof of address banks can also insist on a declaration that he/she does not enjoy credit facilities from other banks.

Opening an account with a bank creates relationship between the bank and the account holder. Anyone who can enter into a contract can open an account. Even minors can open account jointly with their guardians. Individuals, sole proprietors, partnerships, Hindu Undivided Family (HUF), trusts, associations and Limited companies are some examples of those who can open an account with the bank. As per RBI guidelines an account can be opened only if the person wanting to open an account has an introducer. The guideline further suggests that the introduction should be by an existing customer, a respectable person of the local community, and another banker. The bank can insist on a photograph before opening the account except in cases of savings account where no cheque facility is provided, fixed and term deposit upto an amount of Rs 10,000, accounts like cash credit and overdrafts etc. and staff members. Apart from furnishing a proof of address banks can also insist on a declaration that he/she does not enjoy credit facilities from other banks.

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Opening of Deposit Accounts

  1. 1. Opening of Deposit Accounts Introduction Who Can Open Account Introduction to Open Account Photograph & Address of Account Holder PAN/GIR Number Additional Precaution Documentation Opening of Deposit Accounts Retail Banking Chapter 03
  2. 2. Introduction By opening deposit account, an individual who has no other account with the bank, begins a relationship. As this relationship imposes various obligations on a bank, he must therefore be careful regarding whose account he opens. An account can be opened by anyone who can enter into a valid contract. Minors may also open an account jointly with their guardians. This chapter will explain factors that you should consider and the documents that you should procure to open an account. Opening of Deposit Accounts Retail Banking Chapter 03
  3. 3. Who Can Open Account These accounts can be opened by those who have funds in hand. But the person who have unsound mind can’t open account. The others like eligible to open an account. e.g. are: 1. Individuals 2. Sole proprietorship 3. HUF 4. Partnerships 5. Trusts 6. Associations 7. Limited companies etc. Opening of Deposit Accounts Retail Banking Chapter 03
  4. 4. Introduction to Open Account The RBI insists the account should be properly introduced. The banker will get legal protection u/s 131 of the Negotiable Instrument Act only if the bank has acted in good faith and without negligence. RBI also states that proper identification enables the bank to trace the person later if required. The account should not be opened without meeting between the bank official and the customer. The introduction should be by: -An existing customer -A respectable person of the local community -Another bank/ banker Opening of Deposit Accounts Retail Banking Chapter 03
  5. 5. Photographs Bank must obtain photographs of the customer/ customers to check the identity of the person operating the account. In the case of minors, the guardian’s photographs should be obtained. The photograph should be recent. The cost of such photographs may be born by the customers. The customers must submit two photographs. Photographs cannot be a substitute for specimen signatures. Photographs need not be insisted upon in following cases: -A new saving account where cheque facility is not provided. -Fixed and other term deposit up to an amount of Rs.10,000/- -Account like cash credit, overdraft etc. -Bank also need not insist on photographs for accounts of staff member (single/joint). Opening of Deposit Accounts Retail Banking Chapter 03
  6. 6. Address of Account Holder Bank must obtain full and complete address of depositors. Independent confirmation of the address must be obtained in all cases (like recent telephone bill, electricity bill that is in his name or some other acceptable correspondence or document like ration card. A driving license and even a passport (sometimes) is not an acceptable document in support of one’s address (as they may not be up to date). As a precaution, bank should, after the account has been opened send a letter to the customer at the address on the account opening form. Opening of Deposit Accounts Retail Banking Chapter 03
  7. 7. PAN/GIR Number When any account is opened by initial deposit of Rs. 50,000/- or more, PAN/GIR number must be obtained. If an account opener does not have a PAN/GIR number, he must be requested to submit Form 60 of the Income Tax Department. The specimen signature of the client has to be procured with the account opening documentation. The opening of new accounts should be authorized by the branch manager or by the person to whom the authority has been delegated. It must be ensure that all account opening formalities are undertaken at the bank’s premises and no document is allowed to be taken out for execution. Opening of Deposit Accounts Retail Banking Chapter 03
  8. 8. Additional Precaution Following is the additional precaution for opening of current account. Bank must insist on a declaration from the account holder to the effect that he is not enjoying any credit facilities with other banks. If customers are enjoy any such facilities the particulars of such to be obtained. The account opening banks should obtain a no-objection from lending banks. If no response is received after a fortnight the account may be opened. Opening of Deposit Accounts Retail Banking Chapter 03
  9. 9. Documentation Following is the list of different entities who wish to open a deposit account. Let’s look briefly the documentation and the other information required by each of them for opening an account. Individual: Make an application in prescribed form. Proof of identity any one of following; Driving license Passport Photo credit card Election ID card PAN card Opening of Deposit Accounts Retail Banking Chapter 03
  10. 10. Documentation Proof of Address any one of following; Telephone bill Recent electricity bill Ration card etc. Signature verification: by passport or self cheque if customer has another account. Client accounts opened by professional intermediaries: The client must be identified. Banks may hold ‘pooled’ accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds etc. Opening of Deposit Accounts Retail Banking Chapter 03
  11. 11. Documentation Where funds held by the intermediaries are not co-mingled at the bank, the entire beneficial owner must be identified. The ultimate responsibility for knowing the customer lies with the bank. A Sole Proprietorship should submit: A certified true copy of its shops and establishment, license or any other approval from the government. A declaration from the sole proprietor that he is the sole proprietor. Opening of Deposit Accounts Retail Banking Chapter 03
  12. 12. Documentation Accounts of Politically Exposed Persons Bank should gather sufficient information on any person/customer of this category intending to establish a relationship and check all the information available in the public domain. Banks should verify identity of the person and should seek information about sources of funds. The decision to open account of PEP should be taken at senior level. The above norms may also applicable to the closed relatives or the family member of PEPs. Opening of Deposit Accounts Retail Banking Chapter 03
  13. 13. Documentation Accounts of non-face-to-face customers With the introduction of telephone and electronic banking there must be specific and adequate customer identification procedure to mitigate the higher risk. Certification of all the documents presented may be insisted. Lower Income Group: In October 2005 the RBI stated that KYC guidelines should not be an excuse for banks to keep the poor away from the banking system. A simplified procedure could be provided for opening of accounts in respect of those persons who do not intend to keep balances above Rs. 50,000/- and whose total credit in one year is not exceeds Rs. 1,00,000/-. Opening of Deposit Accounts Retail Banking Chapter 03
  14. 14. Documentation Hindu Undivided Families: A HUF deed. The account is opened in the name of KARTA or in the name of the HUF business. Certified true copies of return for last two/three years. A HUF declaration that has been signed by all the coparceners affirming the composition of the HUF. Opening of Deposit Accounts Retail Banking Chapter 03
  15. 15. Documentation A Trust/Nominee or Fiduciary Account A certified true copy of the trust deed or the charter under which it is opened. Its byelaws; A list of its trustees including their address and telephone number; A resolution of the trustees to open the deposit account and the manner it is to be operated. Opening of Deposit Accounts Retail Banking Chapter 03
  16. 16. Documentation Partnership Companies Should Submit A certified true copy of partnership deed. A list of all partners and their address mentioning if they are limited partners. Attested true copy of resolution of the partners to open the account. Power of attorney granted to a partner or an employee to transact business. PAN card Telephone bill for address proof. Opening of Deposit Accounts Retail Banking Chapter 03
  17. 17. Documentation An Association/Club/Society should submit Its certificate of registration. A copy of its governing body resolution. A certified true copy of its byelaws List of management committee members. Management committee resolution to open the account and the manner it is to be operated. Opening of Deposit Accounts Retail Banking Chapter 03
  18. 18. Documentation Limited Companies should submit: Their Memorandum and Articles of association. The certificate of incorporation. The certificate of commencement of business in case of public limited companies. Principal place of business. Copy of PAN card. Mailing address and fax number. Proof of address. Opening of Deposit Accounts Retail Banking Chapter 03
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