Paying Banker :
The term paying banker refers to the drawee banker who pays the cheques of his customers.
The primary relation between a banker and his customers is that of a debtor and a creditor.
When the banker accepts deposits from its customers he became a debtor and is under an obligation to return the money to the customer or to any person to the order of the customer by honouring the cheques drawn by his customer.
When the banker lays his customers cheques he is termed as paying banker.
Duties Of Paying Banker :
The duty of the paying banker to honour his customers cheque’s is a statutory duty.
Section 31 of the Negotiable instruments Act, has imposed upon the banker the obligation to honour customers cheques.
According to this section, the drawer of a cheque having sufficient funds of the drawer in his hands, properly applicable to the payment of such cheque must pay the check when properly required to do as such, and in default of such payment, must remunerate the drawer for any loss or damage brought by such default.
The paying banker has the following duties :
A) In case of sufficiency of funds in the account of the drawer which can be properly used to pay the cheque, banker must pay the cheque when required to do so.
B) The paying banker is expected to pay the cheque to the genuine payee as per the direction of the drawer.
C) The paying banker should pay the cheque when there is no restriction imposed on the payment by the drawer or by the law.
D) The payment should be made when the cheques is presented for payment within a reasonable time after being drawn and during banking hours.
E) He has to honour the cheque drawn against the account maintained at that branch of the bank where the cheque is presented.
F) The banker should not make payment of crossed cheques over the counter of the bank. He must pay the crossed cheques through a banker.
In short, the paying banker is required to make payment of his customers cheque’s according to the provisions of the law.
The paying banker should act with care and caution and prudence in honouring the cheques.
Liabilities Of Paying Banker :
The paying banker is responsible to his customer and is under a duty to make payment of the cheques to the right persons in accordance with the instructions of the drawer.
If he dishonours the cheque wrongfully or honours the cheques carelessly and negligently he subjects himself to heavy liabilities.
In the following ways liabilities of the paying banker may arise :
A) When there is sufficient funds in the account of the customer applicable for the payment of cheques the paying banker shall be liable to pay damages if he wrongfully dishonours the cheques.
B) When the customer has been granted overdraft facility, the banker will be held liable if he dishonours cheques drawn by the customer on the basis of the overdraft.
C) When the customer is misled by the entry in the passbook and draws a cheque believing the balance shown by passbook as the actual balance, the banker shall be liable if the cheque is dishonoured.
D) When the customer is allowed by the banker to draw cheque on the basis of cheque deposited for collection, before it is actually realised, the banker shall be liable to the customer if he subsquently dishonour the cheque.
E) The paying banker shall be liable if he pay the cheque contravening the legal provisions laid down by the Negotiable instruments act.
Precautions To be taken by the Paying Banker :
The paying banker has to be extremely vigilant while making payment of customers cheque’s.
On one hand he may have to bear the loads for wrongful payment and on the other hand he may be held liable for wrongful dishonour of cheques by the customer.
Therefore, a banker must carefully examine the cheques presented to him and take the following precautions :
A) Form of Cheque : The cheque drawn by customer must satisfy all the requisites of a valid cheque. The negotiable instruments act has not given the form of a cheque.
B) Date of Cheque : A cheque must be bear a date without which it is incomplete. The date of the cheque is important because the order of the customer to the banker given through the cheque becomes legally effective on the date mentioned on the cheque.
C) Amount of Cheque : The amount should be mentioned on the cheque both in words and in figures. It should be written as distinctly as possible and in a way to prevent insertions or alterations.
It should commence as near printed Words “Rupees and Rs ” as possible and should add the words “only” or draw a line after the amount in words or figure.
D) Fund of the customer : The banker should see whether there is sufficient funds in the account of the customer to pay the cheque.
It may be noted that the cheque has to be paid in full and not in part and therefore, inadequacy of funds of the customer will result in the dishonour of the cheque unless the banker has granted loan or overdraft facility to the customer .