a) Explain four rights that a banking institution have over its Clients. (4 Mark

Question

a) Explain four rights that a banking institution have over its

     Clients.                                                                                (4 Marks)

b) Discuss four circumstances that can lead to the termination of

    the banks authority to pay money on behalf of a client.       (4 Marks)

c) Explain four feature of a bill of exchange.                            (4Marks)

d) Explain three information a bank requires a to open an account

    for a partnership business.                                                  (3 Marks)

a) Explain the disadvantages of using land on collateral for a bank

    Loan.                                                                                    (5Marks)

b) Outline the documents required to open an account by a limited

    company.                                                                             (5Marks)

Explain the objectives of crossing of cheque

Explanation / Answer

Ans1.i Bank has the right to charge a customer commission and service charges for maintaining customer's account, clearing cheques and for other banking services

ii. Bank has the right to charge interest on loans given to clients also penalty for non payment of interest.

iii. Bank has the right to sell customer's property in case of default by customers on loan taken on security or property of the customer.

iv. Bank has the right to take any action against customer incase of misguiding the bank in document verification.

Ans b. Circumstances in which bank can terminate payment on behalf of the client are as follows:

i. if documents are not provided to the bank or incomplete documents are provided to banks

ii. If signatures doesnt match with that of client

iii. If there is insufficient amount in clients account

Ans c. Four features of bill of exchange

i.Bills of exchange is an instrument in writing by a maker

ii. In the bill of exchange it is stated to be paid by money only and the amount must be specific along with date and time.

iii.The amount must be paid within a stipulated period.

iv.The name of the person to whom money has to be paid (drawee) must be mentioned

Ans d. Three information bank requires for oprning an account for a partnership business are:

i. Copy of partnership deed

ii.Identity proof of partners

iii. Partnership registration certficate

iv. Address proof of partnership firm.

Ans a.disadvantage of using land as collateral for bank loan are

i. In case of continuous default bank may put the land for auction for recovering their money

ii.It also depends on how the land valaution is done. If the land is undervalued the loan amount sanctioned will be less.

iii. There will be legal case filed by bank against the owner for defaulting payments which may result in huge loss of money.

iv.Bank can re mortgage the land to other parties for sudden need of money.

Ans b.the documents required to open an account by a limited company.

i. MOA memorandum of association : this docment basically has information about company like name, address, objetives,assets and liability etc..

ii. AOA article of association : This document gives detail abut duties and responsibilities of the company members.

iii.Power of attorney if any given to any directors, manager or members.

iv. Copy of identity proof of board of directors

v.Resolution of board of directors who are allowed to access the account.

Ans objectives of crossing cheque are:

a. crosssing cheques helps in safe transfer of money to other person's account.

b. In case if misplaced, it cannot be cashed by any third party

c. It serves as proof as money is transfered directly to party's account

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