DEFINITION OF BANKER AS PER BANKING COMPANIES ACT OF INDIA

DEFINITION OF BANKER AS PER BANKING COMPANIES ACT OF INDIA

DEFINITION OF BANKER AS PER BANKING COMPANIES ACT OF INDIA

DEFINITION OF BANKER AS PER BANKING COMPANIES ACT OF INDIA

Definition of Banker

Till the passing of the Indian Companies Amendment Act,1936 there was no statutory definition of banker in India.

Though many legal decisions and interpretations were made, they seemed to be not satisfactory. Most authors on this subject tried to give the meaning of the term “banker”, based on the functions and services rendered by the banking business.But all of them including the English law have failed to provide a satisfactory definition of the term “banker”.

There being no statutory definition for the term banker, some of the leading writers on the banking law have, from time to time, attempted to give the essentials of the concept of the term from the decided cases. Dr. Herbert L. Hart, an author on Law of Banking, based on a number of legal decisions, defined the term “banker” as follows: “A banker is one who in the ordinary course of his business, honours cheques drawn upon him by persons from and for whom he receives money on current accounts”.

Another great authority on banking, Sir John Paget defined the term based on the essential functions performed by persons who claim to do the business of banking. According to him, “it is a fair deduction that no petsonor body corporate or otherwise, can be a banker who does not (1) take deposit accounts, (2) take current accounts, (3) issue and pay cheques and (4) collect cheques crossed and uncrossed, for his customers”.

Hence according to Sir John Paget, a person or body claiming to be a banker must profess himself to be one whose main business must be that of banking. Though this definition seems to be exhaustive, it does not make any mention of other important functions of the present day banker, such as the agency and general utility services.

In India, till the passing of the Banking Companies Act.1949, no restrictions were imposed on the use of the term “bank” or “bankers” by money lenders. But mere money lending does not constitute banking business as per the decision given in Bank of Commerce Ltd Vs Kunj Behan Kar (AIR 1945 II). The Banking Regulation Act, 1949 defines the word “banking”, as “accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheqüe, draft or otherwise “‘
vide section 5(b) and (c). The salient features of this definition are as follows :

Salient Features:

(1) A banking company should perform the essential functions of (a) accepting deposits, and (b) lending or
investing the same.
(2) The deposits have to be repaid either on demand or after expiry of a specified period.
(3) The word “Public” is significant and it implies that a banker accepts deposits from anyone who offers his
money for such purpose. The banker can refuse to accept deposits from a person who is considered as an
undesirable person, viz., a thief, robber, etc.
(4) A bank should also perform the function of collection of cheques for and on behalf of his customers.
(5) It should have banking business as the main business.

Apart from the above mentioned main business performed by modern bankers, many general utility and agency services are undertaken by them. No banking company shall engage in any form of business other than those referred to above. Taking into consideration of the range of services offered by banks, right from the main services relating to deposits and loans, banking companies are not allowed to indulge in any
violent speculative activities.

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