Responsibilities of paying Bank
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is the primary duty of a paying bank when a cheque is presented for payment?
The paying bank must verify the genuineness of the cheque, ensure the drawer's signature matches, check that funds are sufficient, and pay the correct payee in due course.
What is the paying bank's responsibility when a cheque is presented after banking hours?
Bank may dishonour it; payment next working day is standard.
Under Section 31 of the Negotiable Instruments Act, what obligation does the drawee bank have?
Under Section 31, the drawee bank is bound to pay a cheque drawn on it if the drawer has sufficient funds, and it is liable to compensate the drawer for any loss caused by wrongful dishonour.
What is the paying bank's duty when a cheque is presented with an irregular date?
Bank should return the cheque citing 'date required' or 'date irregular'.
What does 'payment in due course' mean under the Negotiable Instruments Act?
Payment in due course means payment made in good faith, without negligence, to the person in possession of the instrument, under circumstances that do not arouse suspicion about the possessor's title.
Under what condition can a paying bank return a cheque with the reason 'effects not cleared'?
When deposited cheques in the account are not yet cleared for withdrawal.
When is a paying bank protected from liability even if a cheque is paid to a wrongful person?
A paying bank is protected if it pays in good faith and without negligence, as defined under Section 10 of the Negotiable Instruments Act, making the payment in due course.
What is the paying bank's responsibility regarding verification of cheque amount in words and figures?
Amount in words prevails if there is a discrepancy between words and figures.
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