The bank which collects the proceeds of cheques, drafts, pay orders and bills etc. from other banks for
deposit into the accounts
of its customers is called a collecting banker.
Capacity of Collecting
Banker :
As an Agent : A collecting banker acts as an agent of the customer if he credits the latter‘s account with the
amount of the cheque after the amount is actually realised from the drawee bank. Thereafter, the customer
is entitled to draw the amount of the cheque. The banker thus acts as an agent of
the customer and may charge from him
a commission for collecting the amount from
other banks.
As an agent of his customer, the
collecting banker does not possess title to the cheque
better
than that of
the customer. If the customer has no title thereto, or his title is defective, the collecting banker can not have good title to the cheque. He will be held liable for conversion of money, i.e. illegally interfering with the
rights of the true owner
of the cheque.
As Holder for Value : Collection of cheques takes some time, specially in case of outstation cheques. If the
collecting
banker pays to the customer the amount of the cheque or credits such amount to his account and
allows him to draw it before the amount of the cheque is actually
realised from the drawee bank, the
collecting banker is deemed to be its ‗holder for value‘. The bankers takes an undertaking from the
customer to the effect
that
the
latter will reimburse the
former in case of
dishonour of the
cheque.
Duties of Collecting
Banker
01. Presentation of cheques for payment within reasonable time:
The banker
should collect
the
cheques, sent by the customers, with due care.
As per Section-74, they
must present the cheque to the drawee bank within a reasonable time. According to the practice followed by the bankers, if the collecting and paying bankers are in the same place, the collecting banker should present the cheque before the next clearing immediately after he received it. In case
of outstation cheques, he should despatch the same to the drawee banker on the same day after it is received by him. The cheque may also be presented through a clearing house or through the post. If a cheque
presented with undue
delay and in the meanwhile
the drawer of the
cheque
suffers damage, the drawee is
discharged to
the extent of damage.
02.
Notice of dishonour :
In case a cheque is dishonoured and returned back by the paying banker to the collecting banker
without payment for one reason or the other, the banker must serve a notice of dishonour on his
customer to enable the latter
to claim the amount from the previous parties including the drawer.
Statutory
protection to
Collecting Banker.
01. Crossed cheque only:
The statutory protection is available to the banker only in case of cheque crossed generally or
specially to
himself. He can
not avail this protection
in case of uncrossed cheque.
02. Collection as an Agent:
The statutory protection is available to the banker if he collects the cheque as an agent of the
customer and not as its holder for value.
03. Good faith
and
without negligence:
The most essential
prerequisite for availing of the statutory protection is that the banker must
receive
payment in good faith and without
negligence. A thing is deemed to be done in good faith when it is in fact done honestly irrespective of whether negligently or not. He should not be negligent in receiving the payment. The onus of proving that he was not negligent in collecting
the cheque lies,
however, on the
banker himself.