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Opening accounts for various types of customers
6.5. Opening of Account - Every adult and sane individual can open a bank account, provided he is not insolvent or an un-discharged bankrupt. Joint account can also be opened by two or more individuals. Similarly a group of persons having formed themselves into a ‘partnership firm’ can also open a ‘partnership account’, provided the maximum number of partners is twenty. Whenever the maximum number exceeds this limit, law requires that it should get itself incorporated as a joint stock company under the Companies Ordinance 1984.

A bank account is opened with an initial deposit of money generally in the form of cash. To this end an account opening form is used. The account opening form is required to be completed and signed by the prospective account holder and accepted by the branch Manager or an official duly authorized in this behalf. The completion and signing of the account opening form by the prospective customer and its subsequent acceptance by the bank and deposit of initial amount constitutes a contractual relationship between the account holder and the bank.

It is, therefore, necessary that the bank before entering into this contractual arrangement with the prospective account holder should, among other, be satisfied with regard to his identity, integrity and reliability.

The bank should satisfy itself that it is not opening account of a person, who is non-existent or is a person of questionable integrity and reliability. This underlines the need
and importance of detailed customer due diligence by the bank manager. This entails satisfying himself that the customer is genuine, he is not an imposter, his address is verified, his computerized ID card is genuine, his sources of funds are known and he is a reliable person suitable for maintaining a bank account and is not likely to indulge in money laundering. On satisfaction about the integrity of the new account holders, usual approval for opening the account shall be extended by the Manager himself. Thereafter other formalities like allotment of distinctive account number and recording of customer’s data in the ledger/computer system shall be undertaken.

CUSTOMER DUE DILIGENCE (CDD)
In the year 2008 State Bank of Pakistan issued instructions that there is no compulsory requirement of INTRODUCTION. Instead the bank opening the account is required to do detailed due diligence to ensure that the account is opened for a person who is properly identified, the bank should make enquiries that he is a genuine person and his address and other details are verified as per the requirements of Prudential Regulations and KNOW YOUR CUSTOMER and the Bank Manager interviews the prospective customer. The manager confirms in writing that he is fully satisfied about the genuineness and suitablility of the customer. The bank manager can call for any documents that he considers appropriate or make any enquiries he deems necessary before approving the opening of the account.
Banks usually open account with a first ‘cash’ deposit and accept ‘cheques’ for deposit only thereafter so as to be certain that the cheque is being collected for a ‘customer’ to be within the protection of Section 131 of the Negotiable Instrument Act.
The essential precautions are:
i. The prospective account holder, preferably, calls at the bank and signs the account opening form in the presence of an authorised bank official.

ii. A new account holder is interviewed by the bank officer in order to reassure himself about the genuineness of the person applying.

iii. To secure identity of the prospective account holder banks’ officers may visit the place of residence and/or business at the address given in the account opening form, tactfully verifying the antecedents of the new customer.

iv. As a matter of routine the Bank Manager sends a ‘letter of thanks’ to the new customer for having opened his account with the bank assuring him of the bank’s courteous and efficient services. The real purpose of this exercise is to eliminate the possibility of the account opener being a “fake” person or an “impersonator” or the address being wrong. If a ‘thank you letter’ is returned undelivered, bank must make detailed enquiries as it may be due to the customer being fake or non-genuine.

v. If the new customer has or had an account in some other bank, that bank may be requested to provide a confidential report on the status of the customer, in accordance with the established practice amongst banks for exchange of information on each other’s customers.

vi. State Bank of Pakistan has given detailed instructions for “Know Your Customer (KYC)/Anti Money Laundering(AML)” due diligence and also a list of minimum documents that are required for opening of an account.


Types of Customers
The relationship of banker and customer is primarily that of debtor and creditor. The amount deposited by the customer becomes bank’s own money once it enters Bank’s kitty. The customer has a choice of action i.e. a right to reclaim the debt from the bank by drawing a cheque or by issuing written instructions. The deposits are obtained from various types of customers with varying features and implications which are discussed below:

7.1. Individual’s Account (Single or Joint,Natural Person/s)
Any person having capacity to make a valid contract can open an account by signing the prescribed account opening form and specimen signature card. The account has attributes of acceptance of deposits and withdrawal through cheques to the extent of credit balance available in the said account. The customer can also give special instructions or standing orders to the bank regarding periodical payments like insurance premium, subscription or for any other services to the debit of his account, which the bank will comply with in the normal course of business.

7.2. Joint Account
7.2.1. Nature of the account — an account opened in the name of two or more natural persons is known as a joint account. In a joint account express instructions must be obtained with reference to its mode of operation i.e., whether one or more of them shall operate singly or jointly. However, if it is silent the operation will be allowed only under the joint signatures of all the joint account holders. It is relevant to signify that the joint account holders are not partnership or trust account. Any one of the joint account holders have a right to ask for stop payment, but subsequent withdrawal of stop payment instructions and request to close the account must be signed by all the joint account holders.

Joint Operation
If a joint account is subject to Operation by Joint signatures, withdrawals will be allowed only if all the joint holders sign the withdrawal. In case of death of a joint holder in a joint operation account, the survivor cannot draw the balance amount and Court Instructions will have to be obtained as to who can draw the funds.

7.2.3. Either or Survivor Letter : This is a special mandate obtained from all the joint account holders authorizing operation by Either or Survivor. In this case any one account holder or survivor can operate the account. This is a convenient arrangement inasmuch as the survivors can automatically continue operation upon the account or can even withdraw the entire balance left after the death of one of the joint account holder. State bank has also given directions to add a column on the back of the form to provide information about “next of kin” enabling banks to correspond in case of death. The next of kin has no authority to draw funds. He is only authorized to receive information about the account in the case of death of account holders.
Due to the above reasons, when a joint account is opened clear cut written instructions should be taken in regard to the operation of account.

7.2.4. — List of Documents to be obtained from
Individual’s Account (Single or Joint)(Natural Person/s):
1. Photocopy of Computerized National Identity Card (CNIC) or passport of the individual attested by a gazetted officer or a Notary Public. This attested copy must be tallied with the CNIC / Passport. Before returning the original CNlC/Passport to the applicant, the bank officer should write on the attested copy “original seen and returned”.
Verification of CNIC. The genuineness of CNIC must be confirmed FROM NADRA through the on-line computerized system.

2. In case the CNIC does not contain the photograph, the bank / DFI should also obtain, in addition to CNIC, any other document such as driving license etc. that contains the photograph. However, if the individual does not have any other valid document which bears photograph, following documents should be obtained:

(i) A copy of the photograph duly attested by a gazetted officer / Nazim.
(ii) A copy of CNIC without photograph duly attested by the same person who has attested the copy of photograph as per Sr. No. (i) above.
(iii) A confirmation in writing from the applicant to the effect that the individual has no other document bearing photograph. The Banks / DFIs (Development Finance Institutions) shall ensure that the CNIC and the photograph are of the same person whose account is being opened with them. The particulars / CNIC of such persons must be verified from NADRA in writing or through its “VeriSys” system by the bank/ DFI.
3) Account Operation Instructions must be selected or mentioned in the joint account opening form.
Options
A) Any one may operate. Also mention ‘Either or Survivor’ and take either or survivor letter if prescribed. In case of death of joint holder the survivor can operate.
B) Joint Operation. (It means all joint holders to sign the operating instructions. In case of death of joint holder the amount will be released only on succession certificate.)
4. In case of a salaried person, attested copy of the service card, or any other acceptable evidence of service, including, but not limited to a certificate from the employer.

5. In case of other professions take some appropriate document which evidences the profession of the account holder.

Sole Proprietorship Account----Documents Required
1) All the formalities/documents discussed above under individual account will be fulfilled for the sole proprietor.
2) Additionally the sole proprietor of a trading concern must sign a declaration that he is the proprietor of the firm.
3) Mandate portion of the AOF should be completed if the proprietor delegates the account operation authority to any other person on his behalf.

The officer of the bank authorizing the opening of a sole proprietor account must undertake extra due diligence and independent enquiry while authorizing such account as sole proprietorship concerns are not registered entities and the only evidence the bank has to the effect that the proprietor owns the concerned business is the undertaking of the customer himself.
Documents like NTN certificate can also be demanded.

7.3. Partnership account:
Partnership has been defined in section 4 of the partnership Act, 1932 as;
“……………..the relation between persons who have agreed to share the profits of the business carried on by all or any of them acting for all.”.

Partnership can be created by agreement whether oral or written. Persons who have entered into partnership are individually called partners; and their collective group is called a firm. Maximum number allowable as partners in any business is 20. Minor partners are not considered for computing maximum number of partners. All acts and deeds done by any partner in the course of the ordinary partnership business will bind the other partners also. Therefore each partner is the principal/agent of the other partners. However, according to section 19 2(b) of the Partnership Act, a partner has no implied authority to open a bank account on behalf of the firm in his own name.
Therefore, a banker should always open a firm’s account in firm’s name and obtain all the necessary details like the nature of business, the names and addresses of all the partners and the names of those who are authorized to operate the account in the name of the firm.
Section 58 of the Partnership Act, 1932 enables any firm to be registered with the registrar of firms, as un-registered firms cannot bring suit to enforce a right arising out of a contract against outsiders. Moreover, a suit filed by an unregistered firm is not maintainable. A partner of a firm can not sue his unregistered firm for damages for wrongful dismissal or for share of profits.
A written agreement made by the partners at the time of forming the partnership is called partnership deed. It spells out all the terms and conditions under which the business of the firm will be conducted and profits/losses to be shared. Nevertheless the liability of partners is unlimited, joint and several, which means that in the event of loss or liquidation of the firm each partner will be liable to meet the liabilities of the firm either singly or collectively with other partners.
Any mandate given by the partners for operating the account ceases to be effective on the death, lunacy or bankruptcy of any partner unless otherwise mentioned in the Partnership Deed. The bank should obtain a fresh mandate from the surviving partners for future operation of the account. Legal heirs of a deceased partner do not automatically become partners in the firm but are only entitled to the share held by the deceased in the firm at the time of his death. In the event of admission of a new partner or retirement of any of the existing partners, the bank should record the changes and obtain a fresh mandate from all the partners for future operation of the account. In the absence of any agreement in the Partnership Deed for the consequences to follow on the death, lunacy or bankruptcy of a partner, the bank should normally freeze the account of the firm and not allow any further debits in the account until proper order of a court is produced.

7.3.1. Opening and operating a partnership account — a partnership account resembles a joint account in that it is opened in the name of more than one person. A partnership, unlike a corporation, does not have a legal personality separate from that of the partners, the account constitutes in effect a joint account of the partners. The account opening form and any mandate on behalf of the partnership should be signed by all the partners.

7.3.2. Dissolution of partnership by death — the doctrine of survivorship is inapplicable to partnership accounts. Unless the partnership agreement provides to the contrary, the firm is dissolved upon the death of one of the partners. Under section 38 of the partnership Act 1890 the surviving partners have the power to continue to act for the firm for the purpose of winding-up its affairs.

7.3.3. Problems of insolvency — under section 33 and 38 of the Partnership Act 1890 a partnership is dissolved by the insolvency of the firm or of one of its partners. After his adjudication, the insolvent partner is unable to bind the partnership. If prior to the commencement of the bankruptcy, he has incurred any debts in the partnership’s name the other partners are liable.

7.3.4. Documents to be obtained;
(i) Photocopy of identity cards of all partners, duly attested and verified from Nadra as mentioned in para 7.2.4.
(ii) Attested copy of ‘Partnership Deed’ duly signed by all partners of the firm.
(iii) Attested copy of Registration Certificate with Registrar of Firms. In case the partnership is unregistered, this fact should be clearly mentioned on the Account Opening Form.
(iv) Authority letter, in original, in favor of the person authorized to operate on the account of the firm duly signed by all the partners.

7.4. Joint Stock Companies
As defined in the Companies Ordinance 1984 a joint stock company is an association of individuals for transacting any business for acquisition of gains, possessing a common capital contributed by members constituting it; such capital being commonly divided in to shares, of which each possesses one or more and which are transferable by the owner. When such an association is incorporated according to law, it becomes “an artificial person created by law with a common seal and perpetual succession” and it is regarded as a legal person, separate and distinct from its members. There is a well known case of “Solomon vs Solomon” where the House of Lords held that since Solomon held 20000 shares out of 20006 shares and the company was therefore a ‘one man company’, nonetheless he was different from the company which he had formed.

7.4.1. Companies accounts
(1) General principles — a company has a legal personality of its own, regardless of whether it is a public corporation or a private company. This means that the companies can enter into contracts in their given name and can sue and be sued.

(ii) Unincorporated associations accounts- Unincorporated associations are mainly bodies such as clubs, literary societies and charitable institutions. The objects of such bodies are primarily non-commercial. Frequently they decide not to incorporate in order to avoid the expenses involved. An unincorporated association would need a bank account to be utilized for the payment and collection of cheques, or even to borrow money to carry out its objectives. Thus a club may wish to raise credit in order to arrange for the acquisition of its premises.

(iii) An unincorporated association does not have an independent legal personality. It follows that such an association can neither sue nor be sued in its own name. Actions have to be brought against the committee that acts on behalf of the body. Usually the liability of members is expressly restricted to the amount of the subscription or membership fee due from them.
In dealing with an unincorporated association the bank has to follow rules dictated both by prudence and by legal considerations. Where the bank accepts an unincorporated body as a customer, the bank should ask for clear instructions as to who is entitled to operate the associations account. Ideally the bank should obtain a copy of the constitution or failing that, a copy of a resolution concerning the opening of and drawing upon the associations account. The bank has to be more cautious when the association requires an overdraft or a loan.

7.4.2. Statutory Companies - These are companies which are incorporated under a special Act of Parliament or Assembly. State Bank of Pakistan is an example of this type.

7.4.3. Limited Companies — A company may be
(a) a company limited by shares, or
(b) a company limited by guarantee (such as Karachi Stock Exchange) or

Furthermore a private limited company may be:

(i) a single member company(smc), where the name is required to denote as
(SMC Pvt) Limited”

(ii) a two or more but not more than fifty person (the name is required to denote (Pvt) Limited;

(iii) A public limited company which may either be listed (7 members) or unlisted (3 members);

(iv) If the company is limited by guarantee, the name is required to denote (Guarantee) Limited”;

Opening of account of a company not yet incorporated is risky as it has not yet become a legal entity. In such cases usually the Promoters would open account in their individual names.

Documents to be obtained for opening Company Account:

Certified copies of:
(i) Resolution passed by Board of Directors of Company for opening of account specifying the person(s) authorized to operate the account. (This Resolution is the most important document to be taken for opening a limited company account.)
(ii) Memorandum and Articles of Association.
(iii) Certificate of Incorporation.
(iv) Certificate of Commencement of Business.(Only if it is a Public Ltd Company)
(v) Attested photocopies of identity cards of all the directors.
(vi) Fresh List of Directors on Form 29 issued by the Registrar Joint Stock Company.
(vii) Latest Balance Sheet, if it is an on-going company.
For opening an account of a private limited company, Certificate of Commencement of Business is not required.

7.4.4. Memorandum & Articles of Association

7.4.4.1. Memorandum - It sets out the objectives for which a joint stock company is formed and also defines the scope of its activities. It also embodies the address of the registered office of the company, the amount of its capital and its distribution into shares of fixed amount declaring the fact that the liability of the members is limited.

7.4.4.2. Articles - The articles of association contain the rules and regulations for the internal management of the company. Generally they contain:
• Power vested in the directors.
• Election and retirement of directors.
• Procedure for calling of meeting of share holders and directors and passing of resolutions.
• Audit of account of the company and appointment of auditors.
• Company seal and procedure for its use.

7.4.5. Certificate of Incorporation - From the banker’s point of view this document is very important. It is issued by the Registrar of Joint Stock Companies (now SECP) and is conclusive evidence to the effect that all the requirements of the law in regard to formation and registration of the company have been duly complied with, and the company has legally come into existence.

7.4.6. Certificate of Commencement of Business - When the registrar of Joint Stock Company is satisfied that a public limited company has fulfilled all the requirements with regard to the subscription of shares, submission of the statutory declaration and other requirements of the law, the Registrar of Companies issues the certificate of commencement of business.

7.4.7. Balance Sheet - It is a statement of the financial affairs of the company; and the banker can draw its own conclusions about the company from the study of the financial affairs, particularly with reference to past performance. However, balance sheet will not be expected from a newly formed company when opening its account.

7.5. Opening accounts of Associations, Clubs and Societies
As non-trading organizations these are formed for social, cultural, educational, recreational, charitable and community development purposes etc. Some of these institutions are registered under the Societies Registration Act, 1866. A certificate of registration is issued after its bye-laws are approved and found fit for registration. According to the bye-laws, the affairs of the organization are administered by an Executive Committee, or Managing Committee, by whatever name it may be called.

7.5.1. Documents to be obtained:

Certified copies of
(a) Certificate of Registration.
(b) By-laws/Rules & Regulations
(c) Resolution of the Governing Body/Executive Committee for opening of account authorizing the person(s) to operate the account and duly attested copy of the identity card(s) of the authorized person(s).
(d) An undertaking signed by all the authorized persons on behalf of the institution mentioning that whenever any changes take place in the persons authorized to operate upon the account, the banker will be informed immediately.

The unregistered institutions have neither legal entity nor powers to make contracts. Any loan raised from the bank will be extended to the members of the committee in their personal capacity and not in representative capacity as the institution cannot be sued.

7.6. Account opened by Agents
By virtue of a power of attorney executed by the principal (donor), an agent appointed may open and operate a bank account on the principal’s behalf. Power of attorney should bear stamps under the Stamp Act and notarized by a Notary Public. If executed in a foreign country it should also be consularized by the Pakistan Embassy there. When an agent is allowed to open his principal’s account, the banker should carefully scrutinize the power of attorney executed in his favour, in respect of the clauses relating to opening and operation of the account and the borrowing powers, if any. Power of attorney should be registered in the bank’s record. A power of attorney is rendered invalid upon the death, insanity or insolvency of the principal. Therefore, on happening of any of such events the banker must stop all operations on the account. Cheques presented after the principal’s death should be returned and marked “Drawer reported dead.” However, on the agent’s death account will not be stopped and the principal can either operate the account himself or appoint a new agent.

7.6.1. Documents to be obtained:
i) Certified copy of ‘Power of Attorney’.
ii) Duly attested photocopy of identity card of the customer and agent.

7.7. Opening of Trust Accounts:
7.7.1. General principles —Trust accounts are opened mainly by executors appointed as trustees under a will and by persons such as solicitors trust companies who administer family or charitable trusts. A trust does not constitute a legal entity separate from that of the trustees. The broad principal is that the trustees have the legal title in the trust property and the beneficiary of the trust acquires the equitable interest. The trustees’ function is to administer the trust in accordance with the deed under which they hold their appointments. In addition, certain powers and duties are conferred on them by the Trustees Act 1925.

Usually a trust deed requires appointment of two or more trustees. The object of this arrangement is to ensure that the trust property remain under the control of more than one designated person. Trustees are not usually permitted to delegate their authority. For this reason and unless the trust deed makes a stipulation to the contrary, a cheque drawn on the trust account requires the signatures of all the trustees.

As the trustees have only the legal as distinct from the equitable title to the property, the problem of survivorship does not arise. When a trustee dies, another person is appointed either under the provisions of the will or by the court. Until such an appointment is made Section 18 of the Trustees Act 1925 authorizes the surviving trustee or trustees to carry on the business of the trust for the time being.
7.7.2. Duty of the bank - the bank does not incur any liability to the beneficiaries unless it knows that the account involved is a trust account (case law Thomson v Clydesdale Bank Ltd 1893). In this case the owners of certain shares ordered their stockbroker to sell them. Naturally the bank has knowledge if the account is expressly opened as such. The second general principle with regard to bank’s liability is in case of breach of trust. The bank’s concern is to ensure that the trustees act within the scope of their apparent powers. Thus the bank has to ensure that a cheque drawn on the trust account carries all the required signatures. In the absence of express knowledge by the bank of an improper or a fraudulent design perpetrated by the trustees, the bank is not usually liable for their misconduct.

When opening an account in the name of a Trust, bank should ensure that all trustees sign the account opening form or all the trustees who are authorised to operate on the account by a resolution passed by the Trustees. A copy of the Resolution certified by at least two trustees should be obtained and kept on Bank’s record. If the account is opened in the name of trustees, it should not be treated as a joint account. On the ledger sheet as well as on the specimen signature card it should be prominently mentioned in bold letters that it is a Trust Account. The Trust Deed or Instrument of Trust should be carefully examined and copy thereof may be kept in bank’s record. Special attention should be paid to the trustees’ powers and the provision for the appointment of new trustees. Under the Trust Act, 1882, a trustee cannot delegate his powers to co-trustee or to any third party. However, a trustee can appoint an attorney or proxy for an act of routine nature involving no independent direction. Contravention of provisions of section 47 of Trust Act, 1882 by a banker which forbids the delegation of authority by a trustee, may cause breach of trust and the members may by asked to redress the same.

Trust accounts should be handled with utmost care and the transfer of funds from Trust account to the personal accounts of trustees should not be allowed, otherwise the banker will be responsible for the consequences. When dealing with Trust accounts, a banker is expected to be aware of legal position of a Trust. Section 3 of Trust Act 1882, defines Trust:

“A Trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by him for the benefit of another or of another and the owner.”

Section 4 of the same Act declares that: “A Trust may be created for any lawful purpose. The purpose of a Trust is lawful unless it is

(a) forbidden by law; or
(b) is of such a nature that, if permitted, it would defeat the provisions of any law; or
(c) is fraudulent; or
(d) involves or implies injury the person or property of another; or
(e) the Court regards it as immoral or opposed to public policy.

Every trust of which the purpose is unlawful is void. And where a Trust is created for two purposes, of which one is lawful and the other unlawful and the two purposes cannot be separated, the whole Trust is void.” Section 6 of the Trust Act authorises the creation of Trust by word of mouth or by any act which reflects the intention of the author of the Trust. Any person who is competent to contract is capable of creating a Trust which must be for a property transferable to the beneficiary. In the event of the death of a trustee out of several trustees the authority may be exercised by the continuing trustees unless otherwise provided for in the Instrument of Trust.

7.7.4. Documents to be obtained:
(i) Attested copy of Certificate of Registration of Trust.
(ii) Duly attested photocopy of identity cards of all the trustees.
(iii) Certified copy of ‘Instrument of Trust’.

7.8. Opening Executors’ / Administrator accounts — An “Executor” is a person to whom the execution of a Will is entrusted by the testator. (Who is a testator?) The executor derives his authority from the will. As such he has to carry out all the directions contained in the testator’s last Will.
An “Administrator” is a person appointed by a court of law to look after the estate of a person who died without leaving a Will or the persons he appointed are incapable of acting as executors. When he dies intestate (i.e. without leaving a Will) the administration is generally granted to his widow or widower or the children of the deceased, as the case may be, or any one else on whom all the heirs agree or the court considers fit for the purpose. A banker should have full knowledge about the legal significance of the “Will” so that he may allow operation on the Executor’s! Administrator’s account accordingly. Section 74 of the Law of Wills lays down that a will may be drawn in any such language that express the intention of the testator clearly. A Will may be oral or in writing and need not be witnessed. The testator under Muslim Law is permitted to give only one-third of his estate to a stranger by Will. The remaining two-third, will only be inherited in accordance with the Muslim Law.

Probate is a certified copy of the Will, issued under the seal of the court. A person who has been named as an Executor in the Will is eligible to apply for a probate. When one or more of the Executors or Administrators die(s), the authority is vested in the survivor/s. If the deceased was the sole Executor or Administrator, a fresh Letter of Administration must be obtained. If the account shows a credit balance, operation on the account should be stopped on the death of the Administrator or Executor until a new one is appointed.

An account opened by Executors or by Administrators constitutes an account of the estate. The Executors are the representatives of the estate and unlike partners, have no personal interest in the account or in the estate’s property. As each Executor has the status of an agent, he is entitled to open an account in the name of the estate and equally is entitled to countermand cheques drawn on it, be they drawn by himself or by another Executor. To avoid conflicts banks usually ask for clear instructions concerning the drawing of cheques on an account of an estate. The bank’s mandate is spelt out in indisputable terms usually each cheque is to be signed by two Executors.

7.8.1. Documents to be obtained:
(i) Duly attested photocopy of identity cards of the Executor/Administrator.
(ii) Certified copy of Letter of Administration or Probate.

7.9. Opening Accounts of Local Bodies - Local bodies are constituted under the Local Bodies Act, such as Municipal Corporations, Municipal Committees etc. They are governed by their own executive committees consisting generally of elected members. They are administered through notifications issued under the Act from time to time. The chairman of these local bodies may be elected by the members or nominated by the Government.

As these bodies derive their authority from the relevant Act, the banker opening their account must see that the request comes from the person authorised to do so. Proper instructions and specimen signatures many be obtained from the person/s authorised to operate the account. Generally no advance is given to a local body unless some statutory provisions authorises them to obtain a loan and provide security for it.

7.10. Opening Shares Subscription Account - whenever a public company issues shares for public subscription it has to open a bank account to which all the receipts would be credited. A bank opening such an account will be known as “Banker to the issue”. This is a collection account and will have only credits with receipt of each application. Once subscription is closed, the sponsor may transfer the funds to their regular account and payments for unsuccessful subscribers made after the balloting, if any. No cheque book is issued.

7.11. Opening Dividend Account - Companies declaring dividend (share of profit) to be paid to shareholders desire to open an account with a bank to which the total amount to be disbursed as dividend is credited and on presentation of dividend warrant, it is debited. If the bank receives an intimation that a dividend warrant has been lost, all precautions should be taken as are applicable to a lost cheque. If a company declares dividend every year, it is preferable to open separate dividend accounts for each year. This facilitates balancing / reconciliation of the accounts.

7.12. Opening Collection Account — quite often a bank may be asked to open a “Collection Account”. As the name indicates it is used for collection of funds e.g. a tea company may have sales all over Pakistan. It may open the main account with the bank’s Karachi branch and collection accounts with other branches from where the funds are transferred to the main account periodically as per arrangements. Another example may be the President’s Collection Fund for disaster relief etc.

7.13. Dormant Account
When does a normal, active account become a DORMANT ACCOUNT?- an account in which there have been no transactions for a sufficiently long period of time, six months for current account and one year for saving account, is usually marked as “Dormant” and any withdrawal there from is first referred to the Branch Manager / in charge deposits department. If an account remains DORMANT FOR 10 YEARS, the amount of the account must be surrendered to State Bank of Pakistan as Unclaimed Balance. The bank continues to keep full record and if the true claimant approaches the bank subsequently the amount can be recalled from State Bank of Pakistan.

7.14. What is a Deceased Account ?- on the death of an individual his account is immediately marked “deceased account” and no further withdrawal / payment is allowed. Depending on the balance in the account, the bank may ask the heirs to produce heirship or a Succession Certificate. In case the amount is small, the bank may, if satisfied, pay the amount on certification by area Nazim / Naib Nazim or Counselor after obtaining an “indemnity” from beneficiaries.


7.14. Closing of Accounts - Every account holder has a right to close his account at any time. Instructions to do so must be given by the account holder in writing and he must surrender any unused cheques before the account can be closed. In case of joint accounts, it can only be closed by all the joint account holders collective instructions. Even if a joint account is operated upon singly, instructions to close it must be given by all the joint account holders. Bank may also close the account of a customer after notifying the bank’s intention and giving him reasonable time to make arrangement to have his cheques in circulation presented for payment before the notice period expires. It is usually done when the customer has become undesirable like:

a. By frequently drawing cheques much in excess of the balance in his account, which have to be returned unpaid;
b. By frequently contravening the “Rules for operation” of the account;
c. By making himself a nuisance during his visits to the bank’s branch and picking up quarrels with the staff unnecessarily.

7.15. Statements of the account — Banks generally provide the balance of an account on request. Full statements of an account are also available either on request or by pre-determined arrangements. In some countries banks return customer’s cheques with statement of account to enable the customer to discover any unauthorized signatures or alteration and to report any discrepancy promptly. Failure to comply precludes the customer from asserting forgeries against the bank unless the bank itself has been negligent in paying the cheques.

The State Bank of Pakistan, vide circular 18 of 2004 has given strict instructions that all banks are required to invariably send the statement of accounts periodically to all their account holders irrespective of the balances in their accounts.

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“Whenever you find yourself on the side of the majority, it is time to pause and reflect.” -Mark Twain