Responsibility of Paying Bank | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS
Responsibility of Paying Bank - Bank Theory Notes Banker - Responsibility of Paying Bank 1. Negotiable Instruments Act and Paying Banks The Negotiable Instruments Act, 1881 governs the liabilities and protections related to negotiable instruments such as cheques. A paying bank is responsible for making payments on cheques presented to it and must ensure that the payment is made in accordance with the law. 2. Liability of Paying Banker when Customer’s Signature on the Cheque is Forged If the signature of the customer is forged, the cheque is considered invalid. A paying banker has no authority to debit the customer’s account and is liable for any payment made on such a cheque. 3. Payment to be in Due Course for Bank to Seek Protection To be protected under the Negotiable Instruments Act, the bank must make payment in due course. This means payment must be made: According to the apparent tenor of the instrument In good faith and w...