Responsibility of Collecting Bank | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS
Banker - Responsibilities and Duties of Collecting Bank Banker: Responsibilities and Duties of the Collecting Bank Responsibility of Collecting Bank A collecting bank is responsible for receiving payments on behalf of its customers through instruments like cheques and drafts. The bank must act with due care and diligence while collecting the payment, ensuring that it does not collect for a fraudulent or non-existent account. The collecting bank is a holder for collection and acts as an agent for the customer. Statutory Protection to Collecting Bank Under Section 131 of the Negotiable Instruments Act, a collecting bank is granted statutory protection if it collects a crossed cheque in good faith and without negligence for a customer who has a legal title to the cheque. This protection shields the bank from liability in case the title turns out to be defective, provided the bank has acted honestly and witho...