1. PRACTICE & LAW OF BANKING
Negotiable Instrument Act 1881
This Act defines and amends laws relating to Negotiable Instrument.
Followings are negotiable instruments:-
 Promissory Notes.
 Bills of Exchange.
 Cheques.
Followings are Quasi Negotiable Instruments:-
Railway Receipt (R.R)

Truck Receipt (T.R)

Post Parcel Receipt (PPR)

Bill Of Lading (B.L)

Airway Bill/Air Consignment Note (AWB/ACN)

On first instance the three instruments are real negotiable instruments and these are subject
to the negotiability of Money only, where as under the second instance (Quasi) the
negotiability is of Goods or Merchandise.
PROMISSORY NOTE
Section 4 of Negotiable Instrument Act 1881 defines Promissory Note as “Promissory Note
is an instrument in writing, (not being Currency Notes or Bank Notes) containing an
unconditional undertaking signed by the maker, to pay on demand or at a fixed or
determinable future time, a certain sum of money; only to or to the order of a certain person
or the bearer of instrument”
ESSENTIALS OF PROMISSORY NOTE
It must be in writing.

It must be signed by the maker.

It must contain an undertaking to pay money only.

The sum payable must be certain.

The payable amount if includes interest or mark-up with certain amount mentioned

can be considered as certain amount.
 The sum of money must be payable to or to the order of certain person (In our
forthcoming session we must discuss this bold line in future)

2.  The sum of money can be paid on demand or at a fixed or determinable future
period.
A promissory note payable on demand is known as Demand P/N, and that payable in future
is known as Usance P/N.
Another thing is that undertaking can be given by individual, jointly or Joint and Several
Liability.
A single person can sign P/N, two or more person jointly can sign, and if two or more person
SPECIMENS
Promissory Note Payable on Demand
Rs. 50,000/- Lahore
November 05, 2007
On Demand I promise to pay to Mr. Saeed Ahmed or the order the sum of Rupees Fifty
Thousand only.
STAMP
(Signature of Sohrab Sheikh)
(Whether word on demand is written or not, but if future time is not written, it can be
considered as demand P/N. If written as “I promise to pay Mr. Saeed Ahmed or the order
the sum of Rs. Fifty Thousand only”)
Promissory Note Payable after Date
Rs. 50,000/- Lahore
November 05, 2007
One month after date I promise to pay to Mr. Saeed Ahmed or the order the sum of Rupees
Fifty Thousand only.
STAMP
(Signature of Sohrab Sheikh)

3. Which of the followings are narrations of a qualified Promissory Note?
 I promise to pay Mr. Saeed Ahmed or order a sum of Rs. 50,000/-
 On demand I promise to pay eldest son of Mr. Saeed Ahmed Rs. 50,000/-
 On demand I promise to pay Mr. Saeed Ahmed Rs. 50,000/-
 I acknowledge myself indebted to Mr. Saeed Ahmed for Rs. 50,000/- to be paid on
demand.
 I promise to pay Mr. Saeed Ahmed Rs. 50,000/- or any amount payable till next three
months.
 I promise to pay Mr. Saeed Ahmed Rs.50, 000/- on demand after deducting my
commission.
 I promise to pay Mr. Saeed Ahmed Rs. 50 million if he marries his daughter with me.
 I promise to pay Mr. Saeed Ahmed if Pakistan wins ODI match on November 08,
2007.
Promissory Note can be written on plain paper and by affixing Revenue Stamp or it can be
written on a Stamped Paper (Printed).
There are two parties in a Promissory Note.
Maker
A person who promises to pay and signs it is called Maker
Payee
A person to whom promise is made is called Payee.
While concluding it is stated that for every matter where there is need of assurance for any
monetary transaction or dealing involving monetary transaction; the basic or primary
document which can be referred as evidence or proof, and which could be provided to the
court of law for the legal recourse is Promissory Note.
For having better position it is advisable that at least two witnesses may be taken for
favourable decision.
Bills Of Exchange
Section 5 of Negotiable Instrument Act 1881, defines, a “Bill of Exchange as an
instrument writing, containing an unconditional order, signed by the maker,
directing a certain person, to pay on demand or at a fixed or determinable future

4. time, a certain sum of money only to or to the order of certain person or to the
bearer of the instrument”.
Essentials of Bills of Exchange
 It must be in writing.
 It must be signed by a person.
 It must contain unconditional Instructions or order.
 The Instructions must be to pay money only.
 The person, to whom instructions are being given, should be instructed to
pay on demand, or future fixed or determinable time.
 The amount should be payable to or to the order of certain person or bearer
of instrument.
Demand bill of exchange. A bill of exchange which when presented to drawee
must be paid or refused. When paid, we call that bill has been honoured, and when
there is refusal we call that the bill has been dishonoured. A bill of exchange that
must be honoured or dishonoured at its presentation immediately and instantly is
known as demand bill of exchange. It is also known as Sight bill of exchange as it
must be paid or refused at its first sight, and any delay is considered as not
honoured or refused.
While drawing such bill; the maker may write as: -
On demand Pay Mr. Saeed Ahmed or order Rs. 50,000/-
Or
Pay Mr. Saeed Ahmed or order Rs. 50,000/-
This shows that whether word demand is written or not, if no future fixed or
determinable date is given, it is considered as demand bill of exchange.
Usance bill of exchange. A bill of exchange which is to be paid at future fixed or
determinable time is known as usance bill of exchange.
Such bill of exchange is drawn as: -
90 days after the date pay Mr. Saeed Ahmed or order Rs. 50,000/-
06 months after the date pay Mr. Saeed Ahmed or order Rs. 50,000/-
02 years after the date pay Mr. Saeed Ahmed or order Rs. 50,000/-
The date on which a usance bill of exchange becomes payable after counting the
given days, months or years is known as date of maturity or due date.
FOR EVERY USANCE BILL OF EXCHANGE THE MOST IMPORTANT THING IS
THAT THIS BILL OF EXCHANGE MUST BE PRESENTED FIRST TO THE

5. DRAWEE FOR HIS ACCEPTANCE, BEFORE IT IS PRESENTED FOR PAYMENT
ON MATURITY. IF THE ACCEPTANCE HAS NOT BEEN TAKEN BY THE
DRAWEE AND HE REFUSES TO PAY ON MATURITY, IT COULD NOT BE
CONSIDERED AS DISHONOUR, AND HE WOULD NOT BE LIABLE FOR SUCH
DISHONOUR.
SO USANCE BILL IS PRESENTED TO DRAWEE TWICE; FIRST FOR
ACCEPTANCE AND THEN FOR PAYMENT ON MATURITY.
ANOTHER THING TO BE NOTED IS THAT IF THE DRAWER OF USANCE BILL
REFUSES TO ACCEPT BILL THEN IT WOULD NOT BE PRESENTED FOR
PAYMENT ON DUE DATE OR MATURITY AS HE HAS ALREADY REFUSED TO
ACCEPT TO PAY THEN WHY WOULD HE PAY ON DUE DATE.
In above stated situation dishonour of bill would be of two types:-
1. Dishonour for acceptance; it is the situation of dishonour when drawee
refuses to give acceptance to pay on maturity or due date.
2. Dishonour for payment; it is situation when drawee had already accepted
the bill or gave his acceptance to pay, but on due date refuses to pay it.
Again being repeated a bill not accepted or not presented for acceptance; if not
paid or honoured on due date would not be considered as “Dishonour for Payment”
Parties to a bill of exchange
According to section 7 of NIA, there are three parties to a bill of exchange. Those
are:-
Drawer, a person who signs at the face of the instrument and who gives
instructions is known as Drawer.
Drawee, a person to whom instructions are given is known as Drawee.
Payee, a person to whom or to whose order sum of money is to be paid is known
as Payee.
How bill of exchange is being dealt in local and International Trading?
For secure and safe local and International trading; where both sellers and buyers
are settled far flung from each other and both seller and buyer are reluctant to have
any risk. Buyer would like to have goods first and seller the money and both are
not ready to depart from their assets.
Then comes any intermediary, usually the bank and acts agent of seller. Seller
sends goods not to buyer but his banker and advises the banker to deliver the goods
to seller: -
In case of Cash Trading (non-credit) after getting money from the buyer, and in
case of credit deal after taking assurance of payment from buyer.

6. The document which authorizes the banker to get money from the buyer or to get
assurance from the seller is Bill Of Exchange.
The seller would draw bill of exchange on buyer and would instruct him either to
pay money to the bank or give acceptance on the back of the bill that payment
would be made on future fixed or determinable period.
The Demand Bill of Exchange so drawn would be:-
DEMAND BILL OF EXCHANGE
Rs. 50,000/- November 07, 2007.
On demand pay United Bank limited or order sum of Rs. fifty thousand for
value received.
To: - (Signature)
Haji Noor Muhammad. Saleem Ahmed
281-Z, Gulberg-8, 898-Jodia Bazar.
Lahore. Karachi
USANCE BILL OF EXCHANGE
Rs. 50,000/- November 07, 2007.
Two months after date pay United Bank limited or order sum of Rs. fifty
thousand for value received.
To: - (Signature)
Haji Noor Muhammad. Saleem Ahmed
281-Z, Gulberg-8, 898-Jodia Bazar.
Lahore. Karachi
In both the cases drawer is Saleem Ahmed (Seller), Drawee is Haji Noor
Muhammad (Buyer) and Payee is United Bank Limited (Agent) or order.
Under first bill of exchange Haji Noor Muhammad would make payment to UBL,
and UBL would write at the reverse of bill “Payment Received” and would deliver

7. documents title to goods to Haji Noor Muhammad, and later on remit the money to
Saleem Ahmed.
Under second bill of exchange Haji Noor Muhammad would write at the reverse of
bill of exchange “Accepted to pay on_________ or simply Accepted” ; bank would
deliver the documents title to goods to Haji Noor Muhammad and would keep this
bill of exchange till it paid. On maturity if it is paid, then again UBL would get the
payment, would write at the reverse of bill “Payment Received” and deliver it to
buyer, Haji Noor Muhammad. Later on the ,money will be remitted to seller,
Saleem Ahmed. In both the cases the transaction was accomplished through a
document known as Bill of Exchange.
Other related Parties: -
 Acceptor
 Acceptor for honour.
 Drawee in case of need.
Other related Parties in a bill of exchange
 Acceptor
 Acceptor for honour.
 Drawee in case of need.
Acceptor Drawee of usance bill of exchange when accepts the bill his title is
changed from drawee to acceptor
Acceptor for honour In case the original drawee of a usance bill of exchange is
not in a position to accept it and obviously reason being that due to his financial
constraint or deficiency his cannot commit himself for the payment on due date
then for the sake of honour of this original drawee any body else if accepts it he
becomes acceptor for honour.
In this situation the real drawee becomes free from any responsibility and acceptor
for honour becomes fully liable for the payment of bill. In case acceptor for honour
does not fulfill his commitment then suit can be moved against acceptor for honour
and not real drawee.
Drawee in case of need. Sometime when any demand or usance bill of exchange
is drawn instead of one; another persons is also shown as drawee. The first one is
known as drawee and the other is known as drawee in case of need.
Name of real Drawee comes first and before the name of next person words
“Drawee in case of need” must be written. The bill must be present to the real or

8. first drawee, and if he refuses to pay or accept only then it is presented to drawee
in case of need.
Under this situation the primary responsibility is of first drawee, and if both of
them refuse to pay or accept the bill then suit could be filed against first drawee
and not against drawee in case of need. But once the drawee in case of need gives
his acceptance then first drawee becomes free from any liability, and if suit needs
to be filed it would be against Drawee in case of need and not drawee. Again
repeat that first drawee is primarily responsible in case of non payment by both,
but when drawee in case of need gives his consent then he becomes liable and
makes the first drawee free from any liability.
SPECIMEN OF DRAWEE IN CASE OF NEED BILL OF EXCHANGE
Rs. 50,000/- November 07, 2007.
On demand pay United Bank limited or order sum of Rs. fifty thousand for
value received.
To: -
Haji Noor Muhammad.
281-Z, Gulberg-8,
Lahore.
Drawee in case of need:- (Signature)
Mr. Zahid Sheikh. Saleem Ahmed
888-F-Defence Phase 50 898-Jodia Bazar
Lahore Karachi
CHEQUE
Section 6 of Negotiable Instrument Act 1881 defines Cheque as “Cheque is a bill
of exchange, drawn on a specified banker, not expressed to be payable otherwise
on demand”.
In simple words; characteristically or formation wise, Cheque is similar to a bill of
exchange with a difference that it can only be drawn on a banker only, and is
always payable on demand.

9. No doubt bill of exchange and Cheque are similar in formation, but with vast
difference as far as the drawee and its mode of payment is concerned. Bill of
exchange can be drawn on an individual, firm or corporate body, but Cheque will
be drawn on banker only. As far as mode of payment is concerned, a bill of
exchange can be drawn as demand and usance, but Cheque will always be drawn
as demand only.
No one has seen any Cheque where the account holder (drawer) has written any
Cheque with instruction to pay after so many days or months. It is always assumed
that either it will always be paid or dishonoured only and only when presented to
the banker.
In bill of exchange there are always three parties; drawer drawee and payee and all
would be different persons, whereas in a Cheque there can be three or two persons.
When account holders intends to make payment to other person than there are three
parties, but when he himself presents Cheque for payment, then there are two
parties as he himself becomes drawer and payee.
Essentials of Cheque
Almost same as of Bill of exchange, with the difference as stated above.
SPECIMEN OF A CHEQUE
HAJVERI BANK LIMITED
Industrial Estate Branch. Cheque #
Lahore. Date_______
PAY____________________________________________ OR BEARER
RUPEES___________________________________________________
(AMOUNT IN FIGURE)
SIGNATURE
TYPES OF CHEQUES
Relating to the Payee point of view a Cheque can be brawn as:-

10. BEARER
ORDER
Bearer
A printed cheque book is provided by the banker to the customer and in addition to
other contents, there is a line where the instructions from the account holder
(drawer) regarding to whom payment is to be made is printed as:-
PAY_____________________________________________ OR BEARER
Under this instruction (remember one thing that a cheque contains instructions
from account holder to pay money to whom he desires and as desires) the account
holder desires that its payment to be made to a person; whose name will be written
on the blank line or any person who presents this cheque to the banker. So the
cheque would be drawn as: -
PAY Mr. Saeed Ahmed OR BEARER
When cheque is drawn in this shape, it is named as BEARER CHEQUE, which
means that the payment against this cheque is to be made to Mr. Saeed Ahmed or
any person who presents it. Further more the bank would not need to verify the
identification of Mr. Saeed Ahmed, if he himself presents it or even who so ever
presents it.
ORDER CHEQUE
When drawer (Account Holder) cuts words “Bearer” and either he writes “Order”
or not, the cheque is supposed to be drawn as Order.
Under this situation the banker would make payment to the first Payee or
subsequent payee, only and only order verification that its payment must be
collected by the first payee himself, and if the first payee transfers the title (After
writing “Pay to________or order”) then the second or subsequent payee’s
verification is done.
Illustration
PAY Mr. Saeed Ahmed OR BEARER
PAY Mr. Saeed Ahmed OR BEARER Order
This is order cheque.

11. If Mr. Saeed Ahmed goes for payment, bank must verify that it is being presented
by Saeed himself, and also to verify identity. If Saeed transfers the title in favour of
Shahid, then he has to transfer it by writing the words “Pay to the order of Shahid”
or Pay Shahid or Order. So if Shahid goes to collect payment, banker would verify
the identity of Shahid.
How verification is done?
In both cases, who so ever present cheque, bank would ask him that some one
known to the bank, preferably account holder should verify his signature. That
person when verify the signature, it would mean that the verifying person confirms
that the signature is of the genuine payee. Later on officer of the bank would verify
signature of the person who verified the signature of presenter or payee.
All bankers’ cheques are drawn as “Order” and not bearer. Banker’s very common
cheque is Demand Draft and Traveler’s Cheque. Theses cheques are printed in
order form just to secure the ownership of the Payee.
FORMS OF CHEQUE
Crossed Cheque.
Open Cheque.
Negotiable Instrument Act 1881 defines: - Two transverse parallel lines across the
instruments with or without words there in. Law is silent as where those lines can
be drawn, but as per practice, in Pakistan, these lines are drawn on the upper left
corner. The reason is the If drawn on upper right corner, lower left or right corner
or completely across the instrument, it could destroy or interrupt the material parts
of instrument.
For the sake of knowledge, it is submitted that material parts are: - Date, Name of
Payee, Amount in words, Amount in figure and Signature of drawer.
As we already know that cheque contains instructions from drawer (Account
Holder) to drawee (Banker) to pay the cheque, so these two lines known as
crossing carries some additional instructions. These lines gives instructions to the
ban that the payment of this cheque should not be made on counter in shape of
cash, but its payment is to be made by crediting the account of payee or any other
person.
This payment in shape of crediting the account can be given within the same
branch of the bank, other branch of the bank, in other bank within the city, within
the country or outside country. What ever could be the situation but crossed

12. cheque’s payment will be done by crediting the account and not paying cash on the
counter.
(Students should know how lines were drawn and what was written between lines
when we had session in class. Those not attended must consult with other students)
Open Cheque
Cheque which is not crossed is known as open cheque. Its payment is not
prohibited to be paid on counter. The payee may collect payment in the shape of
cash from counter or can get its credit in his account. Please remember on thing
that it not necessary that its payment must be made on counter only. It depends upon
payee what he desires.
TYPES OF CROSSING
Simple Crossing. When nothing is written between two lines or words “& Co” is
written, the crossing is known as simple crossing.
Significance of simple crossing. When cheque is crossed with simple crossing, the
purpose is that it cannot be paid on counter and can be credited in any person
account.
Bearer cheque with simple crossing can be credited in any person’s account and no
words are to be written at the back of instrument if credited in the account of
person other than the payee.
Order cheque with simple crossing can also be credited in any person’s account,
but if not credited in the account of first payee, then its title must be transferred by
the first payee by writing the words “Pay ________ or order” When the title is
once transferred it cannot be credited in the account of first payee, but MUST be
credited in the account of second or any subsequent Payee.
Restrictive Crossing. In between two lines, when words “Payee’s Account Only”
or “Payee’s A/C Only” or “Account Payee Only” or “A/C Payee Only” are
written the cheque is known to have restrictive crossing.
Significance of Restrictive Crossing.
As it appears from name, the only and only purpose of this crossing is that it
prohibits or restricts transfer of title from first Payee to any next payee. When
cheque bears such crossing the instructions are that the cheque should not be paid
on counter, but in the account of first payee only. First payee cannot transfer its
title in favour of any else payee.

13. We must remember that we had known that bearer cheque’s payment can be
collected by any person, but once the cheque is crossed with restrictive crossing, it
must be credited in the account of payee only and bearer or order becomes
meaningless and insignificant.
Special Crossing. In between two lines when name of bank and its branch name are
written, or only bank’s name is written, the crossing is termed as special crossing.
Before we discuss the purpose or significance of this crossing, let us have
knowledge of two basic terms related to this crossing and those are: -
Collecting Banker. When a customer deposits his cheque to his banker, which is
drawn on other branch of that bank within the city, out of city or country, or other
bank within the city, out of city or outside country, to collect its payment and credit
his account; the bank where such instrument is deposited is termed as collecting
banker. Collecting banker means it collects instrument from its customer to get
payment on his behalf against the instrument he deposited, and credit his account.
Bank after collecting that instrument sends it to the bank or branch, where it has
been drawn, gets payment from there and credits the account of his customer.
Paying Banker. When collecting bank collects an instrument, it sends it to the
bank on which the cheque is drawn, so that it may get payment from it. The bank
on which the instrument is drawn is known as paying banker. It is the bank that has
to make the payment against the cheque sent or lodged by the collecting banker.
Now we can proceed to the purpose and significance of Special Crossing.
The first purpose of such crossing is that as soon as such crossing stamp is affixed,
it establishes the ownership and possession of collecting banker. Any cheque that
bears special crossing shows that the ownership lies with the bank and branch
whose name is written between two lines. In case it is lost or stolen, no one else
can claim its payment, unless such crossing is cancelled.
The other and ultimate purpose is that it is direction from collecting banker to the
paying banker, not to make payment to other than the bank that has its special
crossing.
Who can cross a cheque? Who can cancel crossing and how crossing can be
cancelled?
Who can cross?
Cheque drawn by an Account Holder can be crossed by himself when written and
before to be delivered to payee.

14. If not drawn by the account holder it can be crossed by the payee or any
subsequent payee or holder of cheque.
Suppose Imran Khan has drawn a cheque and has written as:-
Pay to Saeed Ahmed or bearer
Here Imran Khan before delivers it to Saeed Ahmed can cross himself; in this case
it may be considered as crossed by the drawer or account holder.
If Imran does not cross it and delivers it to Saeed Ahmed and Saeed Ahmed for his
own protection put these two lines himself then we may say that it has been
crossed by the payee.
If Saeed Ahmed himself does not want to cash the cheque, but delivers it to Sohail
uncrossed and Sohail puts crossing then the crossing is done by the subsequent
payee or holder of cheque.
All above crossings those can be done by account holder, payee, subsequent payee
or holder; those would be simple crossing or restrictive crossing.
Concluding, we can say that Simple crossing can be done by the drawer (Account
holder), first payee and subsequent payee or holder.
Special Crossing can be done only and only by a banker and the banker would be
collecting banker. (For the students not aware of collecting banker must refer
previous notes)
Who can cancel simple and restrictive crossing.
Simple and restrictive crossing, no doubt can be drawn by any one, but for
cancellation, it must be cancelled by the drawer only. The drawer would cancel it
on the face of the cheque and would put his full signature. If drawer has not
crossed it, even then the cancellation must be done by him.
Who can cancel special crossing? And how?
Since special crossing is drawn by collecting banker, its cancellation can also be
done by the collecting banker. Collecting banker needs to cancel crossing only and
only when cheque is returned unpaid from the paying banker and it has to be
returned to the account holder, who deposited the cheque. Sometime account
holder may request the collecting banker to return him the cheque before it is sent
to the paying banker.
Under every situation collecting banker should cancel the crossing before it is
delivered to the account holder.
Unlike simple and restrictive crossing, special crossing is cancelled in a way that
the crossing remains on the face of the instrument (cheque), bit at the back of the
cheque banker would affix a stamp “Our all stamps stand cancelled” or “Our

15. Crossing stands cancelled” below this writing officer of the bank would put his
signature to authenticate the cancellation.
NON-INTEREST BANKING.
Before Non-interest banking in Pakistan, our banking system as it is prevailing in
other countries was based on Interest. Interest was paid to the depositor and
interest was charged or taken from the borrower.
Bank’s funds are collected from the depositor and bank later on lends it to the
borrower. Bank has to pay to the depositor for keeping his money, and has to
charge or collect from the borrower for using the money. As stated above before
non-interest based system of banking what we would pay to the depositor used to
be interest and what we used to collect from the borrower was interest.
Since interest is against Islamic system; so a system was developed that bank had
not to pay interest to the depositor and not to charge interest from the borrower.
Now, what we pay to depositor is Profit, and what we charge from the
borrower is Mark-up or Mark-down.
In Pakistan, every bank; either incorporated in Pakistan or outside Pakistan
(Foreign Based Banks) they are maintaining accounts of depositors on Profit and
Loss Sharing Basis. No doubt the rate of profit is pre-determined, but the condition
stands that these funds are being kept on the basis of Profit and Loss sharing.
If the banks would earn profit, it would be shared with the depositor, and in case of
loss too, it would be shared by the depositor.
But fact is that no bank has ever shown such loss and never shared any loss with
the depositors, reason being if it ever happens; it would be the last day of the
bank.
Recent history shows that after the introduction of Profit and Loss sharing banking,
there has been tremendous decline in the rate of return that was being paid to the
depositor.
An account where public used to deposit there small savings, known as Saving
Bank Account, and now named as PLS. S. B. Account (Profit and Loss Sharing
Saving Bank Account) has shown drastic decline in the rate of return. Before PLS,
it used to be 7.5% to 10%, at that time the word interest was used. But now in the
same type of account the rate ranges from 0.75% to 2%, and interest is not paid but
“Profit”
Other type of account which is mostly meant for commerce class, for business
purpose, the account is called current account and principally no profit id paid in
that type of account.
With operation point of view, banks are maintaining two types of accounts.
 Multiple operational accounts.
 Single Transaction accounts.
Saving bank accounts and current accounts are multi transactional accounts.
Cheque book is provided to the account holder, and account holder can deposit and

16. withdraw in that account with unlimited number of times, and there would br no
restriction. All such transaction would be done in that single account right from the
day it was opened till it is closed. Account holder can deposit money even more
than 100 times in a day and can withdraw through 1000 or more times through
cheques in a single day. Cash and cheques both can be deposited in that account.
So these accounts are multi transactional accounts.
Notice Deposit Accounts, Term Deposit Account, Fixed deposit accounts are
single transactional accounts. Cheque book is not provided, but certificate or
receipt is issued for every deposit, and when withdrawal is done the account is to
be closed. For every deposit separate account is to be opened and for every
withdrawal account is to be closed. These accounts are single transactional
accounts.
Notice deposit accounts are those accounts, where depositor deposit money with
the condition that before withdrawing the funds, prior notice must be given to them
bank as when those funds are to be withdrawn.
One is called 7 days notice deposit account and other is 30 days notice deposit
account. For 7 days notice deposit account, bank must be informed in writing 7
days prior to withdrawal, and for 30 days notice deposit account, bank is to be
informed 30 days before. Rate of profit is higher for 30 days deposit account than 7
days notice account.
For 7 days notice account, funds must remain more than 7 days with the bank;
otherwise no profit would be paid. For 30 days notice deposit funds must remain
more than 30 days; otherwise funds would be returned without profit.
Other single operational accounts are term deposit or fixed deposit accounts, where
notice is not required before withdrawal, but it is pre-determined that the funds
would be kept for a certain term i.e. 03 months, 06 months, 01 year, 05 years 10
years etc.
Rate of profit for term deposit is more than notice deposit, also more is the period
higher would be the rate of profit. Rate of profit for 03 months be least, and rate of
profit for 10 years would be the highest. (For students those would study the
money market in future, I must state that is phenomena depends nature of
money market that prevails. It is the present condition of Pakistan, but may
be in other countries where money market behaves in different way, the rate
of return would be higher for lesser period and less for the maximum period)
ANSWER TO A CHEQUE
When a cheque is presented to the banker, it has got only two options; either to pay
it or to return it and both options are available instantly. It means the payment
cannot be delayed if not paid. When cheque is not paid from the banker the term
used is dishonour of cheque or return of cheque.

17. But when cheque is to be dishonoured or returned unpaid, the banker must give the
reason in writing and the reason is to be authenticated by the officer of the branch
from where the cheque is being returned.
We must also know that for a banker; two blunders are never forgiven and are
subject to be sued by the account holder and those two events are:-
 Not keeping secrecy of account holder.
 Wrongful dishonour of cheque.
Wrongful dishonour means that cheque was supposed to be paid but was
dishonoured, and if account holder sues the bank for damages, and if it is proved
then banker would be in hot waters and has to pay the damages; what so ever
claimed by the account holder. The amount claimed is not necessarily to be
matched with the amount of cheque returned wrongfully. Even a customer may sue
for damages in million if his cheque is returned having figure in thousands. Only
the account holder knows how much damage has been done to his reputation or
business for a cheque wrongly returned.
So much care is to be taken before returning and also giving proper reason for the
return.
The reason to be given while returning a cheque is now named as “Answer to a
Cheque”.
The reason could be any and please note that for return of cheque it is not
necessary that funds are not available in the account, but there could be numerous
other reasons. But the reason should be genuine and true.
Some of the reasons are: -
Refer to Drawer. (Now not in practice in Pakistan)
 Insufficient Balance.
 Not arranged for.
 Exceeds arrangements.
 Effects not clear, may be presented again after 02 days or after ____ date.
 Cheque not properly drawn.
 Cheque is mutilated.
 Cheque is post dated.
 Cheque is stale dated.
 Cheque is anti-dated.
 Cutting requires drawer’s authentication.
 Cheque is crossed.
 Cheque crossed to two banks.
 Collecting bankers crossing required.
 Not drawn on us.
 Account deceased.
 Account attached.
 Account frozen.
 Cheque contains extraneous matter.

18.  Drawer’s signature differs.
 Drawer Signature required.
 Payment stopped by the drawer.
(TO EXPLAIN THEM IN DETAIL IS ASSIGNMENT FOR ALL
STUDENTS)