The person who performs the banking activities such as accepting of deposits, lending money, withdrawing facilities, exchanging of money is known as a banker. In other words, the person who directly related to the banking business is called banker. Banker manages all the activities of a bank.
The position of a collecting banker as:
a) An agent of his customer
b) A holder for value.
In today’s world, a banker renders a variety of service besides its primary functions. In this way, due to a variety of transactions incurred, various types of relations arise between banker and customer. Two positions of a collecting banker in these relationships are described below:
As an agent of his customer: An agent is a person employed to do any act for another or to represent another in dealing with the third person. As an agent, bankers act for and on behalf of the customer and under the latter’s expressed or implied authority. On behalf of the customer, a collecting banker collects the customer’s cheques, drafts, dividend warrants, interest warrants, fixed deposits and bills of exchange for credit.
As a holder for value: A banker becomes its holder for value by giving its value to the customer in any of the following ways:
(a) by lending further on the strength of the cheque;
(b) by paying over the amount of the cheque or part of it in cash or in an account before it is cleared;
(c) by agreeing either than or earlier, or as a course of business, that customer may draw before the cheque is cleared;
(d) by accepting the Cheque in an avowed reduction of an existing overdraft; and
(e) by giving cash over the counter for the cheque at the time it is paid in for collection.
In any of these circumstances, the banker becomes the holder for value and also the holder in due course. He bears the liability and possesses the rights enjoyed by the holder for value. If the last but one endorsement is proved to be forged, he will be liable to the true owner of the cheque. But he shall have the right to recover the money from the last endorser, i.e., his own customer, if the customer is unable to pay, the banker himself will bear the loss. If the cheque sent for collections returned dishonored, the collecting banker can sue all the previous parti1 alter giving them notice of dishonor.