Closing of Bank Account

 

Closing of accounts

·       At the time of closing an account, the banker should ask the customer to surrender the unused cheque along with the passbook.

·       When a customer expresses his willingness to close the account in writing, the banker should settle his account. Before doing so, the banker has to arrive at the closing balance which maybe to the credit or debit of the customer.

·       When the balance is to the credit of the customer, the banker to pay the amount either in person or send the same by a cheque to the address of customer.

·       In case of undesirable customer, banker will give notice to the customer for closing the account. If the customer evades the request of the banker, a date will be fixed by the banker to close the account. This will be informed to the customer. On that particular day, the bank will close the account of the undesirable customer and send the credit balance to the address of the customer.

·       Conditions for closing of account:

o   Death of customer: When a customer dies, the contractual relationship stands terminated and operations in the account should be stopped as soon as the banker receives the notice of death. The banker should also obtain a copy of the death certificate. If the customer has left a will, the will has to be probated by a court and the amount should be paid to the executor, or administrator of the will. In the absence of a will, the legal heirs have to obtain a Succession Certificate.

o   Insolvency of customer: When a customer is adjusted insolvent by the court, an assignee will be appointed by the court. The account of the customer in the bank will not be operated by the official assignee appointed by the court. Thus, the account of the customer stands closed, and the customer cannot operate the same.

o   Insanity: When the customer is of unsound mind, the account cannot be operated. As soon as the banker comes to know that the customer is of unsound mind, a doctor will be asked to judge the nature of unsound mind. If it is of permanent nature, the bank will have to close the account of the customer. But if the unsound mind is of a temporary nature, the account will be suspended till such time the customer becomes normal. It is on the basis of medical report, the banker will take a decision.

o   Garnishee order: On the receipt of order from the court, the banker has to close the account of the customer. Such an order is called Garnishee Order. This order is of two parts. First, the court will ask the banker about the status of the account which is called Order Nisi. After receiving the explanation from the bank when court sends an absolute order, it is called Order Absolute. Thereupon, the account will be closed. The court orders the closure of the account when creditors of the customer convince the court that in spite of sufficient funds at his disposal, the customer is unwilling to settle their claims.

o   Withdrawal of power of attorney: When the customer gives permission to another person to operate his account during the absence of the customer, such an account is called Power of attorney account. When the customer withdraws such a power, the agent who was allowed to operate can no longer operate the account.

o   Dissolution of the firm: When a partnership firm has an account in a bank, it is operated as long as the firm remains in operation. A firm gets dissolved due to the death, insolvency, insane, etc., of any partner or all the partners. The partners may also agree to dissolve the firm. In all the above cases, the account of the firm stands closed.

o   Winding up of company: A company ‘s account will be operated as long as it is in operation. Once the company’s winding up process commences, the account will operate by liquidator. The company’s account stands closed.