Types of Account holders of a Bank

The account holders can also be classified. Many types of persons, institutions, organizations come to open the account in a bank. Such people or organizations are called account holders. A bank opens three types of accounts such as current, saving, and fixed deposit accounts for their customers. a legal person or a natural person can open an account in a bank. But if the terms and conditions fixed by law are fulfilled, an account can be opened in the name of the disqualified person as well. there exists a contractual relationship between the customer and the bank. there is no dispute in that a competent person can open his account in the bank without any obstacle but the people who are unable to make a contract can open the account under guardianship. But they must fulfill the terms and conditions required by law. Persons who can open an account in a bank are as follows:

1. Competent Person
2. Minor
3. Lunatic or Person of Unsound Mind
4. Joint Account Holders
5. Private Firm
6. Partnership Firm
7. Company
8. Illiterate Person
9. Drunkards
10. Trustee
11. Insolvents
12. Institutions Registered Under Special Act.
13. Other Institutions

Competent Person

The relationship between a bank and an account holder is contractual. the relation between a bank and a customer can be displayed in many ways. But the contractual relationship is very important. The person who concludes a contract can open an account and can deposit his cash in a bank. The person who is qualified by law is competent. The person who is disqualified by law cannot open an account in a bank. A person who has not completed 16 years of age cannot carry out transactions under the civil code. Likewise, a person under 16 years of age is considered incompetent to open an account in a bank under the Contract Act 2056 (1999). Hence, the illegal contract cannot get legality. If the contract is concluded by an incompetent person and a bank becomes void.

Minor

A person who has not completed the age of majority fixed by law is a minor. in the context of Nepal, whether it is the Contract Act 2056 (1999) or Civil code, or different acts, a person who has not completed the age of 16 is a minor. After completing the age of 16 years, he becomes a competent person. Until he completes the age fixed by law he is in fact considered an incompetent person. But the contract made by him in the presence of his guardian becomes valid. thus, the account can be opened in the name of a minor in a bank but his guardian should operate that account rather than by the minor. after completing the age fixed by law the restriction ends itself. thereafter, the minor becomes the account holder legally. He can operate the account in his own name in the bank. The guardian should not use the property of the minor against his interest. Should he do that, after completing the age the minor can file the case against such person and have his wealth returned? therefore, the guardian should always do work in the favor of the minor's interest. The bank should know whether the minor has completed the legal age or not. The evidence, showing the clear age, should be kept in the bank. Regarding the account of the minor, the bank should keep special care or interest.

Lunatic or Person of Unsound Mind

It is not certain that a natural person always remains in the same condition and position all the time. Due to any cause, the consciousness of the natural person may be lost. He may go mad.  A mad man can be dull and dumb. Consumption of beer, wine, drugs, and other kinds of drugs may cause to lose the sense of the people. Such persons are not capable in the name of the law to carry out transactions. All the contracts and the deeds concluded by such person are void or voidable. In this sense, such a person cannot open an account in a bank. If the person is fit, sound, and conscious a the time of opening an account, the contract becomes legal. There is no difficulty in carrying out banking transaction by the person who is temporarily unconscious with the use of beer, wine, drugs, and other intoxicating medicine and later becomes sound and conscious, again in such condition, a bank can deal with him. he must be sound at the time of dealing. Therefore, a bank should give payment of the cheque produced at the time when he is in sound health. This is a duty of a bank. But a bank certainly should try to know the reality.

Joint Account Holders

Two or more persons can open an account jointly in a bank. Such persons are called joint account holders because there will be the signatures of two or more two persons in the account. There is no need for the signature of all the joint holders, if all, the joint account holders, by concluding an agreement to authorize a particular person to operate the account. in such a situation, the signature of the authorized person is sufficient. If such an agreement does not exist these all of the account holders must sign. Such type of account is usually limited only to a family. Sometimes, this account can be opened based on friendship and relationship as well.

The bank should take the following precautions in dealing with a joint account:

• All the persons who have joined to open a joint account must have signed in the account application form to open a joint account.
• The bank should ask for clear instructions in writing as to who will operate the account. Suppose, no clear instruction is given, the bank should honor the cheque only when all the joint account holders sign the cheque.
• Any joint account holders including the one who is authorized to operate the account can stop payment of a cheque issued on a joint account.
• The bankers should also ask for a clear mandate to allow overdraft facility for the joint account.
• The authority to operate the account can be revoked by any of the persons giving the authority. It is automatically revoked if one of the joint account holders dies, becomes bankrupt, or of unsound mind.
• The bankers should ask for clear instructions regarding the withdrawal of securities in the joint account.

Private Firm

Private firms are registered under the Private Firm Registration Act 2014. A person can run his business in the name of a firm. He has absolute right over that firm. The owner of the firm is a natural person. Any person, after getting the certificates of a firm from the related offices can start his business. To run his business, he needs a bank account. So, he opens the account. Instead of using his own name, he uses the name of his firm to open the account and operates his firm. Such a type of account is called the account of a private firm. But to open an account and to withdraw money, he must sign in the name of the firm and after the seal.

 

Partnership Firm

A firm that is registered by concluding an agreement or contract or deed of two or more two people, under the Partnership Act, 2020 is called a partnership firm. This firm is created by law. the partners, jointly or individually are responsible for their function and liability. Under the contract, the partners should start their work and should start the operation of the business only after getting the firm registration certificate. To carry out the transaction of such a firm, a bank account is needed. an account, which is opened in the name of such a partnership firm is called the partnership firm account. 

Company

A company is a legal person. this legal person also is called an artificial person. A company can open an account in a bank in its name. Law creates a company, so it is called a legal person. There are various types of companies. There can be a one-man company, a private company, a public limited company, a joint venture company, etc. There can be a few and many shareholders in it. There can be foreigners' in a joint venture company. There can be a company of institutions and persons. There can be a company from only persons also. Such companies open an account in the bank in their own name to operate their banking transaction. A company has the right to open such an account in a bank. The companies which are established under the companies act should open the account in the company's name. A company is a legal person. therefore, it and its shareholders have a separate legal existence. The companies established under the Company Act 2021 (1965) or 2053 (1996) can open accounts.

Illiterate Person

An illiterate person also can open an account in a bank. However, a bank has to take the following precautions while opening the accounts; in such a person's name:

• As illiterate persons cannot sign their names, the bankers will have to take their thumb impressions as a substitute along with a recent photograph.
• The application form and the photograph should be attested by an approved witness.
• For withdrawal of money, an illiterate person has to attend the bank personally and affix his thumb impression in the presence of an official of the bank for the purpose of identification of the depositor.

Drunkard

A drunkard is a person who is under the influence of alcoholic drinks or drugs and stands on the same footing as a lunatic. An agreement is made during the period of drunkness becomes void. The bank should not honor cheques of a person who has written and issued them under the influence of liquor. However, it is very difficult to judge whether the person is intoxicated or not. When a customer presents his own cheque when he is drunk, the bank should not make immediate payment. Therefore,, it is better and safer than the bank should insist upon such a customer getting a witness (who is not drunk) to countersign before making any payment against the cheque.

Trustee

A trustee is a person in whom confidence is reposed. The person who reposes the confidence is called the author of the trust. The person for whose benefit the trust is formed is called the beneficiary. A trust is usually formed using a document called the 'Trust Deed'. The bank can permit the opening of an account by a trustee. But before doing so, the bank should take certain precautions:

• The bankers should take all precautions to safeguard the interests of these beneficiaries of a trust, failing which the banker shall be liable to compensate the latter for any fraud on the part of the trustee.
• The bank should thoroughly examine the trust deed to know the names of trustees, the powers vested in them for administering the trust property, and other terms and conditions.
• The trustees may borrow money from the banker and pledge or mortgage the trust property, only if the trust deed specifically confers such power on them.
• In the case of two or more trustees, the banker should ask for clear instructions regarding the person/persons who shall operate the account.
• If one or more of the trustees dies or retires the authority vested in the remaining trustees depends on the provisions of the trust deed.
• The insolvency of a trustee does not affect the trust property and the creditors of the insolvent trustee cannot recover their claims from the trust property.

Insolvent

Bankers should not open accounts for undischarged insolvents as the entire property belonging to the undischarged insolvent is handled y the official assignee. If a customer of the bank later becomes an insolvent person, the bank should not allow operations on the account except for credits to the account, as the entire balance in such an account after the declaration of the insolvency falls into the hands of the official assignee and the same can be disposed or only as per orders of the court.

Institution Registered Under a Special Act

Under a special Act, an institution can be established for the work of special nature. There are numerous such types of institutions in Nepal. This institution created by special act for the special purpose has a special significance. In Nepal, the institutions of this nature are the Gorkha Patra Sansthan, The royal Nepal Airlines Corporations, the National Insurance Company (Rashtriya Beema Sansthan), the Nepal Electricity Authority, etc. Some of these corporations are established under the Corporation Act 2021 (1965) and the Communication Corporation Act 2028 (1971). These corporations can open the bank account in their own name. These corporations should submit the following document to open an account:

• The registration Certificate of the corporation
• Special contract to operate the corporations if they are made.
• Resolution of the board of directors to open an account.
• The details of the authorized persons who can run or operate the account and financial transaction (name, caste, address, post, and specimen signature).
• The certificate of income tax
• The certificate of Value added tax
• Other Necessary Documents

Other Institutions

Under this topic, the following institutions can be treated as the institutions, which are established under an act and they can open an account in a bank:

1. Those institutions, which are established under the Corporation Registration Act 2034 (1977).
2. Co-operative Institutions were established under the Cooperative Act 2048 (1992).
3. Schools established under Education Act, 2028 (1971).
4. Municipalities, Village Development Committees, and District Development Committees, established under the local self Governance Act 2055 (1998).
5. Campus/Colleges
6. Sports Organizations
7. Clubs
8. Trade Unions

The above-mentioned institutions can be the customers of a bank. if they want to open an account in the name of the institution, they should submit the following documents.

• A certificate that shows the registration of the institution.
• The rules, regulation, constitution of the institution, contract, agreement, and other like documents.
• The decision to open an account in the bank was made by the board of directors.
• Authorized letter, or power of attorney, if the institution has given responsibility and right to open the account in the bank to a specific person, his details (name, surname, address, post,, etc.)
• Other necessary documents, if required.