Recently I visited a new generation private sector bank to deposit cash in my wife’s account. I had carried with me a pay-in slip, properly filled and signed by my wife, to deposit ₹1 lakh. The cashier asked who the account-holder was. I told it was my wife’s account. Then she informed that only ₹50,000 can be deposited in the account by third parties.

I explained to her that it is not a deposit by third-party and my wife is depositing the money in her account and she has also signed the pay-in slip and has sent me to deposit the money.

The cashier informed that the account-holder has to come in person, and the camera in the bank captures who deposits money also. If the account-holder does not come there will be audit objection, she pleaded.

Then I approached the manager, who could understand my difficulty. He verified the pay-in slip and account details in the system and noted my mobile number. I received a transaction number in my phone and the cashier accepted the cash once the number was entered in the pay-in slip. Hence this transaction was accepted as an exception to the general system the bank follows.

What the law says

I was wondering why the need for all these formalities. If they had wanted to verify my identity, I could have provided proof of the same.

When the account-holder signs the pay-in slip, how can the deposit be from a third party? When must a bank decline cash from third parties for credit in customers’ account? Is there any law or guidelines from the regulators for this?

There is no provision under the Prevention of Money Laundering (PML) Act that enables banks to simply decline cash deposits by third-parties. The PML Act just stipulates that banks must be cautious to ensure that no money-laundering takes place while accepting cash from depositors, either directly or through representatives. Banks are supposed to report only suspicious transactions. There is no such directions under ‘Know Your Customer’ guidelines too.

There are restrictions only for acceptance of cash for issue of demand draft, etc., by banks. As it is there are no curbs on depositing cash in an account, except that PAN and transaction details must be provided if the amount exceeds ₹10 lakh.

Power of attorney

Banks do permit customers to operate their account through power of attorney or mandate. While mandate is a simple letter of authority to operate the account, power of attorney is a more formal one. Banks also allow the power/mandate holder to withdraw or transfer money from the account.

When an agent on behalf of the principal can withdraw money from the account, why cannot the agent deposit money in the account? What is the risk the bank undertakes here?

Legally, any activity that can be done by the principal can be done by the agent also, so as to bind the former.

Even Reserve Bank of India guidelines on power of attorney for non-resident accounts bars only opening of account by the PoA holder, with no restriction on operation.

Banks cannot be allowed to have rules and regulations that are inconsistent with the law of the land. One expects the RBI to scrutinise such rules framed by individual banks and advise them suitably.

The writer is a retired banker.

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