BANKING LAW

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Due to the development of science and technology in banking business, it is the high time the law to meet with the demand of the people in this globalized world. The presentation at hand will help the bankers and customers to fulfill their obligations within the contractual relationship.

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MAJURA Ibrahim W. LL.B.- UDOM BANKING LAW IN TANZANIA: Bankers and customer relationship . by MAJURA, Ibrahim W. (LL.B.-UDOM)

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MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF THE CONCEPT OF BANKING:

GENESIS OF THE CONCEPT OF BANKING Banking began long time ago. It had been argued that the first bank established in Mesopotamia in 1406 but the banking system and process began early about 7 th and 8 th century B.C. MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF THE CONCEPT OF BANKING:

GENESIS OF THE CONCEPT OF BANKING The main reason for emergence of banking was surplus production. Before the emergence of surplus production , people produced for consumption and the properties owned communally. But after the emergence of surplus production, now people found that, there is a need to kept or store such properties for future use. MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF THE CONCEPT OF BANKING:

GENESIS OF THE CONCEPT OF BANKING In other situation, the society identified that there are perishable goods which cannot be stored, therefore, they innovated precious metals such as silver and gold used in exchange of perishable goods which finally used to hoard. MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF THE CONCEPT OF BANKING:

GENESIS OF THE CONCEPT OF BANKING Surplus production led to the emergence of trade. One society began to exchange goods with other society. This led to the emergence of the medium of exchange such as cowries, gold, silver etc. Due to this emergence of medium of exchange facilitated the emergence of people who specialized in the business of the medium of exchange. MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF THE CONCEPT OF BANKING:

GENESIS OF THE CONCEPT OF BANKING They tried various things as medium of exchange and finally found that money became convenient as medium of exchange. The development of money as medium for exchange facilitated the rise of money -changers who acted as financial institutions who played the same roles as the modern banks we have today. Therefore the money- changers improved in their activities eventually led to the rise of modern banking we have today. MAJURA Ibrahim W. LL.B.- UDOM

A. The Currency Board System :

A. The Currency Board System We have seen that banks were imposed on the African colonized communities, including East African communities. These banks were imposed to service capital that was exported to the African communities. But the conditions for operation of a bank had to be there. [What are the conditions/prerequisites?] So what happened? Export of capital to hitherto subsistence economies had the following consequences - changing the prevailing natural/subsistence economy into money economy - produce for sale – commodity production (ii) with commodity production money was used as a medium of exchange with regularized commodity production – widespread use of money (iv ) widespread use of money called for establishment/imposition of financial institutions (v ) imposition of bank branches of mother commercial banks abroad. These branches could not issue currency nor control the supply of currency. MAJURA Ibrahim W. LL.B.- UDOM

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MAJURA Ibrahim W. LL.B.- UDOM

BANK OF TANZANIA (BOT):

BANK OF TANZANIA (BOT) MAJURA Ibrahim W. LL.B.- UDOM

History:

History At independence in 1961, the Tanzanian monetary system was based on the East African Currency Board established in 1919 to manage the supply and exchange of currency in the then British colonies of East Africa and neighboring countries. The Currency Board stopped functioning in 1966 when central banks came into existence in East Africa. The Bank of Tanzania (BOT) was therefore established in 1966 by the BOT Act of 1965 providing for the establishment, constitution and functions of the Bank of Tanzania as a central bank. MAJURA Ibrahim W. LL.B.- UDOM

History :

History However, the BOT Act of 1965 was repealed in 1995 and was replaced with the BOT Act of 1995. The BOT Act of 1995 was the landmark in Tanzania’s monetary history. For the first time, since the Bank of Tanzania’s existence, there was a move away from multiple-policy objectives to a single policy objective, i.e. price stability. MAJURA Ibrahim W. LL.B.- UDOM

History :

History Later the 1995 Bank of Tanzania Act repealed and reenacted by the Bank of Tanzania Act, 2006, No. 4 of 2006. The reasons for passing this new law were: To provide for more responsive regulatory role of the Bank of Tanzania in relation to the formulation of monetary policy. To provide for supervision of banks and financial institutions, and To provide for another related matters. MAJURA Ibrahim W. LL.B.- UDOM

Relationship with government :

Relationship with government According to the BOT Act of 1995, the Central Bank is autonomous in conducting monetary policy without the interference of the Government, and its primary objective is to safeguard the internal and external value of the shilling by pursuing monetary policy that will ensure the maintenance of low rate of inflation. MAJURA Ibrahim W. LL.B.- UDOM

Relationship with government :

Relationship with government The President appoints the Governor and the Deputy Governor for a period of five years. They are eligible for re-appointment but not for more than two terms. The Governor or the Deputy Governor can be dismissed by the President under the same conditions as other members of the Board. The Board of the Bank has ten members, including the Governor (Chairman), the Deputy Governor (Deputy Chairman), the Permanent Secretary to the Treasury of the United Republic of Tanzania, the Permanent Secretary to the Treasury of the Revolutionary Government of Zanzibar, and six other directors appointed by the Minister for Finance in Tanzania. MAJURA Ibrahim W. LL.B.- UDOM

Relationship with government :

Relationship with government The Board of Directors is responsible for determining the policy of the Bank and approving the Bank budget. MAJURA Ibrahim W. LL.B.- UDOM

Relationship with government :

Relationship with government The Bank of Tanzania acts as Government's banker and fiscal agent to both the United Republic of Tanzania and the Government of Zanzibar. As such, the Bank performs the following functions: - Maintains and operates special official accounts in accordance with arrangements made between the Bank and the Government; - Acts as an agent of the Government for servicing the public debt, including the issuance of, payment of interest on, and the redemption of bonds and other securities of the Government; - Pays, remits, collects or accepts for deposit or custody funds in Tanzania or abroad; - Purchases, sells, transfers or accepts for custody cheques , bills of exchange and other securities; - Collects the proceeds, whether principal or interest resulting from the sale of Government securities or other property; and - Purchases, sells, transfers or accepts for custody gold or foreign exchange. MAJURA Ibrahim W. LL.B.- UDOM

Relationship with government :

Relationship with government The Bank, on behalf of the Government, may sell Treasury bills and bonds to finance temporary revenue shortfalls in the government budget and/or transfer spending power from the public to the Government. Currently, the Bank of Tanzania is issuing Treasury bills for maturities of 35, 91, 182, 364 days and two-year, five-year, seven year and ten-year bonds through auctions. MAJURA Ibrahim W. LL.B.- UDOM

Design and conduct of monetary policy:

Design and conduct of monetary policy MAJURA Ibrahim W. LL.B.- UDOM

Main objectives of monetary policy:

Main objectives of monetary policy The primary objective of the Bank of Tanzania is price stability. The Bank therefore, has the responsibility of ensuring that it establishes monetary conditions consistent to low and stable inflation. MAJURA Ibrahim W. LL.B.- UDOM

The monetary policy instruments :

The monetary policy instruments The Bank of Tanzania uses indirect instruments of monetary policy to influence the level of money supply. MAJURA Ibrahim W. LL.B.- UDOM

The monetary policy instruments :

The monetary policy instruments This is mainly achieved through: 1. Open Market Operations (OMO). OMO involves the sells or purchase of Government securities (e.g. Treasury bills, Treasury bonds) by the Bank of Tanzania in order to withdraw or inject liquidity into the economy, in order to influence the reserve money. 2 . Foreign exchange market operations (FEMO); which involves sells or purchase of foreign currency by the Bank of Tanzania. 3. Discount rate ; which is the rate of interest the Bank of Tanzania charges on loans it extends to commercial banks. 4. Statutory reserve requirement requires all depository corporations in Tanzania: Mainland and Zanzibar, to maintain an account with the Bank of Tanzania for statutory minimum reserves (SMR). 5. Moral suasion as an instrument of monetary policy has no legal commitment. It can be used by the Bank of Tanzania to influence the behaviour of certain economic units such as Government, banks and non-banks by using all means of communications: report, studies, speeches, etc. MAJURA Ibrahim W. LL.B.- UDOM

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Other activities of central bank (BOT) MAJURA Ibrahim W. LL.B.- UDOM

Other activities of central bank (BOT) :

Other activities of central bank (BOT) The bank of issue The banker’s bank The government’s bank The adviser to the government The guardian of the country’s international reserves. Supervision of banks and financial institutions. Promotion of financial development. MAJURA Ibrahim W. LL.B.- UDOM

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MAJURA Ibrahim W. LL.B.- UDOM

COMMERCIAL BANKS:

COMMERCIAL BANKS Meaning of CB - commercial banking refers to that banking which is concerned with the acceptance of deposits from the public repayable on demand or after the expiry of a short period and the granting of mainly short term credit to trade, commerce and industry through wide networking of branches throughout the country. MAJURA Ibrahim W. LL.B.- UDOM

Commercial banking services:

Commercial banking services Commercial banking services include- 1)      Receiving various types of deposits. 2)      Lending various types of loans. 3)      Extending some non-banking customer services like facilities of locker, rendering services in paying directly house rent, electricity bills, share calls, insurance premium etc. MAJURA Ibrahim W. LL.B.- UDOM

Functions of commercial banks:

Functions of commercial banks 1)      Primary or basic functions a) Receiving of deposits - deposits constitute the main source of funds for commercial banks. CBs receive deposits from the public on various accounts. The main types of accounts are- fixed, current, savings, recurring (explain lil ). b) Issuing notes/ cheques - this function once considered to be the most paying part of banker’s business is in modern times performed generally by the central bank. Its importance has dwindles to a large extent in some developed countries where cheque currency has replaced bank notes to a large extent. MAJURA Ibrahim W. LL.B.- UDOM

Primary or basic functions:

Primary or basic functions c) Lending of funds- it is the main business of CB. Advances form the chief source of profit for CB. Banks lend funds by way of loans, over-drafts, cash credit, discounting of bills. ( i ) Loan- it is a financial arrangement under which an advance is granted by a bank to a borrower on a separate account called the loan account. A loan may short, medium or long term. It is granted either against collateral securities or against personal security of the borrower. (ii) Over-draft- it is a financial arrangement where a current account holder is permitted by a bank to overdraw his account that is to draw more than the amount standing to his credit upon an agreed limit. (iii) Cash credit- it is a financial arrangement under which a borrower is allowed an advance under a separate account called cash credit limit. Here the borrower can withdraw the amount in installments as and when he needs. (iv) Discounting of bills of exchange- here the bank takes a BOE maturing from an approved customer and pays him and credits his account immediately with the present value of the bill. MAJURA Ibrahim W. LL.B.- UDOM

Primary or basic functions:

Primary or basic functions d) Investment of funds on security - it is one of the imp functions of comm. Banks. They invest a considerable amount of their funds in govt and industrial securities. In India it is required by statute for CB to invest a considerable amount of their funds in securities. MAJURA Ibrahim W. LL.B.- UDOM

Primary or basic functions:

Primary or basic functions e) Creation of money - the various ways of creation of money are- ( i )      By advancing loans (ii)      By allowing over draft (iii)      By providing cash credit (iv)      By discounting BOE (v)      By purchasing securities (vi)      By purchasing fixed assets The commercial banks are prominent in today’s world because they manufacture or create money. The bank deposits are regarded as money coz they perform the same function as money that is they increase the purchasing power of the community and serve as medium f exchange in purchase of goods and services and settlement of debts. MAJURA Ibrahim W. LL.B.- UDOM

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COMMERCIAL BANKING IN EAST AFRICA MAJURA Ibrahim W. LL.B.- UDOM

Reasons for establishing commercial banks in east Africa:

Reasons for establishing commercial banks in east Africa The reasons were given by two text writers Jucker T. Fleetwood: Money and Finance in Africa Newlyn : Money in an African context. The reasons outlined were: Ever- increasing of trade between Britain and E. Africa. Commercial bank services were demanded by the expatriate population and government officials to finance their ventures and government respectively. To avoid cumbersome and costly methods of shipping money in specie. MAJURA Ibrahim W. LL.B.- UDOM

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There was therefore a need to establish commercial banks in order to: Facilitate trade Satisfy credit demands of expatriate population and government officials. To do away with problem of shipping currency in specie. Harness possible current and future profits and gain. MAJURA Ibrahim W. LL.B.- UDOM

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FUNCTIONS OF COMMERCIAL BANKS IN EAST AFRICA MAJURA Ibrahim W. LL.B.- UDOM

Functions of commercial banks in East Africa:

Functions of commercial banks in East Africa Management over finance capital Acceptance of deposit and maintenance of deposit accounts. Discounting of bills and collection of bill proceeds. MAJURA Ibrahim W. LL.B.- UDOM

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RELATIONSHIP BETWEEN A BANK AND A CUSTOMER MAJURA Ibrahim W. LL.B.- UDOM

RELATIONSHIP BETWEEN A BANK AND A CUSTOMER:

RELATIONSHIP BETWEEN A BANK AND A CUSTOMER Who is a bank customer? The term customer is not defined by law. Ordinarily, a person who has an account in a bank is called a customer. According to Dr. Hart, a customer is a one who has an account with a banker or for whom a banker habitually undertakes to act as such. MAJURA Ibrahim W. LL.B.- UDOM

RELATIONSHIP BETWEEN A BANK AND A CUSTOMER:

RELATIONSHIP BETWEEN A BANK AND A CUSTOMER Relationship between a banker and customer is of great significance. It depends upon the services rendered by the banker to the customer. MAJURA Ibrahim W. LL.B.- UDOM

Definition of banker:

Definition of banker (a) Statutory definitions of banker or bank Bills of Exchange Act - S.2 - “banker” includes a body of persons whether incorporated or not who carry on the business of banking. “Business of banking” has not been defined in the Ordinance. MAJURA Ibrahim W. LL.B.- UDOM

Definition of banker:

Definition of banker BOT Act 2006, No. 4/2006 S.3 “bank” means an entity engaged in the banking business. “banking business” means the business of receiving funds from the general public through the acceptance of deposits payable upon demand or after a fixed period or after notice, or any similar operation through the frequent sale or placement of bonds, certificates, notes or other securities, and to use such funds, in whole in part, for loans or investments for the account of and at the risk of the person doing such business. MAJURA Ibrahim W. LL.B.- UDOM

Definition of banker:

Definition of banker Foreign Exchange Act, 1992 No. 1/92 S.4 “bank” means a bank within the meaning of section 3 of the B & FI Act . B & FI Act 2006, No. 5/2006 S.3 “bank” [has the same meaning as that given to that term in the BOT Act, 2006] MAJURA Ibrahim W. LL.B.- UDOM

Case – law definitions of banker or bank:

Case – law definitions of banker or bank United Dominions Trust, Ltd v. Kirkwood [1966] 2 QB 431; [1966] 1 All E.R. 968 “… a bank or banker is a corporation or person (or group of persons) who accept moneys on current accounts, pay cheques drawn upon such accounts on demand and collect cheques for customers” - if such minimum services are afforded to all and sundry without restriction of any kind and are a substantial part of the whole, the business is a banking business, even if another or other businesses are undertaken at the same time. MAJURA Ibrahim W. LL.B.- UDOM

Definitions of banker or bank by textbook writers :

Definitions of banker or bank by textbook writers In Sheldon’s – Practice & Law of Banking the terms are defined according to purpose/function or context in which the definition is required (p.159) “For the purposes of the BEA, the Cheques Act and the Stamp Act it would seem that there must be the functions of - receiving money from customers & - repaying it by honoring their cheques when required” in order to call a person a banker . MAJURA Ibrahim W. LL.B.- UDOM

Definitions of banker or bank by textbook writers :

Definitions of banker or bank by textbook writers Dr. Hart [ Law of Banking 4 th Ed. p. 1] a bank or banker is a person or company who/which carries on the business of - receiving moneys from customers - collecting drafts for customers honouring cheques drawn by customers provided there are sufficient funds in the customers a/ cs to enable payment of such cheques . MAJURA Ibrahim W. LL.B.- UDOM

Definitions of banker or bank by textbook writers :

Definitions of banker or bank by textbook writers Paget 8 th ed. p. 16 basis his definition on the Court of Appeal judgment in United Dominions v. Kirkwood – underlines the functions: - accept moneys on current a/c - pay cheques drawn on such a/ cs on demand - collect cheques for customers MAJURA Ibrahim W. LL.B.- UDOM

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Common features in these definitions - accept deposits - open current a/ cs - honour cheques - act as bank for collection MAJURA Ibrahim W. LL.B.- UDOM

Definition – broad view :

Definition – broad view Initially – surplus – safe custody – deposit at a safe place – individuals, families, shrines, palaces – when in need – go and take – others allowed to borrow - grain, precious metals, etc. – no cheques - Next with commoditization of the economy & consequent wide – spread use of money in transactions; need for establishment of firms and companies where huge sums of money could be deposited and borrowed – corporations were formed to specifically do the business of accepting money/repaying it on demand - lend such money - assist MAJURA Ibrahim W. LL.B.- UDOM

Definition – broad view :

Definition – broad view customer in his financial transactions – discount his bills, collect his cheques – In short the banker was acting as a middleman. - With spread of capital the world over banks fall under management by financial giants - simple role of bank as a middleman ceases - role of huge international banks (financial oligarchies) with branches scattered all over the world/controlling small banks in economically dominated countries – is one of a universal book – keeper, controlling world economies. You cannot define such a bank in terms of accepting deposits, opening C/Ac, honouring cheques , collecting drafts. MAJURA Ibrahim W. LL.B.- UDOM

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Therefore a banker is who: Take deposit account Take current account Issue and pay cheques Collect cheques crossed and uncrossed for his customers. Money lender is not considered as a banker as mere lending does not constitute banking business. Banker is an institution which borrows money by accepting deposits from the public for the purpose of lending to those who are in need of money. MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer?:

Who is a bank customer? Great Western Railway v. London and County Banking Co., [1901] AC 414, The court said that, to make a person a customer of the bank, there must be a current or deposit account with such bank. It is very important for a person to open an account with a bank to be a customer of that bank. MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer?:

Who is a bank customer? In the case of Commissioner of Taxation v. English Scottish and Australian Bank, [1970] AC 683, Lord Dunedin observed, “the word customer signifies a relationship in which duration is not essence. A person whose money has been accepted by the bank on the footing that the bank undertakes to honour cheques upto the amount standing to his credit, is a customer of the bank irrespective of whether his connection is of long or short standing.” MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer?:

Who is a bank customer? The above view was also confirmed by the Kerala High Court in the case of Central Bank of India, Bombay v. Gopinath Nair and Others, AIR, 1970 Kerala 74, he Lordship observed: “Broadly speaking a customer is a person who has the habit of resorting to the same place or person to do business. So far as the banking transactions are concerned he is a person whose money has been accepted on the footing that the banker will honour his cheques upto the amount standing to his credit, irrespective of his connection being of short or long standing” MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer? :

Who is a bank customer? To constitute a customer, the following essentials must be fulfilled. he must have a sort of account; Even a single transaction constitute a customer; The dealing must be of a banking nature. MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer? :

Who is a bank customer? A casual transaction like encashment of cheque does not entail a person to be a customer. There is no unanimity as regards to the time period of the dealings. The duration of association of the customer with the bank is of no essence. MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer? :

Who is a bank customer? Therefore a bank customer, is one who has an account with the bank and to whom the bank undertakes to extend business of banking. A person, company, entity who has an account with the bank is a customer. MAJURA Ibrahim W. LL.B.- UDOM

Who is a bank customer? :

Who is a bank customer? A customer need not to be a natural person. A customer can be: A firm Joint stock company A society or Any separate legal entity may be a customer. A customer includes government department and corporation incorporated by or under any law. MAJURA Ibrahim W. LL.B.- UDOM

BANKER’S SPECIAL CUSTOMERS:

BANKER’S SPECIAL CUSTOMERS Any person who is legally capable of entering into a valid contract may apply in the proper way to deposit his money with the bank. A banker’s special customers are generally: Minors Married woman Illiterate persons Lunatics Blind people Drunkards Insolvents etc. who are incompetent to open such accounts. MAJURA Ibrahim W. LL.B.- UDOM

BANKER’S SPECIAL CUSTOMERS:

BANKER’S SPECIAL CUSTOMERS There are impersonal customers like: Schools Clubs Partnership firm Joint stock companies etc. Certain precautions are to be taken by banks while opening accounts in the name of these customers. MAJURA Ibrahim W. LL.B.- UDOM

Minor :

Minor A minor is a person who has not attained the age of 18 and in case a guardian is appointed, it is 21. Minors are regarded “pet children of law”. In Mohori Bibi v. Dharmodas Ghose , a minor executed a mortgage for Rs 20000 and received Rs 8000 from the money lender. Subsequently, the minor sued for setting aside the mortgage. The money lender wanted refund of money which he had actually paid. The PC held that an agreement by a minor was absolutely void and therefore, money lender was not entitled repayment of money. MAJURA Ibrahim W. LL.B.- UDOM

Minor :

Minor Some of the precautions to be taken by the banker on opening and operating account of a minor are- 1)      The banker may open a SB account but not a current account as it incurs no liability to the minor. 2)      At the time of opening of account of minor, the bank should record the genuine date of birth of the minor. Banker should insist on to give some schooling record or date of birth as entered in Births and Deaths Register. 3)      Minors are allowed to open such accounts when they have completed a particular age say twelve years in some banks and ten years in some others. MAJURA Ibrahim W. LL.B.- UDOM

Minor :

Minor 4)      Banks should prudent to issue cheque books only to minors of, say sixteen or seventeen years of age. 5)      Accounts for illiterate minors are not opened in their single name. 6)      As a measure of precaution, banks adopt a general rule not to accept deposit exceeding a particular sum. 7)      Since a contract with a minor is void and cannot be enforced against him in Court of law, a minor’s account should never be allowed to be overdrawn. 8)      A guarantee obtained to secure the money borrowed by a minor is also of no avail. However, if the guarantor undertakes to indemnify he will be held liable though borrower is minor. MAJURA Ibrahim W. LL.B.- UDOM

Minor :

Minor DATE OF BIRTH At the time of opening of the account of minor, the bank should record the date of birth of the minor as disclosed by his or her guardian. MAJURA Ibrahim W. LL.B.- UDOM

Minor :

Minor DEATH OF THE MINOR GUARDIAN In the event of death of a minor the money will be payable to the guardian. In case the guardian dies before the minor attains majority and the account is a joint account or to be operated by the guardian only, the money should be paid by the bank to the minor or attaining majority or to some person appointed by the court as his guardian. MAJURA Ibrahim W. LL.B.- UDOM

Minor :

Minor MINOR AS A PARTNER A minor can be admitted to the benefit of partnership with the consent of all the partners but he will not be liable for the losses or debts of the firm. Within six months after majority he should repudiate the liability as partner otherwise he will be liable as a partner. MAJURA Ibrahim W. LL.B.- UDOM

Married women:

Married women A married woman is competent to enter into a valid contract. The banker may, therefore, open an account in the name of a married woman. In case of a debt taken by a married woman, her husband shall not be liable except in the following circumstances: If the loan is taken with his consent or authority; and If the debt is taken for the supply of necessaries of life to the wife, in case the husband defaults in supplying the same to her. MAJURA Ibrahim W. LL.B.- UDOM

Married women:

Married women The husband shall not be liable for the debts taken by his wife in any other circumstances. The creditor may in that case recover his debt out of the personal assets of the married woman. While granting a loan to a married woman, the banker should, therefore, examine her own assets and ensure that the same are sufficient to cover the amount of the loan. MAJURA Ibrahim W. LL.B.- UDOM

Married women:

Married women A banker may open an account in the name of a married woman like any other customer. However, a banker should exercise caution while opening account for the wife of an undischarged insolvent. 1)      While opening an account of a married woman, the bank should enquire about her means and circumstances, and if she is living with her husband, something about him and his occupation and position in life, and if he is an employee, the name of the employer. MAJURA Ibrahim W. LL.B.- UDOM

Married women:

Married women 2)      In case she applies for an overdraft, the banker should see that she owns separate property in her own name and precaution should be kept in mind regarding her status and capacity to pay and the purpose for which the borrowings are made. Also he should seek suitable securities preferably on her, which can be attached by the Courts. 3)      The banker should always observe that there is credit balance in her account. 4)      Banks usually require that a married woman be independently advised by her own solicitor when depositing security for the account of other persons. MAJURA Ibrahim W. LL.B.- UDOM

Married women:

Married women 5)      A married woman may enter into a contract of guarantee and it is enforceable only against her separate estate. 6)      In case of an illiterate married woman, her thumb impression should be obtained on the account opening form and on the identification card. MAJURA Ibrahim W. LL.B.- UDOM

Illiterates:

Illiterates An illiterate person is competent to contract and bank may open an account in his name, but special care should be taken by the banker before opening an account. 1)      The account of an illiterate person may be opened provided he/she calls the bank personally along with a witness who is known both to the banker and the depositor. MAJURA Ibrahim W. LL.B.- UDOM

Illiterates:

Illiterates 2)      A passport size photograph of the illiterate person is identified before the banker in presence of the account holder. The photographs have to be attested by the bank officer/ witness. 3)      The left hand thumb impression in case of male illiterate and right hand thumb impression in case of female illiterate are duly attested by some responsible person on the account opening form. 4)      One or two identification marks of the depositor should be noted on the account opening form. MAJURA Ibrahim W. LL.B.- UDOM

Illiterates:

Illiterates 5)      The illiterate person should be provided with a passbook which should also contain an attested photograph of the illiterate person. 6)      Normally, no cheque book facility is provided on accounts in the name of illiterate persons. 7)      At the time of withdrawal/repayment of deposit account the account holder should attend personally with passbook and attest his/her thumb impression or mark in the presence of an authorised person. MAJURA Ibrahim W. LL.B.- UDOM

Illiterates:

Illiterates 8)      The thumb impression of illiterate person on the withdrawal form or cheque (if provided), and on the back of the withdrawal form or cheque should be duly compared with the specimen impression kept by the bank. MAJURA Ibrahim W. LL.B.- UDOM

Illiterates:

Illiterates Auchteronis Co. vs. Midland Ltd, AIR 1928 In this case the court held that a bank does not owe duties to third parties who are not its customers. Certainly the mere fact that a bank owes a duty to its customer in connection with a transaction does not mean that it owes a duty to its customer in connection with a transaction does not mean that it owes a parallel duty to  third person who may also be interested in the transaction. MAJURA Ibrahim W. LL.B.- UDOM

Lunatics:

Lunatics Lunatics are persons of unsound mind. Lunatics are disqualified from contracting but the disqualification does not apply to contract entered by lunatics during their period of sanity. Following are banker’s duty n case of lunatics- 1)      Since a lunatic has no capacity to contract, acc to sec 11 of the ICA, no banker knowingly opens an account in the name of a lunatic. 2)      If an existing customer becomes insane, the banker must immediately stop the operation of the account. It is so because, the banker has no right to debit his account for payment made out of his account from the moment, the banker knows the fact of lunacy of customer, the contract between them is void. MAJURA Ibrahim W. LL.B.- UDOM

Lunatics:

Lunatics 3)      A banker must not be carried away by hearsay information or rumours . He must get definite information about the lunacy of the customer. 4)      If a banker dishonours a cheque in a hurry, without having any proof of lunacy, he will be liable for wrongful dishonour of cheque. 5)      It should return all cheques of customer’s account with the word ‘refer to drawer’ and not ‘customer insane’. It should make careful note of lunacy order. MAJURA Ibrahim W. LL.B.- UDOM

Lunatics:

Lunatics 6)      If a third party is authorised to draw on customer’s account, that authority will cease when the customer becomes insane since when a principal cannot act for himself his agent can no longer act for him. 7)      If one party to an account opened in joint names becomes mentally incapable of managing his or her affairs, the banker should not allow either party to operate the account. MAJURA Ibrahim W. LL.B.- UDOM

The drunkard:

The drunkard If a person is in state of intoxication and is not in senses, he cannot open an account with a bank. The main condition of valid contract with a bank is between persons who are of sound mind. However it a person is drunk is of sound mind he may open and operate an account with a bank. MAJURA Ibrahim W. LL.B.- UDOM

Partnership firm:

Partnership firm A partnership is the relation between the persons who have agreed to share the profits of a business carried on by all or anyone of them acting for all. The banker should take the following precautions while dealing with a partnership firm. MAJURA Ibrahim W. LL.B.- UDOM

Partnership firm:

Partnership firm 1)      The banker shall open an account in the name of a partnership firm only when an application is submitted in writing by any one or more partners. Authority to open an account in the name of an individual partner is positively denied. MAJURA Ibrahim W. LL.B.- UDOM

Partnership firm:

Partnership firm 3)      To be on safer side, a banker should get a written request from all the partners jointly for opening an account. 4)      The banker should go through the partnership deed and carefully study the objects, capital, borrowing powers etc. he should get a copy of the duly stamped partnership deed. He should enquire about the details of the firm, partners and their powers. If the firm is registered the banker should get a copy of the registration certificate. Dealings with unregistered firms will involve risks. MAJURA Ibrahim W. LL.B.- UDOM

Partnership firm:

Partnership firm 5)      There should be a clear mandate from all the partners. Mandate must be signed by all the parties. 6)      The banker should not mix the personal and private accounts of the partners. He has no right to set off and lien over the accounts. 7)      No partner has an implied power to sell or mortgage the property of his firm. So in case of mortgage of property, the deed of mortgage should be signed by all the partners. MAJURA Ibrahim W. LL.B.- UDOM

Partnership firm:

Partnership firm 8)      While advancing loans and advances to partnership firm the banks in practice get the loan documents executed by the partners on behalf of the firm as also in their personal capacity. 9)      Since a firm stands dissolved on insolvency or insanity of a partner, a cheque signed by an insolvent partner before the date of adjudication should not be paid by the banker without confirmation from other partners. MAJURA Ibrahim W. LL.B.- UDOM

Trust:

Trust A trust is an obligation annexed to the ownership of the property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. MAJURA Ibrahim W. LL.B.- UDOM

Trust:

Trust While opening accounts in the names of persons in their capacity as trustees, the banker should take the following precautions. 1)      The banker should examine the trust deed concerning instructions regarding opening and operating the account contained in the trust deed. In the absence of such instructions, all the trustees may join in opening such account. MAJURA Ibrahim W. LL.B.- UDOM

Trust:

Trust 2)      Instructions regarding limitation on withdrawal in the trust deed, if any, be prominently noted at the ledger head and specimen signature card and withdrawals should be restricted. 3)      The banker should note the objects for which the trust has been created so as to facilitate the passing of cheques . MAJURA Ibrahim W. LL.B.- UDOM

Trust:

Trust 4)      A trustee has no individual powers. They must all act together. All must join in signing of cheques . Unless expressly provided otherwise in the trust deed, no trustee can delegate his power to another. 5)      If one of the trustees dies or retires, the bank on receiving notice should suspend all operations in the account. However, if the trust deed is silent the bank can let the operations to continue. MAJURA Ibrahim W. LL.B.- UDOM

Trust:

Trust 6)      In case of breach of trust the bank must see that it does not become a party to the breach. The banker is justified in dishonouring the cheque drawn by a trustee, if intended for breach of trust. 7)      If the trustees are authorised to borrow to discharge the functions of the trust, the banker must get specific assets of the trust as security. MAJURA Ibrahim W. LL.B.- UDOM

Trust:

Trust In the case of New Bank of India v. Union of India, AIR, 51. Supreme Court observed that a trustees is generally not entitled to dispose of or appropriate trust property for his benefit. In the present case the banker was entitled to dispose of the share and utilities the amount thereof for adjustment to the loan account if the debtor defaults. This bankers obligation to transfer back the shares can arise only when the debtor clears dues of the bank. Hence bank was not considered as trustees. MAJURA Ibrahim W. LL.B.- UDOM

Agent:

Agent A person employed to do any act for another, or to represent another in dealings with third persons, is known as an agent for another. The precautions to be taken by a banker in opening and operating account of a customer by an agent are 1)      A banker should at once suspend all operations on that account upon hearing or being notified of the principal’s death, insanity or bankruptcy. MAJURA Ibrahim W. LL.B.- UDOM

Agent:

Agent 2)      The agent must assign the cheque for and on behalf of the principal, so that the third parties would know that he is dealing in a representative capacity. 3)      Whenever a bank receives a mandate, it should be recorded in a register, serially numbered, indexed alphabetically, and instructions should be noted in the customer’s ledger account. MAJURA Ibrahim W. LL.B.- UDOM

Agent:

Agent 4)      In case the agent is authorised to open an account on behalf of the principal, the application should be made to sign by the principal himself, delegating authority to agent to operate the account. 5)      The agent should sign in a manner to indicate that he is signing as an agent. MAJURA Ibrahim W. LL.B.- UDOM

Agent:

Agent 5)      The agent should sign in a manner to indicate that he is signing as an agent. 6)      The banker should on no account allow the agent, or in fact any person to pay into his own private account, cheques which he has endorsed on behalf another, without satisfying himself that the agent has the authority of the principal to do so. 7)      A banker should not allow an agent to overdraw his principal’s account express with his express authority. MAJURA Ibrahim W. LL.B.- UDOM

PowerPoint Presentation:

LENDING OR ADVANCING MONEY AGAINST SECURITY MAJURA Ibrahim W. LL.B.- UDOM

Types of security which banks prefer:

Types of security which banks prefer Land Debenture Shares Life policy Pledge (pawn) Hypothecation Banker’s lien Right of set off (combining accounts), (cash as security) and Guarantee MAJURA Ibrahim W. LL.B.- UDOM

PowerPoint Presentation:

MAJURA Ibrahim W. LL.B.- UDOM

PowerPoint Presentation:

ELECTRONIC BANKING MAJURA Ibrahim W. LL.B.- UDOM

Definition of Electronic banking:

Definition of Electronic banking Electronic Banking can be defined as the business of banking which involves the use of computers and communication network equipment like mobile phone network and the internet to mention a few. When bankers’ activities involve the use of these electronic facilities in operating customers’ accounts such as crediting or debiting, usually the widely used term is electronic fund transfer system (EFTS). MAJURA Ibrahim W. LL.B.- UDOM

Electronic Fund Transfer System :

Electronic Fund Transfer System Electronic Fund Transfer System are the systems whereby amounts of fund are credited or debited to various accounts by means of electrical impulses transmitted by cable, wire or tape, or through microwave transmissions. It includes, ATM, SWIFT, POS terminals, etc. MAJURA Ibrahim W. LL.B.- UDOM

ATMs:

ATMs ATMs (Automated Teller Machines); these are machines which dispense cash and accept deposits from customers. These are usually located at the branches of most banks, though they may be fixed elsewhere. MAJURA Ibrahim W. LL.B.- UDOM

SWIFT (Society of Worldwide International Fund Transfer):

SWIFT (Society of Worldwide International Fund Transfer) SWIFT (Society of Worldwide International Fund Transfer); this is an electronic facility that simplifies payments of international character between banks located in different countries. This form is where the bank customers can made a transaction through their mobile phone, and a customer must have a password and they always advices to keep it. In Tanzania this system is practiced by different bank like SIM- BANKING by CRDB and Mobile Banking by NMB. K. Zaharani , Electronic Banking A Hastened Overview For Lecture Notes pg. 3 MAJURA Ibrahim W. LL.B.- UDOM

Mobile banking :

Mobile banking Mobile banking is a way for the customer to perform banking actions on his or her cell phone or other mobile device. It is a quite popular method of banking that fits in well with a busy, technologically oriented lifestyle. It might also be referred to as M-banking or SMS banking. Mobile banking allows the user to log into his or her account from a cell phone, and then use the phone to make payments, check balances, transfer money between accounts, notify the bank of a lost or stolen credit card, stop payment on a check, receive a new PIN, or view a monthly statement, among other transactions. This type of banking is meant to be more convenient for the consumer than having to physically go into a bank, log on from their home computer, or make a phone call. http://www.wisegeek.com/what-is-mobile-banking.htm MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF MOBILE BANKING IN TANZANIA :

GENESIS OF MOBILE BANKING IN TANZANIA Development of science and technology in world has brought many changes in human activities. In commercial activities it has evolved the system of e-commerce, which is defined as the commercial exchange system, which makes use of computers and communication network advances. Hence banks and financial institutions engage themselves with the business of banking as a commercial enterprise. See Law Reform Commission of Tanzania on Commerce and the Law in Tanzania, available at http://www.lrct-tz.org/Positionpaperone-COMMERCE.DOC . MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF MOBILE BANKING IN TANZANIA :

GENESIS OF MOBILE BANKING IN TANZANIA The growth of science and technology also facilitate the mobile companies such as Tigo , Zantel , Airtel and Vodacom to engage in electronic fund transfer as a simplified banking system through their system hence Tigo used Tigo pesa , Vodacom used M- Pesa , Zantel EzyPESA and Airtel used Airtel money. In Tanzania these mobile companies has simplified much the banking services to the people since it can served even in remoteness areas where there is no any bank. MAJURA Ibrahim W. LL.B.- UDOM

GENESIS OF MOBILE BANKING IN TANZANIA :

GENESIS OF MOBILE BANKING IN TANZANIA Mobile banking and its system include financial services delivered via mobile network has been legally recognized in Tanzania hence the mobile companies has full authorized in Tanzania where under section 6 (1) (b) ( i ) it show that the mobile companies are ruled by the Tanzania Communication Regulatory Authority (TCRA) which has authority to issue, renew or cancel license to any mobile company that wish to operate Its activities in Tanzania. But in awarding the license to any mobile company, the authority has to consult with the responsible Minister of the relevant sector as provided under section 6(3) of the Tanzania Communication Regulatory Authority Act, 2003. The Tanzania Communication Regulatory Authority Act, 2003. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA In Tanzania electronic banking has lacked a full legal and regulatory operation to deal with the security of the consumer, such that whenever the consumer has got loss or damage in the process of money transaction, there is no law that direct or deal with the security of the customer concerned; though in Tanzania Communication Regulatory Authority Act under section 37 established the council consumer consultative that has power to represent the interest of the consumer. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA Also under section 48(1) it giving the authority power under its council to punish the company or any person that cause other party to suffer loss or damage but this does not mean that the council is to protect the security of the consumer but the council is there to deal with the consumers’ interest in spite the presence of this provision, but the provision does not cover effectively the issue regarding to the consumer protection. Tanzania Communication Regulatory Authority Act, 2003. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA The growth of online banking presents other opportunities for perpetrators economic crime, fund can be embezzled using wire transfer or account take over “customer” can submit fraudulent online application for banks loans. Hackers are able to disrupt e-banking by engaging in denial at service attacks and by compromising online banking payment system identify theft, also affect online or Electronic Bank, thus raising concerns regarding the safety and soundness of Financial Institution. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA According to Meridian Research in 2000, estimated loss resulting from fraud in credit card industry emanated to $1.5 billion annually, of which $230 millions resulted from Electronic transactions. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA In order to regulate Electronic banking system in Tanzania, the law makers adopt the following principles from judicial decision, international laws and amendment of domestic legislation as explained hereunder. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA In Tanzania although no specific law dealing or monitoring Electronic banking, but Electronic Evidence in Tanzania is recognized by law, as can be traced back in the case of Trust Bank Tanzania Ltd v. Le-Marshal Enterprises and others , in which Judge Nsekela argued that,”due to current technological changes, computer printout should be regarded as original document for the purpose of evidence”. Also in the case of Tanzania Cotton Marketing Board v. Coge Got Cotton Company , the Court stated expressly that, while it is an undisputed fact that under Rule 4 of the Arbitration Rules, 1957 the award is to be forwarded to the registrar of High Court by “registered past” should be interpreted widely to take into account current development in communication technology that has taken. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA Effort has gone further with Minor Reform in Evidence Act 1967, through the written Laws (Miscellaneous Amendments) Act NO.15 in 2007. However the steps are at an infant stage compared with speed of development and problems generated by ICT. Written laws 2007 adjusted existing Evidence Act to incorporate Electronic revolution and its impact on the laws and procedures, this amendment made Electronic Evidence admissible. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA Despite of being not recognized by our domestic law, but it has reached a time where by e-banking are needed to be monitoring by its own specific law as the way different nations has made step forward in dealing with e-banking problem by enacting specific legislation, for example The Commonwealth Nations under the supervisory of Great Britain has decide to enact a specific legislation to deal with electronic communication and E-banking inclusively in October 2002, the commonwealth secretariat prepared the model law on computer and e-banking crime, within the commonwealth 53 members has incorporate the law into the domestic legislation with exception of Tanzania MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA Through this model law, the convention on cybercrime has become one of the legislative choices in substantive criminal law, covering the offence of illegal access. MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA Although we don’t have the specific legislation dealing with electronic banking but we are in the process of transaction to adopt aforesaid legislation as we see the effort made by the government of Tanzania, such as the process which commenced in 2006 with the submission of proposal for enactment of cyber law which include electronic banking by Tanzania law reform commission to the Ministry of Justices and Constitutional Affairs. It proposed separate bills on cybercrimes, regulation of electronic transactions and communication, privacy and data protection and the amendment of the Evidence Act 1967. Yet it does not came into practice due to the reason that the legislations are not yet enacted by the Parliament of Tanzania while the problems associated by electronic banking increase daily to daily due to development of science and technology. See Recommendation No. R. (95) 13) MAJURA Ibrahim W. LL.B.- UDOM

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

Development of mobile banking and electronic banking in general, have been facilitated and became the convenient transaction in the society of ours, even in the rural areas where there is no accessibility of bank branches. The difficulties and challenges which are facing this mode of transaction is the weakness or absence of the law governing this process. MAJURA Ibrahim W. LL.B.- UDOM LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA

LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA :

Due to weakness or absence of these laws led to the rise of the cyber criminals who intervene in this mode of transaction and create fear among the people to use this system and cause the development of electronic banking to develop gradually while in other countries, the system is growing rapidly to cope with the changes which are taking place in technological advancement in this globalised world as one village. Therefore the government should make effort to adapt or enact the law soon as possible which will deal with electronic banking and regulating the companies and other financial institutions and punish all the cyber criminals. MAJURA Ibrahim W. LL.B.- UDOM LAW RELATING TO THE ELECTRONIC BANKING IN TANZANIA

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