Banks play a vital role in any Financial System. An efficient banking system helps the nations economic development. Various categories of stakeholders of the society use the banks for their different requirements. Banks are financial intermediaries between the depositors and the borrowers. Apart from accepting deposits and lending money, banks in the present day offers a number of value added services to their clients. The entire banking system of any country is regulated, supervised and facilitated by the respective countrys Central Bank.

As financial intermediaries between the depositors and the borrowers, banks are responsible to pay the value of cheques as per the contract, when payment is due from him to the customers. Similarly, they have the duty of collecting cheques, drafts and letters of credit on behalf of their customers. Banks acting as paying bankers and collecting bankers are liable to the customers in case of any negligence from their part and will be responsible to pay for the damages and losses caused to their customers.

You are required to answer the multiple choice questions based on the below listed transactions performed by Al Baraka Chartered Bank also known as ABC Bank.

1. On January 5th 2021, Mr. Z presented a cheque of RO 100,000 that was drawn by Al Yaseer LLC. The cashier of the bank makes the payment against cheque to Mr. Z. After few hours the bank manager received the call from Al Yaseer LLC complaining that RO 100,000 has been reduced from companys account while the company has not issued any cheque of this value to any person. On investigation by the bank manager it was found that the signature on the cheque was forged.

2. On 20th December 2020, Mr. Khalfan drew a cheque to his daughter Ms. Bushra of RO 10,000. On the same day Ms. Bushra handed over the cheque to her husband Mr.Barak and requested him to deposit it in her individual account. Ms. Bushra has two accounts in ABC Bank. The first account is her own individual account and the second one is a Joint account along with her husband Mr.Barak. On 2nd January 2021, Mr. Barak deposited the cheque in their joint account by adding his name after Ms. Bushra in the cheque. The cheque got cleared and money was credited to their joint account on 5th January2021. Mr. Barak, transferred the money to his individual account on 6th January 2021. On finding that the money was not credited to her individual account, Ms. Bushra enquired with the banker regarding the clearance of the cheque. After investigation by the bank manager, it was found that Mr. Barak had commited a fraud both to the bank and his wife Ms.Bushra.

3. Ms. Khadija a customer of ABC Bank issued a cheque of RO 5,000 to Ms. Maryam to settle her debt. Later, she realized that she has stated an amount on cheque which was more than the debt. So she called the manager and requested him not to honor the cheque.

4. Mr. Ashraf presented a bearer cheque dated 2nd February 2021 on 2nd March 2021 at counter of the bank. The cashier of the bank refused to make the payment and informed him that the drawers account has been seized by the court.

5. An open bearer cheque was presented by Ms. Fatima which was dated 25th October 2021. The cashier of ABC bank dishonor Fatimas cheque

6. A cheque which did not contain the signature of the drawer was presented by Mr. Ali to the bank on 5th May 2021 for collecting the amount. The Cashier dishonored the cheque.

7. Ms. Raiya received a cheque from Ms. Suad a customer who had purchased some goods on credit. The cheque had the date, payees name, the drawers signature and the amount in figures. Ms. Suad had forgotten to write the amount in words. Ms. Raiya presented the cheque to ABC Bank for encashing the same, as soon as she received the cheque from Ms. Raiya without noticing that the amount in words was not mentioned. ABC Bank dishonored the cheque.

8. Mr. Omar presented the cheque to ABC Bank for receiving the cash. The cheque had the signature of the drawer in the right place. But the date was also mentioned below the signature. The ABC bank dishonor the cheque.

9. The cashier of ABC bank dishonored the cheque presented by Mr. Abdul Aziz. The cheque was complete in all respect but was torn into 4 pieces.

10. Ms. Sara received a crossed cheque from her client for RO 500. In between the crossing the name of Bank Nizwa was mentioned. Ms. Sara has two savings accounts, one in Bank Muscat and another in Bank Nizwa. She also has a current account for her business needs in Bank Dhofar.

Q

The cheque transactions involves three parties initially to complete the transaction. Identify the statement describing the role of drawer: -

a.

The person or company making the endorsement

b.

The person or company who draws the cheque and orders the bank to pay the sum.

c.

The person or company that is directed by customer to pay a certain sum written on the cheque.

d.

The person or company to whom the amount is to be paid

Which condition of payment in due course is not satisfied by the banker, when it makes a mistake of not going through the cheque carefully : -

a.

Without negligence

b.

In good faith

c.

Under circumstances

d.

To a person in possession

Ms. Fatimas cheque was dishonored by ABC Bank because the cheque was a : -

a.

Inchoate cheque

b.

Post-dated cheque

c.

Ante-dated cheque

d.

Stale cheque

The fraud commited by Mr. Barak to alter the liability of bank is known as: -

a.

Overwriting

b.

Unintentional alteration

c.

Simple alteration

d.

Material alteration