Law on Obligation and Contracts.

Olivia maintains a savings account with Chinese International Bank and had a deposit therein in the amount of P10, 000,000.00. She then acquired a cash loan from the bank in the amount of P2,000,000.00, in order to buy a new car, which is payable in 12 monthly installments. Later, Olivia issued post-dated checks in the amount of P200,000.00 each in favor of the bank, to cover the monthly payments. However, on the 3rd, 4th, and 5th months, the checks post-dated bounced. Thereafter, the bank claimed that the entire obligation is due, and after having given a notice to him, the bank then proceeded to deduct the amount of P2, 000,000 from Olivia's deposit claiming that this is a form of compensation allowed by law. Is the bank correct? Explain.