This lesson examines the different categories of bank customers, the procedures for opening accounts, and the legal requirements for customer identification and due diligence.

4.1 Classification of Banking Customers
Banks serve various types of customers, each with distinct legal characteristics and requirements. The Dempo College syllabus identifies the following customer types :

• Individuals (Sole Proprietors): Natural persons operating under their own name or a trading name.

• Partnership Firms: Businesses owned by two or more persons, governed by partnership law.

• Joint Stock Companies: Incorporated entities with separate legal personality.

• Clubs and Associations: Non-profit organisations.

• Trusts: Entities holding property for the benefit of others.

• Local Authorities and Cooperative Societies: Public bodies and cooperative organisations.

4.2 Account Opening Procedures and Precautions
Opening a bank account involves a systematic process: the customer submits an application form with required documents; the bank verifies identity and address; the bank completes customer due diligence (CDD) and risk assessment; the bank opens the account and provides account details; and the bank issues passbook/cheque book and activates the account . The banking law syllabus identifies the need for “procedure and precautions to be taken” when opening accounts for different customer categories . Special precautions are required for non-resident accounts, minor accounts, and accounts of illiterate or visually impaired persons.

4.3 Know Your Customer (KYC) Norms and AML Framework
KYC norms are a critical regulatory requirement. The Dempo College syllabus includes “Opening of accounts – Procedures and Precautions to be taken, KYC norms:- PMLA Act, nomination facility” . Key elements of KYC include: Customer Identification Program (CIP) collecting and verifying customer identity, Customer Due Diligence (CDD) assessing risk profile, and Enhanced Due Diligence (EDD) for high-risk customers. The Prevention of Money Laundering Act (PMLA) provides the statutory framework for anti-money laundering measures, including transaction monitoring and reporting of suspicious transactions .

4.4 Account Closing: Procedures and Precautions
Closing an account requires proper procedures to avoid legal liability. The bank must ensure all dues are cleared, return any unused cheques, close the account in the system, and retain records as per regulatory requirements. Precautions include ensuring no pending transactions and obtaining a written request from the customer .