(a) What is a Capital Market?
(b) State eight reasons why a bank may dishonour a cheque.
Explanation
a) Capital market deals essentially with lending and borrowing long term loans. Its members include the stock exchange, mortgage banks, insurance firms, bank of industry, Agric bank, Development banks etc.
(b) A bank may dishonour a cheque if the following happens:
(i) When payment is stopped by the owner before encashment.
(ii) When a postdated cheque is presented earlier than the date written on it.
(iii) When the cheque is more than six months from the date written on It.
(IV) When the bank has notice of the death of the drawer before the cheque is presented.
(v) When the court declares the drawer bankrupt before the cheque is presented.
(vi) When the signature on the cheque differs from the one on the signature card at the bank / irregular signature.
(vii) When there are not enough funds in the drawer’s account to cover the sum stated on the cheque.
(viii) When there is an alteration on the cheque and the alteration is not initialled by the drawer.
(ix) When the cheque is defaced or torn.
(x) When the amount stated in words and figures disagree.
(xi)When the account of the drawer has been closed before the cheque is presented for payment.
(xii) When the cheque is not dated.
(xiii) When there is a notice that the customer is insane.