In Section 5, the Banking Regulation Act, 1949 in clause (b) defines banking as accepting for investment or lending of cash deposits from the public, which can be repaid on demand or by other means and withdrawable via draft, cheque, an order, or any other method.


A banker is anyone who functions as a banker and any savings bank that is a post office.


The case that provides answers to the question is R. Pillai v S. Ayyar., A District Board was able to access its funds through the government's treasury and was able to withdraw funds by issuing orders that were in the form of cheques. A written and unconditional order had been received, the issue to decide if it was a check. R A J declared that "Treasury is not a bank" and, therefore, the request was not a cheque in the sense of Section 6 but rather a bill of exchange as per Section 5. Negotiable Instruments Act. This is because any person who takes the money of another and makes payment following his instructions can't be considered an individual banker unless the person creates a business to earn profit. A glimpse of the concept that defines "banker" is seen in the following declaration of R A J. from the Madras High Court in Sajjan Bank (P) Ltd v RBI. In 1949, the Banking Companies Act was passed to codify and amend the law applicable to banks.

The purpose of the law was to safeguard the interests of the depositor and shareholders and the nation's economic interest, particularly. In Section 5(b) in the Act, the term “banking" is defined as accepting, as investing or lending of deposits of money made by the public, payable upon demand or other means and withdrawable via check, draft orders or other means. The core of a bank's business is receiving cash on the current account to deposit with the general public that is repaid on request and withdrawable via draft, cheque or any other means. A typical money lender who doesn't accept money in a manner that allows a depositor to make cheques on him will not be a banker, or a banking institution appropriately referred to as. In a separate case, in the Madras High Court, a person was operating the business of lengthened accepting money and was termed “banker" or "banker". An amount of money was lent to him to use in his branch in the foreign country and the moneylenders from the branch located in India on behalf by the person who made deposit. The issue was whether the baker was a person as a legal entity in which case it is essential for the lender submit a demand at the branch in which he held an account. Otherwise, there is no obligation to pay be incurred. There, it states that the core of the relationship between a customer and banker is the giving the client to draw funds from the bank via the use of cheques. This is the main aspect of whose bank business. Without it, the company isn't banking as English law is understood and understood. "Banker" is the term used in English law "banker" was defined by Dr. H.L. Hart according to his L B, which reads", A banker, i.e., who, in the conduct of business honours cheques made on his behalf by people who receive cash from current bank accounts. In section 5(b) of the Banking Regulation Act defines the banking business according to 5(b) 'banking' refers to the acceptance in the interest of investing or lending of money deposits from the public, which can be repaid demand or other means and withdrawable through draft, cheque, an order, or any other method. Sir J P in his book, T L B observed that the banking activities include:

  1. Removing deposits;
  2. The taking from the current account;
  3. Pay and issue cheques, and
  4. Accept cheques from his clients.

The same feature was emphasized in the speech of Lord D in his address on United Dominions Trust Ltd v Kirkwood. Lord D outlined the background of the creation of the notion of banking. He used a definition from an 1855 dictionary in which “a "bank" is a place where money is deposited to be accessed periodically and “a "banker" as one that deals in cash.

He also cited instances where a firm was deemed to be conducting the banking business, even though it didn't issue cheques or maintain any current accounts, but issued deposit receipts and allowed the withdrawal upon presentation of passbooks. The advancement of technology has taken the idea of banking to a level that is far more than the instances fifty years back. Today, a bank requires that its customer deposit cash and cheques in his account and then withdraw funds by draft, cheque or order. His Lordship also stated: There are thus, three traits that are commonly encountered in today's bankers:

  1. They take money from, and also collect cheques from their clients and then place the cheques on their credit accounts;
  2. They accept checks or orders made on them.
  3. They maintain current accounts or some other thing like that in their books.

When we apply these principles to the circumstances in the matter before the Lordship of His Majesty's Court, the business that was in dispute was considered to be an institution of banking, even though it was founded as a hire-purchase financier and later became a well-known banker due to its ability to help facilitate hiring purchase transactions, it offered other services similar to those offered by bankers like accepting payments made by crossed cheques and depositing them into their customer's accounts.

In the Bombay case, a person agreed to pay a person to settle his trade obligations. The borrower handed over chits to his creditors, and they were sent to the lender, asking the borrower to pay. The borrower paid and then filed a lawsuit against the borrower over the chits. The posed issue was whether the chits that were not stamped could be presented as evidence. It was decided that the chits are not cheques nor bills of exchange. The lender was not a banker, and neither did the chits have a demand to pay. The terms are contained in Section 5. Banking Regulation Act, 1949, which have the aim to shed some illumination on the notion of banking, is described as follows:

  1. "Banking" means the acceptance to invest or lending of cash deposits from the public, which can be repaid on demand or by other means and draw able through a check, draft, or another method;
  2. "Banking Company" is any entity that conducts the banking business in India.


Any business involved in the production of goods or conducts any business and takes deposits of money from the public only to finance its business as a trader or manufacturer will not be considered to be carrying out the banking business in the sense of this clause. A deposit-taking or loan-making company (the Reserve Bank has characterized such firms as non-banking financial businesses) is not a bank and a banking institution.