Banking · Negotiable Instruments Act

Identify the statements that correctly describe the collecting banker's liability, statutory protection, and standards under the Negotiable Instruments Act in India: Statement 1: A collecting banker is deemed negligent if they collect a cheque for an agent or fiduciary and credit the funds to the personal account of that fiduciary without making proper inquiries. Statement 2: The protection of Section 131 extends to the collection of 'Banker's Cheques' and 'Pay Orders' as per the 2002 amendment to the Act. Statement 3: If a material alteration is not visible to the naked eye but detectable under scanning devices standard in the industry, the collecting banker may be liable for negligence if they do not use such devices. Statement 4: If a customer deposits a cheque and immediately takes a loan against it, the bank becomes a 'Holder for Value' and can seamlessly use Section 131 to defend against conversion claims. Statement 5: A collecting banker must follow the customer's mandate unless it violates the law of the land or RBI guidelines. Statement 6: Statutory protection for collecting banks under Section 131 is conditional, not absolute. Statement 7: Collecting banks are encouraged to use AI-driven fraud detection tools to spot high-risk patterns of third-party collection.