Power of Attorney — Banking

What this document contains

6 clauses every power of attorney — banking carries.

1. 01

   Who grants the authority, and to whom

   The head of the deed: the place and date, the grantor, and the person being authorised. The attorney is named here rather than being taken from the party picker — a power of attorney is executed by the grantor alone, and a person who signs nothing is not a party to it.

2. 02

   The attorney

   Who is being authorised, identified well enough that a bank, a society or a government office can be satisfied it is them. Their specimen signature is recorded here because that is what counterparties ask for — it is not a signature Dharaa collects, and the attorney does not execute this deed.

3. 03

   The accounts

   Which accounts the authority relates to, identified by bank, branch and number. Named rather than described generally: a bank will act only on an instrument that identifies the account it is being asked to act on, and an authority over "my accounts" is one no branch will accept.

4. 04

   What the attorney may do

   The powers granted, chosen by the grantor. Each is a separate thing the attorney may do in the grantor's name, and only what is selected is granted — a power of attorney is read strictly against the person relying on it.

5. 05

   What the attorney may not do

   The powers withheld — closing the account, borrowing against it, changing the nomination, and altering who else may operate it. Mandatory and fixed: those four are what turn access into control, and a banking authority that does not withhold them is one an attorney can use to empty and close the account.

6. 06

   How long it lasts, and how it ends

   When the authority begins, when it ends, and that the grantor may revoke it. Every power of attorney needs this: one that says nothing about its own end is one nobody can be sure has ended.

What the law requires

The bank will probably want its own form as well

Banks operate accounts under their own mandate procedures. Most will require their prescribed form, many will want it executed at the branch or before their own official, and some will decline a general instrument drafted elsewhere however well it is drawn. A properly stamped and notarised power of attorney is what binds anyone other than the branch, but it does not compel the branch to dispense with its own process.

Reserve Bank of India directions on deposit accounts and know-your-customer requirements; the bank's own mandate procedure

Only what is granted is granted

A power of attorney is construed strictly. An authority to do one thing does not carry an implied authority to do another, and a counterparty relying on an attorney's act takes the risk that the act was outside the authority. Anything the attorney will need has to be on the list.

Indian Contract Act 1872, ss. 186–188 (extent of an agent's authority)

When registration is required

Registration follows the transaction rather than the document. A power of attorney authorising an act that is itself compulsorily registrable must be registered; one that authorises no such act generally need not be. Notarisation is not a substitute for registration where registration is required.

Registration Act 1908, ss. 17, 32 and 33

A deed executed outside India has a clock on it

An instrument executed outside India must be stamped within three months of the date on which it is first received in India. An instrument not duly stamped is inadmissible in evidence and a sub-registrar will not act on it. Where the duty payable is not obvious the instrument may be adjudicated by the Collector.

Indian Stamp Act 1899, ss. 18, 33 and 35

Authentication abroad

A deed executed in a country party to the Hague Apostille Convention carries an apostille, which Indian authorities accept without further legalisation. Where the country is not a party, the deed is executed before an Indian Embassy or Consulate and attested there. The two are equivalent in effect for documents originating in Convention countries.

Hague Convention of 1961 abolishing the requirement of legalisation

How the authority ends

An agency may be revoked by the principal, and ends on the principal's death or insanity, on the agency being renounced by the agent, or on the business of the agency being completed. Revocation is effective against a third party only when they come to know of it, which is why a revocation is served rather than merely signed.

Indian Contract Act 1872, ss. 201–208

An authority to operate is not an authority to dispose

The power to operate an account does not carry an implied power to close it, to borrow against it, to create a charge over the balance, or to change the nomination. Those are separate acts, and an attorney who does them without express authority acts outside the agency.

Indian Contract Act 1872, ss. 186–188

A cheque signed by an attorney puts the taker on notice

Where an instrument is signed by an agent expressed to be on behalf of the principal, the person taking it has notice that the agent's authority is limited and takes the risk that the act was outside it. That is why a bank asks to see the instrument and keeps a copy.

Negotiable Instruments Act 1881, ss. 27 and 28

NRE and NRO accounts have their own conditions

Non-resident accounts are subject to conditions on what may be credited to them and what may be repatriated. An attorney operating such an account is bound by those conditions whatever the deed says, and a permitted transaction on one kind of account may not be permitted on the other.

Foreign Exchange Management Act 1999 and the regulations on deposit accounts of non-residents