The Secretary's Correspondence with the Company's Bankers

Why a Company Needs a Continuing Banking Relationship

A company cannot lawfully keep large sums of cash lying around its office — every rupee it receives from customers, and every rupee it pays to suppliers, employees, taxes, or lenders, moves through its bank account. Beyond this day-to-day cash management, a company's bank is also very often its most important source of short-term borrowed funds (overdraft and cash credit, covered later in this chapter) when the company's own working capital falls short. Because this relationship is continuous and touches the company's money directly, every instruction the company gives its bank must be given formally, in writing, and only by someone the bank recognises as authorised to give it.

The Secretary as the Bank's Point of Contact

It is almost always the Company Secretary who carries on this day-to-day written correspondence with the company's bankers — drafting the letter to open a new account, writing to request a loan or an overdraft, instructing the bank to stop payment of a cheque, asking for a statement of account, informing the bank of a change in who may operate the account, or writing to close an account that is no longer needed. In every one of these situations, the Secretary does not act on personal authority — the Secretary writes and signs on behalf of the Board, under the specific authority a Board Resolution has given, exactly the kind of Board Resolution the 'Board Meetings' chapters of this syllabus already showed you how to draft.

Why a Board Resolution Comes First, Every Time

Section 179 of the Companies Act, 2013 reserves certain powers to be exercised only by a resolution passed at a duly convened meeting of the Board — and borrowing money (an overdraft or a cash credit limit is a form of borrowing) and investing the company's funds are squarely among them. A bank, quite reasonably, will not open an account, sanction a credit facility, or accept a change of signatory for a company purely on a letter's say-so — it insists on seeing a certified true copy of the Board Resolution that actually authorises the action, together with the specimen signatures of the persons the resolution names as authorised to operate the account. This is why nearly every specimen letter in this chapter either encloses a certified Board Resolution or explicitly refers to the meeting at which the Board passed it.

Essentials of a Good Letter to a Bank

A well-drafted banking letter, whatever its specific purpose, should always contain:

1. The company's own letterhead — name, registered office address, and CIN (Corporate Identity Number).
2. The bank's name, branch, and address, addressed to 'The Manager' or 'The Branch Manager'.
3. The company's account number, quoted clearly, once an account already exists.
4. A short, specific subject line stating exactly what the letter is about.
5. A courteous, formal salutation ('Dear Sir/Madam,') and complimentary close ('Yours faithfully,').
6. The precise instruction or request — stated once, clearly, and never left to the bank to guess at.
7. A list of enclosures, where documents (a Board Resolution, KYC papers, a cheque, specimen signatures) accompany the letter. …