A collecting banker is one who collects the cheques and other negotiable instruments deposited by his customers and places the amount to the credit of the customers account. A collecting banker acts as an intermediary between the paying banker and his customer in collecting the proceeds of a cheque from the paying banker and crediting the same to the customer’s account. 

The collecting banker may collect the cheques of his customers either as:

(i) A holder for value or,

(ii) An agent of the customer.

The legal position of the collecting banker depends upon the capacity in which he collects the cheques.

Collecting banker as a holder for value: When to oblige a customer a banker pay the amount of the cheque before the collection of the cheque drawn upon another banker, the collecting banker is deemed to be its holder for value. 

The collecting banker shall be deemed to be the holder for value:

(a) If he pays the amount of cheque in cash or in the account of the customer before it is actually realised,

(b) If he lends money on the strength of the cheque,

(c) If he accepts the cheque drawn on other bank to reduce the amount of existing debt or

(d) If he pays cash over the counter at the time the cheque is paid in for collection.

As a holder for value he bears the liability and enjoys all the rights of a holder in due course. If the cheque is dishonoured, the collecting banker as a holder in due course can sue all the prior parties after giving a notice of dishonour.