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Set-off means- that the bank can adjust the credit balance in a customer's account against a debit balance in another account maintained by the same customer.
Right of set off is a type of financial arrangement between two parties that owe each other money in two separate accounts or debts. With this strategy, the amount owed by one of the parties is offset by subtracting that figure from the amount of the debt owed by the other party. The end result is that both parties are able to partially or completely settle an outstanding debt without actually making use of the proceeds from any income or revenue stream that either party generates.
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Right of set off
The losses can be set off againt the fuure generated profits, the debtos balances can be set off againts the creditors balance of same group or comapny, for example, A suppliers of chicken in a Hospital, when get the medical treatment, he can ask the hospital to set off against the payment of chicken supply.
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It is not unusual for a customer to have a current account, a savings account and a credit card account - all with the same bank or building society. The same customer might also have a loan, an ISA and a mortgage with that firm. And some of those accounts might be held jointly with someone else, usually a spouse or business partner.
In this article we look at what the firm can (or should) do where a customer does not have enough money in a particular account to make payments due from that account, but does have sufficient funds in one of their other accounts with the firm.
For example, when an overdraft facility on a current account runs out and the customer fails to pay the amount owed, can the firm take money from the customer's savings account to reduce or clear the debt- Or, if a customer fails to make credit card or mortgage payments, should the firm use available funds from that customer's current or savings account to make the missing payments, thereby helping the customer to avoid extra interest or charges-
The basic position is that a firm has a right - but not a duty - to look at a customer's overall position and to "combine" the accounts held by that customer. This is sometimes called a right of "set off" or a right to "combine" accounts. A firm has this as a general right, whether or not it mentions the right in the account terms. So, in the examples above, the firm can transfer money from an account that is in credit in order to make payments due on another account. But it does not have to do this.
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