A major function of a bank is to make collections of the proceeds of checks, drafts and other financial instruments lodged by customers, on their behalf. The bank acts as a collecting agent of the customer. Collection takes place, when the drawee bank ordered to make payment by the check or similar instrument, takes off funds from the account of the drawer (its customer who has written the check) to the collecting bank.
A collecting bank assists its customer in obtaining payment of instruments in accordance with payment terms.
A crossed check is an instrument which is payable only through a collecting banker and not directly at the counter of the bank. Crossing protects the holder of the check since the collecting banker credits the proceeds of the instrument to the account of the payee of the check.
When a banker, without negligence in good faith, receives payment of any crossed check, draft or bill for any customer; though the client has no title or defective title thereto, the banker shall not be liable or responsible to the true owner for collection of the proceeds of such check, draft or bill.
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