Banker's lien over bills meaning

In practice, this describes a bank’s right to retain a customer’s bill of exchange (or its collected proceeds) that the customer has lodged for collection, as security for any overdraft or other indebtedness owed to the bank. It is a possessory, general lien arising at common law in the ordinary course of banking, not from statute; the Bills of Exchange Act 1882 defines bills but does not create the lien. The lien attaches unless excluded by express agreement or by circumstances showing a special purpose inconsistent with a lien (for example, items held solely for safe custody, or where the bank knows the customer holds the bill as agent for another). Where applicable, the bank may retain the bill or, once paid, apply or set off the proceeds in reduction of the customer’s general balance, subject to prior equities and defects in title. Usage is broadly consistent in England and Wales, Scotland, Northern Ireland and Ireland; Scots law recognises an analogous banker’s right of lien/retention operating as security for the general balance. The concept is of practical significance in collections, set-off and insolvency, where banks rely on a banker’s lien over bills of exchange and their proceeds to secure repayment.