Who Is Correct And Why?

[Mysticjane]

Mercy, who has a savings deposit with Deloy Bank in the sum of P 1,000,000.00 incurs a loan obligation with the state Bank in the sum of P500,000.00 which has become due. When Mercy tries to withdraw his deposit. Deloy Bank allows only P500,000.00 to be withdrawn, less service charges, claiming that compensation has extinguished its obligation under the savings account to the concurrent amount of Mercy's debt. Mercy contends that compensation is improper when one of the debts, as here, arises from a contract of deposit. Who is correct? Explain.