BANKER-CUSTOMER RELATIONSHIP

BANKER-CUSTOMER RELATIONSHIP & RIGHTSPresented By:LAKSHMI.S.RBANKERDEFINITION

A banker is a dealer in capital, or more properly, a dealer in money. He is an intermediate party between the borrower and the lender. He borrows from one party and lends to another.

J.W.Gilbert Principles & Practice of BankingCUSTOMERDEFINITIONCustomer is a person who has some sort of account, either deposit or current account or some similar relation

Any person or corporate body is a customer when it is opening a current or deposit account, or when negotiates on advance on his account, or a loan account.QUALIFICATIONS OF A CUSTOMERHe should not be a minor & must have attained the age of majority, because a minor is not competent to contract. However exception has been allowed.

He should be a person of sound mind. If not so he is incompetent to contract.

He shall not have been debarred from entering into a contract under any law, like un discharged bankrupt, proclaimed offender and alien enemy.RIGHTS OF A CUSTOMERTo draw cheques against his credit balance, or an overdraft if there are accommodations made with the banker.

To receive a pass book or a statement containing a copy of his account with the banker.

To sue the bank for the cost, loss & damages when his cheque is wrongfully dishonored.

RIGHTS OF A CUSTOMERTo sue when the banker has not maintained the secrecy of hid account

To claim for & receive the profit/return on hid deposits as promised by the bank GENERAL RELATIONSHIPThe relationship between banker & customer is in fact that of a debtor & creditor.

When the banker receives money from customers he does not hold it in a fiduciary capacity, but it was generally believed that by accepting deposits from the depositor the banker assumed the responsibilities of his agent.CREDITOR-DEBTORRelationship between the customer having a deposit account and the banker.Depositor is the lender and the banker is the borrower.Depositor is the creditor and the banker is the debtor.The money handed over to the bank is a debt.

PRINCIPAL-AGENT:

The special relationship between the customer and the banker is that of principal and agent.

The customer (principal) deposits checks, drafts, dividends for collection with the bank.

He also gives written instructions to the bank to purchase securities, pay insurance premium, installments of loans etc on his behalf. When the bank performs such agency services, he becomes an agent of his customer.

OTHER RELATIONSHIPS1- BAILOR & BAILEEA bailment is delivery of goods by one person to another for some purpose, upon a contract.

When the banker provides safe custody facilities to his customers for their valuables, the relationship becomes that of Bailor & Bailee.OTHER RELATIONSHIPS2- PRINCIPAL & AGENTWhen a banker performs agency services he becomes agent of his customer. These services include collection of cheques, other negotiable instruments, payment of premium, subscription & fee to clubs & associations etc.SPECIAL FEATURES OF RELATIONSHIPa.Obligation to honour cheques

It is a statutory obligation to honour cheques drawn on him by his customer as long as his balance is sufficient, provided that the cheque is not stale or post dated and appears to be valid on the face of it and that there is no prohibiting order of any court against the account of the customer.SPECIAL FEATURES OF RELATIONSHIPb.Right of Lien

Lien is the right to retain the property belonging to another until the debt due from the later has been paid. A bankers general lien is of peculiar type, for it extends to all the securities placed with him by his customer.SPECIAL FEATURES OF RELATIONSHIPc.Right to charge for their services

Bankers have the right to charge for the services they provide to their customers.FIDUCIARY RELATIONSHIP

Every relation of trust and confidence is a fiduciary relation. A banker who receives a customers money is under a duty not to part with it which is inconsistent with the customers fiduciary character and duty. It was held that banks old money for a specific purpose of sending it somebody the money is impressed with trust.

DUTIES OF A CUSTOMERCustomer must present the cheques for payment & collection within the business hours of his banker.

The customer should see that the cheque & other instruments are presented for payment within a reasonable time from the date of their issue.

He should keep cheque book at a safe place. Failing to do so he is to be held responsible for leaving his cheques unprotected.DUTIES OF A CUSTOMERHe should draw the cheques very carefully & in such a way that there is no room left for any fraudulent alterations & additions.THE BANKERS DUTY OF SECRECYThe relationship between banker & his customer is obviously confidential, therefore, a banker must maintain secrecy about the state of his customers account.THE BANKERS DUTY OF SECRECYThe obligation of secrecy, may not be considered essential on the following occasions:

Under Compulsion of Law Duty to Public to DiscloseIn the Interest of the BankExpress or Implied Consent of CustomerCommon Courtesy to other BankersBanking companyAs per Section 5(c) of Banking Regulation Act, 1949 a "Banking Company" means any company which transacts the business of banking in India.

Explanation: Any company which is engaged in the manufacture of goods or carries on any trade and which accepts the deposits of money from public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause.TERMINATION OF RELATIONSHIPNotice by a customeri.Due to change in addressii.A customer may not be satisfied with the services of his bank.iii.Account may be closed due to death of the customer or having zero balance in the account.TERMINATION OF RELATIONSHIPNotice by Banker

Insufficient funds.Non maintenance of minimum balance.Asking banking facilities after banking hours.

TERMINATION OF RELATIONSHIPOTHER REASONS:

Obstinacy of the customerDeath of the customerCustomers insanityCustomers insolvencyOrder of courtAssignment of accountUnsatisfactory operation

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