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BANKER - CUSTOMER
RELATIONSHIP
Banker Customer Relationship
What is a Banking?
“ Banking means the accepting, for the purpose of
lending or investment, of deposits of money
from public, repayable on demand or otherwise,
and withdrawable by cheque, draft, order or
otherwise”
 Any company doing banking business on these
lines will be termed as a bank and individuals
involved are the bankers.
Banker Customer Relationship
Different activities undertaken by a bank.
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Borrowing and lending of money.
Collecting Negotiable instruments on behalf of
the customer.
Dealing in foreign exchange.
Granting Letter of Credit to customers.
Providing Safe custody facility / lockers.
Banker Customer Relationship
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Acting as an agent on behalf of the customer.
Underwriting & dealing in stocks, shares on
behalf of the customer.
Issuance of Guarantees.
Dealing with property that may come to it as
security in satisfaction of its outstanding claims.
Offering different value added services like
ATM, Online banking and internet banking.
Issuance of currency notes.
Banker Customer Relationship
Qualification of a Customer.
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He should not be a minor.
He should be a person of a sound mind (he
understands the contract at the time of making
it).
He shall not have been debarred from entering
into any contract under any law.
He deposits money and bank accepts it.
Banker Customer Relationship
Rights & Duties of the Customer.
RIGHTS.
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To draw cheque against his credit balance.
To get passbook, cheque book, and periodic account’s
statement.
To make bank liable to correct any over crediting or
over debiting.
To sue the bank for the cost, loss, and damages when
his cheque is wrongfully dishonored.
To sue the bank if the secrecy of his account was not
maintained.
Banker Customer Relationship
DUTIES.
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To present the cheque for payment or collection with in
the banking hours.
To insure that cheques should not be Stale or Post
dated.
To keep his cheque book / ATM in safe custody.
He should draw the cheque in a manner that no
alteration can be done for fraud.
Banker Customer Relationship
Different types of Banker Customer
Relationships.
As Creditor and Debtor.
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When customer deposit money, he becomes creditor
and bank as debtor by accepting and then further
utilizing it.
As Bailor and Bailee.
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When a person gives goods to some one for some
purpose.
When banks provide safe custody facility to customers
to keep their valuable belongings.
Customer is bailor and bank is bailee
Banker Customer Relationship
As Principal and Agent.
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When a banker performs Agency service he
becomes Agent of his customer.
This may include collection of cheques and
other instruments or payments on behalf of the
customer with his standing instructions.
Banker Customer Relationship
As Pawner/Pawnee, Mortgagor and
Mortgagee.
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When a customer pledges goods and documents
with the bank as security for an advance, he
becomes the Pawner and the bank becomes
Pawnee. Similarly, when advance to the customer
is made against security of immovable property,
the relationship becomes that of Mortgagor and
Mortgage.
Banker Customer Relationship
Special feature of Relationship.
The following are special features of this
relationship.
Obligation to honor cheque.
It is obligation on the bank to honor the cheques
drawn on him by his customer as long as his
balance is sufficient, provided the cheque is not
Stale or Postdated and that there is no
prohibiting order of any court against the
account of the customer.
Banker Customer Relationship
Right to Lien.
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“Lien means right to retain the property belonging to
another until the debt due from the latter has been
paid”
Bank has a right of Lien on any kind of securities
deposited by the customer.
Following conditions do apply for exercising right of
Lien:
The property of the customer must come into the
hands of the banker.
There should not be any entrustment for special
purpose.
Banker Customer Relationship
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Banker should obtain possession lawfully.
There should be no agreement inconsistent
with the right of Lien.
Banker Customer Relationship
Right of Set – Off.
“ Set-off means adjusting debit balance against credit
balance in other account or accounts of the same
borrower”
 It is a legal right of the banker.
 Normally, banks get written authority from the
customer in advance for this so that there is no need of
notice.
 Credit balance of one account of the customer can be
used to adjust the debit balance in another branch.
Banker Customer Relationship
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For partnership, the personal account of the
partner cannot be used to set-off the firm
account but for sole proprietor it can be used.
The balance of the single account cannot be setoff for any joint account un till otherwise agreed
by the joint account holders.
Individual account can be used for set-off for
Trust account but Trust account cannot be used.
Banker Customer Relationship
The Banker’s duty of Secrecy.
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The banker customer relation is a confidential
agreement/contract so it is the duty of the
banker not to disclose any kind of information
to third party who so ever he/she may be.
It include both personal information and the
information of the status of the account.
Banker Customer Relationship
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Banks can disclose information in the
following cases.
Under Compulsion of Law.
Duty to public to disclose.
In the Interest of the bank.
Express or Implied Consent of the customer.
Common courtesy to the other banks.
Banker Customer Relationship
Termination of Relationship.
Since banker-customer relationship is a
contractual one, it may be terminated by any one
of the two by serving a notice to other.
Notice by the customer.
 The following are reasons when customer serves
notices to the bank for termination of the
contract.
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Banker Customer Relationship
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Due to the change in residence.
Unsatisfactory services by the bank.
Death of the customer.
Shifting of account to the other branch/bank.
Changing of account nature.
To close accounts for special purposes like
salary accounts.
Banker Customer Relationship
Notice by the Banker.
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Banks normally serve notice to the customer
before closing their accounts for any reason.
This notice can be served due to many valid
reason like:
Insufficient balance in the account.
Presenting cheques after business hours.
Having very less balance for a long time.