BANKER AND CUSTOMER

CHAPTER-1

ORIGIN OF BANK

The word 'Bank' is derived from the Italian

word banco. The Lombard Jews were the

first to practice the money exchange

business. The first money exchange counter has been established in Italy A.D. 808.

Evolution of Banking in India

Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units. These three banks were amalgamated in 1920 and Imperial Bank of India was established.

Phase II
Government took major steps in Indian Banking

Sector Reform after independence. In 1955, it

nationalised Imperial Bank of India with

extensive banking facilities on a large scale

specially in rural and semi-urban areas. It formed

State Bank of India to act as the principal agent

of RBI and to handle banking transactions of the

Union and State Governments.

Phase III
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M. Narasimha, a committee was set up by his name which worked for the liberalisation of banking practices.

Who is a Banker?

Banker is a person who carries on the business

of banking, which is specified as conducting

accounts for his customers, paying cheques drawn on him, and collecting cheques for his

customers.

Who is a Customer?

Customer (in banking) is a person who

has

some

sort

of

account,

either

deposit or current or some similar relation with a bank.

RELATIONSHIP BETWEEN BANKER AND CUSTOMER

1. General Relationship

2. Special Relationship

General relationship between banker and customer

Debtor and Creditor Creditor and Debtor Agent and Principal Bailor and Bailee Lessor and Lessee Mortgagor and Mortgagee Bank as a Trustee Banker As a Custodian Banker As a Guarantor

Special Relationship between Banker and Customer

i) Rights of a banker
ii) Obligation

Rights of a banker
i) Bankers Right of Lien ii) Right of Set-Off iii) Right of Appropriation iv) Right to Charge Interest, Commission, Incidental Charges etc. v) Right of Garnish order.

OBLIGATION
Bankers obligations to honour customers cheques.
The obligation to maintain secrecy by a Banker.