BANKER-CUSTOMER

RELATIONSHIP & RIGHTS

Presented By:LAKSHMI.S

BANKER
DEFINITION
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 Banking

CUSTOMER
DEFINITION
Customer 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 CUSTOMER

He 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 CUSTOMER

To 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 CUSTOMER

To 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 RELATIONSHIP

The 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-DEBTOR

Relationship 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 RELATIONSHIPS
1- BAILOR & BAILEE
A 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 RELATIONSHIPS
2- PRINCIPAL & AGENT
When 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 RELATIONSHIP

a. 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 RELATIONSHIP

b. 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 RELATIONSHIP

c.

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 CUSTOMER

Customer 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 CUSTOMER

He 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 SECRECY

The 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 SECRECY

The obligation of secrecy, may not be considered
essential on the following occasions:
1.
2.
3.
4.
5.

Under Compulsion of Law

Duty to Public to Disclose
In the Interest of the Bank
Express or Implied Consent of Customer
Common Courtesy to other Bankers

Banking company

As 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 RELATIONSHIP
1.

Notice by a customer
i. Due to change in address
ii. 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 RELATIONSHIP
2.

i.
ii.
iii.

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

TERMINATION OF RELATIONSHIP
3.

4.
5.
6.
7.
8.
9.
10.

OTHER REASONS:

Obstinacy of the customer

Death of the customer
Customers insanity
Customers insolvency
Order of court
Assignment of account
Unsatisfactory operation

ANY QUESTIONS