TYPES OF CUSTOMERS & BANKER-CUSTOMER RELATIONSHIP

1. Various types of customers – (Constitution & Legal Aspects)

1. Individual - Single
2. Joint Accounts/Group of persons – No limit
3. Sole Proprietorship Firm
4. Partnership Firm – (Partnership Act, 1932)
- Number of Partners Banking - Max 10
- Non Banking - Max 20 (As per Companies Act, 1956)
- Firm may be regd or unregd. Unregestred firm can not
sue their debtors but creditors may sue the firm.
- HUF must not be a partner
- Any partnership firm may be partner of other
partnership firm, in that case number of partners of
firm- 1 will be added in firm-2 to decide the number.
- Exceeding the partners firm will not be in existence.
- Minor may be partner for benefits only, no liability but
after attaining majority he/she has to clarify stand. Any
agreement with Minor is Void Ab-initio.
- Partners act as Principal & Agent for firm/each otrher.
Firm has no seprate legal entity only business purpose.
- Partners are jointly & severally liable i.e. unlimited.
- All partners may authorize any one to operate the
account.
- Any single partner may withdraw the authority/stop
payment cheque signed by any partner.
- A partner can not delegate his authority to any one.
- Dead/Insane/Insolvent partner’s signatures are not to be
entertained.
- Dissolution by : A. By mutual agreement
B. Death/Insolvency C.Operation of Law (By court)
D. Automatic – For seprate period.
- On dissolution authority of partners ceases to bind
Others – Clayton’s Rule will apply.

5. Society/Trust/Club/Non Profit Making Organizations

6. HUF : Karta – Eldest Male/Female member of family (Major)
 7. Companies : (Companies Act, 1956)

Private Limited Public Limited

Member/Share Holder Min - 2 Maxi - 50 Min - 7 No Limit
Directors Min – 2 Min – 3
Share Transfer Restricted Freely Transferable
Pub Invitation for Not Permitted Permitted
Shares, Deb & FD
Certificate of Not Required Required
Commencement of
Business
Paid Up Capital Min 1.00 lac 5.00 lacs

8. LLPs : Limited Liability Partnership Act, 2008 came into force

w.e.f. 09.01.2009 – Partners Min - 2 : Maxi - No Limit

RELATIONSHIP

BANKER : Sec 5 (b) of Banking Regulation Act-1949 defines a banker as a person

undertaking business of banking. Banking means (SECTION 6 of BR Act)
accepting deposits from public, for the purpose of lending, repayable on
demand or otherwise withdrawable by cheque, draft, order or
otherwise.

Customer : There is no legal/statutory definition of the customer but from various

judgements based on section 131/131 A of NI Act 1881, a customer
means a person who seeks to open account which bank accepts with
proper introduction.

As per the KYC policy (RBI, Dec. 2004), a customer may be defined as :

- A person or entity that maintains an account with the Bank and /or has a
business
- One on whose behalf the a/c is maintained (the beneficial owner)
- Beneficiaries of transactions conducted by professional intermediaries, such as
Stock Brokers, Solicitors etc. as permitted by the Law, and
- Any person or entity connected with a financial transaction which can pose
Significant reputational or other risks to the bank, for example - a wire transfer
Or issue of a high value demand draft as a single transaction.
BANKER –CUSTOMER RELATIONSHIP in different transactions :

The primary relationship between a banker and customer is that of a debtor and
creditor (Reason: on opening the SF/CA/Term/any deposit account the banker
becomes a debtor). However a banker is different from an ordinary debtor on two
counts, viz.
- The banker is required to pay the customer only when payment is
demanded within business hours of a working day at the branch (An
ordinary debtor should search for his creditor and repay the debt).
- For a normal debt, the period of limitation start from the date of
debt. However, in case of bank deposits, it starts from the date of
demand, by the depositor.

Apart from the primary relationship, there can be other legal relationship
between a banker and customer depending up to the transaction as given
hereunder:

Sl. No. Transaction Bank Customer

1 Acceptance of Deposits Debtor Creditor
2 Loan from bank Creditor Debtor
3 Collection of cheque Agent Principal
4 Sale/purchase of securities/shares on Agent Principal
behalf of customer
5 Safe Custody of articles Bailee Bailor
6 Safe deposit locker Lessor Lessee
( Licensor) (Licensee)
7 Payee of a Draft & Issuing Bank Trustee Beneficiary
8 Money tendered to bank pending Trustee Beneficiary
instruction for its disposal
9 Articles left by Mistake Trustee Beneficiary
10 Carrying on standing instruction Agent Principal