MODULE-1

MEANING OF BANKS:
A bank (German word) means a joint stock fund. A bank denotes a financial institution dealing in
money. A bank is an institution that is prepared to accept deposits of money and repay the same on
demand. The system of banking is very old and the same was prevalent in Greece, India and Rome.

A banker (i.e., person or a corporation) deals in credit and money i.e. it accepts deposits from those
who want to commit their wealth to safety and earn interest thereon, and lends money to the needy
through cheques and advances and loans of various sorts.

KINDS OF BANKS

1. Organized and Unorganized banking:

(i) Organized banking: It refers to that part of the Indian banking system which is under the
influence and control of the Reserve Bank of India. For example. Commercial Banks,
Industrial Banks, Agricultural Banks.

(ii) Unorganized banking: That part of Indian banking system which does not fall under the
control of our central bank (i.e. Reserve Bank of India) is called as un-organised banking.
For example, Indigenous banks.

2. Scheduled and Non-scheduled banks:

Under the Reserve Bank of India Act, 1939, banks were classified as scheduled banks and
non scheduled banks.

The scheduled banks are those which are entered in the second schedule of RBI Act, 1939.
Scheduled banks are those banks an which have a paid up capital and reserves of aggregate value of
not less than Rs 5 lakhs and which satisfy RBI. All Commercial Banks, Regional Rural Banks, State
Cooperative Banks are scheduled banks.

Non-schedule banks are those banks whose total paid up capital is less than Rs 5 lakh and RBI has
no specific control over these banks. These banks are not included in the second schedule of RBI
Act, 1934.
3. Indigenous Bankers:
From very ancient days indigenous banking as different from the modern western banking
has been organized in the form of family or individual business. They have been called by various
names in different parts of the country as Shroffs, Sethus, Sahukars, Mahajans, Chettis and so on.
They vary in their size from petty money lenders substantial shroffs.

4. Central Bank:
In each country there exists central bank which controls a country’s money supply and
monetary policy. It acts as a bank to other banks, and a lender of last resort. In India Reserve Bank of
India (RBI) is the Central Bank.

5. Commercial Bank:
A bank dealing with general public, accepting deposits from making loans to large numbers
of households and firms. Through the process of accepting deposits and lending, commercial banks
create credit in the economy. Some examples (commercial banks in India are State Bank India (SBI),
Punjab National Bank (PNB) etc.

6. Development Banks:
Development banks are specialised financial institutions. To promote economic development,
development banks provide medium term and long term loans the entrepreneurs at relatively low rate
o interest rates. Some examples of development banks in India are Industrial Development Bank of
India (IDBI), Industrial Financial Corporation of India (IFCI), Industrial Credit and Investment
Corporation of India (ICICI) etc.

7. Co-Operative Banks:
Co-operative banks are organised under the provisions of the Co- operative societies law of
the state. These banks were originally set up in India to provide credit to the farmers at cheaper rates.
However, the co-operative banks function also in the urban sectors.

8. Land Mortgage Banks:

The primary objective of these banks is to provide long-term loans to farmers at low rates in
matters related to land, The land mortgage banks are also known as the Land Development Banks.
9. Regional Rural Banks:
Regional Rural Banks (RRBs) are established in the rural areas to meet the needs of the
weaker section of the rural population.

10. National Bank for Agricultural and Rural Development (NABARD):

This bank was established in 1982 in India in view of providing the rural credit to the
farmers. Actually, it is an apex institution which coordinates the functioning of different financial
institutions working in the field of rural credit. NABARD has been making continuous efforts
through its micro-finance programme or improving the access of the rural poor to formal institutional
credit. The self help group (SHG) – Bank linkage programme was introduced in 1992 as a
mechanism to provide financial services to the rural poor people on a sustainable basis.

11. Exchange Banks:

These banks are engaged in buying and selling foreign exchange. These banks help the
growth of international trade.

12. Exim Bank:

It is popularly known as ‘Export Import Bank’. Such banks provide long term financial
assistance to the exporters and importers.

The functions of banks are of two types.

(A) Primary functions; and

(B) Secondary functions.

Let us discuss details about these functions.

A. Primary functions

The primary functions of a commercial bank include:

a) Accepting deposits; and

b) Granting loans and advances.

a) Accepting deposits The most important activity of a commercial bank is to mobilise deposits
from the public. People who have surplus income and savings find it convenient to deposit the
amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn
interest. Thus, Business Studies 10 deposits with the bank grow along with the interest earned. If the
rate of interest is higher, public are motivated to deposit more funds with the bank. There is also
safety of funds deposited with the bank.

b) Grant of loans and advances The second important function of a commercial bank is to grant
loans and advances. Such loans and advances are given to members of the public and to the business
community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of
interest charged on loans and advances varies according to the purpose and period of loan and also
the mode of repayment.

i) Loans A loan is granted for a specific time period. Generally commercial banks provide short-term
loans. But term loans, i.e., loans for more than a year may also be granted. The borrower may be
given the entire amount in lump sum or in instalments. Loans are generally granted against the
security of certain assets. A loan is normally repaid in instalments. However, it may also be repaid in
lump sum.

ii) Advances An advance is a credit facility provided by the bank to its customers. It differs from
loan in the sense that loans may be granted for longer period, but advances are normally granted for a
short period of time. Further the purpose of granting advances is to meet the day-to-day requirements
of business. The rate of interest charged on advances varies from bank to bank. Interest is charged
only on the amount withdrawn and not on the sanctioned amount.

Types of Advances Banks grant short-term financial assistance by way of cash credit, overdraft and
bill discounting.

a) Cash Credit: Cash credit is an arrangement whereby the bank allows the borrower to draw
amount upto a specified limit. The amount is credited to the account of the customer. The customer
can withdraw this amount as and when he requires. Interest is charged on the amount actually
withdrawn. Cash Credit is granted as per terms and conditions agreed with the customers.

b) Overdraft: Overdraft is also a credit facility granted by bank. A customer who has a current
account with the bank is allowed to withdraw more than the amount of credit balance in his account.
It is a temporary arrangement. Overdraft facility with a specified limit may be allowed either on the
security of assets, or on personal security, or both.

c) Discounting of Bills: Banks provide short-term finance by discounting bills, that is, making
payment of the amount before the due date of the bills after deducting a certain rate of discount. The
party gets the funds without waiting for the date of maturity of the bills. In case any bill is
dishonored on the due date, the bank can recover the amount from the customer.

B. Secondary Functions of The Bank

The secondary functions of the Bank are either selling gold coins to the public or selling insurance
products and selling mutual fund products etc. Let us make a more formal study. Following are the
important secondary functions of the Banks:

1. Agency Functions:
i. The bank is an agent for its customers in a way that it invests on behalf of its customers.
ii. Acting as the agent of the customer the bank may transfer funds,
iii. the collection of cheques, 
iv. periodic payments,
v. portfolio management,
vi. periodic collections, and
2. General Utility Functions: The bank also performs several utility functions. Some of the
most important utility functions of the banks may include:-
i. the issue of drafts,
ii. letter of credits,
iii. locker facility,
iv. underwriting of shares,
v. dealing in foreign exchange,
vi. project reports,
vii. social welfare programs,
viii. The banks also provide several services like the safe deposit locker facilities, safe custody
facilities, and
ix. Demat accounts. The opening of Demat accounts allows the account holder to trade in
the stock exchange or the money market directly. The customer that holds a Demat
account can directly buy or sell shares from the capital market.
Reserve Bank of India Act, 1934

The Indian banking system is headed by Reserve Bank of India It came monetary authority
of India having the function of currency issue and credit control and came into being by the Reserve
Bank of India Act 1934. The Bank was originally shareholder’s bank.. It was nationalized in 1948.

Central Board: The central board has 20 members and are entrusted with general superintendence
and direction of the bank. This is made up of 1 governor, 4 Deputy Governors, 4 nominated
directors, 10 government nominated directors and 1 government official from the Ministry of
Finance. The Central Board exercises all the powers of the bank and is required to meet atleast 6
times a year and atlas once a quarter.

Local Board: The country has been divided into 4 areas-southern, western, northern and eastern and
each of these is managed by a local board. The local board consist of 5 members appointed by the
Central Government for a term of 4 years.

Functions of the Reserve Bank

Central Banking Function

Issue of Bank notes: The Reserve Bank issues and regulates the issue of currency in India. It
regulates and control money supply in the country. The notes issued by RBI are unlimited legal
tender. Bank notes management is undertaken by two separate departments of the bank-the issue
department and the banking department. By the Reserve Bank Amendment Act, 1956, TRBI is
required to keep a minimum reserve of Rs.200 crores of which foreign securities should have a
minimum value of Rs.85 crores and a minimum reserve of gold of vale Rs.115 crores. This is known
as the minimum currency reserve.

Currency Chest: RBI has opened offices in 10 cities to distribute the currency notes and coins.
Currency Chests are boxes or containers in which stocks of new or re-issuable notes and coins are
stored. If the payments, on a particular day exceed the balance with the bank, it can withdraw funds
form the chest. It helps in avoiding physical transfer of cast at frequent intervals from one place to
another.
Acts as Banker to Government: The RBI acts as a banker to the Government of India and the State
Governments. It acts as a Government’s banker, agent and adviser. It manages public debt. It
transacts the banking business of the central Government keeps the cash balances as deposits free of
interest, receives and makes payments on behalf of the Government and carries out its exchange
remittances and other banking operations. It acts as a advisor to the Government on important
economic and financial matters.

Acts as Banker’s Bank: Reserve Bank is the banker to commercials, co- operative, regional rural
banks and local are banks. The bank manages the volume of credit created by the commercial banks
to ensure price stability. The Reserve Bank frames policies regarding the purchase and sale and
release of foreign exchange and all 9tehr matters relating to foreign exchange. It manages the
clearing of cheques and also acts as clearing house of other banks. The Reserve Bank manages
important payment systems like real time gross settlement (RTGS) and national electronic funds
transfer (NEFT). Reserve Bank is the lender of the last resort.

Controller of Credit: It has the power to influence the volume of credit growth in the country by
raising or lowering the cash reserve ratio.

Custodian of Foreign Reserves: The bank manages the external value of the currency (Indian
Rupee). It maintains the external stability of the rupee. It controls and regulates the foreign exchange.
It maintains fixed exchange rates with all other member countries of IMF. It acts as the custodian of
India’s reserve of international currencies.

Supervisory functions: It supervises and promote the sound banking in India. RBI has the power to
supervise and control over the commercial and co-operative banks, relating licensing and
establishments, branch expansion, liquidity of their assets, management and methods of working,
amalgamation, reconstruction. It is authorized to carry out periodical inspections of the banks.

Promotional Function: It performs a variety of development and promotional functions. It helped in

setting up of Industrial Finance Corporation of India and the State Finance Corporation; It set up the
DepositInsurance Corporation in 1962, The Unit Trust of India in 1964 and many others to promote
the saving habit and to mobilize savings and to provide industrial as well as agricultural credit. It has
developed the co-operative credit movement to encourage savings.

In addition:
Every bank has to get a license from the RBI to do banking business in India. Each scheduled bank
must send a weekly return to the Reserve Bank showing its assets and liabilities
 It hold cash reserve s of all the scheduled banks
 It issues directives on how banks may function
 It approvers the choice of Chairman, Managing Directors, Directors and other positions.
 It has the power to examine and sanction scheme of arrangement and amalgamation
 It has the power to recommend the liquidation of any weak banking companies
 It can ask the banks to send returns and report on banking or any other matters
 It has the power to control the lending policy of banks and give direction

Other Functions

Acceptance of money on deposits without interest from the Central and Sate Governments, banks,
local bodies or any other person
 The purchase , sale and rediscount of bills of exchange ( for financing agricultural operations,
for holding or trading in securities of The Central and State Government) and promissory
notes drawn and payable in India
 The making of loan and advances to States, local bodies, scheduled banks and state co-
operative banks
 The issue of demand drafts made payable at its own offices or agencies
 The purchase and sale of gold and bullion
 Maintenance of exchange value of rupee
 Helps in extension of remittance facilities
 The management of clearing house
 Tendering advice on financial matters, collection and dissemination of banking statistics, etc.
RELATIONSHIP BETWEEN BANKER AND CUSTOMER:

Definition of a ‘BANKER’ The Banking Regulations Act (B R Act) 1949 does not define the term
‘banker’ but defines what banking is? As per Sec.5 (b) of the B R Act “Banking' means accepting,
for the purpose of lending or investment, of deposits of money from the public repayable on demand
or otherwise and withdrawable by cheque, draft, order or otherwise."

As per Sec. 3 of the Indian Negotiable Instruments Act 1881, the word “banker includes any
person acting as banker and any post office savings bank”.

According to Sec. 2 of the Bill of Exchange Act, 1882, ‘banker includes a body of persons,
whether incorporated or not who carry on the business of banking.’

Sec.5(c) of BR Act defines "banking company" as a company that transacts the business of
banking in India. Since a banker or a banking company undertakes banking related activities we can
derive the meaning of banker or a banking company from Sec 5(b) as a body corporate that:

(a) Accepts deposits from public.

(b) Lends or

(c) Invests the money so collected by way of deposits. (d) Allows withdrawals of deposits on
demand or by any other means.

Who is a ‘Customer’?

The term Customer has not been defined by any act. The word ‘customer’ has been derived from the
word ‘custom’, which means a ‘habit or tendency’ to-do certain things in a regular or a particular
manner’s.

Thus bank customers can be categorized in to four broad categories as under:

  Those who maintain account relationship with banks i.e. Existing customers.
 Those who had account relationship with bank i.e. Former Customers.
 Those who do not maintain any account relationship with the bank but frequently visit branch
of a bank for availing banking facilities such as for purchasing a draft, encashing a cheque,
etc. Technically they are not customers, as they do not maintain any account with the bank
branch.
 Prospective/ Potential customers: Those who intend to have account relationship with the
bank. A person will be deemed to be a 'customer' even if he had only handed over the
account opening form duly filled in and signed by him to the bank and the bank has accepted
it for opening the account, even though no account has actually been opened by the bank in
its books or record.

General Relationship:
1. Debtor-Creditor: When a 'customer' opens an account with a bank, he fills in and signs the
account opening form. By signing the form he enters into an agreement/contract with the bank.
When customer deposits money in his account the bank becomes a debtor of the customer and
customer a creditor. The money so deposited by customer becomes bank’s property and bank has
a right to use the money as it likes. The bank is not bound to inform the depositor the manner of
utilization of funds deposited by him. Bank does not give any security to the depositor i.e.
debtor. The bank has borrowed money and it is only when the depositor demands, banker pays.
Bank’s position is quite different from normal debtors.

2. Creditor–Debtor:
Lending money is the most important activities of a bank. The resources mobilized by banks are
utilized for lending operations. Customer who borrows money from bank owns money to the
bank. In the case of any loan/advances account, the banker is the creditor and the customer is the
debtor. The relationship in the first case when a person deposits money with the bank reverses
when he borrows money from the bank. Borrower executes documents and offer security to the
bank before utilizing the credit facility

Special Relationship:

1. Bank as a Trustee:
As per Sec. 3 of Indian Trust Act, 1882 ‘ A "trust" is an obligation annexed to the
ownership of property, and arising out of a confidence reposed in and accepted by the owner, or
declared and accepted by him, for the benefit of another, or of another and the owner.’ Thus trustee
is the holder of property on behalf of a beneficiary.

2. Bailee – Bailor:
Sec.148 of Indian Contract Act, 1872, defines "Bailment" "bailor" and "bailee". A
"bailment" is the delivery of goods by one person to another for some purpose, upon a contract that
they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the
directions of the person delivering them.

3. Lessor and Lessee:

Sec.105 of ‘Transfer of property Act 1882’ defines lease, Lessor, lessee, premium and rent.
As per the section “A lease of immovable property is a transfer of a right to enjoy such property,
made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or
promised, or of money, a share of crops, service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on
such terms.”

Definition of Lessor, lessee, premium and rent:

(1)The transferor is called the lessor,

(2)The transferee is called the lessee,

(3)The price is called the premium, and

(4)The money, share, service or other thing to be so rendered is called the rent.”

4. Agent and Principal:

Sec.182 of ‘The Indian Contract Act, 1872’ defines “an agent” as a person employed to do
any act for another or to represent another in dealings with third persons. The person for whom such
act is done or who is so represented is called “the Principal”. Thus an agent is a person, who acts for
and on behalf of the principal and under the latter’s express or implied authority and the acts done
within such authority are binding on his principal and, the principal is liable to the party for the acts
of the agent.
5. As a Custodian:

A custodian is a person who acts as a caretaker of something. Banks take legal

responsibility for a customer’s securities. While opening a dmat account bank becomes a custodian.

6. As a Guarantor:
Banks give guarantee on behalf of their customers and enter in to their shoes. Guarantee is a
contingent contract. As per sec 31, of Indian Contract Act guarantee is a " contingent contract ".
Contingent contract is a contract to do or not to do something, if some event, collateral to such
contract, does or does not happen.

DUTIES OF A BANK

The relationship between the banker and customer creates some obligations on the part of a bank.
The main obligations of the banker towards the customers are as follows:

1. Obligation to Honour Cheques:

The bank has a statutory obligation to honour the cheques of its customers up to the amount standing
to the credit of the customer’s account. If a bank wrongfully refuses to honour the cheque of its
customer, the bank shall be liable to compensate the customer. This obligation is subject to some
conditions, namely:

a) There must be sufficient funds of the customer in the hands of the bank.
b) The funds must be properly applicable for the payment of the customer’s cheque.
c) The cheque must be properly drawn Up i.e., it should be complete in all respects.
d) The cheque must be presented for payment within a reasonable time.
e) There must be no legal bar preventing the payment of such cheques. If the bank has received any
order from a court or any other competent authority prohibiting payment, it is the duty of the bank to
obey such orders.

2. Obligation to Maintain Secrecy:

The relationship between the banker and customer is of a nature. The bank must not disclose to any
outsider the details concerning the customer’s account; as such disclosures may adversely affect the
credit and business of the customer. However, a disclosure can be made under the following two
situations:
(a) When the law requires such disclosures to be made, and

(b) when the practices amongst the banks permit such disclosure.

3. Obligation to Follow Customer’s Instructions:

The banker is under a legal obligation to follow the instructions of the customer. This is so because
there is the contractual relationship between the bank and the customer.

4. Obligation to maintain Record:

The banker is under an obligation to maintain accurate record of all the transactions of the
customers made with the bank.

5. Obligation to give Notice before Closing the Account:

If a bank wishes to close the account of a customer, it must give a reasonable notice to this effect to
the customer.Thus, a bank cannot close the account of a customer on its own, because it may have
serious consequences to the customer.

THE BANKING OMBUDSMAN SCHEME, 1995

 The Banking Ombudsman Scheme is like a fast track and inexpensive forum for the
customers of the bank for resolution of their complaints regarding the services rendered by
the banks in India.
 The Banking Ombudsman creates an onus through Section 35A of the Banking Regulation
Act, 1949 to appoint a banking ombudsman, who is a senior official not below the rank of
Chief General Manager or General Manager appointed by the Reserve Bank of India.
 The scheme came into effect from the year 1995 and presently the current operational scheme
is Banking Ombudsman Scheme (amended up to July 1, 2017).
 The main aim of the scheme is to have a resolution scheme related to the services rendered
by the banks in case the customer is not satisfied with the same and in cases where there is no
solution provided by the banks for settlement of such complaints and disputes.
 The Banking Ombudsman Scheme extends to the whole country and covers the business of
banking industry in the country that means all scheduled commercial banks, rural banks,
cooperative banks will come under the purview of the scheme.
  The Reserve Bank of India shall specify the jurisdiction or the territorial limits of the selected
ombudsman.
 The ombudsman shall be responsible for receiving and considering the complaints filed by
the aggrieved parties irrespective of the amount of money involved in the complaint.
 He will be responsible for the settlement of the dispute between the bank and the aggrieved
party either by the process of mediation or conciliation or if necessary by giving an award to
the concerned party if the circumstances require so.
 The appointed ombudsman has to submit a report to the governor of the Reserve Bank on
30th June of every financial year regarding the activities conducted through his office during
the preceding financial year and also any other details as asked by the Reserve Bank.

Grounds on which complaints can be filed

Some of the grounds on which these complaints can be filed by the aggrieved customers are-

1. Delay or non-payment of cheques, drafts, bills etc.,

2. Non-acceptance of any notes or coins of the Indian currency without giving any sufficient
cause,
3. Charging some amount of commission for any service mentioned in the above point which
the bank does not have the authority of,
4. Non-payment or delay in payment of the inward remittances,
5. Non-adherence in regards to the working hours of the banks,
6. Delay or failure to provide a banking facility, earlier promised by the officials or the
agents of the bank,
7. Refusing to open deposit accounts without any valid reason,
8. Levying of any other additional charge without any previous intimation to the customers,
9. Non-adherence to the instructions and guidelines given by the Reserve Bank in relation to
use of ATM or Debit cards, like – Account debited but cash not dispensed by ATMs, Less
cash dispensed by the ATM machine, Stolen cards, Account debited twice for one
transaction done on the abovementioned factors,
10. Inappropriate approach by the recovery agents on behalf of the banks or not following the
guidelines are given by the Reserve Bank in regards to the functioning of the recovery
agents.
11. Any other guidelines stated by the Reserve Bank.
 12. Non-adherence to the guidelines given by the Reserve Bank in regards to the Mobile or
Internet Banking facility provided by the banks, like – delay or failure to effect online
payment / Fund Transfer, unauthorized electronic payment / Fund Transfer
13. Delay or refusal to accept payments towards taxes and other charges as directed by the
Reserve Bank or the government,
14. Delay in issuance or refusal to issue redemption of government securities,
15. Forced closure of deposit accounts without prior notice or without any specific reasons for
the delay in closure of any type of accounts held by the customer,
16. Non-adherence to any other guidelines or any other instructions given by the Reserve
Bank from time to time to the banks or their subsidiaries involved in the banking business
in the country.

Procedure to register a complaint

 Filing of the complaint

The procedure to register a complaint regarding any of the banks by the customers starts from the
process of identifying the sort of deficiency of service from the list above mentioned.

 Who can file the complaint?

The complainant may, himself or through an authorised representative make a complaint to the
Banking Ombudsman within whose jurisdiction the bank is located. It should be noted that in cases
of credit card complaints the complaint will be filed with the Banking Ombudsman within whose
territorial jurisdiction the billing address of the complainant or the customer is located.

LIABILITY UNDER CONSUMER PROTECTION ACT, 1986.

section 2(1) (d), “Consumer” includes a person who avails or hires a service for consideration.

Section- 2(1)(g) "deficiency" means any fault, imperfection, shortcoming or inadequacy in the
quality, nature and manner of performance which is required to be maintained by or under any law
for the time being in force or has been undertaken to be performed by a person in pursuance of a
contract or otherwise in relation to any service;
Section- 2(1) (o) "service" means service of any description which is made available to potential
[users and includes, but not limited to, the provision of] facilities in connection with banking,
financing insurance, transport, processing, supply of electrical or other energy, board or lodging or
both, [housing construction,] entertainment, amusement or the purveying of news or other
information, but does not include the rendering of any service free of charge or under a contract of
personal service;

Hence any person who owns an account in bank or takes a service form bank can file complaints
under this act for “deficiency” or regarding unfair practices by the banks. Consumer courts not only
compensate for the defect but also for the mental agony suffered or harassment faced. Listed are the
few deficiencies in banking services as laid down by consumer commissions and courts of law :

 Refusing or holding back the amount that was due on fixed deposit after maturity
 Delay in the payment of amount on term deposits after maturity
 Dishonor of cheques because of mistake or negligence by bank.
 Dishonoring of demand drafts because of omission by bank officials.
 Refusing grant of loans without any bonafide reason
 Causing undue delay in discharging installments of loan
 Charging interest at higher rate than what has been specified in loan agreement.
 Failure in returning securities even after the loan is repaid.
 Bank’s failure to honour guarantee, if demand was as per guarantee.
 Liability is on bank if articles in locker are lost
 loss to customers due to unavailability of securities in bank premises
 Closing bank account without any instructions in that regard from the account holder
 Refusing cheque book facility to customer just because of the fact that the minimum balance
has not been maintained
 Failure of bank cashier to account for money deposited at the counter with him(vicarious
liability)
 Rude behavior of bank officials resulting in discomfort or mental agony to customers
 Without even demanding repayment giving notice to “face the auction or make payment”.
 Failure at returning the dishonored cheque.
In Vimal Chandra Grover vs. Bank of India
it was argued before the Supreme Court on behalf of the bank that the appellant, who took overdraft
facility from the bank by pledging shares, is not a consumer within the meaning of the consumer
Protection Act. The Supreme Court repelled the arguments of the bank and held that bank is
rendering service by providing overdraft facilities to a consumer, which is not without
consideration. Bank is charging interest and other charges as well in providing the service.
Provision for overdraft facility is certainly a part of the banking and falls within the meaning of
“service” as provided in section 2(1)(o) of the Act.