MODULE 4- BANKER-CUSTOMER RELATIONSHIP

NATURE OF BANKER-CUSTOMER RELATIONSHIP :

• In general, the banker-customer relationship is considered to be transactional in nature.
These transactions are based on the nature of account that has been opened to establish a
relationship between the banker and the customer;

• Accordingly, depending upon the nature of activities/transactions, the products or services

availed by the customer and provided by banker, the baker-customer relationship can be
identified and determined.

• Thus these relationships may include a principle-agent relationship or a bailer-bailee

relationship, a debtor-creditor or creditor-debtor relationship etc.

STATUTORY RELIEFS PROVIDED FOR BANKER-CUSTOMER RELATIONSHIP :

• The different banking regulation statutes such as the Banking Regulation Act and the
Reserve Bank of India Act or the State Bank of India, do not per se address the remedies
provided to customers in case of lack or deficiency of services by banks while discharging
their obligations or duties and powers.

• Accordingly, bank customers have the full authority to sue banks on the grounds of
deficiency of services or negligence in taking due care and diligence while discharging their
functions under the Consumer Protection Act of 2019.

• The customers also have further powers to invoke the provisions of the Banking
Ombudsman Scheme of 1995 that was introduced by the RBI with the aim to provide
redressal to the grievances of customers which arose out of the services provided by banks.
The provisions of this scheme put a greater emphasis on the bank services such loans and
advances as well as other matters such deposit and withdrawal of money etc.

• Therefore, even though the different banking regulation statutes governing banking
functions and powers are silent, yet the same can be redressed and remedies can be availed
under the aforementioned laws and rules.

DEFINITION OF BANKER :
• The term banking is defined under Section 5(b) of the Banking Regulation Act however it
does not per se define the term 'banker' as such. According to this section, “banking” means
the accepting, for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or
otherwise;

• Section 3 of the Negotiable Instruments Act of 1881 however states that a 'banker'
includes any person acting as a banker and any post office savings bank.

• Section 2 of the Bill of Exchange Act, 1882 provides the definition of 'banker' and states
‘banker includes a body of persons, whether incorporated or not who carry on the business
of banking.’

DEFINITION OF A CUSTOMER :
 • Much like the definition of the term banker, the word customer has not been per se defined
in any banking regulation statutes or legislations in order to establish a banker-customer
relationship.

• The word 'customer' has been originated from the term 'custom', which means a habit or
tendency to do certain things in a regular or a particular manner.

• Since there is no definition for a customer in terms of banking per se, therefore the general
definition as provided in the Consumer Protection Act can be referred to. Accordingly,
section 7 of the Consumer Protection Act defines a consumer as-

"consumer" means any person who—

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly
promised, or under any system of deferred payment and includes any user of such goods other than
the person who buys such goods for consideration paid or promised or partly paid or partly
promised, or under any system of deferred payment, when such use is made with the approval of
such person, but does not include a person who obtains such goods for resale or for any commercial
purpose; or
(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any beneficiary of such
service other than the person who hires or avails of the services for consideration paid or promised,
or partly paid and partly promised, or under any system of deferred payment, when such services
are availed of with the approval of the first mentioned person, but does not include a person who
avails of such service for any commercial purpose.
• Furthermore, Section 131 of the Negotiable Instruments Act provides a more clear
definition of banker-customer relationship. Accordingly, it states that when a banker receives
payment of a crossed cheque in good faith and without negligence of the customer, the bank
does not incur any liability to the true owner of the cheque by reason only of having
received such payment. Thus to establish a banker-customer relationship, it is necessary for
the customer to have an account with the bank. Bank accounts opened by the customer
will allow to establish a banker-customer relationship and such relationship is
considered to be a contractual relationship.

CLASSIFICATION OF BANKER-CUSTOMER RELATIONSHIPS :

• The banker-customer relationship can be categorised into two types of relationships, namely
General relationship and Special relationship.

• Section 5(b) of the Banking Regulation Act, 1949 provides the activities undertaken by a
bank in a wider and general parlance and therefore allows defining such a banker-customer
relationship as a general relationship. The activities of lending money and accepting
deposits are the most basic transactions or activities undertaken by banks and therefore
relationships arising out of such transactions shall be rendered as the General banker-
customer relationship;

• Section 6 of the Banking Regulation Act, 1949 provides the categories of tasks/activities
undertaken by the banks which classify or establish special relationships between the banker
and the customer. Accordingly, section 6 states-

(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or
without security; the drawing, making, accepting, discounting, buying, selling, collecting and
dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills of lading, railway
receipts, warrants, debentures, certificates, scrips and other instruments and securities whether
transferable or negotiable or not; the granting and issuing of letters of credit, traveller's cheques and
circular notes; the buying, selling and dealing in bullion and specie; the buying and selling of
foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission,
underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations,
securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of
securities on behalf of constituents or others, the negotiating of loans and advances; the receiving of
all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of
safe deposit vaults; the collecting and transmitting of money and securities;
(b) acting as agents for any Government or local authority or any other person or persons; the
carrying on of agency business of any description including the clearing and forwarding of goods,
giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but
excluding the business of a 1[Managing Agent or Secretary and Treasurer] of a company;
(c) contracting for public and private loans and negotiating and issuing the same;
(d) the effecting, insuring, guaranteeing, underwriting, participating in Managing and carrying out
of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures, or
debenture stock of any company, corporation or association and the lending of money for the
purpose of any such issue;
(e) carrying on and transacting every kind of guarantee and indemnity business;
(f) Managing, selling and realising any property which may come into the possession of the
company in satisfaction or part satisfaction of any of its claims;
(g) acquiring and holding and generally dealing with any property or any right, title or interest in
any such property which may form the security or part of the security for any loans or advances or
which may be connected with any such security;
(h) undertaking and executing trusts;
(i) undertaking the administration of estates as executor, trustee or otherwise;
(j) establishing and supporting or aiding in the establishment and support of associations,
institutions, funds, trusts and conveniences calculated to benefit employees or ex-employees of the
company or the dependents or connections of such persons; granting pensions and allowances and
making payments towards insurance; subscribing to or guaranteeing moneys for charitable or
benevolent objects or for any exhibition or for any public, general or useful object;
(k) the acquisition, construction, maintenance and alteration of any building or works necessary or
convenient for the purposes of the company;
(l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or
turning into account or otherwise dealing with all or any part of the property and rights of the
company;
(m) acquiring and undertaking the whole or any part of the business of any person or company,
when such business is of a nature enumerated or described in this sub- section;
(n) doing all such other things as are incidental or conducive to the promotion or advancement of
the business of the company;
(o) any other form of business which the Central Government may, by notification in the Official
Gazette, specify as a form of business in which it is lawful for a banking company to engage.

GENERAL RELATIONSHIP BETWEEN BANKER AND CUSTOMER :

1. DEBTOR-CREDITOR RELATIONSHIP-

• As mentioned before, Section 5(b) of the Banking Regulation Act provides the general
transactional activities undertaken by banks. Accordingly banks enter into banking
agreements or contracts with customers for the purpose of opening their bank accounts and
thus carry on the business of accepting deposits and lending money;
 • Thus by signing the forms and necessary documents while opening a bank account, the
customer agrees to enter into a contractual relationship with the banker.

• When a customer deposits money into the their bank account, they impliedly act as the
debtor to the banks and themselves take the position as creditors.

• When such a debtor-creditor relationship is established, the bank, unlike a standard creditor,
becomes a privileged debtor. There are four reasons for the same:

a. When money is deposited into the bank by the customer, the deposited money becomes the
property of the bank and therefore holds the right to utilise the money for different purposes. The
banker/bank is therefore not required to disclose the purpose for which the creditor's money is being
used.
b. Unlike the standard debtors, a banker/bank is not required to return the amount deposited by the
customer at a particular date or time. The money needs to be returned to the customer only at the
time when the same is demanded by the customer.
c. Furthermore, the bank is not required to pay any form of interest on the amount deposited by the
customers unlike the normal debtors along with the principle amount.
d. Lastly, the bank is not required to give any security or collateral or create a charge on any of its
assets or property when the customer deposits the amount in the bank. The money deposited by the
customers is not like a loan or advance given by them to the bank, but rather kept in the form of
deposit as way of safekeeping the same.
Anandita Jena & Anr. v. General Manager & Anr. - The facts of this case state that there was a
default in the payment by the plaintiff 'A' to another, 'X'. Accordingly, X went ahead and sued A to
recover the said amount before the DRT. DRT issued the direction to 'Y' bank where A was
employed to withhold the PF and Gratuity amount payable by it to A, and use the same to satisfy
the debt owed by A to X. A was also a customer of the Y bank. A accordingly filed a suit against
DRT for the purpose of recovering the PF and Gratuity amount used to set-off the debt owed by A to
X.
The court held in this case that the decision by the DRT was valid since the PF and Gratuity amount
payable by the employer to the employee are not to be considered as a part of the remuneration or
wages. These are liabilities accrued by the employer, to be paid to the employee as extra benefits
under the social security provisions of law. Thus, PF and Gratuity amount payable in this case by
the Y bank to A would fall under their relationship as an employer-employee and not as banker-
customer. Thus the use of PF and Gratuity to set off the debt owed by A to X is valid.

2. CREDITOR-DEBTOR RELATIONSHIP-

• When the customer undertakes a loan/advance from the bank, then the relationship so
established becomes allows the bank to hold the position of the creditor whereas the
customer holds the position of the debtor.

• In such a case, the customer acquires the position of a standard debtor unlike a bank which
is considered as a privileged debtor. The customer thus have to return the loan amount or
advance on specific date and time as agreed upon in the loan agreement entered into while
opening the loan account; pay interest on the principle amount and discharge a security or
asset as a collateral over which charge can be created in case default on payment of the
amount due.

• The relationship so established also falls under the general lending activities of the bank as
provided under section 5(b) of the Banking Regulation Act.
SPECIAL RELATIONSHIPS BETWEEN BANKER AND CUSTOMER :
1. BANK AS TRUSTEE-

• A trust is a contractual relationship entered into by the parties for the purpose of creating a
trust over a property or for the protection and maintenance of a property set out for the
benefit of the assigned beneficiary.

• The definition of trust has been provided under section 3 of the Indian Trust Act, 1882
wherein it states-

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 a trustee is basically a person entitled with the responsibility to the hold the trust
property for the or on behalf of the trust property.

• Section 15 of the Indian Trust Act imposes the duty of due diligence and reasonable care on
the part of the trust while handling or holding the trust property of the beneficiary very much
as if the property was his own. Accordingly the section states-

‘A trustee is bound to deal with the trust-property as carefully as a man of ordinary prudence would
deal with such property if it were his own; and, in the absence of a contract to the contrary, a trustee
so dealing is not responsible for the loss, destruction or deterioration of the trust-property.'
• Thus under Section 32 of the Act, a trustee has the right of reimbursement of expenses
undertaken by him to protect and maintain the trust property on behalf of the beneficiary.

Indian Bank v. Blue Jaggers Estate Limited

Shanti Prasad Jain's case

New Bank of India Ltd. v. Pearey Lal AIR 1962 SC 1003 - It was held in this case that although the
money was sent to the Calcutta branch with the purpose of acquiring fixed deposits, yet the same
was to be done only after receiving specific instructions by the respondent (pearey lal). Since the
money was deposited for a specific purpose and based on specific instructions to be provided to the
customer, therefore the relationship established was not that of debtor-creditor but rather of a trustee
and beneficiary. The Calcutta branch was required to hold the money received by it on behalf of the
beneficiary aka the customer and release it only after acquiring the instructions set out by him.
• Thus, when the customer entrusts any specific or valuable items with another person with
the intention of acquiring those items back again on demand by the customer itself, then the
relationship so established is that of trustier and trustee.

• Thus such relationship between the customer and the bank can he categorised as a special
relationship.

2. BAILOR-BAILEE RELATIONSHIP-

• Section 148 of the 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.'
• Accordingly the person delivering the goods is the bailor and the person receiving the goods
is the bailee.

• Thus under the relationship of bailment between the customer and the banker, the banker
acts as a the bailor, discharging the duty of delivery of any specific or valuable assets in
exchange of a particular consideration paid by the customer.

• Thus where the banker makes an alterations to the property deposited to it by the customer
or while delivering it, then the it breaches its duty as a bailor and can thus be held liable for
compensation.

• In some cases physical possession of securities goods (Pledge), valuables, bonds etc., are
taken. While taking physical possession of securities the bank becomes bailee and the
customer bailor. Banks also keeps articles, valuables, securities etc., of its customers in Safe
Custody and acts as a Bailee. As a bailee the bank is required to take care of the goods
bailed.

Jagdish Chandra Trikha v. Punjab National Bank & Ors.

Bank is liable for the safe custody of goods deposited with it. The bank therefore has the liability to
return the goods so deposited to the customer as and when demanded and where there is any breach
of such liability or the property deposited has been returned with damages, then the bank can be
sured for damages.

Punjab National Bank v. Lakshmi Industrial and Trading Co. (P.) (Ltd.) & Ors.
Multiple securities on a security or pledged property cannot be done. Where a pledged property has
been undertaken to acquire a loan or advance or a security has been created over the same, then the
bank can be made liable for any damage caused to the pledged property.

3. AGENT-PRINCIPLE RELATIONSHIP-

• Law of agency is applicable when the relationship established between the customer and the
bank is that agent and principle. The law of agency therefore includes the principle of
vicarious liability, wherein the principle is held liable for the acts done by the agent under
his/her implied or express authority. Thus where the customer acts as a principle and
authorises the bank to act as as an agent, an express or implied authority is granted to the
banks to act on behalf of the customer in various regards.

• Section 182 of the Indian Contract Act, 1872 defines an 'agent' and states, '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”'.

• Banks collect cheques, bills, and makes payment to various authorities viz., rent, telephone
bills, insurance premium etc., on behalf of customers. . Banks also abides by the standing
instructions given by its customers.

• In all such cases bank acts as an agent of its customer, and charges for these services. As per
Indian contract Act agent is entitled to charges.

Deputy Commissioner of Income Tax, Chennai v. T. Jayachandran

No payment of taxes since the excess money that was gained by the respondent was not used for his
personal use but rather for the purposes of demand drafts and paying interest to the Public Sector
Undertakings. There was a principle-agent relationship which existed between the broker and the
bank such that the broker (agent) was employed in terms of contract for service and not contract of
service. It was thus held that the respondent acted in his capacity as a broker of the bank (as agent
of the principle) and not as an individual dealer for personal interests or purposes.

4. AS A CUSTODIAN :

• A custodian is a person who acts as a caretaker of something.

• Banks take legal responsibility for a customer’s securities.

• Unlike trustees, when the bankers carry out their responsibilities as a custodian, they hold
the property on the behalf of their customers and therefore acquire legal rights over the
property, for the purposes of maintaining the same.

5. AS A GUARANTOR :

• The contract of guarantee is considered to be a contingent contract wherein the banker steps
into the shoes of the customer to repay back any loan or advance undertaken in case they
default on the same.

• The contract of guarantee is considered as a contract of surety such that the banker acquires
enough security from the customer along with commission to undertake the role of a
guarantor in case the need arises.

• Section 126 of the Indian Contract Act, 1872 defines the contract of guarantee and states,
"A ‘contract of guarantee’ is a contract to perform the promise, or discharge the liability, of a
third person in case of his default. The person who gives the guarantee is called the ‘surety’;
the person in respect of whose default the guarantee is given is called the ‘principal debtor’,
and the person to whom the guarantee is given is called the ‘creditor’. A guarantee may be
either oral or written."

Om Prakash Laceria v. Punjab National Bank

When the principle debtor defaults on the repayment of loan/debt account only then can the creditor
go ahead and seek for repayment from the guarantor or the additional security.
Thus the primary contract is established with the primary debtor and therefore the first source of
repayment of loans or advances will only be the primary debtor. Only when the primary debtor
defaults in discharging his duties can the secondary debtor i.e. the guarantor's liability be invoked.
The guarantor has a secondary liability and is therefore considered as a secondary contract.

BlueOrchard Microfinance Fund v. Share Microfin Limited

The petitioner was held to have acted as surety on behalf of the respondent . The principle debtor
guarantying debt to creditor bank. The petitioner was entitled to recover the debt amount that was
advance by the Bank to the respondent under the terms of the contract of guarantee.

TERMINATION OF BANKER-CUSTOMER RELATIONSHIP :

• By operation of law- in case of death/lunacy or insolvency of the customer, the statutory
provisions clearly indicate that the banker-customer relationship ends on such date of either
of the cases. The banker can exercise its right of set-off or appropriation to make good the
 dues owed by such customer before finally closing the account;

• Voluntary termination- wherein the customer itself voluntarily closes the account in the
bank, thereby ending the banker-customer relationship;

• Liquidation of the company- in such an instance, the banker along with the official
liquidator will keep the money safely and presume the role of a trustee or custodian till the
time the insolvency resolution process is complete;

• The banker-customer relationship ceases only when the bank account is closed post the
receiving of the due notice given by the customer in this regard;

• In case where the bank account was opened by the customer only for a specific purpose, for
example a loan account opened to undertake education loan, then once the specific purpose
has been achieved and the due loan amount has been returned back, then the account can be
closed after giving a due notice and accordingly the banker-customer relationship ceases to
exist.

BANKERS' RIGHTS :
1. BANKER'S RIGHT OF GENERAL LIEN-

• The right to retain goods until payment is made out for any loan or debt;

• Only the right to retain the property and not the right to pledge or sell the property- Alliance
Bank of Simla Ltd. v. Ghamandi Lal Gaini AIR 1927 Lah.408

• State Bank of Mysore v. Lakshmi Constructions (P) Ltd. (2001)

• Bankers' general right of lien, as provided under Section 171 of the Indian Contract Act,
1872 defines or provides the persons who can exercise the general right of lien

• Vijaya Bank v. Naveen Mechanised Constructions (P) Ltd., (2004) 121 CompCas.783 -
Section 171 allows the right to exercise the general right of lien only to the persons
mentioned therein and against the same persons who have borrowed the debt. The general
right lien cannot be exercised against another.

• Tilendranath Mahanta v. United Bank of India AIR 2002 Gau 1 - The general right of lien of
a banker can only arise against the property that belongs to the customer disposed off as
security to the bank against the debt borrowed. Cannot be made against fixed deposits or
separate accounts.

• Exceptions: Safe custody of deposits; documents deposited for special purpose; Money
deposited for specific purpose; securities left with the banker negligently; securities held in
trust.

2. BANKERS' RIGHT TO SET-OFF-

• Section 13 of the Insolvent Debtors Relief Act, 1728- Statutory right and contractual right
 • The right of the bank to set off the debit amount in one bank account with the credit amount
held in the other account of the customer within the same bank provided where there is no
express or implied agreement in the contract which prohibits the same - Halesowen Press
Work and Assemblies v. Westminster Bank

• Although the bank has the right to set-off, the same cannot be done without acquiring
consent of the customers holding the said account. Due consent of the customer is necessary
to set-off any amount for setting off any liability.

• Conditions for set-off-

a. Account must be in the same name and right;

b. Amount of debt must be certain;
c. Right may be exercised in the absence of an agreement to the contrary;
d. Banker may exercise his right at his discretion subject to prior consent being acquired by the
customer;
e. Banker has the right to exercise the right of et-off before the Garnishee order is made effective.
• Garnishee order basically allows the debts of judgement debtor to be held by a third party,
not allowed to repay back the debt amount or the delivery of any good etc., without having
being authorised to do so without the court's order.

• A garnishee order allows the principle creditor to prevent other creditors from exercising
their right against the judgement debtor and therefore can acquire an order from the court
concerning the same.

• In case of set-off in joint account, the dues owed by the debtors in their personal capacities
cannot be set-off using the joint account. However where the liability on the debtors is
several and joint, then in that case the amount maybe set off. This would depend upon the
contractual terms and conditions.

3. BANKER'S RIGHT OF APPROPRIATION-

• Section 59 of the Indian Contract Act, 1872.

• Right of appropriation takes place when the judgement debtor owes two or more debts to the
same judgement creditor and pays a certain amount of money to be used to discharge a
particular debt.

• Question of appropriation arises when the amount paid by the debtor is not sufficient to
discharge all the debts owed to the creditor.

• The right can be discharged by three parties: Debtor (sec. 59); Creditor (sec. 60) and the
Law (sec. 61)

• Clayton's Case- Devyans v. Noble - The rule of chronological appropriation of money from
the account. The money which was deposited first will be withdrawn first and that is how the
debit side will be appropriated in the credit side.

• Difference b/w set-off and appropriation:

 • Right of appropriation is covered under Indian Contract Act. If the debtor does not make any
appropriation at the time when he makes a payment, the right of appropriation devolves
on the creditor and he may exercise that right until the very last moment and need not
declare his intention in express terms.

• The bank's right of setoff is an equitable right that has a distinguished and venerable lineage.
The legal source of setoff is not known. The banker's right of setoff, to apply a debtor-
depositor's funds in his commercial account against the debtor's matured debts to the bank,
is based on practical business.

• Setoff by a creditor would remain restricted to allowable claims

• Right of appropriation can extend to any amount received during the course of a business.

BANKER'S OBLIGATIONS-
1. To honour the cheque

2. To maintain secrecy

3. Recovery of loans

BANKER'S DUTY OF CONFIDENTIALITY -

• The bank's duty of confidentiality covers all customers' information about themselves
and their accounts obtained by the bank, irrespective of the information source and for as
long as the banker-customer relationship exists.

• There are many logical reasons for obliging the banks to keep customers' confidential data
private before, during, and after their relationship.

• First of all, information provided to the bank before the beginning of the contractual
agreement is possibly the same information that is provided by the customer after that
agreement has been initiated; consequently such information falls under the duty of
confidentiality.

• Secondly, information provided to the bank at any period during the banker-customer
relationship does indeed fall under the bank's duty of confidentiality according to the
common law definition of confidence

• Thirdly, in practice, there is nothing to prevent banks from submitting an explicit duty
to the customer to inhibit the disclosure of specific information, even if such
information theoretically is not within the ambit of the bank's duty of confidentiality.

• Fourthly, the customer's right of privacy must certainly be respected and a most
important aspect of a person's rights is the right to keep his/her information private.

• There is the further possibility that disclosure of any confidential information after the
termination of the banker-customer relationship may cause loss or damage to the
person.
 • Finally, a customer's confidential information could be of a commercially sensitive nature,
and disclosure might adversely affect his/her subsequent business or commercial
activities.

• Given the above factors, it seems that the bank's duty of confidentiality should be
maintained indefinitely, even after the customer's death, as long as the law does not indicate
a specific time for the termination of the duty.

• Banker's duty of confidentiality however is not absolute and therefore depends upon the
following exceptions:

• And is subject to four exceptions, identified in Tournier: Disclosure by compulsion of law;

Disclosure under duty to the public interest; Disclosure under the bank's own interest and
Disclosure under the customer's approval.

TYPES OF ACCOUNTS-
Depending upon the bank’s product portfolio, different types of accounts maybe provided to
customers for opening. It is upto the banking companies, based on their creativity and the kind of
the customers they want to cater to would form the base of kind and nature of accounts provided by
the banks.
Demand- On demand, the money has to be paid as and when demanded by the customer. Wherein
the customer is the creditor and the bank is the debtor.
In case of term deposit account- in this case the banker’s duty to repay the money deposited by the
customer is required to be paid only at the time when the agreed term or duration ends. Tax saving
FD’s are to repaid only when the term or duration decided initially is completed unlike other
conditions on which the FD account maybe opened. Other FD’s maybe broken but where it is clear
that it is for tax reduction then no liability on bank to pay before the end duration.
In both cases of accounts, the interest shall be paid by the bank to the customer. Only in case of an
overdraft facility will the bank be entitled to receive interest from the customer since it is an
additional credit facility provided to the customer.

Saving account is generally for salary purposes wherein the income saved etc., can be deposited. So
anytime the customer requires money, for any purposes wherein the demand is made, the bank shall
be liable to pay. Personal purposes.
Current account is opened by companies or partnerships etc., basically for business purposes. It is
usually a joint account wherein the liability is joint and several but is limited to the conditions of the
agreement entered into at the time of opening the account. A current account will not be demand
deposit where there an overdraft facility has been extended by the banker to meet a short term credit
requirement, for example short term working capital requirements. In such an instance, the
customer shall not be considered as a creditor. The customer shall become the debtor in such an
instance and the banker shall become the creditor.

Fixed Deposit- Wherein the money is received by the customer only at the time when the specific
duration for which the money was deposited along with the interest accumulated on such amount.