UNIT - 2

BANKER AND THE CUSTOMER RELATIONSHIP

GROUP MEMBERS
 SRILEKHA
 UJJWAL
 KUNAL KUMAR
 HONEY TYAGI
 ROSHAN GAUTAM
 SOUMYADEEP DAS
 BANKER

 Banker include a body of persons whether incorporated or not who carry on

the business of Banking, in other words , ” A Banker is one who in the
ordinary course of his business honors cheques drawn upon him by persons
from and for whom he receives money on Current Accounts”
 CUSTOMER

 A customer is one who has an account with a Banker of for whom a Banker
habitually undertakes to act as such . The word Customer signifies a
relationship in which duration is not of essence . A person whose money has
been accepted by the bank on the footing that the bank undertakes to honor
cheques up to the amount standing to his credit, is a Customer of the bank
irrespective of whether his connection is of long or short standing.
 THE BANKER AND CUSTOMER
RELATIONSHIP
 Banker as a bailee : The customer can keep his valuable or any secret documents
in the bank for safe custody. When the banker accepts the same, he will be accepting
its as a ‘Bailee’ . As a bailee, he should protect the valuables in his custody with
reasonable care. If the customer suffers any loss due to the negligence of the Banker
in protecting the valuables, the Banker is liable to pay such loss .
 Banker as an Trustee : when the Banker accepts securities and other valuables for
safe custody, he acts as a trustee for his customer. Banker as a Trustee retains money
or other Assets and performs for the benefit of his customer called beneficiary.
Customer continues to be the owner of his Assets deposited with Banker. As a
Trustee, it is the duty of Banker to take care of the lockers and their contents.
 Banker as an Agents : Banker also acts as an agent of his Customer. It performs a

number of agency functions like buying and selling of securities on behalf of the
Customers, collection of cheque and make payment of various dues on behalf of his
Customer . Hence a Banker performs as Agent of his Customer who becomes
principal while rendering an agency function.
 Debtors and Creditor relationship : When a person deposits some money to open
an account, the Banker assumes the position of a Debtor and Customer becomes a
Creditors. But on the other hand, when a Customer avails the facility of overdraft,
Banker takes the position of a Creditors and Customer becomes his Debtor.
 SPECIAL RELATIONSHIP / SPECIAL
FEATURES OF BANKER CUSTOMER
RELATIONSHIP.
 Banks Right of General Lien : Lien is a term used to identity the right to retain a
property belonging to a Debtor till such time he discharges the Debt due to the
Retainer of the property. Lien will be lost when the possession of the property is lost.
The Lien may be a Particular Lien or General Lien.

 Particular Lien

 General Lien
 Particular lien: This lien refers to a particular property which is retained by the lender
or creditor against the specific or particular loan. The particular property will be retained
until the particular debt is cleared by the debtor. Ex. A transport operator can retain the
property sent for transshipment till such time the customer pays his transport charges.

 General lien: General lien is a right of the banker (creditor) to retain all the properties of
debtors (customers) till the entire sum due to the bank are recovered. In the absence of
any agreement to the contrary, banker may retain any goods and securities bailed to
him as a security for general balance of accounts. The Indian Contract Act (u/s 171)
provides this right, and this right is called ‘General Lien’. 
 RIGHTS TO CHARGE INTEREST, COMISSION, INCIDENTAL CHARGES,
COMMITMENT CHARGES INTEREST :

Bank enters into an express agreement to charge interest on outstanding balances . It is

the normal practice of every bank to calculate interest at every quarter or half-year and
Debit the same to the Loan Account . The Customer is expected to pay this Interest as and
when it is Due.

 Commission

 Incidental Charges

 Commitment Charges
 Commission : The banker has an implied right to charge commission for the services provided to
the customers.

 Incidental Charges : Incidental charge is a levy imposed by the bank on unremunerative current
accounts. Normally, it is not charged on the current accounts whose balances can be profitably
employed by the bank. These charges need not be paid in cash but will be debited to the
customer’s current account.

 Commitment charges : It is a charge made by the banker on overdrafts and cash credit accounts.
The commitment charge is charged on the unused part of the sanctioned limit which does not earn
any profit to the bank besides charging interest on the used part of overdraft.
 RIGHTS TO SET - OFF OR RIGHT TO COMBINE BANK ACCOUNTS :

Rights to Set-off is a right to adjust the Accounts of one against the other between
the Debtor and Creditor to determine the Net Balance due to either Debtor or
Creditors. Supposing X must pay Rs.10,000 and Y must pay X Rs. 4,000 . After
Adjusting Rs.4,000 to X, as Account, as Y must pay Net Balance of Rs.6,000.

If a Customer holds two account in the same capacity , the Accounts can be adjusted
one against the other or the Accounts can be combined as per the rights to set-off
.the right to set-off facilities the Banker to know the Net Amount due to him from the
Customer and ensures the safety of Funds.
 RIGHTS TO APPROPRIATE PAYMENTS :

The needs of appropriate arises in case a customer raises more than one Loan
Account. The Payment made by the Customer may not be enough to clear all
Debts due to the Customer may not be enough to clear all Debts due to the
Customer . Similarly, when a Customer olds more than one Current Account
and regularly operates these Accounts by depositing funds and making
withdrawals simultaneously in all the Accounts he holds. It creates a problem
for the Banks to appropriate which fund to which Account.in such
circumstances, he must follow the rules Governing the appropriation.
 RIGHTS TO PRODUCE BOOKS OF ACCOUNTS :

The Banker need not produce the original books of Accounts as evidence in the
cases in which the Banker is not a party. He can issue only an attested copy of
the required portion of the Account which can be utilizes as evidence before the
court when the Court is not satisfied with the Certified copy, the court can
summon the Original Books. But when a Banker is a party to the Suit, the Court
can force the Banker to produce the Original Records in support of his claim.
 RIGHTS UNDER GARNISHEE ORDER :

A Garnishee order is an order issued by an Court addressed to Banker instructing to

stop or withhold Payment of Money with the Banker and who has committed a default
in satisfying the claim of his Creditors. The Creditors on whose request the order is
issued is called Judgement Creditor and the person to whom it is issued is known as
the Garnishee.
 OBLIGATIONS FOR A BANKER

 To honor Customer’s cheques.

 To maintain secrecy of Customer's account.

 Give reasonable notice before closing the Customer's account.

PROCEDURE TO OPEN
AN ACCOUNT WITH THE
BANKER
 Decide the Type of Bank Account you want to Open

There are several types of bank accounts such as Saving Account, Recurring Account,
Fixed Deposit Account and Current Account. So a decision regarding the type of account
to be opened must be taken.

 Approach any Bank of choice & meet its Bank Officer

Once the type of account is decided, the person should approach a convenient bank. He
has to meet the bank officer regarding the opening of the account. The bank officer will
provide a proposal form (Account Opening Form) to open bank account.
 Fill up Bank Account Opening Form - Proposal Form
The proposal form must be duly filled in all respects. Necessary details regarding name,
address, occupation and other details must be filled in wherever required. Two or three
specimen signatures are required on the specimen signature card. If the account is
opened in joint names, then the form must be signed jointly. Now a days the banks ask
the applicant to submit copies of his latest photograph for the purpose of his identification.

 Give References for Opening your Bank Account

The bank normally required references or introduction of the prospective account holder
by any of the existing account holders for that type of account. The introducer introduces
by signing his specimen signature in the column meant for the purpose The reference or
introduction is required to safeguard the interest of the bank.
 Submit Bank Account Opening Form and Documents
The duly filled in proposal form must be submitted to the bank along with necessary
documents. For e.g. in case of a joint stock company, the application form must
accompany with the Board's resolution to open the account. Also certified copies of
articles and memorandum of association must be produced.

 Officer will verify your Bank Account Opening Form

The bank officer verifies the proposal form. He checks whether the form is complete in all
respects or not. The accompanying documents are verified. If the officer is satisfied, then
he clears the proposal form.
 Deposit initial amount in newly opened Bank Account
After getting the proposal form cleared, the necessary amount is deposited in the bank.
After depositing the initial money, the bank provides a pass book, a cheque book and
pay in slip book in the case of savings account.
 OPERATION OF BANK ACCOUNTS.
 Acceptance of Deposits.

 Lending of Funds.

 Clearing of Cheques.

 Remittance of Funds.

 Lockers & Safe Deposits

 Bill Payment Services.

 Online Banking.

 Credit & Debit Cards.

 ADVANTAGES OF HAVING A BANK
ACCOUNT
 Safety of Money.

 Cultivate habit of Savings.

 Avail Loan facilities.

 Collection of Cheques.

 Facility in making Payments.

 Safe custody of Valuable Articles.

 Providing Credit Information.

 JOINT HINDU FAMILY

 The HUF carries out Ancestral Business and possesses Ancestral properties. The

Eldest Male member is called as a Karta. The right to manage HUF property vests in

the Karta of the family all other male members are called Coparceners.
 PROCEDURE AND PRACTICE IN OPENING
HUF ACCOUNT
The following Documents to be obtained for Opening Account of HUF :

 Declaration from the Karta

 Proof of identification of Karta.
 Prescribed joint Hindu Family letter Signed by all the audit Coparceners.
 Banker's duty
 The account may be opened in the name of Karta or in the name of family business and should be
duly introduced.
 The account opening from should be signed by the audit Corpocracies, even though the Karta would
operates the account.
 The declaration signed by all the members as to who is the Karta and who are the other
coparceners including minor coparceners should be obtained.

 If there are minor coparceners, the other adult coparceners should sign for self and as
guardians of minors.

 Authority should be given to the Karta to operate the account of all concerned under their
joint signature.

 On attaining majority, the minor coparceners should be asked to join with other coparceners
in signing the existing account opening form in ratification of previous transactions.
 Any member of the HUF can stop payment of a cheque drawn by Karta. When the bank
receives a notice about any dispute amongst the family members of the HUF, the
operations in the account should be stopped till further instructions from a competent
court.

 The burden of proof that loan was taken by Karta for purposes beneficial to the family
lies on the banker. Thus, before granting loans necessary enquiries should be made to
ensure it. Otherwise, the bank may not be able to succeed in a suit for recovery of debt.