BANKER CUSTOMER RELATIONSHIP

Ambily B. HormisGeever ThambiJemy Anna Jose

Jisha P.GSanoop Girish

Who is a Banker…..• A person doing the banking business.• Multifarious functions:

Man of wisdomRepository of financial advices

• Indian View: “Accepting for the purpous of lending and investment, of deposits of money from the public, repayable on demand, order or otherwise and withdrawal by cheque, draft order or otherwise.”

Who is a Customer…..

• He must have some sort of an account• Even a single transaction may constitute

him as a customer• Frequency of transactions is anticipated

but not insisted upon.• The dealings must be of banking nature.

Duties of Banker

• Duty of secrecy• Duty to honour cheques• Duty to submit periodical statements• Duty to collect cheques/bills

Rights of a Banker

• Right of General lien• Right of set off• Right of appropriation• Right to act as per mandate of customer

Implied Terms• The bank will receive the customer’s deposits and collect

cheques• The bank will comply with written orders (i.e. cheques)

issued by its customers assuming there is sufficient credit tin the account;

• The bank will repay the entire balance on the customers demand at the account holding branch during banking hours

• The bank will give reasonable notice before closing a customer’s account if it is in credit

• The bank must only act on its customer’s valid instructions and not on any forgery of those instructions

Cont…..

A customer only has duties to:• To exercise reasonable care when

drawing cheques to prevent forgery and alteration; and

• To notify the bank if he actually knows of forgeries on his account, a customer who wilfully ignores the obvious is not considered to have actual knowledge

ClassificationsTypes of transaction1. Acceptance of Deposits2. Overdraft/Loan/CC in debit

balance3. Collection of cheque on

behalf of customer4. Sale/Purchase of securities

/shares on behalf of customer5. Carrying on standing

instruction6. Purchase of DD/MT/TT &

Issuing Bank7. Payee of DD and Issuing

Bank8. Safe custody of article 9. Safe deposit Locker10. Money tendered to bank

pending instruction for its disposal

Banker Customer RelationshipDebtor and CreditorCreditor and Debtor

Agent and Principal

Agent and Principal

Agent and Principal

Agent and Principal

Beneficiary and TrusteeBailee and BailorLessor and LesseeTrustee and Beneficiary

Debtor-CreditorCustomer is the lender and Bank becomes the borrowerFeatures:• Bank is free to use the money• Demand of payment should be made by the customer• Demand should be made where account exists• Demand should be made in the proper manner• For monies deposited Cr does not call for any security

from the Dr as in the case of commercial debts• SB account-law of limitation does not begin to run until

demand has been made for repayment• FD account-on or after the due date of deposit the law of

limitation begins to run from the date on which the receipt is produced

Creditor-Debtor

• Bank is the lender and customer is the borrower in the case of loan/CC and overdraft.

• Banker is the privileged person because he is acting as a secured creditor.

• Law of limitation will operate from the date of the loan unless it is renewed.

Agent-Principal

• Banker is the agent and customer is the principal

• Ancillary services rendered by bank is remittance, collection of cheques, bills etc. on behalf of the customers.

Trustee-Beneficiary

• Bank is the trustee and customer is the beneficiary.

• A trustee holds money or assets and performs certain functions for the benefit of the other person called beneficiary.

Bailee-Bailor

• Bank is the Bailee and customer is the bailor.

• According to the section 148 of the Indian Contract Act, 1872, the bank becomes custodian of the securities of the customer and hence as a bailee is liable for any loss caused to the bailor due to negligence.

Lessor-Lessee

• Bank as a lessor and customer as lessee.• Also termed as licensor-licensee.• Provides safe deposit lockers to the

customers who hire them on lease basis.• Bank lease out space for the use of clients• Bank not responsible for any losses that

arise except due to any negligence of that bank.

Termination of Banker-Customer Relationship

• Death• Insolvency• Lunacy of the customerThe relationship is not affected by reason of:• Arrest of the customer• Imprisonment of the customer• Migration of customer to foreign country

Thank You