A banker performs various functions including accepting deposits, issuing and paying cheques, collecting cheques, and lending money. A banker has relationships with customers that can include creditor-debtor, principal-agent, bailer-bailee, pawner-pawnee, mortgager-mortgagee, lessee-lessor, and indemnifier-indemnified depending on the specific services being provided. Bankers have obligations to maintain customer secrecy and honor cheques as well as rights like general lien, set-off, charging interest and fees, and appropriating payments.
A banker performs various functions including accepting deposits, issuing and paying cheques, collecting cheques, and lending money. A banker has relationships with customers that can include creditor-debtor, principal-agent, bailer-bailee, pawner-pawnee, mortgager-mortgagee, lessee-lessor, and indemnifier-indemnified depending on the specific services being provided. Bankers have obligations to maintain customer secrecy and honor cheques as well as rights like general lien, set-off, charging interest and fees, and appropriating payments.
A banker performs various functions including accepting deposits, issuing and paying cheques, collecting cheques, and lending money. A banker has relationships with customers that can include creditor-debtor, principal-agent, bailer-bailee, pawner-pawnee, mortgager-mortgagee, lessee-lessor, and indemnifier-indemnified depending on the specific services being provided. Bankers have obligations to maintain customer secrecy and honor cheques as well as rights like general lien, set-off, charging interest and fees, and appropriating payments.
A banker performs various functions including accepting deposits, issuing and paying cheques, collecting cheques, and lending money. A banker has relationships with customers that can include creditor-debtor, principal-agent, bailer-bailee, pawner-pawnee, mortgager-mortgagee, lessee-lessor, and indemnifier-indemnified depending on the specific services being provided. Bankers have obligations to maintain customer secrecy and honor cheques as well as rights like general lien, set-off, charging interest and fees, and appropriating payments.
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CUSTOMERS RELATIONSHIP
. Definition of banker • A person who is doing the banking business is called a banker. But it is not easy to define the term ‘Banker’ because a banker performs multifarious functions.
• According to section 3 of the NI Act, 1881, banker includes any
person acting as a banker and any post office savings bank.
• According to section 5(b) of the Banking Regulation Act, 1949,
banking means the 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. . To sum up a banker is who • Take deposit account • Take current accounts • Issue and pay cheques • Collect cheques crossed and uncrossed for his customers Definition of customer The term customer is not defined by law. Ordinarily, a person who has an account in a bank is called a customer. • Acc to Dr. Hart,a customer is one who has an account with a banker or for whom a banker habitually undertakes to act as such. . . CREDITOR-DEBTOR
• Relationship between the customer having a
deposit account and the banker. • Depositor is the lender and the banker is the borrower. • Depositor is the creditor and the banker is the debtor. • The money handed over to the bank is a debt. • The money once deposited in the bank becomes the money of the bank and it is prerogative of the bank to use that money as it deems fit. The depositor remains a creditor that too an unsecured creditor DEBTOR-CREDITOR
• When the customer avails a loan or an advance
then his relationship with the banker undergoes a change to what it is when he is a deposit holder. • Since the funds are lent to the customer , he becomes the borrower and the banker becomes the lender. • The relation is the debtor- creditor relation, the customer being a debtor and the banker a creditor. PRINCIPAL-AGENT • Banks provide ancillary services such as collection of cheques, bills etc. They also undertake to pay regularly the electricity bills, phone bills etc. • The relationship arising out of these ancillary services is of principal-agent between the customer and the bank. • The relationship seizes once the customer dies, becomes insane or becomes insolvent. • The proceeds of the cheques sent for collection, which are in transit, not created to the customer account are not the moneys of the banker till such time as they are credited into the customer account. Bailer-Bailee
• A bailment is the delivery of goods in trust. A bank may
accept the valuables of his customer such as jewellery, documents, securities for safe custody. • In such a case the customer is the Bailer and the bank is Bailee. • If a customer keeps certain valuables or securities with the bank for safe-keeping or deposits a certain amount of money for a specific purpose, the banker, besides becoming a Bailee, is also a trustee. The money or the securities so kept are not at the disposal of the bank. The banker cannot utilize those moneys or securities as he desires since the money does not belong to him. Pawner and Pawnee
•When a customer Pledge goods and
documents as security for an advance he then become Pawner (Pledger) and the bank becomes the pawnee (pledgee).
• The pledged goods are to be returned intact to
the pawner after the debt is repaid by him. Mortgager and Mortgagee
• Mortgage is the transfer of an interest in
specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan.
• When a customer pledges a specific
immovable property with the bank as security for advance, the customer becomes mortgager and banker is the mortagee. LESSEE-LESSOR
• The banks provide safe deposit lockers to the
customers who hire them on lease basis. The relationship therefore, is that of lessee and lessor. In certain banks, this relationship is termed as licensee and licensor. The bank leases out the Assests to clients for their use on lease the customer become lessor and Bank become lessee INDEMNIFIER- INDEMNIFIED
• The customer is indemnifier and the bank is indemnified.
• A contract by which one party promises to save the other
from loss caused to him by the conduct of the promisor himself or the conduct of any other person is called a contract of indemnity – section 124 ( Indian Contract Act, 1872). In the case of banking, this relationship happens in transactions of issue of duplicate demand draft, fixed deposit receipt etc. The underlying point in these cases is that either party will compensate the other of any loss arising from the wrong/excess payment. Banker and trustee
• When banker appointed as receiver by court in proceeding,
money is deposited in bank and bank act as trustee because in this case bank is receiver of money for specific propose. • A banker becomes a trustee under special circumstances. When a customer deposits securities or other valuables with the banker for safe custody, the banker acts as trustee of customer. Advisory relationship • When bank advises the customer to make their investment in particular business, trade , project etc. This advice either given officially or unofficially. While given advice customer has to take maximum care and caution OBLIGATIONS OF THE BANK • Obligation to honor the cheque - When a current account is opened by a banker in the name of a customer there is an obligation on the banker to honor the customer’s cheque as long as there are sufficient funds available in the customer’s account for meeting the cheques. The debts are repayable by the banker to the customer on demand as per contract entered into between them. So, whenever the customer demands the repayment of his deposits by issuing cheques, there is a contractual obligation on the banker to honor his customer’s cheques and repay his deposits. Obligation to maintain secrecy
• Obligation to maintain secrecy -Section 13 of
banking companies Act 1970 stipulates the banks to maintain secrecy of their customers accounts and dealings with them. • However there are exceptions. The exceptions are : 1. When law requires 2. When the practices and usages among bankers warrants exchange of information. Secrecy of customer’s account Secrecy of customer’s account- the The bank owes a contractual duty not to disclose the customer’s financial position without his consent. However the obligation of secrecy is not considered essential on the following occasions. 1. When a banker is required to give evidence in the court. 2. When there is national emergency and disclosure is essential in the public interest. 3. When there are clear proofs of treason to the state 4. When a consent is given by the customer to provide information for the preparation of balance sheet. Garnishee order (order of the court) • Garnishee order (order of the court) – It is the duty of the banker to abide by the order of the court (garnishee order) and attached the funds of the customer to the creditors who has obtained the order in his favor.
• Standing orders - It is the duty of the bank to
abide by the standing orders of the customers in making periodical payments on his behalf such as club, library, insurance premium etc. RIGHTS OF THE BANKER • Banker’s general lien: Banker’s general lien is the right of a banker to retain the goods and securities entrusted to him as a banker by a customer in respect of the general balance due from the customer • Right of set-off or banker’s right to combine account: A banker’s right to set-off refers to the right of a banker to adjust the amount due to him from a customer on one account against the amount due from him to the customer on another account. In short, it is the right of a banker to combine or adjust the debit and credit balances of two or more similar account held by a customer in the same capacity.. RIGHTS OF THE BANKER
• Banker’s right to charge compound interest: When a
banker grants an advance to a customer, he becomes the creditor of the customer. When he is the creditor of the customer, the banker has an implied right to charge interest on the customer by virtue of banking customs.
• Banker’s right to charge incidental charges: Incidental
charges may take the form of services charges, ledger folio charges, processing charges, appraisal charges, handling charges, penalty charges, stop payment charges etc. RIGHTS OF THE BANKER • Banker’s obligation and rights when a customer’s account is attached by a garnishee order: When a debtor fails to pay the amount due from him to his creditors and when the creditor knows that some money is due to his debtor from another party, he may apply to the court for the issue of a garnishee order on the debtor of his debtor attaching the amount due from him to his debtor and directing him to pay the same to the judgment creditor RIGHTS OF THE BANKER Bankers Right of Appropriation (Clayton’s case) • When a customer owes several distinct debts to a banker and makes a payment which is insufficient to discharge his entire indebtedness, there is a problem of appropriating payment. In such a case when money is paid, it is to be applied according to the expressed will of the customer, not the banker. If the party to whom the money is offered does not agree to apply it according to the expressed will of the party offering it, he must refuse it and stand upon the rights which the law gives him. In case there is a current account, and neither the banker nor the customer makes any specific appropriation, then any successive payments will be appropriated in accordance with the rule in Clayton’s case. RIGHTS OF THE CUSTOMER TOWARDS THE BANKER 1. A customer who has deposited money can draw check on his account up to the extent of his credit balance or according to overdrawing limit sanctioned by the bank. 2. A customer has the right to receive statement of accounts from the bank. 3. A customer has the right to sue the bank for compensation of a wrongful dishonor of his check. 4. A customer has a right to sue and demand compensation if the bank fails to maintain the secrecy of his account. 5. To claim for and receive the profit/ return on his deposits as promised by bank Duties of a customer 1. It is the duty of the customer to present checks and other negotiable instruments during the business hour of the bank. 2. The instruments of credit should be presented by the customer with in due time from their dates of issue. 3. A customer must keep the check books issued by the bank in safe custody. In case of theft or loss, it is the duty of the customer to report the matter immediately to the bank. TERMINATION OF RELATIONSHIP 1.Mutual Agreement: This is clear enough. The balance at the credit of the customer will have to be paid off and the overdraft, if any cleared. 2.Notice to Terminate: In case of a current account, no such notice appears necessary. But if it’s a deposit account, the banker could insist on the notice period specified on the fixed deposit. 3.Death of Customer: This is an obvious method of terminating the relationship. But it is the notice of death, which revokes the banker’s authority to pay cheques. TERMINATION OF RELATIONSHIP 4.Lunacy of Customer: The lunacy of a customer automatically terminates relationships though here again the banker’s authority to pay cheques is revoked by notice of insanity. 5.Bankruptcy: Bankruptcy or winding up is a sufficient ground for terminating the relationship. The customer will be entitled to a dividend in respect of any balance standing to the credit of his account calculated in the ordinary ways and will be entitled to the return of any articles bartered.