Banker & Cuctomer Relationship
- 1. Presented By: Gurpreet Kaur MBA 4th sem
- 2. Definition of a ‘BANKER’ The Banking Regulations Act (B R Act) 1949 does not define the term ‘banker’ but defines what banking is H.L. HART – the banker is one who receives money, collects cheques and drafts, for customers, with an obligation to honour the cheques drawn by customers from time to time subject to availability of amounts in the account. Section 3 of NI ACT 1881, and Section 2 of BILL OF EXCHANGE ACT 1882. state that the term banker includes person or corporation or a company acting as banker.
- 3. Who is a ‘Customer’? A person who buys goods or services from a shop or a business entity. A person you deal with as a business entity. There is no statutory definition. A person/ company/entity who has an account with a bank is a customer. There is no agreement as regards to the time period of the dealings. A casual transaction like encashment of a cheque does not entail a person to be customer. A customer is one who has an account with the bank and to whom the banks undertakes to extend business of banking.
- 4. Banker and a Customer Relationship The relationship between a banker and a customer depends on the type of transaction. These relationships confer certain rights and obligations both on the part of the banker and on the customer. Classification of Relationship General Relationship • . Special Relationship • . Special Relationship
- 5. General Relationship 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
- 6. General Relationship 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.
- 7. Special Relationship 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.
- 8. Special Relationship Bailee – Bailor Sec.148 of Indian Contract Act, 1872: 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. The person delivering the goods is called the "bailor". The person to whom they are delivered is called, the "bailee". Banks secure their advances by obtaining tangible securities. In some cases physical possession of securities goods (Pledge), valuables, bonds etc., are taken.
- 9. Special Relationship Lessor and Lessee Sec.105 of Transfer of property Act 1882: 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. Safe deposit lockers
- 10. Special Relationship 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”. Banks collect cheques, bills, and makes payment to various authorities viz., rent, telephone bills, insurance premium etc., on behalf of customers
- 11. Special Relationship As a Custodian A custodian is a person who acts as a caretaker of some thing. Banks take legal responsibility for a customer’s securities. While opening a Dmat account bank becomes a custodian.
- 12. Termination of relationship between a banker and a customer The death, insolvency, lunacy of the customer. The customer closing the account i.e. Voluntary termination. Liquidation of the company. The closing of the account by the bank after giving due notice. The completion of the contract or the specific transaction.
- 13. Duties of a banker a) Duty to maintain secrecy/confidentiality of customers' accounts. b) Duty to honour cheques drawn by customers on their accounts and collect cheque, bills on his behalf. c) Duty to pay bills etc., as per standing instructions of the customer. d) Duty to provide proper services. e) Duty to act as per the directions given by the customer. If directions are not given the banker has to act according to how he is expected to act. f) Duty to submit periodical statements i.e. informing customers of the state of the account g) Articles/items kept should not be released to a third party without due authorization by the customer
- 14. RIGHTS OF BANKER Right of general lien- Lien is the right of the creditor to retain the goods and securities owned by the debtor until the debt due from him is paid. It confers upon the creditor to retain the securities of the debtor. It does not confer the right to sell. There are two types of liens – General lien and particular lien. Section 171 of Indian contract Act 1872 confers general lien on bankers. Pledge – Section 172 of Indian contract Act 1872- bailment of goods as security for payment of a debt or performance.
- 15. Conti….. Right of set off – The mutual claims of a debtor and a creditor are adjusted together and only the remainder amount due is payable. Right of appropriation - If the customer has more than one loan account , the customer can direct the repayment of the loan as credit into any other accounts. If there is no specific directions from the customers the banker has a right to appropriate as per his choice. Right to charge interest- As a creditor the banker has right to charge interest on the funds he lends as per the norms and as per the contract.
- 16. . THANK YOU