Banker customer relationship

Banker Customer Relationship Banker: a banker is a dealer in capital, or more properly a dealer in money. He is an intermediate party between the borrower and the lender. He borrows from one party and lends to another. Customer: any one conducting banking transactions with a bank is a customer. A person who has an account in a bank is said to be a customer of the bank. A person whose money has been accepted by a bank on the footing that they undertake to honor cheques up to the amount standing to his credit. According to current banking practices only those persons are said to be customers who maintain a regular bank account .

Qualification of a customer Nature of relationship is purely contractual. Any one who is capable of entering into a contract can be a customer. He must not be a minor. He must have attained the age of majority. A person is deemed to have attained majority when he has completed his age of 18 years. He should be a person of sound mind. If not he is incompetent to contract. Section 12 of the contract act says that a person is said to be of sound mind for the purpose of making a contract if at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

Qualification of a customer He shall not have been debarred from entering into any contract under any law. Requisites of a contract: Free consent Competent to contract Offer Acceptance consideration

Rights of a customer towards the banker To draw cheques against his credit balance. To receive a statement containing a copy of his account with the banker. Customer has the right to get corrected any errors he finds. To sue the bank for the cost, loss and damages when the cheque is wrongfully dishonored. To sue when the banker has not maintained the secrecy of his account. To claim for and receive the profit / return on his deposits as promised by the bank.

Duties of a customer towards the banker Customer must present the cheques for payment and collection within the business hours of his banker. The customer should see that the cheques and other instruments are presented for payment within a reasonable time from the date of their issue. Customer should keep his cheque book under lock and key so that no unauthorized person gets access to it. He should draw cheques very carefully and in such a way that there is no room left for any fraudulent alterations and additions. To pay charges to the bank. Bankers have the right to charge for the services they provide to their customers.

General relationship The general relation ship between banker and customer is of a debtor and a creditor. Creditor: a person from whom deposits have been received on the basis of participation in the profit & loss. Debtor : a person to whom finance has been provided.

Other relationships Bailor and Bailee: Bailment is delivery of goods by one person to another for some purpose, upon a contract. When the banker provides safe custody facilities to his customers for their valuables the relationship becomes that of a Bailor and Bailee. Where the customer is the bailor and the banker is the bailee. Old relationship started from earlier bankers-goldsmiths.

Principle and agent: When a banker performs agency services he becomes agent of his customer. These services include collection of cheques and other instruments. Collection of utility bills and fees etc.

Pawner/pawnee, mortgagor and mortgagee: When a customer pledges goods and documents with the bank as security for an advance, he becomes the pawner and the banker becomes the pawnee. Similarly when advance to the customer is made against security of immovable property the relationship becomes that of mortgagor and the mortgagee, where banker is the mortgagee and customer is the mortgagor.

Termination of relationship Since banker customer relationship is a contractual one it may be terminated by any one of the two by serving a notice to the other. Notice by a customer: Change in the residence of the customer. Customer may not be satisfied with the services offered by the banker. Account may also be closed due to the death of the customer.

Notice by a banker Banker may close the account of the customer for a number of valid reasons. Cannot be done without giving reasonable notice. Serve the notice generally on the following reasons. Presentation of customer’s cheques for payment without having sufficient funds in the account. When a customer is unable to keep a remunerative credit balance in the account. Regular presentation of cheques after business hours.

Notice by a banker Obstinacy of the customer. Death of customer. When the customer does not close his account even after the expiry of reasonable notice given to him the banker may close the account by returning the entire credit balance in his account and asking for return of unused cheques. Death of customer. As soon as banker receives the intimation about the death of his customer he must stop payment of cheques drawn on him by deceased customer.

Unsatisfactory operation. Customer insanity: The mental disorder or insanity of customer automatically terminates the bank’s authority to act as his agent, since the banker customer relationship comes to an end. Customer insolvency: Insolvent customer looses all his rights. As soon as the banker receives the notice of insolvency of his customer his authority to take any action on behalf insolvent customer comes to an end. Order of court. Unsatisfactory operation.