Table of Contents

Rights of a Customer...........................................................................3
Right to fair treatment................................................................3
Right of transparent, fair and honest dealing.....................3
Right to suitability........................................................................3
Right to privacy.............................................................................3
Right to grievance redressal and compensation................4
Duties of customers to banks..............................................................4
The obligation of a customer..............................................................5
To repay overdrawing: -..............................................................5
To pay bank charges...................................................................5
Operation of account...................................................................5
Duty of reasonable care in drawing cheques......................5
Young v. Grote – Case Law........................................................6
Non- drawing of cheque in insufficient of funds................6
Termination of relationship or closing an Account..........................6
Termination by the customer...................................................6
Termination by the banker.................................................................7

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Rights of a Customer

Right to fair treatment

According to this right, banks cannot discriminate between customers on

the basis of gender, age, religion, caste, and physical ability while providing
services. This does not mean that banks cannot offer schemes which are
designed for a particular set of people. Banks have all the right to offers
differential rates of interest or products to customers.

Right of transparent, fair and honest dealing

The contract between the banks and customers should be easily understood
by the common man. It is the responsibility of the bank to make the
customer understand interest rates, the risk involved and all other terms
and conditions. Banks should not hide anything from the customer before
the signing of the agreement. Even if there are any short comings, they
should be communicated to the customer. The language in the contract
should be simple and easily understood.

Right to suitability
You might have come across a lot of cases of mis-selling of financial
products, especially life insurance policies. Usually, customers are forced to
buy the product which offers the highest commission to an agent. As per
this right, customers should be sold the product which is suitable to them.
So, banks should always keep customers’ needs in mind, before selling any
product.

Right to privacy
As per this law, the personal information provided by the customers to the
bank, must be kept confidential. Bankers can disclose only such
information, which is required by law or only after customers have given
permission. Banks are not allowed to provide your details to telemarketing
companies or for cross-selling.

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Right to grievance redressal and compensation
Banks are responsible for all the products and services offered by them and
customers have the right to easy and simple grievance redressal systems in
case the bank fails to adhere to basic norms. Along with their own products,
bankers are responsible for the products of third parties like insurance
companies and fund houses. If the customer complaint is not resolved by
the bank, customers can go to the banking ombudsman.

Duties of customers to banks

1. It is the duty of customers to present the cheque and other negotiable

instruments only during the business hours of the bank.

2. In the case of any disagreement in the bank statement, customers should

inform the bank.

3. Whenever photographs of customers are required by the bank, it should

be submitted.

4. It is the duty of the customer to present the instrument of credit within

the due time from the date of issue.

5. The cheque should be filled by customers very carefully.

6. If the cheque book is lost or stolen, it is the duty of the customers to

inform the bank.

7. If the customer notices any forgery in the amount of the cheque, he/she
should inform it to the bank immediately.

8. Customers should provide proper information in the Know Your Customer

(KYC) form.

9. Customers should make the repayment of all the dues on time.

10. It is the duty of the customers to read the MITC (Most Important Terms
and Conditions)

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The relationship between the banker and the customer arises out of the
contract between them and cannot be created except by mutual consent. In
the case of banking where a person is offered to open a bank account and
once the customer accepts to open a bank account it takes the face of the
contractual relationship.

The obligation of a customer

To repay overdrawing: -
Bankers generally allow overdraft facilities to its customers holding current
accounts. The facility of the overdraft is to keep the reputation of its
customers by the dishonor of cheque. Hence, it’s the duty of the customer to
pay the overdraft amount. Alike is the case with the credit card facility.

To pay bank charges

A customer is a duty bond for the services charges they enjoy from banks
like locker facility, issues of demand draft, travel cheques, etc.

Operation of account
The customer should immediately notify any forged activities drawn on his
account. It can help the banker and will not pay to honor the cheques
drawn by the forged signature.

Duty of reasonable care in drawing cheques

The customers another self-regarding duty is to draw cheques on his
account in a way which does not facilitate the alteration of the amount,
failure to do so this, will entitle the customers bank to debit his account for
the amount for which cheque appears to have been drawn if it pays that
amount on presentation of the cheque and does so in good faith and without
negligence.

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Young v. Grote – Case Law
It was held that the customer should take due negligence while drawing a
cheque if he fails to do so, the bank will not be liable. In this case, the
customer draws the cheque by leaving the gap in figures and words which
resulted in the alteration of the cheque. The court held that the bank is not
liable to pay the amount.

Non- drawing of cheque in insufficient of funds

The customer should not draw a cheque for the insufficiency of funs in the
account which leads to the dishonor of the cheque and it is considered as a
criminal offense. The customer can be punished with imprisonment for a
term which may extend to 2 years and a fine double of the cheque.

Termination of relationship or closing an Account

The relationship can be terminated because of two reasons, first by the

parties voluntarily at customers will and second by operation of law.

Termination by the customer

A customer may close his account at will without notice to a banker at any
time in the following circumstances.

a. If the customer is not satisfied with the services of the bank.

b. If he cannot get required facilities from the banker

c. If he loses his confidence in the bank’s reputation, economic stability, etc.

d. If he does not agree with the terms and conditions of the bank.

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Termination by the banker

1. Death of the customer

As soon as the bank receives the information on the death of a customer, he

should stop the transaction and also should notify the information in
ledgers and others. Reliable information includes the announcement in the
newspapers, radio, or from relatives. In such a case banker should close the
account and hand over the balance to the nominee or deceased heirs on the
production of the death certificate.

2. Customer’s insanity

The same is the case of insanity once the bank receives the information of
the insanity of the customer, the banker should stop the transaction from
his account and close the account. Later, the banker can reopen with the
orders of the court or the certificate issued by the medical authorities.

3. Customer Insolvency

The bank should stop the transaction of the account of the customer after
receiving information about his becoming insolvent.

4. Assignment

If the customer assigns his account with its fund to any other person and
orders the bank for the assignment then the bank should handover the
account to such a person.

5. Winding- up of the company

If a company is wound up, the banker should act according to the

instruction of the court.

6. Closing of partnership firms

If the partnership firm is closed by the consent of partners or due to death of

one or more partners, the bank should stop the transaction, and then close
the account of the said firm.
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7. Customer of an enemy country

During the war period, if the customer belongs to an enemy country, the
bank is justified in closing his account.

Bank closes the account of the customer on three other conditions: -

1) If a customer becomes fraudulent and turns to be a cheater

2) If customer harass the staff and behave in an indecent manner

3) If the customer spreads bad goodwill of banks in the world.