BANKER-CUSTOMER RELATIONSHIP

Banker

• A Banker is one who in the ordinary course of his business, honours cheques
drawn upon him by persons from and for whom he receives money on current
accounts.
Dr. H.L. Hart
• Four essential functions for consideration of an entity as Bank or Banker:
(i) Take Deposit Accounts;
(ii) Take Current Accounts;
(iii) Issue and Pay Cheques; and
(iv) Collect Crossed and Uncrossed Cheques for its Customers.
Sir John Paget
• ‘Banking’ means the accepting, for the purpose of lending or investment, of
deposits of money from the public, repayable on demand or otherwise, and
withdrawal by cheque, draft, order or otherwise.
Section 5(b) of the Banking Regulations Act 1949
 Customer
According to Duration Theory:
• To constitute a customer, there must be some recognisable course or habit of dealing in
the nature of regular banking business…It is difficult to reconcile the idea of a single
transaction with that of a customer. The word surely predicates even grammatically,
some minimum of custom antithetic to an isolated act.
Sir John Paget
According to Modern theory:
• The relation of banker and customer begins as soon as the first cheque is paid in and
accepted for collection and not merely when it is paid.
Ladbroke v. Todd 30 TLR (1914) 433
• Single transaction may constitute a customer.
Savory and Co. v. Llyods Banks Ltd. 1932 TLR 344
• Customer is a person who has the habit of resorting to the same place or person, to do
the business. So far as the banking transactions are concerned, he is a person whose
money has been accepted on the footing, that the banker will honour up to the amount
standing to his credit, irrespective of his connection being of short or long standing.
Central Bank of India Ltd. v. Gopinathan Nair AIR 1970 Ker. 74
Essential Requisites to Constitute a Customer

01 Bank Account

02 Anticipated Frequency

03 Dealing Must be of Banking Nature

04 Contractual Relationship
 General Relationship

Debtor and Creditor

Lessor and Lessee

Trustee and Beneficiary

Pawnor and Pawnee Banker- Principle and Agent

Customer
Relationship

Mortgager and Mortgagee Trader and Consumer

Guarantor and Beneficiary Bailee and Bailor

 Special Relationship

Banker’s Right Banker’s Obligation

1. General lien
2 1 1. Duty to honour cheque
2. Set-off 2. Maintain secrecy of account
3. Appropriation of payment 3. Honour guarantee
4. Claim incidental charges 4. Honour LC
5. Compound interest 5. Recovery of Debt
6. Dropping Box
7. Maintain Correct Account
3 8. Not to convert excess Credit

Customer’s Obligations and Right

1. Not to draw cheque without sufficient funds
2. Drawing cheque with reasonable care
3. Repay overdrawings
4. Pay reasonable charges
5. Maintain genuineness of transactions
6. Make demand for repayment of deposit
 Special Type of Customers

Minor

Hindu Undivided 1
Family 8 Lunatics
2

Married Woman 7
3 Drunkards

Blind Person 6 4 Insolvent / Bankrupt

5
Illiterate Person
 SUMIT BAMHORE
sbamhore10@nlunagpur.ac.in
Assistant Professor of Law
MNLU Nagpur