TERMINATION OF BANKER-

CUSTOMER RELATIONSHIP

Presented To: Presented By:

Prof. Dr. Muhammad Muhammad Kashif
Ashfaq Ahmad Bhatti B.Com (Hons) 6th sem
BC19-230
Section C Morning
Learning Outlines of the
Presentation
 Termination of Banker-customer Relationship
 Modes of termination of relationship
 Notice by Customer
 Notice by Banker
 Other reasons
Termination of Banker-Customer
Relationship
 Banker-customer relationship is a
contractual relationship between
the two parties.
 It can be terminated by either
both or any one party by the
process of law.
 The banker is also competent to terminate his relationship
with the customer, if he finds that the customer is no more
a desirable customer.
 If an account remains un-operated for a very long period,
the banker may request the customer to withdraw the
money. the banker usually transfers the balance to an
“Unclaimed Deposit Account”, and the account is closed.
Modes of Termination of
Relationship
There are two modes/methods/ways
of terminating the Banker-Customer
relationship.
1) Notice by the Customer
2) Notice by the Banker
1) Notice by Customer:
A customer can terminate his relationship by closing his account
due to any of the following account:
 Change in Address:
Due to change in address, the
customer may not be able to easily operate his account from the
new place of his residence or job. He may, therefore, request the
banker to close his account,
 Lack of satisfaction with services:
A customer may
not be satisfied with the services offered by the banker. The rude
behavior of the staff, undue delays in encashment of cheques etc.
are some of the grounds on which customer may close his
account.
 Death of customer:
Account may also be closed due
to the death of customer. The law does not authorize the
heirs to operate the account of the deceased person.
Therefore, the credit balance of the deceased customer
is paid to the heirs according to the legal requirements
in the specific case.
2) Notice by the Banker:
The banker takes the extreme step to close the account of
the customer in circumstances when the customer is guilty
of conducting his account in an unsatisfactory manner, i.e.
 If the customer is convicted for the issuance of cheques
without sufficient funds.
 If he does not fulfill his commitment to pay back the
loans or overdrafts, etc.
Notice by the Banker:
The banker gives a formal notice to the customer that he
wishes to close the account after the specific period.
He may also request his customer to withdraw all the
credit balance in his account and returned the unused
cheques.
The Banker serves the notice on the following grounds:
 Issuing of cheques with insufficient funds:
When the customer does not stop presenting the
cheques for payment without having sufficient funds
in his account, the banker can close his account
permanently.
 Too low balance in account:
When the customer is
unable to maintain a remunerative credit balance in his account,
the banker can close his account with prior notice.
An account is not remunerative for the banker when the account
holder is maintaining a very small balance in his account.
 Irregular routine:
When the customer regularly
presents cheques for payments after the usual business hours.
3) Other Reasons:
 Obstinacy of the Customer:
When the customer
does not close his account even after the expiry of the
reasonable notices given to him, the banker may close
his account by returning to him the entire credit
balance in his account and asking him to return the
unused cheques held by him.
 Death of the Customer:
As soon as the banker
receives the notice about the death of the customer, he must
stop all the payments of cheques drawn by the deceased
customer, because according to the Negotiable Instruments
Act, 1881, the notice of death, revokes his authority to pay
such cheques.
The heirs or the executors of the deceased customers are not
authorized to operate the account.
 Customer’s Insanity:
A lunatic or a person of
unsound mind is not competent to manage his account. The
mental disorder or insanity of the customer automatically
terminates the banker-customer relationship.
The banker will not honor cheques and can close the account
after receiving notice about the insanity of the customer and
receiving a confirmation about it through medical reports.
 Customer’s Insolvency:
Insolvency is “civil death”.
Therefore, the insolvent loses his rights and his affairs are
transferred to the official assignee, receiver or liquidator.
As soon as the banker receives the notice of insolvency of
his customer, he transfers his credit balance to his official
assignee and closes his account.
 Order of court:
A court of law may serve a banker
with the order in garnishee proceeding in execution of a
decree, prohibiting him from honoring the customer’s
cheques. The order may be absolute when it refers to the
entire amount of the customer in the banker’s hand.
The banker must act according to the terms of the order
served to him, and his relationship with the customer
automatically comes to an end accordingly.
 Assignment of Account:
A customer can assign
his entire balance to a third person by giving a notice to the
banker. As soon as, the banker acts upon the assignment
instructions of his customer, his relationship with the
customer comes to an end.
 Unsatisfactory Operations:
A banker may close
the account of his customer after serving a notice if he fails to
maintain his account satisfactorily.
The banker determines his customer’s account as “ Unsatisfactory”
if the customer has been involved in suspicious or doubtful
transactions through his account.
If the customer has been found involved in immoral or fraud
activities, the banker can terminate his account after serving him
notice.
.

THANK YOU