Dr.

J C Pande
What is the meaning of 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.
 Banking has been defined as “Accepting the deposits
of money from public, for the purpose of lending or
investment, repayable on demand or otherwise and
withdrawals by cheque, draft, order or otherwise.”
What is the meaning of a
Customer?
 A customer is a person who maintains an account with
the bank, without taking into consideration the
duration and frequency of operation of his account.
 To constitute a customer of the bank.
 One should have an account with the bank.
 One should deal with the bank in its nature of regular
banking business.
 One should deal with the bank without consideration of
the duration and frequency of operation of his account.
Banker and Customer Relationship
 The relationship between the banker and customer is
very important. It is generally studied under the
following two heads.
 General Relationship
 Special Relationship
General Relationship
Debtor and Creditor:
 The true relationship between banker and customer is
primarily of a debtor and creditor.
 When a customer deposits money with a bank, the
bank then is the debtor and the customer is the
creditor.
 The customer expects from the bank that
 His money will be kept safe by the bank
 It will be returned on demand within business hours
 The money will be intact and safe and will give some
thing by the way of return (interest).
 The position is reversed if the customer is advanced
loan then the banker becomes creditors and the
customer is debtors.
Special Relationship
 Principal and agent:
 The special relationship between the customer and the
banker is that of principal and agent.
 The customer (principal) deposits cheques, drafts,
dividends for collection with the bank.
 He also gives written instructions to the bank to purchase
securities, pay insurance premium, installments of loans
etc on his behalf.
 When the bank performs such agency services, he
becomes an agent of his customer.
Bailer and Bailee relationship
 A bailment is the delivery of goods in trust. A bank
may accept the valuables of his customer such as
jewellary, documents, securities for safe custody.
 In such a case the customer is the Bailer and the
bank is bailee.
 The bank (bailee) charges a very small amount as
service charges for safe custody of the valuables
from his customer (bailer).
Pawner and Pawnee:
 When a customer pledge goods and documents as
security for an advance he then becomes Pawner
(Pledger) and the bank becomes the Pawnee
(Pledgee).
 The pledged goods are to be returned intact to the
Pawner, after the debt is repaid by him.
 Mortgager and Mortgagee
relationship:

 Mortgage is the transfer of an interest in specific

immovable property for the purpose of securing the
payment of money advanced or to be advanced by way of
loan.
 When a customer pledges a specific immovable property
with the bank as security for advance, the customer
becomes mortgager and banker is the mortagee.
 Hypothecator and Hypothecatee
relationship:
 Hypothecation is defined as legal transaction whereby
goods (movables) may be made available as security for a
debt without transferring the property or the possession to
the lender.
In other words, in case of Hypothecation, a charge
over movable properties like goods, raw materials, goods–
in-progress, is created.
 When a customer pledges a specific movable property with
the bank as security for loan, the customer becomes
hypothecator and banker is the hypothecate.
Bank as a trustee
 The bank act as a trustee for his
customer in those cases where he
accept securities and other valuables
for safe custody.
 In such cases the customer continues to
be the owner of the valuables deposited
with the bank.
Executer, attorney, guarantor
 The bank also acts as executor, attorney and guarantor
for his customer.
 Executors and Administrators are the persons who
are appointed to conduct the affairs of a person after
his death. Through a will & probate from court(official
confirmation of will)– Executor, and through a letter of
administration by court – Administrator.
 Attorney is a person, typically a lawyer, appointed to
act for another in business or legal matters.
 Guarantor is a person or organization that provides a
guaranty.
Bank Customers-Special types
 Minor or Infant.
 Married Woman- Right to Streedhan– A wife has ownership rights to all her streedhan,
that is the gifts and money given to her before and after marriage. The ownership rights
to streedhan belong to the wife, even if it is placed in the custody of her husband or her
in-laws. A wife has the legal right to live with dignity in the matrimonial home under any
circumstances i.e even after her spouse dies.
 Lunatic- is a person of unsound mind, who cannot form rational judgement of matters.
 Drunkard.
 Partnership Firm- A/C should be opened in the name of the firm; Consent of all the
partners; Mandate to be signed by all partners (The name of person who is authorized to
operate the a/c, the extent of authority given to such persons; Personal a/c and a firms
a/c; Creation of Mortgage, Deed to be signed by all; Retirement/Death/Insolvency/
Insanity of partner).
 Joint Stock Co- A JSC is an artificial person created by law. Preliminary Steps
[Certificate of incorporation, Memo. of Assoc(Constitution of Co.), Article of Assoc
(Rules & Regulations of Mgmt), Certificate of commencement of business]; Copy of
Board Resolution; Mandate; Purpose of Loan; Directors personal a/c and the Co. a/c.
 Clubs, Societies and Non-Trading Associations – Opening of A/Cs – whether
registered or not; Mandate and Resolution; Copy of rules of the club; Change in the
Official; Club a/c and a Personal a/c.
RIGHTS AND DUTIES OF
CUSTOMER
TOWARDS
BANKER
Rights of a customer:
 A customer who has deposited money, can draw cheque
on his account up to the extent of his credit balance or
according to overdrawing limit sanctioned by the bank.
 A customer has the right to receive statement of
accounts from the bank.
 A customer has the right to sue the bank for
compensation of a wrongful dishonor of his cheque.
 A customer has a right to sue and demand
compensation, if the bank fails to maintain the secrecy
of his account.
Duties of a customer
 It is the duty of the customer to present cheques and other
negotiable instruments during the business hour of the
bank.
 The instruments of credit should be presented by the
customer with in due time from their dates of issue.
 A customer must keep the cheque books issued by the
bank in safe custody. In case of theft or loss, it is the duty of
the customer to report the matter immediately to the bank.
 A customer should fill the cheque with utmost care.
 If a customer find any forgery in the amounts of the cheque
issued by him. It should then immediately be reported to
the bank.
Duties or obligations of a
banker towards the
customer
To honour a customer’s cheque:
The banker is to honour the cheque of the customers
provided the cheques are:
 Properly drawn
 The customer has balance to his credit
 The loan contract has been signed
 There is no legal bar or restriction attaching to the
customer’s funds.
Standing orders
 It is the duty of the bank to abide by the standing
orders of the customers in making periodical
payments on his behalf such as club, library, insurance
premium etc.
 Secrecy of Customer’s a/c
The bank owes a contractual duty not to disclose the
customer’s financial position without his consent. However
the obligation of secrecy is not considered essential on
the following occasions:
 When a banker is required to give evidence in the court.
 When the bank considers that the customer is involved in activities
prejudicial to the interests of the country.
 When the bank’s books reveal that the customer is contravening the
provisions of any law, and
 When sizable funds are received from foreign countries by a
constituent.
 When a consent is given by the customer to provide information for
the preparation of balance sheet.
Garnishee order
(order of the court)
 It is the duty of the banker to abide by the order of the
court (garnishee order) and attached the funds of the
customer to the creditors who has obtained the order
in his favour.
Precautions by the banker
The banker should observe the following precautions
while giving replies about the status and financial
standing of a customer:
 The banker should disclose his opinion based on the
exact record of the customer’s dealings with the bank.
 He should give a general statement of the customer’s
account or his financial position without disclosing the
actual figures.
 He should furnish the required information honestly
without bias.
Rights of a banker
Right to set off:
 It is a right of the banker to adjust his outstanding loans
in the name of the customer from his credit balance of
any of the accounts he is maintaining with the bank.
Right to charge interest, commission etc
 It is the right of the banker to charge interest
commission etc according to the rates for the services
the banker has rendered to the customer as agent,
trustee etc.
Right to lien
 A banker has the right to retain the property belonging
to the customer until the debt due from him has been
paid.
Thank You