Assignment

Subject: Principles and Practices of Banking

Chapter-2: Banker and Customer (Chapter 8)
(Resubmission)

Submitted by,
AL RAFI
Merit position: 667
Section: B

Submitted to,
MD. Nazmul Hasan
Associate professor
Department of Banking and Insurance

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Question 1: Discuss the types of relationship between the banker and the customer.
Ans: Relationship as Debtor and Creditor: The opening of a bank account in the bank of a banker
by the person who has the capacity to contract is the basis of the debtor and creditor relationship
between banker and customer. By filling the form for opening a bank account bind the banker
and customer in the written contract. The customer when deposits his money into his bank
account, becomes a creditor because he is giving his money to the bank indirectly. The money
deposited by the customer in the bank account becomes the bank’s property. The bank can use
customers money as it likes. By using this money, the bank becomes a debtor because he will
take that money into his account to make further transactions with other bank customers. The
bank is not liable to inform the customer about the utilization of his money.
Relationship as Trustee and Beneficiary: The bank performs the relationship as a trustee with
his customer when the bank customer deposited his property or other assets. In this case, the
bank holds the property of other documents of bank customers in exchange for the loan provided
by the bank. The person who is depositing the property or other document is known as the
beneficiary.
Relationship as principal and Agent: The bankers provide agent services to their customers.
The agent is defined under section 182 of the Indian contract act as the agent is the person who is
employed by a person by giving him the power of attorney to work or deal on his behalf. The
banker pay taxes, electricity bills, insurance premium etc. at the command of the bank customer
who acts as principal. The bank usually charges for these services provided by the bank to its
customer.
Relationship as Lesser and Lessee: Section 105 of the transfer of property act deals with the
contract of lease. It is a transfer of a right to enjoy the immovable property for a certain time with
consideration. This happens in the relationship between banker and customer when the bank
provides a safe deposit locker to the customer of the bank to save his important property for a
certain period of time. The bank changes its customer who is taking the benefit of the locker for
a certain period of time.
Relationship as Pledger and Pledgee: The banker performs the relationship of Pledger and
Pledgee when the customer took the loan from the bank and deposits some security to the
banker. The customer becomes a pledger and the bank is pledgee. The security of the customer
will remain in the custody of the bank until the person repays the money of loan taken by him
from the bank.
Relationship as Bailor and Bailee: The banker can perform the relationship of bailor and bailee
with its customer. The relationship of bailor and bailee between banker and customer arises
when the customer gives his security document of any other goods to the bank for a specific
period of time for security. The customer is a bailor and the bank becomes bailee.
Relationship as Advisor and Client: The relationship between banker and customer can be as
advisor and client in a case when the customer invests in securities. The bank gives advice to his
customer for investing. For example, if you are planning to take any kind of loan, but you are not

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sure that which loan you should take. Here, the bank can advise you officially or unofficially to
take the right decision. In that case, the banker will be your advisor and you will be his client.
(Source: with the help from internet)

Question 2: Discuss the special features of relationship between the banker and customer.
Ans: Right of General Lien: A lien may be defined as the right to retain property belonging to a
debtor until he has discharged a debt due to the retainer of the property. It one of the important
rights enjoyed by a banker.
The right of set-off: The right of set-off is a legal right by a debtor to reduce the amount owed
to a creditor by offsetting against it any amounts owed by the creditor to the debtor. For example,
a bank can seize the amount in a customer's bank account to offset the amount of an unpaid loan.
Right under Garnishee Order: Garnishee order is an order that is issued on the bank by the
court of law to stop or withhold payment of money belonging to a particular person who has
committed a default in satisfying the claim of his creditors. Therefore, whenever a bank receives
such an order, the banker has to obey the order fully. Garnishee orders can be made on banks and
financial institutions, compelling them to put a freeze on anyone’s accounts.
Right to Charge Interest: A banker has the implied right to charge interest on the advances
granted to the customer. The rate of interest is fixed by the central bank, Bangladesh Bank.
Right to Close Accounts: A Banker has the right to close his customer’s account and
discontinue operations if it is needed.
(Source: with the help from Text Book)

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Question 3: What do you mean by a Banker’s Lien? Explain the distinction between
General Lien and Particular Lien. What are the special features of Banker’s lien?
Ans: Lien means the right of the creditor to retain the goods and securities owned by the debtors
until the debt due from him is repaid. It confers upon the creditor the right to retain the debtor’s
security and not the right to sell it. And the banker’s lien refers to the right of a banker to retain
the subject matter of the lien until an indebtedness of the customer is paid or discharged.
Particular lien: a lien upon specific property as security for the payment of a debt or the
satisfaction of some other obligation arising out of a transaction or agreement involving that
property. The particular lien is called specific lien also.
General lien: It is the right of an individual to retain the goods or property of another person
until the promise or the liability due on that person is discharged accordingly. It could be
regarded as the right against the general balance of the account. General lien is commonly used
by the Bankers, Factors, Policy brokers, Attorneys and so on.
(Source: with the help from internet and text book)

p.t.o

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Question 4: Discuss a banker’s right of set-off and right of appropriation.
Right of Set-off: The right of set-off is a statutory right which enables a debtor to take into
account a debt owed to him by a creditor, before the latter could recover the debt due to him
from the debtor. In other words, the mutual claims of debtor and creditor are adjusted together
and only the remainder amount is payable by the debtor. A banker, like other debtors, possesses
this right of set-off which enables him to combine two accounts in the name of the same
customer and to adjust the debit balance in one account with the credit balance in the other.
Right to Appropriate Payments: Whenever the customer deposits funds into his account in the
bank, it is his duty to inform the bank to which account they are to be credited (provided the
customer has more than one account at the same bank). Once the customer gives specific
directions regarding appropriation, the banker has no right to alter them. It is his bounden duty to
carry out the instructions of the customer. This right of appropriation is to be exercised by the
customer at the time of depositing funds and not later. In case the customer is silent or fails to
give instructions, the banker has every right to appropriate in his own way. In case both have not
used their powers, the rule given in Clayton’s case would be applicable.
(Source: Text Book)

Question 5: What is a Garnishee order? What are the main effects of Garnishee order?
Ans: Garnishee order is an order that is issued on the bank by the court of law to stop or withhold
payment of money belonging to a particular person who has committed a default in satisfying the
claim of his creditors. Therefore, whenever a bank receives such an order, the banker has to obey
the order fully. Garnishee orders can be made on banks and financial institutions, compelling
them to put a freeze on anyone’s accounts.
If the garnishee order is issued on a bank to stop any customer’s account, the customer can’t
carry on his banking transaction with that account.
(Source: with the help of text book)