Module 2

BANKER AND CUSTOMER

RELATIONSHIP
 Meaning of Banker
A banker is one who undertakes banking
activities, accepting deposits and lending
money for different purposes.
 Definitions of Banker
• According to English Common Law, “A banker
is a person who carries on the business of
banking, which is specified as conducting
current accounts for his customers, paying
cheques drawn on him and collecting cheques
for his customers”.
 Meaning of Customer
Customer is a person who has an account
either savings account, current account, term
deposit account or maintains any similar
relationship with a banker such as deposit
cash to other accounts, makes DD, deposits
cheques to others account etc.
 Definition of Customer
• According to Dr. Harbert L. Hart, “ a Customer
is one who has account with a banker or for
whom a banker habitually undertake to act as
such.
 Importance of Banker-Customer
Relationship
• The relationship between a banker and a customer
comes into existence when the banker agrees to open an
account in the name of the customer.
• The relationship between a banker and a customer
depends on the activities, products, or services provided
by the bank to its customers or availed by the customer.
Thus the relationship between a banker and customer is
the transaction relationship. Bank’s business depends
much on the strong bondage with the customer. Trust
plays an important role in building a healthy
relationship between a banker and a customer.
Types of Banker-Customer Relationship Special
Relationship

General Relationship

-
Debtor and Creditor
-Creditor and Debtor
-Pledger and Pledgee
-Licensor and Licensee
-Bailor and Bailee
• Bailor and Bailee: when a customer gives
valuables to the banker for safe keeping, the
customer becomes the bailor and the banker
becomes bailee
• When a bank receives money or other
valuable securities, then the banker's position
is of a trustee. On the other hand, when a
bank receives money and uses it in various
sectors, the bank becomes the beneficiary
 Termination of Relationship
Voluntary Termination
If the Bank desires to close the account
Termination by Law
• Death of Customer
• Bankruptcy (When an organization is unable to honor its
financial obligations or make payment to its creditors)
• Garnishee Order(a third party who is instructed by way of
legal notice to surrender money to settle a debt or claim.)
• Insanity of the Customer (the state of being seriously
mentally ill; madness)
Statutory Protection available to a Banker
• Protection in case of an order cheques (Order cheque is paid to the person whose name is
mentioned on the cheque i.e., only that person can go and collect the cash from the bank.)
a) Endorsement must be regular : The endorsement of the payee or the endorsee must be
regular or correct.
b) Payment must be made in due course (The banker must have made the payment on
the true belief that the person who received the payment is entitled to receive payment )
• Protection in case of Bearer cheques (An individual having possession of this type of cheque
can easily obtain funds from the bank by undergoing the KYC process. "These types of
cheques do not require account holder's authorization for making the payment)
• Protection in case of crossed cheques
A crossed check is any check that is crossed with two parallel lines, either across the whole
check or through the top left-hand corner of the check. This double-line notation signifies
that the check may only be deposited directly into a bank account.
a) Payment in due course
b) Requirement of the Crossing
Crossed cheque, Order cheque & Bearer
cheque
 Meaning of Collecting Banker
• A collecting banker is one who collects the
cheques and other negotiable instruments
deposited by his customers and places the
amount to the credit of the customer's
account.
 Duties and Responsibilities of Collecting
Banker
• Due care and carefulness in the collection of cheques
• Acts as an agent
• Serving notice of Dishonour (A notice of dishonor is a
formal notice stating that the bank will not accept a check
or draft presented to the institution)
• Payment of interest to the customer
• Collection of Bills of Exchange
• Present the cheque for collection without any delay
• Scrutinizing(examine or inspect closely and thoroughly) the
Instrument
• Settlement of proceeds
 Meaning of Paying Banker
• Paying banker is a banker, who actually pays a
cheque to his customer or to the order of his
customer. For example, a customer draws a
cheque on his banker.
Duties and Responsibilities of Paying Banker
• There must be sufficient funds in the customer’s account on which
cheque is drawn
• The funds should be properly applicable to the payment of such
cheque
• Cheque should be properly drawn and should not be irregular
• Cheque should be presented during the banking hours of the bank
• Cheque should be presented for payment within the validity
period
• Verification of signature of the drawer
• The holders title on the cheque to be verified as valid or invalid
• The instrument must not be state or post-dated
• No material alteration to be made on the banking instrument
 Meaning of Lending Banker
• The process whereby banks issue loans to
borrowers. When a lender gives money to an
individual or entity with a certain guarantee or
based on trust that the recipient will repay the
borrowed money with certain added benefits,
such as an interest rate, the process is called
lending or taking a loan.
 Duties and Responsibilities of Lending
Banker
• Evaluating credit worthiness by processing loan applications and documentation
within specified limits
• Interviewing applicants to determine financial eligibility and feasibility of granting
loans
• Determining all applicable ratios (quantitative assessment )and set up debt
payment plans
• Communicate with clients either to request or to provide information Justify
decisions (approvals/rejections) and report on them
• Complete loan contracts and counsel clients on policies and restrictions
• Update job knowledge on types of loans and other financial services
• Maintain and update account records
• Assess customer needs, explore all options and introduce different types of loans
• Develop referral networks, suggest alternate channels and cross-sell (the selling of
an additional product or service to an existing customer. ) products and services to
accomplish quotas
 Meaning of Banking Ombudsman
• Banking Ombudsman is a body created by the
RBI to take care of the banking complaints of
the general public in India. RBI appoints a
senior official or Ombudsman who addresses
and resolves all the complaints and grievances
of the customers. It covers all kinds of banks
including Public sector banks, Private sector
Rural banks as well as co-operative banks.
Benefits/ Features of Banking Ombudsman

• Prompt and impartial resolution of complaints

• No cost to the customer
• Focus on customer education and financial literacy
• Customer Awareness and Empowerment
• Assessment based on overall fairness, good business
practices, accepted banking law and practice
• Bad practices may be remedied
• Sate ombudsman can offer conciliation (the action of
stopping someone being angry) as well as
investigation
Thank you