1. BANKER CUSTOMER RELATIONSHIP

2. Topics covered
• Who is banker?
• Who is customer?
• Relationship
• Obligation/duties of banker
• Right of bankers

3. Who is banker?
• According to banking regulation act 1949 defines
banking as accepting for the purpose of lending or
investment of money from the public, repayable on
demand or otherwise and withdrawal by cheque,
draft order or otherwise (Sec.5B) and says that any
company which transacts the business of banking
is a “Banking Company” (Sec. 5C).
“Bank/Banker/banking company ”is an organization which
essentially performs the two factions:
1)Accept deposits from public
2)Use such a lending for the purposes of lending of
investment

4. Who is customer?
• A customer is one who has a saving/current/fixed
account irrespective its debit or credit balance with
the bank.
• One ,who has any other transactions/business only,
but no account with bank cannot be called as its
customer.
• It is also noteworthy that merely because of
becoming customer of one branch of a bank ,one
would not become customer of other branches of
the bank.

5. Banker-Customer Relationships
1. Debtor Creditor
2. Trustee – Beneficiary
3. Agent – Principal
4. Bailee – Bailor
5. Lessor - Lessee

6. Debtor Creditor
 When a bank accepts deposits, it becomes debtor
and the customer a creditor irrespective of the fact
bank pays interest or not.
a)The customer can not claim return of the same notes
or coins from banks ,which can repay a sum of
equivalent amount.
b)For repayment the creditor must raise demand.
Limitation for suit for recovery of deposits amount
against bank is 3 years from the date of demand.

7. Trustee - Beneficiary
 The Customer instruct a bank to manage his
money and remit to other branch, the banker
becomes trustee and customer beneficiary
 Bankers manages properties of its customers.

8. Agent - Principal
 When the banker accepts bills etc. for
collection on behalf of his customers, he acts
as an agent.

9. Bailee - Bailor
 When a bank accepts articles for safe custody,
its legal position is that of bailee, and the
customer is Bailor
 Bank is required to take care of goods &
should not harm goods.
 Bailee has right of particular lien in terms of
indian contract act of 1872.
which says that bank can retain goods until he
receive remuneration for his service.

10. Lessor - Lessee
 On hiring out of locker, bank becomes lessor,
and the customer a lessee and
 The relationship is that of landlord and tenant.
 The lessor is not responsible for any loss or
damage to valuables of locker
 Lesee are advised ,in their own interest ,to
insure valuables in locker.

11. Obligation/duties of a banker
1) Primary duty of a banker is to honour cheque of its
customer subject to certain condition
2) A banker is obliged to maintain secrecy of the state of
account unless required to do so
a)by law
b)in public interest
c)in bank’s interest
d)as per consent of government
3)Bank is responsible for embezzlement /fraud committed by
its employees, as principal(bank) is responsible for wrongful
act of agent(employee)
4)An instrument with forged signature is no mandate at all &
hence bank cannot debit its customer’s account in such a
case

12. Right of banker
1) Bankers lien : Right to retain valuables until charges,
commission paid by customer
types of lien:
a)Particular lien
b)general lien
2)Right of set off :
Banker has right to combine two or more accounts ,if one of
them is in debit of customer in same name & same right

13. Con’d
3)Right of Appropriation :
if customers have more than one account & while making
deposit does not instruct as to how the deposit be
appropriated as per its discretion.
a)termination of relationship:
 When customer close account
 when bank close account
 with the knowledge of the death of customer
 With the knowledge of insanity / bankruptcy of the
customer

14. Con’d
b ) Garnishee order & attachment order :
 When the debtor failed to pay the debt to his creditor ,the
creditor may approach court for issuance of garnishee order
on the banker of the debtor .
 Garnishee order issued by court & attachment order is
issued by income tax authority.
 It direct the bank to stop the payment in the account of
debtor

15. Con’d
• Claytons’s rule for payment of debt
 To dishcharge of particular debt as per instruction of the
debtor
 If the debtor does not intimate or circumstances do not
indicate ,as per discretion of the creditor
 When neither of party indicates ,to dish charge of debts in
order of time.
 For dishcharge of interest & then principal in chronological
order(arranging events in their order of occurrence in time)