elationship between banker and customer , definition of a banker and customer , definition of banking , general relationship between banker and customer , relationship as debtor and creditor , special relationship: banker as trustee , pawner and pawnee , bailer and bailment relationship , mortgager and mortgagee relationship , executer , attorney , guarantor , duties of a customer , rights and duties of the banker towards the custom , rights of a banker , garnishee order

1. Relationship Between
Banker and Customer

2. Definition of Banking
• Accepting for the purpose of lending or investment, of deposits of money from
the public, repayable on demand or otherwise, and withdrawable by cheque, draft,
order or otherwise.
• Salient Features:
• i) A banking company must perform both of essential functions such as a)
accepting of deposits, b) lending or investing the same.
• ii) need to collect deposit from every stakeholders.
• iii) bound to repay deposited money at any time and any mode.
Home Work: Definition of Sir John Paget.

3. Definition of a Banker and Customer
• A banker is a dealer in capital or more properly a dealer in money.
• The term customer of a bank is not defined by law. Generally, a person or a
company who has an account in a bank is considered its customer but all the
activities anticipated by customer must be valid and lawful.

4. 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.
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5. 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
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6. General Relationship between Banker and Customer
•Relationship as Debtor and Creditor
•Banker as Trustee
•Banker as Agent/ Intermediaries

7. Relationship as Debtor and Creditor
• On the opening of an account the banker assumes the position of a debtor. He is not a
depository or trustee of the customer’s money because the money handed over to the
banker becomes a debt due from him to the customer.
• A depositor remains a creditor of his banker so long as his account carries a credit balance.
Causes for differing this Debtor-Creditor Relationship from similar in ordinary commercial
debts in following aspects:
i) The creditor must demand payment
ii) Proper place and time of demand
iii) Demand must be made in proper manner.

8. Special Relationship: Banker as
Trustee
• Trustee is an individual person or member of a board given control or
powers of administration of property in trust with a legal obligation to
administer it solely for the purposes specified.
• In Banking Business, a trustee holds money or assets and performs certain
functions for the benefit of some other person called the beneficiary. For
instance, if the customer deposits securities or other variables with the
banker for safe custody, the latter acts as a trustee of his customer.

9. Banker as Agent/ Intermediaries
1. Payment and collection of subscription, dividends, salaries, pensions etc. bankers make payments and receives
money on behalf of their customer in the following ways:
• Payment of insurance premium.
• Payment of membership subscription to club, library, and professional association
• Payment of rents and salaries.
• Collections of dividends on behalf of customers.
• Collection of pension, rents etc.
• Transfers of tunas from one account to another.
2. Purchases and sales of securities: Banker undertakes to purchase and sell shares and debentures of joint stock
Company on behalf of his customer only. Whenever the customer delegate the work to the bank the banker should
get clear and precise instructions in special forms used for this purpose. The form should contain the following things:
• The particulars of securities to be sold or purchased.
• The minimum and maximum price at which the securities are to be sold or purchased.
• The period within which they are to be sold or purchased.
• The names, addresses of the persons in whose name they are to be registered.
• In executing this services the banker act as an agent of his customer.

10. Bailer and Bailment 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.
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11. Bailer and Bailment relationship
• The bank (bailee) charges a very small amount as service charges for safe
custody of the valuables from his customer (bailer).
• This relationship between the bank and the customer as bailee and bailer
started from the days of earlier goldsmiths.
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12. Pawner and Pawnee:
• When a customer Pledge goods and documents as security for an advance
he then become 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.
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13. 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 mortgagee.
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14. Executer, attorney, guarantor
• The bank also acts as executor, attorney and guarantor for his customer.
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15. RIGHTS AND DUTIES OF THE CUSTOMER TOWARDS
THE BANKER•Rights of a customer:
• A customer who has deposited money can draw check 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 check.
• A customer has a right to sue and demand compensation if the bank fails to maintain the
secrecy of his account.
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16. Duties of a customer
• It is the duty of the customer to present checks 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 check 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 check with utmost care.
• If a customer find any forgery in the amounts of the check issued by him. It should
then immediately be reported to the bank.
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17. RIGHTS AND DUTIES OF THE BANKER TOWARDS
THE CUSTOMER
Duties or obligations of a banker towards the customer:
i) To honor a customer’s check:
The banker is to honor the check of the customers provided the check 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.
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18. RIGHTS AND DUTIES OF THE BANKER TOWARDS THE
CUSTOMER
ii) 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.
iii) Secrecy of the customer’s account:
• The bank owes a contractual duty not to disclose the customer’s financial position
without his consent.
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19. Secrecy of the customer’s
account…[Cont..]
• 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 there is national emergency and disclosure is essential in the public
interest.
When there are clear proofs of treason to the state
When a consent is given by the customer to provide information for the
preparation of balance sheet.
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20. 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
favor.
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21. Rights of a banker
i) 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.
ii) 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.
iii) 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.
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22. Thanks…….
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