Banker Customer Relationship

Relationship between a banker and customer comes into existence when the banker agrees to open an account in the name of customer. The relationship between bank and customer is based on simple contract. Meaning of a 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. According to H.L.Hart, A banker or bank is a person carrying on the business of receiving money and collecting drafts for customers subject to the obligation of honouring the cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts. According to G.Crowther, A banker is a dealer in debt of this own and other people. 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. According to Doctor Herbert Hart, a banker or a bank is a person carrying on the business of receiving money and collecting data for customers subject to the obligation of honouring available on their current accounts. According to the banking company's ordinance 1962 banking has been defined as accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise and withdrawals by cheques, draft or order

Meaning of a Customer The word customer has not been defined in English or Pakistans law. In simple words a customer is such a person to whom you extend your services in return of consideration. 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. A customer is a person who maintains a regular account with the bank without taking into consideration the duration and frequency of operation of his account. To be a customer for any bank the individual should have an account with the bank. The individual should deal with the bank in its nature of regular banking business. He should deal with the bank without consideration of the duration and frequency of operation of his account. The relationship between banker and customer is of utmost importance. If is generally studied under the following two heads one is general relationship and special relationship Relationship between banker and customer The relationship between banker and customer is of utmost importance. Now we can define the nature of relationship that exists between a banker and customer. According to John Paget, The relation of a banker and a customer is primarily that of debtor and creditor the respective position been determined by the existing state of the account. General Relationship Debtor and Creditor The customer becomes a creditor and the banker becomes debtor when money is deposited in the bank. The relationship becomes opposite i.e. a customer become debtor and bank creditor when loan is advanced. BANKER AND CUSTOMER. When a customer

deposits money in a bank the relationship of debtor and creditor is established When a customer pays in money to the credit of his account, the banker becomes the debtor and When a bank grants loan or other credit facilities to the customer, relationship is reversede customer the creditor, but when the banker makes a loan to a customer the position is reversed, as the customer is then the debtor and the banker the creditor. The money which a banker receives from a customer is at the free dis posal of the banker ; he may preserve it in his till, invest it in some security, or lend it out to another customer ; but the customer retains the right to demand back a similar amount, or to draw cheques upon the banker up to that sum, the cheques being payable either to the customer himself or to some other person. The customer may also accept bills and arrange with the banker that they be charged to his account at maturity, or he may, in certain cases, make arrangements for the banker to accept bills on his behalf. In order to constitute a person a customer, Lord Davey said, in Great Trestern Railway v. London and County Bankin; Co. (1901, A.C. 414) : " I think there must be some sort of account, either a deposit or a current account or some similar relation." When money has lain dormant with a banker for six years, the Statute of Limita tions no doubt applies, as in an ordinary case of debtor and creditor, but a banker never takes advantage of the statute, and is always ready to repay the money upon the demand of the customer or of his legal representatives. (See STATUTE OF LIMITA TIONS, UNCLAIMED BALANCES.) If a customer leaves with his banker a parcel of securities for safe custody, the banker's position is that of a bailee, and his liability depends. to a certain extent, upon whether he undertakes the duty gratuitously or for reward. The difference between a hanker as a debtor to his customer and as a bailee may be illustrated as follows :-1 t John Brown pays in 120 to the credit of his account, the banker becomes Brown's debtor and is liable to repay to Brown on demand, but until the demand

is made the banker can do what he likes with the money, and the 120 which is ultimately repaid to Brown is not, of course, the same coins as were originally handed by Brown to the banker ; but if Brown gives to the banker a sealed bag containing, say, coins to the value of 120 and leaves it for safe custody, the hanker becomes a bailee and must take care of the bag, as entrusted to him, and return it, with the contents un touched, to the customer when required. (See SAFE CUSTODY.) The position between banker and customer may also be that of mortgagee and mort gagor, as where a customer grants a mort gage, for a fixed amount, to the banker. In such a case the banker can charge simple interest only upon the loan account. A banker and his staff are bound to secrecy regarding the business and accounts of the customers, but a hanker may, in certain cases, be compelled to give evidence in a court of law Special relationships Principal and Agent This relationship arises only in certain cases. When a customer deposits draft, cheques, dividends, certificates etc., for collection, he becomes the principal and bank acts as his agent. In other words when a bank is performing agency services for his customers he is acting as their agents. Principal & Agent Relation In certain situations, the banker serves as agent of the customer ( principal) some of these situations are enumerated below: Collection of cheques on behalf of the .customer Collection of dividends and bills of exchange Acting as attorney, executor Duties of the Agent:

Duties of agent are contained in sec 211 to 218 of the Contract Act. Some of the important duties are given below: iv.To follow principals instructions v.To show required skill and diligence vi.Agent to render proper accounts vii. Agent to pass on any benefits derived by him Duties of the Agent: Sec 211: Agents duty in conducting principals business: an agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and , if any profit accrues, he must render accounts for it to the Principal. Duties of the Agent: Sec 212: Skill and diligence required from agent An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless, the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill, etc Duties of the Agent: Sec 213: Agents Duty to Render accounts:An agent is bound to render proper accounts to his principal on demand. Sec 214: Agents duty to communicate with principal : it is the duty of an agent, in cases of

difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions. Duties of the Agent: Sec 215: Right of principal when agent deals, on his own account in business of agency without principals consent: if an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous Duties of the Agent: Sec216: principals right to benefit from any gains by agent dealing on his own account in business of agency: if an agent, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction Duties of the Agent: Sec 218: agents duty to pay sums received for principal:subject to such deductions, the agent is bound to pay to his principal all sums received on his account. Duties of Principal 1. Payment of remuneration to the agent 2. not to prevent his agent from performing the duties/ acts assigned to him under the contract and for which remuneration is payable. 3. Any legitimate expenses which have been incurred by the agent in the course of performance of his duties are to be indemnified by the principal.

Pawner and Pawnee A pawner is a person who pledges the goods. A pawnee is a person to whom goods are pledged. Pawner and Pawnee Relationship. -- When credit facility is provided by a bank to its customers against security (Collateral of movable property) the Relationship of Pledger and Pledgee is established. In this case: PledgerCustomer

Bailor and bailee Bailment means delivery of goods by one person to another for some purpose upon a contract. When a customer places his valuable with the bank for safe custody he becomes bailor and the bank becomes bailee. Bailor and Bailee Relationship: In banker customer relationship, bailment is also an important type of relations. It may arise in the following situations: Availing safe custody services ( lockers) Pledge of stocks as security for availing credit from bank

Mortgagor and mortgagee When a customer takes loan from the bank and mortgages his property with the bank, he becomes mortgagor and bank mortgagee. Mortgagor and Mortgagee Relationship

When credit facility is provided by the bank to a customer against the security(collateral) of immovable property, the relationship of Mortgagor and Mortgagee is established. In this situation: Mortgagor Customer

Banker as executor, Trustee, Attorney When a bank is asked to take care of any property or investment in a particular way after the death of the client then bank becomes executor and the client becomes testator. When power of attorney is assigned by the court then bank becomes attorney and client is called executants. When a banker is asked to manage a property under a trust the banker becomes trustee and the client becomes author. Financer and Fiance We all know that bank give loans to their clients after accepting appropriate security. When a loan is grated or finance is provided, bank becomes financer and client becomes financee. Termination of contract between a customer and banker The following are the circumstances under which the relationship between the two is terminated. Termination of relationship by a customer A customer due to change of place, may like to close the account with the bank.

If the customer is not satisfied with the working of the bank, he may then close his account the bank. The account is also closed on the death of a customer. The outstanding balance is paid to the nominee of the customer.

Termination of relationship by a banker

If a customer keeps a very small amount in his account which may be deemed un-remunerative by banker. If customer does not responded to notice served on him by the banker and he continuously ignore them, then banker can close his account In case of the death of the customer the banker will close his account. In case the customer goes mad insane, the relationship of customer and banker automatically terminates and the banker will close his account. When banker receives the notice about insolvency of the customer, all his duties comes to an end and the will close the account of the customer transferring any balance in it to the official assignee or liquidator. When bank receives a garnishee orders his relationship to the customer comes to an end. Assignment of accounts means that customer directs the bank to pay all his balance to any other party. When the banker executes such an instructions, the account is closed and relationship comes to an end.

Plenty of more articles on banking are available on this website. Please click on the below mentioned bold, underlined words if you want to read them.

State Bank of India (SBI) (NSE: SBIN, BSE: 500112, LSE: SBID) is the largest Indian banking and financial

services company (by turnover and total assets) with its headquarters in Mumbai, India. It is state-owned. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to form Imperial Bank of India, which in turn became State Bank of India. The government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). The State Bank Group, with over 16,000 branches, has the largest banking branch network in India. It also has around 130 branches overseas. With an asset base of $352 billion and $285 billion in deposits, it is a regional banking behemoth and is one of the largest financial institution in the world. It has a market share among Indian commercial banks of about 20% in deposits and loans.[2] The State Bank of India is the 29th most reputed company in the world according to Forbes.[3] Also SBI is the only bank featured in the coveted "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010.[4] The State Bank of India is the largest of the Big Four banks of India, along with ICICI Bank, Punjab National Bank and HDFC Bankits main competitors.[5] .