The rights of the banker include: 1. Right of General Lien. 2. Right to set off 3. Right to close an account 4. Right to appropriate payments
The presentation was on the relationship between the banker and the customer. A banker is a person who is doing the banking business. There is no clear definition for banking as it performs multifarious functions. A customer is a person who maintains an account with the banks. He must have some sort of account. Even a single transaction may constitute him as a customer. custo mer. Frequency of transactions is anticipated but not insisted upon. The dealings must be of banking nature. The duties of the banker include: 1. Duty of secrecy 2. Duty to honour cheques. 3. Duty to submit periodical statements. 4. Duty to collect cheques/bills.
The rights of the banker include: 1. Right of General Lien. 2. Right to set off 3. Right to close an account 4. Right to appropriate payments
The primary relationship between a banker and a customer is a debtor ± creditor relationship. The various classifications of the banker customer relationship are described below: 1. Debtor-Creditor (Bank is a debtor and Customer is a Creditor)
When a customer deposits money with his bank, ba nk, the customer becomes a lender and the bank becomes a borrower. The money handed over to the bank
is a debt. The relationship between the banker and the customer is that of a debtor and a creditor. The features of this relationship are: y
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The money is lent to the bank and the bank is free to use it in a way most beneficial to it. The bank is not bound to keep such money intact. It is not bound to return the notes and coins of the same denomination as it was deposited. Demand of payment should be made by the customer. The banker is not required to repay the debt voluntarily, unlike in the case of commercial debt. Demand should be made at the branch where the account exists. Except in the case of drafts, traveler¶s cheque, ATM card etc.the branch is not required to make the payment to the customer elsewhere. The demand should be made in proper manner. For the amount deposited , the creditor (customer) does not call for any security from the debtor (bank) Eg: when customer deposits money with the bank the bank becomes creditor as the bank borrows it from the customer and here t he customer is a debtor as it lends money to the bank.
2. Creditor-Debtor
When the bank lends money to the customer, the customer is the borrower and the bank is the lender. The relationship between the banker and the customer is therefore that of a creditor and debtor. Eg: when the bank provides provides loan to the customer the bank becomes the debtor debtor and the customer is a creditor as the customer owes o wes money to the bank 3. Trustee- Beneficiary relationship
If a customer keeps certain valuables or securities with the bank for safe-keeping or deposits a certain amount of money for a specific purpose, the banker besides becoming a bailee, is also a trustee. 4. Bailee- Bailor relationship ( Bank- Bailee and an d customer- Bailor)
When a customer deposits certain valuables, bonds, securities or other documents with the bank for safe custody, the bank besides becoming a trustee, also becomes a bailee and the customer is the bailor. The bank
becomes custodian of the securities of the customer and hence is liable for any loss caused to the bailor due to negligence. 5. Agent-Principal Relationship ( Bank is agent and customer c ustomer is principal)
One of the ancillary services ser vices rendered by the bank is remittance, r emittance, collection of cheques, bills etc.on behalf of the customers. It further undertakes to pay regularly, electricity bills, telephone bills, insurance premium, club fees etc. In all such cases, the bank acts as an agent, his principal being the customer. The relationship of agency terminates on the death, insolvency and lunacy of the customer or on the completion of the work assigned. 6. Lessor and Lessee ( Bank as a Lessor and Customer as a Lessee)
The bank provide safe deposit lockers to the customers who hire them on lease basis. The relationship therefore, is that of lessor and lessee. In certain banks, this relationship is termed as licensor and licensee. The bank leases out the space for the use of clients. The bank is not responsible for nay loss that arises to the lessee in this form of transaction except due to the negligence of that bank. The banker customer relationship can be terminated due to death, insolvency and lunacy of the customer. However, the relationship is not affected by reason of arrest of the customer, imprisonment of the customer and migration of the customer to foreign f oreign country. Rights of the banker
The right of setoff- is nothing but combine the two or more accounts of a customer of the customer. If the customer have two or more account and in case of absence of agreement the banker can exercise e xercise has right of set off a. The two or more accounts must be in the name of same customer b. There must be same capacity c. There must be same bank ,though different branches d. One account should show debit balance and other should show a credit balance e. The debt must be manual f. The amount of debit should be certain cert ain one Thus set off is adjustment of debit debit balance with that of credit balance balance
Right to close an account There should be no confusion between bet ween closing the account and stopping operation of the account. The T he contractual relationship between banker and customer is terminated by closing the account. There is no opportunity for the customer to operate the account once again. On the other hand, stopping operation of an account refers to the suspension of the operation of an account for the time being, at the advent of certain events. It is purely suspension of the relationship between a banker and a customer and the customer can operate the account, after such events come to a close The circumstances for closure of account are: y
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i. ii. iii. y
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Customer¶s intension to close the account The customer can close the account in any of the following condition If he does not agree to the terms of the banker such as rate of interest, bank charges etc If the customer does not enjoy such facilities as are offered bys some other banks e.g. free transfer of money upto Rs 10000 When the confidence of the person is shaken Bankers intention to close the account The banker can close the account of the customer when when he finds The account is not remunerative r emunerative When the customer is not a desirable one. Customers death-as soon as the bank gets notice of the death of the customer, he should should immediately immediately stop stop the operations of the account. It is because death puts an end to the contract Customers insanity-the banker should stop the operation of his account .the banker should apply for the official copy of Lunacy Order Customers insolvency-when the banker comes to know that the customer is insolvent than the bank will close the account of the customer Right to appropriate payments
The banker has the right r ight to appropriate the money deposited by a customer to any one of the loan account due by him. The appropriation arises when
the customer has more than one account one showing the debit balance and the other with a credit balance. The customer is given the first option to decide the account to which the amount should be credited. If the customer fails to indicate his choice then the banker has every legal right to credit the amount in any one account of that customer .
