PPT on "Relationship between Banker and Customer" for BBA & B.Com 1st year students, CA, CPT, CS & CMA Foundation. Indian Banking PPT by Sandeep Sharma. Meaning with suitable example & explanation.

1. Unit-II
INNOVATIVE
BANKING
Part-2

2. Bank & Customer
Meaning
Bank
Customer

3. Banker
Meaning
Banker

4. Relation b/w Banker & Customer
Debtor & Creditor,
Trustee & Beneficiary,
Principal & Agent,
Bailor & Bailee,
Advisor.
Statutory Obligation, to
honour the Cheque,
Obligation to maintain
secrecy of accounts,
Banker’s Rights
• Right of Lien
• Right to set off
• Right of Appropriation
• Right to charge interest/
other charges.
General Relation Special Relation

5. Banker as a debtor & creditor

6. A debt by a banker v/s an ordinary
commercial debt
i. The creditor must demand payment: in case of ordinary
commercial debt, the debtor pays the creditor as per the terms
of the contract.
ii. Proper place & time of demand: transaction should be made
during the specified hours on working days.
iii. Demand must be made in proper manner: withdrawals by
Cheque, draft order etc

7. A debt by a banker v/s an ordinary
commercial debt
iv. Security: banker get the deposit money without giving any
security to the customer.
v. Law of limitation: Indian Law of Limitation, 1908 does not
apply in banker’s debt

8. Banker as aTrustee
Trustee means,

9. Banker as an Agent
Banker
Service Provider

10. Banker as an Advisor
 In case of, Woods Vs. Martine Bank Ltd. the court observed
that the manager is responsible for wrong advice toWoods.
Here, court ordered to the bank, to pay compensation.

11. Bailee & Bailor
When customer deposits valuable
articles, bonds, documents for safe
custody the customer becomes
bailor & bank becomes bailee.
Bank is liable to keep these articles
in its safe custody as a custodian.

12. Special Relationship
I. Statutory Obligation:
 The banker undertakes an obligation to honour his
customer’s Cheques.
 This is statutory obligation under section 31
Limited obligation to honour the Cheque:-
1) Availability of money in the account of the customer
2) Complete Cheque: like date name of payee, amount etc.

13. Limited obligation to honour the Cheque:-
3) Proper presentation: Presented at the branch where the
account is kept, during the business hour.
4) Proper form: it should not contain any request to pay the
amount.
5) Proper application of the funds: eg: if the trust funds are
withdrawn by a Cheque for private use.
6) Existence of legal bar: banker is not bound to honour the
Cheque if there is any legal bar attaching the customer’s a/c.

14. Special Relationship
II. Maintain secrecy of accounts:
 It is banker’s duty to maintain strict secrecy of his customer’s
accounts even after the accounts are closed .
 The banker will take all necessary precautions to ensure that
customer’s account is not made known to other by any
means.

15. Circumstance where disclosure be justified.
1) When Law requires
2) When banker is required to protect his own interest.
3) When the customer gives his consent.
4) When banks are required to give out information in the interest
of the public
(Disclosure - the action of making secret information known)

16. Special Relationship
III. Banker’s Rights
a) Right of Lien (both general & particular)
b) Right of Appropriation (by the debtor, creditor, neither party)
c) Right to Charge interest and other charges.
d) Right to set off: this right enables a banker to:-
 Combine 2 accounts in the name of same customer.
 Adjust the debt balance on one account.
 Banker can set off one’s account after serving notice/letter.

17. Termination of an account/bank-customer relationship
I. Voluntary termination
II. If the banker desires to close the account: if an account remains un-
operated for a very long period.
III. Termination by Law
a) Death of customer.
b) Bankruptcy of customer
c) Insanity of the customer
d) Garnishee Order: an order by court, addressed to a banker to stop
payment of a particular person or an organization who has
committed default in satisfying the claim of the creditors.