1. Relationships between banker & customer : -
‘Banker’ & ‘Customer’ do not have statutory definition under banking laws
The ‘Account’ is the nexus of banker – customer relationship
It is the contractual relation created by mutual consent. Various customs & usages govern
this contract. They are recognized by courts & are considered to be implied terms of
contract. Depending upon the nature of service provided by the banker, the relationship
is either general or special.
Kinds of relationship : -
1. Debtor & creditor
• Banker is a debtor when he holds the deposit amount as a debt. Customer is creditor.
• Banker is a creditor when loan is given to the customer. Customer is debtor.
2. Trustee & beneficiary
• Banker is a trustee for the deposits of money made with specific instruction by the
customer who will be the beneficiary.
2. 3. Principal & Agent
• Banker buys / sells securities on behalf of his customer. Banker is agent & customer is
principal.
4. Trader & consumer
• Bank provides services to customers. Banker is trader (Service provider) & customer is
consumer. Customer can recover compensation from banker for deficiency in service
provided by the bank.
5. Bailor & Bailee
• Where goods are entrusted to bank for a specific purpose, it amounts to belment.
Banker is bailee for customer who is bailor.
6. Guarantor & Beneficiary
• Where bank issues letter of credit for it customers, banker is guarantor & customer is
beneficiary.
7. Mortgager & Mortgagee
• Where the customer takes loan from bank on the security of immovable property,
banker is mortgagee & customer is mortgager.
3. 8. Pledger & Pledgee
• Where the customer takes loan from bank on the security of movable property,
banker is pledgee & customer is pledger.
9. Lessor & Lessee
• When the customer hires a locker, banker is lessor & customer is lessee.
Termination of banker & customer relationship : -
A. Termination by customer
• Dissatisfaction with the services of the banker
• Disagreement with the terms of the banker, etc.
B. Termination by banker
• Under the operation of law – death, insanity or insolvency of customer, winding up of
company, dissolution of partnership firm, receipt of garnishee order from court.
• Undesirable account of the customer – Fraud or cheating by customer, immoral
activities, etc. Commercial viability for maintaining account. Case – M/S. Bhagirathi
Agencies Pvt. Ltd. Vs Union Bank of India.
4. C. Obligations of customer
1. Not to draw cheques without sufficient funds
2. Drawing cheques with reasonable care
3. To repay over drawings
4. To repay reasonable charges for services rendered by the bank
5. To make a demand for repayment of deposits
D. Rights of customer
1. Right to fair treatment
2. Right of transparent & honest dealing
3. Right to privacy
4. Right to grievance redressal & compensation.
5. Special features of relationships between banker & customer
A. Banker’s obligations : -
1. To honour cheques
2. To maintain secrecy of accounts. Case – Tournier Vs National Provincial & Union Bank
of England, 1924.
3. To honour guarantee & letter of credit
4. To maintain correct account of the customer. Case – SBI Vs National Open School
Society.
B. Rights of banker
1. Right of general lien
2. Right of set off.
Case – Barclays Bank Ltd. Vs Quistclose Investment Ltd
Case - Anumati Vs Punjab National Bank
3. Right of appropriation
4. Right to charge interest, incidental charges etc.
5. Right to publish defaulting borrowers.
