Bankers have important rights and obligations regarding their customers. Some key rights include the right of lien, which allows bankers to retain customer goods/securities until debts are repaid, and the right of set-off, which lets bankers adjust debit and credit balances in different customer accounts. Bankers also have obligations like honoring customer checks if sufficient funds are available and maintaining secrecy of customer accounts, though some disclosure is permitted by law or to protect the banker's interests.

1. BANKING & PRACTICE
DONE BY
S.BHUVANESVARI M.A.,

2. Unit - II
RIGHTS AND OBLIGATIONS
RIGHTS - Terms & condition
 OBLIGATIONS --- Duties

3. RIGHT OF LIEN:
One of the important rights enjoyed by a banker is the right of general lien.
Lien means the right of the creditor to retain the goods and securities owned by the
debtor until the debt due from him is repaid .
Lien may be either (1) a general lien or, (2) a particular lien.
A particular lien can be exercised by a craftsman or a person who has spent his time
labour and money on the goods retained. In such cases goods are retained for a particular
debt only. For Ex: A tailor has the right to retain the clothes made by him for his customer
until his tailoring charges are paid by the customer.
A general lien, on the other hand, is applicable, in respect of all amount due from the
debtor to the creditor.
“Banker may, in the absence of a contract to the contrary, retain as a security for a
general balance of account, any goods bailed to them.
Special Features of a Banker’s Right of General Lien.
The banker possesses the right of general lien on all the goods and securities entrusted
to him in his capacity as a banker and in the absence of a contract inconsistent with the
right of lien.
The goods and securities have been entrusted to the banker as a trustee or an agent of
the customer.

4.  A banker’s lien is tantamount to an implied pledge:
 The right of lien is conferred upon thee banker by the Indian contract Act.
 The right of lien can be exercised on goods or other securities standing in the name of
the borrower only
 The banker can exercise his right of lien on the securities remaining in his possession
after the loan
Right of Set-off.
The right of set-off is a statutory right which enables a debtor to take into account a debt
owed to him by a creditor, before the latter could recover the debt due to him from the
debtor. In other words, the mutual claims of debtor and creditor are adjusted together
and only the remainder amount is payable by the debtor. A banker like other debtor,
possesses this right of set-off which enables him to combine two accounts in the name of
the same customer and to adjust the debit balance in one account with the credit balance
in the other. For Ex: A has taken an overdraft from his banker to the extent of Rs.25,000
and he has a credit balance of Rs. 20,000 in his savings bank account, the banker can
combine both of these accounts and claim the remainder amount of Rs. 5,000 only. This
right of set-off can be exercised by the banker if there is no agreement and after a notice
is served on the customer intimating the latter about the former’s intention to exercise
the right of set-off.

5. The right of set-off can be exercise subject to the fulfillment of the following conditions:
 The account must be in the same name and in the same right.
 An account in the name of a person in his capacity as a guardian for a minor is not to
be treated in the same right as his own account with the banker.
 The funds held in Trust Accounts are deemed to be in different rights.
 The right can be exercise in respect of debts due and not in respect of future debts or
contingent debts.
 The banker may exercise this right at his discretion.
 The banker has right to exercise this right before the garnishee order is made
effective. In case a banker receives a garnishee order in respect of the funds
belonging to his customer, he has the right first to exercise his right of set-off and
thereafter to surrender only the remainder amount to the judgment-creditor.
RIGHT S TO CHARGES INTEREST INCIDENTAL CHARGES Ex: service charges,
swipe the debit card above 6 time in other ATM centre.
Bankers Obligation To Honour The Cheques
The deposits accepted by a banker are his liabilities repayable on demand or otherwise.
The banker is, therefore under a statutory obligation to honour his customer’s cheques in
the usual course section 31 of the Negotiable Instruments Act, 1881.

6. “The drawee of a cheque having sufficient funds of the drawer in his hands, properly
applicable to the payment of such cheque, must pay the cheque when duly required to
do so and in default of such payment must compensate the drawer for any loss or
damage caused by such default.”
The banker is bound to honour his customer’s cheques provided the following
conditions are fulfilled :
 There must be sufficient funds of the drawer in the hands of the drawee.
 The funds must be properly applicable to the payment of the cheque.
 The banker must be duly required to pay.
Garnishee order:
 The obligation of a banker to honour his customer’s cheques is extinguished on
receipt of an order of the court, known as the Garnishee Order.
 The creditor at whose request the order is issued is called the judgment creditor.
 The debtor whose money is frozen is called judgment debtor.
 The banker who is the debtor of the judgment debtor is called the Garnishee.
 The Garnishee Order is issued in two parts (i) Order Nisi (ii) Order Absolute.
 First, the Court directs the banker to stop payment out of the account of the
judgment debtor. Such order is called Order Nisi.
 After the banker files his explanation, if any, the court may issue the final order called
Order Absolute whereby the entire balance in the account or a specified amount is
attached to be handed over to the judgment creditor.

7. BANKERS OBLIGATION TO MAINTAIN SECRECY OF ACCOUNTS
Bankers are responsible to maintain secrecy of his customer accounts. Thus the
general rule about the secrecy of customers accounts may be dispensed with in
the following circumstances:
I. When the law requires such disclosure to be made and
II. When the practices and usages amongst the bankers permit such disclosure.
A banker will be justified in disclosing information about his customers account on
reasonable and proper occasions only as stated below
Disclosure of information required by law.
I. Under the Income-Tax Act,1961. (II) Under the companies Act,1956. (III) By
order of the Court under the Bankers Books Evidence Act,1891. (IV) Under
the RBI of India Act,1934. (V) Under the Banking Regulation Act,1949. (VI)
Disclosure police. (VII) Under the Foreign Exchange Regulation Act ,1973.
Disclosure permitted by the Bankers practices and Usages:
II. With express or implied Consent of the Customer. (II) The banker may
disclose the state of his customers account in order to legally protect his
own interest. (III) Bankers Reference. (IV) Duty to the public to disclose.