Banker and Customer Relationship
Banker and Customer Relationship features:
In general, any individual/organization that maintains an account with the bank is treated as a customer. But in some situations, Banker extends their services to the individuals/organizations even if they are not customers as defined above.
According to the duration concept, a customer should run transactions of the banking business for a certain period. But in practice period of transactions is not an important factor for considering an entry as a customer.
Broadly Bank-Customer relationship may be divided into two categories:
1) General relationship.
2) Special relationship.
Different kinds of General relationship are given below:
Contractual relationship: Basically Banker-Customer is a contractual relationship established through the opening of the account. This contract shall remain valid until the account is closed. As per contract as well as Section 5(P) of the Bank Company Act. deposit of the customer is repayable on demand.
Besides this contractual relationship, there are other kinds of general relationships between the banker and customer depending on the services rendered by the bank.
Generally, the following are the major forms of relationships between a banker and his customers:
Debtor-Creditor: The general relationship between a banker and customer (account holder) is that of a debtor and creditor. If the customer’s account shows a credit balance, the bank is the debtor and the customer is a creditor. The bank in this case has to repay on demand. On the other hand, if the account of the customer is overdrawn, the relationship is just the reverse and here the customer has to repay since he is the debtor.
Agent- Principal: Banks provide agency services to their customers. When a banker buys or sells securities on behalf of his customers he performs an agency function. Similarly when he collects cheques, bills, interest, and dividends, etc. or when he pays insurance premium from the customer’s account, as per his mandate, he acts as an agent. In the case of agency services, the law of agency governs the relationship between the banker and the customer. Here, the banker, is the agent and the customer is the principal.
Bank as trustee: A trustee is one who holds property for the benefit of a person or beneficiary. The banker is a trustee when a customer deposits his valuables and securities for safe custody. The bank cannot use the articles kept for safe custody anyway he likes. Fund, if any, coming to the hands of the bank, as a trustee must also be applied for specific purposes as the trust deed indicates.
Bailor-Bailee: When a bank advances money to a customer against merchandise, the bank might bring the merchandise under his control. In this case, the relationship between a customer and a banker is that of a bailor and bailee. Here the law of contract operates.
The rights of one party are the duties of others and vice versa. The rights and duties are the subjects of a special relationship between a bank and it’s customers. The special relationship between a banker and customer is discussed under the following heads:
Banker’s obligation to a customer:
a) Acceptance of deposit
b) Honoring Cheques
c) Maintenance of secrecy of the account
d) Notice to be given in case of closure of accounts
e) Payment of interest
f) Furnishing statement
g) Providing services