Banking: LESSON 10 BANK CUSTOMER RELATIONSHIP: CONCEPT AND CASES
The relationship between banker and customer is mainly that of a debtor and creditor. However, they also share other relationships. Some of. The relationship between a banker and a customer depends on the type of The relationship between banker and customer is not only that of a debtor and. There are numerous kinds of relationship between the bank and the customer. The relationship between a banker and a customer depends on.
However they share some other forms of relationships also discussed in detail below.
- Different forms of Banker Customer Relationship in Banking
- Banking & Insurance
In other words, depositor lend money to bank and bank repay it on demand as per contract of deposit. In this case, Customer is creditor of bank and bank is debtor.
In Case of Loan Account — Bank not only accept deposit but also lend money further at an agreed rate of interest to their customer for various business purpose, education, housing, vehicle purchase etc. Relationship of Licensor Lessor and Licensee Lessee When customer avail safe deposit locker facility from bank, relation between banker and customer is Licensor and Licensee Lessor-Lessee.
Relationship of Bailor and Bailee When Customer deliver goods to bank for purpose of safekeeping under a condition that goods will be returned to depositor when purpose is completed.
In this case, Customer becomes bailor and bank becomes bailee. Customer who borrows money from bank owns money to the bank. The relationship in the first case when a person deposits money with the bank reverses when he borrows money from the bank.
Borrower executes documents and offer security to the bank before utilizing the credit facility. Depending upon the type of services rendered and the nature of transaction, the banker acts as a bailee, trustee, principal, agent, lessor, custodian etc. Bank as a Trustee: In case of trust banker customer relationship is a special contract. When a person entrusts valuable items with another person with an intention that such items would be returned on demand to the keeper the relationship becomes of a trustee and trustier.
Relationship between Banker and Customer
Customers keep certain valuables or securities with the bank for safekeeping or deposits certain money for a specific purpose Escrow accounts the banker in such cases acts as a trustee. Banks charge fee for safekeeping valuables 2. A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.
The person delivering the goods is called the "bailor". The person to whom they are delivered is called, the "bailee". Banks secure their advances by obtaining tangible securities. In some cases physical possession of securities goods Pledgevaluables, bonds etc. While taking physical possession of securities the bank becomes bailee and the customer bailor.
Banks also keeps articles, valuables, securities etc. As a bailee the bank is required to take care of the goods bailed. The relationship between the bank and the customer is that of lessor and lessee.
Banks lease hire lockers to their customers their immovable property to the customer and give them the right to enjoy such property during the specified period i. Bank has the right to break-open the locker in case the locker holder defaults in payment of rent. Banks do not assume any liability or responsibility in case of any damage to the contents kept in the locker. Banks do not insure the contents kept in the lockers by customers. Banks collect cheques, bills, and makes payment to various authorities viz.
Banks also abides by the standing instructions given by its customers. In all such cases bank acts as an agent of its customer, and charges for these services. As per Indian contract Act agent is entitled to charges. No charges are levied in collection of local cheques through clearing house.
Charges are levied in only when the cheque is returned in the clearinghouse. A lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid, provided that there is no contract express or implied, to the contrary.
It is a right to retain possession of specific goods or securities or other movables of which the ownership vests in some other person and the possession can be retained till the owner discharges the debt or obligation to the possessor. The creditor bank has the right to maintain the security of the debtor but not to sell it. There are two types of lien viz.
Particular Lien and 2. Right of General Lien a Particular Lien: A 'particular lien' gives the right to retain possession only of those goods in respect of which the dues have arisen.
It is also termed as ordinary lien.
VidyaGyan: Relationship Between Banker and Customer:
If the bank has obtained a particular security for a particular debt, then the banker's right gets converted into a particular lien. Banker has a right of general lien against his borrower. General lien confers banks right in respect of all dues and not for a particular due. It is a statutory right of the bank and is available even in absence of an agreement but it does not confer the right to pledge.
A 'general lien' gives the right to retain possession of any goods in the legal possession of the creditor until the whole of the debt due from the debtor is paid. Section of Indian Contract Act, confers the right of general lien to banks. While granting advances banks take documents. These documents confer right to convert general lien as an implied pledge. Banker's right of lien is not barred by the Law of Limitation.
Exercising Right of Lien: Bank has the right of lien on goods and securities entrusted to him legally and standing in the name of the borrower. Bank can exercise right of lien on the securities in its possession for the dues of the same borrower, even after the loan taken against that particular security has been re-paid.
Special Relationship between the Banker and Customer
Right of lien can be exercised on bills, cheques, promissory notes, share certificates, bonds, debentures etc. Where right of lien cannot be exercised: Bank cannot exercise right of lien on goods received for safe custody, goods held in capacity as a trustee, or as an agent of the customer, SDV, or left in bank by mistake Right of set-off: The banker has the right to set off the accounts of its customer.
It is a statutory right available to a bank, to set off a debt owned to him by a creditor from the credit balances held in other accounts of the borrower. The right of set-off can be exercised only if there is no agreement express or implied to the contrary.
This right is applicable in respect of dues that are due, are becoming due i. It is not applicable on future debts. It is applicable in respect of deposits that are due for payment. The right of set off enables bank to combine all kinds of credit and debit balances of a customer for arriving at a net sum due. The right is also available for deposits kept in other branches of the same bank. The right is also available for time barred debts.
Deposits held in the name of a guarantor cannot be set off to the debit balance in borrowers account until a demand is made to the guarantor and his liability becomes certain.
Banks cannot set off the credit balance of customer's personal account for a joint loan account of the customer with another person unless both the joint accountholders are jointly and severally liable.
Banks exercise the Right of set off only after serving a notice on the customer informing him that the bank is going to exercise the right of set-off. Automatic right of set off: Depending on the situation, sometimes the set off takes place automatically without the permission from the customer.