Banker and customer relationship in indian

Banker-Customer Relationship Explained in Detail

banker and customer relationship in indian

that of debtor and creditor. "The relation of banker and customer", as Sir John Paget aptly remarks, "is primarily that thrown further light on the relation between. The relationship between a banker and his customer depends upon 80 Central Bank of India Ltd. Bombay V/S Gopinath Nair and others (A.I.R , Kerala. At page , which deals with the relationship of banker and customer. borrower and lender, as is the position in English and has been hitherto in Indian law.

banker and customer relationship in indian

There are numerous kinds of relationship between the bank and the customer. The relationship between a banker and a customer depends on the type of transaction. Thus the relationship is based on contract, and on certain terms and conditions.

These relationships confer certain rights and obligations both on the part of the banker and on the customer.

IndianMoney | Special Relationship between the Banker and Customer

However, the personal relationship between the bank and its customers is the long lasting relationship. Some banks even say that they have generation-to-generation banking relationship with their customers. The banker customer relationship is fiducial relationship. The terms and conditions governing the relationship is not be leaked by the banker to a third party.

The relationship between a bank and its customers can be broadly categorized in to General Relationship and Special Relationship. Thus the relationship arising out of these two main activities are known as General Relationship. In addition to these two activities banks also undertake other activities mentioned in Sec.

Customer Relationship Management in Banking Sector

Relationship arising out of the activities mentioned in Sec. When a 'customer' opens an account with a bank, he fills in and signs the account opening form. When customer deposits money in his account the bank becomes a debtor of the customer and customer a creditor.

The bank is not bound to inform the depositor the manner of utilization of funds deposited by him. Bank does not give any security to the depositor i. The bank has borrowed money and it is only when the depositor demands, banker pays.

Banker does not pay money on its own, as banker is not required to repay the debt voluntarily. The demand is to be made at the branch where the account exists and in a proper manner and during working days and working hours. The debtor has to follow the terms and conditions of bank said to have been mentioned in the account opening form.

In fact the terms and conditions are mentioned in the passbook, which is issued to the customer only after the account has been opened. This practice has since been discontinued. For convenience and information of prospective customers a few banks have uploaded the account opening form, terms and conditions for opening account, rate charge in respect of various services provided by the bank etc.

Lending money is the most important activities of a bank. The resources mobilized by banks are utilized for lending operations. 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.


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".

Banking & Insurance

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 demand must be in form of cheques; withdrawal slips, or pay order.

Now-a-days, banks allow e-banking, ATM, mobile-banking, etc. Relationship of Pledger and Pledgee The relationship between customer and banker can be that of Pledger and Pledgee. This happens when customer pledges promises certain assets or security with the bank in order to get a loan.

In this case, the customer becomes the Pledger, and the bank becomes the Pledgee. Under this agreement, the assets or security will remain with the bank until a customer repays the loan. Relationship of Licensor and Licensee The relationship between banker and customer can be that of a Licensor and Licensee. This happens when the banker gives a sale deposit locker to the customer. So, the banker will become the Licensor, and the customer will become the Licensee. Relationship of Bailor and Bailee The relationship between banker and customer can be that of Bailor and Bailee.

Bailment is a contract for delivering goods by one party to another to be held in trust for a specific period and returned when the purpose is ended. Bailor is the party that delivers property to another.

Bailee is the party to whom the property is delivered.

  • Special Relationship between the Banker and Customer

So, when a customer gives a sealed box to the bank for safe keeping, the customer became the bailor, and the bank became the bailee. Relationship of Hypothecator and Hypothecatee The relationship between customer and banker can be that of Hypothecator and Hypotheatee. This happens when the customer hypothecates pledges certain movable or non-movable property or assets with the banker in order to get a loan. In this case, the customer became the Hypothecator, and the Banker became the Hypothecatee.

Relationship of Trustee and Beneficiary A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer.

banker and customer relationship in indian

The customer is the beneficiary so the ownership remains with the customer. Relationship of Agent and Principal The banker acts as an agent of the customer principal by providing the following agency services: Buying and selling securities on his behalf, Collection of cheques, dividends, bills or promissory notes on his behalf, and Acting as a trustee, attorney, executor, correspondent or representative of a customer.

banker and customer relationship in indian

Banker as an agent performs many other functions such as payment of insurance premium, electricity and gas bills, handling tax problems, etc. Relationship of Advisor and Client When a customer invests in securities, the banker acts as an advisor.

banker and customer relationship in indian

The advice can be given officially or unofficially. While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client. Other Relationships Other miscellaneous banker-customer relationships are as follows: