BANKER AND CUSTOMER

BANKING LAW AND PRACTICES

1. Dr.V.GURUMOORTHI Assistant Professor Dept. of Commerce with Cost Accounting D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a

2. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Introduction Banker Banker and customer Banker and customer Relationship Types of Relationship Primary Relationship Secondary Relationship CONTENTS

3. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a UNIT I Definition of banker and customer – relationship between banker and customer – General relationship – special relationship. SYLLABUS

4. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a When you think of a bank, what image comes to mind? INTRO. OF BANK

5. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a A bank is a financial intermediary for the safeguarding, transferring, exchanging or lending of money. INTRO. OF BANK

6. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a DEFINITION According to sec 5(c) of the Banking Regulation Act 1949, a banker is a person who undertakes business of banking. Banking means accepting deposits from public, for the purpose of lending, repayable on demand or otherwise with drawable by cheque, draft, order. BANKER

7. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a A customer means a person who seeks to open account which banker accepts with proper introduction. The relationship is not based on frequency of transactions, and durations. CUSTOMER

8. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Customer should be a major Customer be of sound mind He should not be debarred under any law There must be an offer and acceptance of the proposal FEATURES CUSTOMER

9. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a TYPES OF RELATIONSHIP

10. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a When customer deposits money with a bank the relationship of debtor and creditor will be established, in this case banker is a the Debtor and Customer is the Creditor. Debtor and Creditor

11. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a When a bank grants loan and other credit facilities to the customer, the relationship between the banker and customer is reversed, that is customer is Debtor and Banker is Creditor. Creditor and Debtor

12. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a In some situations, the banker serves as agent of the customer (Principal). Such as, Collecting cheques Collecting dividends and bills of exchange Acting as an Attorney, representative or executor Buying and selling securities Principal and Agent

13. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a To follow the instructions given by principal (customer) To show required skill and carefulness Duty to provide proper accounts Duty to pass on any benefits derived from agency Duties of Agent (Banker)

14. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a The principal should pay remuneration to the agent. The principal should not prevent his agent from performing the duties. Any lawful expenses which have been incurred by the agent has to pay. Duties of Principal (Customer)

15. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i 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 fulfilled, be returned or disposed. Bailor – Who delivering the goods and Services Bailee – The person to whom these are delivered. Bailor and Bailee Relationship

16. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Pledge means the bailment of goods as security for payment of a debt or performance of a promise . When credit facility is provided by a bank to its customers against collateral security. Here Customer – Pledger, Banker – Pledgee . Pledger and Pledgee Relationship

17. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Mortgage means the transfer of an interest in specific immovable property for the purpose of getting the payment of money as debt . When credit facility is provided by the bank to a customer against the security. Here Mortgagor – Customer, Banker - Mortgagee Mortgagor and Mortgagee Relationship

18. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Right of General Lien Right of Set-off Right of Appropriation Right to charge interest and commission Right to close the account Rights of Banker

19. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Lien is a right to keep possession of a property belonging to someone else until that person discharges the debt they owe you. The right of general lien is conferred on the bankers by sec 171 of the Indian Contract Act. Banker cannot exercise the right of general lien in case of bailments. Right of General Lien

20. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a If valuable are deposited for safe custody If money or documents are deposited for specific purpose If there is an express agreement that the bank shall not exercise this right. Exemption of lien

21. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Right of set-off gives the banker the power to adjust the amounts due to them from a customer, against the amount payable by the customer to the banker. If customer has two or more accounts by the same name in a bank, the banker has the right to set-off the amounts in the both the accounts. Right of Set-Off

22. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a A customer may owe several distinct debts to the bank. When the customer deposits some money in the bank without specific instructions and the amount is not sufficient to discharge all debts, then the problem arises as towards which debt this amount should be adjusted. Right of Appropriation

23. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a In the absence of any specific instructions, the bank has the right to appropriate the deposited amount to any loan, even to a time barred-debt. But the banker must inform the customer about the appropriation. Right of Appropriation

24. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a A banker has a right to charge interest on loans and advances. A bank also has the right to charge a commission for services can be SMS notification services, retail banking, multi-city cheque service, etc. Such charges can be debited to the customer’s account. Right to charge interest and commission

25. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a The banker has the right to close an account. If it is of the opinion that a account is not being operated properly. It may do so only by sending a written intimation to the customer. Right to close the account

26. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a The most important duty of a banker is to help their clients with all their financial queries and needs. The banker may do so by meeting their clients in person or speaking with them over the phone. Duties of Bankers

27. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Review client’s History Advise Clients Keep records Gather financial information Disbursal of funds Duties of Bankers

28. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a The banker must review their clients financial history and current financial position. Review of client’s History

29. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a Reviewing a client’s history helps the banker learn about the customer’s desired financial needs. The banker should assist and guide them to meet their financial goals. Advise Clients

30. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a The banker has to maintain complete and check records of the bank’s transactions on a daily basis. Documents such as loan applications, bank statements and so on, must be reviewed and filed by the banker. Keep Records

31. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a A banker should gather financial information from both new and existing clients. A banker should speak with the clients and sue the information gathered to prepare accounts, loans and determine their creditworthiness. Gather financial information

32. D r . N . G . P A r t s a n d s cie n ce co l l e g e D r . N . G . P . A S C C o i m b a t o r e , T a m i l N a du, I nd i a A banker must withdraw and deposit funds. This requires a lot of attention and accuracy. Disbursal of funds