BANKER CUSTOMER RELATIONSHIP.pptx

Banker customer

1. BANKER & CUSTOMER RELATIONSHIP

2. DEFINITION OF BANKER According to sec 5 (b) of banking regulation act banker is a body corporate that (a) accepts the deposits from public (b) lends (c) invests the money so collected by the way of deposits (d) allows the withdrawals of deposits on demand or by any other means

3. Definition of a customer It is generally believed that any individual or an organisation which conducts the banking transaction with the bank , is the customer of bank The bank customers can be categorized in four broad categories

4. With the implementation of core banking solution the customer is the customer of bank & not of a particular branch he can operate his account from any branch of the bank anywhere

5. GENERAL RELATIONSHIP BETWEEN BANKER & CUSTOMER Debtor & creditor relationship : when a customer opens a account with bank , he fills & signs the account opening form . By signing the form he enters into an agreement with the bank When the customer deposits money in his account the bank becomes the debtor of the customer & customer becomes the creditor of bank The money deposited by the customer becomes the bank’s property & bank has the right to use the money as it likes

6. The bank is not bound the to inform the customer about the utilization of funds Bank does not give any security to the depositor The bank has borrowed money & it is only when the depositor demands banker pays & demand has to be made at the branch where the account exists in a proper manner & during working days & working hours

7. Creditor – debtor relationship- in case a customer takes any loan from bank then the banker becomes the creditor of the customer .& customer becomes the debtor of the bank

8. Bailee & bailor relationship : sec 148 of Indian Contract Act , defines A ‘ bailement ’ is the delivery of goods by one person to another person for some purpose , upon a contract that they shall when the purpose is accomplished , be returned or otherwise dispose off according to the directions of the person delivering them

9. The person delivering the goods is “ bailor ” & to whom they are delivered is “ bailee ” Banks secure their advances by obtaining tangible securities . In some cases physical possession of securities goods , bonds are taken While taking physical possession of the securities bank becomes bailee & customer becomes bailor

10. Agent & principal relationship : sec 182 of Indian Contract Act defines “ agent “ as a person employed to do any act for another or to represent another in dealings with third person . The person for whom such act is done is called as “ principal” Bank collects cheques , bills ,& make payment to the varoius authorities viz rent , telephone bills , insurance premium on behalf of customers , in all such cases bank act as agent for customer

11. Special Relationship between banker & Customer Right of General lien : A lien is the right to retain possession of specific goods or securities or other movables of which the ownership vests in some other person & possession can be retained till the owner discharges the debt or obligation to possessor

12. Particular lien It gives the right to retain the possession only of those goods of which dues have arisen If a bank has obtained a particular security for a particular debt , then banker’s right get converted into particular lien General lien It gives the right to bank to retain the possession of any goods in legal possession of creditor until the whole of debt due from debtor is paid

13. Right of appropriation : it is the right of the customers to direct his banker against which debt ( when more than one debt is outstanding ) the payment made by him should be appropriated In case no such direction is given , the bank can exercise its right of appropriation & apply it in payment of any debt Section 59,60,61 of Indian Contract Act , 1872 lays down rules of appropriation

14. Section 59 Application of payment where debt discharged is indicated ( as per borrower instruction ) Section 60 Application of payment where debt to be discharged is not indicated ( in absence of express or implied intention of debtor )

15. Obligation of the banker : Obligation to honour cheques : bank is bound to honour cheques provided following conditions are fulfilled Sufficient funds Funds must be properly applicable Banker must be duly required to pay

16. Obligation to maintain the secrecy of accounts : Obligation to keep record of transactions

17. What is a garnishee order this is an order of court issued under order 21 rule 46 of the code of civil procedure 1908, in case of debtor failure to pay debt Such order attaches the funds in the hand of the third party who owes the judgement debtor money warning the third party or the banker , not to release the money attached until directed by court to do so .

18. The party for whom the order is given is called judgement debtor & creditor against whom the order is issued is called as judgement creditor The third party on whom the order is served is called garnishee

19. Example if A OWES B rs 500& B being unable to recover to amount sues A & obtains the decree against A B comes to know that C may be bank owes 600 rs to A . B then obtains a garnishee order from court whereby C will be directed to apy to B 500rs out of the money held by him belonging to A

20. Order Nisi- by this order court asks banker to stop the payment out of all accounts of judgement debtors . Order Absolute : b y this order court directs the banker to pay the either the whole or part of funds lying in account against order nisi has been issued to judgement creditors

21. Effects of garnishee order A garnishee order may either attach the entire account or attach a specified amount only with the banker . The effects of garnishee order on various accounts are as follows : Joint accounts – a joint account which is opened in the name of two or more persons , can be attached only when all joint account holder are joint judgement debtors

22. Partnership account : the personal account of a partner can be attached for the payment of firm’ s debt . But firm’s account cannot be attached for the payment of personal loan of an individual partner Proprietorship accounts : if the customer is the sole proprietor of the firm , the firm’s account is attached by a garnishee order issued in names of sole propietor only judgement debtor

23. Termination of banker & customer relationship Voluntary closure of account : it is of two types (a ) mutual agreement - if customer is not satisfied with the services or behaviour of the bank they may terminate the relationship by mutual agreement (b ) By prior notice – bank can close customer account by giving notice to him . The customer should be given sufficient time so that he may open account in any other bank

24. Notice can be given subject to the follwowing conditions : When customer makes fraud When there is no minimum amount in the account When he is declared criminal When he writes cheque irrespective of minimum balance in the account

25. Death of customer – if the customer gives cheque to some other person before death & cheque is presented to the bank then bank will not clear the cheque . After death his legal hier get the right on his account & banker has to follow his order Insanity of customer : banker is not under obligation to honour cheque if customer has becoem insane

26. Insolvency of customer : if customer becomes insolvent then the relationship is terminated, if any balance is standing in customer account then it is paid according to the order of court Dissolution of company : when company is dissolved the relationship is terminated . After dissolution the liquidator of company gets the right to operate the account of company

27. Assignment of account balance by customer : when the customer assign his account to someone , the balance standing in the customer name is transferred in the name of the person in whose favour the assignment in done , then bank enters into a new relationship with a new customer Closing the business by bank : if any bank closes or amalgamates with any other bank then the banker customer relationship is terminated