Banker-Customer Relationship Explained in Detail
Bank management should target specific industries and markets in which lending officers have expertise. However, while competing goals of. The relationship between a creditor and a debtor is one of the most important to understand in terms of business practices of any kind. This is because most. Debtor and creditor, relationship existing between two persons in which one, the debtor, can be compelled to furnish services, money, or goods to the other, the.
However, there are many persons who do utilize services of banks, but do not maintain any account with the bank. Thus bank customers can be categorized in to four broad categories as under: Technically they are not customers, as they do not maintain any account with the bank branch.
Those who intend to have account relationship with the bank.
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A person will be deemed to be a 'customer' even if he had only handed over the account opening form duly filled in and signed by him to the bank and the bank has accepted the it for opening the account, even though no account has actually been opened by the bank in its books or record. The practice followed by banks in the past was that for opening account there has to be an initial deposit in cash. The term 'customer' is used only with respect to the branch, where the account is maintained.
In the event of arising any cause of action, the customer is required to approach the branch with which it had opened account and not with any other branch. Banking is a trust-based relationship.
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.
- Debtor and creditor
These relationships confer certain rights and obligations both on the part of the banker and on the 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. 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.
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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.
Banking: LESSON 10 BANK CUSTOMER RELATIONSHIP: CONCEPT AND CASES
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.
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. 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.
The customer is the beneficiary so the ownership remains with the customer.
Article Storm: Debtor and Creditor Relationship
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 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. The advice can be given officially or unofficially.chapter 32 nature of the debtor creditor relationship
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: Obligation to honour cheques: As long as there is sufficient balance in the account of the customer, the banker must honour all his cheques.
The cheques must be complete and in proper order. They must be presented within six months from the date of issue. However, the banker can refuse to honour the cheques only in certain cases. Secrecy of customer's account: When a customer opens an account in a bank, the banker must not give information about the customer's account to others.
Banker's right to claim incidental charges: A banker has a right to charge a commission, interest or other charges for the various services given by him to the customer. Law of limitation on bank deposits: