RELATIONSHIP BETWEEN BANKER AND CUSTOMER

Relationship is a bond between two or people or an association. Person can have different relationship simultaneously. Relationship can be broadly classified into two categories

1) Social

2) Commercial

In our discussion we will be dealing with only COMMERCIAL relationship

Any dispute between two parties can be solved only on the basis of nature of the existing relationship between both the parties. Hence, one should know the exact relationship between the banker and the customer. Relationship depends upon type of transaction. It confers certain rights, duties, obligations on the part of both. Relationship falls under two broad categories

  1. A) GENERAL   B) SPECIAL

GENERAL

In addition to accepting deposits for the purpose of lending and investment banks provide variety of services which make the relationship more wide and complex depending upon the type of services rendered and nature of transaction, the banker acts as a bailee, trusty, executor, agent, principal, etc.

There is a depository relationship

When the person opens an account with the banker there arises a contractual relationship by implication. When a customer (creditor) deposits money with the bank (creditor) as such relationship is that of debtor and creditor. It is a general relationship.

Some important points to be noted in debtor creditor relationship are:

  • The baker is debtor of a customer with obligation.
  • When banker lends money to his customer, customer becomes debtor and the banker a creditor.

A depository is the one who receives some valuables and returns the same on demand but at present a banker is not bound to return the same coins and currency notes deposited by customer. Instead, he is required to give the same amount. So he is not a depository. If a customer insists upon return of same coins and notes then a banker cannot run his business successfully. Moreover, if a banker is acting as depository then he cannot make use of money to his best advantage. A banker has to make use of money deposited with him for earning the maximum profit and the whole income is not returned to the customer, only a part of it is returned to the customer. The money paid into bank ceases altogether to be the money of principal. It is then the money of banker. He is known to deal with it, as his own. He is bound to return an equivalent by paying a similar sum, thus deposited with him, when he is asked for it.

Banker as a Bailee

The person who delivers goods is called ‘bailer’. The person to whom goods are delivered is called bailee. These goods are for specific purpose. He is bound to return ‘identical’ goods to bailer. He does not provide any interest to the bailer.

  • When a bailer is a bailee?

Banker acts as bailee only when he receives gold ornament and important documents, for safe custody and he doesn’t allow interest on his article. It is only the customer who has to pay rent for lockers.

  • Why banker is not a bailee while accepting deposits?

As banker doesn’t use the articles in the advantage form. He goes as per instructions of customers. He is bound to return identical articles on demand. Moreover banker cannot acquire any title in respect of stolen articles. So, a banker acts as a bailee only when he receives articles and not when he receives money as deposit.

Banks secure their advances by obtaining tangible securities from customer. So while taking possession of securities bank becomes bailee and customer becomes bailer. As a bailee bank is required to take care of goods bailed.

There is an agent relationship

Agent is the one who is employed by the principal and acts as per instructions given by principal. He is paid remuneration for services. He is accountable for promises.

  • When banker acts as agent?

Agent principal relationship is said to exist between banker and his customer when banker buys and sells shares, pays a bill as insurance premium, taxes or collects cheques for customer, collects interest on investment, dividend on shares on the instructions of customer to various authorities.

Banker acts as per ‘standing instructions’ given by customer and bank charges nominal commission from customer for providing services.

  • Why banker is not an agent while accepting deposits?

When banker receives deposits from customer he is not regarded as agent of his customer. If he acts as agent, he should use deposited money according to the instructions of his principal (customer). But this is not the case. The banker should give detailed list how he used deposited money, income earned there on etc. In this case also, whole income should not go to customer. So he is not acting as agent while accepting deposits. Banker should only receive remuneration.

LEASER LESSEE RELATIONSHIP

Leaser is the one who leases immovable property for specified period in consideration for some value.

  • Why banker acts as leaser?

Providing safe deposits lockers is an ancillary service provided by banks to customers while providing these facilities to customer, banks enter into an agreement with customers. This agreement is known as ‘memorandum of letting’ and attracts stamp duty. The relationship between bank and customer is that of leaser and lessee. Banks lease (hire locker to customer) their immovable property to customer and give them right to enjoy such property during office or banking hours and charge rentals. Bank has right to brake-open the locker in case the locker holder defaults in the payment of rent. Bank doesn’t assume any responsibility in case of any damage to contents kept in locker. Banks do not ensure contents kept in locker by customer.

  • Why banker is not leaser while accepting deposits?

There is no fix space leased by banker while depositing money in the particular account. Demand deposits accounts are not for the specified period. Bank pays interest for the service as a consideration.

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