The relationship between a banker and a customer depends on the type of transaction. In this banker and customer relationships; both parties have some obligations and rights.
The relationship between banker and customer is not only that of a debtor and creditor.
The term banking may define as accepting of deposit of money from the public for the purpose of lending or investing investment of that money which are repayable on demand or otherwise and with a draw by cheque, draft or order.
Features of Banking
The definition of banking describes the following features of banking.
(i) A banking company must perform both of the essential functions.
(ii) Accepting of deposit.
- Lending or investing the same: The phrase deposit of money from the public is significant. The bankers accept a deposit of money and not of anything else. The world public implies that a banker accepts a deposit from anyone who offers his/her money from such purpose.
- The definition also implies the time and made to withdraw the deposit. The deposit money should be repayable to the depositor on demand made by the letter or according to the agreement reached between the two parties.
A person who has a bank account in his name and for whom the banker undertakes to provide the facilities as a banker is considered to be a customer.
To constitute a customer the following requirements must be fulfilled;
- The bank account may be savings, current or fixed deposit must be operated in his name by making a necessary deposit of money.
- The dealing between the banker and customer must be of the nature of the banking business.
Relationship between Banker and Customer
- Debtor and Creditor
The relation between a banker and his customer is primarily that of a debtor and creditor, which can be explained in following ways.
- Bank (Debtor) & Customer (Creditor): When a customer deposits money in his account, the money is to be considered as the money of depositor, so he has the right to withdraw it at any time as per rules of bank. Here the bank is the debtor and customer is the creditor.
- Bank (Creditor) & Customer (Debtor): When a customer takes loan from bank or avails overdraft from bank then the bank is a creditors and customer is a debtor in this relation.
- Bailer and Bailee
When a banker takes charge of his customer’s valuable goods, he becomes a bailee. The customer who deposits property in this way is a Bailer. This relation of bailer and bailee is the oldest relation between a banker and customer.
- Mortgager and Mortgagee
When a banker accepts real estate like land and building etc. as security of loan by way of mortgage, the relationship becomes that of mortgager and mortgagee. In this relation, the customer is a mortgager and the bank is mortgagee.
- Principal and Agent
When a banker acts according to the instructions or on the behalf of its customer then their relationship of principal (customer) and agent (bank) exists. When the bank buys or sells securities on behalf of its customer, it performs an agency function. Similarly, when it collects cheques, drafts, bills and other instruments and pays fee, rent etc. on behalf of its customer, it acts as his agent.
- Purchaser and Seller
Under deferred payment’ sale on markup mode of financing, the banker is the seller of goods financed and the customer is purchaser of the same.
- Lesser and Lessee
When a banker provides finance to a customer on the basis of lease financing the relationship becomes that of a lessee and lesser. In this case the banker is lesser and the customer is lessee.
- Trustee and Beneficiary
When a bank receives securities, and valuable goods for the custody, the banker’s position is that of, a trustee. On the other hand, when a banker receives money and uses it in various sectors for his benefit, he then becomes beneficiary.
- Pledger and Pledgee
When a customer pledges an article (goods and documents) with the banker as a security for payment of debt or performance of promise the relation between customer and banker exists. The customer becomes pledger (pawnor) and the banker becomes pledgee (pawnee).
- Hirer and Owner
In case of hire purchase financing the banker is the owner of the asset and the customer is hirer of the same. Under this system, the bank purchases the required good at the request of client and hires those good to the client.
- Advisor and Advisee
When a bank gives financial advice to its customer then bank becomes advisor and customer becomes advisee.
- Cordial Relation between Banker and Customer
Sometimes the banker is in a position to, establish cordial relation with his customer by providing reliable and confidential information about the general standing of people.